uber cover pic

Uber’s in the news again. And not unexpectedly, not for a good cause.

A quick run down of what happened earlier this week…

Michael Wolff, an insufferable media journalist, invited Ben Smith (editor-in-chief of BuzzFeed) to a dinner with some of Uber’s management team and venture capitalists. Although the dinner was off-the-record (media-speak for “you can’t write about this or cite it in anyway, so we can have an honest conversation without worrying about PR”), Wolff had failed to notify Smith of the fact that the dinner was off-the-record.

So over the course of the dinner, Smith chatted up Uber’s senior VP of business Emil Michael (who came to Uber from Klout, and who Wolff later hinted was drunk during the conversation) regarding the bad press Uber have been getting since its inception (Uber’s aggressive tactics are considered to be asshole-ish in the media and start-up circles). Responding to Smith’s question, Michael was quoted saying that Uber was planning to spend around $1 million to hire opposition researchers (researchers who dig dirt on instructed targets) and journalists to smear those in the media who dare write about Uber negatively. The best part, Michael was quoted saying to Smith, was “nobody would know it was us.”

Smith then went on to publish those claims.

The next day, when Michael realized how badly he had screwed up, he apologized for his comments, saying “they were wrong no matter the circumstance and I regret them.”

But by then, the damage had already been done.

Insiders started coming out, revealing the fact that some of Uber’s management had threatened them with their ability to reveal their travel logs with the service (internally, this is called “God’s View“).

This really got people’s attention – including senator Al Fraken’s, who demanded Uber reveal their privacy policies.

Uber CEO Travis Kalanick posted a 13-tweet apology (word on the street is that these tweets were written by the newly-hired David Plouffe, Uber’s senior VP of policy and strategy, who was a key member on Obama’s election campaign).

But here’s where it gets wild.

People started calling for Kalanick and Michael’s head to roll.

They wanted Uber’s Board of Directors to fire Kalanick from the company he founded, and Michael for bringing bad press to Uber.

First, technology evangelist Robert Scoble posted this on his Facebook page:

Robert Scoble asked for Travis Kalanick's head to roll for the scandal.
Robert Scoble wants Kalanick’s head to roll for the scandal!

Then Business Insider reporters went to several parties, and here’s what some people from the New York tech scene had to say:

“Fire the guy! And don’t just fire him, have a ceremony. Make it public. They should invite everyone they know and show this kind of thing is not okay” a four-time entrepreneur said about Emil Michael as he munched down a red and green sprinkled cupcake.

“Travis is a kid, they need an adult in charge,” said another.

“The company seems arrogant and sloppy. I don’t think they are, but they’re making it seem that way and eventually it’s going to hurt them. I don’t think they’re going to be able to fix it unless someone goes. I’d get rid of Emil,” said a fellow founder.

But here’s the thing: firing Kalanick is myopic and insane idea. Those who suggested it obviously haven’t thought about it much. They’re just following where the lynch mob is headed to. 

Did Kalanick and Michael screw up? Yes!

Should they apologize? Of course!

However, they shouldn’t be fired. Because Kalanick is the perfect CEO for Uber. Without Kalanick, Uber can’t be the disruptive force that it has been, it is, and it will be. 

Here are a couple reasons why it’s just downright stupid to fire Kalanick at this point in the game (while Michael’s comments may reflect the culture within adversarial Uber, let’s not forget that it’s that culture that allowed them to be so disruptive… also, realize how in the Business Insider report, people were pissed off at Kalanick’s action, but none of them have deleted the Uber app. That just goes to show how indispensable Kalanick have made Uber for everyone).

CASH

Most start-ups around aren’t profitable. They’re all great ideas, may scale well and have lots of users, but most just aren’t profitable.

Either that, or their profits are so tiny that they’re negligible (Snapchat, Twitter, etc.).

But Uber’s different. Completely different.

Based on its previous rounds, Uber is now valued at $18.2 billion. That’s an insane number… and one that may be hard to justify!

But for Uber, the $18.2 billion may be an undervaluation.

Internal numbers provided by Business Insider show that Uber’s gross revenue is expected to hit a run rate of about $10 billion by the end of the year.

So if Uber keeps 20% of its gross revenue and shares the rest among its drivers, they would still be left with $2 billion in net revenue. Even more stunningly, they’re doubling it every SIX MONTHS, with a projected growth rate of 300% this year, and another 300% next year. 

Seems wild?

Here’s the evidence to back it up: from New Years Eve 2012 to New Years Eve 2013, the growth rate was… 369%! 

There’s no reason to believe why Uber can’t grow even more in a fully penetrated market.

And that’s not all!

Better still, most of their $10 billion revenue today comes from only 10 cities (Uber generated $212 million in annual revenue just in San Francisco alone, with the average user spending $50-60 per month).

But they’re operating in more than 150 cities (with plans to expand to 230 cities in total).

So will happen when the 140 (or 220, when they’ve fully expanded) other cities have matured in their operations?

The numbers will be unbelievable.

Can you imagine Uber's revenue when all these markets have fully matured operations? | Source: Business Insider
Can you imagine Uber’s revenue when the operations in these markets have fully matured? | Source: Business Insider

Anyway, this is the main point: Uber couldn’t have been, and will not be as successful without being under Travis Kalanick’s guidance. 

Because of what Kalanick has done so far, investors expect Uber to IPO at a valuation of $50 billion to $100 billion in a few years. 

In context, that’s more valuable than existing companies such as Microsoft ($63 billion), Google ($56.6 billion), Coca-Cola ($56.1 billion), IBM ($47.9 billion) and McDonald’s ($39.9 billion).

The difference between Uber and these companies?

Uber have only existed for a much shorter period of time.

Currently, Uber is in talks to raise another ~$2 billion round with a valuation of around $35 billion (from what I’ve heard).

The future looks great for Uber.

And this man made it possible.

WHY TRAVIS KALANICK CAN’T BE FIRED…

Now that we’re done with the number games, let’s talk about why Uber CEO Travis Kalanick is the perfect guy to lead Uber now. And why no one else can, or should be doing it.

1. He’s got experience. Lots of them.

We’ve all heard of the typical start-up story, whereby a genius comes up with a revolutionary idea but ends up getting pushed out of his own company because he couldn’t manage his staff (famous examples include Apple, Tesla and Twitter). And that happens because of a relatively simple truth: most idea people aren’t managing people.

Sure, they know how to build awesome products. But in order to do that, they’ll need a competent staff to help them.

The problem is, most of these idea guys (usually credited as the “founders”) have got absolutely no idea how to manage the team. Chaos would be prevalent throughout the company’s culture, and no one knows who is leading what, who is working on what and who should be taking responsibility for what. The Board of Directors would then step in and fire the “child” CEO and bring an “adult” CEO to provide oversight.

But Uber won’t ever suffer from this problem, and that’s because Kalanick is really experienced when it comes to running these things.

Before Uber, Kalanick had another startup with a couple buddies called Scour, Inc. It was a multimedia search engine (which was way ahead of its time) and had a service called Scour Exchange, which allows for peer-to-peer exchanges. Upon knowing such a startup existed, the huge media conglomerates (RIAA, NMPA, MPAA) began filing lawsuits against Scour, and before long, they went bankrupt.

When your very first startup goes bankrupt, odds are that you learn lessons and values that’ll stick with you for the rest of your life. Lessons and values that can’t be taught in a Stanford management class.

Undeterred, Kalanick took the team from Scour to form another P2P file-sharing company, called Red Swoosh. Long story short, although it did not face any imminent threats from huge media companies to the point where they have to declare bankruptcy just to save themselves, they weren’t exactly profitable either. And neither were they making a huge impact.

They were just there. Surviving.

At that point, to keep the company going, Kalanick slept (he was around 30 years old at the time!) in his parent’s basement, until Akamai Technologies bought the company in 2007 for $19 million.

Having to sleep in your parent’s basement at 30 will, once again, teach you lessons that can’t be taught in a Stanford management class.

In those two startups, he learned everything a startup founder needed to build resolve: risk, failure, neediness, aggressiveness, management, and much, much more.

When he came to Uber, he already had all those skills. There’s no internal turmoil within Uber (quite unusual for a startup of this size and being this disruptive), because everything is clear – goals, strategies, and operations.

Kalanick made sure things are the way they are.

2. Kalanick has got a clear goal. He knows what he’s looking for, and where the company should be headed for.

Recently, Business Insider obtained a slide from a slide deck used within Uber during performance evaluations…

There's no confusion at Uber: they know exactly what they value. | Source: Business Insider
There’s no confusion at Uber: they know exactly what they are looking for and value. | Source: Business Insider

Note the word “fierceness”, because here’s what Uber’s spokesperson has got to say about it:

Be fierce. Do whatever it takes to make Uber a success, even when it’s hard and takes some risk to get there.

(Emphasis mine!)

This slide alone shows what that Uber knows what its looking for: people who will make Uber a success, at all costs. People who will emulate the “hustling” spirit of Kalanick – which is exactly what it needs to do if it has any hopes of expanding to new markets. 

It’s not very hard to explain why Uber is considered to be one of the most, if not the most, disruptive startup in recent times: they’re changing the way we travel.

In every city that Uber tries to do business, they’re always going to face opposition from taxi cartels who aren’t used to competition. In fact, most of these taxi cartels are either directly or indirectly backed by the country’s government (or a subsidiary company of the government).

These government/taxi cartels have a vested interest in making sure that their profits don’t diminish because of new and novel startups like Uber. And they’ll go a long way into make sure of that: unfavorable court rulings, guerrilla attacks (with the government often closing one eye to these incidents), and pointless laws (such as forcing customers to wait X amount of minutes before boarding an Uber cab).

Uber, therefore, needs people who are tough, aggressive and yet enthusiastic (“super pumpedness”) about the Uber brand. It needs these people to push through bureaucratic red-tapes and punitive government policies. Without it, Uber couldn’t have been as successful as it is today, and odds are without those values instilled in the workplace culture, I doubt anyone not living in San Francisco would’ve heard of Uber.

But sometimes, that aggressiveness and cultivated enthusiasm can be directed at the wrong people… and that’s what I guess happened this week with the press. But more on that later…

Another point: Uber knows what it’s doing.

There’s no guessing.

Every employee comes to the office knowing what their big and individual goals are.

Employees I’ve talked to recently have said that the culture within the company was developed with “precision” to ensure that Uber collectively comes closer to its goals, every single day.

Now, contrast this with working at a company like Tesla, where it has been said that no one even knows whether they’re still hired the next day when they come into office or not.

The difference is day and night.

Uber’s razor focus will serve them very well as they continue to expand into cities previously untouched.

After all, Uber’s aggressiveness is what makes Uber, Uber – whether investors like that aspect or not, they surely can’t deny not knowing about it.

ABOUT THAT PR PROBLEM…

So, time to talk about what started this column article in the first place: Uber’s PR problem this week.

Good question!

I’m in no way trying to advocate for Uber’s asshole culture, but I think the answer to Yarow’s question is no.

In fact, the test for whether people actually do care about it, or if they’re just following the lynch mob, is to see if they’re still talking about it next week.

My guess is they won’t.

Everyone knows that Uber isn’t a nice company (but neither is other companies). It’s nothing new.

But journalists reporting on this piece of news are way overestimating the impact it’s going to have on users of Uber. Sure, a couple privacy buffs will delete the Uber app from their iPhone. But for the 99.95% of us, Uber is a service that just works. Hit a couple button, and a nice sedan will pull up.

It just works.

And users know that.

They love it. A couple articles by journalists (especially at a time when public trust in news organizations are at its lowest) aren’t going to deter them from continuing to use the service.

In the end, as much as I hate to say this, the current PR problem Uber is facing will most likely face the NSA disclosures paradox: widely discussed among journalists (because they’re the ones most affected.. and also because problems like this gives them lots of stuff to write/talk about) but will hardly make an impact in both the way Uber operates, and the way customers use the service (in other words, the people who are supposed to care).

As I’ve written previously, Uber is on-track to become massive. By then, most of the press (Re/Code, TechCrunch, The Verge, etc.) will be writing rave articles about how disruptive Uber is, and this PR blemish will be largely forgotten.

Do I think Uber should reform its culture?

Sure!

(If I were an investor) Do I think they should reform their culture at the expense of their revenue?

No!

To sum it up… there’s no denying that Uber’s internal culture, when viewed from the outside, is terrible. But that same culture is what makes Uber the immensely successful company it is today. If investors could have Uber without the bad PR, they’d snap it right up. However, because Uber is so successful, even with the bad PR, investors are still going to snap it up.  And Uber shouldn’t even think about firing Kalanick, unless they want a leader who’s not as inspiring, prepared or determined.