‘Embrace the chaos’: a history of Uber’s rapid expansion and fall from favour

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The Guardian

As Uber expanded around the world at breakneck speed under the leadership of Travis Kalanick, an executive in its fledgling Indian business sent a message to colleagues that captured the company’s rogue spirit.

“Embrace the chaos. It means you’re doing something meaningful.”

It was August 2014. Uber had been operating in India for only a year and was already in 10 cities. But the rapid expansion and a cavalier attitude towards taxi laws had collided with opposition from competitors and regulators – each grappling with Uber’s insistence that it didn’t need to play by the same rules as the incumbent taxi industry.

To Uber, the fight was justified – righteous, even. Above all, it was necessary.

“We will likely have both local and national issues in almost every city in India for the rest of your tenure at Uber … so get used to this as the status quo,” continued the email from Uber’s top executive in India.

Four months later, an Uber driver was accused of raping a customer, leading to the service being temporarily banned in Delhi. He was later given a life sentence. In the days after the assault, the executive emailed staff saying the team was making changes to improve customer safety and checks on drivers, but was in good spirits: “We know that Uber is a force for good in India, and around the world. Of course, we have much to improve on.”

Nearly three years later, as Kalanick’s leadership unravelled, it was reported that while the company publicly promised to improve safety, another executive obtained the medical files of the rape survivor in a failed attempt to discredit her evidence. Uber fired the executive after journalists began asking questions about the incident.

Uber’s behaviour during its years of explosive growth returned to the spotlight this week with the publication of the Uber files, a Guardian-led investigation based on 124,000 internal documents that illustrated how the company flouted laws, duped police, exploited violence against drivers and secretly lobbied governments during its aggressive global expansion. The cache of files, which span the years 2013 to 2017, laid bare a catalogue of ethically questionable practices as the company chased an increasingly bullish valuation, one which increased from just $60m (£50m) in 2011 to $82bn when it joined the stock market in 2019.


What are the Uber files?


The Uber files is a global investigation based on a trove of 124,000 documents that were leaked to the Guardian by Mark MacGann, Uber’s former chief lobbyist in Europe, the Middle East and Africa. The data consist of emails, iMessages and WhatsApp exchanges between the Silicon Valley giant’s most senior executives, as well as memos, presentations, notebooks, briefing papers and invoices.

The leaked records cover 40 countries and span 2013 to 2017, the period in which Uber was aggressively expanding across the world. They reveal how the company broke the law, duped police and regulators, exploited violence against drivers and secretly lobbied governments across the world.

To facilitate a global investigation in the public interest, the Guardian shared the data with 180 journalists in 29 countries via the International Consortium of Investigative Journalists (ICIJ). The investigation was managed and led by the Guardian with the ICIJ.

In a statement, Uber said: “We have not and will not make excuses for past behaviour that is clearly not in line with our present values. Instead, we ask the public to judge us by what we’ve done over the last five years and what we will do in the years to come.”

Today, the firm led by Kalanick’s successor, Dara Khosrowshahi, is still atoning for the sins of its past as it struggles to achieve the profits its investors spent billions betting it would attain.

‘Move fast and break things’

In the beginning, Uber was a typical Silicon Valley upstart. The company was founded by Kalanick and Canadian entrepreneur Garrett Camp in 2009. They conceived the idea after unsuccessfully trying to hail a cab in Paris the previous year.

Uber was among a class of supposed disruptors that embraced Mark Zuckerberg’s “move fast and break things” approach.

In Uber’s case, investor cash subsidised users’ fares in cities the company had muscled its way into with an app that connected passengers with cab drivers. The price of their ride fluctuated depending on supply and demand. Uber was among the pioneers of the gig economy business model, using a vast pool of freelance labour and initially, avoiding the costs – such as holiday pay and pensions – associated with contracted employees.

To the pugnacious Kalanick, who was 32 when Uber launched, “move fast and break things” appeared to apply as much to laws as anything else.

In an early investor slide deck from 2008, Kalanick and Camp proposed a members-only service called UberCab that combined the “convenience of a cab in NYC” with the “experience of a professional chauffeur”.

The company they launched in San Francisco in 2010 quickly evolved from a limo-hailing service to one that relied primarily on pseudo-professional drivers with their own cars, fuelling its break-neck expansion. By 2012, Uber was operating across the US and in three cities in Europe. Just a year later, Uber was in 74 cities around the world and worth about $3.5bn.

Uber pitched itself as an innovator with a service too novel to play by the antiquated rules the entrenched taxi industry abided by. Taxi companies were archaic enemies of innovation – and expensive – according to Kalanick.

Internal emails and text messages from a critical period of growth imply that Uber’s true innovation was not necessarily the platform, but the lower cost, lower barrier relationship it had with its drivers who, typically, were not commercially licensed.

However, cities around the world had long-established laws that intended, mostly, to ensure the safety of taxi passengers and, according to those laws, in many places Uber’s business was illegal.

Missing from Uber’s retelling of its own history is that it not only launched a service it knew was illegal in many cities, but that running an unlicensed business was critical to the company’s bottom line.

In emails and text messages reviewed by the Guardian, executives acknowledged that fighting enforcement was necessary and, in one instance, described it as “extremely strategic” to the company’s “ability to scale the business” in Europe.

By 2016, Uber was in 400 cities in 68 countries, with a valuation of about $66bn that it struggled to justify. And on any given day, the company was fighting regulators in a dozen cities worldwide.

Externally, Uber presented itself as a champion of the free market and a righteous disruptor, with dreams of revolutionising transportation despite being dragged down by a system designed to uphold and preserve the status quo.

But one question continued to stalk the company: did Uber have a sustainable business if it played by the rules? In a 2014 email to a senior member of the policy team, the then head of global communications Nairi Hourdajian said “sometimes we have problems because, well, we’re just fucking illegal”. Contacted by the Guardian, Hourdajian declined to comment.

Evading regulators

The Uber files shed new light on Uber’s tactics to evade regulators, of which only the contours were previously publicly known. They also raise serious questions about whether the company told investors enough about the myriad flaws in its business, and the lengths to which executives went to ensure Uber was able to operate outside the law. “The new revelations could raise issues about whether Uber disclosed enough information to investors about the risks,” said Carl Tobias, a professor in law at the University of Richmond, Virginia.

Uber, for its part, is confident in the accuracy and completeness of its disclosures to investors. and lists more than 50 pages of risk factors in the prospectus for its 2019 stock market float, including a reference to the rape in Delhi.

To preserve its business model, Uber developed a sophisticated strategy that ranged from evading regulators with technology to widespread lobbying to win over politicians, media and the public.

Emails show that executives established and discussed practices to thwart regulators across Europe, including in Spain, Belgium and the Netherlands.

When law enforcement officials would attempt to hail a car, hoping to catch Uber operating without permission, company employees tried to present them with a “fake view” of the app using a tool called Greyball. To the officials, it would appear that no cars were in the area, or there would be phantom cars not linked to an actual driver. And when law enforcement raided offices, the company would often be one step ahead, deploying a “kill switch” to shut down all computers. The use of the kill switch was discussed by Uber executives in at least six countries, and in a statement, Uber said it stopped using it and Greyball in 2017.

Then there was the lobbying, using a handful of well-connected political consultants and the company’s policy team.

David Plouffe, former campaign manager to Barack Obama, was appointed in 2014 to lead Uber’s policy and communications teams, and used his personal connections and political sway to open doors for the company. A little more than a year later, Uber replaced Plouffe with Google’s PR boss Rachel Whetstone, and moved him into a chief adviser role.

Meanwhile, Uber continued to battle regulators and well-funded competitors around the world, claiming victories in many places while being forced to pull out or rethink its operations in major markets like China in 2016.

But a new era of reckoning came in early 2017: a massive #DeleteUber campaign sparked by a blog post by Susan Fowler, an engineer who wrote about the sexism and discrimination she encountered at the company. It set into motion a series of events that culminated in the forcing out of many of the top brass.

A change at the top

Uber’s reputation was in a critical state in 2017 and Kalanick was at the centre of the criticism. He resigned in June after the company released a report on its workplace culture led by the former US attorney general Eric Holder.

Amid internal chaos, Uber turned to an understated but talented external figure as Kalanick’s successor: Iranian-born Khosrowshahi, then CEO of online travel company Expedia.

Speaking after his appointment in a New Yorker profile, Khosrowshahi said: “We were probably trading off doing the right thing for growth, and thinking about competition maybe a bit too aggressively, and some of those things were mistakes.” Khosrowshahi had to prove that Uber – which posted a net loss of $4.5bn in 2017 – could achieve profitability by playing nice.

But a change at the top has not lessened the regulatory and political pressure on Uber. The UK has been at the forefront of battles over its business model and its drivers’ employment status. Last year the supreme court dismissed Uber’s appeal against a landmark employment tribunal ruling that its drivers should be classed as workers with access to the minimum wage and paid holidays. After that ruling, Uber said its 70,000 UK drivers would be guaranteed a minimum wage of £8.72 an hour, holiday pay and pensions.

In 2020, voters in California approved a law that gave gig workers some employment benefits but classed them as independent contractors. In June, Massachusetts’ top court rejected an Uber-backed bid to ask voters whether app-based cab-share and delivery drivers should be treated as independent contractors rather than employees. From Switzerland to the Netherlands, courts in Europe have also increasingly ruled in favour of drivers’ rights.

Uber now employs 29,300 people and operates in 72 countries and 10,500 cities. It has the scale, but the business under Khosrowshahi has yet to yield a consistent profit. Since it was founded, Uber has wracked up a cumulative loss of $23.6bn.

Uber floated on the New York Stock Exchange in 2019 with a valuation of $82.4bn, but stumbled on its first day as a public company, ending with a valuation of $69.7bn after investors pushed shares down 7.6%.

Khosrowshahi has been forced to take radical action, selling Uber’s autonomous driving division for a reported $4bn and offloaded its loss-making flying taxi division.

The company has also resorted to working with an unlikely partner in major cities around the US: the taxi industry. In New York City and San Francisco – where Uber faced some of the most aggressive opposition from taxi regulators and companies in the US – the company has partnered with yellow cab companies and is now allowing riders to hail taxis on the platform.

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Uber is now a slimmer business, with its cab-hailing arm vying neck-and-neck with its takeaway and grocery delivery unit in revenue terms. In its most recent quarterly results, Uber posted another loss – of $5.9bn – after writing down its stakes in other companies. It has also been battling a backdrop of dampened investor faith in tech stocks, which has resulted in Uber’s share price declining 50% this year. Having floated at $45 a share, it is now worth less than $21 a share.

In a statement to the Guardian about the Uber Files, a spokesperson for Kalanick said: “Travis Kalanick never authorised any actions or programs that would obstruct justice in any country.” The spokesperson added: “The reality was that Uber’s expansion initiatives were led by over a hundred leaders in dozens of countries around the world and at all times under the direct oversight and with the full approval of Uber’s robust legal, policy, and compliance groups.”

Jill Hazelbaker, Uber’s senior vice-president of public affairs, said: “We have not and will not make excuses for past behaviour that is clearly not in line with our present values. Instead, we ask the public to judge us by what we’ve done over the last five years and what we will do in the years to come.”

Even if profit follows for Uber, how it got there will be remembered in corporate history as a tainted path.

July 16, 2022 at 12:09AM Johana Bhuiyan and Dan Milmo

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