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Fare play.

Well this is pretty wild:

SAN FRANCISCO—Uber Technologies Inc. is testing a new feature that gives some drivers in California the ability to set their fares, the latest in a series of moves to give them more autonomy in response to the state’s new gig-economy law.

Starting Tuesday morning, drivers who ferry passengers from airports in Santa Barbara, Palm Springs and Sacramento can charge up to five times the fare Uber sets on a ride, according to a person involved in developing the feature. Uber confirmed in an emailed statement that it is doing an “initial test” that “would give drivers more control over the rates they charge riders.”

That is from the Wall Street Journal. Uber is deeply concerned about the impact of Assembly Bill 5, the law passed by California last September that makes it harder to classify workers as independent contractors rather than employees. We talked last week about some of the changes that Uber has made to how it does business in California to strengthen the claim that its drivers are contractors: ditching upfront pricing, capping its own commission, and restoring surge multipliers for drivers. But letting drivers set fares isn’t something I ever thought Uber would put on the table.

Here is more from the Journal:

Uber’s latest changes will set up a bidding system that allows drivers the ability to increase fares in 10% increments, up to a maximum of five times Uber’s price, the person involved in developing the feature said. Once a rider pings the Uber app at the locations in the pilot program, Uber will match the rider with the driver who has set the lowest price, the person said. Drivers who have set higher fares are gradually dispatched as more riders request rides.

One ride-hail app that tried letting riders and drivers set prices was Arcade City, a Facebook-group-based platform that popped up after Uber and Lyft lost a regulatory battle and pulled out of Austin, Texas, in 2016. People who needed a ride in the Arcade City Facebook group would post their pickup information and exchange messages with drivers, who would sometimes set prices when responding to a request. It was all very internet 1.0, despite Arcade City’s attempt to pivot to blockchain. (Uber and Lyft returned to Austin in mid-2017 after Texas overrode the city’s stricter ride-hail regulations.)

Uber isn’t letting drivers set prices from scratch, but seems instead to be giving them the option to increase a base fare it provides. The experiment is particularly interesting in light of a 2015 lawsuit against Uber, Meyer v. Kalanick, that argued the company and then-CEO Travis Kalanick were engaged in a broad price-fixing conspiracy by getting a bunch of contractors together and making them adhere to prices set by the Uber algorithm. Uber folks at the time thought the complaint was wacky, and were floored when a judge didn’t immediately dismiss it. In 2017, Uber got the case sent to arbitration, which was scheduled for late last year.

The bottom line is that in the new AB5 era, Uber is obviously worried about its pricing methods in California. The most substantive changes Uber has made since the bill passed have all focused on pricing. You could argue that to let driver set their own prices is the best way Uber could hand them control of the platform, and control of course is the key to all of this. Even so, simply to dabble in letting drivers adjust their fares is unprecedented for a company that once released a research paper arguing it was pointless to raise fares, because economics. But here we are in 2020 and Uber is letting some drivers do the unthinkable. Because California.

Taken out.

After a month of speculation, Uber sold its India food delivery business to local rival Zomato in exchange for a 9.99% stake in its competitor.

By now we should be used to seeing Uber consolidate. Uber sold its China business to Didi Chuxing and merged its Russia operations with Yandex.Taxi during the Travis Kalanick era. Under CEO Dara Khosrowshahi, who has a mandate to stem losses and make Uber profitable, the company has sold its Southeast Asia operations to regional competitor Grab, pulled Eats from South Korea, and now sold off Eats in India.

Uber’s global retreat isn’t necessarily a bad thing. In the majority of these deals, Uber has walked away with a sizable stake in either its competitor or the merged entity. It’s arguably better for Uber and its investors to own these stakes than to overextend the business and bleed cash in markets where it often operates at a disadvantage to local competitors. It’s certainly preferable for investors who’ve backed several ride-hail firms to have them forge a truce than to watch each one hemorrhage money in a turf war (SoftBank, for example, has invested in Uber, Grab, and Didi).

Khosrowshahi said in November that Uber’s strategy for Eats was to “invest aggressively into markets where we’re confident we can establish or defend no. 1 or no. 2 position over the next 18 months.” India wasn’t one of those markets. Uber was a distant third to homegrown firms Swiggy and Zomato.

As you’d expect, all these companies are burning lots of money. Analysts had estimated Uber was burning $400-$500 million a year on Eats India. Uber said in a securities filing today that Eats India had 2 million monthly active users in the 2019 third quarter—down from 3 million in the previous two quarters—and lost $61 million on $20 million in revenue that quarter. Its loss from operations for the first nine months of 2019 was $244 million on $28 million in revenue. The Times of India reported Zomato late last year was burning $20 million a month and Swiggy $47 million.

Both Swiggy and Zomato are now battling for the title of [pick your impressive-sounding adjective] market leader. Swiggy in December claimed to be the “clear market leader” with “close to 60% revenue share.” Zomato said today, following its Uber Eats acquisition, that it is the “undisputed market leaders in the food delivery category in India.”

Scooters!

LimePass, e-scooter company Lime’s first subscription product, is coming to the UK. The pass costs £4.99 a week, in exchange for which Lime waives the £1 fee to unlock an e-bike for each ride. Riders still pay the per-minute cost associated with their trip, or £0.15 per minute in London and Milton Keynes. (In the US, LimePass costs $4.99 a week and waives a $1 e-scooter unlock fee, but not the per-minute travel cost.) The program is designed to appeal to frequent Lime users, such as the roughly 50% of riders Lime says use its service to commute to school and work or run errands.

“Depending on how often a rider uses Lime, the subscription can pay for itself in as little as 2-3 days,” Lime said in a rider email. Is this a good deal? I’m not so sure. You need to ride Lime at least five times a week to pay off the cost of the subscription, and at that point maybe you should just get your own bike or scooter?

One problem I imagine all the micromobility companies will run up against is the line between what people are willing to spend on a service before they decide to invest in their own device. Take Oakland, California. Lime said last year that the median ride time on its first 1 million e-scooter trips there was 7 minutes. Currently, a 7-minute Lime ride in Oakland costs $3.24 ($1 to unlock plus $0.32 a minute). Alternatively, you could buy this scooter on Amazon for $450. At a median cost of $3.24 a ride, it would take about 139 rides before it became cheaper to have bought your own device instead of continuing to rent—and that’s if Lime doesn’t raise prices. Certainly if you were a regular commuter, it would make sense to get your own scooter.

LimePass seems like an attempt to make Lime more like public transit, but what if those things just don’t mesh? Public transit systems are famously unprofitable. (So are scooter companies, but that is perhaps not the long-term goal.) Here is an interesting essay from Alex Nesic, co-founder of Clevr Mobility, arguing that for shared micromobility to be truly public-transit-like, profit can’t be its main objective. Nesic suggests cities should run and subsidize these services directly, rather than go through startups and take indirect subsidies from venture capitalists:

Some might say that investing in such a ‘new’ technology is not the right move for cities, but I would argue that the required investment is rather insignificant in comparison with more traditional transportation project costs. Consider that the global average cost of building (operations and maintenance aside) a subway line is reportedly $500 Million per mile (often much more in the US) and takes decades to complete, or that new buses cost anywhere between $500K — $800K each with up to $215/loaded labor hour to operate. In contrast, a high quality ‘fleet grade’ scooter costs approximately $500 — $650 and around $12 — $15 per day to support. Roughly speaking, a fleet of 1000 scooters could be acquired and deployed for one year at a cost of $5.5 Million.

You could also take this one step further and argue that instead of taking on deployment and management of scooter fleets, cities could just subsidize private purchases of e-scooters and e-bikes. That would encourage alternative transport modes, involve a lot less work for the city, and be a no-brainer purchase for the frequent e-scooter user.

WeStillWorkin’.

Or at least so says SoftBank:

“We are still in it, we are involved, we are helping the company because we believe the idea at its core is very, very good,” said Deep Nishar, senior managing partner at SoftBank’s Vision Fund. “We will help solve WeWork’s problems with corporate governance with the next set of management,” he said at Munich’s Digital Life and Design conference Saturday.

Honestly, can you imagine spending $9.5 billion to bail out a company that you didn’t still believe had a good idea at its core?

Elsewhere: WeWork’s leasing activity plunged 93% in the fourth quarter after failed IPO attempt

This time last year.

Federal workers are ‘making ends meet’ on Uber

Other stuff.

SoftBank secretly invested $750 million in on-demand startup GoPuff. WeWork co-CEO warns of corporate culture misfit. Uber’s Jump launches adaptive scooter pilot in San Francisco. Lime introduces adaptive scooters in Oakland. Skip reveals scooter upkeep metrics. European Investment Bank backs Uber rival Bolt with €50 million ($56 million) loan. Arrival raises $100 million for electric delivery vans. Turkish grocery delivery startup Getir raises $38 million. Quanergy CEO leaves after lidar stumbles. Spanish delivery startup Glovo exits the Middle East. Goldman dumped entire Uber stake late last year. Investors eye increasing stake in WeWork China. Adam Neumann in talks to boost investment in mortgage startup Peach Street. Uber ending ride-hail service in Colombia. Uber driver banned after carrying passengers holding ladder out of car window. Uber and London in talks over licensing dispute. New York governor expected to propose legalizing e-bikes and e-scooters. France loosens employee stock option rules to help French startups compete for talent. Airbnb writes long memo. “As I type, they are busy turning our street into a low-traffic, communal woonerf.”

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Send tips, comments, and Uber bids to @alisongriswold, or oversharingstuff@gmail.com.

Hello and welcome to Oversharing, a newsletter about the proverbial sharing economy. If you’re returning from last time, thanks! If you’re new, nice to have you! (Over)share the love and tell your friends to sign up here.

20 (+2,580) for 2020.

Happy new year from SoftBank, you’ve been laid off!

• Oyo Hotels is firing thousands of staff across China and India, people familiar with the matter said, adding to growing signs of trouble at one of the largest startups in SoftBank Group Corp.’s portfolio. –Bloomberg

• Latin American delivery startup Rappi said on Thursday it has laid off 6% of its workforce, less than a year after Japan’s SoftBank Group invested nearly $1 billion in the company. –Reuters

• Zume Pizza Inc. said it was cutting about half of its staff and shuttering its pizza business, making the former robotic pizza maker the latest in a long line of SoftBank Group Corp.-backed companies forced to slash spending. –Bloomberg

• Car-rental startup Getaround plans to lay off roughly 150 employees, or about a quarter of its staff, in a bid to reduce rising costs, people familiar with the matter said. –The Information

Forget 20 for 2020, SoftBank portfolio companies layoffs are already at 2,600, with another 1,200 reportedly planned at Oyo in India over the next three to four months. Add in major cuts made by Uber, WeWork, and a handful of other companies last year and you get that SoftBank-backed firms have logged about 6,700 job cuts in the past six months. SoftBank is also walking away from some big startup investments.

Any of these companies could be a case study in a management textbook, but the one currently attracting the most gleeful schadenfreude is that of Zume Pizza Inc. In case you aren’t familiar, Zume is a five-year-old startup based in Mountain View that dreamed of building a robot pizzeria. Zume set up a robot kitchen and patented “Baked on the Way” delivery trucks with ovens that could bake up to 120 pizzas per hour. Pizza was a starting point but, like all good startups, Zume had grander ambitions: “We are going to be the Amazon of food,” Zume co-founder and former Zynga Studios president Alex Garden told Bloomberg in 2016.

In November 2018, SoftBank pumped $375 million into Zume, boosting its valuation to over $2 billion, with a tentative promise of another $375 million down the line. And hey, look what happened next:

Employees describe a culture at Zume where the emphasis moved quickly from one project to the next, with priorities driven by engineering ambition rather than market research. For example, last year a team of engineers spent months working on a project, codenamed “Penrose,” to equip food deliveries with sensors that would record data such as the temperature of the food once dropped off with the customer, according to two people familiar with the situation who asked not to be identified discussing private information. At the end of the year, with no customers committed to the sensors, the project was dropped and its manager left the company.

At a staff meeting in the Bay Area last June dubbed “Day Z,” Garden told employees cash burn had hit $10 million a month, according to people familiar with the matter, all of whom asked not to be identified. One of the people said that figure was at least 50% higher by year end.

Also:

Many of the now-struggling Vision Fund companies are run by charismatic men without experience running large businesses.

Zume has now announced plans to close the pizza delivery business and pivot to sustainable packaging, if you can even call that a pivot instead of just throwing out one idea and picking up another. Packaging! “We have a clear path to provide what the market wants and what the world needs—a more sustainable food future,” says Garden, in a memo to employees. Only a little awkward that it took five years and $375 million of SoftBank money for robot pizza to figure that out. So much for the Amazon of food. But, you know, whatever. It’s sorted now. Even Amazon needs boxes.

Gigs.

Uber made some major changes in California last week to strengthen the case that its roughly 150,000 drivers in the state are in fact independent contractors, not employees, even under California’s stricter employment classification test.

The two biggest changes are:

1. Goodbye upfront pricing. Passengers will see an estimated price range rather than a set dollar figure before requesting any non-Pool ride. The final price will be calculated at the end based on time and distance. Drivers earn the fare minus Uber’s commission, which is capped on UberX trips at 25%. (UberXL, Comfort, SUV, and Lux trips will carry a 28% service fee.)

2. Hello surge multipliers. Uber at some point replaced the surge multipliers drivers could earn on fares during busy periods with a “flat surge” system that added a fixed amount to the driver’s earnings price. Uber is now reverting to its original system of calculating surge earnings for drivers as a multiple of the fare.

Other changes in California include tweaks to rider rewards (Uber is nixing price protection on routes and flexible cancellations) and to driver incentives (“Quests” will earn discounts on Uber’s commission rather than a bonus). “Due to a new state law, we are making some changes to help ensure that Uber remains a dependable source of flexible work for California drivers,” Uber told California riders in an email. “Our goal is to keep Uber available to as many qualified drivers as possible, without restricting the number of drivers who can work at a given time.”

These changes on the whole feel less like a step toward a new Uber than a reversion to an older one. Price estimates were the norm on Uber until the company quietly introduced upfront pricing in 2016. Upfront pricing allowed Uber to decouple what the rider paid from what the driver earned, in a way drivers suspected was favorable to Uber. That’s because drivers continued to be paid based on time and distance, but riders paid whatever number Uber quoted them. That meant Uber took a hit if the quote was too low and pocketed the difference if it was high. Uber maintained that upfront pricing was designed to break even for the company and its drivers over many trips.

Surge multipliers, similarly, are early Uber. Before the sexual harassment allegations and the federal probes and all of Travis Kalanick’s antics, the biggest Uber scandal was that it jacked up prices—some would say gouged consumers—during high-demand periods (remember that snowstorm?). Drivers had mixed feelings about replacing surge multipliers with the flat system, but seemed to feel multipliers were generally preferable except for on short trips, when adding a flat rate to the fare could go further than putting a multiplier on an already small number.

AB5, the California state law that precipitated these changes from Uber, is ultimately about control. The law is concerned that workers classified as independent contractors are genuinely independent in their jobs, and not simply controlled at arm’s length by a hiring entity that is an employer in all but name.

Control has long been a touchy subject at Uber, which has been dogged by employment misclassification lawsuits and accused of using algorithms and incentive schemes to indirectly manage workers. These algorithmic management techniques became more sophisticated over time as Uber learned more about rider and driver behavior, paving the way for systems like upfront pricing. For Uber now to reverse course under legislative pressure seems like a tacit admission that it may have had too tight a grip on the wheel all along.

King transport.

Here are a couple theories about how to get people to drive cars less and take public transit more:

1. Create fees or taxes, typically known as congestion pricing, that make driving cars more expensive. London and Stockholm both do this. New York last year became the first US city to adopt a congestion pricing policy.

2. Make public transit free. This approach is gaining popularity in Europe and also being tested a few places in the US. Olympia, Washington, is the latest transit system to go fare-free. Kansas City voted in December to make bus rides free starting this year. Boston mayor Marty Walsh is at least theoretically interested in eliminating fares on city buses.

3. Ban cars. This is the boldest and, I think, most interesting option. For instance, take Birmingham, England:

Private cars will be banned from taking "through trips" across Birmingham city centre under plans to cut pollution.

Vehicles will be able to drive into the city, but would have to go back out to the ring road to access other areas.

A draft proposal from Birmingham City Council floats “transforming the city centre” with “a network of pedestrian streets and public spaces integrated with public transport services and cycling infrastructure” and “no through trips” for private cars. Birmingham says 25% of all car journeys taken by residents are less than a mile long. “Cars will no longer be king in the city, public transport systems will become king,” Waseem Zaffar, the cabinet member for transport and environment, told the BBC.

Or how about San Francisco?

In a sweeping attempt to curb pedestrian injuries and deaths on Market Street, SFMTA announced that private vehicles won’t be allowed on the road starting January 29th.

Honestly, I think option three sounds great. We accept that cars litter our streets but what if they didn’t? What if public roads belonged to other types of travelers? I have long said Manhattan should pick one street and one avenue to close to cars and convert into a dedicated bike-and-scooter superhighway. Biking to work would be so easy if you could take 11th Avenue the length of Manhattan! The beauty of New York City is that it’s gridded, so why not take advantage of that? People would be upset for a day and then never look back.

Casper.

Online mattress company Casper Sleep Inc. filed for an IPO. Thank you Casper for the early entry to Bad Charts, 2020:

Casper describes itself as part of the “Sleep Economy,” a market it estimates at $432 billion globally. It is not profitable, having lost $92 million in 2018 and $67 million over the first three quarters of 2019. The market wasn’t kind last year to companies that went public with big losses.

As always, the good stuff is in the risk factors, and one unusual risk in Casper’s filing is influencers. “Use of social media and influencers may materially and adversely affect our reputation or subject us to fines or other penalties,” the company warns. “While we ask influencers to comply with the FTC regulations and our guidelines, we do not regularly monitor what our influencers post, and if we were held responsible for the content of their posts, we could be forced to alter our practices, which could have material adverse effect on our business, financial condition, and results of operations.”

Casper is the first of the many mattress startups to take the plunge into the public markets. I would like to name all the others for you here but really there are just too many of them: Emma, Leesa, Tuft & Needle, Eve Sleep, Bear, Purple, Helix, something called Pangeabed. They all look remarkably similar and offer big discounts with code words that more often than not are advertised on the subway. It makes sense why Casper wants to be in the sleep economy. Mattresses are a commodity, but sleep is an experience.

This time last year.

Make congestion pricing great again

Other stuff.

Grubhub denies being up for sale. Lime exits 12 markets, lays off 100. Longtime Uber exec Rachel Holt leaving to launch a VC fund. Egypt competition authority approves $3.1 billion Uber acquisition of Careem. Yandex to expand car-sharing service to Europe. Fiat Chrysler may join Daimler, BMW driverless car venture. One-third of e-scooter injuries involve the head. Takeaway wins bid to buy Just Eat for £6.2 billion in stock. Amazon offers loan to Deliveroo while UK probes investment. Instacart holds firm on tipping policy as shoppers call for national boycott. Uber rolls out PIN safety system in the US. Men give young women the best tips on Uber. China Tech Startups Go Bust in 2019 ‘Capital Winter.’ Airbnb has patented software that predicts if guests are psychpaths. Airbnb partners with powerful North American union. ClassPass becomes a unicorn. Yamaha Warns Musicians Not to Climb in Instrument Cases After Ghosn Escape.

Thanks again for subscribing to Oversharing! If you, in the spirit of the sharing economy, would like to share this newsletter with a friend, you can forward it or suggest they sign up here.

Send tips, comments, and other mattress startups to @alisongriswold, or oversharingstuff@gmail.com.

Hello and welcome to Oversharing, a newsletter about the proverbial sharing economy. If you’re returning from last time, thanks! If you’re new, nice to have you! (Over)share the love and tell your friends to sign up here.

Happy new year!

TK.

In 2010, at the start of the now-previous decade, Travis Kalanick had just become CEO of Uber, a nascent black-car service offering rides at the touch of a smartphone button. By the middle of the decade, Uber was the most valuable startup in the world. Kalanick, sporting an Alexander Hamilton Twitter avatar, was short-listed for Time’s 2015 Person of Year. Two years later, with Uber in crisis, Kalanick was ousted from the CEO role by his own investors. Last week, with eight days left in the decade, Kalanick closed out his entire position in the ride-hail company he founded and departed its board of directors.

In 2010, Adam Neumann founded WeWork, a company that rented out shared office space, part of a new trend in “co-working.” By 2016, WeWork was valued at $16 billion and Neumann, its tequila-swigging capitalist-kibbutznik-in-chief, planning for the WeGeneration. Over the past three months, WeWork, now known as The We Company, pushed out Neumann as CEO, pulled its IPO, struck a bailout deal with lead investor SoftBank that shredded its valuation, and said it would lay off some 2,400 employees. Neumann finagled a unicorn-sized exit package and last week decamped to Israel, his latest in a series of travels to escape the “negative energy” of New York City.

The 2010s was the decade of founders like Kalanick and Neumann, whose charisma, arrogance, grandiosity, and ambition helped them build great companies and also nearly destroyed them. Kalanick’s and Neumann’s arcs have nice parallels, but there are others: Elizabeth Holmes, Parker Conrad, central-casting villain Anthony Levandowski.

Where are they now? Kalanick launched a venture fund, netted several billion dollars from Uber, and is working on a kitchen-leasing business (already valued at a theoretical $5 billion, thanks to a hefty investment from Saudi Arabia’s sovereign-wealth fund). Neumann is globe-trotting (flying commercial, now that WeWork sold his jet), taking bids on his Gramercy penthouse, and waiting for his $1.6 billion exit package to grow even larger. Parker Conrad, who was ousted from HR startup Zenefits for cheating California compliance rules, has a new HR company. Holmes will be tried in federal court in San Jose this summer, and faces up to 20 years in prison. Levandowski’s trial is set for 2021.

Possible prison sentences aside, life in infamy is not so bad. Uber’s and WeWork’s stories are getting TV treatment and Theranos made into a film starring Jennifer Lawrence, immortalizing the founders of these companies in the popular culture. People are still willing to fund Kalanick and Conrad—men who can build great companies, even if they also almost ran them into the ground—and almost certainly someone would finance a new project from Neumann. Everyone is looking for that founder who seems able to bottle lightning, making their mistakes more likely to be forgiven. The 2010s were the Travis years, but there’s no reason why the 2020s couldn’t be as well.

Notable 2019.

• WeWork rebrands to The We Company, with a mission to “elevate the world’s consciousness.” No one bats an eye. It is only January!

• Republican-majority National Labor Relations Board (NLRB) finds SuperShuttle van drivers to be independent contractors, not employees, under US labor law.

• New York City’s minimum wage for ride-hail drivers, the first of its kind, takes effect Feb. 1, 2019. The rules are expected to raise annual pay for some 70,000 professional drivers in the city by nearly $10,000 each.

• Lyft files to go public, kicking off the 2019 IPO party. The filing is very pink.

• New York state passes historic congestion pricing plan.

• The NLRB says Uber drivers are independent contractors, not employees.

• DoorDash agrees to revise its tipping policy after widespread consumer outrage over the company’s use of tips to subsidize worker wages.

• Uber admits ride-hailing is “likely contributing to an increase in congestion,” but insists private cars and commercial vehicles are worse.

• WeWork unveils its IPO filing. The word “Adam” appears 169 times.

• Former Uber, Waymo employee Anthony Levandowski is charged by federal authorities with 33 counts of attempted trade-secret theft.

• California passes Assembly Bill 5, a blow to the gig economy. The bill, which took effect Jan. 1, makes it tougher to classify workers as independent contractors, the foundation of most gig companies. On Dec. 30, Uber and Postmates ask a US court to block the law, arguing it violates the Constitution.

• WeWork pulls its IPO.

• Uber loses its London license. Again.

Quotable 2019.

“To make something very precious, you have to apply a lot of pressure” –Adam Neumann

“Noah’s Ark represents a covenant between God and the people to never destroy the world” –Adam Neumann

“Adam grew up on a kibbutz and likes to walk barefoot. He is a kibbutznik. Should we ask him to stop?” –unnamed Adam Neumann spokesperson

“Too much money actually is probably what kills companies” – Kevin Talbot, Relay Ventures

“The IPO is a spiritual cleanse” –Marc Benioff

“I am a Grinch” –Nick Evans, CEO of Unicorn

Best of: WeWork.

The I in We (New York Magazine)

How Adam Neumann’s Over-the-Top Style Built WeWork (Wall Street Journal)

WeWork was a family affair, until things got complicated (Bloomberg)

Cancer-causing chemical found in WeWork phone booths (The Guardian)

Neeraj K. Agrawal@NeerajKA

My friend’s entire company is locked out of their WeWork office because an umbrella fell, jamming the door. No one can figure it out. It’s been like this for 2 days.

September 17th 2019

27,417 Retweets149,054 Likes

WeWork’s Neumann Loses Billionaire Status (Forbes)

The Sun Sets on We (New York Mag)

The Fall of WeWork: How a Startup Darling Came Unglued (WSJ)

The Money Men Who Enabled Adam Neumann and the WeWork Debacle (WSJ)

Worst of: charts.

Who needs a Y-axis label?

Credit: Bird/Travis VanderZanden

Trust me it is all going well.

Credit: WeWork

I SAID TRUST ME, WHY DO YOU WANT THE AXIS LABELS, LOOK AT THAT NICE GRADIENT ARROW I MADE FOR YOU

Credit: SoftBank

RIP.

• Munchery

• WeWork’s IPO

• Ofo

• Car2Go North America

Best of: other stuff.

Shared Scooters Don’t Last Long. A Silicon Valley Studio Apartment Is Being Rented to Two Cats. Criminals make getaways on shared electric scooters. Scooter-riding thieves nabbed in Hollywood. Dropbox evacuates office after electric scooter catches fire. Hundreds lose driver’s licenses for drinking and scooting. Uber Driver Pulls Out Sex Toy on Cops Who Feared It Was a Gun. Uber will take “years” to make a profit, CTO says. Uber CEO says business is ‘absolutely sustainable.’ Uber CEO predicts profitability by 2021. Invest in the gig economy with this ETF. Uber paid Beyonce $6 million in stock to play at a party. Online groceries are causing a cold storage shortage. We Hired Three Fiverr Workers to Write About Fiverr’s IPO. Tip Your Delivery Worker in Cash. Rich, semiretired millennials. Barnacle bike. Scooter repos. E-unicycles. “Founders are always killing it.”

Thanks again for subscribing to Oversharing! If you, in the spirit of the sharing economy, would like to share this newsletter with a friend, you can forward it or suggest they sign up here.

Send tips, comments, and 2020 thoughts to @alisongriswold, or oversharingstuff@gmail.com.

Hello and welcome to Oversharing, a newsletter about the proverbial sharing economy. If you’re returning from last time, thanks! If you’re new, nice to have you! (Over)share the love and tell your friends to sign up here.

I know, it’s been a while! Oversharing was on hiatus because I had no home wifi for about a month (adventures in London life… who knew you needed UK credit history to get an internet contract!). Thank you to everyone who sent concerned notes; happy to report that I am indeed alive. The off-the-grid lifestyle was pretty good: I read The Bluest Eye and half of Daniel Deronda, watched a lot less Netflix, and was generally more productive. Now here we are, back just in time for the holidays, and then onto 2020.

Uber ails.

November was a bad month for Uber. London declined to renew its license. Seattle approved new fees on rides and a to-be-determined minimum wage for drivers. Chicago passed a congestion tax on ride-hail services that adds as much as $3 to private rides during peak hours. New Jersey hit the company with a $640 million bill for misclassifying drivers as independent contractors. India may cap the commission it takes on fares at 10%.

Uber’s share price fell 6% in November, to $29.60. Even equity analysts, a famously optimistic bunch, appeared to lose faith and lowered their Uber stock price targets to an average of around $45, the same price Uber went public at in May and has rarely closed above since.

Ride-hail companies have entered a new era, marked not by breakneck growth but by skeptical and emboldened regulators. Cities lost the first round against Uber, which strong-armed them into passing rules it wrote to suit its ride-hail service before anyone could figure out what was happening. Now cities have regrouped, and are flexing their muscles. One by one, Uber’s most important markets—London, New York, Los Angeles, San Francisco, the entire state of California—are proposing taxes and rules that one way or another make rides more expensive.

It’s hard to overstate the threat this shift poses to companies like Uber. Ride-hailing is built on regulatory arbitrage. It hires workers as independent contractors instead of employees; it circumvents many of the rules imposed on traditional taxi companies; in some countries, it sidesteps taxes on local goods and services. All these things helped make Uber’s low prices possible, and low prices are Uber’s main selling point. Closing those loopholes is bound to make rides cost more.

Uber isn’t the only company under threat. Juno, a three-year-old ride-hail service in New York, shut down in November and filed for bankruptcy protection after failing to find a buyer. Juno blamed its financial trouble on a wage floor for New York City ride-hail drivers that took effect in February, arguing it increased costs, lowered drivers’ hourly pay, and led to a significant drop in ridership. Lyft, which operates only in North America, is also exposed. Lyft and Juno both sued New York earlier this year over its driver pay rules. In California, Lyft and Uber have each pledged $30 million to fight a new law that makes it harder to classify workers as contractors.

For nearly a decade, all of these companies—Uber, Lyft, other competitors that have cycled through—prioritized growth and left profits for later. The strategy contained an implicit assumption that profits would come more easily with scale; that more cities and total bookings meant more clout with regulators; and that thin margins were fine if you ‘made it up in volume.’ The reality heading into 2020 looks precisely the opposite: more rules, more taxes, more costly protections for workers. If Uber never figured out how to make money in a decade of loose oversight, how will it fare when regulators start paying attention?

Taken out.

Elsewhere in Uber, the company is reportedly looking to unload its Eats food delivery business in India to Zomato, a local rival. The deal would value Uber Eats India at around $400 million and would likely see Uber take a sizable stake in Zomato, similar to deals it reached with Southeast Asia’s Grab, Russia’s Yandex, and China’s Didi Chuxing when it exited those markets.

Analysts have estimated Uber is burning something like $400-$500 million a year on its India Eats business. Analysts have fixated on the India Eats business amid fierce competition, and since Uber admitted to it being a drag on adjusted net revenue (ANR), a key financial metric.

Uber CEO Dara Khosrowshahi said in November that Uber’s strategy for Eats was to “invest aggressively into markets where we’re confident we can establish or defend no. 1 or no. 2 position over the next 18 months.” His comments came not long after Uber pulled Eats from South Korea, ceding to local market leader Woowa (which, incidentally, just sold to Germany’s Delivery Hero for $4 billion). He reiterated the strategy at a Barclays conference last week, saying, “if we don't get to a #1 or #2 position, we will look at alternatives, just like we looked at alternatives in the ride-share business in a constructive way.”

Cutting losses is a key focus for Khosrowshahi, who has set his sights on turning Uber profitable by 2021. Uber lost $1.2 billion in the latest quarter, up (down?) from a loss of $986 million in the third quarter of 2018, largely due to a hefty stock-based compensation expense.

Uber Eats is a big question mark in that profitability equation. Uber bet on food delivery as a way to diversify beyond rides and wring more value from its extensive logistics network. The reality a couple years in is that food delivery is complicated and expensive. Uber has spent hundreds of millions of dollars on incentives for Eats drivers, not to mention other Eats-specific costs. At the same time, the share of revenue Uber retains from Eats orders has been mostly lower in 2019 than the previous two years. In August, investment firm Cowen estimated Uber was losing $3.36 on every Eats order, and would continue to lose money on every order until at least 2024.

A deal with Zomato could happen as soon as this week, the Wall Street Journal reported, citing people familiar with the matter. Eats launched in India in 2017. Uber and Zomato both declined to comment to the Journal.

Crazy guy.

Here is a story about SoftBank, the giant pile of money it burned, and the man behind it all, Masa Son:

The strategy that Son and his all-male phalanx of managing partners followed seemed less about any specific technology than about placing large bets on the buzziest startups: WeWork ($10.7 billion), Uber ($7.7 billion), on-demand pizza maker Zume ($375 million), and dog-walking app Wag ($300 million). They invested in a few hardcore artificial intelligence companies, too. Portfolio companies expanded quickly, often haphazardly, leading to a collection that included high-profile disappointments and the conspicuous disaster at WeWork. SoftBank’s starry-eyed investors convinced themselves that WeWork’s outrageous operating losses and the erratic behavior of co-founder Adam Neumann didn’t matter—until potential public-market investors reminded them that, actually, they did.

Son is SoftBank’s chief executive, but also might be called Silicon Valley’s chief enabler. In addition to pouring money into startups, he imbues them with outsized ambition and confidence:

Many SoftBank-backed founders have Masa stories. These often begin with a summons to the 26th floor of SoftBank’s green-tinted glass headquarters in Tokyo or to Son’s home in Woodside, Calif., a 74-acre compound whose massive main residence features a foyer with a large marble statue of a horse and chariot. The entrepreneur might then sit across a table from Son, answer a few questions, hear that their idea is even more promising than they thought, and, by the end of the conversation, be anointed “the next Jack Ma.”

“You feel enabled, you feel euphoric,” says a chief executive officer in Asia. “You’ve been told no a hundred times, and then he says he believes in you. Every entrepreneur dreams of having that kind of backing.”

The story is worth a read. I recommend pairing it with this one on SoftBank’s questionable accounting practices. Choice quote from NYU professor Aswath Damodaran: “The more they talk about accountants the less I would trust the numbers.”

Scooters!

Where do they go for the winter? Into warehouses, down to southern markets, or just out on the streets like normal:

Stockholm-based Voi, founded in August 2018, operates in about 40 European cities, including 16 Nordic ones where average winter temperatures range from -6°C (21°F) in Tampere, Finland, to 6°C in Copenhagen (43°F). Voi’s “Jack Frost” winter plans include limiting scooter speeds in snow, working with local plowing companies, restricting riders to well-plowed areas and the heated streets of some city centers, and disabling its fleet in particularly treacherous conditions like black ice.

Last year, Voi suspended its shared electric-scooter service in Stockholm for just over a week in total, said Kristina Nilsson, a company spokeswoman. “We’re Swedish, we’re used to the winter,” she said, having just returned from snowy Oslo, where Voi kept a limited fleet in service. “In Swedish there’s a saying, ‘There’s no bad weather, just bad clothing.’”

Scooters are a seasonal business. Fewer people ride in the winter, when they’re exposed to the elements, than in the summer when the sun is out and the weather is warm. Bird’s gross revenue fell by about 60% in the first quarter of 2019 from the previous quarter. Even Voi’s ridership was cut in half last winter compared to the previous summer.

Scooter companies often seem indistinguishable with their monosyllabic names (Scoot, Spin, Skip) and identikit hardware, but winter has drawn some distinctions. European firms, perhaps because cold weather is a fact of life in many of their markets, have generally more robust winter scooter plans, while some of their California rivals are content to hibernate until springtime.

Elsewhere in scooters, Uber is doubling down on European micromobility, scooter companies are caught up in the trade war, Bird laid off Bay Area Scoot employees, Spin’s staff voted to unionize, San Francisco rejected Skip over a formatting error—see, I am not joking, Scoot, Spin, Skip!—and a literal e-scooter Unicorn is out of business with lots of angry customers.

WeWatch.

WeWork is being made into a movie and a TV show. The movie will be scripted by Charles Randolph, the screenwriter behind The Big Short. The TV series will be based on a forthcoming WeBook from Wall Street Journal reporters Eliot Brown and Maureen Farrell, with Succession star Nicholas Braun playing Adam Neumann. No word yet on whether the film will cast Adam Driver as Adam Neumann, which it absolutely should.

WeWork and the now-infamous Neumann have very kindly continued to provide material for both projects: Neumann’s work for Jared Kushner on Mideast peace and offer to mentor Crown Prince Mohammed bin Salman; WeWork paying a $500,000 monthly retainer to a crisis PR firm; SoftBank-appointed chairman Marcelo Claure enjoying a Michelin-starred meal in New York City one day after WeWork laid off 2,400 employees; Neumann fleeing New York with his family and an entourage of nannies to escape the “negative energy” from his company’s collapse. WeCan’tWait.

Other stuff.

Car2Go exits North America. Silicon Valley Braces for Belt-Tightening. WeWork looks to exit office leases. WeWork China rival files for US-listed IPO. Travis Kalanick dumps Uber stock. European court to rule on whether Airbnb is online service or real estate agent. Uber rival Bolt says nearly profitable in most markets. Half of Seattle bike-share rentals inoperable in city audit. DC awards dockless permits for 2020. E-bike startup Cowboy hits crowdfunding goal in 12 minutes. Kroger opens dark kitchens for restaurant-style meal delivery. DC attorney general sues DoorDash. Conductor execs buy their startup back from WeWork. WeWork competitor RocketSpace leaves UK. Uber rival Ola registers drivers for London launch. Uber lets drivers see where passengers are heading. Uber threatens to leave Phoenix over airport tax hike. Uber received over 3,000 reports of sexual assault in the US in 2018. Airbnb bans open-invite parties after Halloween shooting. Elizabeth Warren wants to let gig workers unionize. Instacart contractor leads worker revolt. Singapore’s Neuron Mobility raises $19 million for e-scooters. Queen Elizabeth seeks social media director. Scooter racks. Bicycle mayors. Lyft rentals. Uber Works. Wag, the dog. I Am a Patagonia Vest Warrior Who Conquers Digital Mountains of Excel Spreadsheets.

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Send tips, comments, and wifi horror stories, to @alisongriswold on Twitter, or oversharingstuff@gmail.com.

Hello and welcome to Oversharing, a newsletter about the proverbial sharing economy. If you’re returning from last week, thanks! If you’re new, nice to have you! (Over)share the love and tell your friends to sign up here.

Back in May, I said my relocation to London would involve picking up coverage of European efforts to regulate Big Tech. This week Oversharing is taking a detour from the sharing economy to talk about that.

It’s a good time for it. The EU recently appointed Danish politician Margrethe Vestager to an unprecedented second term as competition chief and also named her head of digital policy. Vestager made a name for herself during her first term by bringing hefty fines against tech conglomerates, including a record €4.3 billion fine issued to Google in July 2018 for restrictions it imposed on Android device manufacturers and mobile network operators to protect its dominance in search.

In the US, the word we use to talk about regulating corporate bigness is antitrust. Here in Europe, the phrase is competition policy. The questions on both sides of the Atlantic are the same: How big is too big? Is tech different? If something must be done to rein in the tech giants and reanimate competition, then what?

I survey the history of monopolies, competition policy, and current probes into dominant tech platforms in the US and Europe this week in a series for Quartz, “Taming Big Tech.” The stories live on Quartz’s members site but I’m including bits of them here. I would also be an irresponsible employee if I didn’t encourage you to sign up for a Quartz membership, which you can get for 50% off, or $49.99 for the first year, with my code ALI0299. That’s, like, a week of Blue Apron, and a much better value.

Is Big Tech too big?

Big Tech is not just big, it is inescapable in modern life. The world’s five most valuable public companies are all American technology groups—Apple, Microsoft, Alphabet (neé Google), Amazon, and Facebook. They are collectively worth $4.6 trillion.

Technology moves fast, but even by its standards these tech giants emerged in a stunningly short period of time. Amazon was founded in 1994, Google in 1998, Facebook in 2004. It wasn’t that long ago that these behemoths were seen as the underdogs. Measured in human years, Google just this year became legally old enough to drink. Facebook doesn’t have a driver’s license yet.

There is now a growing global consensus that Big Tech is too big. Google today commands 73% of the US search ad market. Amazon controls roughly half of US e-commerce and 5% of all US retail sales. Amazon also holds nearly half of global public cloud services through AWS, and is carving out a sizable chunk of search. Facebook counts 2.2 billion daily active users across Facebook, Instagram, WhatsApp, and Messenger. That’s nearly 30% of the entire global population.

How did we get here?

In the beginning, American politicians viewed monopolies and unchecked private power as a threat not only to competition but also to democracy. But sometime in the mid-20th century, America lost touch with these principles. In their place emerged a new school of thought that held that monopolies weren’t bad in and of themselves; they were only bad if their control of an industry led to higher costs for consumers. This laissez-faire framework became known as the Chicago School of antitrust, and its singular focus on how monopolies affected consumers the “consumer welfare” standard.

The Chicago School of antitrust and its consumer welfare doctrine paved the way for Big Tech’s dominance. Google consolidated the ad market through acquisitions, most notably a $3.1 billion purchase of competitor DoubleClick in 2007 that the FTC deemed “unlikely to substantially lessen competition” after an eight-month investigation. “This acquisition poses no risk to competition and will benefit consumers,” Eric Schmidt, then Google’s CEO, said at the time. Amazon bought up e-commerce competitors, often after bleeding them dry with race-to-the-bottom pricing. It also resolutely lowered prices and preached the gospel of “customer obsession.”

What’s going on right now?

In Europe, led by competition chief Margrethe Vestager:

• A formal European Commission investigation of Amazon regarding its use of data from independent marketplace sellers

• A complaint filed by Spotify against Apple with the European Commission in March over Apple’s control of the App Store

• An EU investigation into Facebook’s Libra digital currency

In the US, where antitrust has emerged as a rare issue with bipartisan support:

• Fifty attorneys general from 48 states are investigating Google…

• …and 47 are investigating Facebook

• The US Department of Justice is scrutinizing unnamed “market-leading online platforms” over whether they reduced competition, stifled innovation, or harmed consumers

• The Federal Trade Commission is probing Facebook on antitrust grounds

• The US House Judiciary Committee is investigating “competition in digital markets” and has sought information from Facebook, Amazon, Google, and Apple on matters including market share, competitors, pricing strategies and algorithms, correspondence related to acquisitions, and data collection

Also in the Quartz series:

• It will take more than big fines to tame Big Tech. Since 2017, the European Commission has fined Facebook, Google, and Qualcomm a collective €9.6 billion for anticompetitive conduct. But to companies the size and scale of Google, even multibillion-euro fines are just another cost of doing business.

• The best way to tame Big Tech isn’t necessarily to break it up. My colleague Allison Schrager, a bona fide economist, makes a case for “participative antitrust” and other novel approaches to regulation.

• Is monopolization inevitable in the digital era? I chat with Matt Stoller, a fellow at the Open Markets Institute and author of Goliath: The 100-Year War Between Monopoly Power and Democracy, about his favorite corporate villain and whether consumers should try to cut Big Tech out of their lives. (I also recommend signing up for his excellent email newsletter, Big.)

• Why is it called antitrust? Before there was antitrust, there were trusts.

ICYMI.

Thank you SoftBank for making my week with this chart.

Famously eccentric T-Mobile CEO and Adam Neumann hair twin John Legere is in talks to become CEO of WeWork.

T-Mobile shareholders didn’t like it.

Wait I fixed it.

Thanks again for subscribing to Oversharing! If you, in the spirit of the sharing economy, would like to share this newsletter with a friend, you can forward it or suggest they sign up here.

Send tips, comments, and breakup stories, antitrust or otherwise, to @alisongriswold on Twitter, or oversharingstuff@gmail.com.