Uber: heading for a crash - TechCentral

Uber: heading for a crash

It’s been a tough few months for Uber. Already this year, it has been hit by a massive boycott followed swiftly by serious allegations of institutional sexism and sexual harassment. Now the most serious scandal in the ride-hailing company’s tumultuous history has broken: it appears that Uber has used its technology to evade and thwart law enforcement and other officials in contentious markets.

The New York Times broke the story on Friday, based on information received from four current and former Uber employees. The technology, called Greyball, was originally created to prevent disruption to Uber’s services by people using it in bad faith, such as competitors seeking to harass drivers, or thieves hoping to rob them. But at some point, Uber began to use the system to deceive law enforcement officials.

Uber has a bad habit of entering new cities without taking the time to comply with local laws and regulations. Authorities in those cities would normally respond by fining drivers and Uber for breaking these laws. But Greyball has made it difficult, if not impossible, for law enforcers to catch drivers in the act.

Greyball gives Uber’s operational teams in cities the ability to detect, track and avoid authorities. Once the phone of a would-be rider is flagged (or “greyballed”) they will be shown “phantom” cars whenever they open the app, and will be unable to find a driver willing to pick them up. This makes effective enforcement of local laws almost impossible. Uber cars are unmarked — catching them by random stops or normal surveillance is just not practical.

The root of these issues is obvious: the company’s leaders are drunk on their own success and have lost touch with reality

This technology has proved particularly useful in markets where regulators and vested interests have tried to prevent Uber from gaining a foothold. By effectively locking authorities out of their service, Uber has been able to more easily gain de facto acceptance in heavily regulated cities like Paris and Boston.

This information, assuming it is true, could not have emerged at a worse time. Uber is already reeling from damning accusations by several female employees — both former and current. They depict the company as toxic, performance-obsessed and deeply misogynistic. At least three women are already suing the company for sexual harassment or verbal abuse.

On top of this, the company faced a large scale revolt by its customers when CEO Travis Kalanick agreed to join US President Donald Trump’s economic advisory council. Sources within the company suggest that the ensuing grassroots social media campaign resulted in over 200 000 people deleting the app in less than a week. Kalanick hastily resigned from the council in response.

All of this must be deeply troubling to Uber’s investors, who have ploughed over US$13bn into the company. Because the company is still privately held, valuations are somewhat opaque, but the company is generally accepted to be worth around $70bn. Should public opinion turn against Uber, it will struggle to live up to that lofty valuation.

Uber is a victim of its own spectacular success. Tens of millions of people around the globe use its service daily, and most praise it effusively. In most cities, it is cheaper, faster and better than incumbent taxi services. This has made the company a target for everyone from competitors to regulators to left-wing activists, and has drawn increasing scrutiny from the media.

From that perspective, Greyball is a vital tool for the company. Without it a few dozen determined vandals, each armed with several mobile phones, could easily disrupt an entire city’s Uber service. Around the world, including in South Africa, Uber drivers are regularly harassed, attacked and even killed.

But in its quest to disrupt an industry, the company has nurtured a culture that rewards performance at all costs. The unintended consequences of this culture are now painfully obvious. The radically libertarian mindset of Uber’s founders has allowed the company to flourish, but may also have sown the seeds of its downfall.

These scandals are a gift to Uber’s critics and enemies. Anti-capitalist commentators are particularly smug, seeing this as more evidence of the company’s predatory and exploitative business practices.

Even if public opinion does not turn against it, the company’s current culture will steer it off a cliff

I’m deeply suspicious of Uber’s more hysterical detractors. Casting it as the cartoon villain serves the purposes of too many vested interests for it to be credible. The armchair Marxists expect us to believe that all the incumbents in the industry are ideal employers, and that Uber is systematically crushing steady, well-paid jobs in order to set up a global monopoly.

The reality is far more nuanced and complex. Too many taxi industries around the world have existed in cosy symbiosis with regulators. Supply has been intentionally limited to ensure prices remain high. Exhibit A is the licensing system for yellow cabs in New York City. Until recently these were selling for as much as $1m.

To imagine that any ordinary taxi driver could afford to enter such a market is laughable. In large cities like New York, taxi firms are typically tightly controlled by a small number of operators. These owners collude on price, if it is not already set by their tame regulators. This means that taxi trips cost significantly more than they should. Try catching a black cab in London to see this in action.

Uber CEO Travis Kalanick speaks at TechCrunch Disrupt in San Francisco, California (Photo by Steve Jennings/Getty Images for TechCrunch)

I don’t accept that Uber is inherently evil or unethical, but these scandals are a sign that radical changes are required within the company. Even if public opinion does not turn against it, the company’s current culture will steer it off a cliff.

For example, if the European Union were to turn against Uber the way it has against Google and Microsoft, the consequences would be ruinous. Europe is one of Uber’s most important markets, and nothing annoys Eurocrats like a company that behaves as though it is above the law.

The root of these issues is obvious: the company’s leaders are drunk on their own success and have lost touch with reality. This is the only explanation for their self-defeating behaviour. How else could they expect to get away with systematically protecting sexual harassers? Or cosying up to Donald “Cheeto Benito” Trump?

The ability to roll out a programme like Greyball reveals a spectacular lack of self-reflection. Any company that intentionally disrupts the enforcement of a law — even where the law is petty or unclear — is putting itself in the same category as Enron. It takes a special kind of hubris to rationalise such reckless tactics.

So now, Uber is down, and its detractors are lining up to kick it in the face. The company’s future depends on its leaders’ actions over the next few months. Either it reforms and rises to new heights, or it collapses under the weight of its own success. It’s time for Kalanick and his team to grow up and lead.

  • Alistair Fairweather is the founder of PlainSpeak, a consultancy focused on helping businesses and people to get the most out of technology

11 Comments

  1. Logic and Reason on

    70bil? Not a chance, it is a clearly inflated valuation. A much more sensible number would be in the 2/3rds ballpark, perhaps 45billion. Anything higher looks unfounded, even more so considering the recent news involving the company.

  2. I can’t agree with much in this analysis. To conclude that a company as big & as important in the tech space is at risk of implosion over its sexist culture, falling foul of regulators (by the author’s own admission a regular occurrence), and the CEO’s willingness to serve as a Trump administration economic advisor is, frankly, poor and misguided journalistic opinion. Uber is far from squeaky clean, their head office jock culture is renowned as much as their deliberate flouting of regulatory limitations – all factors that will be toned down as they time warp transition from hot startup to serious global player with a big stake in autonomous transport. But to suggest any of this combination could lead to the company’s demise is frankly nonsense and betrays a personal agenda of distaste rather than any serious business analysis. Alistair Fairweather is a lightweight in this category.

  3. Clive Maasch on

    Another journo sensationalizing a headline to get effect. Uber is a proven business model. It will be saved before it crash’s.

  4. Bob Barbanes on

    Uber comes into a market, especially one that already has rules for “vehicles for hire.” Then they claim that they’re just a “ride-sharing” platform and their cars/drivers are certainly *not* driving people around for money, which would normally constitute a commercial operation.

    Dumb lawmakers, easily fascinated and distracted by new technology (like the smart phone) allow Uber to operate outside of existing regulations. Obviously this does not sit well with legacy cab companies who’ve done nothing wrong but follow the damn rules, pay the licensing/permitting fees and get expensive commercial insurance.

    The media, always rooting for companies that find ingenious ways of “sticking it to the man” (like this “Alistair Fairweather”) eats it up like it’s free pizza.

    The *ONLY* reason Uber is cheaper than taxis is because Uber is subsidizing every trip so their drivers can make a pittance and pretend they have a real job. Kalanick says the future of Uber rests on getting rid of the driver, using self-driving cars (or SDC’s), but the reality is that they are a long, LONG way off. The company will surely implode way before SDC’s are in widespread use.

  5. Bob Barbanes on

    Actually…it’s not a “proven business model.” It’s losing money every day and there is no firm prediction as to when it might make money. It has to subsidize every trip so the driver can make even a little money. If Uber actually charged a reasonable rate the trips would be no cheaper than an existing taxi, thus eliminating the “Uber is so much cheaper!” attraction. Okay, so the app makes hailing a taxi super-easy. But taxi companies will catch up with that. I’ve had a few people ride in my cab who say they no longer use Uber. The reason? Because, they say, you never know who’s driving you around. It’s usually just any old Joe Schmoe in his private car. You know what? People are leery of that. At least with a taxi you know that the driver went through a municipal permitting process and his car was inspected. Small things, maybe, but enough to make a difference for some people.

    So Uber’s success is not guaranteed.

  6. Google lawsuit over stolen tech … no loyalty from drivers … $3 billion loss … over 100 other lawsuits … talent flight … where does it stop? Yes, they may recover … but it’s a steep hill to climb ….

  7. Arthur Green on

    Many rapes,assaults,improper insurance,drivers told to lie to their insurance companies,breaking into customers residences,and the list goes on…I guess it will take,God forbid, multiple MURDER rapes,because the many verified rapes that have occurred haven’t been enough to get anyone’s attention,of importance..I don’t get it………..I guess rape only matters if it’s the Mayors,or Governors daughter….it’s wrong,and it’s still happening today…

  8. As is the fashion in much propaganda, this analysis relies heavily on broad supposition based on thin shards of fact. This does no justice to the writer’s prose. A delicious sense of expectation collapses into a tepid anticlimax.