Billionaire investor David Bonderman resigned from Uber’s board of directors Tuesday night after reports that he had made a sexist quip during the company’s all-hands meeting earlier that day to address company culture. Bonderman’s blunder was so dumb that it almost seems like a cosmic joke about Uber’s toxicity, and it couldn’t have happened at a touchier time, as the company is frantically attempting to rehabilitate its mangy image after a year of damning scandals.
It seems strange that Bonderman lost his seat on the board over a stale “women be talkin’” joke, while CEO Travis Kalanick has been merely sequestered in a time-out box for exponentially more inappropriate behavior, from personal delinquency (berating his own Uber driver, taking employees to an escort club) to allowing bombastically unscrupulous company policies (creating potentially illegal software to evade police, permitting a climate of widespread sexual harassment for years).
But it is strange only if you look at Uber’s struggle to reinvent itself as a good-faith attempt to change its company culture. From another vantage point, losing Bonderman but keeping Kalanick makes perfect sense. Uber is trying to revamp its reputation first and foremost. Bonderman served up his own head on a giant gaffe platter to quickly placate critics at a sensitive time; as his shallow apology made clear, he was sorry people were offended but not actually sorry for his tone-deaf attitude. Uber, likewise, is terribly sorry that people are offended by its incessant transgressions, and yet it has thus far not done the one thing that will most obviously show that the company accepts that its culture was unacceptable. To actually change the company instead of merely signaling change, Travis Kalanick should either resign or be fired. He has steered his darling startup into ignominy, and a sabbatical is a gentle hand-slap disguised as a pivot. Kalanick styled his board in the “founder friendly” fashion, which means he and several key board allies have votes that count more than that of other members — in other words, it is unlikely that the board would vote Kalanick out without his approval. However, unlikely does not mean impossible. It is in Uber’s best interest to fire Kalanick. Apart from the many sketchy, potentially illegal, and unambiguously immoral antics Kalanick allowed to happen at his company, his badness at being a CEO is multifaceted.
First, while Kalanick is undeniably good at raising money, his track record at making money is terrible. Turning a startup into a transit behemoth is an impressive feat, but it is not indicative of an ability to lead that company into profitability. Eight years after its launch, Uber continues to hemorrhage cash. Leaked financials indicate a company that is running at an enormous loss; as Bloomberg reported, the company lost $1.27 billion during the first half of 2016. Most of these losses come from the fact that Uber heavily subsidizes its drivers’ pay, making rides cheap enough to undercut competitors. Perhaps if Uber is able to elbow traditional taxis and limousines into extinction, it will be able to cost-correct and raise prices enough to edge into profitability because people will be so used to the convenience and so stymied by a lack of other options that they’ll deal with a huge price hike. Maybe it will come up with a separate revenue stream with lower costs. But among these maybes, one thing is certain: Kalanick has been in charge of Uber for eight years and he still hasn’t figured it out.
What’s more, Kalanick has a proven track record of surrounding himself with bad hires, and of looking the other way when those hires wreak havoc — until the negative news coverage or legal repercussions require him to punish these people to ameliorate bad publicity. If Kalanick had surrounded himself with wiser subordinates, he may have been able to temper his own tempestuousness with good counsel. Instead, he shrugged off foolishness. He knew former senior vice president of business Emil Michael had suggested spying on journalists in 2014. Michael resigned this week at the recommendation of the law firm hired to investigate Uber’s culture. According to Recode, both Michael and Kalanick had been informed that another Uber executive, Eric Alexander, had obtained confidential medical records of a person raped by an Uber driver in 2014. Altogether, the law firm’s assessment recommended that Uber fire 20 people, including top executives, suggesting that Kalanick’s permissive attitude toward Michael was not an isolated judgment error. Meanwhile, apart from the company culture investigation, Uber also recently fired former Google engineer Anthony Levandowski, who pleaded the Fifth Amendment during Google’s lawsuit against Uber, which alleges that Levandowski stole Google’s technology for Uber. While it is not clear whether Levandowski stole the technology or whether Uber knew about it, the fact that a judge recommended a criminal investigation into Uber’s first head of driverless-car technology speaks once again to Kalanick’s gravitation toward recklessness.
Michael blames the board for his ouster, and has not acknowledged that his own poor choices directly contributed to his fall. “He places the blame on the directors, particularly investor Bill Gurley, for his removal, accusing them of not having the backbone to stand by him amid what he sees as largely mischaracterized and inconsequential controversies,” sources told Bloomberg. This is telling, as Michael is as close a surrogate as anyone in the company to Kalanick.
The case for removing Kalanick from Uber is strong, as his corporate governance has been defined by losing money, hiring bad people, and a dizzying array of miscellaneous cartoonish villainy. The advantages Uber has gained from its cutthroat attitude have been eclipsed by its controversies.
The leave of absence is a soft separation, as Kalanick has already been emailing employees to reassure them that they will survive. “The ultimate responsibility, for where we’ve gotten and how we’ve gotten here rests on my shoulders,” Kalanick wrote in that email, according to Time. “There is of course much to be proud of but there is much to improve. For Uber 2.0 to succeed there is nothing more important than dedicating my time to building out the leadership team. But if we are going to work on Uber 2.0, I also need to work on Travis 2.0 to become the leader that this company needs and that you deserve.”
Kalanick built Uber into a world-famous company valued at $70 billion. He is both the face and head of the company. His cutthroat machinations are the reason why investors got onboard and why the company is operating in more than 70 countries. Removing him would be a far more radical move than getting rid of Bonderman, and it is clear that Uber would prefer to shift blame onto scapegoats and polish Kalanick into respectability than cut him loose and face the formidable task of acquiring a new leader at a company that has thus far been defined by one man’s vision. But that is precisely why it is the only move that will signal seriousness to change the company. Kalanick may emerge from his leave of absence as a man chastened by failure, but Uber is so far off the rails that it doesn’t need an upgrade — it needs a complete reset.
