Will Uber do better or worse without its founder? Is it time for Google and Apple to swoop in?

“Uber’s Travis Kalanick and Silicon Valley learn that work isn’t a fraternity” (Sacramento Bee) makes it sound as though Uber’s founder was a waste of space and shareholder cash:

Uber long has been the poster child for the downside of Silicon Valley. The dismal treatment of women. The corner-cutting business practices. The unbelievably childish and even dangerous bro culture.

On Tuesday, Kalanick announced he would take a leave of absence, …

Certainly Uber is not the first startup to outgrow a hard-charging founder. But the culture Kalanick fostered has been among the most blatantly obnoxious and fraught with misogyny.

More than 215 of the company’s 12,000-plus employees [i.e., 1.8 percent; compare to the 44 percent of female federal employees who said that were harassed within the preceding two years (1994 survey)] were accused of unprofessional conduct that ranged from sexual harassment to discrimination to bullying to retaliation to physical threats.

The company will be transformed?

It reportedly bans sexual relationships between employees at different levels, requires senior managers to undergo leadership training, details a new process for handling employee complaints and requires Uber to implement new benefits, such as equal time for family leave.

Media reports of Uber’s evilness have been tough to square with my limited personal experience, e.g., meeting an Uber executive from the Los Angeles office temporarily assigned to Moscow. She seemed to identify as “female” and yet didn’t have any complaints regarding the company. It also seems implausible that apparently the majority of evil American workers were gathered into this one enterprise, the only sensible inference from the non-stop media coverage of how evil Uber is, ignoring the nearly 30 million other American businesses.

I’ve always wondered why Uber exists at all. If Google (“not evil” by definition/motto!) and Apple know where everyone is and those companies both have comprehensive mapping software, why aren’t they the companies connecting drivers and passengers and taking a fee for doing so? Could it be that the business isn’t actually profitable?

Readers: What do you think? With the hated Kalanick sacrificed, will Uber enter a new and more glorious phase of corporate development? The world’s top female sysadmins will flock to the company to replace Susan Fowler? Or was Kalanick somehow important? And why doesn’t a $1 trillion gorilla such as Apple or Google take away this business?

[Separately, how is the new policy “bans sexual relationships between employees at different levels” different from what Kalanick himself promulgated in 2013: “Do not have sex with another employee UNLESS a) you have asked that person for that privilege and they have responded with an emphatic ‘YES! I will have sex with you’ AND b) the two (or more) of you do not work in the same chain of command.”?]

13 Comments

  1. Fazal Majid

    June 13, 2017 @ 8:38 pm

    1

    Uber is in fact massively unprofitable. The theory is that they can buy market share now and profit when the market expands, and from the network effects (e.g. someone from Boston where Uber reigns will default to them when traveling to Moscow or Chongqing).

    I haven’t seen any evidence that their market is particularly defensible or their ability to put barriers to the entry of competitors. It’s also far from proven they could weather the transition to self-driving cars like Netflix did from DVDs to streaming. They ceded China to Didi because even spending $1B a year they were losing market share.

    From articles in The Information, their IT was a mess until about 18 months ago when they hired a VP of Engineering away from Google, but they recently fired him because he omitted to mention to them at hiring time that he had been fired by Google for sexual harassment.

    Kalanick was clearly a genius salesman at raising money from gullible VCs and mutual funds at ludicrous valuations, but it’s unclear he would have been able to keep this Ponzi scheme going much longer.

  2. Tom Galloway

    June 13, 2017 @ 10:29 pm

    2

    Nope, it’s very much not profitable. It lost $708 million on revenue of $3.4 billion last quarter…an improvement from the $991 million loss the previous quarter.

    As for Google buying them, Google Ventures did invest around 300 million in them a few years back. But I suspect part of why Google or Apple didn’t do an Uber type business (yet) is because dealing with all the various different governments and laws and regulations on a city by city level is both something they didn’t want to do *and* Uber in particular has been steamrolling through in a way a larger, easier and more lucrative to sue, company wouldn’t want to do. On the other hand, once Uber and Lyft do enough of the work so that one can be functional in a large number of places as a turnkey operation, any of Apple, Google, Amazon, or Microsoft (or others, such as auto companies) could jump in.

    And, as I wrote when Fowler’s statement went out, Uber’s problem wasn’t sexism. Rather, sexism was the result of its real problem, a very bad and hostile company culture (I refer to Uber the San Francisco company here, not its drivers). Here in Silicon Valley, it’s long had the rep of having a sufficiently toxic culture and a high number of assholes without even taking sexism into account that a fair number of folk I know, including myself, had no interest in working there despite the possible big payout.

  3. Roger

    June 13, 2017 @ 11:43 pm

    3

    I think the Google and Apple game plan is to wait for autonomous cars, and then have a robot taxi service.

  4. John

    June 14, 2017 @ 1:40 am

    4

    Google (Waze) is already rolling out their Carpool service, using the only possible method to undercut Uber’s subsidized prices: genuinely non-professional drivers who get only gas and depreciation covered by passengers while driving a route they would have taken anyway.

  5. Tom

    June 14, 2017 @ 5:16 am

    5

    Now that they are freaking out about “bro culture”, I suppose it would be unsporting to mention that harassment guy is an Indian? Or is that what this is really about, the workplace collision of well fed feminists with high caste subcontinentals? In some ways, that makes sense.

  6. bjdubbs

    June 14, 2017 @ 6:37 am

    6

    The reason Apple and Google don’t dominate this business (other than antitrust issues) is that Uber serves a two sided market, and knowing where one side of the market is (riders) isn’t that useful if you don’t control the other side of the market (taxis). Most two-sided markets are very expensive to build (eBay being a huge exception). My question about Uber is the opposite – shouldn’t it be easy for the taxi drivers to get together and form their own cartel? Cabs have a natural advertizing platform, the top of their car. Just put a sign on the cab that says “download this app,” form a taxi cartel, and boom, the local cab drivers have cut out the Uber and Lyft middlemen. Then pay a simple monthly fee to whoever wrote the software.

  7. Tom

    June 14, 2017 @ 7:23 am

    7

    The oligopoly of Stockholm taxi firms have apps. One for each company though, last time I checked. But just booking with a phone call is usually fast and reliable.

    Ordinary taxi in Stockholm has nice cars, reliable service, good availability etc but is pretty expensive. To make a mark there, I think Uber would need to have radically lower prices, like half or so. (Last time I tried, they instead had surge pricing and were more expensive than conventional taxi. And arrived later. Not a great moment in the history of disruption.)

  8. philg

    June 14, 2017 @ 11:03 am

    8

    Tom Galloway: “sexism was the result of its real problem, a very bad and hostile company culture (I refer to Uber the San Francisco company here, not its drivers). Here in Silicon Valley, it’s long had the rep of having a sufficiently toxic culture and a high number of assholes without even taking sexism into account that a fair number of folk I know, including myself, had no interest in working there despite the possible big payout.”

    How does Uber hold onto employees then? A friend of mine was involved in firing the 12 most incompetent tech people at a VC-backed Silicon Valley company. “I checked LinkedIn a week later and they all had new jobs.” If the labor market is so vibrant, why don’t the Uber-oppressed throw off their shackles and join a different company? (as Ms. Fowler finally did, for example) Is it that Uber pays so much better than nearby firms with a “non-toxic” culture?

  9. bobbybobbob

    June 14, 2017 @ 11:21 am

    9

    Costs in the thin margin taxi business are dominated by fuel and vehicle depreciation and maintenance, not labor. Driving cars is expensive. Cabs need to be reliable fleet vehicles with in-house mechanics for economies of scale. Uber really sells $10 taxi rides for $8, and self driving cars can’t fix the problem. Their current pitch to investors is that they are betting the entire future of the company on self driving cars, so never mind that the model makes no sense as is.

    When Amazon, Tesla, and Uber finally roll over Enron will be a curious footnote in business history.

  10. Neal

    June 14, 2017 @ 12:42 pm

    10

    The leave of absence strikes me as a terrible compromise by the board. Either change is needed in which case the founder should go, or they still have confidence in his vision and execution in which case they should back him up. This way, part of the company will be working toward the goals set by his temporary replacement and part of the company will keep their heads down and wait for the return of the king. OTOH, if it is just a PR stunt then perhaps it will work (to solve their PR problem).

  11. jack crossfire

    June 14, 2017 @ 2:51 pm

    11

    The revaluation of the lowly taxi cab as a $70 billion technology innovation was Janet Yellen’s economic stimulus package. The mane question is whether Uber will trigger the next recession, be the next government bailout because it’s too big to fail, or be generation millenial’s Enron.

    Every single investment fund was heavily tied up in Uber. Many startups were declined funding rounds in 2016 to keep Uber going. When they finally have to write off $15 billion of the total SOMA pot, everyone is going to pay.

    The only bigger bomb could be Salesforce, a $70 billion markup of millions of 1 cent web sites. The Yellen years were marked by the largest markups of worthless assets in history, for the sake of achieving total employment.

  12. Tom Galloway

    June 14, 2017 @ 7:12 pm

    12

    Honestly, that’s a question I’ve wondered about in general with respect to known bad culture companies. I’d guess in part because, until this public blowup, Uber has for the last few years been considered the best bet to get a significant pre-IPO stock option/RSU payoff (i.e. you’ve got a good shot at being a low millionaire or close to it, and the pre-IPO valuation is such that it’s relatively low risk for such compared to your own startup or other companies). Once you’re there, golden, OK, more like silver, handcuffs. In part because you might luck out and get one of the few good managers. In part because you’re an asshole and fit in. But I’ve never figured out a good general reason for why toxic culture companies last or even become long term successes given other options for the employees.

  13. bobbybobbob

    June 14, 2017 @ 9:00 pm

    13

    > I’ve never figured out a good general reason for why toxic culture companies last or even become long term successes given other options for the employees.

    In a lot of ways a deliberately “toxic” culture is probably a good idea because it drives away problem people. With complete freedom of association and truly free at-will employment laws this would be silly. But we aren’t under such a system.

    As is, a motivated contingent of leftists *will* infiltrate your company and institute a leftist program of “equality” and drive down performance. Because it’s illegal to just fire these people as they become apparent, having a “bad reputation” such that left wing outlets are constantly hyperventilating is probably a fantastic plan. Nailing a huge crucifix (or Wotanist symbol, or whatever) on your front door would probably also be a good idea. Keep the vampires away.

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