What’s the Story of Uber?
Uber’s business story has changed the history of urban transportation
What happens when two unusual people can’t get a taxi in the middle of the night in Paris?
It’s an experience that used to frustrate everyone.
That is — before Uber came along.
Because when the right people decide to do something about a small problem that affects everyone, billion-dollar companies are born.
Travis Kalanick and Garrett Camp were cold, lost, and just tired of waiting for a taxi on that cold Paris night.
And that’s why you are here.
You know that Uber Technologies Inc. (NYSE: UBER) is about more than that. You have read the news. You know that the Uber empire is full of secrets, intrigue, and scandal.
So what’s the story of Uber (UBER)?
The story of Uber is reminiscent of the best mafia plots of all time.
The story of Uber is a story of greed, betrayal, and illegal business.
A Harsh Beginning
Travis Kalanick was born in 1976 in Los Angeles. As a kid, he was super smart, competitive, and driven to win.
He had good grades, was a track athlete, and played football. But he carried a deep secret that would influence his life forever. Travis was bullied by older students, and to escape their attention, he busied himself with work, plotting how he could be super successful so he would never be pushed around by anyone ever again.
As a teenager, he sold kitchen knives in his neighborhood by going from door to door, talking to different people, and meeting his natural sales skills. He was impressed by his sales experience and went on to study business economics and computer engineering at UCLA. Both subjects, business economics, and computer engineering, paved the way for his later global takeover of the taxi business with Uber.
But first, Travis had to get some training, gain exposure, and, above all, gain insight. So he confidently dropped out of university to devote himself fully to his new business plan, a peer-to-peer file search engine, Scour, which he developed and has been compared to Napster.
But the consumer-oriented Travis designed Scour so that consumers didn’t have to pay for the content. Content providers then spoke out, and a number of entertainment companies sued Scour for $250 billion for copyright infringement. Scour filed for bankruptcy in 2000 to protect itself from the lawsuit.
Travis could not wait to get back in the saddle and, the next year, founded a new revenge company, Red Swoosh, another peer-to-peer file-sharing service. After seven long years of bad luck, bad business, and bad deals, Travis finally got the attention of a wealthy American investor on an internet forum, who invested $1.8 million in Red Swoosh, after which Travis sold the company for $19 million and moved to San Francisco. Only to invest in his biggest project to date, Uber.
When Travis and Gareth Camp met, Gareth had just sold his company StumbleUpon to eBay for $75 million. It was love at first sight. Travis and his friend Garett were men of action, vision, and courage. They didn’t like to wait long for things to happen.
It looked like something out of a bad dystopian movie when they couldn’t get a taxi in the middle of San Francisco. And if it meant James Bond using his phone to track a car via a map, they wanted that too.
A new business model was born. The Black Limo Car Service App. A Bondian taste of luxury. Already in 2010, Travis and Garett launched their first app called UberCab in San Francisco.
UberCab was everything a traditional taxi wasn’t. The app allowed users to hail a taxi with just the touch of a button. They could then track the car's arrival on the interactive map, drink chilled bottles of water during the ride and not worry about tipping because the ride was automatically charged to the user’s credit card.
The business flourished. And the genius of it was that Uber did not own a single car but let its professional drivers use their own cars, which saved Uber a lot of money. But it wasn’t legal. In October, the local authorities showed up with expensive fines and jail time for every day that Ubercab was in operation.
The small Uber team was desperate. But Travis kept his cool and advised everyone just to ignore it. Then he announced that UberCab wasn’t a taxi but a technology company, and therefore traffic rules and regulations didn’t apply. Then he changed the name of the company to Uber.
But Travis knew that the war with the authorities had begun, and he prepared the weapons, the war strategy, and the winning mindset.
Spy Software
Travis believed that Uber was better for both drivers and passengers but that the state rules were not business-friendly. So he ignored them completely.
His tactic was to create a large pool of users who would fight back when the authorities tried to shut the company down. So he invested a lot of money in popularizing Uber and lost a lot of money in the process. First, Uber made a deal with TNT to buy thousands of iPhones in bulk at a discounted price.
Travis installed the Uber software on the phones and gave it to the drivers, who also received cash rewards for a certain number of weekly rides. The number of drivers grew rapidly. Meanwhile, the passengers were attracted to free first rides and discounted future rides.
This tactic cost Uber a lot of money, but it paid off. People loved Uber. And soon, Travis started taking Uber to other cities with the same working model. He was obsessed with Jef Bezos and wanted to follow his advice for rapid growth, innovation, and expansion.
To ward off the constant threats from the authorities, Travis sent notifications to the app’s users with a button to easily sign a petition or email their local representatives to show their support for Uber. And it worked. The inboxes of city councilors and supervisors were flooded with statements of support for Uber. And it wasn’t uncommon for Uber to organize protests in front of city halls on its behalf.
But in 2012, Travis was almost swept away by his hunger for innovation and expansion, and when the new service Uber X was launched, a new can of worms was opened. Uber X allowed almost anyone with a driver’s license to drive for Uber, which led to all sorts of legal problems and brought the city authorities into dirty action. They started threatening drivers and stopping people from using Uber.
But Travis saw this coming. He was willing to pay for any fines or fees incurred while driving for Uber, and he sent regular messages to drivers through the app to inform them of Uber’s policies.
But that wasn’t all Travis was willing to do for Uber. He also developed spy software called Greyball to detect when police, authorities, or local councils tried to join the app and block them. The app didn’t show any cars on the map, and it looked like no driver was available.
Uber even hired former CIA, NSA, and FBI employees to help them improve the Greyball software, but also to spy on local government officials and track their movements. In parallel, Uber lobbied governments to legalize its business model and change legislation. Such as changing the laws on contract workers so that Uber didn’t have to give drivers full benefits.
Travis held on to this business model until 2017, when Uber was accused of invading and deceiving local authorities for years. But by then, Uber was too popular to simply shut down, as Travis had planned all along.
But Travis had no idea that an even greater war lay ahead.
How to Crash Competition
Mark Zuckerberg, the founder of Facebook, called Travis one morning to tell him that all his co-workers at Facebook were going nuts over a new app called Lyft (LYFT). Travis immediately tried the app and was stunned to discover that Lyft was a ride-sharing service that competes with Uber in the United States.
Now, Travis didn’t like having competition. Everyone who knew Travis said that Travis strives for nothing less than total domination in everything he does. That means he will stop at nothing to get what he wants.
Let’s get a brief overview of Travis’ competition crash course:
- Crash Lyft drivers’ parties and hand out promotional codes that give drivers free money if they choose Uber over Lyft.
2. Put up funny billboards everywhere Lyft operates, urging people to use Uber instead.
3. Create fake accounts with Lyft and track the location of Lyft vehicles. Use this data to run secret software that shows which drivers use both Uber and Lyft. Offer these drivers extra rides and cash rewards so they will only drive for Uber.
4. Order a ride through the Lyft app, and when the driver shows up, recruit them to drive exclusively for Uber.
5. Use burner phones and hold on to lots of Lyft rides at once and then cancel the rides at the last second.
6. Find out when Lyft holds investor meetings to raise money, and call these investors immediately afterward to tell them that Uber will also be raising money very soon. Don’t answer them for a while. They’ll think you don’t really need the money and will be ready to invest.
7. Tell everyone that one day Uber will transport not only people but all goods and deliver everything to any place, making it a serious competitor to Amazon.
8. Troll the founder of Lyft on Twitter and enjoy the war.
But, as investigators began to untie the knots and the public learned of Uber’s dishonest business model, they were no longer quite so supportive of Uber.
Today, Uber is banned in more and more cities and is suffering huge financial and reputational losses. That’s because there is also a dark side to Uber’s story. You have already seen part of it.
Uber breaks the law and lobbies for changes in the law to support its controversial business model. Uber spies on both city authorities and its competitors. Uber beats up its competitors shamelessly, openly, and aggressively. And now things are getting even more opaque.
A Dark Night
When Uber launched, it was very well received by the public. Uber was cheaper and innovative, and it was the underdog going against traditional transport. But over the years, public opinion began to change.
The media started to report about Uber’s spy software used against authorities and competitors. More and more juicy details came to light. They found out that Uber had bribed police officers in Indonesia. And that credit card fraudsters had used Uber for both drug and sex trafficking.
Uber also faced serious data and privacy issues. That’s because Travis updated the app to track people even after they finished their rides. He also looked at celebrities’ data to find out where and when they were traveling.
And in recent years, Uber had to pay cybercriminals a lot of money to cover up a massive data breach that exposed the personal data of 57 million Uber customers.
But Travis never lost his focus on Uber as a tech company that primarily improves the lives of drivers and passengers. For Travis, Uber was simply a more innovative and efficient system that gave drivers the opportunity to make more money and passengers cheaper and easier rides.
But over the years, drivers began to see all the disadvantages of Uber. Their money is eaten up by fuel, taxes, and vehicle maintenance. They’ve got no benefits. They live like freelancers. And passengers raised the issue of safety, which is severely compromised because of the low criteria for Uber drivers. And let’s not forget the other taxi operators who weren’t happy about Uber taking over their market.
In some countries, taxi cartels with close ties to organized crime attacked Uber drivers, stole their cars, or even set them on fire. And in Mexico, Uber drivers were literally killed, and many people suspected the local taxi drivers. This was a total war between Uber and traditional transport.
And then the worst thing that could happen to a business happened to Uber. Drivers began killing themselves out of financial desperation, blaming Uber for their deaths. Doug Shifter wrote on Facebook before taking his own life in front of City Hall, “When I started the taxi business, I worked an average of 40 to 50 hours a week, but I can not survive working 120 hours anymore. I am not a slave, and I refuse to be one”.
In India, a driver who could not pay his car loan installments on time committed suicide, leading to an angry mob of drivers turning up outside Uber’s offices carrying his dead body and shouting that if Uber’s wages were not so low, the driver would still be alive.
And in 2014, a 26-year-old woman was raped during a ride by an Uber driver. As the story spread, many people became vocal about Uber’s lack of safety, leading to a temporary ban on the ride service in some countries.
This is not to say that traditional taxi services do not have horror stories, but they vet their drivers more thoroughly and do not let just anyone work for them. Despite all this, Uber has refused to change anything.
And so when Uber ignored the strike by taxi drivers protesting Trump’s ban on Muslim countries, people were outraged and deleted the app. Reportedly, over half a million people deleted their accounts, and millions deleted the app from their phones. Even Lyft became popular again as people switched to them.
And then it got worse.
Uber Goes Global
Travis wanted to conquer China and its 1.5-billion-people market, where, however, only a few international tech companies are successful.
So Travis repeated his expansion model, spending billions of dollars on free rides and bonuses. But China is a world apart. Chinese scammers quickly got their hands on Uber. They bought tons of cheap smartphones and then set up half of them as driver accounts and the other half as passenger accounts.
The scammers requested rides from one of the passenger’s phones and used one of the driver’s phones to accept them. They then drove around the streets with dozens of mobile phones scattered on the seats. Keeping the money for the ride and receiving extra bonuses from Uber for new drivers. And the scammers could repeat it all by simply resetting their phones.
And Uber could not track them because an Apple privacy policy hid the iPhone’s identity. But Travis was far from backing out of China. Instead, he developed a secret code that he inserted into the Uber app to track down the scammers. This worked for a while, but then Apple found out that Uber had violated its terms of use and threatened to sue and expel Uber from the App Shop.
Obviously, Uber hit its karma here and saw the havoc and loss it could cause. China was a big slap in the face for Uber. Because, let’s face it, Uber did not stand a chance there because there was a competing app offering the same service, DiDi, and because it was a Chinese company, it was naturally favored by the Chinese government.
Also, DiDi knew all the tricks and beat Uber with the same strategies Uber used to beat Lyft. DiDi paid people to protest against Uber, used some of its employees as spy drivers for Uber, and sent fake notifications to Uber drivers that Uber had closed, but they were hiring again.
It took billions of dollars in losses in China to get Uber to make a deal with DiDi and get a 17.7 percent stake in their company in exchange for closing their business in China. Travis was defeated. Despite the fact that Uber stakeholders and investors were extremely happy with the 17.7 percent stake.
Travis’ goal was to conquer China, and when he failed, he started picking on everyone. In 2017, Travis got into an argument with an Uber driver, which was recorded by the car’s dashcam and went viral.
Meanwhile, Uber’s other co-founder, Garrett, publicly confirmed Uber’s plans for self-driving cars, angering the public and drivers who saw this as further proof that Uber doesn’t care about them at all. However, Garrett was concerned that if he didn’t act now on self-driving cars, he’d miss out on the future.
He knew that Google was working on an Uber-like company, but with self-driving cars, and he didn’t want to lose his job to the Google ride-sharing app. So Uber started asking Google’s self-driving car engineers about the technology but was soon stopped by Google’s lawyers, who accused Uber of trying to steal the company’s trade secrets.
At that point, Uber faced attacks from all sides — regulators, competitors, the public, drivers, China, Google, lawsuits, and more. But Uber’s final fall will come from a place least expected.
Work Hard, Play Harder
Travis had been a workaholic ever since he threw himself into work to escape bullying.
His mission in life was to build the best business model ever. He forgot to eat, wash, change clothes, and see his family while working 25 hours/8 days a week for his brain-child Uber. And the same was expected of his employees, who reportedly dealt with their burnout by going to therapists — if they had time.
But Travis knew how to motivate his staff and make them give their all for Uber. He spoke of the outside world of the regulated market as opposed to the Uber community that helps everyone. He saw working for Uber as a world-changing mission that will eventually pay off. And he gave his small teams, which he sent to different cities to spread Uber, a lot of freedom and responsibility, leaving them to decide on all the necessary tactics and budgets.
And that’s how Uber grew so quickly. Travis worked with ambitious, capable, and inspired individuals who had a free hand when approaching a new market. If Travis applied a complex bureaucratic system to his business, he would still rent black limos in San Francisco.
Instead, he threw big company parties worldwide and flew his employees from Europe to Las Vegas to party hard and compensate for work overload.
Work hard, play harder.
The Las Vegas retreat cost the company around $25 million. They had Beyonce. Travis announced that Beyonce and her husband Jay-Z are now investors in Uber because Travis had given them shares for attending the event.
But then came the ultimate blow to Travis and Uber.
Susan Fowler, a former employee, accused Uber of systematic sexual misconduct. Susan said that her boss had sexually harassed her, but HR had dismissed the allegations because it was his first offense and he was a valuable part of the team. However, it later emerged that this was not the first allegation of sexual harassment against this employee, and Uber had often ignored the claims against him.
After this hit the news, other Uber employees began to speak out about the misogyny, harassment, and abuse they had experienced from senior staff at Uber.
Travis immediately ordered an independent investigation into the company’s culture. But the report was far from flattering. It contained hundreds of allegations of physical violence, sexual assault, and many other allegations from current and former Uber employees.
Travis called for an urgent company-wide meeting with the Uber board to discuss improving Uber’s culture. At the time, there was only one woman on the board. Ariana Huffington. And while she was speaking, she was interrupted by a sexist remark from a board member who said: “Actually, what it is that it’s much more likely there’ll be more talking…”
Uber was down and out. The press kept coming up with new sexist stories from Uber. Like when Travis told a reporter he called Uber Boober because it was his chick magnet. Or when Uber had to apologize for running a promotion in France for free rides with incredibly hot chicks.
At this point, Travis started having panic attacks in public and saying all kinds of crazy things. But then he learned that his parents had been involved in a boating accident that left his father hospitalized and his mother dead.
Shortly after, in June 2017, Travis announced he was taking a leave of absence from Uber to work on personal issues and promised to return as a better leader. But that was just his blind, infectious, and childlike optimism speaking.
A New Dawn
It hasn’t been a month since Travis voluntarily took a private sabbatical, and he was forced to step down as CEO by the board of investors. They’d had enough of Travis and his politics.
Now the new CEO of Uber (UBER), Dara Khosrowshahi, must focus on repairing the relationship with the drivers, improving the perception of the brand among customers, and staying out of the headlines. Although there will always be incidents related to Uber because:
- They have this business model.
2. They haven’t given up on their self-driving cars, and one car killed a pedestrian, which scared many.
3. Taxi drivers and taxi companies will never stop fighting Uber
But investors were optimistic after Travis disappeared from the scene. And it would be an understatement to say they were shocked when, on the first day Uber shares traded on the stock market, Uber’s dollar value fell more than any other Wall Street IPO since 1975. And while it’s easier to blame Uber’s bad reputation on Travis’s singular worldview, the lowest IPO ever was also due to the fact that Uber was losing money every year.
Uber lost $8.51 billion in 2019 and $6.77 billion in 2020, meaning that anyone who started a company for a dollar and then did nothing else would be more profitable than Uber by a wide margin. Of course, Uber will always say that they are in the growth and expansion phase and the profits will come later, but Wall Street has shown what investors really think of Uber. It’s a lonely ride for Uber, so it seems.
Uber is a great story because no matter what happened, Uber has always kept going. As slow as that may be today. Because slowness and steadiness come at a price. That’s why Uber is still losing millions of dollars on the market every year.
And maybe new investors aren’t that interested yet because they know that without Travis’ rapid growth, innovation, and winning attitude, Uber doesn’t stand a chance in the future market. We all just have to wait and see.
And remember, despite being kicked out of his own company, Travis Kalanick is now a billionaire, and we can only wonder what his next big idea will be.
