Was The Sharing Economy Way Overblown? — With Emil Michael
12 Apr 2023 · 49 min
In this episode of the Big Technology Podcast, host Alex Kantrowitz interviews former Uber chief business officer and DPCM Capital CEO Emil Michael to dissect the current state of the ridesharing and broader sharing‑economy sectors. Michael explains that post‑COVID rideshare revenue growth is driven mainly by higher fares rather than increased trip volume, and that both Uber and Lyft have raised prices to chase profitability while also absorbing a growing pile of taxes, surcharges and regulatory fees. He discusses the scarcity of drivers, the impact of price elasticity, and the unusual move of Uber’s CEO Dara Khosrowshahi driving for the platform to experience driver‑side problems first‑hand. Michael critiques Uber’s product‑management practices, citing a cascade of feature‑on‑feature bugs that degrade the driver and rider experience. The conversation then shifts to comparative performance: Uber’s market cap sits below its IPO level, Lyft has lost the majority of its IPO value, and DoorDash has out‑performed Uber in U.S. food‑delivery. Michael attributes DoorDash’s success to subscription‑based loyalty (DashPass), early suburban expansion, and aggressive menu‑listing tactics. They explore how the end of the zero‑interest‑rate era forces formerly VC‑subsidized models to confront profitability, with investors demanding better alignment of incentives. Michael argues the sharing‑economy hype was overblown because the model works only for high‑cost assets (cars, homes) and breaks down when applied to low‑value items. He also reflects on the long‑term timeline for self‑driving cars (7‑10 years) and how the investment was more defensive than offensive. The discussion moves to AI, where Michael sees parallels between current AI valuations and past sharing‑economy bubbles, questions whether AI will become a platform that concentrates value in big tech or enable a broader ecosystem, and raises concerns about dual‑use risks such as weaponization of scientific knowledge. Finally, Michael shares his current investment focus on enterprise software and AI applications, his skepticism toward Web3 and crypto, and his view of Miami’s emerging tech scene versus San Francisco’s talent density.
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Welcome to Big Technology Podcast, a show for cool-headed, nuanced conversation of the tech world and beyond. Emil Michael is our guest today. He's the former chief business officer at Uber. And he's the chairman and CEO of DPCM Capital. And Michael joins us at a fascinating moment for the ridesharing business and the sharing economy overall. Let's start with the fact that Uber is sitting at a market cap of $63 billion, which is less than its last private market valuation, and its share price is trading below its IPO price, and its CEO is giving rides himself to figure out why his company can't recruit drivers. Lyft, meanwhile, is down 87% since its IPO, and its founders just resigned for quote-unquote personal reasons. I mean, come on. Then you look at Airbnb, which has effectively been flat on the stock market since its IPO years ago, and you begin to wonder whether there was a sharing economy at all, or whether zero interest rate environment investments from VCs and public market investors have propped up non-businesses this entire time? Well, the answer's not a clear yes, but it's also not a clear no, at least for some companies. I discussed this all with Emil Michael, who's had a front row seat to this at Uber and has followed it closely afterwards, and I think has some very valuable analysis that you're gonna enjoy a lot. My conversation with Emil coming up right after this.
This episode is brought to you by Genesis. What does it actually take to put agentic AI to work across an entire enterprise? I recently spoke with Genesys Chairman and CEO Tony Bates about why orchestration is emerging as a competitive advantage in customer experience and what companies need to get right in the AI era. Then I sat down with Adam Mitchell, Head of Enterprise Business Solutions at Voya Financial, to go inside a large-scale agentic CX transformation, including the business decisions, trade-offs, and lessons along the way. You can watch both conversations now on my YouTube channel today.
Emil, welcome to the show.
It's good to see you again. Been a couple years.
Yeah, you were one of the first— we were just talking, you were one of the first guests we've ever had on the show, and it was in the thick of COVID And we were talking about whether people were going to continue to do ridesharing after, uh, COVID ended, and whether people had, you know, were going to just travel with their own cars. I bought my own car, all right? So I'm doing a lot less, and the businesses have struggles. So actually, it's maybe a pretty good place for us to start. What do you think the rebound from COVID has been like for ridesharing companies in particular?
Well, if you look at the data, the revenue part of ridesharing is all the way back and more. However, I think what's buried in there is the price increases have been dramatic since pre-COVID times. If you look at sort of what the same ride cost, so the number of rides probably has slowed, It's still probably growing a bit, but because the price increases have been material, the total revenue has grown. Contrast that with food delivery, which has sort of shot out of nowhere and was bigger during the pandemic for Uber for a bit than rides. And now that's slowed a little bit and rides has taken back over.
Yeah, Emil, I got to tell you, so I was in San Francisco, came out of the airport and, you know, I had been away for a little bit. I moved back to New York and I was so used to just getting out of the airport, calling an Uber, or a Lyft going to my house in the Mission, and, you know, it being a very easy process. The Uber— I might— maybe it was surging or something— was over $100. I had never done this before. Walked down, went to the, um, the, the black car drivers and, and said, hey, can, can you take me home? And we negotiated a price which was still double what I used to spend, uh, you know, with Uber, but it was also much, um, much cheaper than the Uber prices. Is that Was that a unique experience, do you think? I know you're not there day to day anymore, but was that a unique experience or is this sort of par for the course right now? And if so, what does it say about the long-term trajectory of these businesses?
Yeah. So 2 things are happening. I don't think your experience is unique. Prices are going up for 2 reasons. Both companies, Uber, Lyft, have said, we got to get profitable. And Wall Street has said, well, you know, you guys have to get profitable or your stock's not going to move. So them, amongst other tech businesses, have sort of made that move to profitability, which meant raising prices. That's the easiest way to get closer to profitability, right? The second thing that's happened is there have been a ton of taxes, surcharges, fees that cities, states, and localities have added to rides. In California, Prop 22 added, added some costs. So There's 2 buckets of cost, the profitability cost and the regulatory cost has added to this. And I think that's what you're seeing kind of across the board, across the country, across the world. And what is going to happen is on the margin, it's going to make people take Ubers or rideshares less, right? It's like we learned this very early in our time at Uber. Price elasticity for transportation is super important. Like, you raise the price a dollar, fewer people use it, just period. So I think you're going to end up having slowing growth in the number of riders because of this.
Yeah. And there's also one thing you didn't mention is the fact that there's much less drivers or having trouble getting drivers on these platforms. So there's this recent Wall Street Journal article with— and we got to talk about it because it has— it's basically documenting Uber's CEO, Dara Khosrowshahi, he's moonlighting as a driver with Uber. And I'm just going to read you a little part of it. So this was the first time— he's been CEO for a while. This is the first time he's tried to drive Uber, and he's found all these different issues. So this is from the Journal story. He struggled to sign up as a driver. He saw firsthand something called tip baiting and was punished by the app rejecting trips. Uh, surprisingly hard to take was the rudeness of some riders. Um, and they say that it's part of a campaign by him and his lieutenants to better understand and improve Uber's experience for drivers, whose scarcity has become a critical challenge for the company in the US. Which, think about supply and demand, I think that's probably one of the issues. And here's one of the amazing lines from the story. He hadn't driven on Uber before because it wasn't his biggest priority. Drivers had always been in abundant supply, and it's one of those interesting profiles where it's like you have access, so you're trying to be nice to the guy. But like as it continues to reveal details through the story, you're like, is this person really an effective leader? So you know, I'm curious hearing hearing about this. Was this a practice that that you guys did when when you were at Uber during the Travis era, and had you been driving Ubers? Had Travis been driving Ubers? Not to you know. get too deep into that because I feel like that's been talked about to death. But I'm curious, when you see a CEO driving for the first time this many years in and finding all these issues, what does that mean?
I'd be surprised if that's the first time he's driven. But yeah, we used to drive all the time. I think Travis used to do Halloween. I would do a weekday night and the product managers would do it all the time. We had a program that asked all employees to try to do it once a year, all of them, not just product managers, including engineers, so that they could feel the experience. So that would— that would sound surprising that your biggest product would be something that you didn't experience and shows a little bit of distance between the product you're building for billions— millions of people around the world and, and your effective, uh, ability to effectively lead a company that's supposed to do that. Um, that being said, they did make a, a lot of product decisions in the last couple years, which I think have been a big mistake to both the driver experience and the, and the user experience. And maybe they're figuring those out now. I, I don't know. But we have never had plentiful drivers. That's not true.
Mm-hmm.
There's always been a supply constraint on average. at Uber, um, all the time. It's because demand is, it was, you know, was always rising faster than supply. So I don't, again, that, that's a, that's an interesting quote that I wouldn't have predicted.
Yeah. And no, I guess I kind of give him credit for, for, I mean, the, the knock on him is fair that it took this long for him to get into the product and start doing this. I give him credit for starting to implement some fixes there. The article really gets very interesting when he starts doing delivery. So he finds all these problems in the app that they, I guess, confess to the Journal. And, you know, I guess it's good and transparent, but it was just astonishing to me how many glaring problems that they found. Let me read a little bit more. So this is again Dara going through the delivery experience. I guess I shouldn't laugh. It's good that he's trying it out, but there's something comical about the whole situation. So here it is. So one time he clicked on the notification and the app started navigating him to a new address, hiding directions for the current order. New orders are now queued after existing orders, even if drivers click on them. Okay, so that's a change that he made so information about the current one isn't lost. On another occasion, Mr. Kostasari showed up to a restaurant to pick up what he thought was one order, only to learn that it involved 2 separate deliveries. Uber was combining orders along the same route, but the app didn't make that clear. So now the company is introducing better labeling for trips that involve one more. Than one delivery. He also ran into a problem. This is an interesting one. He also ran into a problem delivery drivers had been complaining about: tip baiting. Customers would entice workers to pick up their food quickly by entering big tips on the app, but then reducing them after the food was delivered. And they're trying to work on fixes for that as well. I mean, that's really disgusting for people to do that to delivery drivers. But what— so what do you think about all these problems that he's finding in this service? And also, what do you think about the fact that It's kind of taking the CEO to actually do this and sort of, you know, force down changes, you know, down the org. It doesn't really speak to the strength of his lieutenants, I guess.
What's baffling to me is that it's been almost 6 years, right? So this is not 1 year into one's tenure. And it just baffles me as to, you know, this is the core of a product manager's job. what is going on in the product management part of this company. Like, there's those TV shows, the Undercover Boss things, which are kind of, you know, a boss goes undercover in his own company. He's like, holy crap, what's going on here? And he comes back up. This is sort of so surprising that it's hard to put into words. But if you look at what Expedia was when he ran Expedia, And you try to translate that into the mobile world where it was just sort of a lot of pop-ups and things that weren't designed for a consumer to sort of easily understand what's happening on. And in this case, drivers and delivery people are consumers of the platform too. They're users of platform as well. So you have to make them happy. It's sort of a jumbled kind of mess. And there was a lot of tweets the other day about some of the messiness in the Uber apps as well. And I just, I just think there's no fundamental design point or principle in the apps themselves that are organizing how new features are pushed out. It's just feature on top of feature on top of feature, and then they start conflicting with each other so as to make the thing unusable. So I, again, if I were him, I'd go right to the product management team and, and some heads would probably roll.
Yeah. So Dara is widely viewed positively, I think, by the public. Do you think he's getting a pass? I'm kind of curious, like, what you think about the public perception of him now that— well, let me even read. All right. I'm going to go read the stats because I have it here on what the situation is with Uber. So the market cap is $62 billion. Last private valuation was $76 billion. It's trading at $31 a share. It was priced at $45 at the IPO. With that in mind, rate the leadership.
Look, it's the tale of the tape, right? Warren Buffett, the stock price is a voting machine, and over the long term, it's a weighing machine. It's been 6 and a half years. Stock price is below the IPO. The stock price today at $31 is where it was in 2014. So you're almost a decade of flat stock price, right? And you could argue sort of whatever Travis and I had left him had some challenges that he did work out, and he was a better diplomat and sort of was someone who the press liked a lot more. But I'd say that likability and effectiveness are separate things. Ideally, you want to be both. He clearly ranks high in the likability. a score. But from an effectiveness standpoint, if you're measuring by stock price, that's been, you know, a D, right? D-minus. You know, D-minus even when you compare it to the Nasdaq or other tech stocks. Now, the one other thing I'll mention on his behalf, just to be, you know, to be fair, he's done better. Uber's done better than Lyft. Uber's done better than Grab.
Getting right into my next questions.
Yeah. Yeah. Uber's done better than Didi. Uber has not done better than DoorDash. DoorDash has whooped Uber on food delivery in the US. So that's the mixed bag on that. But stock price is really the summation of all of it. And I think Keith says he's disappointed in it. I'm not sure why Wall Street isn't, you know, asking for more radical change there.
Interesting. What do you mean by more radical change?
Well, usually When you have a stock price that's languishing as this has, and you promise, well, here's what we're going to do, and it's not achieved, what happens is you have some change in incentive structures. I was looking at the 10-K just came out, the annual report for 2022. Stock price was down in 2022 by 20%. All the executives, all of them, made 200% of their target bonus.
Hmm. That doesn't seem right.
Doesn't seem right. Well, incentives are obviously not working. So the public shareholders suffer, the management team wins. That misalignment is something that, yes, should the board be fixing that and should investors be pressuring alignment there? Yeah, I think, I think that's a, that's one easy fix, right? Whose head rolled when they lost the food delivery war to DoorDash? What's going to happen with all these product issues that were found? Who's going to be responsible for those things? And so accountability, I guess, is what I think the key thing that's missing, not just in Uber, but in a lot of public companies when management gets entrenched.
Okay. So speaking of accountability and speaking of Uber's ability to— or the fact that it has crushed Lyft, there has been some accountability there. Now, the reports are that these founders are— they left to go spend time with their families or do personal reason stuff. It's amazing to me that people today are, um, are even venturing those type of excuses when you know that the business has performed miserably. And this is almost certainly a business-related change. I mean, the, um, the numbers for Uber are not great. The numbers for Lyft are downright embarrassing. Um, Lyft is down 87.96% since it's open. They definitely had the likability thing going. I spent time with John Zimmer, who's one of the founders, and one of his— a couple times actually, I went with him when he was driving himself on New Year's and sort of getting firsthand experience with the product. I thought he was a good guy. I mean, I do think he's a good guy, but obviously the management has not been there for Lyft. I think you had a tweet saying that you're expecting the price to go effectively to zero or something like that. So talk a little bit about the Lyft challenges that Lyft has had, why you think those founders are out, and where you think that company is going.
Yeah. So let us be very clear. So here's another stat that's really important here. Lyft in its lifetime, including its IPO, raised $8 billion, and they're worth today $3.5 billion. So they're worth a fraction of the amount of money they raised. So it's been like WeWork raised all this money, it's worth less than that. That's not the case at Uber, but that is the case at Lyft. And that's a big thing to consider. The other thing to note, though, that's, I think, not intuitive, Alex, is the founders before they went public got voting control of the company. So they didn't have to go if they didn't want to. Maybe they were pressured, but ultimately it was their choice to go because they could have voted to keep themselves in. I think, you know, what happened there is— this is my guess, right? Earnings are about to come out in early May for Q1. My guess is those are going to be a disaster for Lyft. They're going to show real problems, and they didn't want to be responsible for that. So they put someone new in. He'll take the heat and say, well, I'm new here, give me another quarter or 2. And then also when they're on the board and not management team, they have better ability to sell their shares. So I think this is a bad sign for the whole company. And I said $5 a share, plus or minus.
Right.
And today it's, it's, it's about $9 a share. So we'll see what happens in a month. I said May. Yeah, you could hold me accountable for that. But, but we always knew this was going to happen on Lyft. And I'll tell you why. I mean, it's not because they were, they were bad leaders or whatever. It's just the nature of ridesharing is that it has a local network effect. The more riders you have on your platform, the more drivers want to be on that platform because they get rides quicker, shorter distance between rides. The shorter distance between rides, the lower price you can, you can charge consumers per ride and the more drivers make because they're taking more rides. That was always going to work in a zero interest rate environment until a zero interest rate environment was over. When there was no more cash and you start to have to make money, then you can't subsidize the riders and drivers anymore. And market share was going to start to go to 90/10. And that's where it's headed, in my view.
Yeah. He always talked to me that he envisioned that ridesharing networks would be like mobile networks where you have a Sprint and a Verizon, for instance, and you decide which one you want to use. You're shaking your head. Yeah.
I mean, it's sort of a nonsense analogy in that you're like, they're totally separate networks. One's not dependent on the other. Whereas the more people and drivers on a rideshare network, the more valuable it is. It's more like a telephone network it being more valuable, the more people that are on it. That's not the case with mobile because a Verizon customer can call a T-Mobile customer. That doesn't change sort of the value of either network. Maybe that's why they didn't succeed is because they don't really understand the basic tenets of network effects in business.
I don't know. That seems like one candidate. Yeah.
Yeah.
So there's also been this, there's been this talk and we talked about it last time you were on, but it's worth updating now that that self-driving would come in and kind of save the business. I mean, that's basically all John was talking about was how close we were to self-driving. This was 2015, 2016, I think. We're in 2023 and we're not there yet. So how bad has the fact that self-driving is not available yet been for these companies' business and their ability to prosper?
And I still think we're 7 to 10 years away from material percentages of cars being self-driving on the road. Right. Travis and I always disagreed on the timeline on this. Both companies—
I feel like it's always 7 to 10 years. It's always 7 to 10 years.
It's always 7 to 10 years away. Right. Both companies spent a lot of money on this, but it was never going to be the savior. I think for, for both Uber and Lyft, it was a defense against Waymo and Google. The fear was that if we didn't do self-driving and Google did and deployed it fast, well, that would eat rideshare. So we had to be in both camps so we weren't disrupted. It was a— it was more defense than offense. The thing I found really strange about Lyft's strategy here is that they, they did this ballot initiative in '22 to raise taxes for electric cars, which that was going to save them somehow too. So sort of these weird Hail Marys that they were doing instead of expanding into food delivery or to Europe for rides. They're focused on autonomous and on electric vehicles, which I just think were bad, bad business choices.
Yeah. Well, I want to say for the record, before we move on, John Zimmer, I've been trying to get you on the show a couple of times, sent you an email. You have an open invite. And even though I'm not at BuzzFeed anymore, I hope we can still talk. So just making it known.
Yeah. Well, look, he's— everyone says he's a nice guy. Dara's a nice guy. You know, behind the scenes, John I've tangled with him a few times. He's pretty— he has his moments as well.
Yeah. Well, okay. Hopefully, John, you come in, we can talk about it.
Yeah. Hopefully he comes.
So let's talk a little bit.
You brought up zero interest rate policy, which is something that I wanted to talk about. So I mean, how does— because these companies have been subsidizing, like you mentioned, drivers and riders for so long. And of course, when interest rates were zero, you could lose money or break even and the market still loved you when they looked at growth. So I'm very curious to hear from your perspective how the raising of interest rates has changed the nature of the business for these companies, because you can't take those shortcuts you used to anymore and get the same benefit.
Yeah, I mean, it's super simple. And the way Travis and I used to describe it, you're like, someday there's going to be a musical chair and there's going to be one less chair. And If you've been betting on zero interest rate environments and your ability to raise money and subsidize and subsidize and subsidize and not doing the efficiency thing, it's going to— when that breaks, you're going to break. The valuation multiples were getting pumped because there was so much money in the system and you didn't want to miss the next big thing. And entrepreneurs were rightly saying, okay, what am I going to do with this money? I got to spend it so I don't get smaller than the next guy or gal. So that ethic was an ethic about who could grow faster, which was, again, you have to play the game on the field. Now that that's changed and those multiples have come down and some sense of rationality has entered into the picture, which is, well, I can invest in treasuries and get a 6% year-over-year return, or I can invest in Uber stock. And if that does not grow 6% year over year, or 10% to account for the risk, well, why am I putting my money there? And then the money flows out from an Uber stock to there. So then your ability to spend money and raise it without being diluted has changed. So it's sort of a very natural reaction, especially in tech, which was inflated beyond almost any other sector in the economy.
So the knock against these companies has always been that they're just VC-subsidized carpool rides. And when that— when the, you know, the band stops playing, that's going to be the end of these businesses. I mean, we're starting to see that it's made it harder for them to operate. I got— I've got you shaking your head again. So clearly you have a rebuttal here. So what is it?
No, no, I was going to— I was going to add context to what you said, which is you were right that those were VC dollars subsidizing it, but you had to do that because if you didn't, The other company was going to do that. But our theory of the case was we will subsidize as long as we have to and as long as the money is available. And then when it comes down to it, the bigger party is going to win when there's no more money available. And that's what I'm saying is happening today. The bigger party, because of the dynamics of the rideshare market, is going to win and it could be highly profitable. And that's what I think is going to happen.
And you just added the $10K. What's the profitability? profitability picture for Uber right now?
If you're using normal accounting metrics, let's try that. If you start there, it's losing a couple billion dollars a year still. Now, to be fair, a lot of that is because of the stock they hold in Didi and Grab and some of these other rideshare companies around the world. Those are marked to market every year or quarter. So depending on how, you know, it's not really a cash cost to Uber's balance sheet. So If you strip that away, then, you know, they're still losing money, especially, you know, to the tune of probably $1 billion a year. They're paying— I think last, last year they paid, you know, $1 or $2 billion in stock-based comp, which is another kind of current trick that tech companies are using and taking out of EBITDA. So adjusted EBITDA doesn't include all the money you pay your employees anymore, um, which is something that I don't think is, is, you know, it clouds the picture a bit.
Yeah. Um, one more question about these companies, and I think we're going to start to cover some other stuff. But, uh, you mentioned DoorDash has given Uber a run for its money, or I think you said that they whipped them in North America. What has been the secret to DoorDash's ability to do so well?
Tony Hsieh is an entrepreneur, not sort of a caretaker diplomat type CEO. So he is in the product. There is 0% chance that my— I don't know, Tony, 0% chance he hasn't made deliveries on DoorDash frequently to see what that experience is like. So they've just innovated some of the innovations they've done that are really material. DashPass, a huge innovation, right? Because people were ordering so much food during the pandemic that if you could sign up for this $9.99 subscription plan and have free deliveries, it was a deal all day long. And then why would you use Uber Eats? So the loyalty they got with that, they're way ahead of Uber by years on that piece. Smart. Second thing is suburbs. They went to the suburbs faster. And they were the only party out there for a long time. Because remember the old Grubhub? Grubhub was like dense urban areas. They went and attacked a new market in the suburbs again during the pandemic. Super smart move. And then third, they did this brilliant thing where it's called Over the Top. So turns out that when any human wants— opens a food delivery app, and we learned this at Uber, they want to see as much variety as possible, even if they know they want Chinese. They wanna know that it's Italian. They wanna see 7 Chinese restaurants. So DoorDash saw this early. So what they did is they went to every Chinese restaurant in town and they just put their menu on the app, whether or not they had a deal with the restaurant, and they would pay retail for it. And so you ordered it, the customer gave it, and then at the end of the month, the sales guy would call this Chinese restaurant and say, hey, do you know we brought you $2,000 of business this month? Or you wanna sign up? So, you know, they sort of hacked the variety problem. And it was an incredibly smart move.
Yeah, we have— Ranjan Roy comes on every— from Margins, comes on every Friday. And he wrote this story about his friend who owns a pizza place. I'm sure you've seen this story. And they realized that DoorDash had put their restaurant on the app, but like marked up the pizza. So they just kept ordering pizza on DoorDash and then pocketing the difference. Anyway, okay, one, one, one big picture question, then we'll go to a break. Sharing economy. This was the hottest thing about 10 years ago. People could not stop talking about the sharing economy, sharing your cars, sharing your house with Airbnb. I heard people talking about sharing lawnmowers, uh, whatever it might be through an app. Where has that promise gone? Because we've talked about the struggles for, for Lyft and Uber already right now. I mean, Uber might have a path. Seems like it's in better shape than Lyft, but also still not profitable. And then Airbnb has effectively been flat on the stock market and has its own well-documented struggles. So I think you're coming at this from a perspective where, okay, you're probably going to say no, but I want to hear your thoughts anyway on this. Why isn't the sharing economy, looking back, something that was completely overblown And actually in reality has not measured up to the hype?
I think that the sharing economy, if you kind of look back on it, should have only applied to high-cost assets, right? So asset like a home, a car. When you start applying it to lawn mowers, you know, the transaction costs don't make sense, right? So, so we were How many times do you see, we're going to be the Uber for massages, the Uber for dry cleaners, the Uber for this, that? It went so down the line because people were like, I want the convenience of Uber, so let's call it the Uber of this. And I'm not using my lawnmower all the time, so why don't I rent it out? But you're like, yeah, but someone has to drive 20 minutes to borrow your $150 lawnmower or drive back. And the economics just don't make sense. I think it was overblown because it was applied to everything as opposed to being applied to the things where it makes clear economic sense— homes, cars. There's actually a company called EquipmentShare that does farm equipment where the equipment's actually really expensive and they have a sharing platform and it works, right?
Mm-hmm.
So there are categories where it makes sense to do that. But, but the world applied it to everything, just like every, every hype. AI is now applied. What shouldn't we apply AI to right now? Brickmaking? You know, I don't know. Pick your, pick your thing that you're doing, right? It's sort of the— it is the natural hype cycle. And then now we're in the hangover period on it.
Emil Michael is here with us. He's the chief, former chief business officer at Uber, chairman and CEO of DPCM Capital. Joining us here on Big Technology Podcast, talking about the sharing economy, Uber, Lyft, and all that stuff. Well, he mentioned AI, so we're going to talk about AI and what it's like to invest for him when we're not in zero interest rate days anymore. More on that when we come back right after this.
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And we're back here on Big Technology Podcast with Emil Michael, the chief, the former chief, I should have written former in the notes here, the former chief business officer at Uber and the chairman and the CEO of DPCM Capital. Emil, great to have you with us. So, okay, so obviously we're not applying AI to brickmaking, but this technology is going to be undeniably disruptive. I think that your perspective is, you know, given the way that you talked about it before the break, that people are blowing it a bit out of proportion. So I'm curious where you see the actual action happening on this front, what makes you excited about it, and where you think people should kind of chill out.
Yeah, so I am trying to be more sober about it just because all the companies I advise and I invest in, what do I do about AI? And just like self-driving cars, there are some things that will happen quickly with AI and there are some things that will take a long time for AI to impact or disrupt. And so let's just be thoughtful about that. You don't need to go build your own LLM as someone who sells expense management software just yet. Let's just see what— let's think about where this is going to be applied. So I'm a believer that AI is going to change the world in lots of ways. It's going to change learning, healthcare, even dating. I think it's going to change because it'll be able to match people better. There's a lot of dramatic changes it's going to make. I do not have a fully formed opinion where all the rents are going to go to the big tech companies, or is there going to be an ecosystem around the tech that allows other companies to thrive like the iPhone app ecosystem did? Because when you stick LLMs into Bing, into Google, into Office, just like you stuck Alexa and Siri into all these things, does it just become a component of everything that exists today? and therefore, the big tech companies sort of get all the value out of it or not. I don't know yet. So, that's sort of something I'm concerned about. But the valuations you're seeing now are exactly what the valuations you saw for the sharing companies back then.
Yes.
And it still might be a smart bet net-net for a VC, but that you're seeing that bubblicious environment happening there. As well, right?
Right. And we've talked about this on the podcast in the past, but it is very interesting where you get into this place where with the iPhone and apps at least, okay, the iPhone was the operating system, the apps were distinct. You weren't in the same user interface when you were using the apps versus using the app, using iOS. I mean, even though you were on iOS, you were in the app. But when you're using something like a ChatGPT, you're, you know, going to be in that same user interface as you would be with the apps. And if the AI gets better, Then it sort of throws the whole value of building on top of it into question.
Right. So then you're like, well, can you build a dataset to the side that uses both in some way? Like, take medical information. Could you take the Mayo Clinic's whole database of all the outcomes they've had, of all the treatments that they've had since the beginning of time, and have that be something that's proprietary to them, but use everything else that's on the internet to combine the two to get, you know, sort of a worldwide, you know, trial of certain drugs or procedures and get better answers faster. Is there a way to do that? That would be interesting if there were, because then, then you could have companies innovating around it, not just getting subsumed by it.
Yeah. And it goes back to like, I think what's happened with the evolution of technology recently, which is that You almost get all the consumer applications set by the big companies. And then there's places in the enterprise field, in places like medical, where you can build something with value. So for instance, Character AI, which is one of those companies that raised $150 million on no revenue at a billion-dollar valuation, one of those bubblicious companies that you refer to, why can't a user then go into one of these big chatbots, and instead of chat wanting to chat with one of the characters from Character AI, just say, okay, ChatGPT, you are George Washington right now. You don't necessarily need a billion-dollar app to create that functionality. You can just instruct the big bots to figure it out.
Yeah. I mean, those, so those are, you know, I'm not enough of an engineering, uh, no, I don't have enough engineering know-how to know, um, you know, how that will work and can you do it better outside or, you know, but these are all important questions. I do think there are some scary AI questions, not to be the doomsayer here, but I was with Eric Schmidt the other day and we were talking about it and obviously he spends way more time thinking about this stuff. And I was like, what's your greatest fear? He said, well, what if you could subsume all the physics papers that have ever been written and that teaches Iran or North Korea how to make a nuclear bomb? Or you could You do the same thing for viruses, or to the Chinese, or some adversary can use their own version of AI to spit answers out that are propagandizing our, you know, our citizens. And you're worried about sort of the dark uses of that. That can happen today and fast. And there's no way to regulate this stuff very easily outside of our own borders, much less in our own borders.
Yeah. And Schmidt right now is even working on some warfare projects or AI projects meant to counter China. So do you guys speak about that at all?
We do. We spoke about it a lot because the Chinese for years have been investing a lot of manpower on this problem and it's been state-funded, state-directed, right? Where we have 4 companies that have been doing off their own balance sheet this stuff. More or less. And so we talk a lot about, oh, can we get the 4 companies to agree that you can't, you know, you can't chat GPT how to make a bomb and it gives you a clear answer. And so can we get our 4 companies to agree? And I said, Eric, well, yeah, that's great. We get our companies to agree, but how do you get the Chinese to not have their capability available to some, some lone wolf in our country to learn how to make a bomb? And there's no answer to that just yet.
Yeah. So are you investing in any of these companies or looking into them? What's your, what's your exposure to them as an investor?
I mean, as a limited partner, a bunch of VCs, I'm kind of— I have some exposure through those things directly. Not yet, because I'm so flummoxed by the, by how the ecosystem and how it's going to work just yet. And to be honest, I'm not in San Francisco and this is not— this is happening in San Francisco.
Right.
Not Miami right now. It's the first time I was like, huh, that's like, you know, that is the density of San Francisco engineering talent is allowing that to progress in that city more than any other city in the world right now.
Yeah, it's interesting. So you're the 3rd investor that we've had on the show in recent weeks talking that have discussed this type of topic. Joe Marchese and Mike McNanna were on from Human Ventures and Lightspeed a little bit ago. And they were also like talking about just the struggle to figure out what's investible here. So, what are you investing in these days or looking at?
I started, I slowed/stopped investing directly probably mid-'21 just because I'd made a lot of investments and I just at some point got— the Web3 stuff was so nuts in terms of my inability after being in technology for 25 years. I was like, my brain's going to break because I must not be understanding this. Maybe I'm too old now, right? And I was like, you know, I don't think that was blockchain. What?
Yeah, I don't think that was it. I think a lot of it was built on, you know, inflated dreams of what could be versus what was.
So then I said, I must be— I need to go reeducate myself and, you know, go hang out with a bunch of young people to just understand what I'm missing. So I stopped investing then. It turned out to be a smart decision, at least with that wave of companies that had come out there.
Yes.
But now I'm kind of more excited about— I've never been excited about enterprise software, but now I'm kind of more excited about it these days, not because it's steadier, but just because there's a lot of innovation happening in this stuff, and I do think AI as applied to enterprise is going to be clear moneymakers. And so I'm looking for companies that are doing stuff in that way, and that's what I like. I'm a little worried about emerging markets right now because of currency devaluation, especially in LatAm because of political instability. So I'm kind of keeping it enterprise and keeping it keeping my eye open on AI stuff right now.
Interesting. Okay, let's end with this, this part of the discussion because you brought it up and we have to talk about it, man. I think 2 years ago I couldn't, you know, go 5 minutes without hearing about how Miami was the new capital of tech. I mean, it's, it's died down a little bit, but, you know, living there and saying what you've just said about AI in San Francisco, what's your perspective on the state of that city?
So, you know, I love this city. I've been here 5 and a half years before sort of the pandemic rush. So I came to know it before it had started to attract a lot of the people it did. I'm excited that it has. I do think there has been an outflux from New York, LA, Miami, from VCs, hedge funds, some founders, some people, some technology folks who want the lifestyle here, but the remote work sort of revolution allowed them to be here in a place they wanted to live. I still think there's a dearth of engineering talents here that'll be a leading indicator as to when Miami can build its own startups. There are a few great startups here that are homegrown and have engineers here. Lula, Papa, GoPuff Store, essentially headquartered here. So you have 3 or 4 companies that make it, then, you know, could it be like New York or Austin in terms of the outcomes in a couple of years? Yeah. San Francisco still is a 5x from any other city in the country in terms of the density of talent and the speed of money, talent, and ideas. So I love it here. I'm friends with Keith Rabois. I like him a lot. I love that he's boosting it. I agree with him that Miami's increased its relevance in the tech world by a factor of 5. But there's still another factor of 5 to go to get to, to be on the same tier as these other places.
Okay. And before I let you go, so you said you took a break, you wanted to study what the Web3 stuff was all about. What did you conclude there? Because you seem fairly happy that you didn't invest.
I mean, I concluded that, that there are use cases for a blockchain. If you think about a blockchain as a As a network that doesn't have human intervention, so has an unbiased way of delivering information, data, or property from one place to another and securing it in that way. I was talking to a company that was doing— wanted to use blockchain for home titles. How do you trade home titles? Now it's like a little piece of paper, you go to the county, recorder's office. Why should that all not be electronic? Or you sell a car and, you know, you just send the title over. It doesn't have to be blockchain. You know, you can argue with that. But the notion of a network where property is traded makes sense. The notion of the shitcoins, okay, I think we all agree. Like, we were like, I don't know what was happening there. People were bored in their mom's basement, you know, trading.
When you call it shitcoin, just to begin with, I mean, it seems like the answer is in the question right there.
Yeah.
Yeah. No, no. So what I— but I do spend a lot of time thinking about what Balaji says and how he thinks about Bitcoin and why it's different. And it has proven to be somewhat different than everything else. But so there are parts of it I get, but there's parts of it that have proven to be non-utilitarian. There's no use case for them.
Right. So you're not taking that billion— what is the million-dollar bet that Balaji was making?
Oh, that bet was a bet on the Fed's hyperinflation, what he believes are hyperinflationary policies, right?
Yeah. Are you on board with that?
I don't know. There's 60 days left in the bet. I'd take those odds.
Seems like you can't lose.
I'd take those odds.
Yeah, yeah.
I forget what the hyperinflation was defined by, but my recollection is I'd probably take that bet, a friendly bet, because I like Balaji.
Okay, Emil, thanks so much for joining. Great to speak with you as always.
All right, good to see you.
Take care.
And that'll do it for us here on Big Technology Podcast.
Thank you so much for listening. Thank you, Emil, for coming your second time here on the show, which is awesome. This was super fun. I appreciate you being candid, speaking about the issues. Thank you, Nate Guatney, for handling the audio. Special shout out for Nate. You know, I've been working with Nate for 3 years, and, uh, if you're looking for a podcast editor, I highly recommend Nate. Just get in touch with me, bigtechnologypodcast@gmail.com, and I'll put you in touch with Nate. Thank you, Nate, as always. Thank you also to LinkedIn for having me as part of your podcast network. And thanks to all of you, the listeners. Special treat for you coming up this Friday. Jim McKelvey, who's the co-founder of Square and currently the founder of Invisibly— we've had him on the show before— he's going to come on the show with Ranjan and I to discuss the current state of the economy, looking at the Fed, looking at what some people are calling a credit crunch and much more. So stay tuned for that. That'll be 11:00 AM Pacific, 2:00 PM Eastern on LinkedIn and also here on the feed if you miss it. So stay tuned. Jim McKelvey coming up Friday, and I'll be back next Wednesday with my standard flagship interview with Congressman Ro Khanna talking about his trip to Taiwan. Excited to bring that to you. Excited that you're here. I appreciate you listening as always. Thanks again. And that will do it for us here on this edition of Big Technology Podcast.
