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Synopsis

Uber's growth was fuelled by obsessive product focus, broken rules, growth at all costs and minimal bureaucracy. However, the same traits eventually proved to be bottlenecks in Uber's transition from a scrappy startup into one of the world's largest and most influential companies.

Within a year, Uber lost nearly 20 billion dollars in valuation and faced half a dozen federal investigations. Learn how Uber broke the law, developed a product that has not been banned, and dominated the transportation industry from Super Pumped: The Battle for Uber - the book that inspired the hit Showtime TV series starring Joseph Gordon Levitt.

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Top 20 insights

  1. Kickstart demand for both sides of your marketplace to create rapid growth. Uber perfected a playbook to launch the service in any city worldwide at a rapid pace. An Uber City Launcher from headquarters would parachute into the city, flood craigslist with driver ads that offer hundreds of dollars in bonuses, and free rides to customers. This strategy to kickstart demand on the two-sided marketplace was expensive, but it turbocharged growth. Once demand picked up, Uber hired a local City Manager to manage operations in the city.
  2. While it's not a good idea for everyone, if you don't fear regulation, you can often beat it — at least for a little while. Uber's DNA was designed to evade the law and fight regulators who wanted to shut the service down. In every city, Uber's employees and drivers faced threats from law enforcement and local taxi unions. Uber urged drivers to stay on the road even if they got ticketed. The company would bear all costs. To Kalanick, fines and tickets were just the cost of business.
  3. Out-grow your critics. Uber's strategy to blindside transportation regulators was to outpace them. When Uber entered a new city, it moved so fast that, before regulators could respond, it would be too late with thousands of Ubers already active in the city.
  4. Companies that inspire loyalty can rally users to fight for their cause. When New York's mayor Bill de Blasio threatened to cap the number of cars on the road, the app showed its users a screen titled "De Blasio's Uber" with few cabs and wait times of 30 minutes. Users could send an email to the mayor and city council with a single click. By 2015, over half a million drivers and users in America had signed petitions to support Uber.
  5. Empower every employee to be a mini-founder. Kalanick demanded ownership from his employees, offered significant autonomy and complete support. City Managers could spend millions in driver and rider incentives without permission from headquarters as long as they met growth targets. Uber's approach worked because City Manager's understood local people and institutions better than anyone at headquarters.
  6. Uber's product and user experience were so good that it had a negative churn rate. The total revenue from current customers was more than the revenue lost from cancellations. Uber's data showed that by the time a customer used Uber an average of just 2.7 times, they became a long-term user.
  7. Uber invested heavily to rewrite laws in its favor. Uber regularly topped the list of lobbying spenders in multiple US states. Uber invested tens of millions of dollars to sway legislation. At one time, Uber employed over 400 paid lobbyists across 44 states, more than the combined lobbying staff of Amazon, Microsoft and Walmart.
  8. A great startup can make VCs compete to invest in it. Kalanick took advantage of Uber's massive popularity to invert the fundraising model. Startups usually go on a roadshow to pitch their company to investors to raise funds. Uber instead staged a HomeShow where investors came to Uber's headquarters to compete for a chance to invest in Uber. Kalanick did not trust investors and ensured that they had no say in Uber's operations. Even Google Ventures, which cut a $250 million check at a valuation of $3.5 billion, got only limited access to financial and operational information, ordinary shares instead of Kalanick's supervoting shares and an observer seat on Uber's board.
  9. Uber hired only hyper-competitive candidates, and this resulted in toxic work culture. Kalanick would pit employees against each other. The high-pressure work environment made employees worldwide work late into the night, barely take weekends off and frequently join calls at midnight. The pressure caused burnout at all levels. Worse, managers could get away with employee abuse as long as they hit targets.
  10. Companies without effective corporate oversight are a ticking-time bomb. By 2015, investors began to worry about Uber's massive burn rate and poor corporate governance. Uber had no Chief Financial Officer, and the company spent $2 billion a year globally on driver and rider incentives, a staggering burn rate. The company burnt $40 million to $50 million every week in China alone. Worse, Uber had an ineffective legal department and a nearly nonexistent Compliance Division that lead to high regulatory risk.
  11. Uber's growth-at-all-costs mindset led to massive inefficiencies. Uber created the ride-hail equivalent of a subprime mortgage through the lease of cars to high-risk individuals with poor credit history. There was an immediate spike in a range of safety incidents, from speeding tickets to sexual assault. The drivers also returned the cars in poor condition, which resulted in losses of over $9000 per vehicle.
  12. Kalanick ruthlessly prioritized Uber's UX over the demands of drivers. For years, drivers pushed Uber to implement a tip function. Kalanick refused because it could increase friction for customers. A core part of the Uber UX was the frictionless payment experience where a passenger could exit the cab and not worry about money. A tip would require them to open the app again needlessly.
  13. Uber's exploitation of drivers improved efficiency but resulted in massive churn. Drivers were frustrated with Uber's indifference, and by 2016, 25% of drivers churned out every three months.
  14. Uber's mistreatment of drivers eventually resulted in a more inferior customer experience. Drivers hated to drive for Uber so much that the company was forced to hire minimum wage workers who had never driven professionally. Poor quality service led to increased customer complaints.
  15. Uber was more than happy to make profits under the pretense of driver safety. Uber introduced a $1 "safe rides fee" for each ride. It promised to use the money to improve ride safety through improved background checks, regular vehicle checks, driver safety education and insurance. But Uber did nothing for driver safety and treated the hundreds of millions of dollars raised as yet another line of income.
  16. Uber built an extensive spy network to steal ideas from Lyft and out-execute it's rival. When Kalanick picked up early rumors of Lyft's disruptive carpool service, he forced Uber's product team to drop everything and immediately build a rival carpool feature. Uber announced Uberpool hours before Lyft and made them look like also-rans.
  17. DiDi Chuxing outplayed Uber in the Chinese market. DiDi would send fake texts to Uber's drivers, which said that the Chinese government had shut down Uber. Its spies who worked for Uber stole proprietary information and sabotaged Uber's internal systems. DiDi's even persuaded its investor Tencent to frequently block Uber from WeChat, China's most popular social network and payment wallet.
  18. Uber's incentive model failed in China and resulted in massive losses due to sophisticated fraud. Uber spent $40 to $50 million a week in incentives. But nearly 50% of the rides were fraudulent. Scammers bought caseloads of cheap cell phones and created multiple driver and rider accounts for each phone. The scammer booked hundreds of rides and then drove once across the city.
  19. Uber's consistent evasion of regulators tanked its reputation and resulted in a Department of Justice investigation. Uber used sophisticated software systems to evade local regulators who tried to ban the service. The company used ex-CIA and NSA employees to spy on government officials. Uber served these officials fake versions of the Uber app (populated with ghost cars) to prevent Uber drivers from unavailability.
  20. Kalanick had authorized tens of millions of dollars in secret budgets to spy on competitors. 'Hell' was a system created to monitor the real-time locations of Uber drivers who also drove for its competitor, Lyft. Hell even analyzed Lyft's prices and used all this information to undercut Lyft and lure drivers to Uber.
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Summary

In 2008, it was a perfect time to launch Uber. 75% of American households had computers with internet access, and Amazon Web Services had dramatically reduced the infrastructural costs involved to launch a company. Finally, the iPhone and the App store made software distribution to millions of users nearly effortless. Fuelled by the success of Facebook, Google, Instagram and Snapchat, venture capital flooded Silicon Valley and shifted the balance of power from Venture Capitalists to founders.

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The Uber playbook

Everyone's personal driver

Garret Camp came up with the idea for UberCab, a premium black-cab service with luxury vehicles for working professionals. When Kalanick took over as CEO, he negotiated himself a majority stake to have absolute operational controls. Initially, Uber focussed on luxury branding with a fleet of high-end black cars and the tagline "Everyone's Personal Driver." Uber got its first drivers by convinced a few black car services in San Francisco to use Uber during their lull times. The app grew as it received glowing reviews from the press. A customer who hired a traditional cab would not know when the cab would arrive, what condition it would be in and finally struggle to find the correct change. In contrast, Uber had live tracking, offered premium cars and seamless payments charged to a credit card. The use of Uber became a status symbol in San Francisco.

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City launches

Uber needed to replicate its success outside San Francisco. Austin Geidt, a 24-year-old intern, became Uber's first City Launcher. A City Launcher would parachute into markets, set up offices and launch the Uber service. To kickstart demand, Uber would offer incentives to drivers for hundreds of dollars in bonuses for completing a minimum number of rides. This strategy was expensive, but it turbocharged business. Uber replicated this across cities like Paris, Los Angeles and Melbourne. Every time Uber entered a city, the company would hire a local City Manager- a person with local knowledge, ambition, a capacity to work 15-hour days and a willingness to evade the law. The City Manager would flood craigslist with ads for drivers, lure them in with sign-up bonuses and thousands of dollars in cash when they hit milestones. City Managers would have to confront established interests, including legislators, police officers and local transportation unions.

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Designed for battle

Kalanick had designed Uber for battle with the taxi unions and local governments. He considered local transportation hopelessly compromised with cronyism and regulatory capture. When Uber entered a new city, it moved so fast that, before the officials arrived, Uber would hit critical mass, which made it difficult for officials to shut down a large fleet that was popular with citizens. Uber urged drivers to stay on the road even if ticketed. The company would bear all costs. To Kalanick, fines and tickets were just the cost of business.

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Rally users to its cause

When New York mayor Bill de Blasio threatened to cap the number of cars on the road, Uber mobilized its users and nudged them to email the mayor and city council from inside the app. Thousands of emails forced the city to abandon its plans. Inspired by this success, Uber built automated tools to spam lawmakers and rally users in every city. By 2015, more than half a million drivers and riders had signed petitions in support of the company across a dozen states in the US.

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Vast lobbying

Uber spent tens of millions of dollars in local lobbying and regularly topped the list of spenders across states like New York and Texas. At one point, Uber employed 400 paid lobbyists across 44 states. Uber had more lobbying staff than Microsoft, Walmart and Amazon combined. Yet, legislators conveniently ignored Uber's classification of its drivers as contract workers instead of employees, which tremendously lowered its employee benefits costs and decreased its liabilities.

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Let builders build

Kalanick imagined Uber to be the next Amazon and moved from the logistics of the transportation of people to the logistics of everything. The company reshaped how people and goods moved in urban cities.

Uber was designed to "let builders build" with minimal bureaucracy to get in the way. He wanted Uber filled with entrepreneurs who embodied the startup ethos and would own their jobs. The City Manager had the autonomy to spend millions of dollars in driver and rider incentives to spur demand. No matter what the issue was, Kalanick would have his employees' backs.

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The homeshow

Investors were desperate to invest in Uber, and Kalanick took advantage. Unlike other companies which went on a roadshow to meet investors and raise money, Uber created the HomeShow, which forced investors to come to Uber's headquarters and compete to invest in the company. Due to his inherent mistrust of VCs, Kalanick presented poor terms, which stripped investors of the right to see Uber's financials and offered them ordinary voting shares instead of supervoting shares. When Google Ventures invested $250 million at a valuation of $3.5 billion, it got only limited information rights and an observer's seat on Uber's board. In 2016, Uber raised a massive $3.5 billion from the Saudi's Public Investment Fund, which valued the company at an unprecedented $62.5 billion. The deal gave Kalanick power to appoint three additional Board members and cemented his hold on Uber.

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Toxic work culture

Even as Uber experienced breakout growth across markets, the rampant workplace infractions began to catch up with the company.

Hyper competition and burnout

Uber only hired candidates with a cutthroat-competitive mindset, which resulted in an intense, high-pressure environment. Employees constantly pushed themselves harder to work nights and weekends. Their bosses would call at all hours. A manager in Rio would throw coffee mugs at his employees to threaten them. The pace caused burnouts across the company, but Kalanick didn't care.

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Every department and city began to fight for a more significant share of incentives. Uber rewarded growth with bonuses and promotions, and incentives offered the fastest way to kickstart demand in a city. Kalanick encouraged this in-fighting and rewarded the winners. By 2015, Uber spent $2 billion a year globally on driver and rider incentives, a staggering burn rate.

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Corporate misgovernance

By 2014, investors began to worry that Uber spent too much money on market expansion. In addition, Kalanick had fired his Chief Financial Officer to ensure minimal financial oversight. Worse, Uber had a weak legal department and a nearly nonexistent Compliance Division as the company consistently sought to exploit legal grey areas.

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Drugs and alcohol

As Uber grew, Kalanick threw himself into the party lifestyle. He hopped into limousines, dated models, attended the hottest parties in Beverly Hills and jet-setted around the world. He flaunted his lavish lifestyle and publicly made misogynistic statements. The company culture reflected Kalanick's behavior. Parties at strip clubs became regular occurrences, expensed on the company's corporate account. In the company's Southeast Asia offices, parties with drugs were commonplace. The Thailand office frequently saw drug use and visits by sex workers. These events went unchecked and rarely led to any consequences.

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Riding roughshod over drivers

Uber had a massive driver problem, and churn was very high — nearly 25% of drivers left every three months. Drivers were frustrated with rates that rapidly fluctuated and terrible communication from the headquarters. Drivers felt disposable, and to Uber, they were. Kalanick would not allow a simple tip feature to enable riders to make extra money because it would spoil the "user experience." Kalanick did not care how drivers had to do twice the work to make the same amount of money or sleep in their cars overnight, or worst of all had no proper places to urinate. Uber took none of the drivers' bills - vehicle wear and tear, medical insurance- the entire business model revolved on Uber, and minimized its responsibility to drivers.

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Uber was not above playing dirty. For example, in 2014, Uber introduced a "safe rides fee," $1 for each ride to improve safety through background checks, regular vehicle checks, driver safety education and insurance. But Uber used these hundreds of millions of additional dollars for no such thing, exploited user trust and treated it as another income line.

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China, India and Southeast Asia

Kalanick dreamt of being the first Silicon Valley founder to dominate the Chinese market. But, while he was confident about how to ignite demand, he feared the protectionist Chinese government and DiDi Chuxing, a ride-hailing app with billions in venture capital funding and deep state support.

By 2015, Uber burned between $40 million to $50 million a week in China to convince riders to use Uber over DiDi. The worst thing was, nearly 50% of the rides were fraudulent. In addition, Uber's competitor DiDi engaged in corporate espionage to sabotage Uber. After two years and billions in losses, investors forced Kalanick to abandon China. DiDi would take over Uber's business, and Uber received a 17.7% equity stake in the company. In Southeast Asia, a similar story played out as Uber burned $1 billion to fight Grab. After four years, Uber held just 25% of the market and was forced to sell its Southeast Asia business to Grab.

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A $70 billion time bomb

By 2014, as Uber experienced breakthrough growth, the company's behavioral issues began to catch up, which threatened to blow up nearly $70 billion in valuation.

Misogyny exposed

Uber was caught red-handed in an effort to defame Sara Lacey, a tech journalist who frequently wrote scathing pieces on Uber's toxic culture. Uber's plans to hire an oppositional research squad to bring out lurid details about Sarah Lacey's personal life were leaked to the media. This lead to harsh headlines in the New York Times, Wall Street Journal and other publications (apart from NBC and CBS) who panned Uber for its toxic culture, misogyny and attack of reporters.

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#deleteuber

When Trump announced his new immigration policy in 2017, Muslim taxi drivers of New York organized a strike at the airport, which lead to a surge in demand. As a result, Uber turned off its surge pricing to enable commuters to reach the airport. Activists interpreted Uber's action as an attempt to break the strike to profit off refugees. Suddenly, #deleteuber was trending. Celebrities shared pictures as they began to delete their Uber app. Over 500,000 people deleted their Uber accounts within the week, which gave a new lease of life to Uber's competitor, Lyft.

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Repeated sexual misconduct

Susan Fowler, a former employee, wrote a blog post about the rampant sexual abuse inside Uber. The post caused an uproar as employees shared more incidents and demanded action. Some of them began to air their grievances on Twitter. For a company of 6000 people, Uber had a barebones HR department of around a dozen employees. There were no managerial coaches, behavior codes, sexual harassment policies or formal reviews. Whenever a sexual assault victim decided not to pursue charges, you could hear a round of cheers at Uber HQ. Finally, Kalanick was forced to order an independent review into diversity, inclusion and workplace issues. Eric Holder, former attorney general to Barack Obama, was appointed to lead the investigation

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The CEO is a bully

Within months of the Fowler revelations, Bloomberg released a damning video, shot inside of an Uber, which showed Kalanick drunkenly yell back at the driver with a raised finger over Uber's prices. The video went viral and cemented Kalanick's reputation as an arrogant bully who didn't care about his drivers.

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Obstruction of justice

Within a month of the Bloomberg video, NYT released explosive allegations about project Greyball, Uber's sophisticated system to evade regulators. The company employed a corporate espionage force of ex-CIA, NSA and FBI employees to spy on government officials and serve them an identical fake version of Uber populated with ghost cars. Greyball ensured that Uber's drivers would not be booked. As a result, Uber's image went from an aggressive bully to actual obstruction of justice. Employee attrition rates grew, employee attendance at work shrank and protests in front of the Uber Headquarters became a weekly occurrence.

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Heaven and hell

Within weeks, the media broke the story of 'Heaven' and 'Hell,' Uber's user and competitor surveillance systems, respectively. Heaven gave Uber a live bird's-eye view of every single ride in a city. Uber's Competitive Intelligence team had created hell to monitor real-time locations of Uber drivers who also drove for Lyft. Uber even had a tool to steal price information from Lyft and used it to undercut Lyft and lure drivers.

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Uber's Strategic Services Group, made up of ex-CIA and secret service executives, tracked the competitors at DiDi and Lyft and monitored high-profile political figures and lawmakers. They even recorded private conversations. Kalanick approved personal budgets that ran into tens of millions of dollars for these activities. Uber executives used company cash to pay bribes to local officials in Asian markets.

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The CEO must step down

In just three months, Uber had gone from one of the most significant startup investments to a $70 billion time bomb. Many top-line executives had quit in disgust, and over six of them wrote a letter to the board to ask for an independent chairman to counter Kalanick's power and force Kalanick to take a leave of absence.

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The holder report

On June 11, Uber's board of directors read the Holder report, which detailed hundreds of pages of infractions across Uber's offices worldwide. The report recommended that Travis Kalanick step down as CEO, take a leave of absence from Uber, and recruit an independent CEO and a stronger board. By the end of the day, all seven board members, including Kalanick, unanimously voted to accept all recommendations.

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Bring down Kalanick

Kalanick continued to be active. Benchmark's partners and investors were terrified that the firm's investment, now worth billions, would go up in flames. However, Kalanick's removal was difficult. He and his allies held an enormous amount of supervoting shares. Most of the board was aligned with Kalanick. Further, Kalanick had the right to appoint three additional members whenever he wanted.

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A syndicate of Uber's largest shareholders, Benchmark, Lowercase, First Round and Menlo, who held nearly 25% of Uber's stock, gave an ultimatum to Kalanick to step down by 6 PM the same day. If he agreed, he would get a graceful exit. If Kalanick refused, the investors would go public, and their letter would land on the front page of the New York Times. Kalanick was initially furious, but when he realized the number of investors behind the plan, he agreed to step down as CEO and continue on the board.

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The search for leadership

The board wanted a strong CEO candidate who could keep Kalanick out of Uber. On August 25, three CEO candidates, Jeff Immelt, Meg Whitman and Dara Khosrowshahi, the CEO of travel and logistics company expedia.com, presented in front of the board. When Dara spoke, it was immediately apparent to the board that he understood the intricacies and economics of the ride-hailing market. He made it clear that "there cannot be two CEOs." Benchmark and others pitched for Whitman while Kalanick and team rooted for Khosrowshahi, which lead to deadlocked votes. After multiple rounds, the board chose Dara Khosrowshahi as Uber's new CEO.

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2 questions and answers
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Arianna Huffington became a board member of Uber in 2016. The exact reasons for her appointment are not detailed in the content provided. However, it's known that she was brought on board during a time of crisis for Uber, with the company facing a series of scandals and controversies. Huffington, as a successful entrepreneur and co-founder of The Huffington Post, was seen as someone who could bring a fresh perspective and help guide the company through its challenges. Her appointment was also seen as a move to improve Uber's image and corporate culture, particularly in terms of its treatment of women.

The specific reason why Uber's board did not vote on tipping is not mentioned in the content provided. However, it's important to note that the board's primary focus at that time was on selecting a new CEO for the company. Decisions about operational details such as tipping policies would typically fall under the purview of the CEO and the management team, not the board of directors. The board's role is more about setting the company's overall strategic direction and ensuring its financial health. Therefore, it's likely that the issue of tipping was not a priority for the board at that time.

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We do the right thing, period

In December, Softbank reached a deal to buy 17.5% of Uber from multiple shareholders at $48 billion, a steep discount from Uber's $68.5 billion valuation earlier the same year. The infighting had cost Uber a nearly $20 billion loss in valuation.

Over the next 18 months, Khosrowshahi systematically undid nearly everything Kalanick stood for. Khsrowshahi's first task was to repair Uber's relationship with its drivers. Next, he implemented the tip feature, which earned the company some goodwill. Khosrowshahi established strong corporate governance through the identification of an independent chairperson and the hire of strong CFO and legal compliance candidates. The core operating philosophy for Khosrowshahi was not Kalanick's "always be hustling." It was "We do the right thing. Period".

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After a year on the wrong side of headlines, Uber tried to stay as low-key as possible. As a result, Uber was no longer a bold startup with a visionary founder. Instead, it was a professionally run organization with a seasoned CEO.

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