2 min read

Arms Dealer or Arms User

Adnan Khashoggi became a billionaire by brokering war.

Uber is no longer a ride-hailing company

Uber Technologies Inc. is nearing a deal with a group including SoftBank Group Corp. that would invest in its self-driving car unit at a valuation of $7.25 billion

Adnan Khashoggi became a billionaire by brokering war.

Adnan did not have to fight those wars, and he did not have to pick sides in them. He sold machine guns to one side and rocket launchers to the other side. He made the most money when wars were long and messy.

His job wasn't easy. He had to build an operating system — logistics, freight, customs, purchasing pipelines — that moved weapons and supplies across the world. As this operating system grew, he brokered increasingly complex deals between governments, arms suppliers, and other stakeholders.

As a business, it worked. During the hottest parts of the Cold War, Adnan made billions by owning the pipes of war.

"Owning the pipes" is a great business strategy.

Bloomberg owns the pipes for global finance. With Bloomberg's distribution network, traders and financial decision-makers have instant access to the world's best information. Since every trader knows that her competitors have access to similar data, Bloomberg becomes increasingly valuable in the "data wars."

Amazon owns the pipes in American retail. It can deliver any range of product from one point to another, and since every retailer needs to get products to buyers, Amazon's value to every retailer selling online grows over time.

Uber started as a ride-hailing company, but it now wants to own the transportation + logistics pipes in cities.

Uber's ride-sharing business is in a savagely competitive market and, as a result, has terrible unit economics. It loses money on every ride.

But Uber's other businesses, namely Uber Eats (local distribution) and autonomous, are exploding in one direction: they move things — people and goods — through city pipes.

Yesterday it was reported that investors are valuing Uber's autonomous vehicle division at $7.5 billion. It is no surprise, then, that Uber goes heavy in its S-1 on autonomous vehicles:

"We believe that autonomous vehicle technologies will enable a product that competes with the cost of personal vehicle ownership and usage, and represents the future of transportation ... will be an important part of our platform over the long term."

Other big startups, like Flexport for trade and Stripe for internet payments, are building pipes in their verticals.

Cities are complex systems that require physical and digital operating systems.

The companies that own those systems will not have to fight the wars; they will sit back and reap the profits.