Ted Audio Collective.
HBR presents. Hi everyone, you're listening to After Hours.
I'm here tonight with Mehear and Felix.
Hey guys. Hey, I'm Mehear.
Hey, I'm Mehear. So this is going to be a fun episode because we're going to do quick takes.
But before we get into that, we continue to get lots of listener questions in the mail.
Fabulous questions.
And I think we mentioned last week that we're going to do a mailbag episode soon.
So if you have questions for us, continue to send them in, and we'll pick a sampling of them, and we'll do an episode on them.
As for tonight, we're going to do quick takes.
Yes. Which we've done before, but rather than go deep into a couple of topics, we're going to do, do I call them more shallow takes?
Quick takes is better than shallow.
Yeah, we're going to do quick takes on our whole bunch of...
We do deep quickly.
How about that? In order to try to catch up on stories that we haven't really been able to do.
Felix, you want to get us started?
You saw Uber, as part of the process of going public, release a document, S1, that has much more financial information, also tells investors a story about how to think about the risks associated with investing in the company.
It's actually fascinating to me that roughly a fifth of the document is about everything that could possibly go wrong.
But so Uber... Welcome to disclosure, yes.
Uber released its S1.
What's your take? Well, so I'll go first on this one.
They are so far away from sustainable profitability.
It is really remarkable to see.
What struck me was how not only do there not seem to be economies of scale.
There are no economies of market leadership.
In fact, there are marketing costs.
And I use that term loosely because I'm referring to the incentives they pay to consumers in the form of coupons and marketing and all that.
And then the incentives they pay to drivers.
To drivers, yes. Which are not small, yeah.
But they are not small.
So it's a two sided platform and they have to incentivize both sides of the platform to use the platform.
And the costs associated with that are going up.
So that's the first point I'll make.
The second point is the verticals that they are pointing to.
Yeah. Uber Eats, freight...
Uber Eats, freight.
The costs associated with competing in those new verticals.
You see this already in Uber Eats where, again, their costs are just going up and up.
I mean, there was a period of time, and I was trying to remember, but in the late 90s and early 2000s where Amazon as a public company was just losing money.
Remember, as they were building out infrastructure.
And over that course of time, I think they lost between three and four billion dollars.
Uber, last year alone, lost three billion dollars with no physical assets to show for it.
And then the last thing I'll say is when they point to autonomous driving as going to be this salvation.
What we know from history is that whenever you try to switch from one technology platform to another, the costs associated with doing so are always so much greater than people anticipate.
So I'll stop there.
Go ahead. Announce your short position.
Announce your short position.
How about you, me, or what was so interesting and surprising?
Well, I think everything that I agree with, everything that young me said, in a way it was even compounded by the fact that they're pointing to Uber Eats and they're pointing to Uber Freight and the profits aren't there.
But the crazy part to me was the growth has slowed down and is negligible in the ride -sharing piece.
In its core business.
In its core business.
And so quarterly sequential growth was negative or flat.
And on top of that, that was during a period where everybody was waiting to go public, so there was heavy discounted.
So they were giving away money to try to lure people, as was Lyft in Q4 2018, and it didn't show up.
So this, to me, made me, for the first time, think to myself, that market is mature.
Actually, the ride -sharing market in the big cities is mature.
More interesting. But the growth on the ride -sharing piece, which, remember, is 80, 90 % of their business.
Although, to your point, young me, they keep pointing the direction of eats and freight in part because I think they want to take attention away from the stagnation of the ride -sharing business.
The S1 was worse than I thought.
In other words, we had talked about Uber, I think, a few months ago.
But then we kept saying, well, let's wait until we see this one.
This one was worse than I thought?
No, I think that's exactly right.
And I think, in part, what we've all benefited from, which is low prices, that's been funded by SoftBank or whoever else is coming to an end.
Because that is no longer going to be sustainable.
I had two interesting takes on how they think about competition.
The first one was, I was struck that 25 % of their bookings come from five cities.
They are so dependent on a few cities.
I didn't know that.
So it's Los Angeles, New York, San Francisco, obviously, Sao Paulo, and London are the five big markets.
And so you can imagine, regulation in any one of these is going to do really substantial damage.
And then the second point was, you're almost hesitant to talk about your core business.
All the excitement is in the businesses that you haven't built yet.
I'm sitting there, I'm reading, I'm going through the page, and I'm going, but what about the 90 % of your business?
What's going to happen there?
It's crazy. I'm telling you, it's okay, Mihir, you got one?
Sure. So we spent a lot of time talking about technology, but we often don't talk about the deep infrastructure technology stuff.
And there was a fascinating development in the Apple Qualcomm battle.
So just briefly, Qualcomm makes the modem chips that allow your phone to connect to the networks.
And Apple has been engaged in a big dispute with them.
So briefly, Apple was suing Qualcomm because they viewed them as basically making them pay twice, both to buy the chips and then a whole bunch of license and patent fees that were being charged for as well.
Lo and behold, as the case opens, they settle.
And not just do they settle, but the next day, Intel announces that they won't be making any of the chips.
Modem chips. That Apple was relying on at the same time.
So what evolves is Qualcomm stock goes up through the roof 20%, Intel backs out of the 5G market.
So I was just curious about your reactions with both on the IP side as well as kind of the competitive dynamic and whether the FTC, who also has a case against Qualcomm, what do you think will happen there?
So my first quick impression was, I did not know that there are only five companies that make it.
When you think about it, it's so important for your phone to be able to connect.
And then you say, oh, what do you mean?
There's only five companies and then two of them, Huawei and Samsung, actually only make modem chips for their own phones.
So if you're Apple, there's basically almost no choice.
And so I think what was really interesting is the moment Intel drops out of the race, then of course you're back to, oh my God, now Qualcomm is my only...
You basically have no choice, which just goes to show Qualcomm super, super powerful.
Yeah, you know, similar take.
I mean, this to me was a story about power and leverage.
According to legal experts with respect to the lawsuit, Apple apparently had a really strong argument and they were going into this lawsuit on really, really firm legal standing and yet they just immediately caved.
And I think they're looking at a horizon where sales of iPhones are beginning to flatten.
And so the prospect of being late to market with subpar 5G technology is absolutely deadly.
So Intel couldn't deliver the chips they needed.
So all they have left is Qualcomm, that's it.
It's crazy. And then the other piece to this that's so interesting is, I mean, it's just a reminder of how interconnected these global supply chains are.
So Huawei has recently suggested that it might be willing to sell to Apple.
Yes. And then the question is, does Apple say yes to that?
And I think the backdrop to this, to me, is so fascinating is the national interest, right?
So now people, and you've raised this before, I think, you know, do we need an American producer?
And so now Qualcomm is the American producer.
So you have the US government saying, don't do business with Huawei.
And then it's not so easy because there's only one real American provider.
So Qualcomm now emerges as the one American provider.
So yeah, it's going to be super interesting to see how this plays out.
Because especially if the FTC drops its suit, in part, maybe because, wait a second, why do we want to challenge the only American provider of these modem chips?
Exactly. Okay. I need your quick take on a company we haven't had a chance to talk about, which is Pinterest Went Public a few weeks ago.
And I know Felix, this is one of yours.
I love Pinterest. You love Pinterest so much.
So I need to know if you're bullish on this company.
I am actually. So my enthusiasm, in part, has to do with I use it myself.
And I think it's really wonderful.
It's really fabulous.
But there's two things about the business that strikes me as really interesting.
The first one is given our general perception of social media right now and the backbiting and all the negativity, it is heaven.
It is heaven on earth.
You go, it's peaceful, it's positive, it's nice, it's supportive.
It's like everything the world is not.
You find it on Pinterest, which puts them in a really interesting context from an advertiser's perspective.
Because those are, of course, the emotions that brands would love to be associated with.
And then the other thing that I find very interesting is, if you think of a continuum of how sure are you what you're going to buy.
Amazon is like super targeted, right?
I know this is the kind of battery that I want.
And you go to Amazon.
If you're a little less sure what type of battery, which brand, Google I think is a formidable player.
And I see Pinterest as yet one step removed from that.
It's more, I want to be inspired.
I'm invited to a 1980s party, what dress should I wear?
And you go to Pinterest and you see these fabulous dresses.
And of course, you know, you can buy all of them.
And so just the fact that you're looking, I think, is commercially really valuable.
So I don't know. This was lost on me.
I think Pinterest has just lost on me entirely.
And you never used it yourself?
I looked at it very briefly, but I have never used it.
But looking at the S1, I was struck by the fragility of the model and its dependence on advertising.
And, you know, I think, young, you've convinced me that when Amazon gets serious about advertising revenue, the world changes.
And man, I thought to myself, the world changes for Pinterest.
So it feels to me like an IPO that's driven by a lot of very loyal users.
I mean, actually, the economics are better than I would have expected.
The margins are reasonable and they're getting better.
And they seem to be improving in many ways.
But it feels to me like a little small world.
And you know better, but I think it feels to me like a smaller ecosystem.
And so I don't know where it goes and it feels fragile.
But again, that's a little bit from ignorance.
Yeah. I'm in the middle.
But here's why I think everyone should root for Pinterest.
It's done exactly what you're supposed to do in a competitive market, which is build significant differentiation by creating true value for its consumers.
I think Felix, you laid it out beautifully.
If you think about the old fashioned purchase funnel, Amazon is the closest to purchase.
I'm going to buy batteries.
And if you show me an ad right there, that's the most valuable.
In the moment, merchandising you can possibly do.
And then at the other end of the spectrum, you have Facebook, where you don't even want to be shown an ad and the ad is noise.
Pinterest is right in that, I'm just window shopping.
I'm not in the market, but I want to just window shop.
I want to look at stuff.
I want to be inspired.
And on the back of that insight, they have built some really unique advertising tools.
So all of those things make me want to be so optimistic.
The scary side to me is that when you look at their S1, you see most of their growth coming internationally.
Much harder to monetize that business.
And then the second piece is Instagram coming in with their collections.
And we've talked about this, I just have a hard time believing that anyone with an advertising based model, once they reach a certain size, they're just going to end up getting crushed.
If they stay small enough, they can stay under the radar and they can build a little niche business.
But as a public company, they're going to have to grow and grow.
So that makes me much more nervous.
I'm glad to hear you say that because I was thinking I was just skeptical about advertising, but it's just all, there's no recurring revenue to speak of.
There's no subscription service.
What feels very different on Pinterest is that a large parts of Pinterest can never be commercialized.
So for instance, my favorite board on Pinterest is Stairs.
I think it's amazing what Stairs architects and people build.
It's like, really, just, and of course, there's never any advertising because I love the Stairs at termis in Paris, but I'm not going to go out and buy that set of Stairs.
And so the mix, I think, creates...
But this sounds like just a fancy Reddit or something.
Oh, no, no, no, no.
But how do you monetize that?
Sometimes you're looking at every style of faucet for your kitchen because you're thinking of maybe remodeling your kitchen, and so you have an inspiration board that is all beautiful faucets.
You're looking at me with such...
Well, that's because there's tears streaming down your face and Felix is basically...
as you talk about this.
So let me just ask Felix, just to be clear, the stock is now public.
Have you bought some?
It's done very well, right?
As you know. And I think rightly so.
So I'm optimistic. He didn't actually say...
He answered the question?
Hey, who's the lawyer in the room?
Okay, very good. Okay, Felix, you're up next.
We have never talked about the never ending drama.
And I'm not... I was just going to say, I'm not referring to Game of Thrones.
Brexit! It's a bad dream.
Brexit, what do you guys say?
So what's your take?
What have you learned?
So I have two comments about how we got here and maybe one comment about where to go.
So in terms of how we got here, I think the larger lesson is to me, this is the canary in the coal mine about populism, where people start to think they can have the best of both worlds, which is you can be globally connected, you can be in an integrated economy, but no, we can close our borders when we
want to and we don't like these pieces.
We can turn our back on this piece but keep this piece.
And I think that incommensurability of those agendas has now wrought havoc in the United Kingdom.
And it is showing how impossible that dream is.
And so this is the canary in the coal mine for people who think, oh, we can, you know, we talked about control.
People want control.
But they don't want to give up anything.
And they don't understand the bargain that is globalization.
And I think what will end up happening, I don't know what will end up happening, but I think that chances of a real Brexit are going down every day and it's more likely to go to a second referendum or a very kind of soft version of things.
But to me, the broader meaning is, look at this fabulous country.
Look at the havoc wrought because people thought, you know, oh, we can turn our back on this part of the global economy but we can keep this part of the global economy.
It's not the way the world works.
It's not pick and choose.
And that is the illusion that populists have sustained.
And it's so bad. In the UK, you're seeing what happens when people don't understand.
That bundle is something that has brought enormous gains in the last 30 years.
And if you're going to turn your back on it, you can't turn your back on it selectively.
It's going to have huge costs.
Another impression that I have from Brexit is even though there was a lot of public discussion, there are studies and newspaper articles every day.
If anything, people who favor Brexit seem more adamant about now leaving the EU and people who wanted to stay in feel even more bitter about the fact that they have to leave.
And I think the most impressive and maybe depressing manifestation of this, remember when the parliament voted on all these options and there were literally like eight options on the table, not a single one reached a majority.
Like all options are thrown out.
And I think what that means is in a world where we have such split views about what the future will bring, majority rule can be really terrible because it doesn't allow you to use information about, oh, okay, so we're not going to live in the first best world.
Like what's second best?
What's third best? Even the act of polling for people's preferences is fundamentally flawed if people disagree essentially in their theory of how the world works, right?
So if you go back to the original referendum, one of the arguments in favor of Brexit was this notion that the UK, we give all this money to the EU.
Meanwhile, our national healthcare system is crumbling.
So we're going to take all that money, we're going to throw it into the national healthcare system and we're going to fix our national healthcare.
Like that was one of the hallmark promises behind Brexit.
And of course, there are people who believe that's the way the world works and therefore, that's what I want.
And there are other people who say, that is not how the world works.
And if we stop making those payments, that's not what's going to happen at all.
I mean, here you are making the point about how the world is a really complicated place and you can't pick and choose.
This is not an a la carte menu of what you want in the world and you can't have just the best of every course.
But now that we live in a world that is filled with this kind of complexity, explaining the ripple effects of any particular policy becomes increasingly difficult.
And given that inability to be able to explain anything with nuance, politicians are essentially left to kind of sloganeering.
And so there's this reductionism in how we're talking about anything that is really complicated.
And then that leads to a voting process that is polarized.
But I think this is such an important piece of the puzzle, young me, because I almost feel like actually the consequences to the UK of this horrible stalled process for now what will be years, literally years and maybe a decade, will actually perhaps eclipse the actual gains or losses from the actual
transition, because it will do so much damage to the institution, so much damage to the sense of what a democracy is.
But it's altogether, I have to say, it's really quite sad, especially for a country like the UK, and it's stress.
I mean, I think people feel stress on a day -to -day level in the UK that is really taking a toll.
I mean, I don't know, it sounds dramatic, but I think it actually really does take a toll.
All right, me here.
Quick take on something.
What do you got? I got something a little lighter.
Which is, I'm curious, although I have a sense your answer is going to be Games of Thrones, because any question I ask you is going to be - Did you just say Games of Thrones?
Whatever. Okay. Is, I want to know what you think the best TV show about business has ever been.
Wait, let's name some of them.
Let's get some on the table.
Okay, so I'll name a couple.
So right off the top, you got to talk about Mad Men.
I think you got to talk about Succession, recent HBO show.
Billions. Billions, hedge fund finance, Breaking Bad, Metalabs, Silicon Valley.
Breaking Bad is a show about business?
It is. It's a great show.
Okay, so what is your favorite TV show for really explaining and understanding the world of business?
I'm curious. Felix, what do you say?
So before I name a show, one of my disappointments about shows that pretend to be about business is that in the end, they're not.
Somehow, we always end up with 90 % of a show about businesses about interpersonal drama or love stories or what have you.
Like the same - Do you want them to be doing P &Ls?
So what I do, like, I don't - well, I don't know what's my taste.
My P &L is pretty interesting, but I understand that might not be the majority.
Netflix, Paul Felix.
He's got an idea. So having said this, I think probably Mad Men is the one that I love the best.
I should say, the early part of Mad Men, before we went down the abyss of personal relationships, you learned something about how the advertising world worked in a particular era, which I also really love.
So it had the right kind of mix between it was really a show about business and it also painted a picture of what it was like to be a businessperson at that particular point in time, both for men and women, obviously then a very dramatic difference.
What do you say, Yangmi?
The best show about business, hands down, Keeping Up with the Kardashians.
Because - It is a business.
And it's this meta thing that you experience when you watch them because their business is their lifestyle and the showcasing of their lifestyle.
And so it's a very participatory experience when you're viewing it.
But also, we should do an entire segment on the Kardashians.
I have never really thought about it because I guess in part I hadn't thought about it as a show of business, but it is a little bit that point that Hollywood, because it's Hollywood talking about itself, right?
It's so meta. And so that's what they're good at.
Yeah. I mean, Hollywood is the business of celebrity and the show is celebrity.
They are selling you silver.
It's a beautiful point.
Yeah. I never thought about it that way.
It's brilliant. I have actually not watched that too much, but I think your point is really - They're not really the target demo.
But your point is right, which is it is they have created a franchise out of a property and they've manufactured a business out of nothing.
And that's fantastic to watch.
I'm going to go with Mad Men 2 because I think those early episodes, those early seasons, I particularly remember the Carousel episode when he pitches the Kodak slide projector.
When he does those pitches, it's like amazing.
And so I love those.
The last kind of genre that I'll just mention, which I think are really interesting is, I like all the house flipping shows, because the economics are laid bare, like you can buy this house for $400 ,000, we can put in $50 ,000 into it and maybe we'll flip it to $500 ,000.
You, of course, never see the long run outcomes.
But there's an element to the kind of investment and how do we think about whether this property makes sense that I really think are really fun in terms of just seeing the real estate business.
Yeah, that's good. Okay.
We have time. I think we can squeeze in one more.
Do you have another one, Felix?
So, of course, we have to talk about Game of Thrones.
It makes me so happy that we're ending on this.
What's your question?
My question is, this is too good to be true.
The success of this show is bigger than anyone could have dreamed of.
Why on earth, from a business perspective, why would you ever end?
Why are we watching the last season?
God, I have no idea.
I mean, look, I think my basic reaction to this is the puzzle is always the opposite.
The puzzle is why do creative people go too far and too long and exhaust material well beyond when they should?
To kind of continue to produce shows well beyond the kind of natural life of the content, I think is the usual tendency, right?
And so I admire people who actually have the restraint to say we're going to call it to an end, which I think is true.
And for the example of Mad Men, I think they actually cut it at a nice time.
By the way, I didn't mention Sopranos, but Sopranos, also an incredible business show.
But why did Game of Thrones end so early?
To my eye, not early enough.
Oh, my God. So my response goes in a slightly different direction than Mahir's.
I don't think they're going to end.
I think they're going to end, but I don't think they're really going to end.
The biggest aha that I think Hollywood has had over the past decade is the power of creating a really rich and textured universe.
Because once you create that, there are a million things you can do with it after you've created it.
So, of course, the prototypical example is the Marvel universe, where you can just spin it and spin it and spin it.
Star Wars, we thought the movies were done and then they weren't done, and now there's series being spun out.
You know, minor characters become major characters, and what Game of Thrones has done is they've created this unbelievable tapestry, this landscape, this universe, this world.
With all the Seven Kingdoms, should I name them, Mina?
Please do. I can imagine this particular rendition of the series ending, but it wouldn't surprise me at all if, in the future, we begin to see spin -off series of minor characters and other things.
For exactly the reason you said, there's too much money to be made.
Yeah, yeah. There's an interesting analogy to the way the story is told.
Since you haven't seen it in the early seasons, there is one particular person.
You think he's going to be king.
It's his story and then in a really shocking, surprising episode, he gets killed.
You're investing so much in this character, and we really get to know him, and he has a personality and a life and ambitions.
And then you cannot believe the moment when this person is gone.
And so in a way, ending it now, reminded me a little bit of that character development and the storyline in that we're in love with it, it's doing really well, and then in a really surprising way, it gets taken away from us.
But maybe we can live in lots of different other worlds.
Yeah. What a nice way to end this segment.
Okay, guys, so I have a pick for you.
It's really not for you, but I have a pick.
Well, thank you anyway.
Well, because I know you do it already.
So my pick is scc .gov.
How exciting, yeah.
Yes, I know. It's a really sexy one.
So this is the year, as we talk about, this year of many IPOs, and I think there's a tendency for people when they're reading about these companies is to just read the financial press, to read financial journalism, business journalism.
And my recommendation for anyone out there who is really serious about business is before you read anything about a company, Uber, going public, Pinterest, Slack, any of these companies, when they file their S1, don't read what people say about it.
Just go get the S1 off scc .gov, download it, and just read it for yourself.
It's great idea. So tell us quickly, what's an S1?
When a company files to go public, it's required to make disclosures, and those disclosures are embedded in what's called an S1.
And so my recommendation is instead of reading about the company and reading about what a financial journalist or some business journalist that has spent maybe 20 minutes skimming this document for a few interesting tidbits to write a story on, go on and just read it yourself.
It's a great suggestion.
Anybody can download these documents.
You just go to scc .gov, download it, and read it.
It helps you develop an independent sense of how healthy you think this company is and what their prospects are before you're biased by anything else you read.
And then there's a lot of nuance in there, even the metrics they decide to use.
Sometimes they use unorthodox metrics to measure themselves as a business.
So you really get underneath a business when you read those S1s.
So that's a great suggestion.
So that's my recommendation.
Have you guys listened to Billie Eilish's new album?
I have too. You all fall asleep.
Where do we go? She's everywhere.
She's 17. And the music is amazing.
Obviously, we're not telling anyone anything new.
She's all over the radio.
She's everywhere. She's interesting.
But also as a person.
She is so much her own person at a, I think at a very young age and in a very refreshing manner.
Sometimes, and this is probably a little bit to do with social media, I feel like there's this enormous pressure to conform.
And all of that pressure does not seem to matter to her at all.
There was a couple of weeks ago this bigger conversation about she suffers from Tourette's syndrome.
And so some of her fans, I think they picked it out.
Usually when she's being asked questions, she learned to manage her Tourette's, basically showing the twitches in the part of the interviews that the public wouldn't see.
And then that wasn't true for one show.
And so people picked up on it and it became a thing.
And then her response, so authentic, so genuine.
So, yes, this is something I suffer from.
I had to live with it.
All my friends know.
I didn't talk about it because I didn't want to be defined by this one illness that I have.
But in a completely charming way that feels like this person is just her own person.
So both I think the music obviously is fabulous, but also as a person I think there's so much to learn from, so much to admire, that she's 17.
It's so cool when you find yourself an utter admiration of someone who is so young.
Yeah, that's a great suggestion.
Really good one. Okay, I have a slightly lighter one.
It's a meme of sorts, which is, you can follow it on Instagram or Twitter, it's called Midtown Uniform.
So, hashtag or at Midtown Uniform are accounts dedicated to this phenomenon that you will see in finance, but you will see it in particular in Midtown Manhattan.
Wait, finance has memes?
Oh, yeah, we got memes.
And this has got to be one of the greatest ones of all, which is Midtown Uniform is a set of pictures associated with young men, typically in their 20s and 30s, who wear fleece vests, which is the finance uniform, and tailored pants, and Alan Edmund's shoes, and they have created just a fantastic set
of photos, which both kind of poke fun at all these people, but they are hilarious.
Is it the Patagonia Fleece Vest?
And that now has become a controversy, which is so fascinating because Patagonia is now turning its back on finance because of the embrace of the fleece vest.
So this whole story, the Midtown Uniform story, plus the Patagonia response is spectacular.
So I encourage you to look at it.
We should talk about Patagonia at some point.
That would be fascinating.
Okay, those are great recommendations.
Thanks everyone for listening.
This is After Hours from the HBR Podcast Network.
Thank you.
