Why Uber's CEO is okay with reinventing the bus

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Hello and welcome to Decoder. I'm Nilay Patel, Editor-in-Chief of The Verge, and Decoder is my show about big ideas and other problems. Today I'm talking with Uber CEO Dara Khosrowshahi. We recorded this conversation on the same day Uber announced a big set of product updates, including new options for shared rides and some features to make commuting easier and more predictable.

Dar happened to be in New York for all that, so he came to our studio and we actually did this one together, which I think always makes for a great episode. As it happens, the traffic in New York that day was truly terrible. So we started out by talking about how often Dara actually takes Ubers, and what it's like for him when he goes and serves as an Uber driver, something he does regularly.

It turns out there's a lot of security around an Uber Eats delivery when Dara's behind the wheel. Uber might be the single best example of the major service apps that boomed into existence in the early part of the smartphone era. I always think of it in simple, silly terms. The button that can make a Toyota Camry appear nearly anywhere in the world.

But underneath that simple idea is a complicated dance with a ton of dependencies. And it's been Dara's job since he took over for founder Travis Kalanick nearly a decade ago to really operationalize and smooth Uber out into a stable, profitable organization.

That's decoder bait through and through. So we spent a lot of time deep in how Dara thinks about Uber's various businesses, how they're split between product functions and the regional teams and all the countries Uber operates in, and how Uber plans to grow as things like Waymo and other autonomous vehicle companies. Like so many mature service companies, a big part of the answer is to try and become a consistent part of people's lives in a way that drives recurring revenue.

That's things like Uber One subscriptions, but also new bulk trip discounts for regular commuters. And Uber's biggest news last week is something it calls RouteShare, predetermined spots where an Uber is guaranteed to arrive every 20 minutes and pick you up.

It sounds like a bus, right? And I asked Dara if Uber had simply reinvented the bus. His answer is that Uber should be a complement to great public transport. And we talked a little about congestion pricing in New York and how that's playing out in the data that Uber can see.

Of course, if you've been listening to Dakota recently, you know that I'm very curious to see how service apps like Uber will handle things like AI agents, which promise to let you book a car by simply asking an assistant like Alexa or Siri. What's in it for Uber to have its service commoditized away behind someone else's interface, especially as it's trying to grow these new lines of business? Dara had a lot of thoughts here.

But I think it's clear that the business side of the AI agent revolution has just as long a way to go as the actual technology. There's a lot in this one. Dara did not hold back. I think you're going to like it. Okay, Uber CEO Dara Kashashahi. Here we go. Dara Akashashahi, you're the CEO of Uber. Welcome to Decoder. Thank you for having me.

Thank you for being in person. I love doing these conversations in person in our studio here in New York. It's a different energy. So thank you for coming in. In person is a new thing. I have to ask you, did you take an Uber in New York City to our office? I did not take an Uber. Now, like the reality of my life is I need security and all that stuff. So sometimes I take Uber and then the security vehicle.

follows me today. We had a lot of traffic, so I can do it. Yeah, there was a lot of traffic today. I always wonder, like, how often do you get to dog food your own products? You got to dog food your own products. Absolutely. There's this line. Tim Cook said in an interview recently that he uses every single Apple product every single day, which I...

Mathematically seems very challenging. Do you take them all? Do you take UberX and Uber Black? Totally. Like you can't do it every single day. Yeah. But I use Uber. I use Uber Eats. Actually, one of the really important kind of moves that I made was starting to deliver. Most Uber employees, like we use Uber as a consumer, but- Not as many use Uber as an earner, as a driver or a courier. And I think early on when I joined,

We were more building for the rider or the eater than the earner. And so I actually started when I was in San Francisco. It was during COVID. I was going crazy at home. So I got my e-bike and I started delivering food. And then I got. a Tesla and I started driving folks around. So I really do think that it's important to dog food. You know, you can't do it every single day because you have a day job, but one, you learn about your product and...

Just as importantly, it's an example that you're setting for your employees. All right. When you were driving for Uber and driving people around, was security in the car with you? How does this work? They were, well. They were tracking me and then they were following me to make sure everything was okay. This is the most intense Uber ride of all time. It was really cool. And by the way, it's a lot harder than it looks. And when I first...

started driving. I was so nervous. I didn't want to screw up. I didn't want to take the wrong route, et cetera. It's actually a lot more challenging than you think it is. Well, there's a lot to talk about today. You have some news from your GoGet announcements.

You have ways to use Uber in more consistent ways, which I think is very interesting. There's a partnership with VW to launch autonomous rides in LA next year. That's on top of all your other autonomous partnerships. I'm obviously very interested in that. I want to start with just...

Uber conceptually right now. I think of Uber in the most reductive way possible, and so it goes. But I think of Uber as the app where I open it, I push a button, and anywhere I am in the world, a Toyota Highlander will show up. Pretty much. Or another car. But for you, maybe Toyota Highlander. It's almost always a Toyota Highlander. That's awesome. I love it. And there's a whole lot to that. That's all very complicated. But in the most reductive sense, I think...

That's how people perceive Uber, right? It's a button that makes a car show up. I think so, yes. Is that the foundation of everything else, or are there more foundations? I mean, ultimately, we want to be... your everyday app, kind of your iOS for everyday living. So we started certainly with Rideshare.

And that was the core of our business. But then we've expanded into other categories, obviously Uber Eats and grocery, et cetera. And to some extent, I think we're building this real-time logistics network. And it started with moving people around. Now we're moving things around, food around, and we're expanding into many, many more categories. But to the consumer, we want to be known as the app that makes kind of your day a little bit easier and helps you.

Go where you want or get anything that you want. The news today is a bunch of things like route share. There's more ways to use the subscription more consistently, more ways to plan commutes to work. And so that core function, there's a supply of people with cars in the world and we can aggregate the demand and push the button and the cars will come find you.

That's the thing that appears to be changing in your news, right? Where it's not push the button and the car comes to you. It's instead of commuting, we will just manage the logistics of that for you and you will subscribe to it and that will be a recurring behavior. a recurring fee, right? Is that the change here? Yeah, to some extent, if you think about what we're doing is we're saving you your time, right? With someone else doing the driving instead of you. So you can-

do whatever you want. There's a trade-off as it relates to reliability or time and price. The faster you want your ride or the more reliable you want that ride to be, that can cost us more. the more you can trade off your time. If you say, you know what? I may not need my ride in the next four minutes. I can wait 15 minutes. Or instead of having the car come all the way to me, I can walk two blocks.

If that makes the network more affordable or I can save money, that's a tradeoff that you can make. So human beings are always trading off. Essentially, you're paying for your time, so to speak. With our network, there's always a tradeoff between reliability slash time and price. So what we're trying to do is find products that allow people to self-identify where they want that tradeoff. So for example, for you.

Really important trip. I'm going to take a flight, okay? I need to absolutely know that my Uber is going to be there. You can pick a reserve. You pay a premium for that reserve. The driver shows up early, et cetera. The reliability is like 99 plus percent. So that's one version. Now, the other version is this is for the commuter.

This is someone who is going to work every single day, morning, evening using Uber. The price of your commute every day, it can get up there. So what we wanted to do is... allow somebody to trade off a little bit of price or reliability. You may have to, for example, we have one product called Route Match, right? Which is a set route coming every 20 minutes. So there's a predictability there. You will share your ride with up to two other people.

But you are trading off a little bit. You can't quite get on demand because there's a schedule there and you may share it with somebody. You're trading off a little bit of that personal reliability or time in order to get. about 50% off. So we're constantly making trade-offs as it relates to our services. And, you know, originally when we were thinking about these trade-offs, we thought it's about the demo. You know, there are some people who are...

less time sensitive and more price sensitive or the other way around. It turns out that that is true, but there are also occasions, right? So occasion might be travel where you're going to pay more to be more reliable. And there may be another occasion which is, hey, on my commute, if I know 20-minute increments, I can kind of adjust my life to get that 50% off. So it's been a really interesting kind of evolution.

of the network and how we think about the trade-offs and the efficiencies of the network. Is convenience on that list of priorities for you? You talked about time and reliability, but it seems like I open the app, it's inexpensive, and it's right there.

is as important as all the other stuff. Yeah, listen, I think your definition of convenience may be different, right? Something that's cheaper may be more convenient for a person. Something that's more timely can be more convenient. So ultimately... I think convenience is an amalgamation of all of that, and it depends on what you consider to be convenient. One of the reasons I ask that question is I see all the time in various other parts of the tech industry that we cover.

that consumers will pick convenience over quality almost every time. Interesting. Yeah. The example I use, which is not a one-to-one to Uber, is music, where consumers will pick just the worst quality streaming. If it's available, they'll watch. They'll watch bootlegged YouTube videos of the songs they want to hear. They often will not pay for the high-quality losses elsewhere. And you can do price discrimination based on that. Totally, totally.

I challenge you a little bit on that, which is in the early days of music, bootleg music, bootleg movies, et cetera, were the biggest use case. But actually, as streaming made it more convenient. People were willing to pay. So I do think there's a price convenience tradeoff. It's personal. I think habits change as well. And we are just trying to kind of figure out.

What's the most optimal price convenience tradeoff that we can make to essentially aggregate the most demand and the most supply as well? One of the reasons I ask about convenience is you framed route share walk a little bit. to get to the spot is reliability. And to me, that's convenience, right? It's like, I'm going to trade a little bit of convenience and maybe pay a lot less. You can totally go there. I read this press release announcing RouteShare and I just had this like very...

mid-2010s reaction, which is, did Uber just invent a bus? Did you just invent a bus? Well, listen, I think to some extent it's inspired by the bus, right? And if you step back a little bit, what... Part of our looking to expand Uber and grow is about making Uber more affordable to more people. Right. I think like one of the things that makes tech companies really, really different from most companies out there is.

our goal is to lower price right because if we lower price then you can extend audience etc there are two ways of lowering price as it relates to rideshare one is you get more than one person to share a car, right? Because there's car costs money, driver's time costs money, et cetera. Or-

You reduce the size of the vehicle or the price of the vehicle. And we're doing that actively, for example, in a lot of countries, two-wheelers and three-wheelers in those countries. So we've been going after this shared concept, which is bus. you know, for many, many years. And we started with X share, for example, which is kind of on-demand sharing. But this concept takes it to the next level, which is if you schedule.

and create consistency among routes, then I think we can up the matching quotient, so to speak, and then we can essentially pass the savings on to the consumer. So it is called a next-gen bus. But the goal is just to reduce prices to the consumer and then help with congestion, help with the environment. That's all good as well. Congestion is interesting. We're obviously talking in New York City. We're months into the congestion pricing program here.

which was designed to get people out of their cars, onto the bus, onto mass transit, even into Ubers and taxis, right? Have you seen any statistics since congestion pricing has been in effect here that says Uber usage here has gone up? Uber usage has gone up, but we don't have the counterfactual, which is would it have gone up if there were no congestion pricing? But what we're seeing is very, very similar to some of the public data out there, which is traffic is flowing faster.

And the average speed of an Uber, I think the New York Times said traffic speeds were up like six or seven percent. Very similar numbers for Uber as well. So Ubers are getting there faster, but I don't have a counterfactual. Was it good or bad for a business? We supported congestion pricing. The way I think about congestion pricing is it's actually taking cars or vehicles. that have the lowest utility off the road.

Right. It's a little bit like surge pricing, if you think about it. Right. We with surge pricing, it's a combination of, hey, during peak times, we want to get more drivers out there. And at the same time, we want to encourage people who. may not need to travel during peak times. We actually want to dampen demand and move it to non-peak times as well. So congestion pricing, to some extent, is, call it city surge, right? They're increasing prices for a certain time.

And it removes demand from vehicles that have the lowest utilization. It happens that Uber's taxis are very high utility vehicles on the road. Closing in on a decade as the CEO of Uber, the way you talk about it is very operational, right? You're maximizing utility of these assets that are on the road, whether –

Your drivers own them. We should talk about the autonomous fleets that seem like they're going to come into existence. And then maximizing utility and value and all this stuff. You obviously took over a firm founder who had a much grander vision. which was that no one should own a car and that all transportation should be run by Uber. That was a big vision. I'm just wondering, you know, the way you're talking about it, the way you're talking about, you know, route share.

competing with the bus. Is it still the vision to take over from those things? Do you perceive yourself to be in competition with like public transport?

No, actually, I view that we are in competition with personal car ownership. That was Travis's vision as well, right? So actually, public transport is a teammate, right? And consistently we see it in cities in which there's significant public transport. Uber does really well because actually it goes to what I was talking about earlier.

There are just different use cases, right? So you might take public transport for your downtown commute. But if you're going to dinner with your friends, then you might take an Uber, et cetera. So Uber and public transport. We compete on a particular trip. That's absolutely true. We decide, well, am I going to take a bus? Am I going to take a subway? Or am I going to take an Uber? But as it relates to your life, we're very much compliments.

And the big kahuna that we're going after is car ownership. That ultimately is a vision. It remains a vision. You know, it's hard to do. Because actually the car is really flexible product with mass manufacturing, really cost effective, et cetera. So it's going to take a lot of work to get there. We're less than 3%.

miles traveled on the road even though we're very very big company we got a long way to go but the vision definitely hasn't changed are there some markets where you think you've made a bigger dent in car ownership than others I don't know if we've made a bigger dent, but there are definitely some markets where our penetration of miles traveled is higher. So, for example, in Latin America, our penetration is very, very high. New York penetration.

or U.S. big city penetration where there is mass transit is higher as well. I haven't looked at whether we've made a dent in ownership. The reason I ask that question is another way to think about it is,

There's some percentage of people who would have gotten a car, but for Uber existing in their life, right? Do you track that? Do you measure that? We don't track that, but I can tell you my son, and this drives me crazy, he's over 18. I don't know about you. Did you get a license the minute you could drive? Oh yeah, 15 and a half. Yeah, exactly. It was just such a thing. It was a goal in life. It represented freedom. And I'm still trying to get my son.

to get its driver's license. But Uber's freed them up. So it absolutely, if you look at the percentage of, I think, 16 or 18-year-olds who are getting their license, that percentage is coming down. significantly. It used to be, I think, two-thirds. Now it's probably in the 50% range. I could be wrong. So it is absolutely having an effect on car ownership.

Do you think that's a leading indicator for Uber success or is that a lagging indicator of Fortnite success? Probably the two are mixed, but I also think it's an indication of the urbanization. of our populations as well. But I haven't actually looked into whether heavy Fortnite players are Uber users as well. I suspect they may be. Certainly Uber eats users.

I'm going to leave that one alone. There's another hour of just like PhD level sociology in that comment alone. Correlation, causation, who knows? We have to take a short break. We'll be back in just a minute. Bye. I'm Claire Parker and I'm Ashley Hamilton. And this week we're discussing Hilaria Baldwin. Why does she have so many kids? She will not answer that question for you in a way that you want it answered, but she will respond to every single thing ever written about her in a tabloid.

deeply cryptic way. She's taking on the tough questions like does ADD make you speak with a Spanish accent? Does an older man guarantee happiness in a marriage? We talked to Eliza McClam and Julia Hava from Bingetopia podcast. They are Hilaria Baldwin experts, and they dove deep with us on Hilaria's latest memoir, Manual Not Included.

You can listen to new episodes of Celebrity Memorable Club every Tuesday on Amazon Music. Welcome back. I'm talking with Uber CEO Dara Khashashahi about the Big Decoder questions. How is Uber organized? Why do you make those choices?

Let's talk about Uber itself. It's true. You took over in 2017. Yes. Obviously, you took over a company led by a very strong founder and a vision of how the company should be run. How is Uber structured at this point? This is a classic decoder question. So the company... is structured in, you know, we have a combination of matrix and line of business structure, which is we have two global leads, one of our mobility business and one of our delivery business.

And then most of the other functions, if you look at marketing slash PR, government relations, if you look at product, finance, et cetera, are matrixed. And I think it's relatively similar. I would say over as a company's matured. We have matrixed the company more, which happens, I think, to a lot of companies that kind of mature and they are.

practices become more predictable and you're trying to bring kind of a higher degree of expertise into the practices. So it's a combination. We constantly have this creative battle between the lines of businesses. And the matrices, ultimately, I think it works. I think the listeners know that is the secret of the show is I can just guess at 80% of the problems you tell me the structure of the company. And listen, I think that the conflict.

is constructive. You know, this is a terrible metaphor, but if you look at pure breed dogs, they tend to get sick more, like bulldogs that have been bred, you know, year after year after year, versus hybrids. that aren't pure breeds. And to some extent, I think that companies that have a structure that's one note, that only are, there's an LOB structure or there's a matrix only structure.

The lack of conflict sometimes allows the strength or the weakness of either structure to kind of go overboard. You know, matrix structures usually are associated with maybe more efficiency, but slower decision making. LOBs sometimes are associated with much faster, but difficulty in scaling, et cetera.

I think my directs and some of the teams get frustrated with conflict. Some of these decisions come up to me, but I think the conflict is actually really healthy. The conflict is what allows us not to fall prey. Because these two teams are constantly kind of keeping each other in check. If you've got a matrix function, that matrix function may not realize that, let's say, the marketing in Egypt.

is not quite sharp enough, right? But the Egypt GM that we've got is living and dying by that marketing, right? So the two keep each other in balance, but that Egypt GM might not know what great marketing may be. absolutely first rate marketer is. So that conflict keeps those two in check and ultimately gets a better outcome. Conflict can be unpleasant, but I think, you know, kind of the fight, the conflict makes us better.

As a guy who runs a single vertical line of business in a matrix company, I understand what you're saying. Let me tell you. There's no perfect way. There's no perfect way. Put that into practice. Obviously, you gave a hypothetical there. What's an example where you have had to mediate that conflict? Marketing is one, since we talked about that, I've had to mediate as it relates to, let's say, the allocation of capital, which is every single line of business and GM.

is going to want some budget for branding because they're fighting it out on the ground, all right? And then if you look on a global basis, how do I allocate my marketing spend? The answer to the global... Optimum solution may be different than the answer as to the request of that Egypt GM, right? Those answers during planning, budgeting may be different. So early on.

As we were building this matrix structure, there was a lot of conflict. Now, the teams have a real understanding. Like they're getting into a rhythm, et cetera, and the conflicts are much further. They get to me much less often. Same thing with product, right? Product prioritization, very, very similar, which is there's a constant push and pull. As a global company, you want to build.

globalized product that are as similar as possible to each other as you can. At the same time, locally, there are some local competitors that may have some twists and turns of a product that may be only applicable to that market. That may not make sense for you to build on a global basis. That push and pull is a tough, tough push and pull sometimes. I mean, when I say 80% of the problems, that's the one I can usually guess at with like 100% accuracy. How do you solve that? Do you have local?

Product teams are allowed to just make Uber whatever they want. One is we have the GMs on the ground really keep the product teams accountable. But our product planning is global by nature. And it is not perfect. You know, sometimes the GMs that.

yell the loudest, get their way. We want to make sure that our product people kind of travel to the market so they feel the pain of the market, so to speak. But honestly, it's something that we have to keep working on. We don't have it perfect by any means. Obviously, there's a difference there from the sort of founder-led company that is totally functional at the beginning, gobs of VC money coming in. I mean, that's the early Uber, right? It's like we have a bunch of...

Zero interest rate VC money and we're gonna we're gonna win by just buying all the drivers in a market And then setting the prices to zero and we'll figure it out in the end And that was totally functional. You've created it in a different structure. I'm just wondering, how did you make that transition? Well, let me correct you there. It wasn't functional. It was GM-led. Okay. Even back in the day. Oh, it was the GMs were...

mini-CEOs of every single country. Like Travis would hire a GM, parachute them into a market. And you're right, we did go out and buy supply. And really, we are, as a company, a supply-led company, right? Which is... First, you build liquid supply, then you invest in demand. You have to, in the early days, you essentially have to price under market and you lose a bunch of money in a market.

As liquidity increases and the matches increase and the efficiency of the market increases, you can start pulling more profits from a marketplace. That was essentially the formula. And it might have seemed crazy at the time. But I think that Travis and the founding team... got it right, which is creating liquidity in the marketplace is exactly what allowed you to get to profitability. And whoever created the liquidity of supply and demand fastest was the one who ultimately won.

And so in the early days, it was all GMs spent a ton of money on liquidity. And then when I came in, I started to globalize some of those matrix functions. It took time. It was painful.

at times, but I think we're at the right balance now. What's the hardest choice you had to make along that way? Hardest choice was actually on product, and specifically it was when I was around for a while. Our rides business and our eats business were complete verticals. So you had different ops teams, you had different marketing teams, you had different product teams as well. And, you know, eats was competing against pure plays.

DoorDash, Just Eats, Deliveroo, et cetera. So as a company was young and Eats was 10, 15% of the business. So if you decided to matrix. that that function, for example, your head of product, are they going to spend time on their 85% rides or are they going to spend time on 15% eats? And no matter how much I say, hey, spend time on eats, they get paid for ride success. we went a few years with essentially rides and needs totally separate

And then there was a big decision that we made to combine the product teams and the product and tech teams that, you know, that's what makes the company go. There's a lot more that happens around it. But if you don't have great product, if you're not strong technically. you're going to suffer. That decision was probably the hardest decision. It came with some bumps and bruises, but I think it was a really, really good decision. Because in the end, Eats got big enough.

for us to, for everybody in the company to care about it, right? And once it got past that 15%. And then second, we were late to the game as it related to Eats. We were years behind the other pure players. So if you ask yourself, why is it that Eats is going to win? The reason was, obviously, we've got great talent at the company, but you have to assume.

your competitors have great talent as well the answer was a platform right was that uber as a brand was an everyday use case and you could actually introduce your audience who's using rides on a daily basis to eats we then launch a membership program that worked for both etc The platform and the fact that we have greater scale than anyone else allows us to invest more. And then cross-sell our riders into eaters. Now more our eaters into riders. And then drivers too. Encourage them to.

You know, move people, but also move things every once in a while. I want to ask you about cross-selling in the platform in a very specific way. But you've kind of walked right into the other big decoder question I ask everybody, which is about decisions. You just described a big decision. What's your framework for making decisions? One framework that I use is, listen, is it a one-way door or a two-way door, right? That's a classic Amazon. I think Jeff Bezos introduced it.

It's a great framework. One day we're going to make a super cut of people on the show. Yeah, exactly. So many people have been impacted by him and deservedly so. He's one of the great, great CEOs of the world. Two-way door. Just make a decision. Use your instinct. It's always two-way door. That's easy. That's an example of a one-way door, right? And- Merging the product teams. Yeah, merging the product teams. It's like you got to go for it.

I can't tell you that there was a perfect construct one way or the other. Like at some point, some of these decisions you have to make based on instinct and kind of one of the constructs is, what do I have to believe? that the outcome of what I'm doing today is going to change. So is there, hey, incrementally, if I keep doing the same thing, but I do it an inch and a half better, am I going to get to the promised land?

Or is the promised land either, is that just going to take way too much time? Or is there uncertainty in getting there where I need a shock to the system? And as it relates to eats. We had in the early days, we, you know, did unbelievably well. But there was a point at which we were kind of hitting a ceiling. And it was then where I decided, you know what, to get to that next level.

We actually need a shot to the system and we change our organizational structure. I think, listen, in hindsight, I think it was a really good decision. Actually, not necessarily because of, I'd say, the product side.

We still have dedicated rides and eats product leaders, but actually more on the engineering side, on the code base. It allowed our engineers to generalize the code base. to take some of, let's say, our marketplace talent from rides who is second to none, move them over to Eats. I'll give you a little example. It'll take a little while, but I'll give you a quick example of some of these.

unanticipated benefits. When you order an Uber ride, we essentially have to scan the market of all the cars out there and where they're going, et cetera. Are they available, not available? We have to match you to a car and we've got to price that ride in less than 30 seconds, right? We want the ETA to be four or five minutes. And so we have very, very little time to make that decision.

The algorithms that are running have to work very, very quickly. They're making tens of millions of predictions per second. Make that match. Go. All right? Takes certain architecture. Takes a bunch of compute. All right? With Eats. we have the average time to make food is like 10, 12 minutes. So your ability to make that match, you have a lot more time to make that match. So at the time... Just because we have the time, our recalcing...

We had to make all the same calculus, right? It's like courier, where are they? Which courier should I match you? How do I price you? The time with which we had to make the match on the courier side was much longer. So we would recalc the marketplace, the marketplace. two, three minutes. And with EATS, we essentially make a bid to a courier who can accept the delivery or not.

Let's say for a delivery, I've got three bids that I can make for the delivery before the food gets cold. My first bid might be six bucks. If they said no, second bid, maybe seven bucks. If they said no, I really have to get you the food. Third bid might be 10 bucks, right? Once we switch the teams over, the Rise team is like, oh, no, no.

We can make this recalc in 15 seconds, right? So now we've got the ability to make 10 bits. So instead of going from 6 to 7 to 10, you go from 6. 650 675 seven bucks and so the ultimate cost per transaction so to speak uh is lower just because of compute speed of algorithms and and decision making I didn't anticipate that when I made the switch. But those kinds of benefits in terms of backend, code, engineering, just scale, were actually the biggest benefits that we've seen.

I understand why that's great for me as a customer. Cost is down. I understand why that's great for Uber. Margin goes up. Is that good for the courier? Well, the courier, if the couriers get more business. And for example, our ability to make more bids has allowed us to actually increase the number of batches. So now, close to 50% of the time, the courier is carrying two.

goods, so to speak, and gets tipped twice. So that was a side benefit for the courier as well, which ultimately we think helps earnings. The way you're describing Uber is as a platform. A lot of the announcements are use us more as a platform. Engage with us more often in your life. It's a kind of cold platform, but it's an everyday use case, yes. Well, the reason I ask about this is maybe –

60% of the interviews I've done in Decoder this year are people telling me they're going to build AI agents. You're just going to talk to the computer and the Toyota camera is going to show up. That's a cool thing, yeah. Everyone is telling me this is going to happen in ways big and small. Whether we're building model context protocol applications at the...

leading edge of tech standards, or whether we're just going to click around on your website using a testing tool, which is a real product that exists in this world. And Uber has been clicked around on by these products. Of course. Those all disintermediate your platform. You have to do the hard work of creating liquidity of supply and making sure the Toyota Camry appears, and they own the customer relationship.

Why would you ever participate in this? I've been wondering this. I asked them all this question. They're like, I don't know. The market will figure it out. I'm like, that's you. You're the market. But you're the other side of the market. Would you participate in these? I generally – it's a really good question. And by the way, we talk about it all the time. And time will tell as to what the right decision is. I believe in running open platforms. I don't believe in companies that try to –

fight the course that technology is taking. They always like get left behind. I think we should go to where consumers want us to go. That's all nicey-nicey, right? But at the same time, one of the advantages that we have is we have unique inventory, right? We essentially, we've got eight and a half million drivers and couriers. We got over 1.2 million merchants out there. And it's very difficult for a company.

who has an agent, for example, to disintermediate us and go direct to the, you know, almost 10 million pieces of inventory if you want to be quite impersonal. These are people, these are businesses, et cetera. it's very difficult for them to draw that inventory so if you have unique inventory then while you may make your inventory available to these agents you can charge a toll

for that inventory. So I think the agents, if they bring us more demand and it means more orders for our restaurant partners or it means more rides for our drivers, that's worth something for us as well. And at the same time... Because we're becoming more and more an everyday use case, the frequency now of our average user is six times a month, and it continues to increase. We can create our own local agents as well, right?

We know it's your commute time. You know, why don't we get you a car? Maybe we can actually make a dispatch to the car before you actually push the... the button to get the car because we can predict that you're going to do it. So I think as it relates to AI and these agents, et cetera, we want to work with these players. I think we come from a...

place of strength because of the unique inventory and the fragmentation of these markets that we're organizing. And then we're going to build our own agents as well. And I think... You know, that end state, as long as we're thinking about the consumer, we're thinking about our earners and our merchants, I think we'll be OK. We have to take another quick break. We'll be right back. you

In President Trump's second term, we've seen a lot of news about tariffs. Chinese imports into the US now face... A 30% tariff down. About Congress. The one big beautiful bill enshrines into law and funds President Trump's promises. About Elon Musk and Doge. This is the chainsaw for bureaucracy. Those are the loud stories of the Trump administration. There's a quieter story, though. President Trump's obsession with critical minerals.

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Welcome back. I'm talking with Uber CEO Dara Khosrowshahi. Right before the break, we were starting to touch on what I see is one of the biggest emerging problems in the AI revolution. What possible reason does a platform or service like Uber have to play along? Very specifically, on a financial level, what would motivate a company like Uber to let an AI agent abstract its entire service away? All right, so let's say I start Nilay's model company. Yes. Nilay's voice assistant.

And I said, you know, I want to get people sandwiches. I want you to be able to say I need to go to the airport, get me a car. Go read my email, figure out what my flight is, schedule a car. This is the dream. For some reason, scheduling a car is we've got to throw giant data centers at this problem. This is what they pitch me. Okay, so I come to you.

And I say, I want to be able to get cars from Uber. What is the percentage toll? What is the extra margin you would have to charge me, dollars and cents, to make it worth it for me to take the customer away from you in that way?

Because when the customer opens your app, you get to cross-sell them into Uber One or say, would you like some food when you arrive? Or all of these other incremental opportunities that you would forego if I take that customer. So I have a weird philosophy on this, which is…

Initially, I charge you zero. Okay? Like, I think that companies sometimes... Alarm bells just went off at every... No, no. Listen, it's like people spend so much time trying to figure out what the economics might be. When the first thing is, let's try it out. Is it going to be a good experience or not? Is your scheduling actually going to work or is it going to be off and the driver has to wait for 10 minutes, which is terrible. Let's just figure it out.

Then once you optimize the experience, we can measure is are you an incremental consumer for Uber or are you totally cannibalistic? If it's cannibalistic. then I'm going to charge a lot of money. I'm going to say, you can't have any money, right? Because basically-

You're getting the benefit. You're getting my content. You're not bringing me any business at all. If it is incremental, then I would pay some take rate. Is it a 5% take rate, 10% take rate, 20% take rate? Depends on the incrementality. But I think like... So much of innovation is slowed down because companies try to figure out the economics first. First, figure out the experience.

And then the economics, they always, listen, if I do a bad deal for a year, who cares? I'm going to renegotiate with you, right? So, and I'm building stuff for the next 10 years. Success or failure isn't going to be determined as my take rate 5% or 20% in year one. Now, it can set a precedent, and precedents are dangerous. So that's why I would say, let's charge zero. Let's try it out. Let's see what the experience is.

Let's try to measure out what the value add is, and then the economics essentially will take care of themselves. You said you're having these conversations a lot internally at Uber. What is the shape of those conversations? Are there partners you're excited to work with? Are there agents you've seen that are promising?

We're working with a number of players. I'd say OpenAI is probably the top player that we're working with as it relates to agents. It's imperfect. It's really early. The volume is tiny right now. You know, the work is just make the experience really, really great. It's way too early for me to tell you, is it going to work or not? I mean, eventually it will. But I don't know the shape right now, so I want to experiment.

When you think about that particular future, everybody wants this product, right? Like, again, 60% of my conversations, people just dreaming of a future where you talk to the robots and the robots go do stuff for you. Great. Not about future. That implies a lot of things from the very beginning. It implies that Uber exists to even just have an API for you to go ask for a car from. At the base layer of that, I keep joking, it implies that Toyota exists.

And there are literally vehicles with a service and support and maintenance network around the world that is effectively standardized. Right. Like just the Toyota Camry is. atomic unit of transportation in the entire world. And that's an amazing thing that you depend on to say, okay, you can talk to the robot and the car will show up.

There's another change happening here that I think is fascinating, which is the move to autonomous vehicles and fleet operators for those vehicles. You are a participant in that. You have, I think it's Atlanta and Austin with Waymo.

Part of your announcement here is VW is going to launch in Los Angeles for the US next year. That's going to change the dynamics completely of those cars, right? You don't have independent contractors with the atomic unit of the Toyota Camry.

Where you don't even really have to worry about it. Like, where do we get wheels for a Toyota Camry? It's just not a problem that Uber has to solve. Cars start driving themselves. Suddenly, a lot of people have to worry about different things. Yes. How do you think that's going to change?

while the agents are coming for you. Oh my God. Now you've added agents to the mix. Well, because at the end of the day, I think what you really want to do is say, I need a car. And then there's just a network of autonomous vehicles waiting to accept bids. So I don't know. I think you're correlating two things that I would separate, right? Like I was trained as an engineer and you want to –

separate and simplify the two problems. They may interact in certain ways. On agents, we talked about, right, which is... If I bring value in terms of creating inventory for that agent, I'm creating value. The value is going to be determined based on whether that demand for the agent is incremental or not. If it's not incremental, the value is really small, which means.

The content provider should get the vast majority of the economics. If it is incremental, then we'll talk about the value of that incrementality. Now, when you look at autonomous vehicles, you're essentially replacing the driver. with a machine now our drivers everyday drivers not only drive now that's that's a main job But they usually own the car. They refuel the car, clean the car, et cetera. So you have to replace kind of that work set. First is the software layer.

And obviously, the Waymos are working on that. VWs, Wave, like tons of different companies. Pony, WeRide are working on that. And we want to work with all the software providers, make sure they're safe, et cetera, affordable, and bring them to market. Second is a car itself. The car can't just be a good old-fashioned car, right? It has to be a supercar, right? It's wheels, et cetera, but sensor kit. It needs much, much more compute to work.

And the cost of that hardware right now is normally expensive, but after a couple of generations, it will come down. And then you have... Fleet management, which we just talked about, which is cleaning cars, et cetera. And then you'll have fleet ownership as well. The manager may own the car or ultimately actually think you're going to have car ownership by.

you know, the Blackstones of the world. Like right now, Marriott doesn't own any of its hotels. There are these entities, REITs, that own the hotels. There'll be fleets, right? These financial companies, retirement companies, pension funds that own. big fleece of cars. And our job is going to be to bring demand to these really expensive cars. In the early days, because these AVs are so expensive, you're not going to have that many of them on the road.

So there will be kind of a hybrid model, right? Like we have in Austin right now. If a Waymo happens to be close to you, we'll hail a Waymo. If the Waymo is 10 minutes away and there are a bunch of drivers who are really close, we'll get your driver. The percentage of AVs over a period of time is going to increase. And our job is going to be to kind of...

manage that shift smoothly, and then to make sure that the utilization of whether it's a Waymo or VW, et cetera, is really high. And right now, what we're seeing in Austin is that the average Waymo. is 99% more productive in terms of trips per day than the average driver in Austin. So we can really, really drive utilization.

Ultimately, if that demand for that Waymo comes through the Uber app the old-fashioned way, comes through an Uber agent, or comes through an OpenAI agent or another agent, I don't think it really matters in terms of the autonomous transition. That's going to happen separately. We want to manage it. And then where demand comes from, whether agent, app, something that we haven't imagined, Facebook class, that's a separate issue. So we just have to manage both transitions.

I don't think the two are really going to conflict with each other. Let me try to make them conflict. All right. I like it. You have. You have some big partners. I think a lot of people assumed Waymo would be a competitor, but you found ways to partner with them. I think, listen, they're a competitor and they're a partner, right? So in some ways, I'll give you the example. Sorry, I know it's a different thing. Domino's.

They're a competitor to Uber Eats because sometimes people go directly to Domino's app. And they're a partner at the same time. So I think like people look for the drama. Are you with me or are you against me? The fact is that, you know.

co-op petition, whatever you want to call it. They work with us. WAM is going to work with us in certain circumstances, and they're going to be looking to bring customers direct in other circumstances. Right, because you control a whole bunch of demand for this product, right?

The one competitor that I don't see making as pragmatic a decision as that is Tesla, which is weeks away from its Robotaxi event. The way that that has been described. And we will see how it actually exists. But the way it has been described is we're going to take everyone's individually owned Teslas, flip on some software, and while you're sleeping, they're going to go off and drive at night.

I have a lot of questions about that just as a general idea about where the demand in the middle of the night comes from at Socos. But that's a system where you suddenly increase a bunch of inventory of autonomous cars that are just like floating around the city. You can get demand by just saying, I need a car. And then you have an individual unit of supply that's like, here I am. And you can build an entirely other system that does not require paying you a transaction fee. That does feel like.

You can combine these two ideas at the same time because the individual operator of the Tesla robo-taxi might have a different approach. How do you reconcile that? Do you think Tesla is going to make that work? Do you think that all those people are going to end up – turning over their houses to airbnb management companies like airbnb owners do

I think it remains to be seen. We have to take anything that Tesla does seriously. Elon's an unbelievable entrepreneur. He's built so many companies. You know, my thinking is that... That individual owner of the Tesla is going to get a subset of demand if that demand can only come from Tesla. Then he or she could get from Tesla demand plus Uber demand, right?

10 years from now, every single Toyota comes with self-driving software, right? I mean, that I think is relatively likely. You can buy a Toyota and you can, when you're asleep. Put that Toyota on Uber that has unbelievable amounts of demand and make X dollars per day. Or you can buy Tesla and put on the Tesla app, which I think is going to have. less demand i think ultimately the better answer is if you're looking out for the owner

and you want to allow the owner to monetize as much as possible, that owner is going to look for the most demand, which is going to drive you to actually multi-source. This is why, listen, Domino's... Five years ago, on their earnings calls, were saying, I'm never going to use third-party apps. And they are now, because ultimately, it's a box, it's a restaurant.

And you want to monetize that restaurant as best you can. And having multiple platforms feeding that restaurant, so to speak, is mathematically the best way. So I'm hoping. that eventually Tesla decides, hey, I can build my direct channel, but I can also work for Uber. That's ultimately best for Tesla owners. Have you talked to Tesla about collaborating in any way? We...

Talk to them all the time. I think there are 150,000 Teslas on the network. We'd love to collaborate with them. And if they want to take us up on that, we're game. Do you think they can actually pull off the robotaxi fleet as they've described it? I don't know. I don't know. I mean, you need, I think.

you know from my standpoint and this is judgment you really need superhuman safety you know superhuman to me doesn't mean better than a human you know it means 5x better than a human waymo for example i think data suggests that they're they're around that level and it's not 100 clear to me whether camera only can get there most of the players who are building this technology from the ground up are going with camera and lidar to have redundancy as it relates to perception

You know, if Tesla can do it, more power to them. We'll see. I think time will tell. I mean, the thing that I think about is the thing I already mentioned, which is I know what kind of riders exist in the middle of the night. I was one of those riders in my 20s. And it just seems like there's going to be an awful lot of puke and an awful lot of Teslas. There's a lot that drivers do that we take for granted. There's a lot of work.

So, I mean, how do you manage that with your autonomous fleet now, right? Somebody gets sick in the car. Somebody makes a mess in the car. You don't. know it until the next rider shows up. Yeah. I mean, that's something that you have to handle, which is a rider complaint. Or you might have cameras inside the car, for example. The newer cars have that. Do you have like an AI puke detector?

I guess we're going to have to build that. That's going to go into our product roadmap. That was an interesting one. But that essentially is going to be the job of the fleet operator. How does that cut work with a fleet operator? So, you know, I took an Uber to work today. I figured I should use your app before I talk to you. I asked the driver, and he said, I want my rates to go up. That was maybe every driver I ever talked to. Everyone wants to make more money. Absolutely.

That's the driver's perspective. I'm curious how you're going to make the rates go up as you have big fleet operators who now have giant fixed costs who are happy to have 24-7 utilization and maybe take a lower rate for greater use.

Drivers still just want high rates. How do you square that circle? Because it feels like the driver rates are going to get pushed down as autonomy comes into the mix. So I think that our job is going to be to manage the balance between. demand and supply. So I think autonomous is actually going to drive more demand so that even though as a percentage of our overall inventory, autonomous is going to be an ever-increasing percentage.

the overall demand, kind of the number of drivers that we need on our network over the next five to 10 years is going to increase because demand increases more, so to speak. 20 years from now, you might be right. And from that standpoint, we just have to manage our inventory, which is...

There is a turnover of drivers all the time. And we want to make sure that we give drivers the right expectations of earnings, et cetera. And in a city where demand isn't growing, maybe because autonomous supply is coming in. We just have to slow down recruiting of drivers and not make them promises as it relates to earnings. So I think communication, being straight with people, that's the ultimate answer.

I don't take it for granted. Like this is going to be a transition that we have to manage very, very carefully and make sure that our driver base is taken care of. What do you think the deals with the fleet operators will look like? Maybe the entire thesis of The Verge is adding computers to things makes them very complicated, and we should pay attention to that complexity.

You know, I'll use the Toyota Camry again. But the Honda Accord, the Chevy Malibu my parents had in the 80s when I was a kid, you didn't have to update the software. Right. They didn't have buffer overflows. The infotainment staff did not restart in the middle of the day. They might have cranky mechanical issues. But again, the sort of ecosystem of being able to fix that very quickly. You get a flat tire in New York, you can just...

push the car around the corner and there's a taxi garage waiting for you. That's incredible. Yeah. You got a bunch of software. You got a bunch of cars that have tons and tons of software at the bleeding edge of technology. You got cameras that can get dirty or broken or whatever.

That's a different set of costs on top of the existing mechanical costs. Totally, totally. You're not going to repair the robotic cars. The fleet managers are going to repair. The fleet managers are going to. So we actually work with fleet managers today. Yeah. And the reason is. A bunch of drivers can't afford vehicles or can't get loans for vehicles. Companies can. And also we're actively trying to electrify our vehicle base.

Close to 10% of our vehicles are now electric, more than 20% in certain cities in Europe, et cetera. So we have experience with fleet operators. About 15% of our volume comes from fleet operators. Many of those fleet operators own the cars. Not all fleet operators own the cars. So I think if they own the cars, then it's just a return on invested capital that they're looking for.

The return is going to depend on the risk. And the more volume we bring them, so to speak, then the cheaper the cars are going to be because utilization is going to be really, really high. And then there are going to be some pure play operators where I said the financial players are going to own the cars. That's going to look more like cost plus. So if it costs you $10 to operate the fleet, we'll pay you $11 or $12.

Our philosophy right now, it goes to earlier what I said, make the damn thing work, make it safe, and then worry about the economics. Right now, for us, AV loses money. But... We know in the future it's going to be huge. It's going to ultimately bring the cost of our service down. It's going to make the streets safer.

And for us now, it's about like making the system work. And then I think the economics are going to fall into place. But I think fleet operations will be a part of the ecosystem and won't be the majority of the ecosystem. What we will bring to these autonomous players is... you know kind of end-to-end solution so they have to work on kind of what they're really good at which is self-driving algos etc leave the rest up to us

But it's that middle part that I'm just like focused on. Well, listen, we work with these fleet operators. And for example, with Waymo in Austin, one of our fleet partners. is operating that fleet right now. So that is a, you know, certain players may want to do the fleet operation themselves, but I think that...

Our kind of local on-the-ground expertise and the fact that we are running fleets with millions of cars today will allow us, that will be another benefit. Like, I don't know if VW in LA is going to want to operate their own fleet. We will be able to bring that capability if they want to do it themselves. That's totally fun as well. Yeah, I think I'm just stuck on, man, the fleet operators are going to have a bunch of really highly paid IT people.

Sitting around rebooting the fiber optic networks of these cars. If it's just a reboot, that'll be easy. But yes, it is. You know, again, these are complex vehicles. The cost of the vehicles is really high right now.

And the care for those vehicles is going to be non-zero. When you think about the safety side, you've talked about it several times now, the question of just autonomous liability exists in the world. I book Waymo through Uber. The Waymo gets in an accident. Who accepts that liability today? So right now, we think early on, most of the self-driving companies will self-insure. They're big companies. They can afford to self-insure. But ultimately, whether...

They insure, we insure, or the owners insure, like it'll work itself out. I do think that autonomy- What is the mechanism for working it out? Looking at the incident rate and looking at the cost per incident. So I think incident rates are going to come way down, especially if these autonomous vehicles are superhuman safe. Cost per incident is going to go up.

Right. Which is the cars are much more expensive, et cetera. But I think that the overall cost of insurance as a percentage of your ride is going to come way down because of the safety of these cars. Yeah.

We're out of time here. I got to ask you the last question, just in honor of my Uber driver today. If you had to tell Uber drivers today, here's how I will make you make more money, what would you say? I would say we're going to bring you more rides. Income for Uber drivers, for example, in New York, they're making more than 50 bucks per utilized hour. New York is an expensive place, but we think that's a pretty good tradeoff with a job that brings lots and lots of flexibility.

But it's a hard job. Traffic is tough, et cetera. So we'll keep working on it. Ultimately, the way to offer more earnings to drivers is bring more demand. And every single day, we're working on that. Yeah. Jared, this is great. Thank you so much for being on the cutter. Thank you. Really appreciate it.

I'd like to thank Dara for taking the time to join Decoder and thank you for listening. I hope you enjoyed it. If you'd like to let us know what you thought about this episode or really anything else at all, drop us a line. You can email us at decoderatheverge.com. We really do read all the emails. You can also meet up directly on Threads or Blue Sky and we have a TikTok and an Instagram. We'll see you next time. Thank you.