Uber: the scandal(s) that got the CEO fired
Bernardo Montes de Oca
January 6, 2021
  |  

Uber: the scandal(s) that got the CEO fired

Bernardo Montes de Oca
January 6, 2021
  |  
Company Forensics - Learn from the mistakes of VC-funded startups | Product Hunt

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'Twas the night before Christmas in 2019, when one man sold all his Uber shares. But this was no ordinary man, for he had taken Uber from a localized idea in California to a worldwide phenomenon. 

We talk of Travis Kalanick, a CEO whose attitude helped launch Uber into a new level. But, in reality, Kalanick's time in Uber was driven by an alpha-male philosophy that led to controversies piling one on top of the other. 

We'll tell you all about the scandal, or scandals, that got Kalanick out of Uber in this episode of Forensics. 

Kalanick's origins

Kalanick might be one of the most recognizable faces around Uber, but his origins in the startup world are smaller. They're always controversial, but smaller. While studying computer engineering at UCLA, he met Michael Todd and Vince Busam. 

 They had a project called Scour, a peer-to-peer file transfer system to get all your healthy, wholesome content. Kalanick joined them as an employee, but he calls himself a cofounder nowadays. Such an attitude would be his trademark, and it paid off. He was so determined, investors started believing in him. 

While Scour was moderately successful, its existence was a wild ride. Kalanick once told Business Insider that, just before an event, one of his early investors threatened to kill him if he didn't show the proper respect at the podium. Moments later, Kalanick took to the stage, on the verge of tears. 

He wasn't the only one facing certain doom. Scour ran into serious copyright issues as the record industry sued them for no less than $250 billion. So, in 2000, the company had no choice but to fire everyone and declared bankruptcy to avoid the lawsuit. 

Kalanick wasted no time. He partnered with another Scour cofounder, Michael Todd, and created another business called Red Swoosh

It focused on networking surfaces and showed some promise, but it was born in a very conflicting time. Right after 9-11, investment in the tech world, and business in general, shrank. Kalanick's venture was no exception.

Short on cash and desperate for anyone to invest in them, Todd and Kalanick were desperate. To save money, they took some creative and questionable action. 

In 2006, Kalanick took his company's remains to Thailand to lower costs. But, then, things got shady again. The company stopped withholding incoming taxes from employee's paychecks, which is a criminal offense. 

Kalanick says Todd was responsible. Todd says both were in on it. Then, some emails surfaced incriminating both of them but, in the end, after paying up and promising it wouldn't happen again, neither faced charges. 

Red Swoosh survived, but barely. It had no heading, and most of its employees had quit. But, in another stroke of luck, Akamai Technologies offered $19 million for it. And so, Kalanick was now a millionaire. 

He traveled around the world for a year and then bought a LA house called the Jam Pad. It became a shelter for future entrepreneurs like Gary Vaynerchuck and techies from Google. Of course, it was a healthy environment where they discussed their ideas while drinking and playing Wii Sports. But, Kalanick didn't just want to party; he wanted to invest.

One night, he met Garret Camp, StumbleUpon's founder, who had come up with a premium ride-hailing service for high-end customers. This idea would become Uber. 

Joining Uber

Initially, Kalanick joined Uber only as an advisor, though he called himself a "Chief Incubator." Again, now, he's recognized as a cofounder. 

But, at first, his job was to manage the company and look for a CEO. Side note: they found a candidate through Twitter of all places. 

Indeed, it's all a Silicon Valley fairy tale. A startup finds its CEO through a confident, fun tweet. It seemed to work because Graves secured funding for the company when many investors weren't interested. So, it seemed strange that Graves was demoted to GM and Kalanick became CEO just ten months later

Graves would eventually admit that it was a bit of a gut blow to relinquish the CEO role, but he was gracious about it. And, many felt Kalanick was ideal as a CEO, again, due to his personality. 

"There is absolutely no way this business would have gotten where it is without Travis and his arrogance," a source told Business Insider. 

 So, he was a go-getter and arrogant that would elevate Uber to new levels. But his personality would be the platform for his downfall.

 

His tenure as CEO

Under Kalanick, Uber began aggressively expanding. In May 2011, it went from San Francisco to NYC, where it became a huge success, then all the way to Paris, the first non-US city to have the service. 

From 2010 to 2011, the company had raised $44 million and was valued at $350 million. By 2013, the company had already reached a $3.7 BN valuation. 

https://craft.co/uber/funding-rounds

 But, as the money came in, Kalanick's abrasive personality became more noticeable. In 2013, before an Uber event in Miami, he sent an email to employees in which the first sentence read: "You better read this or I'll kick your ass." Smooth. 

The email provided guidelines for the event, which included how to have sex. That's right, the email basically said employees had to ask each other for sex instead of assuming and that it was best not to have sex with someone in the same chain of command. 

His ending statement was: Yes, that means that Travis will be celibate on this trip. #CEOLife #FML.” 

Smooth.

Of course, this email found its way to the press, which, by the way, seemed to love Kalanick's bold personality. In 2014, journalist Mickey Rapkin worked as an Uber driver for a week then wrote about it for GQ. In this article, he recalls meeting Kalanick. 

When I tease him (Kalanick) about his skyrocketing desirability, he deflects with a wisecrack about women on demand: Yeah, we call that Boob-er.

Kalanick's attitude permeated all throughout the company, which by then was famous for arriving at a city and, only after authorities reacted, negotiating to stay. Forget about apologies. 

But things turned dark late in 2014. An Uber driver raped a female passenger in India; he was eventually caught and sentenced to life in prison. But the Government wanted to pursue actions against Uber.

The Asia Pacific supervisor, Eric Alexander, didn't believe the accusation. Somehow, he got the victim's medical records and showed them to Kalanick. The CEO just read the files and ignored the fact that his executive had obtained confidential information. 

In fact, nobody did anything for months until the legal team took the medical records and apparently destroyed them. Apparently. 

Eventually, Alexander was fired, but Kalanick's disregard for the situation drew a lot of criticism. Then reports surfaced of Kalanick partying in escort bars in Korea with other Uber executives.

But, perhaps most concerningly, many praised his attitude. Quartz Magazine once said: 

 Yes, Travis Kalanick pissed people off. And Uber will be forever indebted to him for it. Because what made Uber great, and what has made the company one of the biggest disruptors in the new global economy was that very attitude. 

But, not everyone loved it. Arianna Huffington, an Uber board member, said he needed to evolve from a scrappy entrepreneur to a major global company leader. 

And the worst was yet to come. 

A troubled year

In December 2016, reports surfaced that Kalanick joined Trump's business advisory board. This led to protesters flooding Uber's offices in San Francisco to boycott the service in January 2017.

That same day, the Federal Trade Commission fined Uber $20 million for exaggerating possible income to drivers. 

On February 19, 2017, former employee Susan Fowler wrote a blog post about her year in Uber. She describes how, on her first day as a part of the team, her boss made sexual advances. When she reported the incident to HR, the department said that even though this was clearly sexual harassment, it was this man's first offense. All they could do was warn him.

Somehow, she managed to survive a year at Uber. When she left and wrote her post, it was so popular, it ignited an internal investigation. Leading the team would be none other than former US attorney general Erick Holder. 

Kalanick assured all of Uber's staff that he was taking action. In an email, he said that his priority was to have a better organization and fight injustice. Very righteous. 

But the video appeared. It's always a video. In late February, dashcam footage surfaced of Kalanick arguing with an Uber driver who had complained about the cost of driving. 

Kalanick said: "I make sure every year is a hard year. That's kind of how I roll. If it's easy, I'm not pushing hard enough." 

Once the trip ended, the driver told him about the struggles to make ends meet with Uber's new lower fare plans. Kalanick became angry and told him some people don't like to take responsibility for their own shit

Then, chaos ensued. Kalanick and two other executives saw the video the same day it came out. As it ended, he collapsed on all fours and said, "I'm terrible." 

Within 48 hours, Kalanick had set up a meeting to apologize to the driver. The plan was a quick apology, but Kalanick ended up arguing with the driver for an hour, then offered him some Uber stock. An executive tried to stop the pay-off. Eventually, Kalanick paid the driver $200 000, but his reputation was shattered. 

El colapso

With the investigation and articles looming, many executives left Uber. From March 3 to March 20, five top executives left. The board then fired Anthony Levandowski, a big name in their self-driving car sector. 

On June 6, Uber fired more than 20 staff members related to the sexual harassment accusations. By June 13, the investigation had concluded. All we can say is: what the hell was happening at Uber? 

There were 215 complaints of sexual harassment, and the Holder Report emitted no less than 47 recommendations to improve the work environment. 

Just as the report surfaced, Kalanick took a leave of absence, and eventually, he quit his job as CEO. In his final statement, he made it very clear that he left more because the investors wanted him gone than anything else. 

And, somehow, Kalanick still had a job. He remained in Uber as a member of the board and made a power struggle of it. He tried to appoint his own members to the board to have more control. But the entire board voted to reduce his voting power

With no bright future in Uber, the company he helped grow into a worldwide business, Kalanick decided to part ways in 2019. He said it was time to focus on philanthropic pursuits and other ventures. 

But don't feel bad for him. In the weird eco-system that's Silicon Valley, one can break as many rules as possible and still, somehow, manage to survive. Kalanick sold all of his Uber shares for $2.5 billion.