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Uber's Dirty Tricks Won't Hurt It

Katie Benner is a Bloomberg View columnist who writes about technology, innovation, and the cult and culture of Silicon Valley. She lives in San Francisco.
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The rideshare company Uber, with an implied value of about $18 billion and on the hunt to raise additional capital, is dealing with a public-relations nightmare of cartoonish proportions. Emil Michael, the executive in charge of the company’s partnerships with the likes of Spotify and American Express, told a table full of New York City power players, including BuzzFeed Editor-in-Chief Ben Smith, that it would make sense for his company to hire opposition researchers to attack journalists.

Michael’s fantasy dirt diggers would drag reporters’ reputations and personal lives through the mud if they criticized Uber, Smith wrote in a BuzzFeed story on Monday, similar to partisan political attack campaigns against favorite targets like Hillary Clinton and the Koch brothers. It would work great, Michael said, because, (insert mustache twirl here) “nobody would know it was us.”

The Dinner Debacle is a rich turn of events for a company that hired Barack Obama's former campaign manager David Plouffe to fight a multifront (apparently uphill) battle to win over the company’s critics in government and the press. Plouffe has done quite a bit to rehab Uber’s image and that of its chief executive officer, Travis Kalanick. Most recently Politico ran an editorial penned by Kalanick and former Defense Secretary Robert Gates that called driving for Uber a “unique entrepreneurial opportunity for the military community.” Glowing profiles in Vanity Fair and San Francisco Magazine replaced his bad boy image with a more dignified philosophy of “principled confrontation.” A cordial off-the-record meeting with reporters from the New York Times, Newsweek, BuzzFeed and Business Insider soon followed.

The dinner should have been an easy win for the company. Ply the assembled media types with a fancy meal, let Kalanick tell the story of his incredible work ethic and let the positive feelings flow. Instead Michael’s comments set off a firestorm. The influential media executive Jason Hirschhorn took to Twitter to say that Michael was a detriment to the company.

Lots of people have since wondered whether the latest comments would hurt Uber, force it to make cultural changes or, at the very least, result in Michael’s departure. Angst-filled rants on Twitter aside, this incident probably won’t have any real affect on Uber or its operations whatsoever. Like so many stories about startups behaving badly, the negative press will pass and the company will go on. Unless users abandon the service, all of this outrage will fade and Uber’s fortunes will burn ever brighter.

This latest Uber controversy reminds us of two generally accepted principles in Silicon Valley. The first is that venture investors, who often double as directors, generally don't care in the slightest about the public perception of startups or bad behavior within their portfolio companies so long as there’s a chance that a profitable exit can be secured. After all, hated tech companies such as Microsoft have been hugely successful (as have hated banks such as Goldman Sachs, hated oil companies such as Exxon Mobil and hated cable providers such as Comcast.)

Unconventional executives have done all right too. Facebook Chief Executive Officer Mark Zuckerberg, for example, had what you might call a few personal quirks: he destroyed other people’s laptops, he had ample contempt for his users and he hated some of his partners. (Zuckerberg has since matured, and now you could argue that his visionary qualities trump everything else.)

Investors are similarly accepting of Kalanick’s rocky reputation in the press in part because Uber is a fast-growing company with a clear path to profitability that could soon push its value to $25 billion, or on par with Twitter. And for better or worse, Kalanick is the reason Uber is on that trajectory.

Lucy Marcus, founder of Marcus Venture Consulting, says that directors and venture-capital funds should be more accountable, but they’re often conflicted because they don’t want to interfere with the person who creates growth. “VCs have a great deal of responsibility because ethics and money are linked more than ever,” she says. She adds that VCs tend to disagree with the idea that it's their job to step in when culture issues arise because there’s a perception that “it is ‘easier’ to run a company if you don't have voices from outside asking hard questions.”

The second principle -- really more of a corollary -- is that companies potentially destined for Facebook-like success, including Uber, tend to become impervious to sour press. The only stories about Uber that have popped in the mainstream media are those about the company’s rapid growth, rising public acceptance and soaring valuation. So backers are nonplussed about the risk that BuzzFeed’s story might make people hostile to Uber.

Stories about the leadership’s dubious ethics -- or the ones about subprime autoloans or deceiving the press or sharing private user data for fun and games at a party --haven't really hurt Uber at all. Even reports of incidents that might make one think twice about using the service -- sexual assaults, a hammer attack -- haven’t gained much attention outside the close world of tech blogs. There’s only a slim chance that most consumers will ever know about this stuff and decide that they’d rather use, say, Lyft, an almost-identical service. So long as people continue to download the app there’s an even slimmer chance that the stories will hurt the company’s ability to raise money.

The funny thing about Uber is that its product doesn’t need any of this psyops stuff to succeed. The app is convenient and beloved by many who use it; and that is enough to overcome most criticisms. Arguably, all Uber needs is a thicker skin when it comes to the press, a good strategy for dealing with regulators and some intensive media training for Emil Michael. The posture of antagonism is embedded in the company’s culture, and one that every so often churns up lots of sturm und drang. But so long as Uber succeeds, it will write its own history in the end.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the editor on this story:
James Greiff at jgreiff@bloomberg.net