Ruthless, manipulative, selfish, but also highly gifted… much has been said about Uber’s founder, Travis Kalanick. In Super Pumped: The Battle for Uber, Mike Isaac takes his readers from Kalanick’s early career through his founding of Uber in 2009 to Uber’s almost unbelievable growth period, culminating with his ousting nearly a decade later. Uber is undoubtedly an archetype of a successful Silicon Valley start-up company, and it well deserves to be studied. Wait no more; this book covers Uber’s many successes and crises during the firm’s first decade of existence.
Its author, Mike Isaac, is a technology reporter for New York Times. He closely followed Uber from 2015 to 2019 and shares with us how he became highly critical of the company, primarily due to Kalanick’s ever-growing excesses. In a brief epilogue, Isaac details how Uber has since attempted to restore its image, culture, and reputation under its new CEO, Dara Khosrowshahi, who took over after Kalanick in June 2018. This relentless albeit so-far unsuccessful effort reminds us of how hard it can be to rebuild reputations. The new CEO, understated and calm, has apologized to drivers, customers, and legislators alike for the company’s aggressiveness. His profile offers a striking contrast to Kalanick’s, with the latter’s high kinetic energy. But such turnaround operations typically take a long time and tend to be excessively complicated. Furthermore, to add injury to insult, Uber’s stock price has more than halved over the last year.
Before delving into the details of Uber’s rise and fall, let us briefly review its business model, which was revolutionary and highly innovative at the time. Kalanick deserves a lot of credit for this achievement. Uber successfully disrupted the classic taxi and/or limousine service businesses in many cities worldwide and upset many established local legislative practices. Its tenets were as follows:
To offer cheap fares to customers, delivered on an ad hoc basis by independent vehicle owners acting as drivers.
To allow these drivers to make enough money, have sufficient job security, and feel satisfied.
To provide a high-tech image, drawing on technology and engineering, particularly smartphones.
To capitalize on a strong brand.
Unfortunately, much of what is covered in the book’s five sections adds up to little more than inconsequential details about Kalanick, Uber, and other notable stakeholders. Instead of indulging in this recounting of factoids, let us focus on the more critical business lessons.
The first part of the book deals with Uber’s early years and largely reflects on Kalanick’s personality: aggressive, arrogant, extravagant, and lacking respect for established rules, but also committed to utilizing cutting-edge technology and acting with speed to achieve dramatic industry transformation. Kalanick’s staggering early successes did not help the development of his social skills; for instance, he typically cast setbacks as betrayals. Kalanick was especially ruthless in letting executives go when they no longer fit his agenda. Yet Kalanick gradually managed to develop a network within core Silicon Valley circles, including with Jobs, Doerr, Kleiner-Perkins, and Gurley.
The second part covers how Uber’s success in the US was replicated abroad (London, Paris, Sydney, etc.). Rapid growth was the mantra. The startup’s ability to attract Google Venture as a new investor was celebrated as the coup it truly was! In this stage of Uber’s success story, we see both how the company started as a scrappy competitor and how it became a truly thoroughbred, no-nonsense entrepreneurial organization. Isaac also documents how Uber’s financial base became more stable.
The book’s third part describes Uber’s pinnacle in the early 2010s. Growth was more impressive than ever, but early warning signs of the not-so-good things to come started to appear. Kalanick tacitly or explicitly approved of his executives’ questionable decisions. The self-driving car was at the center of much of this process; Uber hired Levandowski away from Google’s self-driving car project. However, Google’s boss Larry Page counterattacked, leading to Uber’s eventual termination of Levandowski. Kalanick tried to smooth things over, but all attempts failed. Uber’s competitive, cut-throat culture was starting to become too much for many. Moreover, many explicit problems came to the foreground with Uber’s international expansion, above all in Asia (China, India, and Vietnam). Around this time, male drivers’ sex offences against female passengers started to taint the company’s image. Uber seemed able to cope, at least temporarily, with many of these issues. But as it turned out, Uber relied on intimidation and aggressive uses of competitive intelligence among other unconventional tools.
In the book’s penultimate part, the author discusses several more fundamental dysfunctions that were harder for Uber to address. One such issue was Kalanick’s bet on Hillary Clinton for the 2016 US presidential election. Subsequently, President Trump initiated measures that hurt Uber, both abroad (e.g., anti-US sentiment) and domestically (ironically, Trump supported “market-based” measures that helped its competitors, especially Lyft). However, the most serious set of challenges to emerge were the anti-sex discrimination cases from the end of 2015 until early 2017. Kalanick made several totally incomprehensible errors, to a large degree turning a blind eye towards Uber’s toxic culture and tolerating excess.
The book’s final part reports on the collapse of Kalanick’s regime and Uber’s disastrous decline. A report by former US attorney, Eric Holder (ironically commissioned by Kalanick), blamed the company’s toxic and sexist culture, its lack of governance, and the pervasiveness of its unethical practices. Worst of all, Holder stated Kalanick was solely responsible for many of these issues, to the extent that he suggested Kalanick might have to leave. After much back and forth, Uber’s founder did indeed leave, but only after having put up a prolonged fight in which the opposing party was one of Uber’s leading investors, Benchmark, and its CEO, Bill Gurley. Gurley had formed a syndicate of opposing investors representing almost 40% of the owning capital. With new capital brought in from Japan’s SoftBank to stabilize the situation, the syndicate held over a majority of the company’s stakes. Khosrowshahi was chosen to replace Kalanick, who was allowed to stay on as a member of Uber’s board. He also received a considerable “parachute” compensation, but he no longer had any operating influence within Uber.
Given Uber’s rise and apparent fall, what are some of the takeaways from this company´s story? This reviewer wishes to highlight three learning points:
Uber’s strategy
We have outlined Uber’s business model and the way it seems to have worked under Kalanick. Several questions remain:
Does this approach properly lead to a matching of supply with demand?
Does the pricing sufficiently reflect real-time realities? In this reviewer’s opinion, Uber seems to use too much standard pricing to reflect its real costs.
The new CEO, Dara Khosrowshahi, seems to have a core ambition for Uber, which is namely to evolve his firm into what might be seen as the Amazon of the transportation industry. In my opinion, such a revised branding of Uber may not be realistic, for the key reasons discussed below:
The company is too narrowly focused on the transportation of people.
Scalability is too limited (the car/driver is the unit; i.e., no scale here!).
The company has insufficient financial “muscle.”
Speed is essential, as pointed out by Kalanick, but too many external and internal conflicts exist that might slow Uber down and steal focus.
“Winning” also implies that one typically might create “losers,” but these tend to continue to fight. Uber disrupted the traditional taxi industry and its ties with permit-granting local politicians, but many such initial losers kept fighting back. In this reviewer’s opinion, too many of these entities might have ended up becoming opposers of Uber’s progressive strategy.
Kalanick’s management style seems to have been effective in the beginning, highly focused and targeted as it then was. However, over time, the CEO clearly became over-confident and lost much of his focus. Uber became analogous to a high-speed train that had lost its brakes. Uber lost sight of its customers, competitors, investors and employees, who each faced threats stemming from the company’s actions.
Leadership issues
Good leaders typically have the strength to forgive and let go of grudges. However, Kalanick did not appear to have that personality trait. He seemed to focus on his enemies, never forgetting them, never reclassifying them as at least “neutral.”
It is common knowledge that an organization’s most critical asset is its people, especially when they are given relatively free rein to participate and be creative and entrepreneurial. But this did not seem to be the case in Uber, where over-standardizing based on fears seemed to be the norm. Any entrepreneurial instincts that may have been present were effectively squashed; the only legitimate entrepreneur was Kalanick himself.
Financial performance issues
We saw that Uber, in the end, was not able to attract sufficient new capital to pursue rapid, profitless growth, although it is impressive how much financial support Kalanick was able to generate for a long period of time. The post-Kalanick IPO essentially turned out to be a flop, with the initial price offering of $120/share dropping to less than $60/share within one year! Thus, Uber’s ability to invest in new strategic initiatives and maintain its ultra-rapid growth simply was not there.
Strategic renewal at Uber
Strategic renewal is always a stepping-stone to maintaining rapid growth. At Uber, the so-called “driverless car” project was vital. But as we know, this space is already crowded and difficult to commercialize at present. Thus, the way ahead would be to continue to focus on drivers for the more complex routes, while switching to driverless when it comes to the simpler ones - the outcome of which remains to be seen.
However, less complicated renewal initiatives are being pursued:
E-bikes and E-scooters
Carpooling/ride sharing
Hybrid cars
All-electric fleet
In conclusion, strategic alternatives now abound for Uber, but to rebuild a strategy that people (e.g., customers, regulators, investors, and employees) trust takes time – and a lot of apologizing! Thus, the jury is still out regarding whether Uber will prevail.
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