Welcome to Diversity Debt: The Crisis That Could Sink Uber
It’s easy to postpone thinking about diversity while building your company — until that company implodes.
“Some people don’t like to take responsibility for their own shit. They blame everything in their life on somebody else. Good luck!” — Uber CEO Travis Kalanick
In the last two weeks, Uber has been pummeled by a series of self-inflicted scandals. First, a female engineer reported sexual harassment; then the account was corroborated with the anonymous account of another female engineer. Finally, engineering SVP Amit Singhal resigned after Recode dug up sexual harassment reports that had been filed at his previous employer, Google.
The problem isn’t limited to Uber. On Tuesday, news emerged that a female engineer at Tesla has accused the company of creating a pervasive culture of sexual harassment. In February, a senior female executive filed a lawsuit against Magic Leap, one of the most well-funded companies in the tech industry, alleging rampant misogyny and a hostile work environment.
Uber isn’t going to be able to magically wave this issue away by donating large sums to a mediagenic progressive charity, appointing another appropriately “diverse enough” white female board member, or magnanimously proffering a diversity metrics report — no matter how many tears Travis Kalanick sheds at company all hands meetings.
Let Uber’s recent public shaming be a lesson to all other tech CEOs: It’s possible to accumulate so much diversity debt that you can’t find enough billions of dollars in funding to shovel on top of it.
We’re all familiar with the idea of financial debt. You borrow money, it accumulates interest, and then someday you repay the principal plus the interest. If you don’t repay it, you have to declare bankruptcy and start over.
The startup industry, which has long prided itself on speed and agility, is primed for the accumulation of all kinds of debts to achieve its pace. We’ve learned to take technical debt seriously. Now it’s time that we confront the costs of diversity debt as well. Given the pervasiveness of Uber’s toxic culture, as well as the length of time the failings went unchecked, Uber now has a massive diversity debt — one that must be repaid with nothing short of a cultural makeover.
It’s possible to have so much diversity debt that your long-loyal customers no longer believe in your fundamental goodwill, and instead flock in the hundreds of thousands to #DeleteUber.
It’s possible to have so much diversity debt that your investors, who are typically loath to compromise the momentum of a runaway growth vehicle, speak up to publicly castigate you.
We need a Chapter 11 for company culture and diversity. Uber needs to declare diversity bankruptcy.
How do companies incur diversity debt? Take a couple of cofounders and their cognitive biases, add a seed round where they’re faced with the existential imperative of finding product-market fit, and whirl in the velocity of needing to “just get things done” in a very short timeframe.
These frequently unexamined biases then get amplified in thousands of individual decisions around hiring, product, operations, compensation, communications, process, and more. If cofounders don’t prioritize the integration of inclusivity and diversity of ideas into their earliest decision-making processes, every decision they make from the very birth of their company worsens their liability, and time only makes the problem harder to solve. Wait long enough, and these problems become nearly insurmountable.
Like financial debt and technical debt, diversity debt is a trade-off, and one that is sometimes in a company’s best interest. Especially in fast-moving startups, debt can be used for leverage: Get what you want now, and pay it off later. Businesses can handle a certain amount of financial debt if it allows for quick capital, and a certain amount of technical debt if it allows for a faster product release.
The most common way that startups go into diversity debt is at the very start: when they decide on their first 10 hires. Nearly all startups choose to opt for speed, believing that hiring from existing friends-of-friends networks will be more effective than working hard to recruit candidates with a range of race, gender, and socioeconomic backgrounds. (Hiring the people who are easiest to find will almost always mean hiring people like you. In terms of race, for example, white people’s social networks are on average 91 percent white, according to a PRRI study, and 75 percent of white people only know white people.)
It’s a common complaint amongst startup founders that they don’t have the time to tackle diversity in hiring early on. This initial tradeoff seems reasonable — after all, you don’t know if your company is going to ever hit product-market fit, much less get to a substantive Series A financing round. But these issues compound. You’ve now signaled to your team, implicitly or explicitly, that your core values do not value diversity or inclusion. Your first 10 hires are going to perpetuate these values, and they are likely to hire 10 more people just like them.
Here’s a common example. It’s hard to hire a female engineer to be the first woman on a team of five male engineers. It’s easy to justify putting off the work and building your diversity debt, thinking that you’ll have more time to get to it later, once you’ve shipped, once you’ve found product-market fit, once you’ve secured your Series A. Now your engineering team has grown to 7, 10, or 15. Hiring your first female engineer has become much harder.
Eventually, it becomes very hard to get heterogeneous candidates to join your organization when they will so clearly be an “Other,” an underclass, no matter how many resources you try to throw at the problem.
Once you start to think of homogenous hiring practices as a debt — one that limits your ability to cultivate a strong portfolio of diverse employees and diverse ideas that can yield greater potential upsides and serendipity for your company — then you’re in a much better position to choose which diversity debt you’re willing to live with.
The problem with cultural and diversity debt is that the interest you accrue is continuously compounding. Continuously compounding assets (such as the network effects of a dominant platform like Facebook) are exciting, while continuously compounding liabilities (such as a lack of diverse representation on an early startup team) can be disastrous.
In 2014, Google finally released its first company report on diversity metrics, after spending years suing to avoid releasing its numbers. On race especially, it was dismal: Only three percent of employees identified as Hispanic, and two percent identified as black. Google’s 2015 diversity report showed no change: three percent Hispanic employees, and only two percent black.
Recognizing that its numbers weren’t improving, Google leapt into action — the company announced that it was investing $150 million across dozens of projects aimed at everything from broadening its recruiting reach to improving fairness and inclusion in the workplace for minority employees. In June 2016, its new report came out: three percent Hispanic employees, two percent black.
What’s keeping Google from moving the needle on these metrics? It’s certainly not for lack of resources being dedicated to the problem, nor internal commitment to diversity — at least to white and Asian employees. Almost every tech company is mired in diversity debt, and the larger you get before addressing diversity issues, the more debt you accrue. Google’s going to be paying down the interest on its diversity debt for a long time before it can start whittling away at the principal.
Uber, Google, Tesla, and Magic Leap are merely several high-profile examples of a systemic issue, and it’s a problem that’s not going to get better on its own. We have to start tackling existing diversity debt — and teaching startups how to prevent it — since it’s now constraining the impact and growth of the tech industry.
Incurring diversity debt should be a choice, not a default.
Uber’s an example of a company drowning in diversity debt.
Uber has delayed addressing its principal issues — the very values and incentives that the company’s compensation, promotion, and reward systems are based on — for so long, that it has no choice now but to declare diversity bankruptcy.
Uber’s long-established culture of disrespect and dehumanization hasn’t been limited to one group of employees. Multiple categories of employees across the company, from executives to management to engineers to drivers, deemed it acceptable to harass, demean, and assault women — colleagues and customers alike. This widespread disrespect demonstrates Uber’s culture has been infected at its core for a long time. What’s accumulated points to a systemic breakdown across nearly all areas of Uber’s business: HR, recruiting, engineering, driver operations, safety and trust, and marketing.
Just as you can’t cure systemic infection by bandaging a finger, Uber isn’t going to be able to rehabilitate itself at this point without taking drastic action.
Had Uber actually addressed its core problems in 2012, when it first started receiving reports of sexual assault, or in 2013, when it first encountered industry outcry about its sexist and shaming blog posts, it might be in a very different position today.
When faced with its first driver related sexual assault complaint, had Uber rolled out comprehensive passenger safety programs, implemented driver background checks, and signaled complete intolerance for any transgressions — minor and major — it might have had a fighting chance in hiring its target of one million female drivers by 2020. Were the company able to hire such a large group of female employees successfully, then women would have had an insuppressible voice within the company, which would have forced Uber reevaluate some of its cultural norms around sexual harassment and discrimination much earlier than 2017. If it had taken these issues seriously when they first cropped up in 2012, it certainly wouldn’t be in the position it’s in today.
In 2012, Uber had 100 full-time employees. Today, it has more than 6,700, not including all of its drivers. That’s over 6,600 employees who have been trained, incentivized, and rewarded in a broken culture, where destructive norms have been internalized and reinforced at every level.
So what can Uber do now? Sometimes to fight a systemic infection, you have to make the hard call of amputation to save the organism.
If Uber wants to start paying down its diversity debt, it needs to start cleaning house and do the hard work of actually fixing its culture. Problems related to culture and diversity are always the CEO’s responsibility. Though it might be tempting for Uber to scapegoat Susan Fowler, HR, PR, or even the individual managers involved in Fowler’s case, everyone takes their behavioral cues from the top.
Uber must fire all employees, managers, and executives who have been culpable in fostering a culture where sexual harassment is tolerated for the sake of financial growth. This includes CEO Travis Kalanick and board member Arianna Huffington, who thus far have enabled and empowered this toxic culture to persist. Throwing out a sacrificial offering or two like Amit Singhal is not enough.
The next step is acknowledging what you don’t know. Uber must hire external, independent experts to investigate and provide safe channels to constructively address its current issues. Uber must acknowledge that much of its current executive team and senior management needs to go in order to make substantive improvements to its culture. Uber needs to demonstrate commitment to a zero tolerance policy for anything less than a safe, inclusive environment for the company’s most underrepresented groups of employees. It must prioritize employee safety and rider safety programs, and it must show its millions of customers and stakeholders that it cares about human well being.
The tech industry is uncommonly united in its outrage at Uber — not only because of Uber’s callous treatment of our friends and colleagues, but because subconsciously we recognize that we may be in danger as well. How much do Uber’s failures reflect our own invisible, growing debts?
If you’re a startup CEO, you may not be as different from Travis Kalanick as you think. You have probably made some similar choices and are taking on similar debt. If you’re a VC, you may want to look inwardly at your own firm and its own diversity and inclusion (or lack thereof).
Uber is heralded as the largest of all private tech unicorns — and an industry whose de facto leader behaves so unconscionably is not a very healthy industry. Let’s direct a little of the Uber outrage at our industry and at our own organizations, lest we all wind up as Ubers.