Level 6 Study Materials

What’s the deal with Uber?

In today's post, we will look at Uber, and discuss what it is, what they do, and the controversies or heated debates about the company.  Photo by: Danish Siddiqui / REUTERS

What is Uber?

Many people may have heard of Uber. Regardless, Uber (or, Uber Technologies Inc) is a “transportation network” ride-hailing tech unicorn founded by Travis Kalanick, the current CEO of the company. A tech unicorn is a start-up that is worth over $1 billion dollars. Indeed, Uber has a net income of $6.5 billion and is valued at over $51 Billion.

Uber is an on-demand service that works through its phone app. You can hail a cab through your app, and a driver can meet you where you would like to be picked up. Sometimes, ride will be more expensive because there is a high demand for rides. This is known as “surge” pricing. If you enjoy your ride with your Uber driver, you will then be able to rate them on your phone.

Uber does not pay for the cars (drivers have to use their own cars) and carefully coordinate them through a highly scaled and standard platform. Uber takes a 20-30% cut of all bookings, and uses the data to minimize wait times and maximize drive times.

Uber also plans to develop a driverless car program in order to further cut costs and drive profits (although, as you will see, there are some issues with Uber’s plan).

Why is Uber in the news?

There is quite a bit to talk about with Uber.

Uber has been facing controversy for some time now because of concerns about pay and alleged abuses at the company, as well as concerns about possible illicit methods to avoid law-enforcement. But controversy has grown exponentially this year.

To start with, Uber got into a lot of trouble during President Trump’s travel ban or “Muslim ban”. The problem started when taxi drivers in the taxi driver unions protested Trump’s ban by refusing to drive people to the airport. Uber, on the other hand, turned off surge pricing to New York City’s JFK Airport according to Fortune Magazine. Some saw this as throwing support to Trump’s ban. Some saw it as an example of scabbing. Regardless, this led some 200,000 users to drop Uber.

Then in late February, A blog post by one of Uber’s female engineers entitled “Reflecting on One Very, Very Strange Year at Uber” in which she alleged sexual harassment at Uber. As Susan Fowler, who worked from November 2015 to December 2016, explained about one incident involving her manager on her very first day:

“He was trying to stay out of trouble at work, he said, but he couldn’t help getting in trouble, because he was looking for women to have sex with. It was clear that he was trying to get me to have sex with him, and it was so clearly out of line that I immediately took screenshots of these chat messages and reported him to HR,”

Both HR and upper management told her that although her manager was sexually harassing her, “it was this man’s first offense, and that they wouldn’t feel comfortable giving him anything other than a warning and a stern talking-to”.  Later on, according to Fowler, HR even told her that the manager would likely give her a poor performance review, and there was nothing she could do about it because she “had been ‘given an option,'”.

It can’t get much worse for Uber, can it? Well… on March 1st, it did. Bloomberg published a rather embarrassing exchange between CEO Travis Kalanick and an Uber Driver discussing pricing. It’s a bit hard to hear the audio, so below is a transcript:

 


KALANICK: “So we are reducing the number of black cars in the next few months,”

KAMEL (driver): “It’s good.”

KALANICK: “You probably saw some email.”

KAMEL: I saw the email [that says] it starts in May. But you’re raising the standards and dropping the prices.

KALANICK: “We’re not dropping the prices on Black. But in general. In general, but we have competitors. Otherwise we’d be out of business.”

KAMEL (Driver): “You’re raising the standards, and you’re dropping the prices.

KALANICK: “We’re not dropping the prices on black.”

KAMEL: “But in general the whole price is—”

KALANICK: “We have to; we have competitors; otherwise, we’d go out of business.”

KAMEL: “Competitors? Man, you had the business model in your hands. You could have the prices you want, but you choose to buy everybody a ride.”

KALANICK: “No, no no. You misunderstand me. We started high-end. We didn’t go low-end because we wanted to. We went low-end because we had to because we’d be out of business.”

KAMEL: “What? Lyft? It’s a piece of cake right there.”

KALANICK: “It seems like a piece of cake because I’ve beaten them. But if I didn’t do the things I did, we would have been beaten, I promise.”

[…]

Kamel: “But people are not trusting you anymore. … I lost $97,000 because of you. I’m bankrupt because of you. Yes, yes, yes. You keep changing every day. You keep changing every day.”

KALANICK: “Hold on a second, what have I changed about Black? What have I changed?”

KAMEL: “You changed the whole business. You dropped the prices.”

KALANICK: “On black?”

KAMEL: “Yes, you did.”

KALANICK: “Bullshit,”

Kamel: “We started with $20.”

KALANICK: “Bullshit.”

KAMEL: “We started with $20. How much is the mile now, $2.75?”

KALANICK: “You know what?”

KAMEL: “What?”

KALANICK: “Some people don’t like to take responsibility for their own shit. They blame everything in their life on somebody else. Good luck!”

KAMEL: “Good luck to you, but I know [you’re not] going to go far.”


And then the lawsuits

While Kalanick did give an official policy, things were looking bad for Uber. It can’t get much worse, right?

Well. We haven’t even started with the lawsuits and legal issues.

First, Alphabet, Google’s parent company, filed a lawsuit against Uber for fraud and theft. Alphabet is arguing that it can prove Uber has incorporated Waymo’s (a subsidary of Alphabet) technology into Uber’s self-driving car program. In May of this year, a federal Judge in San Fransisco

Then, Uber got into trouble with Apple back in 2015 for “secretly identifying and tagging iPhones even after its app had been deleted and the devices erased – a fraud detection maneuver that violated Apple’s privacy guidelines”. This story was first reported on back in April 2017. This issue made Apple CEO Tim Cook so angry that he personally confronted Kalanick and threatened to kick Uber off the app store.

And now, Uber is facing another lawsuit from the United States Justice Deparment concerning it’s “Greyball” program, which is an internal software program for and developed by Uber that it “allegedly used to deceive local government officials and evade enforcement of local laws”. Greyball worked by identifying likely government workers and officials and showed them incorrect information about where Uber drivers were. If officials tried to get a cab through Uber, the app would give misinformation about Uber drivers in the area.

And those are just some of the lawsuits and issues that have recently come to the surface.

So, what will happen next?

Short answer is: no one knows. While some have called for Kalanick to resign since February, there doesn’t seem to be much pressure to have Kalanick leave. Uber apparently is looking for another CEO to partner with Kalanick.

Uber has been having fiscal issues as well, losing $800 million in the third quarter of last year. Despite it’s issues, Uber still led Q1 of this year for quarterly expenses and receipts despite a slowdown in growth for the company.

It will be important to watch what will happen in the coming months, specifically the ongoing case in Seattle as well as a federal anti-trust suit in New York. It will also be important to know who will come in an help Kalanick as partner CEO.

But based on all of the issues at work for Uber, I personally would not be surprised that things will only get worse for Uber.

Who knows. Maybe Travis Kalanick can go back to playing Wii Tennis.

One quick thing: if you would like to learn even more on Uber and the issues facing the company, I would highly recommend New York Time’s The Daily, which has recently gone over what is going on at Uber and has useful articles associated with it as well.

Vocabulary:

cut (n.) (business) – money that a business takes away from someone’s pay. 
tech unicorn
 (n.) – a start-up company that is worth over $1 billion. Examples include Snapchat, Uber, and AirBnB
to hail a cab/taxi (n.) – to call for or request for a taxi/ride. 
controversy (adj.) – a public dispute, debate, problem, or argument
illicit (adj.) – illegal, not permitted. 
law-enforcement
(n.) – the department or branch of civil service that enforces law, investigates crimes, and makes arrests. 
exponentially
 (adv.) – to increase at an extremely rapid pace. 
to scab
(n) (labor) – to work while refusing to join a union, or a person who refuses to go on strike and protest while his or her fellow workers protest, which undermines the groups ability to succeed with their protest. Often seen as bad. 
fraud
(n) (US Law) – a false representation of facts that is intended to deceive others. 
allegedly
(adv) – something stated or described, asserted.

Leave a Reply