In a move that shook up the ride-hailing world last week, Uber’s Travis Kalanick took a forced vacation from the company he built. It’s not clear how long the departure will last, but the timing of his exit was clear: Kalanick is taking the waters after a series of scandals and missteps damaged the business.
Many of those wounds were self-inflicted, and longtime observers said Kalanick’s departure was a long time coming given his renegade style.
Here are five takeaways:
1. People buy because of what you do, not what you say
Companies are no longer judged only by what they say about their products. It’s also more and more about what they do, and a growing number of people decided they just didn’t like Uber’s behavior, according to Stephen Beck, founder and managing partner of cg42, a management consulting firm.
The firm conducted an online survey of more than 1,500 users of ride-hailing services, more than two-thirds of whom were primarily Uber users. But not for long: Nearly 81 percent were aware of Uber’s run of bad news. Although cost, car availability, convenience and growing competition had been the leading factors making people think about a switch, the survey found that 56 percent of the primary Uber users who left for another service said it was because of the bad news and the shady practices the media exposed.
“Overwhelmingly it was the news, and revelations about what this company was doing, that created the switching behavior,” Beck said. It’s also not just missteps that count these days. Consumers increasingly reward and punish businesses based on a corporation’s perceived politics — as Kalanick found out after taking heat for participating in President Trump’s economic advisory council.
Social media has of course accelerated this trend. Facebook and Twitter have given people the means to share, vent and shame like never before, magnifying a company’s mistakes in a news cycle that now runs like a turbine. In Uber’s case, Beck’s survey found that allegations about the company’s systemic sexism and harassment had the most powerful negative effect. Which brings us to:
2. Boys will be boys, but only if they also want to go bankrupt
Uber’s brazen attitude was sort of charming at first. And it was understandable: Kalanick and the rest of Silicon Valley were busy busting up old business models to create something new and digital. The grit that came with taking on an established industry such as the taxi and limousine business also lent itself to a certain amount of bravado. But that stuff only goes so far, especially if the cowboy mentality is literally about boys.
Steven Hill, who has written extensively about the “sharing economy” and Uber, said Kalanick transformed his start-up into a transportation juggernaut in relatively little time in part by infusing his company with a “pirate mentality” and a no-holds-barred “bro culture.” But that also backfired, particularly with women, Hill said.
The cg42 survey backs that up: 35 percent of respondents said the company’s perceived sexism had the biggest impact on their view of Uber. And that was before David Bonderman, a billionaire on Uber’s board, made a wisecrack about how women talk too much. He has departed, too, free to spend more time in a man cave somewhere with Kalanick.
3. Uber’s troubles could be Metro’s friend
Metro’s management must have been feeling some schadenfreude over Uber’s recent woes. And that’s not just because it must be comforting for the management at Washington Metropolitan Area Transit Authority (WMATA) to see the negative attention diverted from their problems. As Uber’s scandals grew, commuters became more likely to reconsider the virtues of publicly funded mass transit, Beck said.
“People are reevaluating the use of public transit when available,” Beck said. “Do I think that that’s going to be sort of widespread? It remains to be seen.”
Beck said Uber’s problems have also caused people to reappraise ride-hailing in general. The more people got to know Uber, the more people became familiar with its downside, such as drivers complaining of mistreatment or barely making ends meet, rogue drivers who committed crimes, insufficient background checks on drivers and even extra congestion on urban streets.
“When you look at Uber in particular as the poster child for ride-hailing, I think there’s a lot more understanding now of both the positive and negative aspects that go with this new way of finding transportation,” Beck said.
To some extent, that has benefited Lyft and other Uber competitors. But as they’ve grown in popularity, people also started discovering that they suffered from some of the same problems. Lyft drivers, for example, recently accused the company of “wage theft,” a charge the company has denied.
“Lyft has sort of tried to position itself as the good Uber. And there is a degree of truth to that,” said Hill, author of “Raw Deal: How the ‘Uber Economy’ and Runaway Capitalism are Screwing American Workers.” “But at the end of the day, it’s just not that different.”
Hill said Uber’s experience should be a warning to many Silicon Valley entrepreneurs: People are okay with some degree of disruption, until they’re not. When the upside of breaking all the rules becomes the downside, people will cool to the service or product, he said. As many have pointed out, Kalanick’s trajectory is also more proof that the talents and skills necessary to launch a company or win an election are not necessarily the ones needed to govern.
4. Treat workers the way you want customers to treat you
The U.S. labor movement may be at a low point, now that only 6 percent of all private sector companies are unionized, but consumers can still feel solidarity with workers from time to time, especially if they think workers have been treated badly. Nobody likes a bully, as Uber has learned the hard way.
To its credit, Uber was the first ride-hailing company to recognize an organization representing drivers, and it implemented some protections for drivers who faced discipline. But that was also small beer for a company that long refused to allow in-app tipping, slashed fares to compete with other ride-hailing services, battled drivers in court to keep from treating them like regular employees and shortchanged them on fares. When Kalanick was caught on video browbeating an Uber driver, drivers found a highlight reel for their grievances.
“When you treat the drivers or the people making you money like mules and don’t see them as positive parts of the company that they are, things like this happen,” said Jim Conigliaro Jr., a union official who helped establish the Independent Drivers Guild in New York. The Independent Driver’s Guild, which Uber recognized in May 2016, was launched as a partnership with the International Association of Machinists (IAM) District 15, a union that’s part of the International Association of Machinists and Aerospace Workers, AFL-CIO.
The cg42 study found that Kalanick’s videotaped spat with one of his drivers was one of the top three stories cited by Uber users when asked why they might jump to another service.
“There’s a certain level of respect that a CEO of a company, especially a company this big, has to show to the people who are making them money,” Conigliaro said. “When you treat people a certain way — and you refer to getting the other person out of the car — when you make those comments, they have an impact on your company.”
5. Spare the hype
Uber benefited and suffered from its own hype, Beck said. Especially in the early going, Uber pushed the narrative that what it was doing was so revolutionary that people wouldn’t need to own cars or nigh was the day when people could summon driverless cars — driverless airplanes! — just by tapping their smartphones.
“The inevitability of Uber’s success and the wide range of pundits that have been out there saying things like, ‘Oh well, you know, people are just not going to own cars anymore’ — well, hopefully, this cools that off, because that was always overblown in our opinion,” Beck said.
Uber’s financial muscle has also been overrated, said Hill, who has been saying for a while that the San Francisco-based company was in for a comeuppance. Despite its soaring valuation, Uber has yet to show that it can turn a profit and continues to subsidize about 50 percent of each ride, he said.
But it’s also not just Uber. The company seemed to ride the credibility wave that too often greets gee-whiz, we built-a-better-mousetrap Silicon Valley start-ups, Hill said. Seven out of 10 Silicon Valley start-ups go bust, and yet they keep coming, often with a lot of hype.
“I call these the sort of moonshot-to-nowhere of Silicon Valley,” Hill said.
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