Daily Archives: March 21, 2017

Last fall, Uber hired Jeff Jones, Targets former chief marketing officer, to serve as president of the companys core ride-hailing business, with a mandate to improve relationships with Uber drivers and counteract the companys increasingly negative public image. But Jones couldnt solve those problems, and over the weekend he resigned in a way that will exacerbate them, telling Recodes Kara Swisher and Johana Bhuiyan that the beliefs and approach to leadership that have guided my career are inconsistent with what I saw and experienced at Uber.

Joness resignation is the latest blow in whats been a brutal 2017 for the high-flying transportation startup, with problems ranging from a consumer boycott sparked by Ubers participation in a Donald Trump advisory council to a Google lawsuit alleging that Ubers key self-driving car technology was stolen, from serious sexual harassment allegations to the revelation of a secret program to foil local law enforcement.

Uber CEO Travis Kalanick apologized publicly for problems at the company, saying he needs to grow up. But at 40 years old, the paper billionaire has been an adult for a long time, and experts say the steps Kalanick is taking to address the harassment issues are woefully inadequate.

Joness departure is fundamentally a sign that Uber isnt really trying to change its ways. The company gained initial traction in the marketplace thanks to a pirate-ship mentality that viewed willingness to break the rules as a core competitive advantage. Having gained enormous revenue and visibility since it launched in 2010, it would probably have made sense to slow down, mature, and try to transform itself into something more like a boring utility company that maintains good relationships with drivers and regulatory stakeholders.

Ubers view of the marketplace, though, is that the ride-hailing platform is just a stepping stone to a future network of ubiquitous self-driving cars. Thats encouraged the company to plow ahead with the pirate mentality, including perhaps stealing from Google, in an all-out race to win the future of transportation.

Its far from clear that a rule-breaking company with a toxic public image at war with its own workforce can really pull this off without imploding in the process. The taxi market really was (and is) regulated with little concern for public safety or consumer interests. But Ubers sense that the rules dont or shouldnt apply to it is leading to an escalating series of problems that could easily destroy the company.

The classic taxicab market in the United States was plagued with regulations restricting the supply of cabs available to be hailed in a way that went far beyond basic safety concerns. All drivers of all cars require a license, and all vehicles on the road are heavily regulated objects that need to pass a battery of safety and environmental tests. Still, in all states obtaining the permission to drive a car is a fairly straightforward process. But in most cities, obtaining permission to not just drive a car but drive people around in exchange for money was cumbersome, requiring access to a limited supply of special permits.

This permit-rationing process generated extraordinary financial returns to the owners of the permits who, in most cases, were not the actual drivers of the cabs but also ensured that cabs were harder to find than they should have been.

In cities like New York and Washington, DC, that generally meant taxis were unavailable in lower-income and less central neighborhoods. In a more auto-oriented city like Los Angeles, it generally meant that the economics of the taxi industry was focused on exploiting tourists rather than providing a service to locals looking for an alternative to driving when heading out for a night of intoxicants.

Municipal regulation also often led to inefficiency. A Boston cab that took a passenger from South Station or Logan Airport to the MIT or Harvard campus in Cambridge could not, legally speaking, pick up a new passenger without crossing back to the other side of the Charles River first. This kind of regulatory fragmentation served no real public policy purpose, but as each local regulators politics would typically be dominated by the interests of incumbent license holders, it was very hard to get the rules changed.

The laws were, of course, always imperfectly enforced, and illicit gypsy cabs and out-of-jurisdiction pickups by real cabs were a longstanding fact of urban life.

Ubers solution to the basic problem was to boldly plow ahead in a legal gray area, and then wage political battles from a position of strength with customers already in place. As Bradley Tusk, one of Ubers main political impresarios, told Vanity Fair when recounting a fight in New York, We mobilized our customers, over 100,000 of them, either e-mailed or tweeted at City Hall or the city council.

This business strategy fundamentally worked.

Once Uber existed, most consumers in most cities liked it, and most political authorities gave way to the basic idea that more ride availability was going to make life better for most people. But while its certainly possible to believe that the taxi market was excessively regulated without believing that regulation is, in general, illegitimate (the cab market has long been deregulated in Sweden, for example), Kalanick appears to be a true believer in smashing the state.

Years ago, he used the cover image of Ayn Rands The Fountainhead as his Twitter avatar and told the Washington Posts Mike DeBonis that his companys regulatory issues bore an uncanny resemblance to the plot of Atlas Shrugged.

Still, in a practical sense, Uber operates overwhelmingly in big, dense liberal cities and needs political cooperation from Democratic Party elected officials. To that end, Uber has always sought political connections with blue-state politicians (Tusk was a former communications director to Chuck Schumer and top aide to Michael Bloomberg) who can help them in concrete ways that Republicans generally cant. But Kalanick and his inner circle, according to people familiar with the situation, are largely pretty hardcore right-wingers who understand a pragmatic need to go along and get along with progressive values without really believing in them.

Indeed, as Voxs Tim Lee has written, Uber has consistently applied the its better to beg forgiveness than ask permission to a huge range of conduct that has nothing to do with rent-seeking taxi regulation:

[W]hen Uber accepted a massive $3.5 billion cash infusion from Saudi Arabias sovereign wealth fund, I noted the irony of Uber accepting cash from a government that doesnt allow women to drive cars and that once punished a rape victim for being alone with a male nonrelative. And Uber didnt just take Saudi Arabias cash; it also gave the theocratic regime a seat on its board.

Over the years, Uber has allegedly spied on its own customers, threatened to dig up dirt on journalists, and downplayed sexual assault concerns.

In many of these cases, Uber has backpedaled in the wake of a public backlash. Kalanick, for example, tweeted out an apology in the wake of his executives comments about journalists. But often, Uber only seems to take this kind of step after becoming the target of a social media firestorm.

While this attitude was helpful in breaking through initial taxi cartel rules, applying the principle to every situation has enmeshed the company in an endless series of controversies thats unusual for a consumer-facing company.

All corporate management structures enter into some degree of conflict with their employees. At the same time, a companys workers are often its best allies in existential regulatory battles. Coal miners are a stronger face of public opposition to environmental regulation than coal company CEOs or electrical utility shareholders. And workers are not only more sympathetic than executives but also more numerous and geographically dispersed.

A natural step in the maturation process for a company like Uber, which faces a significant and dispersed regulatory challenge, would be to try to recruit drivers as allies for the basic proposition that the service is safe and useful.

Instead, Uber has resisted the notion that its drivers are employees at all, and only under threat of litigation came to a resolution of the basic question of how the workforce related to the company. The settlement, in the end, was a broadly reasonable compromise that allowed Uber to maintain the flexibility it wanted while addressing key driver grievances and even moving toward the creation of a formal group to represent the interests of Uber drivers. But this was dragged out of the company as a concession, not put forward proactively as a workforce model.

The key factor here is that to sell investors on Ubers sky-high valuation and lack of proven profits, the company has very openly espoused a vision of replacing all drivers with autonomous vehicles. The company maintains an aggressive research division based in Pittsburgh thats working on self-driving technology, and at corporate headquarters its taken for granted that the existing hailing business is just a stool to be kicked aside soon enough in favor of the robotic future.

That blocks the otherwise natural turn toward enlisting the broad mass of Uber drivers as political and public relations allies. There are other drawbacks too. Pairing an avowed indifference to a large share of the workforce with a corporate culture that valorizes rule breaking likely encourages misogynistic behavior at the home office, and almost certainly impedes efforts to create a more rule-bound, publicly appealing corporate culture.

Hence the recruitment of Jones from the outside to try to improve things, and his rapid departure as it becomes clear that problems are too deeply rooted from him to change them.

Of course, if the bet on self-driving technology pans out, this could all be irrelevant.

A fleet of cheaply operated fully autonomous taxis would be a massive game changer for the companys basic economics. And since Uber already owns the relationship with a mass of customers, it would be very difficult to dislodge them from a hypothetical position of leadership in the autonomous vehicle game.

But the bet on an unproven, nonexistent technology in a space where Uber does not have an obvious advantage over companies that are more distinguished either in mapping and artificial intelligence (like Google) or in actually making cars (like, well, car companies) is very much a shot in the dark. And its worth asking whether Ubers reputation for lawlessness could be a considerable impediment.

After all, the core of Ubers original case for brushing aside taxi licensing regulations was that this was a fundamentally silly area of government intervention into the economy. All of Ubers drivers had drivers licenses, and their cars were all legal to drive. The basic regulatory issue was whether legal drivers piloting legal cars should be allowed to let someone ride in the back seat in exchange for money.

Self-driving car technology, by contrast, poses obvious public safety hazards. Like any car, if self-driving cars malfunction, people will die. And there is a reason theres no such thing as an automaker that has deliberately courted a public image as defiant of the law or the basic legitimacy of the regulatory state nobody would buy a car they were worried didnt meet basic safety standards. Recalls at General Motors a few years back cost the company a small fortune, and led to high-profile congressional investigations. Its a much higher-stakes game than taxi regulation.

Reasonable people can and do disagree about what rules are genuinely necessary for safetys sake (the public doesnt realize it, but cars considered safe in Europe generally wouldnt be allowed on the road in North America, and vice versa), and there is a lot of low-key lobbying around the margins, but all the players in this industry accept that there will be rules and the rules should be followed.

Nothing about Ubers approach to taxi regulation, labor law, sexual harassment, public relations, or much of anything else, though, suggests the kind of cautious attitude that would tend to give a person or a city council member, or a state Department of Transportation official confidence in the safety of Ubers robot cars. Joness words, which characterized a culture thats so badly broken it took the person brought in to fix it just six months to decide that he couldnt, do not in any way suggest a company youd want to trust on life-or-death matters.

Uber has given life to the slogan move fast and break things in a way that Facebook, which coined it, never did. It was a perfect pitch for an early venture capital fundraising round, but its a frankly terrible motto for a company that aspires to play a critical infrastructure role in piloting fast-moving metal objects down the street.

Read more:

Uber's toxic culture of rule breaking, explained - Vox