Uber makes case for investment in disruptive tech
The fifth World Government Summit in Dubai might seem an odd place to go looking for technology investment ideas. But this public sector answer to Switzerland’s annual Davos World Economic Forum is a regional hot spot for cutting-edge thinking and big name guests. When I saw Elon Musk of Tesla and SpaceX fame was on the roster as well as the top guys from car-sharing company Uber, whose imminent IPO may be one of the largest in history, and the career-networking website LinkedIn, it was clear this represented a major local investment-research opportunity, never having been invited to Davos.
Mr Musk lived up to his reputation for ultra-long distance thought. Indeed, we got as far as discussing colonising the outer moons of Jupiter, while at the same time hearing the crux of his business model for SpaceX as being to make rockets reusable.
He explained that space travel was presently outrageously expensive because it was like ordering a new 747 for every flight. His aim is to reuse a spacecraft a thousand times and so cut the cost of space travel by a similar multiple.
Meanwhile, back on Earth, Mr Musk has opened a Tesla sales office in Dubai and plans a network of charging stations for his superfast electric cars.
In his view it will still take 30-40 years to completely replace petrol cars, although he says most cars will be self-driving within a decade and US lorries within five years.
Does that make Tesla shares a buy?
Given the seven-year high market capitalisation of the Nasdaq stock market I would not buy Tesla now. But as Amazon and eBay proved in the dot-com crash of 2000 it is always worth spotting the stars when the sun is shining and buying them later on a rainy day.
That said, the presentation of the Uber business model by founder and chairman, Travis Kalanick, was equally impressive.
Car-sharing may not sound very interesting. But when it is done across 500 cities in the world in a way that means you can almost always get a car to pick you up within five minutes it is a transportation revolution, and by pooling seats, real inroads can be made into traffic congestion and pollution.
So should you buy into the long-awaited IPO due this year? Well, last year Uber lost US$2.8 billion and its valuation is currently put at about $70bn, making this platform more highly valued than auto companies such as Ford, General Motors and Honda, or twice as valuable as the established tech giant eBay. Did anybody say valuation bubble?
Overpaying for IPOs at the top of a bull market is seldom a recipe for investment success. But again, buying a star that has stumbled in a stock market crash could make very good sense. The basic business logic of car pooling as a transport solution will not change whatever the condition of the stock market.
Incidentally, Mr Kalanick explained how self-driving cars would be a miracle when linked to Uber, which would lower the cost of this very safe and practical transport option to the point that nothing else would be able to compete with it. To my mind that sounds like a prospective huge and well-defended monopoly that I would like to own.
The LinkedIn executive chairman Reid Hoffman also gave a smart presentation, but really looked more a part of the internet revolution part one rather than the disruptive, cutting-edge technology represented by Uber, Tesla or SpaceX.
The same could be said of a speech and question-andanswer session with John Chambers, the chairman and one-time 25-year chief executive of Cisco Systems, the makers of internet routers and servers. Mr Chambers put this $70bn-a-year tech company together by serial takeovers and daring calls on market transitions.
He presently tips France and India as the next stars of the tech start-up and expansion scene. Perhaps it is no coincidence that Mr Chambers was an early evangelist of the benefits of tech expansion and start-ups in both countries, and indeed that is how he grows his own business.
At current market valuation levels I would be very leery of buying Cisco and Mr Chambers says it all by championing start-ups himself. If you want to stay ahead of the curve in technology investment then this is the area you should be investing in – but do try to get your timing right.