Uber Is a Company at War, Not in Crisis
Reeling from a nonstop stream of scandals, Uber Technologies Inc. has agreed to attempt a cultural reformation with the help of Eric Holder’s 47-step plan. Chief Executive Officer Travis Kalanick has gone on a leave of absence, and -- in a symbolic act of penance -- the company will rename its War Room the "Peace Room."
But should Uber really be at peace?
Consider another famous company that had a war room: Intel. In “Only the Paranoid Survive,” Intel co-founder and CEO Andy Grove describes the skirmishes that took place during turbulent periods in the company’s history. As boring as Intel sounds today, it once had internal crises -- over flawed processors, corporate greed, falsified data -- that the media delighted in covering. If Twitter had been around in the 1990s, #deleteIntel would have been trending multiple times.
Intel’s survival has often been attributed to Grove’s ability to serve as an effective wartime CEO. As Ben Horowitz (of the venture capital firm Andreessen-Horowitz) 1 put it, peacetime is when a company has a secure market position and can rest on its laurels, while wartime is when it's facing an existential threat and must go into battle mode. The culture of “constructive confrontation” that Grove instituted became the tech industry’s management playbook for generations to come.
An emerging tech company on the path to disruption is the perfect example of a company in wartime -- a mentality that the winner-takes-all nature of venture investing naturally encourages. Venture capital returns follow a power-law distribution, which means that a very small percentage of companies accounts for almost all the gains, and the vast majority either fail or become another company's acqui-hire. That’s why investors go chasing after unicorns and black swans.
Founders are aware of the odds and go to great lengths to beat them. When you have, say, only a 4 percent chance of success, you don’t pull any punches. The goals of a healthy workplace environment fall to the wayside, and the result is not always pretty.
Here are some examples of Horowitz’s management expectations:
Peacetime CEO knows that proper protocol leads to winning. Wartime CEO violates protocol in order to win.
Peacetime CEO spends time defining the culture. Wartime CEO lets the war define the culture.
Peacetime CEO trains her employees to ensure satisfaction and career development. Wartime CEO trains her employees so they don’t get their ass shot off in the battle.
It’s not that the peacetime CEO is worse than the wartime CEO or vice versa. Different situations warrant different management styles. When a tech company is up against an industry incumbent, its only advantage is speed. Diversity of thought can actually slow down decision making. A wartime company can accrue cultural debt, then sort out the dysfunction later (or just discharge the debt when it fails, which is the most likely outcome). When Intel transitioned to peace, the confrontational culture ceased to be appropriate.
We judge tech companies like they’re unstoppable juggernauts that need to slow down and check their privilege. But the persistent questioning of Uber’s business model underscores how fragile the company is: Lyft, for example, has reportedly taken advantage its plight to gain market share in the U.S. Tempting as it may be to treat Uber as an established corporation given its $69 billion valuation, the appropriate culture isn’t a function of size or age.
Despite the proclamations of a dozen or more recent headlines, Uber isn’t undergoing a cultural crisis. It’s simply a company operating in wartime.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Andreessen-Horowitz was an early investor in household names like Airbnb, Facebook, Twitter, and Lyft.
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