by Isaac, Mike
Kalanick, seeking to defend himself against Google’s self-driving division, had begun staffing up. He had opened an entire center in Pittsburgh dedicated to self-driving car research—the Advanced Technologies Group—in a joint program with researchers at Carnegie Mellon University. The Uber Advanced Technologies Center itself served mostly as cover to raid CMU’s robotics department. Matt Sweeney, an early employee and lieutenant to Kalanick, led some forty engineers out the door, over Pittsburgh’s many bridges, and into the arms of Uber’s new research team. The university was furious.
But buying Otto would mean something different. Acquiring Anthony Levandowski’s startup, effectively poaching Google’s autonomous research unit, would signal Kalanick’s dedication. The price tag sealed the deal: a cool $680 million, or 1 percent of the value of Uber’s entire operation at the time. Plus, Levandowski and his team were entitled to 20 percent profit-sharing of any self-driving trucking business they created. It was a monster deal. And a kick in Google’s teeth.
In return, Kalanick would get all of Otto’s data, a road map for the direction the company was headed, complete control over its intellectual property and patents, and “a pound of flesh”—Kalanickspeak for Levandowski’s dedication to Uber and the cause.
On August 18, 2016, Kalanick and Levandowski unveiled the acquisition. The press covered it as the coup it was; with one of Larry Page’s protégés at the helm, Uber was suddenly ready to challenge Google in the race for self-driving cars.
“The golden time is over,” Kalanick said in a meeting with a top engineering manager, discussing the deal. “It is war time.”
Forty miles south at Google’s campus, executives woke up to news of the acquisition.
They were furious.
Chapter 18 notes
¶¶¶¶¶ See: Google Glass, the thousand-dollar face computer that flopped magnificently after Google realized it had created a legion of “Glassholes”—people who used the technology to take photos of unsuspecting others. The project didn’t last very long, but ate up hundreds of millions of dollars before it was shuttered.
Chapter 19
SMOOTH SAILING
Things were going well for Travis Kalanick.
It wasn’t that long ago that he had met with the co-founders of Lyft—Logan Green and John Zimmer—to discuss the possibility of a merger. Though Uber was soundly beating Lyft in the war for customers, the pink, mustachioed company still managed to raise money every six months or so to keep itself afloat. Executives at Uber figured it would be cheaper to purchase Lyft outright instead of continuing the ongoing price war.
Kalanick had invited John Zimmer, Lyft’s president, to his apartment high up in the Castro hills, along with his lieutenant, Emil Michael. Over cartons of Chinese food, the two sides presented what each thought would be a fair deal. But they had vastly different ideas of what fairness entailed. Lyft’s founders wanted a 10 percent stake in Uber for selling their company.
Kalanick and Michael wanted something closer to 8 percent. As the sides worked toward a compromise—apparently one that did not include the number 9—a venture partner who had joined the discussion asked for much more—a 17 percent stake. The talks basically ended there.
Kalanick didn’t really want to buy Lyft, anyway. He wasn’t into Zimmer. Something about the Lyft president’s personality irked Kalanick. The Uber CEO didn’t want to work alongside Zimmer. He wanted to professionally humiliate him. Lyft was going to run out of money soon enough.
In retrospect, Kalanick felt lucky for having passed on Lyft. Between Michael and himself, Uber had perfected the art of the fundraising. Now, they had convinced the public investment arm of Saudi Arabia to invest $3.5 billion in Uber, privately valuing the company at $62.5 billion—an unprecedented figure for any private technology company.
The deal with the Saudis, announced in June 2016, allowed Kalanick to cement his power at the top of Uber. In a move that would anticipate later events, Kalanick directed his dealmaking stewards to draw up paperwork that gave him, and him alone, the power to appoint three additional members to Uber’s board of directors. The move made some directors nervous—especially Bill Gurley. If approved, it would give Kalanick the power to stack the board against any challenge.
But those same directors also saw Kalanick show up with $3.5 billion in new investment. This was more than a cash infusion. The Saudi investment was a war chest. At the moment, Uber was competing against DiDi in China, against Grab and Go-Jek in Southeast Asia, against Ola in India, and against Lyft in the United States. These were costly, painful wars—with battles on multiple fronts on multiple continents against well-funded adversaries. The Saudi capital gave Kalanick the firepower to overwhelm all his enemies at once.
So, after some deliberation, Uber’s board of directors signed off on the deal.
What improved Kalanick’s mood even more was the state of play at Lyft. By the end of 2016, Lyft was struggling, bleeding capital in a subsidy war with Uber, but without the security of Kalanick’s financial backing. Kalanick took pleasure in hurting Green and Zimmer, and showed them no mercy. Joe Sullivan, Uber’s security chief, monitored Lyft’s websites, open-source repositories, and data, seeking a knockout blow.
Kalanick was presented with a delicious new secret weapon by a group of engineers on “Workation.” A “Workation” was an annual Uber tradition: instead of spending two weeks in December relaxing, employees would volunteer to spend two weeks working on any kind of project they wanted. Over the course of one December Workation, a group of employees built a prototype Uber driver app that repurposed certain parts of a driver’s smartphone—specifically, the accelerometer and gyroscope—to detect the sound of notifications that came from the Lyft app. If Uber knew that a driver worked for Lyft, Uber could market itself differently to the driver—likely with cash bonuses—to entice them away from the pink moustache.
In a meeting, the engineers presented the project to managers, lawyers, and Kalanick himself. The executives around the table were both excited and nervous. This was a powerful new weapon in the war against Lyft. But detecting sounds in a driver’s car without permission might cross an ethical line. After the presentation ended, Kalanick sat in silence. No one spoke.
“Okay,” Kalanick barked, breaking the tension. “I think this should be a thing,” nodding with approval. He stood up and looked the engineers in the eye: “I don’t want the FTC calling me about this, either,” he said. Kalanick thanked everyone for coming, turned toward the door and promptly dismissed the meeting. The feature was ultimately never implemented.
In Silicon Valley, customer privacy had long taken a backseat to companies’ desire to collect data. But Uber took the neglect one step further. Kalanick treated user privacy as an afterthought. At one point, Kalanick changed Uber’s settings so the app could track people even after they had ended their ride. Customers protested and demanded tighter privacy settings, but Kalanick wouldn’t acquiesce for years; he wanted to gain insight into user behavior by seeing where people went after getting dropped off.
Uber would outsmart Lyft at nearly every turn. Green and Zimmer were competitive and ambitious, but Kalanick always faster, and more willing to use questionable tactics. Kalanick didn’t just attack Lyft’s userbase, he went after their best personnel. Travis VanderZanden was an entrepreneur who sold his startup, Cherry—the “Uber for carwashes”—to Lyft in 2013. VanderZanden was a “hustler,” which Kalanick admired. In just a year, VanderZanden had risen to be Lyft’s chief operating officer, one of the highest positions in the company, before he double-crossed his partners to join Uber in 2014.
This was classic Kalanick. When one of his underlings would deliver him good news (which was usually some form of bad news for a competitor), he always grinned—his charming, boyish grin—then rubbed his hands together and, if he was sitting, rose to pace and think of Uber’s next move. He hated his former mentor, Michael Ovitz, for screwing him over during the Scour startup y
ears. But he had also learned from Ovitz. When the superagent had reigned over Creative Artists Agency, and dominated Hollywood for twenty years, Sun Tzu’s The Art of War had been his bible. Now it became Kalanick’s, too:
So in war, the way is to avoid what is strong and to strike at what is weak.
Lyft was weak; Uber was strong. Both companies were willing to make war, but Uber was faster, better capitalized, and more ruthless than Lyft. Whereas Green and Zimmer acted the part of nice guys, Travis Kalanick would do anything to win. As Lyft’s coffers emptied and the founders struggled to raise money, it looked like Uber was going to prevail.
“Holy shit. Am I in over my head here?” Jeff Jones wondered.
Perched at an empty standing desk in the foyer of Uber’s headquarters, Jones and an assistant watched the names of drivers dancing down his Facebook page, all blasting him with expletives and angry questions. For a man used to the mild temperaments of people from Minnesota, this was uncomfortable. “These people are furious!” he said, looking around for sympathy. Other than his assistant and a handful of employees sitting on black leather sofas nearby, engrossed in their MacBooks, Jones was alone.
Jeff Jones was a career executive. Workers had been upset with him before. But it wasn’t an everyday occurrence. People liked Jones. Even at almost fifty and mostly silver-haired, he still looked like a Boy Scout. His face was bright and fresh—chipper, even—and he would set the tone of a meeting by flashing a big, open smile. A year spent at Fork Union Military Academy playing baseball contributed to his personal discipline and upright posture. That and a natural pep and charisma had helped him navigate corporate America. First came Gap Inc. and Coca-Cola, before making his name as a marketing whiz at Target.
During his tenure at Target, customers had mostly loved the big, red bullseye; Targét, they called it, with a mock French accent. But as chief marketing officer, Jones had also shepherded Target through one of the worst periods in its history, after a 2013 data breach left the personal information and financial data of tens of millions of Target customers vulnerable to hackers. He knew what it felt like for people to be mad at him.
Even still, there was angry, and then there was Uber-driver angry. Travis Kalanick knew his business was flying high, and people were taking more Uber trips than ever. But he also knew he had a driver problem, which had begun to affect his bottom line. Uber’s driver “churn”—the length of time it takes for a person to start driving for Uber and then stop and not return—was abominably high.
Everyone in the company knew why, and soon, Jones would know, too: driving for Uber was miserable. The company jerked them around with rapidly fluctuating hourly rates and terrible communication with headquarters. After Uber launched its carpooling product in New York, the office sent a survey to its drivers to see how things had gone. As a roomful of Uber employees examined the results, one manager expressed disgust with the spelling and grammatical errors the drivers included in their responses. “God, I can’t believe these people’s votes count the same as ours,” he quipped to his subordinates.
Drivers, as a result, felt they were disposable to Uber. And in truth, they were. In internal presentations, product managers would stress that “satisfaction ratings” among drivers—already low—had plummeted in early 2016. Roughly a quarter of Uber’s drivers churned out every three months. People hated driving for Uber so much, the company had to recruit new drivers from the widest labor pools possible. That included the obvious, like Lyft and taxi drivers, and the not-so-obvious, like minimum wage–earning workers at McDonald’s, Wal-Mart, even entry-level employees at Jeff Jones’s alma mater, Targét.
Jones was first enticed when, like Anthony Levandowski before him, he met Kalanick at a TED conference. After Kalanick left the stage, the two struck up a conversation about how to improve Uber’s abysmal reputation. Everyone loved the product itself, but hated the brand. And Jones was a brand guy. It didn’t take long for Kalanick to lure him over to Uber. Jones’s title was “President of Ridesharing,” a portfolio as vague as it was wide.
In practice, Jones took over most of the marketing duties of Ryan Graves, SVP of operations. Graves was an “OG” at Uber, there from the start, but he was no marketing guru. The company’s reputation was in the toilet; it needed a professional. So Graves was pushed aside, and given a consolation prize of “focusing on some of Uber’s experiments,” like food and package delivery services.
For Jones, his job was twofold: spin up marketing, and fix the driver problem. Graves had neglected this project. He had never built a proper, functioning human resources apparatus for his employees, nor did he create an effective way of fielding complaints from Uber’s millions of freelance “driver-partners.”
Now just a few weeks into his new job, Jones found himself in front of a laptop at Uber’s headquarters, faced with hundreds of pissed-off Uber drivers. His plan was to begin improving driver relations by introducing himself with a question-and-answer session conducted over Facebook. Drivers seized the opportunity to express their frustration.
“What are you going to do about YOUR DRIVERS when driverless cars come on the road?” “Will you be giving drivers stock options once there are driverless cars on the roads?” “Has Uber forgotten that drivers built their company?” “Why should drivers be put out of work when they were the ones made Uber successful?” Drivers pelted Jones with questions and accusations. Jones was catching years of pent-up aggression from Uber’s driver force. He had only managed to answer twelve questions in the thirty minutes he scheduled—clearly not enough time, he realized, to deal with years of anger and baggage. After his assistant jumped on the thread to announce that Jones had to run, the thread erupted.
“You made it crystal clear (if there was any doubt) that Uber does NOT care about it’s [sic] drivers. From the bottom of our hearts, ::middle finger::,” one wrote.
Jones shook his head at the MacBook screen. What had he gotten himself into?
While Jones was getting the digital bird, Kalanick was embodying his new lifestyle—that of the billionaire****** playboy.
Back in the Scour days, Kalanick had lived with his parents. During the early years of Uber, he had preferred to wrap himself in the warm comfort of an Excel spreadsheet than to stuff dollar bills into G-strings at the Gold Club. (One night he and some friends had actually gone to the Gold Club and Kalanick pulled out his laptop and started working.) Now that Uber had become a unicorn, Kalanick leveled up, largely with help from one man: Shervin Pishevar, a friend of Kalanick’s and an early investor in Uber. Pishevar helped Kalanick bring out the true baller within.
Pishevar, a stocky, slick-haired VC, was the kind of Silicon Valley investor whose friendships matched his rivalries. Pishevar might shower an entrepreneur with compliments one day, then battle them over a term sheet the next. Most of all, Pishevar loved being in the presence of power, and had a keen sense for when such opportunities might present themselves.
One such opportunity presented itself, over time, with his new friend Kalanick; he eventually convinced Kalanick to let Pishevar’s firm, Menlo Ventures, invest in Uber. One of Pishevar’s partners, Shawn Carolan, did much of the work to make the deal happen. But Pishevar managed to take most of the public-facing credit for it; at one point, Pishevar shaved the word “UBER” into the hair on the back of his head, an attempt to prove his devotion to Kalanick’s company.
In later years, Pishevar would be accused of sexual misconduct by multiple women. One alleged incident involved Austin Geidt, one of Kalanick’s earliest hires and longest tenured employees. At Uber’s “Roaring ’20s” theme holiday party in 2014—at which Pishevar showed up with a live pony on a leash—Pishevar was said to have groped Geidt by sliding his hand up her leg and under her dress. Pishevar disputed her account; another person who was with him that evening claimed Pishevar “wouldn’t have been able to touch Geidt because he was holding the pony’s leash in one hand and a drink in the other.”
Kalanick was
a rockstar now, Pishevar said, and encouraged Travis to embrace the lifestyle. Once when Kalanick flew to Los Angeles from Panama, Pishevar sent his assistant to meet Kalanick at the airport. In the back of the car was a suit for Kalanick to change into. They would Uber to parties in Beverly Hills, mingling with celebrities like Sophia Bush and Edward Norton. Leonardo DiCaprio was a frequent guest in their social circle.
Friends close to Kalanick called it “aspirational baller syndrome.” Long before Uber, Kalanick had always wanted to be the badass who hops in limousines, dates the hottest girl, and graces the right parties. Now, he got to live his dream. Kalanick was making up for years of longing. The cost of admission: opportunities for small but significant amounts of Uber equity, available primarily to members of this new celebrity circle.†††††† (Some of it was strategic, too; in the startup world, celebrities often promoted up-and-coming apps in exchange for equity or cash.)
Parties in remote, exotic locations particularly appealed to Travis and Emil Michael, who would later become his new wingman. Kalanick’s girlfriend, Gabi Holzwarth, helped him organize a gathering of friends and stars on the Spanish island of Ibiza. To Kalanick and his crew, the idea of jet-setting, fame, and fun was instantly appealing.
