UBER SENDS SHOCK WAVES ACROSS SILICON VALLEY. MUST LOWER BURN RATE FAST & GET MORE PROFITABLE FAST

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this meeting is being recorded

good morning good afternoon good evening

folks michael’s uber one rental at a

time back with taylor from life goal

investments how you doing buddy

doing great doing great thanks so much

for having me absolutely i don’t know if

you saw it hopefully you did uh uber’s

ceo was out parading around wall street

trying to see what’s going on the last

over the weekend and he put out a note

to his employees which quickly got

leaked

that basically said

investors risk risk appetite has changed

they are only going to pay for earnings

no longer revenue we have got to run a

tighter ship we are going to trade

hiring as a privilege we are going to

whack marketing spend

and this isn’t about uber per se to me

because living in the valley this is

about uber sending a signal to every

single public

and

private tech company that you better get

your ass in front of your burn rate

because the money is not there burn rate

burn rate burn rate and there’s going to

be a lot of companies that go bust

because they didn’t control it what do

you think

building suspenders like typing down the

belt right i mean

to your point of like you know the

difference between revenue and earnings

is what you’re spending there’s only two

sides to the equation in your household

budget and two sides of the quasi-any

businesses budget there’s your revenue

on one side and there’s your expenses on

the other side and if one is struggling

versus the other it’s got to be

corrected so their revenue is high

generally because they obviously are out

there and there’s a million uber cars

running around picking up people at the

end of the day but they’re not

controlling the other side of the

equation very well right now they’re

spending too much money for growth to

box out competition like lyft et cetera

and it’s a time where to your point it

and i hate doing this because i sound

like a broken record but it all falls

back on the fed

where if they can’t go out and finance

debt cheaply

their business operation doesn’t work so

as the fed raises rates the cost of

financing goes up and therefore their

profitability just gets squeezed and

squeezed and squeezed and if they’re not

profitable to begin with it just gets

more and more negative on the other side

yeah so again i don’t think this is

really an uber comment this is again a

comment for every non-profitable company

public or private there’s a lot of

companies in the valley uh that have

been focused on revenue and kind of grow

at any cost and

you know it um

it works when risk is zero it works when

you can finance anything

it’s not so i expect a lot of tech

companies and non-profitable companies

public and private

to do what uber said and frankly

facebook and others where where they’re

going to freeze hiring uh i i’ve told

people that a recession is coming for

months and the first thing they should

do is

get a part of mainline versus new

businesses right i worked in software

right there’s always these new software

ideas where they take a few people and

go hey go try that

that’s this is not that time to be there

go get part of core you want to be you

want to be close to revenue not some new

idea that you can just whack the entire

unit um

you sound a lot a lot like warren

buffett as you make these comments right

seriously i mean like the the more

boring right now is not the worst thing

in the world baron’s wrote an article

this weekend on them this is this is

gold this is the best warren buffett’s

that i’ve ever heard bar none bar none

if you go back to 1965 and look at when

he took over berkshire hathaway and you

look at the stock price till today

if the stock price berkshire a were to

lose

99.99 percent of its value today

he still would have outperformed after

that 99 drop the s p 500 since he

started in 1965.

wow i’ll reiterate that if that if that

because my mind was absolutely blown

when i heard that stat so again if

berkshire a

his his you know his company lost 99 of

its value today

he would still have outperformed the s p

500 per year since 1965 when he started

yeah and again

the beauty of warren buffett is he

doesn’t get emotional right i’ve now

seen him two or three times

be called an idiot in a [ __ ] by a fly

by night investor who got lucky on

timing

yeah

and uh

david portnoy get your ass handed to you

buddy

yeah because

you didn’t realize you got lucky

yeah yeah

to our point uh in one of the prior

episodes like growth stocks it didn’t

matter what you were buying in a growth

stock market and this is the same

conversation we’re having right now with

these companies ubers etc it doesn’t

matter what it was when the fed holds

rates at zero it gives all of these a

lifeline to say hey i can grow at any

cost and explode and at some point i’ll

become profitable and then people will

be willing to pay for i’ll catch the

i’ll get escape velocity and i i too

will be amazon or whatever right yeah

yeah one of the one of the few uh market

penetration strategies where you come in

and you actually lose money consistently

um but jeff bezos is also a wizard that

most folks aren’t exactly exactly yeah

this this is um risk is being repriced

recession

just again recessions are

self-fulfilling sometimes

i stand by my uh

idea that this summer is going to be the

last blowout right we’re going to

finally can travel the world masks

aren’t everywhere i think a lot of

people are going to go have one more

party and then the consumer retreats

um

which is it’s dude it’s i don’t have a

lot of rosy pictures about our economy

uh for the next 18 months i’m quicker

than you on the recession talk yeah

we’ve discussed this i think that the

fed is not able to raise rates as much

as what the market’s saying right now

and they’re going to have to be less

aggressive and they’re still going to

break it

you know they’re still gonna break the

economy what i’m getting at there is

they’re gonna raise rates yeah but the

economy is slowing enough to at this

point already that they’re gonna raise

rates and break it and break the economy

force us into recession more quickly you

agree you just think it’s gonna happen a

little bit later because you agree in

the strength of the labor market yeah

it’s it’s just that would argue yeah

it’s the again but that could turn on a

heartbeat right you get more ubers

that i don’t know what i mean i don’t

know what so again

company a

you know they were hiring 100 people a

month

and you know what suddenly they hire

five

and then you have all these other tech

companies cutting heads it it could get

bad

how do you continue to hire at at a fast

rate when you see inflation the cost of

hiring that person going up and the

productivity of that person going down

so so workers right now are being less

productive i know than in 40 years and

they’re costing more how does a company

afford to do that well unless they’re

just passing through this exorbitant

cost to the end consumer and at some

point the end consumer can’t afford it

and this economic wheel flywheel stops

turning and that’s called a recession

yeah i can already hear all the bosses

right i was a second level guy when i

left and um

i can already hear the screaming forget

your ass back in the office

yeah what year are you talking here

do you mean i think it’s going to happen

i think right now they’re going to start

screaming get your ass back in the

office for a statement oh i i thought

you were talking about a realistic time

in your past when you were when you were

here and then i i’m talking about like

what year i got no no no no

yeah

if you’re a boss or a second line guy

and you’re running you know you have a

budget and all this and you see your

people being less productive one or two

things are going to happen

first you’re going to try to scream

everybody to get back because you you

lose that inertia of people being

productive together otherwise you’re

gonna say guys i’m gonna have to start

whacking people there’s not enough work

this is why better.com and all these

other people are whacking heads there’s

not enough work

do people get drawn back into the office

i think they do yeah again this is all

part of the process you so right now the

labor has all the power

right now you’ve got to have 17 flavors

of popcorn and 17 different things of

soda

and all that other freaking nonsense to

get people there

unions are growing apple amazon all

these other you know

laborers have the power

recession kicks on unemployment doubles

people get scared they suddenly run back

to the office because they don’t want to

be laid off

yeah that’s where we’re going

i totally agree and i think that you

know the the up for debate conversation

that everyone wants to have is whether

back in the office works better or

working at home is more productive and i

think this is getting called into

question right now and i think that

when things get tight

bosses want people they can see what

they’re doing absolutely and that this

is it i’ve had to make layoffs i’ve had

to make layoffs before i’ve had a

spreadsheet i was in the boardroom

uh a spreadsheet i think i had

50 people in my purview and i was told i

had to let 12 go

yikes 24 a quarter of your workforce

yeah

guess what i mean the people that got

let go or the people i didn’t see every

day

yeah yeah so

yeah and that’s the thing is like again

people can argue from productivity from

home and you’re not sitting in the car

going to and from but at the end of the

day if you’re not in the eye of someone

that’s making a decision and someone

else is and they can see that they are

working it’s it’s a tough argument to

make there

yeah it’s coming and again labor’s gonna

that’s why i think

this pushes to next year because i think

labor has enough power enough inertia

we’re still 3.6

unemployment i don’t think this gets

gnarly until it’s seven

i just don’t see it

i just think there’s so much momentum i

i don’t know at this point i hope i’m

wrong because the sooner we break this

goddamn thing the sooner we come back

together i mean really it’s gonna break

is it breaking q3 or is it breaking q2

next year i would rather break early

than later i just i still i don’t see it

i don’t see it

yeah yeah

we’ll see up for debate again i’m on the

side of it breaking earlier and then i

hope it does rates as high and and my

side also likely comes with a little bit

more of a mundane mild recession than

yours if it if it stays hot they crank

rates higher that’ll get uglier

it’s it’s weird to say that if things

are worse now then the recession might

not be as bad

absolutely it could be worse

welcome to economics 101. yeah that’s

funny because we both see it the same

way and i hope you’re right because i

would really like it to be not as bad i

just think by the way we neither one of

us have changed our tune either no since

we have any of our conversations we both

have been in the same camp it’s uh and

you know what will probably happen it’ll

probably land somewhere between me in

the middle yeah

hopefully both of us don’t just come out

looking like morons and we’re totally

wrong but yeah well actually you know

what that might be okay because we’re

calling for a recession yeah it’d be

okay yeah

yeah the fed gets lucky and lands this

thing softly more power to them so two

more questions as we round this up uh

do you think we get 50 bases in june and

july

or do you think they win july

yeah yes i do think they probably go 50

  1. i okay and i have i have moved on

that i have moved on that i i did not

think they were going to be able to get

as many as quickly um but i i do think

you probably get two more 50 50 and they

break

and then they break and then they pause

okay that’s my thought process yeah do

you think it we are in a recession today

meaning that the q2 gdp print will be

negative or do you think that was an

aberration in q1

i think it was an aberration but i think

you’re going to see

slowing gdp growth uh from trendline

last year if you want so but not

negative

now yeah i think we probably get a

positive gdp print correct yeah i think

yeah and me saying that we’re gonna see

slowing from last year like that’s

that’s a stupid comment on my part

obviously we’re gonna see slowing yeah

yeah genius good move

but i no i do think that that the

accounting mechanism that takes place

there you know with inventory restocking

is probably um you know

but but nonetheless it’s it’s coming i

think we get yeah it’s coming all right

taylor where can people find you because

you put out some amazing stuff folks if

you’re not following him he just put out

a ig post about kathy wood being the

antithesis and tith is this the opposite

a diversified investor i thought that

post was awesome well done

thanks so much yeah follow us at life

goal investments we put out something

on instagram we put out something daily

generally it’s broad market stuff it

doesn’t have anything to do with our

company it just talks about

economics and markets and and just rules

of thumb yeah

kathy wood up 157

down this down there

not good not good thanks taylor that’s

not diversification not diversification

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