
Uber is facing the biggest crisis in its history - pencilpup223
http://www.economist.com/news/business/21719509-can-ride-hailing-giant-stay-fast-lane-uber-facing-biggest-crisis-its-short
======
twblalock
Here's the money quote:

> If Mr Gurley and the rest of the board cannot find an experienced candidate
> willing to work with Mr Kalanick, calls for him to step down may grow
> louder. But that is his decision to take. Uber is a prominent example of
> founders’ power at fast-growing tech firms. On its own, Uber’s board does
> not have the clout to change the CEO, because of his super-voting shares and
> those of his co-founder, Garrett Camp: together they control a majority of
> the voting stock.

Well, that's a pretty bad corporate governance problem. The CEO's behavior,
and the culture he created at the company, have badly damaged the company's
image and driven away senior executives and probably a lot of engineers too --
and yet the board can't get rid of him.

I would certainly think twice about investing in a company whose board is
powerless to do anything about such a terrible self-inflicted wound.

~~~
shostack
While I'm not sure I disagree with you, devil's advocate here...do you think
you'd feel the same way as a founder who could prevent yourself from ever
being fired from your own company? I can think of several situations where
retaining that kind of control would be hugely beneficial and important (in
the right hands of course, which is the whole issue here).

~~~
bdavisx
And that's why Google and Facebook (I think) both took steps for the founders
to retain control in that manner. So that they would be able to focus on
what's important to the company vs. bs next quarter results. And it's worked
out well for both of them. But of course, they don't seem to have the "ethics"
issues that Uber does.

~~~
Pica_soO
If google had a ethics issues, i certainly never found something on that on
the web :D

------
hackuser
I make a habit of talking to taxi drivers about Uber. Consistently they say
they drive taxis because there is no money in driving for Uber (which of
course that tells us less than it seems, because they are self-selected to be
people who prefer driving taxis). One told me something new: I asked, as I
often do, if they don't make money then why are there so many Uber drivers?

This man said that some Uber drivers are trapped by car loans: They are
working-class people who took out loans to buy their Uber cars. All cars lose
value the moment they are driven off the lot and these cars are driven hard
and for high mileage, so their resale value is low. He said these drivers keep
working for Uber because they have to try to pay off the loans. (I know
nothing else about that story other than what one random driver told me; I'm
hoping others can contribute some better knowledge about it.)

It struck me: Not only does Uber treat their workers like contractors and give
them no benefits or other employee protections, but they ask (often) working
class people to provide Uber's capital. Arguably, it's like General Motors
calling factory workers 'independent contractors' and asking them to bring
their own machinery. In contrast, taxi drivers lease the cab for a shift,
AFAIK; they have no long-term capital investment or debt trap. It's almost as
if Uber's main business proposition is a loophole in labor rules that allows
them to shift almost all costs onto their own workers.

That said, I hesitate to pile on, even for a company I don't like personally
(which is why I take cabs). Let's not let the hype exceed the reality.

EDIT: A few clarifying edits

~~~
nebabyte
> AFAIK; they have no long-term capital investment or debt trap

Medallions?

~~~
lokedhs
My understanding is that very few places have a medallion system. It's
apparently quite common in the US, but I can't say I've heard about it
anywhere else.

Does anyone have statistics on this?

~~~
hackuser
How do other places control supply of taxis, or do they not do that at all?

~~~
lokedhs
I don't know, and it's likely they don't do it at all.

Why would the number of taxis need to be controlled? I don't know much about
the taxi industry and perhaps there is some good reason for it that I am
simply not aware of?

~~~
hackuser
My baseless assumption always has been that it is for two reasons:

* It's one of those situations where the free market fails. Because anyone with a car can give someone a ride, it creates a race to the bottom and nobody can make money. You'll note that one criticism of Uber is that they create exactly that situation.

* Safety and fraud prevention for customers

Note that the community has an interest in quality transportation, including
for tourists.

~~~
lokedhs
But does controlling the number of taxis achieve those goals? The countries
that I have experience with all have regulations attempting to ensure those
very things that you mentioned, but none of them actively limits the number of
taxis.

------
aianus
As a part-time Uber driver in Toronto I haven't noticed any drop-off in ride
requests whatsoever. Uber will survive, at least unless someone else beats
them to market with an autonomous alternative.

I don't get any incentives or bonuses either, just ~75% of the gross receipts
from the customer.

~~~
robbyking
I think it's important to remember that Uber users aren't loyal: if a ride
isn't immediately available through Uber, they use Lyft; if Lyft isn't
available, they go to the next app.

While I agree that the service is here to stay, the individual players are
likely to shift.

~~~
Taylor_OD
Based on what? I'm pretty loyal to Uber and use it because I know what I'm
going to pay when I order the ride and because I'm not pressured to tip in the
app. I guess if another app had both those features, the same ride
availability, and cost the same I'd download and try it but currently none of
them, that I've tried, do.

~~~
frgtpsswrdlame
Yes but Uber will have to raise prices at some point. Will you be loyal then?

~~~
thecopy
What do you base that on?

~~~
frgtpsswrdlame
Here's a link from a comment a bit further down the thread:
[https://motherboard.vice.com/en_us/article/uber-true-cost-
uh...](https://motherboard.vice.com/en_us/article/uber-true-cost-uh-oh)

If you really want to go down the rabbit hole I'd recommend reading this
series on nakedcapitalism. They're at nine parts now:
[http://www.nakedcapitalism.com/?s=can+uber+ever+deliver](http://www.nakedcapitalism.com/?s=can+uber+ever+deliver)

~~~
valuearb
The naked capitalism series is written by a cab dispatch consultant, and reads
almost like a paid hatchet job. Makes huge assumptions on data not in hand,
and spins iffy conclusions with evident bias. At one point he claims Ubers
costs can never be as low as cab dispatch because Uber is spending money
expanding! That makes zero sense.

It's pretty clear Uber is in heavy investment mode, in market expansion as
well as new businesses (uber-eats, self driving cars, etc), no one can know
what their real costs per ride are unless they can break out that detail.

But it's also clear in their core business their cost to dispatch a ride
should only be pennies.

------
sandworm101
Uber is too young for the phrase "biggest crisis in its history". It has no
history. It has none of the institutional depth to warrant such comparisons.
That comes only after decades, after a company has survived multiple boom and
bust cycles spanning multiple administrations. This is an upstart company run
by upstart kids. That isn't bad per se, but we should expect unpredictability.
Talk about company history when the CEO is in his 70s, is the child of a
former board member, and the head office has become a listed building. Those
companies won't grow massively every quarter, but they do know how to weather
a storm.

~~~
losteverything
I totally agree. Seems like the Economist would know better.

To me, a crisis would be if software stopped working as intended.

------
paulpauper
I suspect management quitting has to do more with options being deep in the
money and no longer having a financial incentive to stay with the company,
more than Uber actually being in much trouble. Sounds like more alarmism. Uber
has gotten a lot of bad press over the past few months but the business itself
is doing fine.

~~~
valuearb
Quitting means forfeiting options.

------
jefe_
The consummate leader cultivates the moral law, and strictly adheres to method
and discipline; thus it is in his power to control success. -Sun Tzu

------
nilanjonB
yet another case of our boss went bonkers, wth should we do about it before we
get wrecked.

------
aceinaday
IMHO as a part-time Uber driver, Uber could fix a lot of their current
problems by putting tipping into the app. The self-driving car is not here
yet, and Uber does not do enough for its drivers. If they would just add
tipping I think that better drivers in better cars would start driving again.
Without the tips, it's just not worth it.

~~~
vaishaksuresh
No thanks! If drivers need to be compensated better, I would suggest
increasing the fare or Uber taking a smaller cut. A lot of people prefer Uber
just so they don't have to deal with tipping like in traditional cabs.

~~~
sp332
Uber isn't taking a cut. They're subsidizing fares.
[https://motherboard.vice.com/en_us/article/uber-true-cost-
uh...](https://motherboard.vice.com/en_us/article/uber-true-cost-uh-oh)

~~~
vaishaksuresh
They are subsidizing the passenger's trip, but taking a cut from the driver's
fare. There is a difference.

~~~
sp332
Taking a cut from where? I don't think Uber's costs are 60% and the drivers'
are 40%.

~~~
vaishaksuresh
The article is talking about a different thing. If the trip costs me $10, the
driver keeps ~$7 and Uber gets $3. If the driver thinks he needs $9 for this
to be viable, then Uber should either take $1 or charge the customer $12 and
pay the driver $9 is my point. I don't want the additional $2 to be covered by
tips, which is determined by an unspoken rule.

~~~
sp332
But right now Uber is actually subsidizing your ride, so you pay $10, the
driver gets $20 and Uber's "cut" is -$10. On top of that Uber does have
expenses of their own so Uber loses $15 total.

The only way this works over the long term is to force out competition so that
they can massively jack up prices, and/or replace drivers with self-driving
cars that have lower costs.

~~~
vaishaksuresh
Right, so make my cost $15 and pay the driver $25 and Uber still loses $15.
I'm okay with that if that means I and the driver don't have to stress out
about the tip before each ride. I don't want to be responsible for the driver
making living wage when I don't employ him.

If Uber does this and they realize customers are not riding as much anymore,
then it is a problem with their pricing and setting of expectation.

------
imh
>Two questions face the company. One is whether Uber will continue prospering
under Mr Kalanick’s leadership. Silicon Valley and its denizens may celebrate
his type, but ...

Well fuck you too, Economist. That seems like an unnecessary and ignorant jab.

~~~
teach
"Though the most successful founders are usually good people, they tend to
have a piratical gleam in their eye. They're not Goody Two-Shoes type good.
Morally, they care about getting the big questions right, but not about
observing proprieties. That's why I'd use the word naughty rather than evil.
They delight in breaking rules, but not rules that matter." -Paul Graham in
"What We Look for in Founders"

[http://www.paulgraham.com/founders.html](http://www.paulgraham.com/founders.html)

There's definitely a sense in which Kalanick's "boundary pushing" is the sort
of thing Silicon Valley encourages.

~~~
imh
Yeah there's a sense, but a bunch of the negative stories about Uber/Kalanick
have originated in our community too. Would Susan Fowler's story have gone
viral had it not been for the outrage within Silicon Valley? Including
"Silicon Valley _and its denizens_ " includes a giant group of people who have
been crying out _against_ this behavior.

I suppose I just don't like the insinuation that I (or my part of the Silicon
Valley community) support that behavior.

------
CamperBob2
Honestly, how many other companies, government agencies, or other
organizations would hold up under the kind of coordinated, orchestrated
drubbing that the media has dished out to Uber over the last couple of months?

~~~
67726e
I'm not at all a fan of Uber, but at this point it seems like a coordinated
smear campaign.

~~~
Apocryphon
It's not a smear campaign; it's a feeding frenzy. When public perception
shifts one way or another, the stories follow to cover it in that angle
(though you'd expect at some point there'd be some contrarian hot takes that
take an apologist stance towards Uber, maybe something like "Don't blame Uber.
Blame the tech industry/gig economy/etc."). There's something rotten at the
company, so journalists will naturally shift to cover it and dig up every
juice piece of mud they can rake.

Same thing happened to RIM a few years back. None of this is personal. It's
just a domino effect.

~~~
67726e
Hadn't even considered that. Suppose the results are the same either way.

