Edition 10
Uber finally makes a profit, world wonders if pigs can fly, elusive "everything apps," and more...
Welcome to the tenth weekly edition of Nowism.
This Week
Uber Drives Ahead
Uber reported its first-ever quarterly operating profit this week, which is pretty big news for a ride-share operator that has so far burned through $25bn of investors’ money. By making $326m in operating profit in Q2, it can now be proud of the last year where it’s now only lost $500m of revenue from $32bn of revenue. Quite the success story?
The big question now of course is whether this is the start of a new chapter of unheralded growth in profitability where it can reduce staffing, and operational costs, adspend, stop acquiring new companies, and turn on taps like ad revenue, and focus on being a “deliver anything” ( via Uber eats, and it’s acquired units of Drizly and Postmates) company to dominate.
I’m always intrigued by the businesses in this space. Companies like Deliveroo, DoorDash, and Delivery Hero, have all shown remarkably similar trajectories where they’ve grown rapidly, and have never ever made a profit - even during the exceptional trading environment of Covid Lockdowns and near-free money. They are always tantalizingly on the "edge of making money.” always “focusing on key markets and profitability by slowing growth,” but somehow never do.
This is quite remarkable, as they all take huge cuts from both food orderers and a stunning 30% from restaurants, while generally treating workers badly. It's quite mad that billions of dollars of market capitalization are "created" from a lose-lose-lose-lose dynamic (customers, drivers, restaurants, app). Surely, the entire point of "tech" and "disruption" would be that markets become more sophisticated and efficient.
Where things go from here is always the question, and to some extent, Airbnb, Zoom, Block (Square), and Amazon (yawn) have shown there is light.
Maybe when Spotify, Lyft, WeWork, Wayfair, Peloton, Instacart, Boxed, Pinterest, Slack, Casper, Snap, and Zillow, seem to grow revenue but never make any money, it’s because they are just so ambitious and confident in their future.
But I’m now so sure. For 5-15 years tech companies have been burning vast sums of cash in order to try to launch, rather like a rocket going into space.
There was always an assumption that, at some point, they would reach orbit. The belief was that the network effects, strong brand recognition, reduced competition, economies of scale, or new technology would somehow overcome the force of gravity.
The free cash acted like rocket fuel. With no gravity present, progress toward growth was all that mattered. We suspended judgment and saw all cash raised as a means to acquire users. The higher the user count, the better. The more cash raised, the more proof of the model.
The problem is, all this thinking was based on the idea that being a "tech" company magically made the future bright, that selling furniture online, or shoes, or cars or shampoo online was intrinsically better than selling in-store. That streaming music had to be a better business than making music. That being a marketplace had to be better than owning assets. That having customer data would change everything. That being in a fast-growing sector, is more important than one where tech is that helpful.
For a while, the joke in Silicon Valley was always that you could make it up in volume. Then it became you could make it up with user data. Then “make it up with advertising.” But I’m just not that sure the ad money is always there. For me, advertising is the revenue model of last resort.
We may have to accept that for Uber, WeWork, Spotify, Casper, et al. to ever make sense, they need about 30 years of near-perfect trading conditions ahead of them.
Disruption isn't solely about sophisticated technology, but rather about new unit economics. Self-driving cars offer a potential solution to change Uber's unit economics. Robots offer a potential solution for DoorDash to make sense. While Wayfair creating a time machine and preventing Ingvar Kamprad's birth may make sense, the internet alone is not enough. Technology in certain categories does not revolutionize everything, nor does it magically transform bad ideas into good ones.
X Marks the Spot
I really hate Twitter about Twitter, and the ongoing car crash of Elon’s antics doesn’t make me want to write much. For me, clumsily changing a few logos isn’t a rebrand because I’m not sure tech platforms are brands. Twitter, like Facebook, or Reddit isn’t really a brand. It’s a user base. It’s a tribe. It’s a product. Nobody will leave because of color changes. I’ve never known why these companies are assumed to be valuable brands. I’d rather own a Matsui TV than a Facebook TV. I’d buy a Gawfolk monitor before a Snap-branded one. I’d pick a mattress from Marriot before Pinterest.
The only thing that matters with the X rebrand is whether it puts it in a better place to become “the everything app,” to which the answer is probably no. The basis for an everything app is trust, security, and most importantly real IDs, something that the cluster of Bots on the platform and snide remarks from Wobbly3202Pc45 make hard to see happening soon. A social graph is a great place to launch most super apps from, but not one that looks like Twitter’s, it’s about the second worse place to start from than 8Chan.
It’s not the pace, it’s the weirdness.
I have long felt it’s not the pace of change that people feel makes the world now feel chaotic, but the uncertainty. This was a good interview on that, sort of. Personally, it feels like we’re in a big interim moment. Tech has changed the underlying assumptions of life. In the modern world, what are gender roles, what are good careers, and should we aim to build a pension or a following or Airbnb property portfolio? What is a good life in 2040? We don’t know. I always thought (in this, the most popular piece ever on The World Economic Forum site) we should be teaching kids to dream not code.
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Little Ones
Hi, please go to the 2nd floor, past accounts, then go left at the lettuce. Offices to become vertical farms.
I know people are bored into a trance, but is anyone ever going to be bored enough to chat to a made-up AI character? People don’t even want to talk to their friends anymore.
Sustainability is hard. Highly rated ESG companies pollute as badly as anyone.
Someone find me some thread. France to pay everyone to mend clothes. One of the world’s hardest-to-manage programs.
Why AI won’t replace coders, but we should also be aware most studies show Gen AI for text is mainly getting worse. Turns out adding more grey paint, to grey paint, doesn’t make it more colorful.
Meme stocks are back. Perhaps Tupperware parties can socially oblige people to buy their stock too.
Fake it until you make it or fraud. Example #402, most of which involves SoftBank. It’s wild how much lying has become part of the Unicorn playbook.
Finally, someone is thinking more imaginatively about loyalty programs. Just a shame it’s with an umbrella brand people have never heard of.
Small simple modular robots will be more impactful than large complex humanoid ones, trust me.
Perhaps one day more countries will ban importing absolute junk from China that’s too worthless to bother to return. Well done Indonesia. We urgently need to focus on selling better things that last longer and are more cherished.
From weight loss programs to computer programs, this could be a brilliant shift of core competency.
Amazingly smart idea, but quite expensive. One day I will moan about badly designed plugs.
The IRS in the USA has woken up to the idea sending tax forms by paper isn’t the best way.
Me me me me me
I did this podcast with 5X CMO Mike Linton about why we’re missing everything that matters.
I did this podcast in Cannes and I thought I’d share it while I’m being all self-promotional.
Why not see my speaking reel too, be the 3,307th person to watch it.
And Finally
I’m going to be in Lisbon, Marrakech, Tel Aviv, and Riyayd in the next 5 weeks, maybe we should meet up.
In the spirit of the summer holiday, I’m taking a little time off in August from writing the weekly Nowism newsletter to focus on some deeper dives and some white papers on the future of Finance and the future of Healthcare.
I hope you’re also finding time to allow yourself to step outside of routines to reset and think more deeply about the topics that matter to you.
Bye for a bit!
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"should we aim to build a pension or a following or Airbnb property portfolio? What is a good life in 2040? We don’t know." -- This resonated big time. Thanks Tom!