Private drivers, public debacles.

Photographer: Andrew Harrer/Bloomberg

When Uber Went to War

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of "“The Up Side of Down: Why Failing Well Is the Key to Success.”
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More than one reader has asked me why I wasn't commenting on Uber's recent troubles. I'm a longtime fan of the service, which provides massive benefits to folks who have trouble getting a conventional taxi. I chronicled its early efforts at fighting heavy-handed regulatory interference in Washington, and I have watched with interest as it expanded the service and the number of cities it serves. I've also followed some of its business challenges, such as user resistance to surge pricing.

So what do I think of Emil Michael's creepy ramblings about targeting journalists who criticize the company? Obviously, I am not for using a team of opposition researchers to harass journalists who criticize you. Beyond that presumably obvious statement, it seems to me that this displays extremely poor business judgement. For one thing, if you are thinking about journalists who criticize you, to the extent of actually describing how you'd go about it, it's probably not a great idea to talk about doing so in front of, y'know, journalists. I suppose it's understandable that Michael got a little carried away and said things he didn't mean -- I've certainly had my share of moments where I suddenly thought, "I really, really didn't mean to say that. I didn't even mean to think that."

What's hard to believe is that he didn't finish his strange rant by at least lamely saying, "Well, of course, we could do that, technically, but we would never, ever do that because I can't even express how deeply that would violate everything we hold dear about privacy and freedom of speech. I mean, my brain feels filthy just thinking about it. I was just illustrating what a bad company could do, maybe one of our competitors, if they were truly horrible people. Hey, is that a squirrel?" But the BuzzFeed editor who attended the event does not suggest that there was any such walk-back.

Uber Chief Executive Officer Travis Kalanick says that these remarks do not reflect the company's values. But there has been other plausible reporting on other dubious tactics -- especially the way that Uber has allegedly targeted Lyft drivers and booked phantom rides to screw up its competitor's reservation system -- that make me think it might be part of the corporate culture. Specifically: Uber seems to gear up for total war against every single perceived threat, no matter how slight.

Leaving aside the morality, this isn't great business practice for the long-run health of the company. As it grows and matures, Uber is going to face a lot of small annoyances. A "blitzkrieg everything" strategy is going to waste a lot of management time and energy. And it is increasingly likely to backfire, as it has in this case, because that management overhead means that as the company grows, more and more of the war making has to be delegated down the management hierarchy. And encouraging every middle manager to think of themselves as a modern-day William Tecumseh Sherman is going to produce a lot of activity that the company doesn't want to have to defend in public.

The Total War attitude was necessary, and I think appropriate, during the major challenge that Uber faced in its early years: fighting back attempts to shut the service down by taxi commissions that were thoroughly captured by the existing owners of taxi fleets. Kalanick is a genius at that. It is not, however, appropriate to the problem of journalists who dislike your service. We won't even discuss the role that journalism plays (however imperfect!) in maintaining a free society. Even if you don't care about having a free society, this is insane. Sarah Lacy is a smart woman with impressive reach. She is not an existential threat to Uber's viability as a company. 

Every new company faces a point -- and usually more than one -- when the management culture and systems that were key assets in the early phases of development start to become liabilities rather than advantages. I think Uber is at one of those points; it needs to make a serious shift in the way that it talks about external threats inside the company, as well as the actions it takes outside the company.

Luckily, I also think Uber is very capable of making this shift. Its initial response to people's concerns about surge pricing was a counterproductive instruction to suck it up. Without abandoning the surge pricing, it has gotten much, much better at communicating on this issue and managing customer expectations. That sounds like a small thing, but it often isn't -- and companies that can't make that sort of leap often fail.

So I have high hopes that Uber can start making the changes it needs to make. What I don't know is whether it realizes it needs to make the change.

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

To contact the author on this story:
Megan McArdle at mmcardle3@bloomberg.net

To contact the editor on this story:
Brooke Sample at bsample1@bloomberg.net