UBER’s IPO: Driving in Reverse?–Futurum Tech Podcast Episode 044
On this episode of FTP, Futurum Tech Podcast, we take a look at Uber’s IPO. Is it really a lift for the company? We don’t think so. We’ll also take a look at the MS Build Conference and SAP Sapphire Conference. We’ll take a look at Google’s new privacy focus, which seems a lot like Facebook’s of late. And we’ll take a look at the rise of drones in the air, from the FAA and their predictions for the 2023 timeframe, as well as what Nutanix is doing in the hybrid cloud VDI space. All this and more on this edition of FTP.
Our Main Dive
UBER finally caught up to rival LYFT, going public in one of the most anticipated IPO’s of the year. And like LYFT, UBER fell a bit flat. What’s going on? Isn’t UBER the future of everything? Um, no.
Our Fast Five
We dig into the week’s interesting and noteworthy news:
- An update on the MS Build Conference
- What’s happening at this year’s SAP Sapphire?
- Is Google’s new Privacy Focus too much like Facebook’s Privacy Focus?
- Just how many drones are flying around up there?
- The latest on Nutanix and its multi-cloud strategy
So, a Facebook Co-founder thinks FB should be broken up into little pieces. He’s not alone.
Crystal Ball: Future-um Predictions and Guesses
Uber v Lyft 12 months out – will there actually be a winner?
Daniel Newman: Welcome to this week’s edition of FTP Futurum Tech Podcast. I’m Daniel Newman and I’m going to be your host today. Joined by my colleague and superstar research analyst Fred McClimans. Olivier Blanchard is out today and will not make the show. He’s on an airplane traveling home, but celebrated a birthday yesterday, so we are going to use this show to wish Olivier a happy birthday.
But for today, big topic on hand, Uber goes public. And we want to cover their IPO, talk a little bit about what’s going on with Uber following their big launch. And then we’ve got a whole bunch of other areas to dive in. We’ll be talking about Microsoft. We’ll be talking about SAP. We’ll be talking about Nutanix, talking about Facebook and one of their founders coming out and talking about possibly breaking up the company, covering all kinds of things. But before we jump into the show, let me just say hello. Let me say, Fred, how are you feeling this week?
Fred McClimans: I’m feeling great. But I’ve got to say, I’m a little bit left out because I didn’t know yesterday was Olivier’s birthday.
Daniel Newman: Well that’s because you don’t go on Facebook anymore. So if you were anything like me, you go on Facebook for only one reason, to know whose birthday it is. Because any other reason you go there, it’s like a black hole. You drop into it. You swim in it, and you come out dumber for it. Oh, sorry. Did I say that out loud?
Fred McClimans: Yes.
Daniel Newman: Oh wait, yes I did.
Fred McClimans: We can say that out loud. We say that often out loud.
Daniel Newman: Well it’s like Daniel Tosh; I’ve never said anything I shouldn’t say into a microphone when it’s turned on in public. Anyway, I digress.
So Fred, welcome to the show. Welcome to another Friday. And everybody out there, thank you as always for tuning in. Before I jump in, I’ve got to do the little blurb to let you guys know this show is for information and entertainment purposes only. We will be talking about companies, potentially talking about their performance, and even talking about their stocks, but we are not here to offer you any sort of financial advice whatsoever, so do not make decisions on any stock purchases, investments, shorts or anything else you’re going to do based upon the advice or insights or information that you gather here on this show.
All right, digging in. Uber, Fred, I’m not going to take a lot of time to do the backstory, but what I’ll say is this. A few, probably about a couple months ago, we did an entire show about the Lyft IPO, so you can’t possibly do a show focused on a lift IPO and not do a show focused on the Uber IPO. The Uber IPO has potentially been one of the most talked about IPOs in a year full of some pretty interesting tech IPOs. We’ve had Lyft. We’ve had Zoom. We have Slack expected later in this year. And now we have Uber. And Fred, it bombed. It did terrible. It didn’t even … It came out lower than than Lyft, and it’s sinking on the first day, so the shareholders … I mean, what happened? I’m just going to jump right over to you. What do you think happened?
Fred McClimans: Well, there are a number of things. I think, first off as we dive into this conversation here, our main dive about Uber and Lyft, it’s important to recognize that these two firms, they have a mutually beneficial relationship of a sort and a bit of a competitive relationship. But they are different enough that when we talk about the stock prices, when we talk about the market cap and so forth, and the business models, they’re different enough that we can’t necessarily draw a one-to-one comparison. But if you do, if we were to compare the two, yeah. So a Lyft is still sitting down there, about a sub $18 billion valuation. Uber was originally projected to come out, and people have been talking about this for the last six, nine months or so. They were going to come out with close to potentially a $120 billion valuation. That would have put their share price coming out today at $65 a share roughly. Instead, they priced low. They priced it a at 45, at sort of the bottom end of their price range. That pegged them at an $82 billion market cap. That’s a huge jump right there. And I think that recognized that the market right now is not as firm, as hungry for Uber as they thought it might be at this point in time.
And there are a number of reasons, just the overall economic malaise, the politics going on, and of course Lyft coming out and dropping. I mean if you look at Lyft’s chart, their price has done nothing but decline since they went public. And everybody kind of associated that Lyft event as a preview. “Here comes the big brother, Uber, right behind. Let’s see what that does.” But I mean, Lyft went from $87 a share, down now to $53 a share. Like I said, their market cap is just over 18 billion. So they lost huge on that. Lyft was a good way to kind of look at what Uber was going to do. They priced low. And I think if they had priced at 60, they’d be right down where they are right now, bottom of the bottom of the box. They are 43, 66 a shares we’re talking right now. Their market cap is under $80 billion. And I wouldn’t be surprised if it drops a good bit over the next month.
And here’s probably the most important thing I can say about Uber. Uber is a very diverse company. They have interests in everything from autonomous vehicles to the bikes and scooters to their supposedly core business of the ride share, gig economy here. But that ride share, that gig economy market, that is going to be changing really fast. And that’s not the only thing they’re into. And by the way, they lost a billion dollars in the first quarter of this year.
They have zero, zero profitability within the next two to three years, maybe even five or six years for this company as far as I can see. So that’s my rant.
Daniel Newman: So you jumped ahead of me a little bit. No, you covered a lot of ground. Fred, I mean the financial wherewithal of the company is crap. I mean, they’re very well-funded, and this IPO will only help them. It will help some of their investors exit. And the investors exited well. Of course, pricing that low may have been … Maybe their thought process, the investment bankers behind this thought process was, “Let’s go in low and see a nice jump on the first day, instead of having what happened with Lyft with a decline, and get a little more momentum. But I think it backfired. I think, frankly, they probably would’ve sold a similar volume at 65. And all they basically ended up doing was driving their price down. Now again, that’s an opinion, and I have no idea how true that is. I’m sure there were a lot of very, very smart little elves crunching numbers somewhere in a back room that decided that this was the right number.
But you made a comment at the end, losing a billion. And they didn’t just lose a billion last quarter. They’ve lost a billion like every quarter for as long as I remember. They don’t make money. I talked to Business Insider not that long ago about Slack’s upcoming IPO. And their CEO actually came out and said, more or less, that, “We don’t see any path to making money anytime soon,” and I slammed him for that. I just absolutely tore them apart. I called it a bad investment because it is a bad investment. Who invests in companies that have no plan to make money? Now, companies like Facebook, it took a while. Twitter turned the corner, and fortunately probably trained their investors well to not care about them making money. But in this economy, there’s too many companies that are making money, that are paying healthy dividends. And these new companies that aren’t making money, these are not cheap buys. Stock at 45, 50, $60 is not a cheap stock. It’s not something that people could … the average Joe can buy a lot of shares in. So if you have the choice to buy Cisco, or buy Dell, or buy these foundational companies with high quarterly earnings, or to take the flyer on a unicorn that’s losing a billion dollars a quarter, I just … It’s really hard to advise that.
So the business fundamental losses to me is possibly one of my biggest reasons that I’m like, “This is a total, total failure.” We are in a time where that’s been okay in the past, but it seems to me that the trend is nobody’s really getting excited about companies that can’t make money. You noticed in these the unicorn stocks this year, well the company that got the biggest wave was Zoom, the video conferencing company. And why was that? Well, Zoom’s doing well. Zoom’s got a plan to make money. Zoom’s a high scale, high adoption rate enterprise software that people are using and paying for. It’s like, “Geez, that seems like it makes sense. Let’s put our money there.”
Fred McClimans: Hey, if I’m looking at business models, the Zoom model, it’s well understood. It’s simplistic in its nature. Create software, software in the cloud. Sell the software. You land and expand. You give up the free trial. You convert people over to a paid accounts. You convert to enterprise accounts. That’s a model that everybody knows, and there are a lot of people that know how to make that work. I can’t find anybody that really knows how to make Uber work, or who can even explain the way Uber works. And don’t forget, you mentioned something a minute ago about the time has kind of passed for that, “Hey, we don’t need to make money.” Uber, I mean they started back in 2009 as Uber Cab, after they kind of lifted the idea from Lyft out there. And back at that point, the idea of not making a profit was acceptable.
That was still at the point where the internet was growing leaps and bounds. Valuations were growing leaps and bounds because of eyeballs. All you had to do was show that you can get a lot of people watching your site, consuming your traffic, doing all that great fun stuff. And you could leave the monetization to some other time down the road. And that’s exactly what Uber is doing right now, only they’ve shifted. They’re not talking about riders anymore. They’re there, but that’s not the main thing now. Now it’s the hype of AI. It’s the hype of autonomous vehicles. It’s the hype of autonomous drones. All this hype, I just … You know, the emperor has no clothes is the only thing I can can say to this.
Daniel Newman: Oh, the emperor is standing there butt naked, and it’s embarrassing. I don’t see it right now. I give the launch day kind of a thumbs down. Like I said, I think they should have gone bigger. I think they actually sort of fanned their own flames. Now I’m going to take one last touch on this topic. How much does the driver’s strike or impending strike, which I heard has been somewhat rectified. And they’re going to make a significant payout, somewhere over a hundred million from what I understand, which again-
Fred McClimans: Which I think that’s cheap.
Daniel Newman: It’s cheap, and it’s still going to hurt them though. Because when you’re losing a billion a quarter, that cash is coming straight … is going to go straight to their losses. I’m sure they’re going to amortize it over a period of time and whatnot, but they’re still going to … It’s just going to add to their losses. Now, what do you think? Do you think the drivers, doing that at the time they did it, do you think it was part of the reason that drove that IPO price down? Do you think they were able to … Because if they did, these drivers had billions of dollars in economic impact on the company. But unfortunately by doing that, they’ve kind of hurt themselves because they hurt the company’s cash, which could have been the cash that went to them. So it’s kind of a big circle. But what do you think?
Fred McClimans: Yeah. I’m sure there was somebody somewhere who put some thought into the timing of this, much in the same way that I also think that Uber just kind of got roped into IPOing right now. I mean, after Lyft went, Uber had to go. They absolutely had to go, and I don’t think they could have picked a worse time to actually go public. But the driver strike and the fact that Uber is now paying out cash, that I think is very telling, and it speaks volumes to a lot of people when you evaluate the company and its prospects. We’ve got to look at the management team. We’ve got to look at the fundamentals on the business model. We have to look at how effectively they can at any point convert some type of customer related activity to the bottom line in the business. And they’ve never been able to demonstrate that they can do that. And in fact, they haven’t really been able to demonstrate that this company for more than six months at a time can be well run, that it can actually manage all the various efforts that they’re into.
So they may be big. They may have the name. They may be on everybody’s mobile device. And I’ll admit it. I use Uber a lot. In the past, I’ve used Uber probably significantly more than Lyft, although that has changed of late. But this company just has not demonstrated that they are worth what they are worth here today. And when you look back at this, there are a lot of people right now that got to be cringing. With the money they paid … If you invested money way back in 2010, ’11, that’s great. But the later round players, they have to be wondering, “How long are we going to have to wait for this to actually turn profitable for us?” And that’s a big thing.
But yeah, there’s so much baggage around Uber. And even for a company that, if you buy their business model, if you buy the gig economy, the, “Hey, they’re not employees; they’re contractors,” and the agreement that they just struck for the hundred million plus pay out here, their side of that is still sticking. “We still get to call our drivers ‘contractors’ here.” But the interesting thing is, we know because Uber is telling us. And the market is telling us that at some point, those drivers … The contractors are not going to be hired. They’re going to replace them with autonomous vehicles as quickly as they can because it’s much more profitable for them. And I think that if that’s even close to as near as we think it might be, that’s going to be a huge disruptive force on this business, massive, massive issues with this particular company. They may have a good product, but-
Daniel Newman: It’ll be a big one to watch. I do think the leadership change has been positive for them. Getting it to public has been a feat. They are in some diverse areas that they could potentially monetize and become profitable later. Just I think right now it’s a tough one to swallow. The market’s already sitting really high, and definitely on some shaky ground right now. So wherever you’re going in, you’ve got to … I’d say proceed with caution, but of course we’re not actually giving that advice. We’re just kind of saying what we think.
All right. So I have to move us forward here to our Fast Five. And you’re going to get a little bigger dose of me Fred than normal without Olivier here. But I hope, Olivier, your plane is on time, and your 17 connections back to Greenville, South Carolina treats you well. Or you could just move to a real city. That would be cool. But anyway, I digress.
Fred McClimans: Come on, Dan, bring it. Bring it. What’s your first Fast Five?
Daniel Newman: All right, so let’s do this. So this week’s been a big travel week. So rather than scouring the news and covering the Fast Five, I want to give some feedback from a few of the events that I got to attend. I started the week off at MS Build. It was over at SAP Sapphire, and I’ll cover both of those.
So Microsoft had their Build Conference this week, their giant developer conference in Seattle. First of all, very good conference, very interesting. Got to listen to Satya’s keynote. With the exception of their big, mixed reality experience on the main stage, the overall keynote was very good. Satya kicked it off focusing on his big topic right now, which is something near and dear to my heart, which is privacy, security and responsible AI. So before we even start talking about all the technologies and the platforms, that’s the big area that Microsoft is building their story around, “We care about your privacy. Data should be secure and protected, and we need to be responsible with AI.”
They did talk about the four platforms of the company that they are really building around. And for anyone that’s not following Microsoft, potentially the hottest stock on the planet right now, maybe the hottest company on the planet, passing Apple in value, staying there for the time being. But their platforms are Azure, which is growing fast. They’re growing faster than AWS was at the same time. There are some caveats there, can’t talk about them in the Fast Five. Their Dynamics 365 or their business, very explosive, A lot of connections with Azure there. Their Office 365 had some really cool things they were showing, especially around conversational AI, more to come there. And then their gaming business, which I do not … We do not track the gaming side of the business here at Futurum Research, but I am a gamer. I play a lot of video game soccer. So if anyone ever wants to challenge me to a game of FIFA, bring it on. Just tweet me, and maybe some time in next year, June, July, I’ll have time, and we’ll go one-on-one. So there’s my first, Microsoft Build. Fred, over to you.
Fred McClimans: Yeah. I’m going to drone on here a bit. We talked about Uber and that forays into autonomous drones, but the people that actually track this stuff and have to manage this stuff, the FAA, they just came out with their forecast for the next two decades, which includes some interesting tidbits about the drone market. The drone market, we have to break it into into two different groups. There are the residential, consumer, “I happen to have a phantom, and I’m going to fly it wherever I can and have a great time.” That market is huge already. There’s 900,000 owners registered with the FAA since they started that program in 2015. But the commercial side of that, as of the end of the year … Oh, and by the way, they now estimate that there’s about 1.25 million drones in operation out there on the individual user side. That’s huge. But right now, as of the end of 2018, there are more than 27,000 commercial-use dones that had been registered with the FAA. And they’re expecting that number to triple by 2023.
It’s an interesting thing to watch because you’ve got companies like Uber out there, but anybody that’s in the retail space, from the Amazons to Walmarts to 7-Eleven, they are all out there experimenting with this stuff. In fact, there was a news article that I saw, then I saw a story online about it where Baltimore hospital actually used a drone to transport a transplant … an Oregon. I don’t know what it was, but they … Literally, they took an organ from one person, put it into a drone, flew to the next hospital where they took it out and transplanted it into the patient.
So anyway, it’s here. I think the scary thing is that if we’ve got 27,000 commercial drones out there today, I’m not seeing them all, but they’re out there. And if that number triples, we’re going to be ducking left and right as we walk from the house to the mailbox. Fun times ahead.
Daniel Newman: Yeah, that’s crazy. I guess sometimes I think of it that way. And sometimes I think of it the other way, like, “How many planes are concurrently in the sky?” Have you ever looked at the aviation map, and you see all the planes out there? It’s like, “Holy crap! That’s a lot of planes.” But yet when you’re up in a plane, you don’t see very many planes. But the good thing with altitude, you can put them at different heights, and there are only a few inches tall … feet to inches tall at the most.
Fred McClimans: There are some groups out there that, in fact I believe Intel is deep into one of them, where they’re actually trying to create the drone collision avoidance technology, the IFR, the friend or foe out there that the military uses and that commercial pilots use to just make sure that two commercial drones just don’t happen to occupy the same space right above a crowd.
Daniel Newman: Unless we want them to.
Fred McClimans: Unless we want them to, yes.
Daniel Newman: So I’ll be on the third Fast Five. So I was at SAP Sapphire and SAP CX Live. Two different events, same location, same company, sort of interesting. A lot going on there. A couple of the highlights. They actually had Bill McDermott, CEO of SAP, on stage with Tim Cook. And Tim went ahead and launched his keynote talking about if you have an android phone, just pass it to the middle, and they would take care of it. I thought that was hilarious, Tim Cook. In their 10 minutes on stage, not a lot was said. And the partnership between Apple and SAP has been more symbolic than reality, but they are working on some things to build apps for iOS.
The big overall theme though of the event with SAP is this intelligent enterprise. Last year, they were super focused on Leonardo. And Fred and I know Leonardo well because we wrote a lot of papers about SAP Leonardo. Leonardo was a technology story. It was IoT. It was blockchain. It was AI, and it was how these technologies are going to have influence over the ERP and software environment. SAP sort of seemingly has tracked back a little on that story, and has come full-out with this intelligent enterprise story which really leads around outcomes. So the themes here at the event were really about moving towards an intelligent enterprise that’s designed around outcome-based implementation of technology, which by the way is what we’ve been saying is digital transformation for a long time.
The other thing was this is the first half hour they had with, since the acquisition of Qualtrics, which was a multi-billion dollar acquisition of the experienced data company. So a big theme this year was this O-data and X-data concept. So companies have historically been very good at using operational data, O-data, or driving systems decisioning, utilization in machine learning, automation. But what they’ve been missing is the X-data. And so SAP, SAP Customer Experience Live, very focused this year on the X-data, the experiential data, on how that data is going to be utilized as part of a company’s strategic decisioning, as part of their systems, as part of their … really the corporate DNA that’s leveraging technology. So going beyond the operational data was the big theme that I pulled away from the show. Fred.
Fred McClimans: Very cool. Very cool. Yeah, the SAP papers, the Leonardo papers, that was quite a fun time. Learned a lot.
Daniel Newman: … But because the papers weren’t fun, it was just there was that many of them.
Fred McClimans: Yeah. So I’m going to shift gears here a little bit and talk a little bit about Nutanix. So, Nutanix, they’re out there in the the cloud space, the cloud computing space. They have some really cool stuff. And I always get excited when I see a company make a move that just fits, and you look at it and go, “Well yeah, of course. That’s the thing to do.” And in particular when that move involves a couple of different pieces that are part of the trends that we’re tracking and talking about every day. So with Nutanix here, they have released a new version of their Xi Frame desktop as a service virtual desktop software. It’s kind of a slick step here evolutionary wise for the technology. When you look at it, you just go, “Yes, this is obviously the right thing to do,” at least in my opinion it is.
But what they’ve done here is they’ve leveraged two trends. The first is the hybrid cloud trend. Dan, you and I, we talk a lot about that, public versus private, the on-prem versus off-prem issues in the cloud space. And the reality is that, and as we’ve been preaching for years, unless a company was born yesterday in the digital-native world and the cloud is the only thing they’ve ever experienced, that organization probably has … I’ll use the word legacy here, I think appropriately. But they’ve got legacy technology. They’ve got investments. They’ve got applications that were designed not to work in the cloud, but to work in the enterprise, in the data center where they have control of that information.
And then there’s a whole nother group of users out there that for regulatory reasons, for security reasons, or maybe simply the apps just don’t run in the cloud and they don’t have the time to actually translate everything into new software there. For those people out there, the cloud is great, and they’re adopting the cloud. But as we published earlier this year in one of our reports, 81 percent … We surveyed 500 enterprises around the world, and 81% of them were using some combination of public/private on-prem/off-prem cloud infrastructure. So hybrid is clearly here, and vendors need to spend time thinking about servicing that market.
The other aspect of this announcement though from Nutanix, the VDI aspect. That’s virtual desktop capability, the ability to take a laptop device or a desktop device, log on to the device, connect your browser, point it at your corporate server somewhere, and actually in that browser window have emulated for you a complete desktop as if you were sitting in that remote location or the centralized location. It’s kind of like when you go into a cybercafe, and you log onto the laptop, and you check your mail, you check your Dropbox, you do all this stuff. The beauty here is that enterprises can take their software, any software, any platform, and you can access that through any device. So regardless of whether you’re in a the Bahamas or Bermuda or Burbank, if you have a laptop and you’ve got Chrome or Firefox or IE or Edge, and you can get to that cloud, you can access your software as if you were sitting right there. It’s a really nice slick thing. Enterprises love it.
But what Nutanix hadn’t done previously is they haven’t bridged the gap between the public cloud and the private cloud, and that’s what they’ve done here. They’ve taken their software and they’ve extended it from the public cloud environment, the AWS’s and the Azures, and said, “Hey look, we’re going to bring this into your private data center. We’re going to bring it into the hybrid cloud environment.” And what’s really important here is they’re doing it in a way that has a single point of management and control that controls both the public and the private simultaneously. So for these organizations that are living in this hybrid world, this is an ideal solution, increased security, increased, decreased risk of data theft, and the ability for your employees anywhere in the world to pretend that they’re sitting at their local desk, accessing all their software without actually having to have that software, and the risks that go with it, with them. So, a really smart move.
Daniel Newman: No question, Nutanix is a player. I mean it’s been VMware at the top of that pyramid, and you’ve had companies like Citrix lagging slightly behind. But Nutanix has kind of come out of nowhere. And they’re not really a brand new company, but just in the last few years they’ve really hit their stride. And Olivier Blanchard, our normal third party, was out there with them at their NEXT Conference this week. So it will be interesting. Hopefully next week when he comes back on the show, we can get his take on this. But I totally agree with you, it sounds like what they’re doing to virtualize the environment for an entire and true hybrid/multi-cloud experience is cutting edge. And so them and VMware really do have very complete, complimentary solutions. And one of the things I think is really interesting, and this is going to be the take, because we work with Dell. And Dell’s someone I have a lot of respect for, their business, that VMware was a great purchase. But do companies like HPE, like Cisco, like IBM, that aren’t necessarily completely playing in the spaces that VMware was playing in, that maybe had historically worked with VMware, are they going to turn to Nutanix when it comes time to fill these gaps? And there’s a compelling case to be said.
Fred McClimans: I think there is. And VMware, as powerful and as solid as they are, they themselves kind of get pulled into that legacy aspect of virtualization. I think there’s something about the way Nutanix is approaching the marketplace that … It just feels a little bit different. It’s got a simplicity to it, and that’s nice to see.
Daniel Newman: Yeah. We’ll have to keep an eye on that.
So my final Fast Five actually talks a little bit about Google, Sundar Pinchai … Did I say that right? I’ve never actually said it out loud … put out an op-ed. You probably might’ve heard Tim Cook talking about privacy as a luxury item or a luxury good. And Sundar came out and wrote an op-ed for the New York Times saying, “That’s not true; It’s not a luxury good.” So this circles back on this theme of privacy that we’ve had here on this show, and it’s something I’m definitely very interested in personally. His op-ed was very good, but the Fast Five item I’m actually talking about is … So Google has launched some new privacy controls that they’re very excited about. So when he talked about this, “It’s not a luxury good. And here’s everything we’re doing.”
But after reading about what they’ve offered, which is giving people more choices with their data, things around location tracking, making it easier to turn that off, or a more a meaningless incognito mode than what’s historically been there. But there’s been some insights, and WIRED went under the hood and kind of said, “This stuff’s really hard to use.” It’s really hard to use. It’s not logical. It’s not simple. So yes, it’s great that they’re doing it, but people cannot easily figure it out. And the whole problem with privacy from the get-go, in my opinion, sits a lot on the expectations of the individual to do their diligence, to understand their privacy, to understand how to control it. And so, good intentions here from Sundar, a well written letter, and it certainly never hurts to take a swipe at Apple when you’re Google, but I’m really kind of finding it laughable as these companies, as apple, as Facebook, as Google all stand up and say, “We really care about your privacy,” when their behaviors really don’t mirror that.
And so, interesting news. Good to hear they’re building more privacy controls. But I have to say, I give it a B minus at best because these companies … Privacy and going too far to the slant of privacy is not going to do anything good for these companies’ business models. So unless they have another plan, I think it’s more lip service to make people feel good than it intent to build solutions that actually solve the privacy dilemma.
Fred McClimans: And I think you’re right.
Daniel Newman: Well good, because I didn’t want any feedback there. So we’re going to keep going here. We’re going to hit into Tech Bites section. Tech does bite sometimes. And we just talked about privacy. We just talked a little bit about things that are going on. And this Tech Bites section isn’t exactly about privacy, but it actually zooms into the op-ed that Chris Hughes, one of the founders of Facebook, put out this week. And Fred, I don’t know if you read it. A piece came out on The Verge. Casey Newton wrote it, and it talked about Chris Hughes, his kind of op-ed and his discussion around the fact that he thinks Facebook needs to be broken up. He basically thinks Zuckerberg’s too powerful. So, not the first calling. We’ve talked about this on the show before from a legislative standpoint, but very interesting to have a former co-founder.
Now, Chris Hughes, here’s a little background, was not a programmer. He’s not a coder. He was the empath, they called him, at Facebook. Meaning that he was kind of the guy that looked at how people might want to connect, and he brought value to the company by sort of having a very human, anthropologic or sociologic value early on. But now he’s basically saying, “The company is to powerful. Mark has too much control, and it needs to be broken up.” So what do you think about that, Fred? Did you have a chance to read it, and what’s your take?
Fred McClimans: I did. I thought it was very interesting, almost compelling the way he makes his argument there. And it’s hard not to take into account the fact that he was there, I mean at the very beginning, as this whole juggernaut started to take shape. One of the things that that was in this piece here was sort of the early signs way back when that, rather than think of Facebook as this monolithic company growing bigger and stronger, like the monolith from 2001: A Space Odyssey. Rather than think of that, his idea was, “Hey look, we’re doing this so that people can connect. Give every college their own software, their own network that’s their little Facebook network. And I think that’s all well and good. But what I didn’t see here was anything that says, “Yeah, the company really needs to be split into four parts,” that that really resonated with me.
I do believe that Zuckerberg as the CEO and chairman of the firm, bad idea. I’ll put that right into the camp with Elon Musk from Tesla, bad idea there as well. But I think what they need more importantly is rather than being broken apart, I think the company is manageable if they have the right management team in place and if they have sufficient guardrails that keep them on path that doesn’t allow them to do things that … Similar in a way Sundar Pinchai from Google. We were talking about earlier, his, “Here’s my letter, my perspective on privacy.” I think they’re talking to an audience of maybe 10 people. That at this point they’re all just trying to give lip service to keep the politicians from trying to step in and legislatively forcing deep regulation, or even breakups as some of the candidates are talking about today.
But anyway, with Chris Hughes here, I thought it was a really interesting piece. I thought he made some really great points. I’m not sure I buy into the breakup model with this, but I certainly buy into the idea that they need to be regulated. I mean this engine that they’ve created is more powerful than … faster than a locomotive, able to leap tall buildings in a single bound, you know, Superman. It’s huge, and we have to do something to make sure that it’s used in an ethical fashion.
Daniel Newman: Yeah, it’s interesting. And I saw this section. It talks about how former Facebook executives are coming out against Facebook’s existence in its current form. It talks about Dustin Moskovitz, which he’s a top donor for Color of Change, which is basically a campaign to have Zuckerberg fired.
Fred McClimans: You’ve got to like somebody that has the wherewithal to actually pull something like that off.
Daniel Newman: Yeah. But he did say out loud that he thinks if the goal is to improve democracy, they need to break up Fox and Sinclair first, then Mark.
Fred McClimans: Yes.
Daniel Newman: Justin Rosenstein, who led the development of the like button, he’s warned about the negative effects of social networks on individual psychology. Sean Parker, the first president of Facebook, also known as The Napster, he’s, quoted as saying, “It probably interferes with productivity in weird ways, and God only knows what it’s doing to our children’s brains.” He led their growth team in its early days, told an audience at a Stanford graduate business school to take a heartbreak from social media. “I think we’ve created tools that are ripping apart the social fabric of how society works.” He added that he felt tremendous guilt over his time at the company before walking those comments back after getting an angry phone call from Sheryl Sandberg. And then the last one was Brian Acton, who cofounded WhatsApp, but he was not an early executive from Facebook, but he famously told people to delete Facebook upon leaving the company.
So there’s quite a bit of negativity coming out of the Facebook camp, so this theme isn’t going to go away. And if you listen to our show, you’re probably going to continue to hear about it either directly or in indirect ways. But the real question is, “Okay, we’ve complained a lot about it, but what are we going to do about it?” And that’s something maybe for another show another day.
And since we’re coming towards the end of this show, I’m going to launch hard and fast into our crystal ball. Fred, bottom line question. I’m going to give you a timeline. 12 months out from now-
Fred McClimans: Yes.
Daniel Newman: Which company is performing better? Give me both from a stock and a performance standpoint, Uber or Lyft?
Fred McClimans: Oh, that’s a great one. I think the way to look at that is going to not be necessarily to look at the share price or revenue growth, but really take a look at, “What’s the EPS? What’s the earnings per share moving forward on these guys here?” And based on everything I’ve seen, based on the management team, based on the market moats that they’ve kind of built around themselves, or even market focus here, I think Lyft is going to be outperforming. From a pure investment perspective, I think they’ll be outperforming Uber moving forward. I just don’t see Uber really getting their act together. They may have great rises in the market cap, but look at that profitability number. Yet, true, Lyft has their issues, but I think because of their focus in the marketplace and the fact that they’re not trying to go into five or ten different market segments, as aggressively as Uber is, and they are focused really heavily on the ride market in the US, where Uber has been all over the place, and lost all over the place, in some cases retreating with a piece of the company that kicked them out. But yeah, I’m going to put my money behind Lyft. But I can’t say money. I’m going to put my-
Daniel Newman: virtual money.
Fred McClimans: … analysis. My virtual money. I’m going to say that I think a Lyft is a better looking company at this point.
And I’m going to be a contrarian here. I actually really have no goodwill towards Uber. And if you’ve listened to me, read about anything I’ve written, I’ve covered it widely. I don’t like Uber, but actually I think Uber has more upside. I think Lyft has narrowed itself down. They’re struggling to diversify the business. I don’t know if ride sharing in itself is actually a profitable business. I think Uber’s further along with autonomous vehicles. I think they’ve got more of a diversified revenue stream. I think they do have a better leadership in place now. I think they’re going to be under pressure at a faster pace because the market … They are the first brand. They are the first name in this business, in this industry, and I think they will potentially turn that corner.
I’m actually doing some analysis on the enterprise side around three companies right now, Intel, AMD and Nvidia. And I can’t say everything I’m going to say about it yet, but I’m looking at the cases for each of those businesses. And let’s just say, as I continue to research companies, ecosystem is more important than we want to make it. Yes, being very good in a small area can work for you when you’re small. But when you’re big, it gets much, much harder to be very successful when you don’t have enough total available market at your disposal. So let’s leave it on there.
I want to thank everybody out there for joining in on this week’s edition of Futurum Tech Podcast. Love having you. Olivier, we missed you, so we’ve mentioned you at least a few times. And everybody out there, if you liked the show better without Olivier, let us know because we can find other things for him to do on a Friday afternoon. Just kidding; you have no say. We really appreciate you tuning in to this week’s edition. We hope to see you very soon. From Futurum tech podcast, Dan Newman, Fred McClimans, we’re out of here.
So for Fred McClimans and for our missing cohost, Olivier Blanchard, I’m Daniel Newman, thanking you for listening to this edition of FTP, Futurum Tech Podcast. There will be plenty of more tech topics and tech conversations right here. Please be sure to subscribe to us on iTunes. Join us, become part of our community. We would love to hear from you. Check us out at futurumresearch.com. We’ll see you later.