# HOW UBER COULD END UP AS SILICON VALLEY'S MOST SPECTACULAR CRASH



## BurgerTiime (Jun 22, 2015)

http://www.newsweek.com/uber-turn-silicon-valley-spectacular-crash-563716 (full)









Just a year ago, Uber reigned as the tech industry's awe-inspiring, all-powerful Wizard of Oz. But lately, the curtain is being pulled back to reveal a guy who's more like an angry drunk frantically yanking levers while taking roundhouse swings at the Tin Man and propositioning Dorothy.

Uber is in a whole lot of bad right now, and there's growing concern that it's about to melt down like a haywire nuclear reactor, which would leave a crater in the heart of Silicon Valley. Uber gave us on-demand transportation. Countless people all over the world love this new kind of service. The category is only going to get bigger. But it's possible it will do that without Uber.

*Rotten Culture, Bad Press*
At the heart of Uber's trouble is its culture, which seems to have been born from a one-night stand between John Belushi's crude Bluto in _Animal House_ and Ayn Rand's hypercompetitive Hank Rearden. That culture got put on public display in February, when former engineering employee Susan Fowler published a blog calling out Uber's rotten treatment of women and its general dysfunction. The place is so cutthroat, she wrote, "it seemed like every manager was fighting their peers or attempting to undermine their direct supervisor so that they could have their direct supervisor's job."

If anyone thought Fowler was a lone whiner, a few days later tech industry legend Mitch Kapor and his wife, Freada Kapor, who is an expert in workplace mores, published an open letter to Uber's board. The Kapors were early investors in the company, and they were unhappy about Uber's tepid response to Fowler's post and fed up with Uber's "destructive culture," to use their term. "We are speaking up now because we are disappointed and frustrated; we feel we have hit a dead end in trying to influence the company quietly from the inside," they wrote.

A week later, while riding in an Uber, CEO Travis Kalanick was captured on video berating the driver, who dared to complain about cuts to his income because Uber keeps reducing fares. "I'm bankrupt because of you," the driver told Kalanick, who then erupted. After Bloomberg obtained and published the video, Kalanick found himself in the all-too-familiar position of publicly apologizing. He posted on Uber's site, "I must fundamentally change as a leader and grow up." Duh.

Negative publicity keeps battering Uber. The company ran afoul of the protesters who flocked to airports after Donald Trump's travel ban, then had to fend off a #DeleteUber movement. (Some estimates say 200,000 people deleted the app in the days after the hashtag went viral.) About six months earlier, Uber took a $3.5 billion investment from Saudi Arabia's Public Investment Fund, a move that made Uber look as if it was buddies with a government that won't let women drive and puts gay men in jail.

One Uber investor said to _Fortune_about the deal, "It goes to the heart of who Travis is. He just doesn't give a shit about optics. Ever."

Now Uber is being painted as a technology thief by Google's parent, Alphabet. Last year, Uber bought a company called Otto for a reported $680 million. Otto develops autonomous driving technology. A bunch of people who work there came from Alphabet's autonomous car subsidiary, now called Waymo. Alphabet alleges that some of those people stole technical data from Waymo, and Alphabet is suing to stop Uber from using it. Uber has often stated that its future rests on having a fleet of self-driving cars-so, of course, it won't have to share revenue with those pesky human drivers. If Alphabet wins its case, Uber would pretty much have to start building the technology all over again or pay a ton of money to buy someone else's.

*Dissatisfied Drivers, Bleak Financials*
While Uber is counting on a hazy future of self-driving cars, in the meantime it has to keep its 160,000 drivers happy, and they are not, as Kalanick's video encountered showed. Drivers want the Uber app to allow tips; Uber won't do it. Uber has fought court cases brought by U.S. drivers asking for employee benefits. It settled a suit for $20 million for posting ads that were misleading about how much its drivers can earn. Rival Lyft has been running ads lampooning Uber's treatment of drivers, hoping to lure away Uber drivers-and convince conscientious riders they should prefer a company that treats its drivers better.

And then there is Uber's financial picture. The company is private, but some of its numbers have been leaked. Bloomberg reported that Uber lost $800 million in the third quarter of 2016. Some speculate Uber may have lost $3 billion last year. Uber is a costly business to run. To serve more customers, it needs to bring in and pay more drivers, so the company can't take advantage of economies of scale. It has little pricing power because it still faces competition from Lyft and taxis and other newcomers including Maven, which is a unit of General Motors. In order to have the cash to fund operations and expansion, Uber has brought in round after round of private investment, pumping up the valuation of the company to nearly $70 billion. That would make Uber worth more than GM. Raise your hand if you think that makes sense.

The sky-high valuation may be haunting Uber. Kalanick has famously refused to take Uber public, even though the company, at eight years old, is in the sweet spot of when many tech companies do an initial public offering. He makes his stance sound like a maverick's declaration of independence from public markets, but whispers now are that Uber's finances might not justify an IPO at a valuation high enough to make current investors happy. If that's true, Uber is in a hole. It won't be able to raise money from anyone who has passed sixth-grade math.

If Uber stalls, it isn't going to be saved by a loyal consumer fan base. There is no stickiness to Uber. It has no frequent-rider program. It has no social component. It prevents users from forming bonds with drivers. No one gets a heightened sense of self by identifying as an Uber rider versus some competitor. Someone else comes along with a better service or lower price, we'll use it.

Uber has done amazing work in its short life. It created, defined and has so far dominated a new market of on-demand transportation, changing the way we do things today and profoundly changing the way we think about the future of urban transportation. It is a historically important company. No one will ever take that away from Kalanick and his crew. But Uber has proved to be a flawed company. To find a business tragedy that's an appropriate warning for Uber, go back to Drexel Burnham Lambert in the 1980s, when Kalanick was in grade school. (He is, believe it or not, 40 years old.) Drexel, led by investing legend Mike Milken, defined and dominated junk bonds as a category of finance. This changed Wall Street and business forever. Drexel was a superstar. But the company had a flawed culture of insane pressure to perform, so employees took sketchy risks that ultimately led to criminal charges. Within a couple of years, the company fell from the pinnacle of Wall Street power to filing for bankruptcy. Milken went to prison for securities fraud.

The Kapors are pushing Kalanick to reinvent Uber's culture so it can become an enduring company. But as Uber's bad days pile up, it often looks as if Kalanick has built the Drexel of the


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## Ca$h4 (Aug 12, 2015)

This paragraph was left out of the above quote.

*Drexel of the 2010s?*
It's hard to imagine the devastation that would come with an Uber collapse. Its dozens of investors range from venture capital companies to individuals like Kapor and companies such as Microsoft and Citigroup. The company employs 11,000 people (excluding drivers), mostly around Silicon Valley, and is in the process of spending $250 million on new  offices. The blow to Silicon Valley's ego might be up there with the pain the Democratic Party has been feeling lately.


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## Jagent (Jan 29, 2017)

No reason for any of this to be happening. Raise minimum fares, charge minimum $1 per mile, add tips - drivers are happy. Stop wasting money on flying cars and SDCs, let automakers make autos, investors are happy. Fire all the weirdos, women are happy. Go public, Travis is happy.


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## BurgerTiime (Jun 22, 2015)

Jagent said:


> No reason for any of this to be happening. Raise minimum fares, charge minimum $1 per mile, add tips - drivers are happy. Stop wasting money on flying cars and SDCs, let automakers make autos, investors are happy. Fire all the weirdos, women are happy. Go public, Travis is happy.


Travis is an asshole. He needs a brain transplant.


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## Jagent (Jan 29, 2017)

BurgerTiime said:


> Travis is an asshole. He needs a brain transplant.


Yeah, he really is. His reasoning for lowering fares is because of Lyft and the fear of losing pax. Guess what? Pax need drivers. You raise fares and no one will drive for Lyft. Pax would be forced to use Uber. I know one thing, first company that raises minimum fares and mileage rate is the one I'm driving for. Current rates suck so bad, it's not worth the effort.


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## ABC123DEF (Jun 9, 2015)

Travis says if it's easy, he's not pushing hard enough. That's how he rolls.


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## uberdriverfornow (Jan 10, 2016)

All they gotta do is raise the rates to "market equilibrium" rates which will be lower than taxi rates and they will be fine. Then hire some drivers that have great ideas about how to improve the app and make the app more efficient and they can grow further. We know any rate hike Uber makes will cause Lyft to raise rates too.


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## sicky (Dec 18, 2015)

great article

So happy the media is finally coming down on Uber. For the longest time, the media just reported whatever BS Uber fed them. I can't even count how many articles I read about how happy Uber drivers are that they slashed rates because they will be making more money. As a driver, I hope they go bankrupt and TK goes to jail.


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## ChortlingCrison (Mar 30, 2016)

sicky said:


> great article
> 
> So happy the media is finally coming down on Uber. For the longest time, the media just reported whatever BS Uber fed them. I can't even count how many articles I read about how happy Uber drivers are that they slashed rates because they will be making more money. As a driver, I hope they go bankrupt and TK goes to jail.


It's getting very sicky for uber.


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## UberHammer (Dec 5, 2014)

This just shows how important a CEO is to a company. If Kalanick remains as the CEO, we are witnessing Uber sink like the Titanic.

Uber can still be set right, but not by Kalanick.


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## jonhjax (Jun 24, 2016)

Would you drive for a company that offered $1.40 per mile, $.25 per minute waiting fee and took 25% for its fee? Also you would be required to have appropriate insurance, vehicle inspections and pass an FBI fingerprint background check? Rates would be higher in major metropolitan areas, i.e. New York, LA, etc. Think this would work?


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## SEAL Team 5 (Dec 19, 2015)

jonhjax said:


> Would you drive for a company that offered $1.40 per mile, $.25 per minute waiting fee and took 25% for its fee? Think this would work?


Until another app company came in with $1.00/mile & $.15/min.


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## UsedToBeAPartner (Sep 19, 2016)

But who is going to drive for the new company when Uber is paying more. Uber can't seem to understand that formula.


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## heynow321 (Sep 3, 2015)

The most important part there is that nobody is loyal to boober. It's "product" is entirely fungible with lyft or any other competitor. That means price is the most important concern. Nobody has found a cheaper or more efficient way to operate a taxi. Once investor subsidies run out it's either game over or everyone must raise prices.


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## Mars Troll Number 4 (Oct 30, 2015)

If uber and lyft both went under when their VC funding ran out,

No one is going to think that the business is a great idea.


Uber will go down in history, as either the biggest change in publc transportation in a century... or the biggest flop ever.

Only time will tell


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## FL_Dex (Nov 13, 2016)

BurgerTiime said:


> But Uber has proved to be a flawed company.


That's my conclusion as well and agree that they're not going to make it. Uber is losing because, instead of fixing the cab business and staying profitable, they're trying to replace public transportation with on demand service. Leave the bottom feeder pax to Lyft. No one is going to drive for them if Uber raises rates. Besides, Lyft is also subsidizing every ride, they also desperately need to raise rates.

The comparisons to Amazon and SpaceX are nuts. Both of them are high margin industries, TNC is not. Uber is struggling to become the King of Cr*p Mountain. It's crazy. Kalanick has lost it.


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## Tim Little (Mar 1, 2017)

In the meantime, we should find ways of increasing our earnings. Tips have been really helpful to me recently...


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## Jagent (Jan 29, 2017)

The problem is, Travis thinks he's in the same league with Bezos, Musk and Gates. He's not.


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## Tr4vis Ka1anick (Oct 2, 2016)

I need an @sshole transplant before the brain transplant. All that constipation has backed up into my head and causing me to make sh1tty decisions.


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## ErkanAk (Jul 1, 2016)

jonhjax said:


> Would you drive for a company that offered $1.40 per mile, $.25 per minute waiting fee and took 25% for its fee? Also you would be required to have appropriate insurance, vehicle inspections and pass an FBI fingerprint background check? Rates would be higher in major metropolitan areas, i.e. New York, LA, etc. Think this would work?


My question is: would you like to drive for yourself without paying any %?


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## Polomarko (Dec 20, 2016)

I heard the news that Arab investors asking Travis: "Where is the money."
Do you think they will symply give up and say O.k. Travis, never mined do you need more.
This guy is in deep sh....!


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## phillipzx3 (May 26, 2015)

Jagent said:


> No reason for any of this to be happening. Raise minimum fares, charge minimum $1 per mile, add tips - drivers are happy. Stop wasting money on flying cars and SDCs, let automakers make autos, investors are happy. Fire all the weirdos, women are happy. Go public, Travis is happy.


Uber can't go public. If they try, any potential investor will know 100% certain of their ponzi scheme.



uberdriverfornow said:


> All they gotta do is raise the rates to "market equilibrium" rates which will be lower than taxi rates and they will be fine. Then hire some drivers that have great ideas about how to improve the app and make the app more efficient and they can grow further. We know any rate hike Uber makes will cause Lyft to raise rates too.


And will do nothing but entice even more people to give driving a go, which drops the number of trips you'll get, which reduces your income.....

What you NEED to do is to follow the advice the cab industry tried to explain to Uber "partners," and demand a cap be placed on the number of drivers allowed in your city. But no, all they said was we were afraid of competition. How well has that worked out? All I see is non-stop *****ing about rates being too low, and no tip feature in the app.

Cry me a river. ;-)


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## Jinxstone (Feb 19, 2016)

phillipzx3 said:


> Uber can't go public. If they try, any potential investor will know 100% certain of their ponzi scheme.
> 
> And will do nothing but entice even more people to give driving a go, which drops the number of trips you'll get, which reduces your income.....
> 
> ...


I'd be cautious about demanding caps on the number of drivers in a market
It has great potential to backfire on drivers. If Uber was interested in retaining more highly rated or profitable drivers they could already be offering them some incentives but Uber doesn't do that. It's more likely that if Uber is ever forced to cap the amount of drivers in a market they'll still concentrate on recruiting new drivers because they'll be easier to exploit rather than experienced drivers who will ask for more concessions that subtract from Uber's profit margin. Uber doesn't care if the quality of service suffers because they know cheap rides ensures they'll still have riders.


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## dirtylee (Sep 2, 2015)

Uber will be fine. Why?

Ants keep driving.


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## LA Cabbie (Nov 4, 2014)

dirtylee said:


> Uber will be fine. Why?
> 
> Ants keep driving.


Amen


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