Innovation

Uber culture created by Travis Kalanick may prove central to its fall

The controversial chief executive announces a leave of absence after scathing report

Uber CEO Travis Kalanick: he is said to be considering a three-month leave of absence. Photograph: Reuters

Davin O'Dwyer
Thu Jun 15 2017 - 06:00

Uber is, in many ways, the quintessential Silicon Valley start-up story, and it will be studied, analysed and discussed for years to come.

But there is every chance that the ride-hailing company will be seen as significant less for the way it has harnessed technology to disrupt 21st century transport, ingenious as that may be; no, Uber will likely be talked about for years to come as a cautionary tale, the misshapen unicorn that embodied toxic macho start-up culture.

At the centre of that culture stands the brash, pugnacious persona of chief executive Travis Kalanick, who announced an indefinite leave of absence this week in order to grieve after the tragic death of his mother and injury to his father injured in a boating accident a few weeks ago, as well as to step away from the multitude of scandals afflicting his company.

Last Sunday, a marathon Uber board meeting in Los Angeles accepted all the recommendations of a scathing report on the company’s behaviour by former US attorney general Eric Holder and his law firm Covington & Burling.

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This led to Kalanick’s leave of absence, as well as the departure of senior vice-president Emil Michael, Kalanick’s right-hand man. In the aftermath, as board members Arianna Huffington and venture capitalist David Bonderman addressed staff about the addition of another woman to the board, Bonderman made a tone-deaf quip that it would lead to “more talking”. Bonderman later apologised and resigned from the board.

Up to 20 employees have been fired in recent months for misbehaviour, and the Holder report is in addition to a separate investigation by another law firm, Perkins Coie. (Let us pause for a moment to appreciate the fact that Uber appears to have done a more thorough job of confronting its toxic leadership issues than the various branches of the US government have managed to achieve in the past few months).

There has been no shortage of missteps and scandals afflicting the company in recent months, and the Holder investigation was prompted by a devastating blog post in February by former Uber engineer Susan Fowler detailing the sexual harassment and poor management she endured at the company.

Then in March the New York Times reported that "Uber has for years engaged in a worldwide programme to deceive the authorities in markets where its low-cost ride-hailing service was resisted by law enforcement or, in some instances, had been banned".

Compromising information

Back in 2014, Emil Michael notoriously suggested the company could gather compromising information on technology journalist Sarah Lacy. The fact that he suffered no consequences suggested Kalanick and the board endorsed these intimidatory tactics.

More recently, another senior executive, Eric Alexander, was forced out only after it was reported that he had obtained the medical records of a woman raped by an Uber driver in India – apparently Kalanick was convinced the rape was staged as part of a plan to discredit Uber by its main Indian rival Ola.

Amid all this turmoil Uber’s determination to get to the front of the line of companies developing self-driving car technology led to another legal scrap as it was accused by Google parent Alphabet of stealing self-driving car technology, leading to a damaging case that saw the departure from Uber of a leading autonomous driving engineer who had once worked for Google.

The consistent thread throughout all these scandals is a disregard for rules and regulations. Of course, Uber’s entire success has been predicated on flouting existing rules and regulations – faced with largely protectionist taxi regulations, Kalanick gleefully bent and broke the rules in city after city, upending the industry as he went.

Industry dominance

But one thing that has so far eluded Uber is profit – indeed, its losses have been staggering. As transport expert Hubert Horan put it in a series of critical articles, “Uber’s growth to date is entirely explained by its willingness to engage in predatory competition funded by Silicon Valley billionaires pursuing industry dominance”.

The assumption underpinning Uber’s $70 billion (€62.4bn) valuation – and that will be trotted out repeatedly before a potential IPO next year – is that Uber is on track for global domination as it becomes a universal transport logistics platform, the digital infrastructure matching demand with supply, not just in taxi rides but deliveries of all sorts. How realistic that assumption may be remains sorely untested.

Announcing the Holder investigation, Kalanick made a very lofty pronouncement about his company’s values.

“I believe in creating a workplace where a deep sense of justice underpins everything we do. Every Uber employee should be proud of the culture we have and what we will build together over time…It is my number one priority that we come through this a better organisation, where we live our values and fight for and support those who experience injustice,” he wrote in a statement, which looks more than a little problematic in light of the fact he did nothing about Alexander obtaining a woman’s private medical records.

Dysfunction

All this might signify nothing more than the dysfunction of one specific company. And even then, plenty of entrepreneurs and chief executives, after all, are deeply unpleasant people and yet manage to succeed. Some dysfunctional companies manage to do just fine.

However, the very best entrepreneurs must be skilled at building not just a product or service, but also an internal culture in aid of that product or service.

Kalanick might very well argue the culture he has created has been integral to Uber’s rise so far. But it might also prove to be integral to his own fall, and perhaps even that of Uber itself.

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