Uncapped with Jack AltmanTony Xu on AI Consumption, Atoms vs. Bits, and the 1% Better Mentality | Ep. 55
EVERY SPOKEN WORD
50 min read · 9,947 words- 0:00 – 0:44
Intro
- TXTony Xu
There are battles for attention, you know, bits and, you know, battles for what's happening in the physical world-
- JAJack Altman
Mm
- TXTony Xu
... you know, for, for the atoms. And, and, and that we largely occupy ourselves in the second category.
- JAJack Altman
Mm.
- TXTony Xu
Right? We are in the war for atoms. Because, you know, one day ultimately, like, what's the point of having a personal assistant-
- JAJack Altman
Yeah
- TXTony Xu
... uh, if it can't actually do real things for you?
- JAJack Altman
Totally. Tony, thanks so much for doing this. One of the things I wanted to start, uh, start with was this concept that, if you'll indulge me on it, 'cause it's something I've been thinking about a bunch, kind of around the idea of, like, AI spend at companies. And I think the, uh, the trigger sort of anecdote that I saw, um, that I'd like to get your take on was Uber was basically
- 0:44 – 2:59
AI spend and token consumption
- JAJack Altman
saying, you know, in the first two months of the year, they blew through their whole AI budget. They were just, you know, rampantly consuming tokens, and what did they get out of it? Did they get more rides? Did they get more drivers? Did anything, you know, their margins im- like, what happened? And I think they were kinda saying, like, it wasn't obvious. And you're obviously, you know, the leader of a company that's super metrics-oriented and has executed super well, so I, I assume you must think about this. But I'm just curious kind of at a high level how you think about, like, what, you know, what is a large rising line item and, you know, as, as it continues to rise, what are you, what do you care about?
- TXTony Xu
Yeah. I, I, I, I think every company right now is trying to figure that out, where, you know, the ultimate goal of any technology is actually to hopefully solve a problem and actually make things cheaper. I mean, that's the, that's the goal of technology. But as you know, especially when you have constrained resources like compute, in the case of these large LLM companies, um, you know, sometimes you don't get the timing of these things always exactly when you can deliver the outcomes. Um, or you don't get the cost profiles or the efficiency profiles to serve the technology to match exactly when you can deliver, um, the customer outcomes. And I think that's the world in which we live today. So I think every company is trying to figure this out. In terms of how we're thinking about it, um, you know, first and foremost is, like, what customer jobs can we actually solve? And so I, I do think, like, when you have new technologies, there's always gonna be this period of inefficiency and, you know, almost, like, discovery-
- JAJack Altman
Mm-hmm
- TXTony Xu
... where you got this new toy. You don't know exactly what you need it for. You probably kinda know that you don't really need a, you know, frontier model to know what the weather is perhaps. But on the flip side, you don't also know the limits or the ceiling of what the technology can do, and you kinda wanna know that. And, and so the way a- at least I think about how you do this somewhat efficiently, even though by definition you're gonna accept inefficiency in the discovery process or in the invention process, um, y- you wanna do it in the, um, most contained set of ways that deliver customer outcomes. So you actually
- 2:59 – 5:08
Directing AI toward customer outcomes
- TXTony Xu
wanna put customer outcomes and start there, and then actually give teams i- i- you know, as many shots on goal towards those outcomes as possible. Doesn't mean you get there, but at least it's directed-
- JAJack Altman
Yeah
- TXTony Xu
... and it's intentional, and it's not, you know, entirely just YOLO. Um, there's obviously some of that, uh, but I think if it can be directed towards, you know, in our case, consumers, merchants, dashers, uh, w- we've actually found some success.
- JAJack Altman
Well, it's funny 'cause, like, as a software company, which is, like, where so much of, you know, the AI productivity is happening right now, th- it's actually harder in some ways for them to measure the, like, end outcome of the work that their engineers have done than maybe yours, where you can say, "Hey, I can measure. Did we complete, you know, more deliveries? Did we get more restaurants? Do we have new users?" Or, you know, all the things that you're tracking. You know, I was sort of like, uh, I was reflecting that over the last few years you've kind of like watched this egg move through the, like, snake in the pipeline from, you know, first there's the build-out and there's chips, and then you get data centers, and then it's like, oh man, are people ever gonna use this? And now they are using it, and the token spend is ramping. But now it's like we've gotta turn the token spend into, like, burritos at people's homes.
- TXTony Xu
[laughs]
- JAJack Altman
And like, you're in, like, as good of a position to see that as anybody. So, like, are you, are you like, "You know, we're gonna have certain teams try to move the metrics in a market with AI"? Or is it kind of just like bottoms up, let the teams explore whatever they want with AI?
- TXTony Xu
Yeah, I think-
- JAJack Altman
Unconstrained.
- TXTony Xu
Yeah, it depends on the team. So if you're product teams, you're, you're exactly right. You can direct teams, I think, towards metrics that matter to customers. If you're merchants on DoorDash today, you know, they're onboarding 35 to 50% faster, um, because we can actually, you know, have AI produce all of their catalog or their menu in the case of a restaurant. Um, you know, help edit your photos, help set up, you know, what might be the best way to describe yourself, um, e- es- especially if you're a new retailer, um, coming online in- i- into a city. Um, so there's metrics like that that are very trackable, measurable, have immediate positive, um, benefit to end customers. Um, similarly with dashers. You know, you,
- 5:08 – 8:18
How DoorDash uses AI today
- TXTony Xu
um, we, we've had AI help detect, you know, both fraudulent, uh, uh, uh, fraud, uh, fraud as well as safety incidences before they occur, and you can stop those and take preventative action if you knew that was actually happening. So there's things like that where you can, you know, get immediate benefit. You know, so immediate, um, customer benefit. Uh, a- a- and, um, but, but you, you said something earlier in your question, you know, well, what about, like, software teams, for example? And I think one of the things you notice there is that i- i- only certain parts of a software engineer's day is writing code. And it's great that, like, y- we have models today to write the code for us, but that helps maybe the, whatever, 25, 30, 50% of our time that's actually, you know, shipping code. But what about everything else, you know, that has dependencies in product reviews, design meetings, you know, alignment with business teams, et cetera, et cetera, et cetera? That also has to change. If that doesn't change and come together, f- uh, y- um, you're not gonna be able to just, um, have perhaps the productivity gain that you hope to have.
- JAJack Altman
Yeah.
- TXTony Xu
Um, and I think that's what, you know- ... companies like ourselves, but I'm sure a bunch of companies, um, across the industry are trying to figure out in getting those workflows right so that it, you're not just AI native from code development, but you're AI native in how you actually operate.
- JAJack Altman
Have you done anything to, like, track different engineering and product teams inside the company comparing, like, how much more productive they become with AI usage, like ones that are using it more and less heavily and things like that?
- TXTony Xu
Yeah. I mean, y- y- you get all these facts, and I'm sure, you know, y- a- as with all things, there's always a distribution of outcomes. You know, maybe the average is 50% more t- productive. Um, but, you know, you have engineers who might be 35 times more productive.
- JAJack Altman
That's crazy.
- TXTony Xu
Right?
- JAJack Altman
Yeah.
- TXTony Xu
And, and, and it is crazy, but, and, and, and it's always fun to study that distribution. But a- but again, like I, I think that m- uh, you know, what's the value of that? The value of that is really knowing what the art of the possible is-
- JAJack Altman
Yeah
- TXTony Xu
... especially in understanding your workflows. But what I, you know, someone like I have to do is I have to think about, well, how do you create that working environment for everyone, you know? Because it's, it, it's great that we-
- JAJack Altman
Yeah
- TXTony Xu
... have, you know, engineers who are 50 [laughs] times-
- JAJack Altman
Right
- TXTony Xu
... more productive.
- JAJack Altman
Yes.
- TXTony Xu
How do you actually get everyone-
- JAJack Altman
Right. But is that an observation
- TXTony Xu
... you know, to that, to that new-
- JAJack Altman
Yeah
- TXTony Xu
... ceiling?
- JAJack Altman
Exactly. And the question is, is like, is that an observation and somebody's gonna be far out, or is there a learning there that you can go replicate it across the org?
- TXTony Xu
Yeah, exactly. And, and, and, and, and I bel- I, I believe it's the latter because with all things, especially if they're newer, you're always gonna get a distribution of outcomes, right? There's always, you know, in sports, in academics, like there's always a distribution of outcomes, but that doesn't mean there aren't classes and teams and, you know, good things that you can teach as a coach or as an instructor so that you can get the rest of the class, you know, to move to the higher plane.
- JAJack Altman
Yeah. You know, for a lot of companies, when AI came around, it was either, like, the most, like, you know, kinda petrifying new technology ever, or it was like the, "Oh my God, thank you, Tailwind."
- TXTony Xu
[laughs]
- JAJack Altman
And I feel like for [laughs] DoorDash it was probably, like, neither. And, you know, tell me if you object to this,
- 8:18 – 12:47
Atoms vs. bits
- JAJack Altman
but, like, I would say, like, you know, you're mostly operating in the w- world of atoms, not bits. You know, you've got this two-sided or three, you know, three-part marketplace with, you know, restaurants, and dashers, and consumers, and all these things, and, you know, you're very, you know, related to cities and all of that stuff. And so I would think it's both insulated from AI in a good way, and then you also maybe didn't, you know, it's not like your business started growing 400% faster-
- TXTony Xu
[laughs]
- JAJack Altman
... because this AI thing showed up and, you know, wasn't very serious. Like, how has that been f- is that, like, is that right? Is that, like, about what it's been for you? Has it been kind of just insulated, and that's both good and bad?
- TXTony Xu
Yeah. I mean, we're not selling, you know, burritos or Nike shoes or groceries as fast as tokens, you know, at some other companies. But yeah, look, I mean, I, I, I think you're largely correct. I remember, um, I don't know, I think this was 2021. This was, yeah, this was '21, before the arrival of ChatGPT. We were playing around with some of these models. I mean, I think it was, like, maybe it was, like, GPT 2 point-x.
- JAJack Altman
Oh, oh
- TXTony Xu
... something like that.
- JAJack Altman
Yeah, yeah.
- TXTony Xu
Right? And just kinda getting a sense of what the world could look like. Um, a- a- and obviously, you know, the models back then are, are very, very different from the models of today. Um, but even then we kinda had this description of the world where there are, you know, battles for attention, you know, bits and, and, and, and, and, you know, battles for what's happening in the physical world-
- JAJack Altman
Mm
- TXTony Xu
... you know, for, for the atoms, and, and, and that we largely occupy ourselves in the second category.
- JAJack Altman
Mm.
- TXTony Xu
Right? We are in the war for atoms and moving things around, and if we can do that and we can build a catalog, for example, for where every item exists, um, inside of a city, or every parking spot exists, or all of this, um, information, we can, as the kind of companies battle for attention, start, um, uh, maturing, that we can really partner and work together in very productive ways. Because, you know, one day ultimately, like, what's the point of having a personal assistant-
- JAJack Altman
Yeah
- TXTony Xu
... uh, if it can't actually do real things for you?
- JAJack Altman
Totally.
- TXTony Xu
Right? Exactly.
- JAJack Altman
Yeah.
- TXTony Xu
Right? And so, um, and, and that's kinda how we thought about it four or five years ago, you know.
- JAJack Altman
It's actually funny on that point, like, you know, I, it, it, it strikes me that, like, um, one of the, it, it's very cool, but, you know, one of the things that I think there's room for improvement is that so much of tech is just, like, typing on our screens, and we're all living in the computer, but at some point to make lives better, you need to, you know, move stuff around. You need education. You need stuff that happens, you know, in a hospital.
- TXTony Xu
Yeah, healthcare, exactly.
- JAJack Altman
Yeah. You know? And so it's, you need, you need, you know, real estate to be developed.
- TXTony Xu
Yes.
- JAJack Altman
It's like all this kinda stuff that's, but it's all physical at the end.
- TXTony Xu
Yes.
- JAJack Altman
And so in some ways it's like all the software ultimately does need to be in service of stuff.
- TXTony Xu
Yes.
- JAJack Altman
Yeah.
- TXTony Xu
Yes. I mean, and, and, and this is, and, and this is exactly why, you know, what is, I guess it would've been five years ago at this point, um, the, the, the, kind of the s- the strategy [laughs] was very much, "No. Play the game that we're meant to play. The game we're meant to play is the game of atoms. And, you know, be best in class at that." And not only is that good for our business, but I also think it's great for our relationship over time with these companies as they, you know, finally build out, you know, some of their assistants, um, and build out super intelligence, and build out agents that can actually do things versus, you know, what they currently do.
- JAJack Altman
Mm-hmm.
- TXTony Xu
Um, because we naturally will need one another in order to be useful to the communities that we serve.
- 12:47 – 17:09
What LLMs can do for the DoorDash app
- JAJack Altman
point. Like, what are the, like, next parts of AI outside of like this, like the LLM on the software side that you care about?
- TXTony Xu
Yeah. Well, well, I mean, I would say first, you know, be- before we step away from, you know, some of the LLMs, we do care about, you know, what LLMs can do. And, and I think they have gotten materially smarter and more powerful, um, not, not just, you know, helping with coding, which may be the most prevalent use case today, uh, and, and certainly the most prevalent, um, spend consumption. Um-
- JAJack Altman
Well, it's definitely a good input to you for building stuff. That's-
- TXTony Xu
Yeah, 100%.
- JAJack Altman
Yeah.
- TXTony Xu
100%. But, but even, you know, for instance, you know, one of the things that, you know, we always ask ourselves is, like, how can a technology actually improve outcomes for customers? Um, so if you take, uh, as an example, the DoorDash app, you know, we've grown a tremendous amount over the last even five years. Forget, like, you know, the 13 years we've been doing this. Just in the last five years, kind of the same arc i- in, in which, you know, some of these LLMs have grown up, you know, DoorDash has moved from one product category, restaurants, one market, uh, US, into, I mean, virtually every retail category, the leader now in, you know, deliveries of grocery, convenience items, alcohol items-
- JAJack Altman
Yeah
- TXTony Xu
... um, across 40 countries. That's... There's lots of positives with that. One of the challenges for a consumer though is, boy, it's a lot harder to use an app like DoorDash because you now have restaurant things in there. You now have grocery items in there. You have retail items in there. You now have, um, the ability to make reservations or get deals inside of restaurants. It's getting more complicated to actually use our product. LLMs, you know, really can help with that. And, you know, just as I think there will be, you know, um, personal agents soon, the DoorDash app should be a personal agent. It should be a personal agent to help you do anything inside of your city.
- JAJack Altman
Mm.
- TXTony Xu
Right? I can't think of any other product and any other utility, frankly, greater than the number of connections that you can have between you and the businesses inside of your city. And so those are the kinds of things that you'll see us launch just with LLMs, right?
- JAJack Altman
Yeah.
- TXTony Xu
You, you should be able to have an easier time actually doing research on what items you wanna buy or what might be great recommendations for you based on all the history-
- JAJack Altman
Yes
- TXTony Xu
... that we have across tens of billions of orders on you.
- JAJack Altman
And you should pretty much be able to get anything to your house and not-
- TXTony Xu
Yeah
- JAJack Altman
... have to shop for it.
- TXTony Xu
Yeah. A- or have the choice of getting it i- later when you're home or because you may be away or the next day-
- JAJack Altman
Yeah
- TXTony Xu
... because it's better for you. Um, you're exactly right.
- JAJack Altman
Mm.
- TXTony Xu
And so I do think that there's still a lot of [laughs] excitement just in the-
- JAJack Altman
Yeah
- TXTony Xu
... LLMs, but you're right. If you wanna go beyond that-
- JAJack Altman
Yeah
- TXTony Xu
... um, there, uh, there, there is a l- a lot of work around, um, uh, the physical space. So for example, we've been working on autonomous vehicles since 2019, and a lot of that, um, started with, um, kind of traditional s- k- traditional systems. Kind of like, you know, with machine learning, yet traditional ways of thinking about how to y- you know, um, use those techniques to build things like recommendation systems, LLMs kind of put a complete new spin on it and didn't really require any of those techniques.
- JAJack Altman
Mm.
- TXTony Xu
Something similar is happening in the physical world where it used to be if you wanted to perhaps, you know, drive autonomously, you know, inside of a market, a lot of what you would do is actually build mapping systems and, and almost like heuristics and rules, uh, uh, to create an engine in which you can make good decisions and, and kinda weigh them in real time. Or perhaps you can, you know, put all of this into a neural net and, and take similar techniques that some of the LLM companies are using and actually make, you know, even faster and better decisions, right?
- JAJack Altman
Mm.
- TXTony Xu
And so there, there are things like that that are going on, um, that allow us to, uh, do some of the work that we're doing with autonomous delivery, you know, faster-
- 17:09 – 20:39
Was the $35 burrito obvious in 2013?
- JAJack Altman
out that it's worth it to people, but, like, was that obvious to you in 2013 that it would go this way?
- TXTony Xu
No, it was not obvious. [laughs] I mean, like-
- JAJack Altman
Like, people would pay, like, 35 bucks for a burrito when you first got started
- TXTony Xu
I mean, for example, when we launched our first, um, partnership with a, um, a national brand, that was July of 2015, I believe, with Taco Bell. I was actually quite skeptical whether or not it would work. You know, on the one hand, you know, you have this legendary brand that's never offered delivery before being offered for the first time. That was the bull case version. On the flip side, you know, um, you're right. Y- you're gonna pay a premium-
- JAJack Altman
Yeah
- TXTony Xu
... you know, to get that order.
- JAJack Altman
Yeah.
- TXTony Xu
And, and, and, a- a- and it w-
- JAJack Altman
Which wouldn't have been intuitive, 'cause you would've said, "Well, I can get the, you know, I can, I can get this order for $4 in store."
- TXTony Xu
Yeah.
- JAJack Altman
If, yeah.
- TXTony Xu
E- e- exactly. And, and, and so that was not obvious to me in 2015-
- JAJack Altman
Yeah
- TXTony Xu
... of what would happen, the, the bull or the bear, you know, version of that. But clearly people love getting Taco Bell delivered. [laughs]
- JAJack Altman
Of course.
- TXTony Xu
And so [laughs]
- JAJack Altman
Well, it's also, I mean, when that, it now makes sense to me in a weird way 'cause it's like, you know, you, you save a lot of time going back and forth. You can use that time to do all this other stuff. You can use that time to work. Like, you know, and I think-
- TXTony Xu
Yeah
- JAJack Altman
... more people are familiar with those kind of calculations now and all that stuff.
- TXTony Xu
Yeah, I think it's that. I think, I, I, I think there's a lot of things, Jack. I mean, like, um, one of the things that I remember, um, even in 2013 looking at a- a- as just this marvelous, like, fact that, that, that only goes in one direction. There, there's a few of them.
- JAJack Altman
Mm.
- TXTony Xu
You know, one of them is that if you looked at, um, if you looked at just food consumption, you know, in the 1950s when the US government used to measure this, um, or when they first started measuring this, something like 70 to 80 cents on the dollar was spent on grocery. Okay? This is, like, in the 1950s. If you looked at 2013 when DoorDash was founded, that number was getting closer to 55 cents towards groceries, you know, 45 cents towards restaurants. Today, it's closer to 55 cents towards restaurants-
- JAJack Altman
Wow
- TXTony Xu
... 45 cents towards groceries. And so over a 75, 76-year, you know, arc, y- yes, there's ups and downs, but if you look at the trend line, it kinda goes in one direction-
- JAJack Altman
Hmm
- TXTony Xu
... which is in the direction of, you know, uh, food prepared by somebody else.
- JAJack Altman
Do you know by chance if, like, the relative cost of a steak you made through your own groceries versus a steak prepared by somebody else, if that ratio of cost has cha- Like, has one gotten more expensive relative to the other?
- TXTony Xu
It's a, it's a great question, but, but, but I think it depends a lot on how you value your time.
- JAJack Altman
Mm-hmm.
- TXTony Xu
So this gets me to another fact that I think is pretty interesting, which is if you looked at the percentage of dual income households, same time period, 1950 to 2020. So this... You know, this goes way beyond AI or-
- 20:39 – 22:20
The 70-year food consumption trend
- TXTony Xu
you know, facts over, like, 70-plus years or something-
- JAJack Altman
Yeah
- TXTony Xu
... they kinda spell out that people, whether it's through-
- JAJack Altman
Yeah
- TXTony Xu
... you know, dollars or time, are expressing the fact with their activity, not just their words, but their activity, that they much value if somebody else-
- JAJack Altman
Yeah
- TXTony Xu
... made them a steak.
- JAJack Altman
It's interesting because, like, you know, the, the, uh, stat about, you know, dual income households. It's like that, that's true, but also, like, the, you know, the cost of a home has gone up crazily.
- TXTony Xu
Yeah.
- JAJack Altman
And if you talk to... I think you talk to a lot of, like, young people today-
- TXTony Xu
Yeah
- JAJack Altman
... versus young people in the '50s.
- TXTony Xu
Sure.
- JAJack Altman
I think people probably feel like it's harder to get, like-
- TXTony Xu
Yes
- JAJack Altman
... the home, and the car, and everything today-
- TXTony Xu
Yes
- JAJack Altman
... than they used to and all of that.
- TXTony Xu
Yes.
- JAJack Altman
So it's a little counterintuitive that people's willingness to spend on food has done what it's done.
- TXTony Xu
Well, I think a couple things. So you know, the first thing I would say is, you know, food happens 20 to 25 times a week. It-
- JAJack Altman
Yeah
- TXTony Xu
... it's not like buying a house.
- JAJack Altman
Buy... Yeah, that's right.
- TXTony Xu
So that's, that's the first point I'd make. So, so even if you're the most avid cook, right? That you love making, you know-
- JAJack Altman
Right
- TXTony Xu
... uh, uh, food, y- it-
- JAJack Altman
What's 20 minutes times 25
- TXTony Xu
... is very difficult. It's very, very difficult-
- JAJack Altman
Yeah
- 22:20 – 26:41
Consumer trends beyond food
- TXTony Xu
Food consumption.
- JAJack Altman
That's right. How much do you think about, like, consumer trends in general outside of food? Like, do you need to just be myopically focused on food, or is it worth your time and head space to care how people are spending their energy on social media, or what's going on with Calci and PolyMarket, or other consumer tr- Like, does that matter to you, um-
- TXTony Xu
It, it-
- JAJack Altman
... to understand-
- TXTony Xu
A- as, as a consumer business with hundreds of millions of customers now, absolutely you have to think way beyond food, and as a company that frankly doesn't just do food anymore.
- JAJack Altman
So I'm cur- like-
- TXTony Xu
And increasingly our Order-
- JAJack Altman
Yeah
- TXTony Xu
... Orders are coming outside of food. We have to pay attention.
- JAJack Altman
So what are, like, some of the other consumer trends that are, like, not about food but that are important and interesting to you?
- TXTony Xu
Well, I think you named one of them, uh, which is this affordability piece, which isn't just about food. People are looking for affila- uh, affordability across every segment.
- JAJack Altman
Yes.
- TXTony Xu
Housing, transportation, eating, groceries, um, healthcare-
- JAJack Altman
Mm-hmm
- TXTony Xu
... I... education. I mean, I... We can keep going. I, I, I'm... Banking. I m- e- every, every category, I would say affordability is a huge deal.
- JAJack Altman
Yeah.
- TXTony Xu
Huge premium. And so a lot of, um, you know, what we're thinking about is how do you continuously do two things? One, continuously bring down costs, and two, how do you bring more value? [laughs] And, and, a- and I, I think those are very hard-to-do things. Um, we, we, we, again, like, m- mainly try to stay focused in the world of atoms, though, because one of the things that I think people, um, on the software side perhaps don't appreciate is, you know, all this information that you can get in software, um, kinda sometimes gives you this perception that you can structure information pretty easily and maybe control information and experiences pretty easily.
- JAJack Altman
Mm-hmm.
- TXTony Xu
End to end. That is the complete opposite in the game of atoms, where everything is an edge case. Every day there's this thing called traffic and weather, and every day by definition, it's not perfectly predictable. And we can argue it's range bounded or not, but h- look, if there happens to be a traffic jam and, you know, something takes 20 minutes a, uh, longer, that's a, that's a real problem for that one customer. A lot of what we're doing is actually just staying as expert and proficient as we can in that game.
- JAJack Altman
What's cool about it is by being so good at logistics, and costs, and all, and coordination and all of that, it's obviously gonna apply to stuff outside of food. Um, but even, even just within food, it seems like, you know, to, to bring more value to the customer, I mean, the, the obvious way is you could just keep chipping away at, you know, the cost, which I assume over time you ought to be able to get to a extremely low place, I would think.
- TXTony Xu
With food, um, but also with inventory of other types of products-
- JAJack Altman
Yeah
- TXTony Xu
... right? For instance, you know, one of the challenges in, you know, grocery or retail is- Um, well, th- th- there's actually separate challenges. In the, in, in the case of grocery, most grocers don't know what items are on shelves. And it's not because of bad technology-
- JAJack Altman
Mm-hmm
- TXTony Xu
... or outdated systems or a lot of different systems. There are those challenges, but it's honestly also structurally because consumers who go inside the store move things around.
- JAJack Altman
Right.
- TXTony Xu
Um, or CPG companies, you know, want, you know, certain items to be promoted or not promoted, and those things change quite often. And as a result of that, you know, that becomes really messy, right? So how do you get great at that? You know why? Because if you don't get great at that and you make mistakes or you have to make a bunch of substitutions, that's extra costs. Back to your point around affordability, that's, that's costs.
- JAJack Altman
Yeah.
- TXTony Xu
Even though it's not just about the price of the items, but it's about everything surrounding it to support fulfillment. In the case of retail, if you didn't know that, you know, th- um, the pair of shoes that you wanted might be a half size off, you know, be- because it doesn't fit great, that's extra cost. That's gonna get returned somehow or refunded. Y- y- you know? Um, and those are all of the challenges that we try to obsess about.
- JAJack Altman
What are the, like, tempting adjacent things that kind of make sense for you to do that you've, like, said no to in the name of focus? Like, you know, as an example, as I was just listening to that, like, you know, do businesses ever wanna use you to, like, you know, work with their own suppliers or things like that, and then have you said, "You know what? That's just too far afield from what we do"? Like, are there, are there close by things that you're constantly saying, "That's a good idea, but it's not a great idea. We're just not gonna do that"?
- 26:41 – 29:37
Sequencing: seven years on restaurants before groceries
- TXTony Xu
between good and great internally right now is around sequencing, you know? And, and, and, and so, you know, for instance, I had no idea, back to one of your earlier questions about, well, how big could food be? It's very hard-
- JAJack Altman
Big
- TXTony Xu
... as an entrepreneur-
- JAJack Altman
Yeah
- TXTony Xu
... you know, when you're working out of your apartment-
- JAJack Altman
Yeah
- TXTony Xu
... um, to know [laughs] you know-
- JAJack Altman
Then it's, yeah
- TXTony Xu
... that, that, you know, what, what that size could be one day.
- JAJack Altman
Turns out a lot of people eat food.
- TXTony Xu
Turns out a lot of people eat food.
- JAJack Altman
Yeah.
- TXTony Xu
Um, it also turns out it, it's a lot harder than we thought. [laughs]
- JAJack Altman
Yeah.
- TXTony Xu
And we worked on it for-
- JAJack Altman
Right
- TXTony Xu
... seven years before we moved to category number two-
- JAJack Altman
Right
- TXTony Xu
... which was groceries.
- JAJack Altman
It's funny. It's like I could see it getting started, like, "Oh, this could be a $5 billion company."
- TXTony Xu
[laughs]
- JAJack Altman
And now you're like, "This could be a $500 billion company."
- TXTony Xu
Actually, in our Y Combinator application, there's a question, I don't know if they ask it anymore, which is how much revenue do you think this company can make one day? And I remember we were just operating in Palo Alto at the time. And so I counted up how many Palo Altos there could be and how many orders we could do in each one of those types of cities, and I estimated something like $100 million of revenue or something like that. Thankfully, we were a few orders of magnitude off.
- JAJack Altman
That's funny. Yeah.
- TXTony Xu
But, but that's true.
- JAJack Altman
Yeah.
- TXTony Xu
That's a... But, but, but to your point about-
- JAJack Altman
No, but it's surprising.
- TXTony Xu
It's very surprising. And so I think a lot of times it's, uh, uh, you, you kind of as an entrepreneur have to take the greedy algorithm, right? You have to keep going all the way-
- JAJack Altman
Right
- 29:37 – 33:13
Building the ads business
- TXTony Xu
well, one of the things I'm really proud of, you know, I think the team gets a ton of credit for being the fastest company in history to hit a billion dollars in ad revenue, but I'm more-
- JAJack Altman
That's awesome
- TXTony Xu
... proud of how they did it-
- JAJack Altman
How they do it
- TXTony Xu
... which is constantly, constantly, I mean, you know, fighting the restraint effectively or, or, or, or, or, or living with the constraint that we must achieve both objectives.
- JAJack Altman
Mm-hmm.
- TXTony Xu
Best in class returns for advertisers as well as consumers.
- JAJack Altman
I mean, you know, it's like, um, Fa- I think, like, probably the Facebook ads team, their early ads team must be, like, one of the greatest it seems like. Um, in, in some ways it actually seems to me, and I, obviously I know you're on the board there at, at Meta, but I feel like in some ways it seems like those cultures are, your culture and the Meta culture probably have a lot in common from, at least from the outside in terms of just, like, you know, extremely metrics driven, a lot of testing and trying things, like, very focused on, like, you know, results and stuff like that. Is that, is that, is that, like, accurate? Is that, like, what... Like, was the ads team, like, an even more distilled version of all of those things?
- TXTony Xu
I mean, I think you're right in that, in saying that, you know, the ads teams at some of the largest tech companies in the world are some of the, you know, candidly most impressive teams because y- y- you know, it's carried them so far.
- JAJack Altman
Yeah.
- TXTony Xu
You know, I think we forget that some of these companies and products that you're, we're talking about here are more than two decades old now at this point.
- JAJack Altman
Yeah.
- TXTony Xu
And not, not only do they have the reach of billions of users and things like that, uh, if you looked at some of the, you know, latest results from these companies, um, it's incredible the, the, the, the, um, business growth-
- JAJack Altman
I mean, also you talk-
- TXTony Xu
... that they've seen
- JAJack Altman
... you talk to people from, you know, Google or Meta ads, I mean, it's brilliant people. Like it's very hard to do-
- TXTony Xu
Yeah. It's v-
- JAJack Altman
Yeah
- TXTony Xu
... a- a- and, and, and, and, and the constant working that problem, right? The, the... And it's, a- a- and, and you're right that this share, you know, i- in some ways with the DoorDash side where maybe we work in a different space, it's not fully in our control, it's not ... all about, you know, digits and, and, and, and attention. It's more about the physical world, and we have a lot more constraints where we have to kind of take what the, the def- uh, you know, what the o- uh, um, defense gives us, so to speak, where you kind of are taking what's happening in the physical world, and then you have to react very quickly to it because we don't get to control sources of demand or supply really. Um, but, uh, i- it's similar in that y- y- you have to be very objective, um, and unemotional about what is best for customers while living within constraints, and then getting 1% better every single day.
- JAJack Altman
Yeah.
- TXTony Xu
And not taking for granted that you can't. Because I think sometimes it's easy to say, especially intellectually speaking, that like, "Oh, we've solved the problem. Finished," you know? Like, "Delivery is finished."
- JAJack Altman
Mm-hmm.
- TXTony Xu
And I think i- if we ever thought like that, I don't think DoorDash can continue growing.
- JAJack Altman
Yeah.
- TXTony Xu
And I think that we've continued to, our teams have continued to, um, just do better by increasing our selection, making fees more affordable, increasing the quality and reliability of our network and delivery-
- JAJack Altman
Yeah
- TXTony Xu
... improving our customer support constantly every single day, 1% better.
- JAJack Altman
Yeah.
- TXTony Xu
Um, and that's, that, that, that leads, maybe not in one sitting, but over an-
- JAJack Altman
Yeah
- 33:13 – 34:23
1% better every day
- JAJack Altman
like, it's, like, really great execution. And, you know, this is like the 1% better every day thing. And this might be hard for you to answer as somebody because it's just the way that you are. Um, but I'm curious if you can sort of speak at all to what it's like to run a company with execution as, like, you know, a core excellence. You know, I, like, I'm thinking of Amazon, for example, as a company that's had to do this. When the margins are, when the margins are thin, like, there's no choice. There are other companies, by the way, where, like, the sort of, you know, the, the zone of genius has to be something completely different. They don't need to be great at execution, actually. They can just have periodic brilliant insights that are just so unbelievably step-changing that, you know, you can actually afford to be sloppy, and the types of people who are gonna have those insights might be the types of people who are gonna more likely be, you know, lot less, you know, attuned to the details anyway. But I'm just curious if you can speak at all to, you know, what your experience is like building a company with sort of these values.
- TXTony Xu
Yeah. I, yeah, that is a hard question. I, I mean, I would say, you know, it, it, it starts first and foremost with, um, a, a love and appreciation
- 34:23 – 38:37
Math and humanity
- TXTony Xu
for how math and humanity come together. Because, and what I mean by that is when I think about the DoorDash business, yes, you, you're right. There are a lot of metrics. There are a lot of constraints, low margins. Um, uh, and, and, and therefore you have to be very good at measuring a lot of things. That's the math part. That's the how do you, you know, take a multivariate problem and make the best set of, you know, trade-offs and, and, and calculus. But underneath it, though, is the recognition that on every single order we do, we have at least three humans [laughs] involved, at least. You know, we ha- a- a- at least a, a Dasher, a merchant, and a consumer who all participate, you know, to make something productive happen inside that city. And you kinda have to like both. Y- y-
- JAJack Altman
Mm-hmm
- TXTony Xu
... it's not good enough to just be very robotic, and all we're gonna look at is the numbers, and if the numbers are good, we're good.
- JAJack Altman
Right.
- TXTony Xu
And, but, and if it has a negative consequence on somebody-
- JAJack Altman
Yes
- TXTony Xu
... then so be it. That's not good enough in my book.
- JAJack Altman
Yeah.
- TXTony Xu
My, m- m- you know, my book is you have to recognize that if you look at the merchants, right? When I think about m- my mom who worked inside of a restaurant, this is life. This is not a job. This is not a nine to five or, "Oh, what are you gonna do from this career to the next career?" No, this is every single day my livelihood, every single day. It's my identity. It's certainly my professional income, but it's everything in, in, in the household. You look at couriers, you know, we have tens of millions of couriers who've, um, you know, delivered with us. Um, and they, we are like a stepping stone for most of them. The vast majority of them are, you know, doing only a few hours a week, and that's because they're, they are trying to strive towards, you know, becoming a doctor, a nurse, a realtor, a teacher, et cetera, et cetera, et cetera. And, and, and then obviously we talked about, you know, the benefits to consumers. And, and so you have to have that appreciation and love. If you don't have that for either the, the, the, the people or the math, I think it's a very difficult game to sustain because it's just not choosing the right game for you.
- JAJack Altman
It, it seems like it could be rare to, uh, have both of those in one person, but you've obviously got a company full of, I presume, people who you believe have both of those things. So what do you, how do, how do you figure out if somebody is, uh, not only one or the other, but somehow both of those things where they appreciate the humanity and all these complexities while also just being, you know, a maniacal sort of stone-cold, you know, operator when, when they need to be too?
- TXTony Xu
Yeah. Look, I, I, I think the tests towards, um, you know, someone's skills or their, um, problem-solving or their metric orientation is a lot more straightforward, uh, to assess than, say, someone's values, I would say. Um, or, and, and, and, and, and, and, and there a lot of it is actually hearing about- ... the things that motivate them as well as the things that demotivate [laughs] them. And it's okay. By the way, there's no judgment here. It, it's really around self-selection. Some people, I think, find it awesome, you know, w- um, the, the types of businesses that wanna become restaurateurs, retailers, grocers. Some find it messy and not for them.
- JAJack Altman
Mm-hmm.
- TXTony Xu
That's okay. That's really okay. And, and, uh, um, a- and, and, and so again, a lot of this is about self-selection. It's about y- um, a- a- about people who are gonna do the right thing, even if maybe the numbers belie, you know, um, uh, that behavior. People who, um, have seen a- adversity, people who believe i- in the fact that, you know, if we can be successful, then all these awesome creators and passion projects inside cities will actually continue to be successful, and actually, you know, want that to be successful. I think if people can self-select into that, that's really how you can tell. There isn't, like, this perfect test, but it's really around self-selecting into it.
- JAJack Altman
That's cool. I'm curious, like,
- 38:37 – 41:09
Growth levers at scale
- JAJack Altman
um, for you when you think about, like, growing your business, what are, like, the biggest levers? Is it, um, is it, like, city expansion still to some extent? Is it, like, or is it now about broadening out through more categories? Like, is it M&A? Like, what are the things when you're like, "I want my business to grow by X amount next year. Here's how I'm gonna ladder my way there." Like, at this stage, obviously a very mature business. What goes into it?
- TXTony Xu
Well, uh, well, I don't know if we're a very mature business. I mean, I, I mean-
- JAJack Altman
Relatively
- TXTony Xu
... w- w- we've, we've, um, we've certainly surpassed, you know, the, the size of my apartment, but, but, but [laughs] I would, but I would say that, um, you know, we're still [laughs] even our largest, you know, business or, or our restaurants business in the US is only single digit percentages of the, of the restaurant category. But the, but to answer your question, I think it's how can we either solve current customer problems better, or how do we solve the next problem? And what is that next problem? And, you know, I, I think a lot of times, you know, back to the comment you were making earlier about some of the, um, advertising teams-
- JAJack Altman
Mm-hmm
- TXTony Xu
... at some of these, um, larger technology companies, I, I, I, I think you c- you have to do two things. You, you have to keep building the core, which, you know, for us has always been food, and just constantly work on that problem of improving selection, quality, price, and service. And then you also have to create the new, which is actually a very different set of skills. It's a different management system. It's, um, different people sometimes. Uh, certainly different incentive mechanisms. Um, it's, uh, it, it has a lot more inefficiency before you have efficiency. Um, and, and that's where we're searching for new problems to solve, and this is your point around, you know, well, d- how much do you focus, you know, versus, um, you know, just doing the core. It is both. I think when you look at, um, you know, companies that can continue to grow, they tend to do this. They tend to keep solving the problems that they've solved for customers continually better, and they also find new problems to solve.
- JAJack Altman
How much do customers care about speed? Like, if you could deliver everything in five minutes, would that, would that dras- Like, can you tell if that would drastically change demand, or is that no longer a huge variable?
- TXTony Xu
No, I think-
- JAJack Altman
Yeah
- TXTony Xu
... er, I, I, I think people, I mean, this is like saying, "Would you like something delivered slower," right? People are always gonna want something delivered faster. That's all, and now is it x-
- JAJack Altman
Have you ever-
- TXTony Xu
Is, is it X minutes for, like-
- JAJack Altman
Yeah
- TXTony Xu
... it, it depends on probably what the product is.
- JAJack Altman
Yeah.
- TXTony Xu
But, but, but, but, but the short answer I know is definitively is that customers always want something faster.
- JAJack Altman
Do you think
- 41:09 – 43:39
Speed, drones, and autonomous delivery
- JAJack Altman
drones will happen for this kind of delivery?
- TXTony Xu
Of course. I mean, like, drones, uh, uh, drones, autonomous vehicles, they, they will all happen. You know, but, but you have to [laughs] remember something. The delivery part is just one part of the time of a delivery.
- JAJack Altman
Yeah.
- TXTony Xu
Right? So while it may be possible to fly in the air and skip a bunch of traffic, it's not possible to skip a busy kitchen-
- JAJack Altman
That's right
- TXTony Xu
... especially if you're understaffed.
- JAJack Altman
Yeah.
- TXTony Xu
And so, and that's the predominant part. The majority time spent on a delivery is the preparation.
- JAJack Altman
That's right.
- TXTony Xu
Whether it's inventory inside of a retail shop or, you know, cooking time inside of a busy kitchen.
- JAJack Altman
Yeah.
- TXTony Xu
Um-
- JAJack Altman
And the drone can't, like, go through the retail store and check out.
- TXTony Xu
Yeah. It, it, [laughs] yeah. Yeah, yeah.
- JAJack Altman
Maybe.
- TXTony Xu
So my, my, my, but my perspective, but, but, but, but again, I, I think you're, you're calling out a very good point, which is when you think about, um, you know, products, I, I think when it comes to digital experiences, a lot of attention is around pixels and every, you know, detail from step-
- JAJack Altman
Yeah
- TXTony Xu
... to step to step. No different in the physical world, but a lot of the steps are just in the physical world.
- JAJack Altman
Right.
- TXTony Xu
And it, and, and it's the coordination and the orchestration of the end-to-end system, you, of which just the fulfillment is one part, right? Understanding exactly did you get the right inventory, understanding the exact prep times, understanding which vehicle to send, you know, whether it's autonomous vehicles or human drivers, understanding what is the right price point, understanding how do you solve, you know, substitutions, understanding how do you do refunds and credits. All of these things have to be orchestrated, and, I mean, effectively h- hidden in terms of the complexity behind the surface to offer a very simple-
- JAJack Altman
Yeah
- TXTony Xu
... just get you exactly what you want-
- JAJack Altman
Yeah
- TXTony Xu
... you know, to the customer.
- JAJack Altman
It's funny. Like, as I'm thinking about, it's like both, um, you have both, like, the, uh, there's, like, the simplest kind of, you know, objective, like, a company of this scale could possibly have, which is, like, get that item from that place to that home as quickly and cheaply as possible. Like, that's really simple. But then, like, the complexity from A to B is ridiculous.
- TXTony Xu
Yeah.
- JAJack Altman
Yeah.
- TXTony Xu
That's, I mean, uh, I mean, and that is the DoorDash problem set, right? It, it, it, and, and for [laughs] better and for worse. I mean, there are, you know, I remember when we started DoorDash, I remember decomposing that there's almost, like, 20 mini systems, mini little processes, if you will. If you imagine a checklist of just bring you a burrito, [laughs] there's 20 little s- things that you, you kinda have to get right. Because if anything goes wrong, you know, you, you would actually need to fix it, and those are, a- a- and, and there's no way, by the way, that, that, that you would know about this unless you actually did the deliveries yourself, right? This is
- 43:39 – 44:16
Why everyone at DoorDash still does deliveries
- TXTony Xu
exactly why we still to this day, I mean, we, we've done it since day one, but to this day, we still have everyone in the company, you know, dash, w- uh, uh, which is our way of saying doing deliveries. We still all do deliveries because- Until you actually get into the physical world, until you find yourself stuck in the wrong elevator or the wrong lobby to try to get upstairs to deliver something, until you get to the wrong alleyway for parking, until you get to the wrong place b- because you realize actually food gets made sometimes in three different stations at a, inside of a restaurant. Until you actually experience those things, it's very difficult to a priori
- 44:16 – 46:14
What Tony is most excited about
- TXTony Xu
just intellectualize that-
- JAJack Altman
Yeah
- TXTony Xu
... and know about it.
- JAJack Altman
Yeah. What are you most excited about for whatever's coming up with AI or, or anything else in the next year or two?
- TXTony Xu
Well, I think right now it's a period of rapid change for everyone. And so what is very exciting is, we, you know, we, we started this conversation talking about some of the, you know, inefficiencies that perhaps companies are experiencing when it comes to token consumption and ex-
- JAJack Altman
Token maxing.
- TXTony Xu
Token maxing-
- JAJack Altman
Yeah
- TXTony Xu
... and experimentation. Um, but there's a lot of fun in that too.
- JAJack Altman
Of course.
- TXTony Xu
You know?
- JAJack Altman
And there'll be a lot of creative-
- TXTony Xu
And-
- JAJack Altman
... like, you know, n- new discoveries that'll come up.
- TXTony Xu
Yeah. And so what I'm excited about is all the things that haven't yet happened, actually. That's what I'm really excited about. Not, not just in like products that, that, that will be great for customer outcomes and, and in- in- increasing the surplus, but, but actually ways of working. I am really excited b- b- because, you know, I, I think one of the things you always ask yourself as an entrepreneur is how do you continuously keep up the velocity and pace at a company similar to what you had when you started the company?
- JAJack Altman
Yeah.
- TXTony Xu
And it's very hard. As you know, you've done it-
- JAJack Altman
Yeah
- TXTony Xu
... um, yourself.
- JAJack Altman
It's, it's-
- TXTony Xu
And, and, and you see a lot of startups today. And, and, and so I'm interested in answering both of those questions. It's like w- uh, yeah, how are we gonna take this period of change to, yes, build better products for customers-
- JAJack Altman
Yeah
- TXTony Xu
... but also literally build better products for ourselves so that we can enjoy work to the max.
- JAJack Altman
Actually, now that you say this, I wanna... M- my, my last question is kind of on the personal 'cause it, it was, you know, I d- didn't do it for as long, but, you know, nine years of it and, you know, it, it's difficult and you're, I guess, 13 years into this company. And, um, obviously it's, you know, was and is very intense. But has your own, you know, when you think about how do we keep it as intense as the early days, like is that kind of the goal in your head, or do you at some point, you know, you're now, you know, whatever, many billion dollar public company, do you at some point say,
- 46:14 – 47:27
Keeping startup intensity at year 13
- JAJack Altman
"I actually now need to find the marathon pace that I can do this for the rest of my life," or is it just the same intensity as day one for you?
- TXTony Xu
Well, it's, it's less about like the intensity in terms of like, you know, how many hours are you, you know, sprinting or, um... I, I, I think it's the feeling of agency and productivity that actually, that you always yearn for. It's not, I, I don't think any startup founder, at least I personally know, is trying to optimize towards the number of hours worked per week or something like that. No, I think what, when, when, when, you know, the reason why people go towards startups is, it, and why they wanna have a, is, is because they wanna have a lot of impact and, and it's the feeling of the agency.
- JAJack Altman
Yeah.
- TXTony Xu
And I think, you know, I wanna make sure that everybody at the company, um, you know, continues to feel that agency to hopefully do more, and more, and more. Because you know why? Because, um, because not only then will they do the bac- best work of their careers at DoorDash, but even if and aft- when they l- you know, leave to go pursue whatever their next endeavor is in life per- personally or professionally, they're gonna have more confidence to do it.
- JAJack Altman
That's awesome. Well, Tony, this was a pleasure. Thanks a bunch for hanging out with me.
- TXTony Xu
Yeah. Thanks, Jack. [upbeat music]
Episode duration: 47:27
Install uListen for AI-powered chat & search across the full episode — Get Full Transcript
Transcript of episode 72taCP0zrY8
