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Why Silicon Valley Can’t Call Uber An Anomaly

The world’s fast-growing company has exposed some fundamental bugs in the startup economy.

Why Silicon Valley Can’t Call Uber An Anomaly
Uber cofounder Travis Kalanick was forced to resign as CEO in June 2017. [Illustration: Klawe Rzeczy; Source Images: Julie Glassberg/The New York Times/Redux (Kalanick); Maik Schmidt/Getty Images (reflection); Getty Images (car); Dave and Les Jacobs/Getty Images (landscape)]

Not long after Uber cofounder Travis Kalanick was forced to step down as CEO following a spate of scandals at his ride-hailing company, one influential venture capitalist tried to convince me that there were no larger lessons to be learned from the debacle. Uber, explained this VC, who would only speak on the condition of anonymity, was not emblematic of some “rottenness” at the heart of Silicon Valley. Rather, Kalanick’s tenure at Uber was simply an “anomaly.”

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Across the tech industry, startup founders, employees, and investors have been grappling with how to interpret Kalanick’s stunning rise and fall. Having built Uber into a disruptive force, a global service with more than 14,000 employees in 600-plus cities, and the highest-valued startup in history (approximately $70 billion)—all in just eight years—Kalanick seemed to embody the best of the startup ethos: what a Valley-style innovator can accomplish when unleashed on a stagnant industry.

His example reverberated across Silicon Valley. Calling your company “the Uber of X,” after all, doesn’t just describe an app that instantly delivers a real-world service; “Uber-izing” a business implies adopting an aggressive approach to scaling and a ruthless approach to the competition. (As one Uber employee wrote online of Kalanick in petitioning for his return, “You’ve launched a thousand of us, your disciples, out into Silicon Valley. Let’s fucking do this. Game on.”) Outside tech, giants of industry from retail to food to health care are racing to Uber-ize themselves before upstarts beat them to it. How, then, could Uber be a mere anomaly?

The red flags had been rising for years. There were Uber’s tactics to undercut rivals and its methods of skirting regulatory scrutiny. There was Kalanick’s brash pursuit of autonomous technology, which led to an intellectual property lawsuit from Alphabet’s self-driving-car unit, Waymo. There was talk of digging up dirt on prying journalists. Despite these controversies, for the most part, Uber kept growing.

It wasn’t until former Uber engineer Susan Fowler’s February 2017 blog post that cries for Kalanick’s resignation gained momentum. Fowler described a toxic workplace, hostile to women and filled with self-aggrandizing employees and permissive managers. The modus operandi was “complete, unrelenting chaos.” In June, after an Uber-commissioned investigation into the matter by former U.S. attorney general Eric Holder found systemic organizational failings, Kalanick stepped down.

Today, it’s impossible not to see shades of Uber in everything from Ellen Pao’s 2015 gender discrimination lawsuit against storied VC firm Kleiner Perkins to the “brogrammer” culture that crippled Zenefits, a once-promising unicorn, last year. This past summer, a string of sexual harassment allegations exposed deep-rooted issues in the venture-capital world.

“I hope we’re at a point in time where everyone doesn’t just want to sweep everything under the rug,” says investor Theresia Gouw of female-led Aspect Ventures. Silicon Valley, though, is insular and guarded. In my reporting, I encountered few people willing to speak openly, let alone critically, about Uber’s troubles. Those who did (most of them, notably, women) argue that there’s an opportunity for course correction right now. It starts by acknowledging that the Valley isn’t yet the utopian meritocracy it strives to be—and that Uber’s errant system exposed some fundamental bugs in the startup economy.

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Hero worship: Near-mythical founders—including Steve Jobs, Mark Zuckerberg, and Larry Page and Sergey Brin—have shaped the way entrepreneurs and investors view tech startups. [Photo: Chris Ratcliffe/Bloomberg/Getty Images]

Startup Values Don’t Always Scale

A few weeks after Fowler’s blog post, Kalanick held an hour-long discussion on Uber’s values at the company’s Palo Alto office. Talking to a room full of female developers, he called for a reassessment of his company’s core principles and vowed to fix Uber’s problems. “We have cultural values—I’m the author of them—and I think there’s a lot of good in them,” he told the audience. “[But] if they’re not well understood, folks can do things they shouldn’t do.”

Uber is often seen as a company devoid of principles, but Kalanick, in many ways, actually personified some of Silicon Valley’s central tenets, including a reverence for rule-breaking and growth at all costs. In the mid-’90s, Intel’s Andy Grove inspired a decade of entrepreneurs with his pugnacious manifesto, Only the Paranoid Survive, and Facebook CEO Mark Zuckerberg’s creed, “Move fast and break things,” influenced today’s generation of hackers turned CEOs. Y Combinator’s Paul Graham counseled founders in an essay that “the only essential thing is growth,” which should act as a “compass to make almost every decision you face.” Investor Ben Horowitz’s treatise on “wartime CEOs” outlined the battle-hardened characteristics required to overcome existential threats.

Promulgated by the very VCs responsible for making and breaking founders, this type of dogma has seeped into the Valley’s id. From the outset, Kalanick defined Uber’s mission by its pursuit of hypergrowth. Among his foundational tenets: “Always Be Hustlin’ ” and “Toe-Stepping,” which promoted a confrontational culture where employees operate at each other’s throats and on the edge of legality. Uber’s values did not include any mention of “teamwork.”

This kind of cultural DNA might have been manageable when Uber was small; as the company grew, it was trouble. “Ask for forgiveness, scale fast, be audacious—generally, these kinds of principles are great,” says Sukhinder Singh Cassidy, CEO of Joyus and founder of the Boardlist, an online network that connects companies with female board candidates. “The issue is what’s missing: the absence of one critical value, which is that people matter.”

In his discussion with female employees back in March, Kalanick declared that Uber needed to transform into a culture where “everyone is accountable for their actions” and embraces “values encouraging good stuff and discouraging bad stuff.” After upending transportation networks across the globe, the leader of the world’s most valuable startup was only just starting to address Uber’s own failings.

Hero worship: Near-mythical founders—including Steve Jobs, Mark Zuckerberg, and Larry Page and Sergey Brin—have shaped the way entrepreneurs and investors view tech startups. [Photo: Justin Sullivan/Getty Images]

The Omniscient Founder Is A Dangerous Myth

Shortly after Kalanick’s resignation, Mood Rowghani, a partner at Uber investor Kleiner Perkins, came to the defense of not just Kalanick, but entrepreneurs in general: “Founder DNA is a precious asset and cannot be underestimated,” he wrote in a statement shared with the news site Axios. “It is a founder’s passion, strategic clairvoyance, ability to inspire and motivate employees, and relentless pursuit of the mission that enables startups to achieve seismic changes against the odds.”

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Steeped in a tradition dating back to Bill Hewlett and Dave Packard creating HP in their Palo Alto garage, tech entrepreneurs are taught that they are the true innovators. And anyone who gets in their way (boards, investors, bureaucrats) is shortsighted, the small-minded naysayers to visionaries like Steve Jobs. So founders today hold tightly to control, leveraging their super voting shares to tilt power away from boards or investors. After Mark Zuckerberg successfully remained CEO by recruiting a COO-slash-mentor (Sheryl Sandberg), nearly every founder, Kalanick included, has tried to replicate that model.

But why should someone who had the ability to incubate an idea into a product also be expected to have the skills to run a complex organization? Few people can do both well. More problematic is the undergirding belief in a founder’s almost supernatural abilities. A serial entrepreneur who has both benefited and suffered under this narrative tells me, “This idea that one person at the top is able to foresee and envision every single strategic move that a company needs to make is just bullshit.”

The reality is, sacrificing the CEO title can be in the best interests of both the company and its founder. Larry Page and Sergey Brin stepped aside so longtime tech executive Eric Schmidt could steer Google through its IPO during the 2000s. Page studied under Schmidt for roughly a decade before taking back the reins. Jobs, too, took nearly this same amount of time to mature as a CEO before returning to Apple.

Yet the Zuck–Sandberg partnership receives more reverence than Page–Schmidt’s, even among investors. “That [founder] mythology definitely drives early-stage boards to give as wide a berth as possible,” says Singh Cassidy, herself a three-time founder. “[There’s] this sense of like, ‘Don’t fuck with the mojo.’ ”

This dynamic can cripple a company. In the months leading up to Kalanick’s resignation, Uber hemorrhaged talent. Among the departures: Uber’s SVP of global policy, head of finance, VP of growth and product, VP of global vehicles, head of AI labs, and president Jeff Jones, a former top Target exec who was brought in to help guide Kalanick. As Jones said when announcing his exit, “The beliefs and approach to leadership that have guided my career are inconsistent with what I saw and experienced at Uber.”

Hero worship: Near-mythical founders—including Steve Jobs, Mark Zuckerberg, and Larry Page and Sergey Brin—have shaped the way entrepreneurs and investors view tech startups. [Photo: James Leynse/Corbis/Getty Images]

The System Of Accountability Needs Breaking

Months before Kalanick’s ouster, Freada and Mitch Kapor, of the investment firm Kapor Capital, published an open letter to the Uber board and investors. They had long tried to address what they saw as a “toxic pattern” of misconduct by exerting pressure behind the scenes. But given Kapor’s relatively small stake, their efforts were largely ignored. “Investors in high-growth, financially successful companies rarely, if ever, call out inexcusable behavior from founders or C-suite executives,” they wrote.

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After several painful months, that finally changed: According to a New York Times report, five of Uber’s top investors demanded that Kalanick step down. When I ask a high-level CEO and investor about the ordeal, he’s sanguine. “We saw the process at Uber, and it worked,” he says. “It took a while, and it played in the press more publicly than it should have, but there were checks and balances.”

But consider how long it took board members to react. Was it that, given Uber’s decaying reputation and culture, they finally felt compelled to step in? Or simply that public pressure was threatening their investment? Either way, it was only through an unlikely confluence of factors—unrelenting outrage, a series of ethical lapses, and a courageous former employee—that this scenario ultimately played out. This is the system working?

If there really were healthy checks and balances, boards wouldn’t wait for public outrage to act. But to acknowledge that Uber’s system of accountability failed is to acknowledge that fundamental change—something Silicon Valley normally embraces—is necessary. If the Valley truly prides itself on moving fast and breaking things, it ought to start here.

About the author

Austin Carr writes about design and technology for Fast Company magazine.

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