A villain, a prophet and two wildly successful start-ups
Silicon Valley encourages an odd form of meritocracy that inpires the ambitious to succeed and disregards whatever happens to the rest — it’s a winner-take-all and loser-get-nothing world. In his new book, “The Upstarts: How Uber, Airbnb, and the Killer Companies of the New Silicon Valley Are Changing the World,” Brad Stone reveals the workings of this brutal tech-world battlefield. He amply illustrates that for every tech champion, there is a forgotten crowd of decapitated competitors, pissedoff investors, defenestrated founders and unrewarded early employees. The Silicon Valley meritocracy rewards some for good luck and destroys others for a bad twist of fate.
Consider the different outcomes for two early Uber employeees. Matthew Kochman was a charismatic and ambitious Cornell grad hired to lead Uber’s assault on the New York market. Relying on his considerable charm, he cut deals with the city’s recalcitrant limo drivers to use the newfangled mobile app. But after his relationship with Uber’s chief executive and founder, Travis Kalanick, soured, Kochman bailed on the company only nine months into his tenure, walking away from his unvested equity stake. In a vindictive pique, he consulted for competitors, bad-mouthed Uber to potential investors and founded another transport start-up that went nowhere. Right now, the Uber shares he abandoned are worth more than $100 million.
By contrast, Oscar Salazar happened to know an Uber founder and ended up heading the Mexican development team that coded the original Uber app. Since he was officially in the United States as a student, he couldn’t accept payment in cash. Instead, he took equity in the fledgling start-up. His stake is now worth hundreds of millions of dollars. “It’s way more than I deserved,” Salazar admits. “It’s more than any human deserves.”
While ill fate and chance play their role, true merit also drives some competitors to the top. Uber founder Kalanick demonstrated his swift reaction time in dealing with an incursion by a London company in the U.S. market. When Hailo, a mobile app matching passengers and taxis in London, announced that it planned to set up operations in Chicago, Kalanick raced into the city with Uber. By the time Hailo finally arrived on the scene five months later, it was too late — the company would never carve out an American beachhead.
Similarly, Kalanick impetuously launched Uber operations in Paris during a personal visit, and in a piddly market called China. Soon after flying into Beijing, Kalanick had the Uber engineering team whip up a very basic Chinese version of Uber that he personally convinced a handful of drivers to use. Then he took the first Uber ride in China himself. Within months, Uber would accomplish what no other U.S. tech company had ever managed, not even Google: It captured a substantial portion of the Chinese market and even fought the Chinese taxi incumbent to a stalemate.
Airbnb founder Brian Chesky also has a claim on entrepreneurial genius, anchored by a much-retold story about his company’s origins. Airbnb got its start when penniless industrial-design students began offering lodgers air mattresses in their apartment to pay for their rent (hence the “air” in Airbnb). Early on, the company struggled. Short on cash, the students used their design skills to produce cereal boxes featuring caricatured faces of the 2008 presidential candidates, Barack Obama and John McCain. They then sold the $4 boxes for $40 at the Democratic National Convention and saved their foundering start-up with the cash earned. As I observed when I pitched my own start-up, a cereal box featuring Obama’s face still adorns the offices of Y Combinator, the prestigious Silicon Valley venture capitalist firm that first funded Airbnb (and my own unremarkable company).
While Uber and Airbnb are the twin showpieces of new entrepreneurship, the leaders of these two companies could not be more different. Each embodies one of the two chief-executive archetypes currently in vogue. Uber’s Kalanick is start-up CEO as textbook sociopath: glib, charming, manipulative, calculating, sometimes reckless and content to treat people as mere means to personal ends. In one telling scene, Kochman had just received veiled physical threats from a sketchy Ukrainian who ran one of New York’s vast limo fleets. In response, Kalanick whimsically observed, “If you get whacked, do you have any idea how much press that will get us?”
The combative Kalanick tenaciously fought any attempts to regulate Uber in the United States, alienating one regulatory agency after another in rowdy public hearings, to the point where Uber staffers eventually kept him from attending. Meanwhile, a direct competitor named Lyft attempted to woo and cajole the California Public Utilities Commission into allowing what we now call ride hailing (that is, permitting anyone to become a taxi driver in their personal vehicle). Suddenly Kalanick became a rule-following reactionary, badgering the commission to go after Lyft as intensely as he’d hectored it to ignore Uber. When Lyft got approval for ride hailing in San Francisco, Kalanick instantly pivoted and announced that Uber was launching a similar product (now known as UberX). What followed was a start-up death match that lives in Silicon Valley lore: Uber employees routinely requested Lyft rides and then offered Lyft drivers huge bonuses to defect to Uber.
On the other side of the start-up playbook, Airbnb’s Chesky is CEO as prophet of a new start-up religion, motivated as much by a mission as by money. Its mission: to bring the world together via shared experiences and cheap lodgings. Airbnb headquarters (like that of my former employer Facebook) is papered with exhortatory distillations of company culture, such as “Belong everywhere” and “Airbnb love” (Facebook’s were rather less cuddly). The company held yearly pow-wows — elaborately staged in grand venues with A-list entertainment — for all of its hosts, while Chesky evangelized to the converted in revival-tent style. Even Stone, the cynical journalist, found some meaning in Airbnb hosts’ gratitude to the company and their passion for its culture.
The Silicon Valley carnival of characters and oddities doesn’t attract nearly enough serious, long-form reporting. Leigh Gallagher, an assistant managing editor at Fortune, offers another much-needed perspective in her new book, “The Airbnb Story: How Three Ordinary Guys Disrupted an Industry, Made Billions . . . and Created Plenty of Controversy.” Gallagher describes how the can-do passion and prophetic vision of Airbnb’s founders overcame all obstacles on the way to redemptive success. The take is more corporate and dry than Stone’s account, and the tale is told in more linear fashion (and somewhat conventionally) from creation, to growth, to surmounting challenges, to eventual success. It’s Airbnb rendered as a Horatio Alger fable, but with smartphones. What Gallagher lacks in snark she makes up for in business perspective, including a long competitive analysis with thoughts from industry leaders that assesses how Airbnb fits into the conventional hostelry business.
By contrast, where Stone really succeeds is in providing the reader with the visceral experience of the start-up enterprise, something lost in typical rah-rah tech journalism. Reading “The Upstarts,” you can almost smell the tightly wound aggression of a pacing Kalanick inside an Uber conference room, phone pressed to his ear, alternately hectoring an employee to meet tighter deadlines or cajoling a wary partner into a deal. You can feel the sphincter-clenching fear and confusion of neophyte Chesky as Airbnb is hit with the first of several scandals involving hosts burned badly by destructive guests, or guests harmed, or even killed, by negligent hosts.
We are spectators of capitalism as theater staged inside progressively more sumptuous offices, all paid for by escalating rounds of venture capital financing that is dizzying even by Silicon Valley standards: Uber and Airbnb have collectively raised around $12 billion. If everything in our lives eventually becomes shared, booked and optimized via software, then Uber and Airbnb will have been the beginning of that epochal transformation.
Antonio Garcia-Martinez is a former Facebook product manager and Twitter adviser, and is the author of “Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley.”
TOP: Travis Kalanick, founder of Uber. BOTTOM: Brian Chesky, CEO of Airbnb.