In an excerpt from his new book “Super Pumped: The Battle for Uber,” New York Times reporter Mike Isaac reveals the details of Uber’s fight against Portland authorities to enter the local market. Isaac will present his book at a Stigler Center and Harry L. Davis Center event on November 18.
No one wanted to walk home that night.
It was winter in Portland, 2014, cold enough to need a heavy jacket. Downtown traffic was thick with students, commuters, and holiday shoppers buying gifts. It had snowed earlier in the week; the streets were still slick with rain and melted flurries. White, flickering Christmas lights lined the trees along Broadway downtown, a festive backdrop for the holiday season. But it wasn’t a good night to be waiting around for a bus. The local transportation officers stood outside in the cold—damp, bored, and annoyed—trying catch a ride.
The officers weren’t looking for a cab home. They worked for the Portland Bureau of Transportation and had a mandate: Find and stop anyone driving for Uber, the fast-growing ride-hailing startup. After months of trying to work with city officials to make the service legal in the city, Uber had thrown negotiations out the window. The service was launching that evening, without the bureau’s approval.
RSVP NOW: NOV 18 – Award-winning reporter @MikeIsaac discusses his new book with @ChicagoBooth‘s John Paul Rollert. “Super Pumped” takes a deep look at @Uber, one of the great venture capital power struggles of our time. @Davis_Center @StiglerCenter: https://t.co/WPgx56DTrS pic.twitter.com/nt3CJCHizb
— Stigler Center (@StiglerCenter) November 5, 2019
For Uber, it was business as usual. Since 2009, the company had faced off against legislators, police officers, taxi operators and owners, transportation unions. In the eyes of Travis Kalanick, Uber’s co-founder and chief executive, the entire system was rigged against startups like his. Like many in Silicon Valley, he believed in the transformative power of technology. His service harnessed the incredible powers of code—smartphones, data analysis, real-time GPS readings—to improve people’s lives, to make services more efficient, to connect people who wanted to buy things with people who wanted to sell them, to make society a better place. He grew frustrated by people with cautious minds, who wanted to uphold old systems, old structures, old ways of thinking. The corrupt institutions that controlled and upheld the taxi industry had been built in the nineteenth and twentieth centuries, he thought. Uber was here to disrupt their outmoded ideas and usher in the twenty-first. Nevertheless, transportation officials were beholden to legislators, and legislators were beholden to donors and supporters. And those donors often included drivers’ unions and Big Taxi, the groups who wanted Uber to fail.
Uber had already tried the nice-guy approach in Portland. Twenty-four hours before, Kalanick had dispatched David Plouffe, an expert political strategist, to smooth things over with city transportation officials. Plouffe was a silver-tongued creature of politics. Many believed his mastery had helped Barack Obama clinch the presidency in 2008. Plouffe knew exactly the right notes to hit with local politicians. He called Charlie Hales, Portland’s affable mayor, to brief him on Uber’s next steps. Hales took the call in an office in City Hall, joined by Steve Novick, his transportation commissioner.
If Hales was a nice guy, Novick was his enforcer. Standing four feet, nine inches tall, with thick glasses and a voice that pitched steadily higher as he got angry, Novick was a bulldog. The son of a waitress and a New Jersey union organizer, Novick was born without a left hand and missing fibula bones in both of his legs, disabilities that enhanced his pugilistic spirit. After graduating from the University of Oregon with his bachelor’s degree at eighteen years old, he went on to earn a Harvard law degree by the age of twenty-one. He had a sense of humor, too: in past campaign advertisements, Novick branded himself “The Fighter with the Hard Left Hook”—a reference to the metal hook-shaped prosthesis that capped his left arm.
Plouffe opened talks with a friendly overture, letting the two local politicians know that Uber had waited long enough, and with a folksy, familiar tone in his voice—a classic Plouffe touch—said Uber was planning a launch downtown the next day.
“Well, guys, we’re already in a number of suburbs outside of Portland, and there’s just so much pent up demand for our service in your great city,” Plouffe said. Uber’s pitch since Plouffe came aboard was a smart one, populist in tone. The service was a way for individuals to earn money using their own cars, on their own terms, setting their own schedule. It would reduce the number of drunk drivers on the road, improving city safety, and passengers would have another convenient option in places where public transportation wasn’t fully mature. “We’re really trying to provide a service to your citizens here,” he went on.
Novick wasn’t having it. “Mr. Plouffe, announcing that you’re going to break the law is not civil,” he said, his hook digging into the mayor’s desk in frustration. “This is not about whether we should have a thoughtful conversation about changing taxi regulations. This is about one company thinking it is above the law.”
Novick and Hales had tried to tell Uber for months that the company couldn’t just roll into town and set up shop just because it was ready to do so. The taxi union would have a conniption. Furthermore, there were existing regulations that prevented some of Uber’s services from operating. And since ride-hailing was such a new phenomenon, much of Portland’s existing rules didn’t address the practice—laws for Uber just hadn’t been written yet. Uber would have to wait.
It wasn’t as if Novick and Hales were being inflexible. Hales had promised to overhaul transportation regulations upon entering office. Just a few weeks prior, Portland was one of the first cities in the country to draft rules that allowed Airbnb, the home-sharing startup, to operate legally within the city’s confines. And for more than a year, the hope was that such a forward-thinking city could do the same with ride-sharing.
But Portland’s good intentions weren’t delivering on Kalanick’s time frame. Now, the two sides found themselves at an impasse. “Get your fucking company out of our city!” Novick yelled into the speaker phone. Plouffe, the charmer, was silent.
Uber’s nice-guy approach hadn’t worked. But it wasn’t designed to. Over the previous five years, the company had grown from a startup employing a couple of techies in a San Francisco apartment to a burgeoning global behemoth operating in hundreds of cities across the world. It had done so by systematically moving from city to city, sending a strike team of employees to recruit hundreds of drivers, blitz smartphone users with coupons for free rides, and create a marketplace where drivers were picking up passengers faster than the blindsided local authorities could possibly track or control. This was the plan for Portland as well, no matter what the mayor and his enforcer had to say. And Travis Kalanick was tired of waiting.
Six hundred miles south of Portland, at 1455 Market Street in San Francisco, Travis Kalanick was power-walking around Uber headquarters.
The thirty-eight-year-old chief executive was a pacer. Pacing was something he had done for as long as any friends of his could remember; his father once remarked that a young Travis had worn a hole in the floor of his bedroom from all the pacing. The habit didn’t dissipate with age. As he grew older, Kalanick leaned into it. Pacing became his thing. Occasionally, when taking a business meeting with an unfamiliar face, he’d apologize and stand up—he had to pace.
“You’ll have to excuse me, I just gotta get up and move around,” Kalanick would say, already out of his chair. Then he would continue the conversation, full of kinetic energy. Everyone inside Uber headquarters was used to Kalanick doing laps around the office. They just made sure to stay out of his way.
Uber headquarters was specifically designed with Kalanick’s pacing in mind. The 220,000 square feet of office space in the heart of San Francisco included a quarter mile of indoor, circular track built into the cement floor, which weaved through rows of standing desks and shared conference room tables. The track, he would say, was for “walk and talks.” Kalanick liked to boast that during the course of any given week his walk and talks would take him 160 laps around the quarter-mile track, the equivalent of forty miles.
This was not just any walk and talk. Portland officials had been stalling on new transportation regulations for more than a year. Now Uber was going to launch in the city, without the mayor’s consent. They didn’t have time for city officials to get their act together and write new laws. “Often regulations fail to keep pace with innovation,” an Uber spokeswoman would later tell reporters of the Portland incident. “When Uber launched, no regulations existed for ride-sharing.”
The problem wasn’t Uber’s black car service, which functioned well in a number of cities because it adhered to standard livery and limousine service regulations. The problem was UberX, an ambitious, low-cost model that turned nearly anyone on the road who had a well-conditioned car and could pass a rudimentary background check into a driver for the company. Allowing random citizens to drive other people around for money opened up a slew of problems, most notably that no one had any idea whether or not it was legal. At Uber, no one really cared.
Kalanick didn’t think much of the nice-guy approach to dealing with cities. He believed that politicians, when it came down to it, would always act the same way: they would protect the established order. It didn’t matter that Uber was transformational, a way for people to catch a ride from a stranger with just a few taps on their iPhone. The new model pissed off the taxi and transit unions, and those people would flood the mayor’s office with angry phone calls and emails. Uber, meanwhile, would happily rake in the cash, and do so with a groundswell of public support from locals who loved the ease and simplicity of the service.
Kalanick was done waiting. It was time to go. He gave the word and Uber general managers on the ground in the Pacific Northwest got the message: Protect the drivers, trick the cops, and unleash Uber in Portland.
The next evening, Erich England was waiting in front of a historic venue, the Arlene Schnitzer Concert Hall, along Portland’s storied Broadway strip. He was glaring down at his phone, refreshing his Uber app.
England was not a concertgoer: he was there to bust Uber. Posing as a fan of the symphony looking to catch a car home, the Portland Transportation code enforcement officer had opened the app hoping to find a driver seeking new rides.
After the phone call ended with Plouffe, Novick had sent out marching orders to his staff: Go catch the drivers. After an officer like England successfully hailed an Uber, he would write the driver thousands of dollars in civil and criminal penalties—lack of proper insurance, public safety violations, required permits—and threaten to impound the vehicle. Novick knew he might not be able to stop the company, but at least the City of Portland could slow them down a bit by scaring off their drivers. Local press showed up to document the action.
Uber was ready. Whenever it entered a new city, the company used the same, reliable approach. Someone from Uber headquarters would travel to a new city and hire a local “general manager”—usually a fired-up twentysomething, or perhaps someone with a scrappy, startup mentality. That manager would spend weeks flooding Craigslist with want ads for drivers, enticing them with sign-up bonuses and thousands of dollars in cash for hitting milestones. “Let drivers know they get $500 cash when they take their first ride on UberX,” the advertisements said. For the most part, the GMs placing these ads had little professional experience, but that wasn’t a problem for the company’s recruiters. Uber only expected that new field operations staff have ambition, the capacity to work twelve- to fourteen-hour days, and a willingness to evade the rules—even laws—when necessary.
England refreshed his app again. Finally, his request was accepted by a driver. The car was five minutes away.
Until it wasn’t. The driver had canceled on him, and the car had driven past, according to the app. England never saw it go by.
|“Behind the scenes, Uber was hardly innocent. Recruiting ex-CIA, NSA, and FBI employees, the company had amassed a high-functioning corporate espionage force.”|
What England didn’t know was that Uber’s general managers, engineers, and security professionals had developed a sophisticated system, perfected over months, designed to help every city strike team—including the one in Portland—identify would-be regulators, surveil them, and secretly prohibit them from ordering and catching Ubers by deploying a line of code in the app. The effect: Uber’s drivers would evade capture as they carried out their duties. Officers like England could not “see” the shady activity, and could never prove it was happening.
England and others in Portland had no idea what they were up against. They considered Uber a group of overzealous young techies, perhaps a bit too enthusiastic about the transformative effects their startup would have on transportation. The staff was presumptuous, even arrogant, but that could be chalked up to the relative youth of the team members.
Behind the scenes, Uber was hardly innocent. Recruiting ex-CIA, NSA, and FBI employees, the company had amassed a high-functioning corporate espionage force. Uber security personnel spied on government officials, looked deep into their digital lives, and at times followed them to their houses.
After zeroing in on problematic individuals, the company would deploy one of its most effective weapons: Greyball. Greyball was a snippet of code affixed to a user’s Uber account, a tag that identified that person as a threat to the company. It could be a police officer, a legislative aide or, in England’s case, a transportation official.
Having been Greyballed, England and his fellow officers were served up a fake version of the Uber app, populated with ghost cars. They had no chance of ever capturing the rogue drivers. They might not even know if drivers were operating at all.
For the next three years, Uber operated with impunity in Portland. It wasn’t until 2017 when the New York Times broke the story of how Uber used Greyball to evade the authorities that Portland officials fully understood just how Uber had carried out its subterfuge.
But by 2017 it was too late. Uber was up and running in Portland—legally, even—a fixture of the city, in regular use by citizens who praised its convenience. Kalanick and his team had violated local transportation laws, and instead of being exiled, they had found enormous, game-changing success.
Kalanick and his forces had flouted laws in Portland, and in scores of other cities. But ask a typical Uber employee at the time—and even some supporters years later—and they will tell you they didn’t see it that way. Greyball was consistent with one of Uber’s fourteen company values: Principled Confrontation. Uber was protecting its drivers while confronting what they saw as a “corrupt” taxi industry that had been protected by bureaucracy and outdated regulations. Concepts like “breaking the law” weren’t applicable, they believed, when the laws were bullshit in the first place. Kalanick was convinced that once everyone used the service, it would click—they’d understand that the old way was inefficient and expensive, and his way was the right way.
To some extent, he was right. As of this writing, Uber operates worldwide. It is present on almost every continent, with copycats and competitors trying to mimic the growth and power Kalanick achieved in the eight years he was at the helm. Uber has struck deals with local governments to become as ubiquitous as public transit, and is working on a future in which the cars that people request will drive themselves.
And yet, Uber is not always seen as a success story. Uber’s rapid rise was nearly undone in 2017, as the company faced the consequences of years of Kalanick’s boundary-pushing behavior, unabashed pugnacity and, eventually, the CEO’s own personal decline. Kalanick’s story is whispered as a cautionary tale for founders and venture capitalists alike, emblematic of both the best and worst of Silicon Valley.
The saga of Uber—which is, essentially, the story of Travis Kalanick—is a tale of hubris and excess set against a technological revolution, with billions of dollars and the future of transportation at stake. It’s a story that touches on the major themes of Silicon Valley in the last decade: how rapid developments in technology can crash into long-entrenched labor systems, throw urban development into upheaval, and overturn an entire industry in a matter of years. It is the story of a deeply sexist industry, fueled by gender imbalance and a misguided belief in a tech-supported meritocracy, blind to its own biases. It is the story of the sweeping but poorly understood ways that startups are financed today, and how this can affect the leaders, employees, and customers of fast-growing companies. It is the story of the ugly decisions made around user data and personal information as technology firms seek to exploit consumer data. But most of all, it is a story about how blind worship of startup founders can go wildly wrong, and a cautionary tale that ends in spectacular disaster.
Travis Kalanick and his executive team created a corporate environment that looked like an admixture of Thomas Hobbes, Animal House, and The Wolf of Wall Street. This toxic startup culture was the result of a young leader surrounded by yes-men and acolytes, being given nearly unlimited financial resources and operating without serious ethical or legal oversight. At war with outsiders and among themselves, the company engaged in spying, backbiting, and litigiousness as it struggled for power and supremacy over a multi-billion-dollar empire.
As a result of Kalanick’s actions, Uber’s valuation was cut by tens of billions of dollars, competitors that might have been vanquished were strengthened and found new footing around the world, and the company faced a half dozen federal investigations into its sordid history. More than once, investors and employees worried that the entire future of the company was at stake.
As a Bay Area resident and professional journalist during the past decade, I saw Uber rise to power right in front of me. I witnessed how quickly a transformative idea can change the urban fabric of a city, and how strong personalities can have an outsized effect on shaping the way a startup operates.
I began covering Uber for the New York Times in 2014. Those were Uber’s glory days, when Kalanick’s cunning and street-fighting sensibilities helped to outwit competitors, seal billion-dollar financing deals, and make Uber’s global conquest seem inevitable.
Just a few years later, Uber was on a collision course with itself, and Kalanick’s leadership had grown into a liability: 2017 turned into one of the worst years of sustained crises for any corporation in the history of Silicon Valley, as Uber suffered blow after self-inflicted blow in full view of the public.
My coverage ultimately led me to becoming part of the story, wrapped up in the twisted saga of lies, betrayal, and deceit that Kalanick and other company leaders used to build and control a tech juggernaut, one of the first unicorns of the mobile era, a company worth billions of dollars that succeeded in changing the way we move through the world, yet nearly destroyed itself in a bonfire of bad behavior, ugly decisions, and greed.
I feel lucky to have been along for the ride.
This is the prologue of “Super Pumped: The Battle for Uber” by Mike Isaac (W. W. Norton & Company). All rights reserved.
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