How Uber changed face of Silicon Valley
Ride-sharing US company has pioneered a new phase in the internet, moving not only pixels but people
Uber has never reported an annual operating profit, but it will join an elite group of Silicon Valley companies when it lists in New York next month.
Valued at up to US$91.5 billion ($137.2b), Uber’s initial public offering (IPO) ranks with Amazon in 1997, Google in 2004 and Facebook in 2012 as a vindication for a tech company that has created a new way of looking at the world.
“It’s definitely bred a generation of founders that are now inspired to go tackle other physical-world problems that other tech companies hadn’t been as open to doing,” said Chan Park, a former Uber manager in Southeast Asia.
Under former leader Travis Kalanick, Uber pioneered a new phase in the internet: moving not only pixels but people, with all the chaos and complexity the real world brings.
“The critique is that they went too fast and broke regulations — but if they didn’t do that, the business wouldn’t exist,” said Mark Suster, tech investor at Upfront Ventures.
Uber’s outsized impact on the world created logjams at airports and stadiums, slowed rush hour to a crawl, and triggered protests from traditional taxi companies.
Figuring out these problems, city by city, meant Uber’s biggest breakthroughs were not in technology but in operations.
It took a different kind of talent, too. Alongside the usual crop of Stanford computer science graduates that Silicon Valley companies vie to hire, Uber operations chief Ryan Graves recruited local staff from a wide variety of backgrounds, from Wall Street financiers to a former tugboat controller in Seattle.
Ten years after it started — the perfect moment to take advantage of the shift to smartphones and innovations ranging from GPS to
payments — Uber has moved ridesharing and the gig economy into the mainstream and turned itself into a feature of daily life for tens of millions of people around the world.
But its success has come at enormous cost. Its investors in Silicon Valley, Wall Street and beyond have stomached more than $10b of cash burn so far as Uber expanded across the world, a spend only possible in an era of low interest rates and high appetite for private tech investments.
Uber’s playbook for expansion was wildly different to many earlier internet companies, which benefited from network effects and the ease of purely online distribution.
“The first six to eight months was a brute-force slog to onboard as many drivers and riders as possible,” recalls Andrew Chapin, who joined Uber from Goldman Sachs in New York in 2011. “I spent a lot of time in dingy offices of black-car companies in Queens and Washington Heights.”
In contrast to the highly centralised Silicon Valley campuses of Apple, Google and Facebook, Uber was from the start a widely distributed organisation that granted unprecedented control to its young army of city managers.
With hundreds of new hires arriving every week, it became hard to impose structure on their teams. Some ex-Uber staff say this paved the way for the cultural problems that came to a head in 2017, when Kalanick was forced out after allegations of harassment, bullying and discrimination at the company.
Yet many who lived through the chaos now take pride in how much harder won, as they see it, was Uber’s growth than that of its forebears. “Facebook and Google are not interacting with the real world,” said one former senior manager. “People are really difficult.”
Instructed to “always be hustlin’”, staff were guided by whether their ideas moved the needle on key growth metrics. These internal dashboards gave each of them a window into how cities varied, in a way that was rare in the write-once, run-anywhere world of software.
“That idea of local autonomy, of start-ups within a start-up, and democratised access to data let us be really agile and move really quickly,” said Nick Mathews, who was one of Uber’s first few dozen employees and launched the service in Boston.
Open data also bred intense competition between city teams. During weekly “syncs” between managers, Kalanick would grill individuals on minute details of their operations, while staffers vied to impress him and trump their colleagues elsewhere by touting their latest “growth hacks”.
“It was great to prove that Boston was better than Chicago or DC,” said Mathews, now co-founder of Mainvest, a crowdfunding marketplace for local small businesses. “You wanted to be the first to share something.”
Yet their experiments had realworld consequences. Sometimes they blew back on Uber itself, such as the day a trial promotion accidentally made all rides in New York City free for an hour.
On other occasions, they brought backlash from customers, such as when Uber implemented “surge pricing” after superstorm Sandy on the US east coast. (Uber said the fare rises were aimed to encourage reluctant drivers on to roads. Instead it looked like it was gouging users.)
Most often, though, it was drivers who felt the sharp end of Uber’s constant tinkering, according to Alex Rosenblat, author of Uberland: How Algorithms Are Rewriting the Rules of
Work. Her interviews with hundreds of drivers found the frequent changes made it difficult for individuals to predict how much they would earn.
“If everyone is constantly being experimented with, how do you know that everybody is being paid fairly?” Rosenblat said. “It’s not that experimenting is bad — you should just have a liveable minimum wage.”
Uber’s early staffers maintain that they were not as cold and detached in these dealings with drivers as its many critics portray. There were panic attacks, tears under desks, fears of personal retaliation from drivers.
The consequences for Uber came in 2017’s reckoning. Kalanick’s hustling tactics had driven Uber’s stellar growth but after antagonising drivers, regulators and even employees, they blew out the public’s goodwill, too. Hundreds of thousands of customers deleted Uber from their phones, according to its own IPO filing.
Today, having lived through the “dumpster fire” years, many Uber alumni are now striking out on their own. Their start-ups range from new spins on marketplace businesses and electric scooters to robotics and autonomous trucks.
“Uber became the marketing shorthand for a type of disruptive technology service that could offer convenience,” Rosenblat said. “If you can disrupt a marketplace that is heavily regulated, that opens up a lot of arbitrage potential. But you can’t do that in a space like healthcare.”
Yet with networks of investors already forming specifically to invest in Uber alumni, such as Moving Capital, venture capitalists are optimistic Uber’s legacy will be an ambitious and battle-hardened crop of start-ups.
“A decade from now I believe the value and societal impact of companies founded by ex-Uber employees will surpass that of all the companies founded to date by exemployees of FAANG companies [Facebook, Apple, Amazon, Netflix and Google],” said Lars FjeldsoeNielsen, an ex-Uber employee turned investor at London-based Balderton Capital. “Their unique experience at Uber has encouraged those founders to tackle enormous challenges that will transform society.”