It’s crazy-prices season in the markets right now! Apple is worth more than $700 billion, Vice is worth $2.5 billion, and Uber, we’re told, is worth somewhere in $40 billion range. Which is double what it was worth six months ago. Meanwhile, the price of oil continues to plunge, along with the yields on European bonds: Spanish government bond yields are at a record low of 1.885%, France is below 1%, and Germany’s at a downright Japanese 0.697%.
What all of these things have in common is that they’re deeply, importantly, about international, cross-border concerns. Once upon a time, investors like Warren Buffett could happily live in an America-sized opportunity space and make their fortunes. And to this day, Americans have an understandable tendency to judge American companies on how well they’re doing in America. But that’s a mistake.
The single biggest success of Steve Jobs, after all, was to create a truly international business. The Macintosh was always a very American machine: Apple’s international customer base was basically limited to a handful of creative industries, before the iPhone came along. But then Jobs invented a whole new operating system, iOS, which everybody in the world wanted, and only he had. That created Apple as we know it today, and the myth of Steve Jobs. And the story only continues in that vein: the recent rise in Apple stock is essentially thanks to the way in which the success of the iPhone 6 Plus mirrors the decline in the fortunes of Samsung, mainly in East Asia.
Or look at Vice. As a U.S. company, it’s really not that special: a fair-to-middling website, a small and buzzy TV production company, a niche ad agency. So why is it worth $2.5 billion? Because it’s global, in a way that many brands are but most media companies are not. If you’re a brand wanting to gain traction with 18-25 year-old men around the world, Vice is pretty much the only place which can credibly present itself as a one-stop shop.
Finally, consider Uber. It isn’t growing any faster today, as far as we know, than it was expected to grow six months ago. So if it’s simply meeting expectations, why the doubling in value? One reason is that the downside is getting smaller. Anybody can say that they’re going to double their revenues over the next six months; actually doing it is harder. Uber is now firmly situated as the first-best car company in the world, recent controversiesnotwithstanding, and its moat is growing, rather than shrinking.
But the international aspect is if anything even more important. This might not be obvious to people in San Francisco, who are spoiled with dozens of hopeful and well-funded startups, many of which are doing much the same thing that Uber is aspiring to. But leave the Bay Area, and the fears and frustrations of trying to get a cab start getting magnified – especially when you’re in a foreign country. The value of Uber is only partially in the service it provides; increasingly, it’s also in the global ubiquity of that service.
I just got back from Rome; I took a standard white cab from the airport, and then took an Uber back to it. The Uber was a much more pleasant ride, as well as being cheaper. But most importantly, it came without any of the anxieties that generally accompany getting into a stranger’s car in a foreign country. Such anxieties are generally small, in a country like Italy, but even the locals will warn you against hailing a cab in a place like Mexico City.
There’s a lot of money, these days, in apps which help turn your smartphone into a remote control for your life, wherever you might be. No one really needs Foursquare when they’re within a few blocks of home, but the more distant and unfamiliar the place you find yourself, the more invaluable it becomes. I’m personally addicted to Citymapper, too: it’s fantastic in New York, where I live, but it’s almost magical when I land in London or Paris or San Francisco and it works just as wonderfully there. Suddenly, I’m even better at getting around than the locals are.
Uber, however, is the first app which can deliver a three-ton glass-and-steel machine to wherever you happen to be, in any of 200 cities around the world, in minutes. That’s why Uber’s bulls think of it as a logistics company rather than a taxi company: it’s fundamentally about being able to move things (initially passengers, but that’s already expanding), within city boundaries, with unprecedented levels of efficiency. Most impressively, Uber has managed to do this within a single app: it doesn’t have a different version for every country that it’s in. Anybody with an Uber account, no matter where they’re from, can automatically use Uber in any city in the world where Uber operates. This is non-trivial, and not at all easy to replicate.
The rise of companies like Alibaba and Rocket Internet is proof that US technology companies can find it surprisingly difficult to scale internationally. Entering new markets is a lot of work, and often local copycats can be faster and nimbler than the people trying to parachute in from Silicon Valley, telling the locals how it’s done. Uber’s international expansion is particularly hard, since it has been met at every turn with fierce opposition from both regulators and the incumbent taxi industry. And yet, partly because it seems to be the only company with the appetite to fight dozens of such battles at once, Uber’s reach is expanding inexorably, and in a way that is extremely hard to replicate. Rival companies can sign up drivers all they like: but from a passenger perspective, if you’re going to have Uber on your phone anyway, because you need it when you visit some distant city, then you might as well just use it at home as well.
That, then, is the bull case for Uber. Not so much its rate of growth, or the prospect that it might replace car ownership, or the dreams of how it might one day be able to deliver self-driving cars. Instead, much of the value of Uber lies in old-fashioned human laziness. If you’re only going to install one taxi app, and if you travel at all, either internationally or domestically, then you’re going to install Uber. And at this point, there’s very, very little chance that any other company is going to be able to usurp that position.