How does a company ensure that it thrives during what is expected to be the worst economic downturn since the Great Depression? Be everywhere all at once. While Amazon enjoyed a multi-lap head start before the coronavirus shutdown, its ability to dominate most sectors of what could be described as the stay-at-home market — e-commerce, web services, entertainment — has given the behemoth the opportunity to best Apple to become one of the top-two companies in the world based on market capitalization. Meanwhile,
rideshare giants Lyft and Uber — more limited in their scope, and in the red before the coronavirus — are both expected to lay off around 17 to 20 percent of their workforce, respectively.
On the most recent episode of the New York podcast Pivot, co-hosts Kara Swisher and Scott Galloway project how Amazon could soon take the silver medal in the U.S. stock market — despite missing its first-quarter earnings — and how the leading rideshares face a bumpy road ahead.
Scott Galloway: I’ll make a prediction: I think Amazon [surpasses Apple] and becomes the second most valuable American company [behind Microsoft]. Amazon Web Services is probably going to see a surge in activity. Obviously, e-commerce, we know that’s going to be crazy up — it’s just a matter of how much crazy up. But the thing that people don’t talk about: What’s the fastest growing media company over $1 billion in the world right now? It’s Amazon Media Group, which is soon probably going to be one of the five biggest media companies in the world.
I’m not talking about Amazon Prime Video. I’m talking about Amazon Media Group where you buy ads such that once you have Huggies in your basket, P&G can advertise Pampers and say, “No, look over here.” The in-store shopper marketing, if you will, is a bigger business than advertising. And Amazon’s about to make it a bigger business than almost every digital media company, with the exception of Facebook and Google. More households have a relationship with Prime than go to church or have a pet or decorate a Christmas tree.
So it’s the fastest growing media company, fastest growing cloud company, fastest growing e-commerce company, fastest growing, or most competent, back-end fulfillment logistics company in the world. So I see Amazon becoming the second most valuable company in the world, and it’s marginally the most valuable company in the world within the next year, if not the next 90 days. It has a scary-fast growth rate, even if the company’s earnings were short of expectations by $1.33 per share for the first quarter.
Kara Swisher: Well, speaking of scary, let me read you a quote. This is part of a column on Amazon that’s about to go up in the Times. “But in the time after this crisis is over, I can say that I fear them more. Because they will be more unfettered than ever, with much less pushback on them from regulators and politicians that had been building decent momentum before coronavirus. Instead, it has accelerated their speed and tightened their grip on our lives. And this kind of consolidation of power combined with a stronghold on data, automation, robotics, artificial intelligence, media advertising, entertainment, retail, and even autonomous tech is daunting.” It’s daunting, daunting.
Galloway: I think Warren — especially as a VP pick — is the only one that’s knowledgeable enough, fearless enough to take on these guys. Everyone else is afraid. But it’s almost a presidential platform to say that the best way to ensure we don’t step towards tyranny, the best way to restore income inequality, the best way to bust out of this dangerous cycle of the gross idolatry of innovators, the best way to ensure the stock market continues to go up, the best way to ensure small businesses are oxygenated, would be a breakup.
Swisher: They’re not going to do it in the middle of an economic crisis. I don’t think Biden has the set to do it.
Galloway: I’m more hopeful.
Pivot is produced by Rebecca Sananes. Erica Anderson is the executive producer. It is also now on YouTube.
What’s Next for Uber?
Swisher: Anyway, Uber is reportedly on the brink of laying off 20 percent of their employees, as the company’s CTO Thuan Pham steps down. The company is planning tiered layoffs that result in letting go of 5,400 employees. Uber CEO, Dara Khosrowshahi, said that its bookings in most major cities were down by as much as 70 percent. Uber shares have fallen more than 50 percent over the past month.
Pham is leaving the company, which seems like the end of an era, as he’s a vestige of the days of Travis Kalanick. But the company has seen recent gains with Uber Eats, obviously. But will this be enough to keep Uber afloat through the pandemic downturn? Scott, what do you think of rideshare more generally? This is the first year Uber and Lyft were publicly listed companies, and I haven’t been in one for months.
Galloway: Yeah. Ride hailing, It’s ground zero. The good news is they can variabilize down their cost structure. I think a lot of people are looking at rideshare and saying, “Okay, should this be a static, ubiquitous part of our society? Should 30-year-olds who make a good living, but not a great living, be taking Suburbans to the airport? Should there be kind of a swarm of people turning on their phone, because they don’t have minimum-wage protection at their job, much less this job.”
There’s a lot of flexibility in the gig economy, but should we be putting them in this construct that is effectively a payday loan where drivers just borrow against the value of their car in the form of deferred maintenance? Have we set up the ultimate Hunger Games? After the coronavirus, I think Uber survives. Lyft goes away or gets acquired. Maybe Uber consolidates them, but Uber is going to survive. It’s a great global brand. Great execution. Uber Eats has now got new life because of what’s going on.
But it’ll just be a shitty stock to own, and they’re going to be a fraction of their former selves. And people are going to rethink, in a new world with consumer confidence way down, should 28-year-olds be taken off the subway and put in cars?
Swisher: They’re going to stay in an Uber. I think the trend is useful, I find Uber useful. But you’re right, it’s going to be a smaller version of what it was, maybe it won’t even be public anymore.
Galloway: Yeah, but still to take Uber private would be huge, and typically companies get taken private when they’re profitable, and they want to layer on debt to finance the acquisition of them going private. It’d be hard to imagine somebody financing the take private of Uber.
And right now, Lyft doesn’t have the brand. I mean, it has all of the calories and none of the great taste of Uber. Ride hailing is a menace to society. It’s bad for the environment. It absolutely accelerates income inequality. It takes people off of transportation and reduces the need to make the requisite investments in long-term thinking around infrastructure investing. But Lyft doesn’t have the global brand.
Swisher: Yeah it’s only in the U.S. and Canada right now.
Galloway: It doesn’t have the scale. It doesn’t have Uber Eats, it doesn’t have Uber Freight.
Swisher: Why would Uber buy them?
Galloway: Oh, just for scale and to get rid of a competitor. You’re the only game in town.
Swisher: Why not just let them die?
Galloway: Well, that’s what’s interesting here. Is this consolidation — or is this Cosmo and Urban Fetch? Where it just becomes such a bad business and it starts a downward spiral. But to your point, there’s still a lot of wealthy people.
It’s the price that’s going to change. And I think that’s an issue. Now, it’s interesting, ironic that you were talking about the damages that these ride-sharing services. John Zimmer is the co-founder and president of Lyft, and he talked a lot about the saving of the environment early on when I met him. He kept talking about 80 percent of the car isn’t in use and it was started in a much more hippie sort of style, that company. It has that reputation and it has that vibe compared to sort of the Death Star that was Travis Kalanick at Uber. And so it’s interesting — again, lovely guys, but much less aggressive than Uber was.
But you’re right. It’s a tough business. And if their workers aren’t making enough money, then it’s simple. You tax them and you enforce minimum wage and employee, not contractor, standards. And Uber goes on to be a great company. So it can be fixed. It’s a great service.
Swisher: I think there’ll be continued pressure to giving drivers rights. So costs will go up, but they will also have a bigger pool of drivers and better drivers.
Galloway: It’ll be a smaller business. And the 16,000 people at headquarters now don’t make as much money on their stock options, but there’s a redistribution of some of that income security to their drivers. And quite frankly, riders should be paying more. So there just needs to be a redistribution of stakeholder value here.
Swisher: Things to come at Uber. I’m sure Dara Khosrowshahi did not think this is what he signed up for.