🚦 Uber is scaling back. Why?


December 14, 2020

PLUS: What’s the next trillion-dollar startup?
December 14, 2020
The Hustle
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Noom

Amazon’s voice assistant Alexa has a new AI upgrade called Interactive Teaching, which allows you to teach Alexa certain skills.

But if you’re hoping you can teach Alexa how to make passive-aggressive comments at your significant other, you’re outta luck.

Alexa is currently only accepting instructions on lighting and temperature settings.

The Big Idea
Uber car

Uber is shedding its wild bets to double down on ride-hailing and delivery. Why?

Since its founding in 2009, a valuation question has hung over Uber: is it taking on the $100B cab industry — or going after the much bigger $1T+ “any-car-for-hire” opportunity?

Under its previous (and much-maligned) CEO Travis Kalanick, Uber made countless bets in various industries to expand its total addressable market.

For the most part, those bets have floundered — and current CEO Dara Khosrowshahi is scaling back the company’s wildest ambitions.

Uber has unloaded lots of non-core assets…

… and, as highlighted by Protocol, those sales have recently accelerated:

  • Self-driving vehicles: A week ago, Uber parted with its autonomous driving division, aptly dubbed the Advanced Technology Group (ATG), in a transaction with Aurora Innovation.
  • Flying cars: Also last week, it shed its air taxi business to Joby Aviation.
  • Electric bikes: Over the summer, Uber transferred its bike and scooter division to Lime in exchange for a $170m investment.

As part of the Aurora deal, Uber will make a $400m investment in the company, amounting to a 26% stake.

Uber will retain minority stakes in Joby and Lime — but won’t have to recreate all those technologies Kalanick poached from probably one too many viewings of Blade Runner and Back 2 The Future Part II.

However, Uber is still in the red

In fact, its most recent quarter showed a loss of $1B+.

Even so, the renewed focus — combined with its controversial Prop 22 ballot victory, which allows Uber to keep treating its drivers as contractors and not employees — has boosted its stock by 50%+ since end-October to a market cap of $93B.

This isn’t Khosrowshahi’s first rodeo

The 51-year-old Iranian-American built Expedia into an online travel powerhouse, growing its value from $7B to $23B between 2005 and 2017.

Khosrowshahi recently told the New York Times he wants Uber to “become the undisputed leaders in mobility and delivery.”

Those two markets are huge, with or without the wild bets.

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Snippets
  • The Pfizer vaccine is a go per the CDC: The first shots will go to front-line healthcare workers and residents at long-term care facilities. A massive coordination among factory workers, truck drivers, pilots, dry ice makers, freezer manufacturers, and medical professionals is underway.
  • Another Pharma giant, AstraZeneca (which has its own vaccine) will buy Alexion — a maker of rare disease drugs — for $39B.
  • AI eats up tons of energy, so recent advances in energy-efficient chips could mean AI is offered in more products like wearables, medical equipment and (finally!) refrigerators.
  • Size isn’t everything: Since the vaccine news broke, small-cap stocks (e.g., those on the Russell 2000 index, avg. market cap = <$3B) are powering the stock market rally.
  • This is reassuring: A group of Russian-backed hackers known as “Cozy Bear” has been monitoring emails for a US federal agency responsible for deciding internet and telecommunications policy.
  • Riots broke out at an iPhone manufacturing plant in India over wage issues. This incident highlights a challenge for Apple, which is trying to shift production away from China.
 
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  • Invest time in yourself
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You’re Out
basketball gif

Source: Trung, who has way too much time on his hands.

Tesla is joining the S&P 500. Here’s the company that’s getting booted.

On December 21st, Tesla will join the S&P 500 index.

At a valuation of $570B+, it’ll be the largest company to ever join the index, and global fund managers are preparing for the huge day.

But when one company joins, another has to go. That company is Apartment Investment and Management Company (Aimco) — and this is its story.

A politician turns real estate magnate

In 1987, a Harvard law grad (and later Colorado state senator) named Terry Considine acquired a majority stake in the largest fee-operated apartment management company in Denver.

Later, Considine formed Aimco — a real estate investment trust (REIT) — and took it public in 1994.

As of end 2019, Aimco operated 124 apartment complexes with ~33k apartments that brought in $900m+ across major markets including Atlanta, SF, Boston, Denver, and New York.

But it’s taken a beating this year

During the pandemic, many municipalities where Aimco operates have put mandatory rent abatements or freezes into effect; consequently, the REIT’s stock has fallen >30% and is now valued at $6.3B.

Why’s Aimco getting the boot, though?

The REIT is actually separating into 2 entities: 1) its apartment holdings and; 2) a development business.

More generally, it’s one of the smallest market cap stocks in the S&P 500, which means Considine is probably looking at fellow index member Xerox (market cap = $4.5B) and wondering, “Yo, WTF?”

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Predictions
money gif

What tiny market today will be worth trillions in the future?

Sam Altman — the entrepreneur who ran Y Combinator and now heads OpenAI — made an offer in 2015.

He put up $100k and challenged anyone calling tech a “bubble” to take the other side of his pricing predictions for January 2020, including whether:

  1. Uber, Palantir, Airbnb, Dropbox, Pinterest, and SpaceX would be worth $200B+
  2. A selection of Y Combinator startups (e.g., Stripe, Instacart, Coinbase) would be worth $27B+

Altman was off on prediction No. 1 (by a few months)

But blew No. 2 out of the water and also got a 3rd prediction right.

Since he had to win all parts of the bet, though, Altman ended up paying $100k to a charity.

It’s always a blast when Altman fires up pricing questions

And, he served up another banger this weekend when he asked the internet, “What tiny/nonexistent markets today will be trillion dollar markets in 10-20 years?”

There have been 1k+ responses including:

  • Space tourism
  • DNA synthesis
  • Virtualization of travel
  • Personalized medicine
  • 3D printing architecture
  • Carbon capture and storage
  • Standardizing the gig economy
  • Commercialized psychedelic medicine
  • Electric charging station mini market stores (7-11 meets Tesla)

The most popular was: “Falling romantically in love with something digital and artificial but extremely realistic.”

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Update the Forbes List!
Liechtenstein Airbnb listing

The Airbnb founders are…doing OK

Back in 2011, Airbnb caught the viral wave when it listed the entire European country of Liechtenstein for rent:

  • $70k per night
  • Minimum 3-night stay
  • Accommodates up to 900 people
  • 500+ bedrooms and 500+ bathrooms
  • Cancellation policy = super strict 😂

Someone who worked on the campaign told us that the idea was adapted from an existing program the country offered. However, Hans-Adam II (the Prince of Liechtenstein) didn’t like the PR and asked the Tourism Board to pull it.

This is a long way of saying that, after Airbnb’s insane IPO last week, each of the company’s 3 co-founders is individually worth $10B+ — or a ~143k-night stay in Liechtenstein.

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*This is a sponsored post.

Corporate relocation of the day
working in Thailand

Travis Kalanick (far chair) surfing working in Thailand (Source: WSJ/David Barret)

Uber’s hard-charging ex-CEO Travis Kalanick was a trailblazer in corporate relocation.

While the latest news is of Oracle’s HQ moving from California to Texas (following the likes of Hewlett Packard Enterprise, Elon Musk, and The Hustle), let’s revisit the time Kalanick moved a tech company from SF to… Southeast Asia.

In 2006, Kalanick’s 5-year-old online video startup (Red Swoosh) was flailing. To get things back on track and slow the burn rate, Kalanick gave up the office lease and moved his team of 6 to a Thai island.

In Thailand, the group had difficulty finding a location with good internet and electricity; when they did, it was not a vacation:

  • Catering to US customers across a time difference of 11-14 hours was hard (Kalanick was regularly up between 11pm and 7am local time)
  • There were mandatory daily meetings and time tracking
  • Only one day a week was for leisure

The 6-week Thai stint refocused the company and — one year after the Southeast Asia excursion — Red Swoosh was acquired by Akami Technologies for $15m.

No word on whether the team celebrated by hitting a Full Moon Party.

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Editing by: Zachary “I’m selling” Crockett, Donna E. Mobile (Musical Director).

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