By Hubert Horan, who has 40 years of experience in the management and regulation of transportation companies (primarily airlines). Horan has no financial links with any urban car service industry competitors, investors or regulators, or any firms that work on behalf of industry participants
One of the themes of this “Can Uber Ever Deliver” series over the last eighteen months is how many mainstream business/technology publications have proactively worked to legitimize and amplify Uber’s preferred PR/propaganda narrative. Uber has always understood that the most effective way to instill belief in its public relations campaign is to have it presented by seemingly independent, objective outsiders.
The latest addition to the pro-Uber PR/propaganda genre is Sheelah Kolhatkar’s At Uber, a New C.E.O. Shifts Gears, the main feature in the 9 April edition of the New Yorker magazine.The article fails to answer the central question it poses about Uber’s future coherently, but provides a textbook illustration of how to write corporate PR/propaganda that naïve readers could easily mistake for honest journalism.
The problem is not that some stories have a pro-Uber slant or might reach pro-Uber conclusions. The problems are that the conclusions aren’t backed by objective evidence, and the slants are created by artificially constructed story lines that prevent readers from evaluating available evidence and competing perspectives. These narratives use classic propaganda techniques to create favorable feelings about Uber, while distracting attention from Uber’s uncompetitive economics and awful financial results, and from viewpoints inconsistent with the idea that Uber has an enormously powerful business model producing ongoing growth that will continue to be a wonderful thing for society.
A legitimate pro-Uber piece using traditional approaches would clearly state its pro-Uber conclusions, the evidence and assumptions supporting those conclusions, and would allow readers to understand key contrary evidence and counter-arguments. PR/propaganda pieces are structured to look like objective reporting, but cherry pick available data while deliberately ignoring counter-arguments, present undocumented assertions as key findings, fail to clearly state or document major conclusions (so they cannot be readily challenged) and depend heavily on emotive language designed to manipulate readers. All of these approaches are used in Kohlatkar’s article.
Totally Ignore Economic/Financial Evidence. In the case of Uber, the easiest way to distinguish pieces honestly trying to inform readers from pieces designed to mislead them is that the former will prominently feature hard data about Uber’s competitive and financial performance and the latter will go to great lengths to ignore objective economic data. In an 8400 word article, only 11 words mention any of Uber’s financial results. Kolhatkar briefly notes Uber’s $4.5 billion 2017 P&L loss at the end of the 32nd paragraph, and then quickly shifts to discuss the Eric Holder report about sexual harassment issues. In an 8400 word article, Kolhatkar chose not to mention that Uber’s losses had been steadily increasing (up from $2.6 billion in 2015), or that Uber’s losses have burned through $10.7 billion of the investors’ cash to date.The author wanted to leave readers with a favorable impression of Uber but was not interested in helping readers understand why Uber has incurred such staggering large losses, or what it would take to achieve sustainable profitability, or how investors might actually earn returns on their investments.
Tell Only One Side of the Story. The second unmistakable giveaway that this is PR/propaganda, not honest journalism is that Kolhatkar and her editors only present one side of the Uber story. Everyone quoted is an Uber stakeholder, invested in Uber’s eventual success. Nowhere in 8400 words is there any mention of anyone who might have a different perspective or hold different views—competitors, government officials, drivers, local transport experts or any of the many journalists who have been following Uber over the years.
The article relies heavily on lengthy interviews with new CEO Dara Khosrowshahi Uber investor Bill Gurley, and various other executives and Board members. As discussed in Part Eight of this series in the context of Brad Stone’s January 2017 book The Upstarts, Uber has never provided this kind of inside access to journalists without assurances (implicit or explicit) that the resulting story would present Uber’s spin and would exclude contradictory arguments and evidence. Kolhatkar doesn’t disclose how she got detailed access to Khosrowshahi, Gurley and other insiders, or why she didn’t interview anyone who wasn’t an Uber insider.
Make False Central Claim: That Uber is “Financially Successful” . Financial data is ignored because the objective of Kolhatkar and her editors is to sell New Yorker readers on Uber’s current narrative—it is a fundamentally successful company whose recent travails were anomalous and were fixed when Uber fired CEO Travis Kalanick and hired Khosrowshahi, and is now back on the path to further success. Those objectives are summarized nicely in the article’s subtitle: “Dara Khosrowshahi is charged with turning the scandal-plagued startup into a traditional company—without sacrificing what made it successful.”
The word “success” is applied to Uber five times in the article’s first 1000 words. But Kolhatkar’s emphasis on “Uber’s continued financial success” and her claim that Uber is “one of the most successful…companies in Silicon Valley” is fundamentally dishonest and easily refuted. This willful attempt to mislead readers depends on ignoring the financial data showing that Uber’s growing multi-billion dollar losses in its eighth year of operations are unprecedented in Silicon Valley history, and that Uber’s peer companies, who (unlike Uber) have fully exposed themselves to the scrutiny of capital markets and have actually produced strong positive cash flows, profits and shareholder returns. Kolhatkar’s does not try to substantiate her central “success” claim save for vague references to rapid growth and strong brand awareness.
There may be a general perception that Uber is “successful” among readers of mainstream media, but this was manufactured by Uber’s communications programs, and reinforced by reporters like Kohlatkar who have no interest in seriously investigating the question.
Emphasize Emotive, Personality Issues to Distract Readers from Looming Business Challenges. Kolhatkar’s story mentions the bad publicity Uber received in 2017, and would have no credibility if she had ignored these widely known issues. This was also true of Brad Stone’s January 2018 article on the fall of Travis Kalanick; Both show how the scandals and crises of 2017 forced Uber to shift its narrative from one depicting an unstoppable march to global industry dominance[8 ]to one emphasizing its redemption and recovery from an inexplicable run of ill fortune. In both cases, the stories present Uber’s currently preferred presentation in the guise of a story by an independent, objective journalist.
Kohlatkar glosses over the causes of recent crises, and falsely claims that Uber could not have foreseen that harassment issues raised by Susan Fowler but moved forcefully to solve those problems once they became aware of them. In order to make Uber seem more like a victim than a perpetrator, Kohlatkar absurdly asserts that “[p]roblems of gender discrimination weren’t as immediately obvious” ignoring a huge body of reporting where Uber was the poster boy for Silicon Valley misogyny, and the near-universal belief that Fowler’s claims of systemic harassment were entirely accurate. Kohlatkar willfully misrepresents the Eric Holder study, which was actually designed to whitewash the harassment issue. Its original version did not sanction anyone in Uber’s senior management, but was hurriedly rewritten after news of Uber’s misuse of police files on a Delhi rape victim emerged made the whitewash untenable.
Kohlatkar dedicates almost a third of her entire story to creating a warm and fuzzy impression of Khosrowshahi. She is not writing a traditional “CEO profile” which would emphasize things like his specific actions and accomplishments at Expedia, his contract terms at Uber, and his proposed solutions for its various challenges. Those topics are ignored because Kohlatkar’s objective is to sell Uber’s “redemption/recover” story and to give readers the impression that, regardless of whatever happened before, the change of CEOs solved those problems. Thus she highlights the Kalanick—nasty guy/ Khosrowshahi—nice guy dichotomy. Since Khosrowshahi is a nice guy, readers should root for his (and Uber’s) future success.
Khosrowshahi is described as a “flatterer, diplomat, negotiator, and salesman” who was selected by Uber’s board “because of his personality: agreeable, unthreatening, comfortable with the kind of corporate talk that investors find reassuring.” He displayed cultural sensitivity while visiting Uber’s India operations. He supports the immigrant “dreamers” affected by the Trump Administrations attempt to end the DACA program. He grew up in what colleagues described as “the most family-oriented family I ever met” and his parents valued education highly. He drove a rented Volvo on his first date with his current wife. Their current house (on 23 acres in the San Juan Islands) has is decorated in “eighty-year-old grandma rock star” style, and Khosrowshahi helped with the dishes after Kolhatkar ate dinner there.
But Kolhatkar provides absolutely no evidence explaining how Khosrowshahi’s positive traits could solve the business challenges he faces or how they could rapidly transform a company with a deeply entrenched personality that embodies its “nasty guy” former CEO. Nothing in the story explains why issues of personal style might have any bearing on whether Khosrowshahi can achieve his commitment to Uber’s board to a 2019 IPO at a $120 billion public valuation, 75% richer than Uber’s inflated $70 billion private valuation.Or on his promise to eventually grow Uber to 20-30 times its current size ($146-220 billion in annual revenue).
Depict 2017 Crises Falsely as Mere “Cultural” Issues Unrelated to the Underlying Business. Kolhatkar’s narrative insists that the 2017 crises were purely “cultural.” “Uber’s board hopes that Khosrowshahi will be able to repair the company’s image.” That suggests that the board believes the crises wouldn’t have happened if Kalanick managed PR better and had hired someone to play the role Sheryl Sandberg has played at Facebook.Kohlatkar quotes a Uber investor framing the challenge as “[h]ow does Dara preserve the positive aspects of the culture and change the aspects that are in desperate need of changing while still competing fiercely?” This reinforces the redemption/recovery narrative where the underlying business model was always sound, and the appointment of someone with Khosrowshahi’s personality will fix supposedly non-core problems that arose in 2017 and put Uber back on the path to success. There’s no need for readers to know more about problems with the underlying business.
But unfortunately for Kohlatkar, even if you withhold the overwhelming awful financial data from readers, the internal contradictions come through. The “nice guy cleaning up the nasty guy’s mess” meme fails because she admits that “Uber’s previous C.E.O., Travis Kalanick, had built the company into an extraordinary success.”
More importantly, her description of Kalanick’s culture shows that it was directly drove that “extraordinary success;” it wasn’t peripheral bad stuff can be readily excised from the good stuff. That culture included Kalanick’s monomaniacal focus on results, active support for “breaking rules” and taking a combative stance towards any competitor, regulator or journalist that might stand in the way of growth. The idea that high performers should operate totally free of any constraints was an explicit “corporate value”. Kohlatkar admits that “Uber’s continued financial success has reinforced the idea that ruthlessness will be rewarded.”
Uber’s “unexpected 2017 cultural problems that the Board fixed by hiring Khosrowshahi” meme requires ignoring (as Kohlatkar does) Uber’s long pre-2017 history of willfully disobeying local laws, competitor sabotage and journalist harassment. A corporate culture that long celebrated ruthlessness and rule breaking will inevitably lead to the theft of intellectual property, the development of software designed to obstruct law enforcement, and attempts to use stolen police reports to attack rape victims and competitors. “High performers” free of any constraints will inevitably lead to the systematic harassment of their female staff.
As has been discussed at length in earlier parts of this series, the “culture” Kalanick established was an integral part of Uber’s business strategy. If Uber had not openly celebrated law breaking and a monomaniacal focus on bulldozing anything standing in its way, it would have collapsed long ago. Until mid-2017, Uber’s investors uttered nary a critical word about any of these issues, because they knew that Kalanick’s ruthless culture was directly responsible for the results (rapid growth, large valuation) they wanted.
Uber was not a “financially successful” company that happened to be run by a bunch of guys with unfortunate views about women. Uber’s had a ruthless culture because it has always had uncompetitive economics. Companies that can generate sustainable profits because they are significantly more efficient than competitors do not need to celebrate rule breaking, steal intellectual property, harass journalists or tolerate systemic sexual harassment. Uber will not resume its “financial success” with a more enlightened CEO and increased sensitivity training.
Alert readers will also note multiple cases where Kohlatkar presents comments from Uber insiders that contradict the “Uber now back on the path to success” part of the narrative.
If Uber’s past “success” was a function of rapid growth, and Khosrowshahi wants people to believe that Uber has the potential to grow by 20-30 times, doesn’t Uber’s steady recent abandonment of overseas operations (China, Russia, Southeast Asia, and potentially India) contradict that strategy? If growth and dominating markets (the way other “tech” companies have done) is critical but was fueled by subsidies, won’t efforts to improve profits by eliminating subsidies reduce demand and increase competition?
Uber may have realized that alienating drivers was a “strategic mistake” but wouldn’t higher commissions make losses even worse, and won’t Uber’s efforts to eliminate drivers make this alienation much worse? If long-term success in the driverless car industry is a strategic imperative, as Kalanick and now Khosrowshahi believe, doesn’t that suggest that they believe that they could never earn returns for investors by operating traditional taxis? Kohlatkar makes no effort to help her readers understand these questions, or anything that doesn’t directly support Uber’s preferred narrative.
Fail to Answer the Article’s Central Question. At the outset of the article, Kohlatkar tells her readers that she will address the question of whether Dara Khosrowshahi can turn Uber from a “scandal-plagued startup into a traditional company—without sacrificing what made it successful.” Despite 8400 words, the article totally fails to either answer that question, or to lay out for her readers the key issues that will determine whether Khosrowshahi can meet that challenge. While I had not known that Khosrowshahi’s home has a “eighty-year-old grandma rock star” style, I did not notice any substantive points in these 8400 words that had not been previously reported.
Kohlatkar’s actual objective is to get her readers to buy into the spin that Uber has always been a fundamentally successful company, and the recent crises her readers have heard about are utterly unrelated to problems with the company’s business model. Readers should root for Khosrowshahi because he’s such a nice guy, and should have some sympathy for Uber’s effort to redeem itself from an annus horribilus that no company deserved.
To sell this fable, Kohlatkar almost completely eliminates any mention of actual Uber financial results, makes no attempt to explain what she think caused Uber’s many 2017 issues and crises, spends much of the article on touchy-feely aspects of personality and style, presents the change of management as a victory for the good guy over a bad guy, and makes no attempt to help her readers understand what Khosrowshahi would actually have to do to reverse billions in losses and meet his ambitious IPO and growth objectives.
This narrative was not based on independent, objective reporting. It is central to the article because Kohlatkar and the editors of the New Yorker deliberately chose to support the PR/propaganda objectives of Uber’s investors.
Part IV of my Transportation Law Journal article, Will the Growth of Uber Increase Economic Welfare?44 Transp. L.J., 33 (2017) Available for download at SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2933177 and Part Nine of this series (15 Mar 17) document how Uber’s narratives have always been directly based on propaganda techniques, the strategic importance of Uber’s PR/propaganda programs, and Uber’s success in getting its narratives uncritically endorsed in the mainstream media. Parts Six (2 Jan 2017) Seven (31 Jan 2017) Eight (16 Feb 2017) and Twelve (23 Jan 2018) of this NC series provide further examples of pro-Uber pieces presented in mainstream outlets as if they were independent, objective analysis but which follow the precise structure of propaganda.
Part 13 of this series (16 Feb 2018) summarizes Uber’s P&L history through the end of 2017. Parts I and II of the Transportation law Journal document the reasons for these huge, ongoing losses–why Uber’s is a structurally less efficient producer of taxi service than the incumbents it has been driving out of business, that if lacks the strong scale/network economies digitally based companies have used to “grow into profitability” and that its growth has depended on massive predatory subsidies funded by Uber’s unusually large investment base.
To cite one of many possible sources, King & Newcomer document that Uber’s revenue and profit performance are dramatically inferior to other public companies with similar valuations, that no Silicon Valley funded startup lost anywhere near as much as Uber over its first eight years, that only one public “technology” related company experienced an annual loss larger than Uber’s 2017 loss, and ratios of sales to market value show Uber offers much less potential to investors than comparable companies.
Early 2017 crises included Kalanick’s inept handling of his decision to join Donald Trump’s business advisory council Uber’s response to a taxi strike at Kennedy Airport, Susan Fowler’s blogpost documenting Uber’s tolerance of systemic sexual harassment, a video showing Kalanick’s profane response to a driver unhappy with changes to Uber’s pricing policies, the disclosure that Uber had used a system called Greyball to obstruct local law enforcement and Google’s lawsuit alleging Uber’s theft of its driverless car intellectual property. Later crises included lawsuits between Board members following the breakdown of company governance processes, the disclosure that senior managers had illegally obtained confidential police files on the rape of an Uber passenger in Delhi (and sought to blame the accusations on competitors), and the failure to disclose of major breach of confidential customer data. Kolhatkar failed to mention the shutdown of Uber China, which had lost over $1 billion.
The January 2018 Stone article on Kalanick, (“The Fall of Travis Kalanick Was a Lot Weirder and Darker Than You Thought” Bloomberg Business Week22 Jan 2018) is discussed in Part Twelve of this series.
Prior to 2017, Uber’s narrative emphasized that its powerful business model was based on major technological innovations; that resistance to Uber was driven by regulators and “The Big Taxi Cartel” who wanted to corruptly deny consumers the benefits of Uber’s substantially superior service; that strong profits would quickly emerge as they had for all other “tech” startups, and that since Uber’s business model could overwhelm competitors anywhere, it would inevitably dominate the global taxi industry, and make major inroads on private car ownership and public transit. See the TLJ article pp.85-86, and Part Eight of this series, which documents how Stone’s The Upstarts faithfully replicates that Uber narrative. Part Twelve notes that Stone’s 2018 article is totally inconsistent with his 2017 book because he has shifted from amplifying (no longer credible) Uber’s “global domination” narrative to its more realistic “redemption/recovery” narrative
Since it would undermine her attempt to generate reader sympathy, Kohlatkar also fails to mention that Khosrowshahi was one of the highest paid CEOs in America while at Expedia, and does not disclose his salary at Uber. Presumably, those terms are far more generous than his Expedia terms, even before the $120 million bonus he could get following a successful IPO.
The growing awareness of Facebook’s highly problematic business model illustrates a similar contrast between media coverage focused on emotive/personality based narratives (do Sandberg and Zuckerberg seem trustworthy?) and coverage focused on the underlying business issues (how can Facebook be trusted if its profits and growth totally depend on unlimited access to private user data?)
While Kohlatkar’s (very brief) mention of operating subsidies and Uber’s failure to eliminate competitive threats suggest she has not been as egregious as some other pro-Uber authors in eliminating anything that might raise doubts the business model, she doesn’t acknowledge (much less address) those doubts. And those mentions need to be considered in the context of the much broader range of readily available evidence she has omitted, and her extensive effort in articulating Uber’s preferred narrative.