Is Uber Driving Off a Cliff?

John Hyatt  Follow

High-profile scandals have beset the transportation industry in recent years: Toyota’s “Sticking Accelerator Pedal” in 2010, General Motors’ ignition switch debacle in 2014, Volkswagen’s emissions hoax in 2015, and of course United Airlines’ when a man was dragged off his flight for refusing to give up his seat this past April. The airlines company quickly found itself embroiled in a PR nightmare: there's no scandal quite like one captured on camera and shared online. For a few days, you couldn't open social media without watching the graphic footage, or seeing a still frame of the passenger’s bloodied nose.

But compared to Uber's crises, even the United fiasco looks like a gentle misunderstanding.

Where to start? The latest is Travis Kalanick's ouster. The pugnacious CEO's laissez faire temperament fueled Uber’s rise, but his forced departure now seems like the logical culmination of his company’s cut-throat culture. Uber’s litany of scandals has gradually eroded public trust, not to mention investor enthusiasm.

There were plenty of warning signs in 2014: class-action lawsuits, reports of NSA-like tactics for spying on customers, secret projects to lure drivers away from competitors, jamming competitors’ operations by booking and then cancelling thousands of rides, to name but a few. Putrid as these revelations were, Uber's toxic culture didn't register with (or simply didn't offend) the millions of urban smartphone users with a growing appetite for convenient and cheap travel. Uber’s market capitalization has continued growing steadily, pegged at $62.5 billion last year. The act of ridesharing has become its own brand, a sort of cultural statement. 'To Uber' is now an act; the company has attained the esteemed Proper noun-to-Verb status enjoyed by the likes of Google, Jet-Ski, and Rollerblade.

Flair aside, Uber's recent stretch of spy-book drama is bringing an end to the party. Fireworks erupted with the first iteration of President Trump’s "travel ban," when New York taxi drivers went on strike and Uber was condemned for continuing its airport operations. The fury was fanned by Kalanick's perceived association with Trump, and he resigned from the President’s business advisory council after a #DeleteUber campaign took Twitter by storm. Then came revelations of rampant sexism from a former female engineer; an SVP's resignation for failing to disclose previous sexual-harassment allegations; President Jim Jones jumping ship after less than a year at the helm; a lawsuit from Alphabet alleging violation of intellectual property rights; a New York Times exclusive on Uber's illegal 'Greyball' software for duping municipal authorities; dash-cam video of Kalanick lecturing an Uber driver on the righteousness of his company's zero-sum ethos; et cetera, et cetera.

By the Summer of 2017, Silicon Valley's dirty secret was mainstream news: Behind your favorite iPhone app lurks a mafia-like enterprise, and its CEO is a postmodern super-villain trying to hijack the commerce of movement for his own maniacal ends.

For PR nerds, the fascinating thing about Uber's meltdown is how each individual crisis appears unrelated to customer experience. Sure, Kalanick was running a misogynistic, lawbreaking, guerrilla organization, but he was also making our lives easier. Customers were, and still are, infatuated by Uber's transformative service/experience.

Unfortunately for indebted startups like Uber, the loss of public favor bodes poorly for long-term growth. Uber’s remaining $9 billion in unrestricted cash and credit will keep the company afloat for several more years, but if executives don’t shift gears from revenue-generation to profitability, Uber’s fate will lay in the hands of wary creditors. In this light, Uber’s predicament is a fascinating look at the intersection of PR and IR: For a young tech company like Uber, raving customers serve as collateral for investor capital, in the same vein that selfie-hungry teens fueled Snapchat's $30 billion IPO. If lawsuits and public disgust are the new norm for Uber, the investment community may abandon its former darling, particularly with competitors like Lyft raring to capture market share in the months ahead.

The saga of Uber and Kalanick also shows us that nobody is immune to the powers of internet virality – if anything, the wealthy and powerful are more at risk. And though instances of corporate impropriety sometimes lack short-term financial repercussions, their aggregate effect leans toward long-term decline – whether in revenue, client loyalty, internal morale, or all the above. Perhaps these concerns explain Mark Zuckerberg’s recent (and rather self-publicized) campaign to clamp down on Facebook's role in spreading fake news.

If the extremity of Uber's story is unique, mistrust of corporate governance isn't. Ironically though, Silicon Valley's backers might just be breathing a sigh of relief. The economy is chugging along. 2008 and Occupy Wall Street feel like ages ago. People are too furious with politics to think twice about the financial industry.

But if Uber's example teaches us anything, it's that fortunes fall more quickly than they rise. Systemic malpractice on Uber’s scale is likely to cause cataclysmic downfalls, but even minor slip-ups prove costly in today's information economy. Or, in Uberian terms: The struggle for reputation is a street race, and every company needs mirrors to see around corners. 

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