Uber’s Potential Acquisition of Expedia, Why Is Europe Always Lagging Behind the US? and How to Outsource to Grow Your Company

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0:02:01 Welcome to the PropG Pods Office Hours. This is the part of the show where we answer questions
0:02:05 about business, big tech, entrepreneurship, and whatever else is on your mind. If you
0:02:10 would like to submit a question, please email a voice recording to officehours@profitmedia.com.
0:02:15 Again, that’s officehours@profitmedia.com. So with that, first question.
0:02:21 Hey, PropG. This is Ryan. I’m coming to you from Denver, Colorado. I have a question
0:02:27 just regarding the recent rumors that surfaced about Uber’s potential acquisition of Expedia.
0:02:32 We’d love to get your thoughts on just the financial feasibility of this deal. Thanks
0:02:36 for all you do, PropG. I’m a weekly listener of all the pods and love the content you
0:02:38 put out. Keep doing what you’re doing.
0:02:42 Ryan, from Denver, Colorado. Thanks for the question and the kind words. By the way,
0:02:46 I think just Colorado should run America. I think they do a great job there. Hey, it’s
0:02:51 spectacular. They’re beautiful. I just bought a home in Colorado. Anyways, where am I going
0:02:52 with this?
0:02:56 All right. So the Financial Times reported that Uber recently explored the possibility
0:03:01 of buying Expedia, the $20 billion travel booking giant. By the way, they have a fantastic
0:03:06 new CEO. They do a great job. I actually use Expedia. I think they are incorporating
0:03:09 AI in very subtle ways to kind of remember who I am when I show up at the site and they
0:03:13 know my economic weight class, kind of tells I stay up. They do a very good job and I like
0:03:16 kind of the UI, if you will.
0:03:19 Big picture, this would be Uber’s largest acquisition to date and would further diversify
0:03:24 the ride-hailing company. In the past few years, Uber has expanded into other businesses,
0:03:29 including train and flight bookings, food delivery, logistics, and advertising. Some
0:03:34 of Uber’s deals since the one public in 2019 include its expansion into food and beverage
0:03:38 delivery via the acquisition of Postmates for, I think it was about $2.7 billion and Drizly
0:03:44 for $1.1 billion. I bet they overpaid for that thing. Drizly, $1.1 billion, really.
0:03:47 It also went into the freight and logistics business through a two and a quarter billion
0:03:53 purchase of Transplace. Uber also purchased Karim, a Middle Eastern ride-hailing business
0:04:00 for $3.1 billion. Wow, that’s serious shit. So this is essentially, companies can either
0:04:06 expand horizontally or vertically and that is they can go after similar businesses or
0:04:12 they can try and find, basically offer more businesses to the same consumer.
0:04:18 I kind of like the idea of one app that uses AI and I say, “Okay, so tonight I’m going
0:04:23 home to London. I like the idea of hitting the app and then using AI.” It says, “Okay,
0:04:28 when do you want to travel? How many people?” And it kind of does the whole thing. It says,
0:04:33 “All right, these are the flights we think you’d want to go. These are the hotels we
0:04:38 think you’d want to stay at. By the way, we’re going to ask you a bunch of questions once
0:04:42 you figure it out and say, “I want this. Use voice-enabled AI. We’re going to set up the
0:04:45 Ubers. We’re going to set up the right seat for you on the plane because we know your
0:04:51 preference.” There’s going to be a travel app that just takes you off the table. And
0:04:57 I also think that Uber has such an incredible, Uber’s primary asset is it has user interface
0:05:03 and custody of the consumer, incredible trust with, I don’t know, I don’t know what they
0:05:08 have, 100, 200 million people. Also, I would absolutely be going shopping if I was Uber’s
0:05:12 head of corporate development right now. The stock is up 56%, meaning they’re kind of playing
0:05:16 with the house’s money. And Expedia’s market cap, just under $20 billion, they probably
0:05:22 have to pay $25 or $30. Their stock is up 24% a year to date, but Uber’s market cap is
0:05:28 173 billion. So you’re talking about what is potentially probably about a 15% dilution.
0:05:33 For them to have those assets and those additional consumers, I do think there’d be synergy there.
0:05:40 More Uber towards Expedia than Expedia towards Uber. Also, Dara knows the company really well.
0:05:44 What are the successful acquisitions? Well, first off, there are a few of them. Only one
0:05:49 in three acquisitions works or pays off. Why? Because it’s kind of the lazy CEO’s way to
0:05:55 greater compensation. What do I mean by that? All behavior in a company can be reverse engineered
0:06:01 to the compensation of the senior executives. And the way compensation works for CEOs the
0:06:08 following, the compensation committee looks at the compensation of CEOs in that industry
0:06:14 of companies that size. So there is an incentive to get bigger. Also, there’s an incentive
0:06:19 to diversify into other fields such that it smooths out your earnings. And everyone’s
0:06:24 looking for the transformational acquisition that’s going to do for their company what
0:06:30 Instagram did for Metta or what YouTube did for Alphabet. A great acquisition can be transformational,
0:06:34 but you almost always overpay because the assets you want are expensive and they want
0:06:39 a premium and they can only sell once. And they almost always, generally speaking, overpay
0:06:45 for the acquisition. So most acquisitions don’t work out well. And the most valuable company
0:06:48 in the world, Apple, effectively does almost no acquisitions because they see their cultures
0:06:53 being very important. They don’t want overpay. And they’d rather build stuff. Anyways, in
0:06:58 this instance, I think it’s a really interesting idea. I like it. The dog likes it. Question
0:06:59 number two.
0:07:05 Hey, Scott, this is Barton in San Diego. I’m a longtime listener and I always appreciate
0:07:11 hearing your good faith, a well thought out point of view, even when I disagree. Something
0:07:17 you bring up a lot is how Europe has stagnated economically while the US enjoys growth over
0:07:23 recent decades. For me, it seems like the growth is mostly on paper and mostly for the rich
0:07:30 while the average European enjoys, in practice, a much higher and more secure quality of life.
0:07:38 What am I missing here? And what do you think the US can do to ensure that security while
0:07:39 maintaining growth?
0:07:43 Barton, that is a really thoughtful question. And also, I just want to acknowledge there
0:07:48 is some truth to what you’re saying because most of our stats look at economic growth
0:07:53 and aggregate. Look at household income and aggregate. First off, let’s acknowledge the
0:07:59 US has been driven by the prosperity of the top 1%. And I think one of the unhealthiest
0:08:04 metrics we have out there is the Dow Jones or the NASDAQ because it gives you the impression
0:08:08 that the economy is doing really well. Well, guess what? 1% of the American populace owns
0:08:13 90% of the economy. So essentially, the Dow Jones industrial average in the NASDAQ are
0:08:20 metrics on how well the 1% is doing. And guess what? 71 new highs this year. So, okay, spoiler
0:08:26 alert, the top 1% are absolutely killing it. But also, the American public lets it happen
0:08:32 because one of our superpowers is our optimism. And people believe there’s a shot they’re
0:08:37 going to be in the 1%. So how would you categorize or how would you summarize the American economy?
0:08:43 I still believe that America is the place that if you’re talented and want to go flat
0:08:47 out, you just want to run so fucking hard. You want to leave it on the field. You’re
0:08:51 not working to live. You’re living to work. You want to be economically secure. You really
0:08:57 want to go after influence, power, and economic security. America is absolutely the best place.
0:09:03 Things just go slower in Europe. Average incomes in Europe lack 27% behind the US with wages
0:09:09 that are 37% lower. If you took out London out of the UK, essentially the household income
0:09:15 is lower than it is in our poor state in the US, Mississippi. Between 2010 and 2023, the
0:09:23 US saw its GDP grow by 34% while the EU managed only 21%. So, a lot of people say, “What’s
0:09:29 different between Europe and the US?” I mean, it’s a few things. On a very base DNA level,
0:09:35 the US is everyone who decided to leave, and Europe is everyone that decided to stay. Think
0:09:41 about that. The people who left, and by the way, they’re selfish. My mom left two siblings
0:09:46 that were still in an orphanage. Both her parents were gone. That was a selfish move,
0:09:52 but she came to America and off a secretary’s salary. My mom lived and died a secretary,
0:09:57 but we as an upper, lower, middle-class family, I think we had better lives than the majority
0:10:04 of our family that stayed in the UK. Now, why is that? Risk-taking, infrastructure, natural
0:10:09 resources, incredible education institutions, geographically blessed with friendly Canada
0:10:15 to the north and harmless Mexico to the south, more oil reserve with the largest energy producer
0:10:20 in the world, largest coal. I mean, we’re just so blessed. We’re one of the largest
0:10:24 agricultural producers in the world. We produce the brightest minds. Not only that, the brightest
0:10:28 minds in the world all have one thing in common. They want to come to the US. So, we’re just
0:10:34 blessed with a ton of attributes. And back to risk aggressiveness, one of the stats I love
0:10:38 is that there are dramatically more per capita entrepreneurs in the US coming out of college,
0:10:43 but even more importantly, we have the capital to fund their dreams. For every startup in Europe,
0:10:48 there’s 1 million in venture capital raised. For every startup in the US,
0:10:53 there’s 5 million in venture capital. So, we have five times the risk capital.
0:10:57 Anyways, long-winded way of saying, I’m not entirely sure, but I think it’s about risk
0:11:02 aggressiveness. It’s about capital and some of the natural blessings we have. And if Europe
0:11:06 wanted to inspire growth, they would need to have government subsidies to tech companies and also
0:11:14 a bigger investment in a world-class engineering educational institutions. Thanks for the question.
0:11:18 We have one quick break before our final question. Stay with us.
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0:14:42 Welcome back, question number three.
0:14:50 Hi, Scott. I’m in my mid-30s married and have a two-year-old. I manage three properties while
0:14:56 working two jobs. Growing up, my parents always did everything themselves to save money. So I’ve
0:15:03 had a hard time outsourcing tasks to contractors. Even though I know hiring help would make things
0:15:10 easier, I tend to focus on money I save doing it myself, which ends up taking more time and adding
0:15:16 stress. It’s becoming harder to manage, especially with the two jobs and caring for my toddler.
0:15:22 I want to scale up and start investing in commercial properties, but the amount of work I
0:15:28 already have is holding me back. Do you have any advice on how I can change my mindset
0:15:32 to be more comfortable with the outsourcing so I can grow my business?
0:15:40 So Anonymous, first off, you’re a young man who’s raising a kid and you own real estate.
0:15:46 This puts you in the top 10% of men in terms of your success. You’re already building
0:15:52 a future for yourself, for your family. So the first is, yeah, you’re stressed out,
0:15:57 but just be clear, don’t be hard on yourself. You’re doing really well. And if you are feeling
0:16:01 stressed and occasionally sort of overwhelmed, that’s kind of where you should be. The arc of
0:16:09 happiness where you have the y-axis is happiness and the x-axis is age. It looks like a smile and
0:16:17 that a zero to 25 is beer, prom, you know, making out. It’s a lot of fun in Star Wars. 25 to 45 is
0:16:22 what I call the shit gets real part of your life. It’s hard, economic stress. Kids are stressful.
0:16:27 I mean, I know it’s supposed to be all like fun and hallmark moments and things to make TikTok.
0:16:32 It’s not. Generally speaking, when people have kids, they’re less happy. They’re happier over the
0:16:38 long term, but during the child rearing years, it is stressful. So look, in terms of how you
0:16:43 develop a mindset around growth, what I have found, I mean, it’s a double-edged sword because
0:16:50 you kind of want to be all over everything. I think that’s the attribute of a founder and an owner,
0:16:56 but at the same time, if you’re fortunate enough to find someone good, a good property manager,
0:17:00 someone who comes to work with you as an intern and they’re good, this is what you got to do.
0:17:06 You got to be generous with that person and make it near impossible for them to leave. Why?
0:17:13 Because greatness, right? And a more boring word for that is scale. Greatness and scale is in the
0:17:21 agency of others. And my kind of core competence is storytelling, but my superpower is the ability
0:17:26 to attract and retain really talented people. And by the way, that’s not just paying everyone more.
0:17:30 If someone isn’t working out, you got to get rid of them. You’re a small company. You don’t have
0:17:35 time to find the right role for them. I am pretty harsh that way. To get to the first 10 or 20 super
0:17:40 people, it takes me 30 to 50. And it’s not fun. It’s not aspirational. It’s not pleasant, but
0:17:44 it’s hand down combat in the beginning. But when you find someone really good,
0:17:48 you got to sit them down and you’re going to say, this is our plan. We’re going to buy commercial
0:17:55 property here. We’re going to build this asset and I’m going to give you 1, 2, 3% of the profits,
0:18:00 whatever it is. Give them ownership. You want them to act like owners. And the only way to make
0:18:05 them act like owners is to make them owners. And that is say, I have my shit together. This is
0:18:09 my plan. This is how we’re going to raise capital by commercial properties is the opportunity. And
0:18:16 this is why you are going to participate in our success. You’ll, you should be able to recognize
0:18:22 those people and to let go and to not be all over them. So give them some slack. But the key
0:18:27 to any type of scale, the key to you not being totally stressed out. And by the way,
0:18:32 you’re going to be stressed out. Owners have to be all over almost everyone, almost all of the time.
0:18:40 Greatness is in the agency of others. Focus on finding the right others and keeping them.
0:18:45 That’s all for this episode. If you’d like to submit a question, please email a voice
0:18:50 recording to officehours@proppgmedia.com. Again, that’s officehours@proppgmedia.com.
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