Is Uber the new Enron?

Uber. No other company epitomises the current wave of innovation, entrepreneurship and disruption sweeping across the globe. It owns no assets, yet it is the most successful taxi company in the world (and true believers will baulk at describing Uber as a “taxi company”). Its name has become shorthand for a whole new class of business models: assetless, driven by algorithms, customer experience and process optimisation. All across the world entrepreneurs are pitching their business ideas as the “Uber for XXX (laundry, food, dog walking, healthcare,…)”. The company’s growth rate and ambition seems limitless and the business consensus seems to be that Uber’s current problems are not exactly trivial, but more like the growing pains of a new and disruptive business.

But let’s rewind 17 years and look how people talked about another tech and innovation darling: Enron. Here is how Clinton Free, Norman Macintosh and Mitchell Stein described it in the Ivey Business Journal in 2007:

“By 2000 it (Enron) had become “the star of the New Economy,” emerging as a paragon of the intellectual capital company with an enviable array of intangible resources, including political connections, a sophisticated organizational structure, a highly skilled workforce of sophisticated financial instrument traders, a state-of-the-art information system and expert accounting knowledge. In 1999, Enron was named by Fortune as “America’s Most Innovative Company,” “№1 in Quality of Management,” and “№2 in Employee Talent.” An army of scientists, business people and academics sat rapt as Skilling — “The #1 CEO in the USA” — proselytized at technology and leadership conferences across the United States about how Enron was not only embracing innovative theories of business but also making a lot of money doing so. (”

But the story did not end well:

“However, in late 2001 Enron announced that because of accounting errors it was reducing its after-tax net income by a total of over $1 billion and its shareholders’ equity by $1.7 billion. On December 2, 2001, Enron, with assets of $63.4 billion, became the largest corporate bankruptcy in U.S. history, triggering a collapse in investor confidence and opening a Pandora’s Box of issues relating to corporate governance, accounting and regulation.”

We all like to believe that history does not repeat itself, that we learn lessons from the past. I sincerely hope this is this the case.

In this article I will not argue that Uber is the new Enron. I am not close enough to the company to make that judgement, but sometimes a bit of distance helps to see the patterns. In this paper I will argue there are a lot of similarities. Enough to be worried and at least consider the idea.

I will build my argument around four areas of similarity:

· Aggressive ambitions beyond the original core market

· Bullying of critics

· Aggressive internal performance culture

· The kind of people these companies hire and their particular vulnerabilities

Together, they paint a picture, which might just be a bunch of random data points, or the indication of something deeper and more profound.

Let’s consider each in turn.

Aggressive ambitions beyond the original core market

I already outlined the similarities between Uber and Enron in terms of their reputation and their perceived “place” at the leading edge of their markets. Enron in its day was not content to be just an energy utility or even an energy trader. It rapidly expanded into other markets: commodity trading, bandwidth trading, coal, paper, steel, and even weather. All this fed the enormous growth projections of the business, which in turn justified their ever rising share price. This continuous expansion into new domains was also useful as a distraction for outside observers and analysts. It made it difficult to compare the business from one period to the next. Likewise, Uber is not content with re-inventing the taxi-business. Anand Sawal, the founder of CB Insights, a respected startup analyst firm even posed the question “Is Uber a ponzi scheme of ambition?”. Here is what he had to say about it:

“When Uber came out, it was going to disrupt the taxi industry.

And then it was taxis, last mile logistics, vehicle ownership and autonomous driving.

And then it was taxis, last mile logistics, vehicle ownership, autonomous driving and trucking (with Otto acquisition).

And then it was taxis, last mile logistics, vehicle ownership, autonomous driving, trucking (with Otto acquisition) and drones.

And now it’s all the above + flying cars.

I might have the order wrong but all are forays by Uber into markets that paint a picture of an ever larger total addressable market (TAM). This coupled with Uber’s uninhibited ambition gets investors excited.”

The parallels with Enron and its ever expanding trading empire in order to keep investors engaged is too obvious to miss.

He also observes that the emperor’s clothes might not be all they are made up to be:

“But the reality is that Uber doesn’t even dominate the first industry it attacked — taxis. Their playbook didn’t work in China. They don’t dominate in India and there are well capitalized competitors in southeast Asia, the Middle East, South America, etc.”

And like every little boy in every fairy tale, he gets shouted down by the “adults”:

“Of course, many at the breakfast thought the idea was “misguided” which is a nice way of saying they think I’m stupid. I don’t deny that I may be :)”

Which brings us to the second point in our argument

Bullying of critics

Enron did not go about its business unchallenged. A number of internal whistle blowers and external analysts did raise some pointed observations and/or fundamental objections. The Enron whistle blower was Sherron Watkins who first raised questions about Enron’s dubious business and accounting practices. She wrote thee now (in-)famous memo to Kevin Lay, stating that “I am incredibly nervous that we will explode in a wave of accounting scandals”. She never went public and the Enron top-management effectively tried to buy her off with bigger and better perks. That was a form of “soft bullying”. Equally (in-)famous is the episode where the then- CFO of Enron was questioned on the analyst call about the incompleteness of Enron’s trading books in their quarterly report. The CFO publicly and empathically called him and “asshole”, trying to shut down his line of questioning and putting in doubt is credibility (here is the link to the original news story:

Uber is not publicly quoted, so no such incidents have occurred. But what has happened is that a number of internal employees have come out to reveal some fundamental shortcomings and plain nastiness in Uber’s management process and culture:

In December of 2016, Ward Spangenberg, a data privacy and security consultant came forward with allegations about the total lack of privacy and data control within the company. He describes how employees in the company could following the journeys of their (ex)girlfriends and celebrities. When highlighting his concerns to Uber’s top management, he was essentially told to stop whining and not stand in the way of the company’s performance. Spangenberg was fired shortly after and he is currently sueing Uber for age discrimination and whistleblower retaliation.

A similar story is painted by the recent revelations of Susan Fowler a female infrastructure engineer in Uber’s Site Reliability Engineering team. She describes how she was subjected to multiple instances of sexual harassment , but was essentially told to suck it up. She went public with her grievances in February of this year and since then there have been reports of Uber targeting people around her to “find dirt” on her and discredit her allegations.

This is consistent with Uber’s tactics in other cases. For example, in December 2015 Uber used Ergo, a security firm run by ex-CIA and NSA employees to dig up dirt on the plaintif in one of the law suits it was involved with. (

Again, Uber is using every legitimate and illegitimate tool at its disposal to aggressively discredit and shut down its critics.

Aggressive internal performance culture

Susan Fowler’s story also lifts the lid on an internal culture where performance is valued above else. Not only is it valued above all else, it is used to justify and gloss over ethical and behavioural transgressions elsewhere. Fowler was told that her complaints cannot be actioned because the people involved are high-performers. It does not take a genius to see how this kind of stuff can lead to a culture of impunity, where performance justifies transgressions anywhere else. This will not only encourages psychopathic pursuit of “legitimate” high performance, it also creates enormous incentives for the people involved to cut corners and “manage perception” (a.k.a. lie and cheat) in the delivery of that performance.

Here again is how Clinton Free, Norman Macintosh and Mitchell Stein in the Ivey Business Journal describe a very similar “performance above everything” culture at Enron :

“Under Skilling, an extreme performance-oriented culture that both institutionalized and tolerated deviant behaviour emerged. The lauding of “creative risk-taking” and “revolution” led to not only stretching, but also circumventing and breaking legal and ethical boundaries. Resistance to bad news created an important pressure point on information sharing internally and externally. Fierce internal competition coupled with huge incentives led to private information, deceit and extensive efforts to bolster short-term performance”

People: MBA, investment bankers, management consultants

Like Enron in its day, Uber is a magnet for the smartest MBA’s, Management Consultants and Investment Bankers across the globe. They bring a ruthless eye for detail, efficiency and optimisation to the business. However, people from these backgrounds are also extremely responsive to competitive pressure, reward and external validation. They also understand how to “work the system” and ensure that their own performance is always seen in the best light possible. What they do not create is cultures of honesty, humility and owning up to your failures. These kinds of organisation are in fact high-performance monocultures which can be very susceptible to “pressures to succeed”.

Here is how it was Clinton Free, Norman Macintosh, Mitchell Stein in the Ivey Business Journal describe the recruitment practices at Enron:

“Skilling hired only the “best and the brightest” traders, investment bankers, information and computer experts, programmers, and financial engineers, most of whom were graduates of prestigious universities. As part of his Analyst and Associates’ Program, Skilling would annually hire from 250 to 500 newly minted MBAs from the top business schools in the country. Promotions and transfers came quickly, without providing time to learn industry details. Those who did not produce deals were quickly redeployed and soon after, often, terminated.”

It was these “best and brightest” which became susceptible to the toxic culture at Enron, bended the rules to “make things happen” and helped cause the ultimate demise of the company.

So, four areas where the story of Enron and Uber seems to run along very parallel lines. Whether or not both stories will see the same end will depend on whether the parallels are coincidental or not. I personally hope that they are coincidental, but my skeptic self implores me to keep an eye out for what happens next and see how the future Uber trajectory is similar to the Enron story . If it is along the same lines, it might be time to start panicking: if Uber goes down in ball of flames, like Enron did, it will take a large chunk of the current technology startup ecosystem with it and we will enter a new startup nuclear winter….Don’t tell me you weren’t warned.