Super Pumped: The Battle for Uber

by Mike Isaac

Allowing random citizens to drive other people around for money opened up a slew of problems, most notably that no one had any idea whether or not it was legal. At Uber, no one really cared.

Greyball was consistent with one of Uber’s fourteen company values: Principled Confrontation. Uber was protecting its drivers while confronting what they saw as a “corrupt” taxi industry that had been protected by bureaucracy and outdated regulations. Concepts like “breaking the law” weren’t applicable, they believed, when the laws were bullshit in the first place.

Then, Kalanick dropped another bomb: Beyoncé and her husband, Jay-Z, were now stockholders in Uber. What he didn’t tell them was how the celebrity couple had decided to invest; Kalanick had paid Beyoncé $6 million in Uber restricted stock units for her performance. The stock’s value would increase by 50 percent in less than a year.

At the end of the week, Uber’s finance team added it all up. The entire “X to the x” celebration cost Uber more than $25 million in cash—more than twice the amount of Uber’s Series A round of venture capital funding.

And as more money flowed into the Valley from outside investors—from hedge funds and private equity firms, sovereign wealth funds and Hollywood celebrities—the balance of power shifted from those who held the purse strings to the founders who brought the bright ideas and willingness to execute them. With money easier to come by, founders were able to exact more favorable terms for themselves, wresting control of the companies from the money men—who required diligence, profitability plans, and oversight.

The list read like Amazon’s corporate values run through a bro-speak translation engine. People in Kalanick’s world were not happy or sad, they were “super pumped” or “super unpumped.” Company brainstorming meetings were “jam sessions.”

“Super pumpedness is all about moving the team forward, working long hours—pretty much a do-whatever-it-takes attitude to move the company in the right direction,” as one Uber employee explained the term. If there was one quality Travis Kalanick looked for in a new recruit, it was that they were as super pumped as he was to work for Uber.

Later, describing the incident and his hatred of venture capitalists, Kalanick would channel the West Coast rap icons of his youth, Snoop Dogg and Dr. Dre: “VCs ain’t shit but hos and tricks,” he said.

Finally, in 2005, Kalanick caught a break. Kalanick got into a flame war on a message board with Marc Cuban, the celebrity billionaire investor and owner of the Dallas Mavericks. Kalanick evangelized peer-to-peer tech, while Cuban thought Kalanick was dead wrong. Though Cuban didn’t like the tech, he did like Kalanick’s hustle, the tenacity he saw in Kalanick during the pitch. Cuban sent Kalanick a private message, offering him money to invest $1.8 million in the company. That was a crucial lifeline which eventually led to more contracts with important partners.

LOL. What?? What is this world in which you argue with Mark Cuban online and end up with $1.8 million?

Aside from the money he made over ten years of dogfights in startup land, Kalanick had gained a great deal of practical experience and emerged with a new understanding of leadership. He now held a siege mentality, one that perceived dangerous enemies all around, and developed a quasi-Darwinian vision of what it takes to survive.

The App Store changed the model for software development entirely. All a programmer needed was an idea and facility with Apple’s mobile software code. With those two components, anyone could build and distribute their own apps and market them to millions of people instantly. Spin up a server on Amazon Web Services, blast out some code, and submit your app to Apple for review, and your work could be up and running in days.

Garrett Camp was pissed off. It was 2008—the twenty-first century—in one of the richest, most forward-thinking cities in the entire world, and he couldn’t catch a taxi in under a half hour.

This was absolutely true of SF taxis and I still do not know why. I never successfully caught a single taxi in San Francisco

(Kalanick hoped for people to call him by the nickname “T-Bone,” securing the Twitter account “@KonaTbone” for his “musings and often controversial aphorisms.” His avatar: a bloodied cut of beef.)

Kevin Harvey, a founding partner at Benchmark, took Gurley hunting. While in the woods together, Harvey got to see Gurley’s analytical mind at work.

The definition of the old boys club

In 1999, Benchmark Capital had five venture partners. Gurley became the sixth. Each was exceptionally tall. They looked remarkably like the starting lineup of a college basketball team.

There were drawbacks. Give too much autonomy to a legion of twentysomethings, and you’ll occasionally empower a battalion of douchebags.

But as one Uber employee competing with Lyft at the time said, “The law isn’t what is written. It’s what is enforced.” To Kalanick’s dismay, SF transit authorities weren’t enforcing a damn thing. For all his bluster about ignoring regulators and disrupting an industry, Kalanick hadn’t actually gone as far as Lyft and Sidecar. Up until then he hadn’t been willing to cross the line into extreme ride-sharing.

Drivers wouldn’t work for Uber unless there was enough demand from riders. And new riders wouldn’t sign up or return unless there was a critical mass of available drivers. It was a classic chicken-and-egg problem. “Uber solved that problem by straight-up buying the chicken,” Ilya Abyzov, an early Uber manager in San Francisco, told friends of the strategy.

After that experience, Kalanick never trusted investors again. So as a condition of allowing them to offer him money, Kalanick offered them miserable terms. Private companies aren’t obligated to make their internal statistics public, but investors with a significant ownership stake are generally given insight into the company’s financials. Kalanick, however, over time stripped some major investors of all “information rights,” and limited the degree of detail offered to others. Moreover, investors had to agree that Kalanick would continue to hold his supervoting shares while newcomers only received shares with weaker voting power. Every supervoting share Kalanick held counted as ten votes in the company, whereas every common share only counted as one vote.

He tracked “supply”—the name Kalanick used for the workforce of human drivers.

As they struggled with local officials, Uber teams devised a playbook for evading crackdowns. Deregulation—a pure, free market, untouched by the corrupt hands of government and Big Taxi—was the ultimate goal for Uber in every city.

After perfecting the quick background check process, Uber’s political machine went to work. In states where fingerprint-based background checks were legally required, Uber hired lobbyists to get laws rewritten that mandated drivers undergo the traditional checks.

Later, as Uber matured, the company’s staff swelled to include nearly four hundred paid lobbyists across forty-four states; the number of ride-hailing lobbyists outnumbered the paid lobbying staffs of Amazon, Microsoft, and Walmart combined.

He imagined himself as the hero in his own narrative—to the point that his Twitter avatar was the cover of Ayn Rand’s The Fountainhead, a book espoused by libertarians for its celebration of self-reliance and disdain of government.

In effect, GMs had free rein. Kalanick wanted to keep Uber from feeling too “big company,” like a Google or an Apple. That meant protecting his employees from corporate bureaucracy. He wanted them to ignore all rules except Kalanick’s beloved fourteen principles.

As Uber’s insurance costs grew exponentially, the “Safe Rides Fee” was devised to add $1 of pure margin to each trip, according to employees who worked on the addition. That meant for each trip taken in the United States, Uber took in an extra dollar in cash. The drivers, of course, got no share of the extra buck. That number added up to hundreds of millions of dollars over years of operation, a sizeable new line of income. After the money was collected it was never earmarked specifically for improving safety.

“Incentives” was the name for the free money Uber doled out to users and drivers. Uber lost money on incentives, but it didn’t matter; for one, if Uber kickstarted the demand flywheel hard enough, they’d train people to keep using Uber even after the company stopped providing freebies. Moreover, Kalanick knew he could always, always find more money. By 2015, Uber was globally spending more than $2 billion annually incentivizing drivers and riders, a staggering burn rate for even the most well-capitalized startup.

Larry Page and Sergey Brin, Mark Zuckerberg, Jeff Bezos, Dick Costolo, Evan Spiegel—almost all of the most influential Silicon Valley leaders of the past twenty years

Dead at Evan Spiegel's inclusion in this list

Scams were endemic in every market worldwide. In New York in 2014, insiders noted that nearly 20 percent of the company’s gross revenue went to fraudulent rides. Thieves skimmed the same amount in London. From Washington DC to Los Angeles, Uber was bleeding money by the millions in its most important markets.

Security incidents usually increased around planned price cuts. From Uber headquarters in San Francisco, Kalanick would occasionally cut the fares for Uber rides in dozens of markets at a time. The effect rippled outward from the Bay Area to the rest of the world, affecting the livelihoods of millions of drivers in an instant. Kalanick did it to spur rider growth; it sometimes incited violence.

At the beginning of 2014, Uber employed around 500 people. By October of that year, Uber had more than tripled in size, and was adding new employees by the day.

There was one problem: InAuth’s service blatantly violated Apple’s rules regarding user privacy. So everything between Uber and InAuth had to be kept secret. if Apple found out, both Uber and InAuth could be in serious trouble, and could even get Uber’s app banned from the iPhone.

In order to fingerprint devices, InAuth required far more data than the average smartphone app, which meant asking for all sort of extended permissions. InAuth created device profiles based on this data to triangulate the users’ IMEI numbers. It was a clever technique, and companies besides Uber paid millions to use it. But the practice upset consumers when they discovered how much information they had unknowingly given Uber.

“Hell” was devised to monitor the locations of all Uber drivers who also drove for Lyft. Uber employees at headquarters would create fake Lyft accounts, which tracked nearby vehicles—up to eight per fake account. Information about those vehicles was then sent back to Uber and stored in a database. “Hell” created a way for Uber to monitor the real-time positions of Lyft drivers. And because many of those drivers worked for Uber as well, Uber could monitor the rates Lyft was offering for drivers and outbid them, thereby swaying drivers to work more regularly for Uber. “Hell,” as Sullivan saw it, was sneaky. It was also highly unethical and would be a public relations nightmare if it ever leaked.

According to executives at the company, Uber had been the victim of a massive hack earlier in 2014, a serious breach of the company’s data that compromised the names and license numbers of more than 50,000 Uber drivers. Uber had kept the hack secret. It didn’t know how to tell the public, much less if it even wanted to do so. Kalanick didn’t know the law, and had no interest in making these calls. Though he certainly didn’t want to spur a public backlash, he always thought it was up to the legal and security teams to figure out what the solution was—and most importantly, to make it go away. Sullivan knew it wasn’t that simple; Uber was required by California law to notify authorities of a data breach.

Brazil was largely a cash-based economy where credit cards weren’t in common use, so there was no payment or identity data to gather on the individual riders. For thieves and angry taxi cartels, it was the perfect crime. A person could sign up for Uber anonymously with a faked email, then play a version of “Uber roulette”: They’d hail Ubers, then cause mayhem. Cars were stolen and burned, drivers assaulted, robbed, and occasionally murdered. The company stuck with Baker’s low-friction system, even as violence increased.

At least sixteen drivers were murdered in Brazil before Kalanick’s product team improved identity verification and security in the app.

They would spend hours making up code names and communicating in secret slang. If the autonomous vehicles could drive themselves, Kalanick mused, they could create a “Super Duper” version of Uber, or “Uber Super Duper.”

WHAT is with this guy's obsession with the word "super"

Now, they had convinced the public investment arm of Saudi Arabia to invest $3.5 billion in Uber, privately valuing the company at $62.5 billion—an unprecedented figure for any private technology company.

In Silicon Valley, customer privacy had long taken a backseat to companies’ desire to collect data. But Uber took the neglect one step further. Kalanick treated user privacy as an afterthought. At one point, Kalanick changed Uber’s settings so the app could track people even after they had ended their ride. Customers protested and demanded tighter privacy settings, but Kalanick wouldn’t acquiesce for years; he wanted to gain insight into user behavior by seeing where people went after getting dropped off.

Drivers, as a result, felt they were disposable to Uber. And in truth, they were. In internal presentations, product managers would stress that “satisfaction ratings” among drivers—already low—had plummeted in early 2016. Roughly a quarter of Uber’s drivers churned out every three months. People hated driving for Uber so much, the company had to recruit new drivers from the widest labor pools possible.

Parties at strip clubs became regular occurrences, often expensed on the company’s corporate account. A few execs would usually bill the evening as client entertainment, or business development—and one or two other executives would sign off on it, as was the case for an incident in South Korea in 2014, something that would come back to haunt the company later. They had a pet phrase to describe expensing strip clubs to the corporate card: “Tits on Travis.”

The tone of Uber’s culture was being set from the top. Kalanick knew what he wanted in his employees—who were mostly white, male, and in their twenties—and made his hiring decisions based on that instinct.

Billionaire on paper, that is. Kalanick was still living off money he made from the sale of Red Swoosh. He didn’t sell a single share of Uber stock during the entire time he ran the company.

The same month Uber hired her, Fowler met the love of her life. Chad Rigetti had “Michael Fassbender–worthy” good looks and an enthusiasm for quantum computing theory.

What a package

Despite all the driver growth, Uber soon found it was losing upwards of $9,000 per vehicle on each Xchange leasing deal, far above the initial estimated losses of $500 per car. Never mind that the company was giving people subprime loans that they couldn’t pay back while ruining their credit—all for a gig-economy job that returned less and less each year as the company garnished drivers’ wages.

The director’s reply was blunt. “If we women really wanted equality, then we should realize we were getting equality by not getting the leather jackets,” she was told. In the director’s mind, making special accommodations for women demeaned them, undermining the meritocracy. The director would do the same thing if the roles were reversed and men were the ones to miss out on the jackets; it didn’t occur to him that, in male-dominated Silicon Valley, that scenario would never occur.

Kalanick believed Whetstone and her deputy, Jill Hazelbaker—another Google alumna and former political operative—were doing a terrible job shaping Uber’s image, evidenced by the company’s consistently bad coverage. The comms team, on the other hand, believed they were doing their best to defend the company with what they were given: an unlikeable, inflexible CEO and a raucous workplace staffed with thousands of men shaped in Kalanick’s image.

And around the same time Levandowski left, his partner, Lior Ron, had searched Google for some incriminating phrases, including “how to secretly delete files mac” and “how to permanently delete google drive files from my computer.”

😂😂

Uber didn’t have an image problem. Uber had a Travis problem.