Monday, September 14, 2015

Modern Alchemy - Uber's US$50 Billion Magic Trick

For much of humanity's recorded history, one of its greatest legends centered around the possibility of changing worthless materials into gold.  Whether it was the myth that lead could be "transmuted" into gold or straw could be spun into auric thread (see: the story of Rumpelstiltsken), people sincerely believed that it could be done.  The belief was so strong that across many civilizations, especially in the Middle East, a discipline arose that was dedicated to the science of Alchemy.

The precursor to modern chemistry, Alchemy has taken many forms over the centuries.  Usually shrouded in mystery, alchemists worked at the manipulation of chemicals to achieve all sorts of feats.  One of the greatest practical successes of alchemy may have been the discovery of Damascus (or "watered") steel.   This invention made the Islamic armies of the Middle Ages truly fearsome opponents.  Yet, for all that it has been, Alchemy will always be intrinsically linked with the human fascination with creating vast wealth out of nothing.

So does the blog post stop here?  Hardly!  What would you say if I told you that today - in the 21st century - that Alchemy, at least the concept, is not only possible but it is front and center in our lives?  And it isn't taking the form of a funny-dressed man playing with chemicals in some dark cave.  No, it is taking the form of something very much ensconced within the world of Information Technology.

Remember what things were like on Planet Earth during the year 2009?  I'm guessing that you do since you're reading this blog, which is written at least at the 3rd grade level of English.  During 2009, there were a little over one billion (1,000,000,000) cars on the planet.  Most of us had nothing to do with putting them around the globe.  They were just simply there.  If you think about why there were so many cars on the Earth, the only real answer is that there were a whole lot of people needing to travel.

With so many cars and possible riders on the Earth, along came two individuals (Travis Kalanick & Garrett Camp) who did the inevitable.  By the process of connecting a few thoughts about supply and demand, they came up with an incredible idea.  What if they could find some way to connect all of these cars (supply) with all the people needing transportation (demand)?

Kalanick and Camp weren't thinking about making cars, maintaining them, building roads, or really constructing anything.  No, they were pondering how to make money by simply utilizing "common" materials already in existence.  Although the two probably didn't see the situation in quite this manner, what they were doing was not so different than trying to change straw or lead into gold.

The two men came up with an extremely brilliant and exceptionally ambitious business model.  Summed up, it went something like this:  "What if we create an app that can match needy riders with available drivers?  If we could simply control the scheduling and payments, we'd create the world's largest transportation company almost literally overnight."

After about a year's worth of experimentation, the company became reality as "Ubercab".  In short order this company quickly morphed into simply "Uber".  Fast forward about five years and several hundreds of millions of dollars in venture capital.  Uber is now in scores of countries and is a direct threat to eliminate the centuries old cab industry.  In such a short time, a single idea has created massive change and disruption throughout the world, not to mention immense wealth for a few individuals.

Think back to the entrepreneurs of the United States about 100 years ago:

  • Andrew Carnegie - Steel
  • Cornelius Vanderbilt - Railroads
  • John D. Rockefeller - Oil
  • Henry Ford - Automobiles
  • Oprah Winfrey - Entertainment
  • Howard Hughes - Aviation
  • Thomas Edison - (well...everything?)
All of these titans created massive infrastructure, wealth, and legacy.  In each case it took insight, daring, planning, and collective lifetimes dedicated to each endeavor.  Then along comes Uber and in the span of half a decade, from the lens of pure size, revenue, and timespan, these titans are made to look puny.

So what is the lesson, you might ask?  The concept of Alchemy - that is, creating enormous wealth from literally nothing, is alive and well in the 21st century.  As is the case with Uber, if you have a great idea and the ability to put that into an app, you just might become wealthier than Midas in his most greedy dreams.

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