David Rosenthal: evaluation

Transcript context

…I think they were dismissive of the global alliance because it was unclear what it really meant or whether there was much value in sort of integrating each other’s apps or how smooth that would be. I think the more meaningful thing, like Uber is bringing a couple of assumptions to its battle with China that I think are interesting to examine. One, obviously I think at the time Travis is pursuing a global network but this is not really a network effects business or if it is, it’s very local. So it was sort of unclear that Uber’s strength and the rest of the world would even translate into China. The great contrast is with Airbnb where I think they do have more of a global network effect because they’ve got travelers going back and forth across oceans. The other advantage I think Uber thought it had was capital advantage and what we really started to see in 2015 and 2016 was this unique capital market where there were all sorts of unique sources of capital that were willing to shower all these companies with money. I think it was more the fact that Didi goes in and gets money from Apple or that these sovereign wealth funds start to kind of provide capital that begins to convince all these companies that they are on a sort of unsustainable path. The investment in Lyft, the global alliance, I think the Uber guys, as arrogant and confident as they are, sort of shrug but it’s when a company like Apple or FoxConn gets into fray and starts putting money into Didi that I think Travis and Emil Michael, his deputy, start to wonder can they really win this battle. By the summer of 2016, Didi is starting to pull away and whether that’s because Chinese regulators are subtly tilting the field towards them or because of its capital or just better execution, hard to say, but Didi claims by summer of 2016 that they have 85% market share so they’ve won back another 15% that Uber had taken and they’re operating in 400 cities in China versus Uber which was only 100. Then apparently, it's Uber’s investors that start pressuring Uber to negotiate a truce and Uber reaches out to Didi and says, “Okay, let’s begin peace negotiations.” And pretty quickly from when they reach out, Brad, I think you say it’s 2 or 3 weeks. They come to a deal where Uber sells its China operations to Didi in return for a 17% equity stake, and Didi agrees to invest $1 billion in Uber and get aboard. How did that set of meetings come together and differ from that first meeting when Travis went over? Well, first of all we should be clear that this is not a bad deal for Uber, right? It’s a sort of remarkable retreat that nearly 20% of what will be kind of their major international rival, a billion dollars investment to kind of recoup some of the massive losses, I think at this point, this is a very respectful set of negotiations primarily Jean Luo of Didi and Emil Michael from Uber culminating, as I depict in the book, this kind of famous drinking session between Cheng Wei and Travis in Beijing over the summer of 2016 where they’re drinking Baiju and Cheng Wei was sort of hilariously dismissive of Travis’ drinking abilities. But of course, Baiju is not for the faint of heart. I guess I don’t have much illumination on how they came to kind of 17% or 18% ownership stake other than this is what sort of the market was suggesting at this time. And for Didi it's a great deal too because they kind of win not just the Uber China brand and its customers and all those employees but basically an open playing field to be the primary kind of transportation innovator in the world’s largest transportation market.…

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