TIP789: The Story of Uber w/ Clay Finck

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You're listening to TIP.

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On today's episode, we're telling the story of Uber. I recently picked up this book titled The Upstarts by Brad Stone, which tells the story of how companies like Uber and Airbnb reshaped entire industries almost overnight. Brad Stone is one of the most respected technology journalists of our time, and the book gives a front seat to the chaos, ambition, and conviction required to build the world's largest ride-hailing company. Rather than focusing on polished success stories, Stone takes us inside the messy early days when Uber had the odds stacked against them. What's remarkable about Uber's story is just how quickly it went from a Silicon Valley idea to a service that has become ubiquitous in less than a decade. It was by no means an easy ride for the company as they faced constant pressure from the taxi industry, regulators, and competitors. I thoroughly enjoyed covering this book on the show, so I hope you enjoy the story of Uber as much as I did.

**SPEAKER_1** (1:03)
Since 2014 and through more than 190 million downloads, we break down the principles of value investing and sit down with some of the world's best asset managers. We uncover potential opportunities in the market and explore the intersection between money, happiness, and the art of living a good life. This show is not investment advice. It's intended for informational and entertainment purposes only. All opinions expressed by hosts and guests are solely their own, and they may have investments in the securities discussed. Now for your host, Clay Finck.

**SPEAKER_2** (1:45)
Hey everybody, welcome back to The Investor's Podcast. I'm your host, Clay Finck, and I'm really excited to bring you today's episode, Sharing the Story of Uber. But before we get into the story, I wanted to mention that I'll be hosting a call later this month with our TIP mastermind community, discussing the investment case for Uber. I have not made an investment in the company, but I'd like to use this as an opportunity to learn more about the business and better understand where this business is heading over the next 5-10 years. If you're interested in joining the call or tuning in to the recording after the fact, you can apply to join the community at theinvestorspodcast.com/mastermind, or you can just click the link in the show notes below. Alright, so Brad Stone wrote this excellent book back in 2017 titled The Upstarts, How Uber, Airbnb and the killer companies of the new Silicon Valley are changing the world. In the not-too-distant past, the idea of getting into a stranger's car or sleeping in a stranger's home would have seemed bizarre and dangerous, but today it's as common as ordering a book online. Uber and Airbnb have ushered in a new era that is redefining the way we travel, move from point A to point B. So the book of course dives into both the story of Airbnb and Uber, but since this was a pretty lengthy book, I covered the story of Airbnb back on episode 503, so I decided to focus this episode primarily on Uber. I'm a big believer that studying a company's beginnings can give us a deeper appreciation for the service it now provides on a global scale. When you really think about it, Uber, like many types of technologies, is a bit like magic. We can pull out our phone, click a few buttons, and a car is summoned in a matter of minutes. It's like we're already living in the future at this very moment. So let's get right into how this type of magic came about. In mid 2008, Garrett Camp had sold his first company called StumbleUpon to eBay for $75 million. StumbleUpon was a site that allowed users to share and find interesting things on the internet without having to search for them on Google. Camp was now living large and enjoying San Francisco's food scene and nightlife. This is when he started to learn more about San Francisco's inefficient and underdeveloped taxi industry. For decades, San Francisco had deliberately kept the number of taxi medallions capped at around $1,500. So the medallions in the city were relatively inexpensive and they could not be resold, so the owners could keep the permits for as long as they logged a minimum number of hours on the road each year. So for the most part, new permits were only available when drivers passed away, and this led to a really long wait list for new drivers. There are stories of some people waiting three decades just to get access to a permit. It's just insane. The system guaranteed a shortage of drivers and long wait times for those waiting for a taxi, so the service delivered within this industry was just brutal. Attempts to change the industry were also futile, as drivers were most interested in keeping their wages high and competition limited. Whenever the mayor or the city's board of supervisors tried to increase the number of medallions, angry drivers would fill the city council chambers or surround the city hall, causing havoc. After Garrett Camp's startup exit, he splurged on a red Mercedes-Benz Class C sports car, but it mostly sat idle in his garage as he actually preferred public transportation due to how stressful driving was in the Bay Area. He also did not want to park such a nice car on the street and did not want to risk it getting broken into. Soon enough, Camp would grow frustrated with the taxi industry. Sometimes he would call up a cab only to have it not show up while he was waiting on the street and meanwhile he'd see two or three cabs drive right by him. He would try to get to his dinners around 20 minutes early only to end up being 30 minutes late due to the headaches related to transportation. In fact, he was so frustrated with how inefficient the taxi cab system was that whenever he wanted a ride, he would call all the yellow taxi cab companies when he needed a cab and simply take the first one that arrived. Of course, taxis hated this tactic and Camp believed that his cell phone number was blacklisted as they quit taking his calls. Then Camp discovered the city's gypsy cab fleet of unmarked black Sudanese that would approach prospective passengers on the street, flash their headlights to try and solicit a fare. He collected the phone numbers of the best drivers in San Francisco to try and make it more convenient for him to get around town. One night when Camp was at home, he was watching Daniel Craig's first James Bond movie. It was called Casino Royale. Camp loved the movie and one part of the movie in particular really got him thinking. 30 minutes into the film, Bond is driving his silver Ford Mondeo in the Bahamas when he glances at his phone. James Bond's phone showed a graphical icon of his vehicle and was moving on a map toward his destination, the Ocean Club. This was a lightbulb moment for Camp. So what if he were to create an on-demand car service in an app that allowed passengers to track the location of the vehicles on their phones? Throughout the year, Camp had been jotting down several business ideas, company names and logos. He liked the name Uber, as it was only one word, and it's a word that described excellence. He couldn't stop talking about this idea with his girlfriend at the time, who thought this idea was just ridiculous. Despite others not really loving the idea, Camp knew that this was a service that he himself wanted, and he also knew that Apple's newly released app store could make this vision a reality. Given the capabilities of the iPhone, it could act as a taxi meter by setting the rates to order a ride, and show the location of the taxi that's on their way to picking them up. He also talked about this idea with friends, including podcaster, investor and author Tim Ferris. Ferris actually loved the idea. Can't believe that an app on your phone could be a much more efficient cab system, especially in San Francisco.