On The Road With Amazon & Uber

Thoughts About Amazon and Uber

AMAZON: Humans Still Needed

Amazon has a delivery driver shortage. It’s gotten so bad that they’re asking their employees to consider becoming drivers.

And recently FedEx moved to delivering packages seven days a week. FedEx is a juggernaut in a field with just a handful of delivery companies, but when you have to operate 24/7, something is both going right (demand for stuff) but also wrong (nobody is going to wait on you to do it if they can go to UPS… or now Amazon).

This reality - that our packages must be shipped and there is simply no making us wait - overshadows the futuristic story of consumers focused on downloads, streams and digital services.

Cat videos rule but we still have to buy food, and have that food delivered, for our four legged furry overlords.

One of the most prevalent jobs in the country is still truck driving. Yet supposedly just around the bend we’ll see robo-trucks displacing humans…

So how close are we to automated trucks and where do we need them?

Automated vehicles are still a work in progress. Yes, trucks are likely the first use cases but we’re not there yet. Development is years away - perhaps sometime in the 2030s.

The 2020s is still about humans. So the whole “death by Amazon’s automation” narrative is much ado about nothing (for now).

2030s and beyond? We’ll see.

Amazon will benefit either way from the reality that most of our goods have to be delivered.

What does this mean for investors?

Shareholders of Amazon and Berkshire Hathaway are positioned to benefit from the entire supply chain necessary to fulfill customer orders, including trains for cost effective “long haul freight” and trucks for neighborhood deliver. Even if Amazon unleashes robot delivery overlords on both land and in the air. It’s a “barbell” investment position which benefits from the entire chain of delivery, from the warehouse to our doorsteps.

Part 2, UBER: Riders Rating & Ranking

UBER, like Amazon, FedEx and UPS, is in the business of moving atoms.

Instead of packages however, Uber “ships” people on demand - its growth from less than a handful of black cars into a global giant in less than a decade is amazing. But the story and press coverage has not been entirely positive.

Some investors worry that UBER is overpriced as a public investment. Others worry that it would wipe out the need for human drivers and therefore destroy jobs. It had already done that with the older taxi business as it became the standard bearer for the “gig economy”.

A few years ago it vacuumed up a lot of robotic engineering talent at Carnegie Mellon, as part of an R&D effort to build self-driving vehicles. While Uber is not alone in inspiring these narratives, there is an additional new wrinkle that stands out.

Right now, there’s a potentially ominous trend that could impact billions of people’s lifestyles.

The Chinese government and leading Chinese tech giants have been exploring the creation of social credit scoring of its citizens to control their financial, travel and service privileges. Tencent Holdings’ WeChat and Alibaba are deciding which of their 1 BILLION users receive privileges like deposit free rentals or hotels stays while the government is focused on credit & lending.

But a similar trend is developing in the U.S.

We use Facebook, Google and “FANG” for our online search, shopping, work and social lives - it was all “indexed” and ranked to help us pick and choose products and services, and find the best cat videos. We are consumers and critics of billions of dollars of services and providers.

Now the script has been flipped, and we are being rated and “ranked” just like Google search engine page results and Yelp reviews. In the eyes of Facebook and Google, we became the product thanks to all the data we share about our lives. Uber now takes this to a new level.

Uber has begun ranking passengers after nearly a decade of passengers having the power of rating drivers. The company can not only ban drivers now they could make it harder for some customers to access their services.

What happens when massive global scale platform networks, like UBER and WeChat, “invert” indexing, ranking and search experiences right back on users?

This leads to differentiated rewards, customer experiences - with unpredictable consequences for long tail edge users and cases. That means if you don’t fit an ideal customer profile or meet a worthy use case, you may be kicked to the curb.

How will we react to social networks turning users, members, customers and citizens into the “product” itself?

This does feel like a real-life Netflix “Black Mirror” story - all you have to do is read about the treatment and monetization of personal user, member and resident data over the past decade. Our life stories have provided the stats for deciding what ads get sent to our devices. This same tech could be used to decide who gets fewer services and who gets the extras and privileges.

But this same scenario may be part of why Uber investors aren’t worried.

This rider rating news hints at the market power of UBER. If a business is willing to turn away customers, what does that tell you about that business? Under the hood Uber might evolve into a “rating agency” focused on a new kind of credit rating. This kind of edge is hard to compete away and may justify higher growth rates.

Right now Uber’s valuation might be iffy. If it makes it through its early days as a public company then it might reward the most patient investors massive gains.