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Uber, transforming into a cash-flow machine

For about a decade, Uber was the poster-child for the excesses of the venture capital model. It was seen as the ultimate ‘millennial lifestyle subsidy’ - where wealthy investors funded unprofitable startups that offered discounted services to their mostly-young users. Uber spent tens of billions of investor money to offer below-cost rides in an effort to expand quickly around the world and fend off rivals like Lyft, Didi and Ola.

But Uber has turned that story around the past few years, under the stewardship of CEO Dara Khosrowshahi. The most recent quarter was Uber’s best financial result to date. As Khosrowshahi explained:

The fascinating thing about this story is that the early VC thesis has played out. The thesis came under a lot of criticism: raise more than you think you need, spend faster than you think you can, expand aggressively and establish a dominant market position before your competition can catch up. Then, and only then, worry about profitability. Uber spent a lot of money pursuing that strategy. But as they sit today, they own 74% of the ride share market in the United States. The thesis played out, now they are preparing to start paying their investors back.

This article is a deep dive on how Uber has turned itself around and what is coming next for the world’s dominant ride share and food delivery player.

Making sense of the China meltdown story

China has too much debt, has over-built infrastructure, has youth unemployment north of 20% and is facing a slow moving economic crisis as its years of unproductive spending are coming home to roost. That is a sentence you could’ve read in an economic publication at any time over the past 5 years. China’s collapse has been called before, and this week we saw the latest round of dire predictions for the world’s second largest economy.

This article from financial research house Gavekal has taken a look at the recent reporting to try and understand if something is different this time in China.

They look at many of the leading indicators of financial crisis - the performance of the share market, the solvency of banks, exchange rates and importantly in a Chinese context, the performance of commodities (this is relevant in China because China is the #1 or #2 importer of almost every major commodity on earth, so if China is slowing down you’d expect to see weakness in key commodity markets). What Gavekal conclude is that while we’re seeing some weakness in some of these indicators, they certainly don’t appear to be anywhere close to crisis levels.

Gavekal then turn to some of the indicators of China’s domestic consumption, which again don’t suggest China is falling headfirst into an economic crisis. Car sales remain strong, Macau tourism levels are hitting multi-year highs, consumer facing companies like Alibaba are reporting strong results.

This is all to say that we should be wary of some of the most dire predictions around China. Sure, there are reasons to worry. With the collapse of Evergrande, the residential property sector is weak and (much like Australia) the Chinese consumer has a lot of their wealth tied up in residential property. Similarly, the incredibly high rates of youth unemployment are a big challenge for China’s leaders. But the majority of economic indicators out of China suggest weakness, not crisis. A reminder for us all to take that next sensationalist headline with a grain of salt.

The staggering economic impact of Taylor Swift’s Eras tour

Taylor Swift’s Eras tour is breaking all kinds of records this year. It is on track to become the biggest tour in history and the first to break the mark of $1 billion in ticket sales. Time has looked at some of the numbers behind the first leg of Taylor Swift’s Eras tour.

• Three and a half hour long shows

• 53 shows in the first leg of her North American tour

• 80% spike in streams to her music catalogue since the tour started

• Already close to $1 billion in ticket sales, with projections that they’ll get as high as $2.2 billion by the end of the full tour in November 2024

Taylor Swift will quickly surpass Elon John’s $939 million in ticket sales for his multi-year farewell tour and continues to outpace Beyonce's Renaissance world tour. The $2.2 billion in ticket sales will be a record that will be hard to surpass. But the economic impact of Taylor Swift’s mega-tour goes far beyond ticket sales.

Time has estimated that the Eras tour will generate almost $5 billion in consumer spending in the United States alone. Take Glendale, Arizona, where Taylor Swift performed in the same stadium that hosted the Super Bowl in February. Local businesses reported they made more money on the night of Taylor Swift’s first Glendale concert than they did on Super Bowl Sunday. And as Swift has travelled around America for the past 5 months she has been delivering the equivalent of two to three Super Bowls every weekend for local businesses.

If you want more on the business behind stadium tours, we recently unpacked it on an episode of Is There Money In…? on the Equity Mates podcast (Apple Podcasts | Spotify | YouTube).

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