CHAPTER 10

GOD VIEW

Uber’s Rough Ride

Anything you can predict, I expect you to handle.

—Travis Kalanick to Uber CTO Thuan Pham

The Facebook IPO on May 18, 2012, had been a messy affair, with technical problems in the NASDAQ that delayed trading for thirty minutes and a stock price that barely rose at all that first day, then sank into a prolonged slump. The IPO was a litmus test for how the world viewed Silicon Valley and its burgeoning technological revolution. The judgment, it seemed, was harsh.

But over the next year, Facebook executives and their headstrong leader, Mark Zuckerberg, acquitted themselves well. The company restructured its business to exploit the smartphone wave, leading to an uptick in advertising sales and a flourishing stock price four quarters later. On June 31, 2013, Facebook stock exceeded its IPO price, and by the end of that year, it was up a robust 45 percent. That meant that even investors who had piled into the company’s later fund-raising rounds, like the Russian investor Yuri Milner, Microsoft, and Goldman Sachs, turned healthy profits.

The triumph of Facebook and its backers would end up changing the course of the upstarts and all of Silicon Valley. At every step of the way, critics had announced that investors were crazy to back the social network at its seemingly overcarbonated valuations. But the conventional wisdom had been wrong. Optimism had paid off handsomely.

Investors tend to ricochet between dueling anxieties: fear of losing money and fear of missing out. Facebook’s success suggested that an overabundance of caution in the dawning digital age was misplaced. But it wasn’t so easy for pattern-matching investors to simply find and back the next Facebook. Now familiar with the headache of pulling off an IPO and publicly reporting their financials every three months, high tech’s premier startups were taking longer to go public. The best, perhaps only, chance for investors was to claw their way into the fund-raising rounds of the hottest private companies.

So financial firms that had historically been tuned to backing public companies started to look for opportunities in private firms, and the flood of new capital into Silicon Valley in the years following Facebook’s resurgence spawned heightened competition for deals and pushed valuations up, up, and into the stratosphere. In a span of just six months, the mutual fund manager Fidelity Investments led a round in the image-sharing site Pinterest at a $3.5 billion valuation, while the investment management firm BlackRock led the financing of the online-storage startup Dropbox, valuing it at $10 billion. These were eye-popping numbers Silicon Valley had never seen before in private companies, and they carried the strong whiff of irrationality that had characterized the first dot-com boom. But unlike the situation last time, many of the new internet franchises were popular with consumers and earned real money on advertising and subscriptions. With internet and smartphone penetration growing rapidly around the world, these companies were enticing to users and irresistible to investors.

Uber and Airbnb would emerge from this conflagration of capital and conviction as the twin giants of a new era. By the start of 2014, Airbnb had raised $320 million in venture capital and was valued by investors at $2.5 billion; Uber had raised $310 million and was valued at $3.5 billion. That was trivial compared to what was coming next.

Over the next two and a half years, with Wall Street desperate to capitalize on the success of the upstarts and the Chinese ridesharing giant Didi raising its own enormous war chest to challenge Uber for global supremacy, the two companies together would raise more than $15 billion. They would be worth close to $100 billion before offering a single share of stock to the public.

As the companies swelled in size, value, and ambition, the world grew increasingly concerned about their impact. For Airbnb, the company’s influence on housing prices, its effect on residential neighborhoods, and its occasionally awkward attempts at compromise with major cities drew new protests from politicians and regulators. Uber attracted an even larger community of critics by using contract drivers instead of full-time employees, challenging conventional notions of employment, and sparking a seemingly endless litany of controversies related to proper background checks, adequate insurance, and the safety of both the drivers and the riders using its service. Taxi drivers and their representatives, their livelihoods squeezed by Uber and other ridesharing services, led the anti-Uber crusade with angry, sometimes violent protests in countless cities around the world.

The upstarts Uber and Airbnb, frequently named in tandem by sharing-economy proponents and critics, were the defendants in a global trial during this time of uninhibited growth. The issues being litigated were critical: Did the benefits of their dominance outweigh the well-publicized drawbacks? What was their true impact on cities? Were they good for society or bad? Facing these questions, Travis Kalanick and Brian Chesky, both shedding the baggage of their pasts, would have to rise to meet the future with credible testimony on behalf of their companies.

Uber was the first to encounter this towering wall of skepticism. Kalanick and his colleagues were flying high after the introduction of UberX in 2013. Their continued success bred a sense of invincibility and fortified the arrogance that had already permeated their dealings with competitors and regulators. Uber’s executives looked down from their perch and, seeing the historic opportunities before them, tried to conquer the world. The world looked up and, for a long moment, wasn’t so sure that it liked what it saw.

Back in the summer of 2013, just as Silicon Valley investors were moving from optimism to outright exuberance, Travis Kalanick set out to raise Uber’s fourth round of financing. Colleagues say Kalanick set the terms of the financing round himself. He initiated discussions with half a dozen large investors and ran the process as an auction, searching not just for the most capital at the highest valuation, but for a powerful partner who could facilitate Uber’s coming global expansion. Yuri Milner’s fund, Digital Sky Technologies, was involved in the bidding, as was the venture capital firm General Catalyst Partners. But ultimately Kalanick’s attention settled on the dominant technology company in the land—Google.

Kalanick started talks with Google’s investment division, Google Capital, but gravitated to its older venture capital group, Google Ventures, or GV, and one of its partners, David Krane. Krane was an early Google PR manager turned investor with a penchant for wearing colorful designer sneakers. He wooed Kalanick with a vision of Google’s sixty thousand employees whose collective energies and 20 percent free time at work could be deployed to aid the Uber cause. Kalanick was intrigued by the idea of aligning himself with Google but wanted reassurances from the top and asked for a meeting with founder and CEO Larry Page.

So one evening in August 2013, Kalanick checked into a suite at the Four Seasons Hotel in East Palo Alto, paid for by Google, and woke up the next morning for a ten o’clock meeting with the most powerful man in Silicon Valley. Krane had orchestrated an experience that would blow Kalanick’s mind. When Uber’s CEO came down to the lobby, a prototype driverless car from the Google X lab idled in front of the hotel, waiting to ferry him to Mountain View. Sitting in the front seat was a Google engineer who could answer all his questions. It was Kalanick’s first ride in a self-driving car on real roads.

At the Google campus, Kalanick met with Page, Google senior lawyer David Drummond, and Krane’s boss at GV at the time, Bill Maris. Page assured Kalanick that the companies could work together to develop Google Maps, which Uber relied on for navigation in its apps, but he didn’t say much or stay very long. The more important legacy that day was Kalanick’s developing awareness of the technology that might radically change Uber’s business.

“The minute your car becomes real, I can take the dude out of the front seat,” Kalanick told Krane excitedly after the meeting. “I call that margin expansion.” In Kalanick’s estimation, payments to drivers were contra-revenue—a deduction from the top line. The inevitable future of robot cars was going to be awfully good for his business, he surmised.

Krane thought he’d sealed an exclusive investment for Google Ventures after a subsequent four-hour meeting with Kalanick and Uber’s head of finance, former Goldman Sachs exec Gautam Gupta. But it wasn’t done quite yet. That night, Kalanick called Krane and told him he also wanted to include a second investor in the round: TPG Capital, the San Francisco private equity firm that had engineered leveraged buyouts of such companies as Continental Airlines, J. Crew, and Burger King. Kalanick wanted the experience and connections of TPG’s legendary founding partner David Bonderman, then a board member at General Motors, and thought he could help Uber with its regulatory problems around the world.

Google invested $258 million in the ridesharing company. David Drummond joined the Uber board, while Krane joined as a board observer. TPG invested $88 million, buying shares directly from founder Garrett Camp and obtaining a provision that allowed the firm to get additional shares if Uber’s valuation ever fell below $2.75 billion, says a person familiar with the deal. Clearly nervous about investing in a startup, the private equity firm was hedging its bets; it also received an option to buy another $88 million worth of stock at the same price within six months. David Bonderman joined the Uber board as a director while his colleague David Trujillo, who had orchestrated the investment, joined as a board observer. (Benchmark also invested another $15 million, and the rapper and entrepreneur Jay Z agreed to invest $2 million—then wired Uber $5 million, hoping for a larger stake. Although Kalanick was impressed by the brash move, he returned the difference.)

Uber’s coffers were now brimming. After the round closed, Kalanick climbed aboard TPG’s Gulfstream jet with Bonderman, TPG co-founder James Coulter, and Trujillo, as well as investor Shervin Pishevar and his partner Scott Stanford, to visit countries in Asia and gauge the company’s expansion opportunities there.

The world seemed wide open. Yet nearly every assumption Kalanick and his investors were making about the future in the fall of 2013 turned out, in the end, to be at least partially incorrect. Google was reluctant to cede the results of its driverless car research to another company and would soon look more like Uber’s mortal enemy, not its ally. Within a year, David Bonderman would leave the board of General Motors, which in 2016 would make a sizable investment in archrival Lyft.

And remarkably, according to multiple people familiar with the transaction, when the time came for TPG to purchase its second $88 million allotment of Uber shares at the same valuation, the private equity firm wavered and waited until the last possible moment before attempting to exercise the option. Characteristically stingy about giving out Uber stock and diluting the ownership stakes of existing investors, Kalanick declined the transaction. Calculating for the dramatic rise in Uber’s value between that round and the end of 2016, TPG’s lack of faith ended up costing the firm hundreds of millions in unrealized gains.

The biggest miscalculations may have been Kalanick’s own. Asia would prove more challenging and costly than he had ever anticipated. He especially misread the atmospheric shifts in Silicon Valley’s fund-raising climate. “Emil,” he had said gleefully to Emil Michael, his new vice president of business development, after closing the investment from Google and TPG, “we’re never going to have to fund-raise again.”

Emil Michael was disappointed to learn that Kalanick thought Uber’s financing efforts were over—he considered fund-raising one of his talents. Born in Cairo, Michael had immigrated with his family to the United States as an infant, graduated from high school in New Rochelle, New York, and earned an undergraduate degree from Harvard University and a law degree from Stanford. He had a brief stint at Goldman Sachs before decamping to Silicon Valley in 1999, right at the peak of the dot-com bubble.

During his ten years in the industry, Michael had cultivated a reputation as being effective, loyal, and upbeat. He first met Kalanick in 2011, when he was taking a hiatus from high tech to work in the White House as a special assistant to Secretary of Defense Robert Gates. Kalanick tried to recruit him to join the startup, but at the time Uber looked like a luxury town-car service, not a worldwide transportation juggernaut. Michael was skeptical that it could ever be a big business.

But Michael remained friendly with Kalanick and by the time he joined Uber, in the fall of 2013, he recognized that Uber’s future was brighter than he had originally believed. While Uber Black remained one and a half times more expensive than a traditional yellow taxi, UberX was, on average, 25 percent less expensive and was starting to dominate the emerging rideshare wars.

Lyft and Sidecar had introduced ridesharing, but when Uber started aggressively rolling out the service, first in the United States in 2013 and then in Europe in 2014, the two rivals struggled to keep up. Uber had a more established brand and more money in the bank as well as upscale product lines, like Uber Black and Uber SUV, whose profits could be used to subsidize UberX rides and offer financial incentives to new drivers.

Uber was growing 20 percent each month and, thanks to UberX, had gone from nonexistent to ubiquitous nearly overnight in San Francisco, Los Angeles, DC, and Boston. That fall, Uber had moved out of its cramped offices on Howard Street to more spacious digs a few blocks away, on the ninth floor of 706 Mission Street, around the corner from the San Francisco Museum of Modern Art. Kalanick’s desk was across from Emil Michael’s, and the two would often peer at each other over their computer screens to marvel at new growth statistics.

“We’d have these moments, asking each other, ‘Did you see this thing?’” Michael says. “It just kept going.”

Some U.S. cities, such as Austin, Las Vegas, Denver, and Miami, resisted the arrival of unregulated ridesharing; amusingly, New Orleans sent Uber a cease-and-desist letter before it was even operating there.1 But Kalanick still had his trusty playbook as well as the political theorem known as Travis’s Law, which dictated that politicians accountable to the people could be pressured to accommodate any service that was markedly better than the alternative.

In October 2013, most of Uber’s four hundred employees flew to Miami on another workation, staying in rooms in the ritzy Shore Club in South Beach. When employees weren’t at dinners or parties around the hotel pool, which had the giant U from the Uber logo illuminated on the water, they walked the beach handing out Uber postcards and affixing pro-Uber posters to light poles. The company’s campaign to drum up popular support to legalize ridesharing in South Florida had a website, an Instagram page, and a Twitter hash tag: #MiamiNeedsUber.

Miami was a challenging market for Uber. Private for-hire limos and sedans were required by law to wait an hour before picking up passengers and had to charge more than seventy dollars for the ride. The ordinance was backed by the region’s taxi fleets and meant to keep them safe from loosely regulated competition from limos and town cars. It didn’t stand a chance against sustained popular demand for ridesharing. Lyft and then Uber would open for business in Miami-Dade a few months after the visit by Uber employees.2 Though the companies’ services were still technically illegal, courts only occasionally levied fines against drivers, and the police didn’t shut down either service. By 2015, lawmakers were ready to change the rules.

“Demand is too great,” Miami mayor Carlos Gimenez told the Miami Herald. “I’m not going to drag Uber and Lyft back into the 20th century. I think the taxi industry has to move into the 21st.”³

Uber was entering adolescence, winning political battles, growing, and adding executive talent. A few months before Emil Michael joined the company, Kalanick had also recruited a new chief technology officer, Thuan Pham.

Pham had left Vietnam as a child, spent ten months in an Indonesian refugee camp, attended MIT, and became an accomplished technical leader at the online advertising firm DoubleClick and cloud company VMWare. Joining Uber as a senior executive meant a grueling interview process that included a cumulative thirty hours of one-on-one conversations with Kalanick. Pham reorganized Uber’s technical team, accelerated the hiring of engineers, and oversaw a complete revision of its dispatch algorithms and database storage systems to keep up with a business that was doubling every six months and showing no signs of slowing down.

Pham’s impact at Uber was evident on New Year’s Eve, typically a night of frantic activity that had overwhelmed Uber’s systems for three straight years. “Thuan, if we have a system breakdown, I’m going to have an aneurysm and my death will be on your hands,” Kalanick told him earlier that day. But for the first time, Uber’s systems survived the night relatively unscathed. A few days later, Kalanick took Pham and his team out for a celebratory dinner and offered a rare bit of praise. “You did a great job,” Uber’s CEO said. Characteristically, the praise came with a new challenge. “From here on out, anything you can predict, I expect you to handle.”

Over the next few months, Kalanick executed two ideas that further propelled the growth of UberX. The first, helping Uber drivers finance the lease of new vehicles, originated with former Goldman Sachs commodities trader Andrew Chapin, who was working as a driver operations manager in Uber’s New York office. Chapin had observed that the biggest obstacle facing many prospective Uber drivers was the lack of a vehicle; a lot of them didn’t own cars because they were immigrants with bad credit or no credit.4

Chapin thought Uber could help drivers obtain car leases and then divert a certain percentage of their earnings toward paying them off. The arrangement would pay dividends for the company, not only by putting more cars on the road but by ensuring that drivers devoted their energies to Uber rather than to rival ridesharing or delivery services. “The demand is there, but if we don’t help our partners and drivers get cars on the road, then it just doesn’t matter. We’re just not going to be able to grow,” Kalanick said that year.⁵

To canvass for interest in such a program, Uber executives visited car companies and auto-loan financers around the country. Their initial reaction was skepticism. “The car companies were like, ‘Yoober? Who are you guys? Aren’t you the town-car company?’” Emil Michael recalls. Kalanick, Michael, and investor Bill Gurley visited the Detroit offices of Ford Motor Company, often referred to as “The Glass House,” and met with executive chairman William Clay Ford Jr., who was also noncommittal. Kalanick got a photo of himself with Ford, the great-grandson of founder Henry Ford, plus a tour of the company’s historic displays in the lobby, where Gurley recalls the Uber CEO got lost in reading about the automaker’s storied past.

Ultimately, the big carmakers, GM, Toyota, and Ford, would sign on to the program, as would dealerships and auto lenders, and in time Uber would bring the financing in-house and make loans through its own subsidiary, Xchange. The program would be criticized for offering subprime loans with onerous terms and for repossessing vehicles when drivers didn’t make their payments on time.6 Michael argued that the program helped credit-challenged drivers who simply had no other options. “You are taking people who are already getting killed on loans and doing something better for them,” he says. “Of course the interest rate is high, but at least they have a chance.”

While driver loans helped stimulate the supply of Uber cars, a second move helped to spark demand and was just as controversial. In early 2014, hoping to improve business during the annual winter slowdown, when people curtailed their nights out, Kalanick cut UberX fares by up to 30 percent in U.S. markets like Atlanta, Baltimore, Chicago, and Seattle.⁷ The theory was that if prices went down, customers would use the service more and bypass rental cars, public buses, and subways. With more passengers, drivers would spend less time idling between rides, replacing the lost income from the fare cuts by completing more rides.

While the plan made sense, subsequent fare cuts would create unrest among drivers, and Uber would eventually have to reverse them in cities where lower prices didn’t spark higher demand. But it also accelerated the growth of UberX and, perhaps just as important, forced the less highly capitalized Lyft to introduce its own fare and commission cuts.⁸ Uber had discovered what startup gurus like to call the virtuous circle, the links between various parts of its business. Lower prices led to more customers and more frequent usage, which led to a larger supply of cars and busier drivers, which enabled Uber to further cut prices and put more pressure on competitors.

Even Uber’s most fervent supporters had not grasped the true potential of the business. Uber wasn’t just taking passengers out of yellow cabs, it was growing the overall market for paid transportation.

“I knew Uber was going to be big, but I didn’t know it was going to be so outlandish,” says venture capitalist Bill Gurley. “When we started testing lower price points, that’s when it was really ‘Oh my God.’ The price elasticity was impressive.” The increasing pace of the business surprised Kalanick himself. “I didn’t understand the scope of the Uber opportunity and I didn’t understand how the private equity and venture worlds would go to massively unprecedented places in order to be a part of that opportunity,” he says.

Nothing could stop Uber now, it seemed, except perhaps itself.

On December 31, 2013, just before eight o’clock on New Year’s Eve, a young mother named Huan Kuang and her two children were walking in a Polk Street crosswalk in San Francisco’s Tenderloin District when tragedy struck. A gray Honda Pilot SUV turned right onto Polk, hit the family, and killed Kuang’s six-year-old daughter, Sophia Liu. The driver of the vehicle, fifty-seven-year-old Syed Muzaffar, had been working for UberX for about a month. He didn’t have a passenger in his car but told police he was monitoring the Uber app, waiting to get assigned a fare. The distraught mother later told a local television reporter that she could see the light of the cell phone reflected on the driver’s face.9

The media reeled at the circumstances surrounding the case and at the uncomfortable fact that, at first, Uber denied any involvement. We can confirm that this accident DID NOT involve a vehicle or provider doing a trip on the Uber system, Travis Kalanick Tweeted the afternoon after the accident.¹⁰ When more facts emerged, Uber released a more carefully worded abrogation of responsibility that, even coming after a statement of condolence to the family, reeked of cold, calculating legal logic. “The driver in question was not providing services on the Uber system during the time of the accident,” read a statement on the Uber blog posted the day after the incident. “The driver was a partner of Uber and his account was immediately deactivated.”¹¹

Uber’s stance defied any common-sense assessment of the tragedy.

The company was earning significant money but apparently wanted none of the liability for accidents. Yet Uber had brought drivers like Muzaffar onto the roads with the lure of a profitable night, furnished them with a smartphone app, and deployed a system that required them to respond promptly to multiple alerts and text messages while on the road. Muzzafar might not have had a passenger in the backseat, but he was performing a key service for Uber: driving around the city with the app open waiting for one.

There were other disturbing facts. Muzaffar had a ten-year-old citation for driving a hundred miles an hour on a highway in the Florida Keys.12 Uber’s background checks were done by a company called Hirease, which reported only the previous seven years of an individual’s criminal history.¹³ Uber carried insurance with $1 million in liability coverage per incident but that applied only from the moment a driver accepted a trip on the Uber app to when the passenger left the car. Neither Uber nor the California Public Utilities Commission, in its contentious hearings the year before, had considered the period when drivers were logged on to the system but had empty backseats and were waiting for fares. Sophia Liu’s family, which had significant medical bills, would have to rely on Muzaffar’s terribly inadequate $15,000 personal insurance policy, if it even paid up. Such a tragedy had been eminently predictable, and yet Uber, it seemed, hadn’t been ready for it.

(That March, three months later, both Uber and Lyft introduced up to $100,000 of supplementary insurance to cover this gap.¹⁴ In 2014, the State of California passed a law mandating the companies carry $200,000 worth of liability coverage for the period when drivers had the app open and were looking for passengers.¹⁵)

Muzaffar was arrested on vehicular manslaughter charges after the incident and tried. The jury deadlocked in April 2016,¹⁶ and, as of this writing, he is awaiting retrial. The Liu family also filed a wrongful death lawsuit against Uber, alleging the company was responsible because its smartphone application had fatally distracted Muzaffar from the road. Uber settled the suit privately in June 2015 for an undisclosed amount while admitting no wrongdoing.17 Yet the damage to Uber’s reputation went far beyond any secret payment. For the first time, the company was widely seen as either unable or unwilling to contain the potentially destructive consequences of the transportation revolution it was unleashing on the world.

Uber execs “were extremely hungry and immature and caught up in a whirlwind of money and growth,” says Christopher Dolan, a local plaintiff attorney who represented Sophia Liu’s family. “They got seduced by the possibility rather than stopping to think about their responsibility.”

The Sophia Liu tragedy kicked off a year of relentlessly negative media coverage that calcified Uber’s reputation as an aggressive, ruthless, and sometimes heartless operator. While Uber spread rapidly into cities and countries in Europe and Asia, critics slammed it not only for facilitating dangerous conduct by drivers with backgrounds that hadn’t been thoroughly vetted but also for what appeared to be anticompetitive tactics and the occasional inappropriate public comments by employees. Many people’s negative impressions of Uber were forged in 2014, during the company’s most challenging year, when mistakes by Kalanick and his team seemed to compound as their business grew.

Less than a month after the Liu tragedy, an unseemly practice among the ridesharing startups roared into public view. Uber, Lyft, Sidecar, and a host of smaller players were only as strong as the number of drivers willing to open their apps, so they constantly vied not only to capture new drivers but to poach one another’s. It was bare-knuckle competition, the kind of junkyard brawling that Travis Kalanick loved—so Uber excelled at it. Inside the company, employees called it slogging, only later ginning that word into an acronym for a meaningless term: supplying long-term operations growth.18

Mostly it involved offering free gas cards, signing bonuses, and other perks to get drivers from rival services to defect, but occasionally it went further. On January 24, 2014, the Israeli startup Gett reported that over a three-day period in New York City, where it had introduced a black-car service, Uber employees ordered and then canceled more than a hundred of its cars and then texted the drivers and attempted to get them to switch to Uber. (Gett, unlike other ridesharing companies, foolishly was not using a service such as Twilio to disguise driver phone numbers.) Jing Wang Herman, Gett’s U.S. manager, compared Uber’s strategy to an attack by hackers and sent Gett drivers a text message apologizing for the harassment and declaring, in all capital letters, WE ARE AT WAR WITH UBER. She also showed media outlets a list of Uber employees who had ordered Gett cars using their real names. It included Josh Mohrer, the general manager of Uber’s New York office.¹⁹

Confronted with the evidence, Uber promptly apologized. “The sales tactics were too aggressive,” read a post on the company’s blog. Kalanick later told me, “The New York team works hard to get as many drivers onto the system as possible, because that’s the only way to grow and service customers in the city with quality, reliability, and the right price. Sometimes they get a bit aggressive, and that’s unfortunate. We apologized and made it a lesson for the rest of the company.”

Uber’s year would become only more contentious from there. In February, a feature in the men’s magazine GQ described Kalanick as a “bro-y alpha nerd” and quoted him observing that Uber had amplified his appeal to women. “Yeah, we call that Boob-er,” he said.²⁰

In May, speaking at the Code Conference, Kalanick had even more trouble elevating his tone to a level befitting a high-profile CEO. I was in the audience that year when he attacked incumbent cab companies so forcefully that it made the taxi fleets look sympathetic. Uber, he said, was engaged in a political campaign where “the candidate is Uber and the opponent is an asshole named Taxi. Nobody likes him, he’s not a nice character, but he’s so woven into the political machinery and fabric that a lot of people owe him favors.” He went on to say Uber would have to “bring out the truth about how dark and dangerous and evil the taxi side is.”

When asked about driverless cars, he said that he was excited for the technology because it could bring prices down, but he didn’t express concern about unemployment for drivers. “The reason Uber could be expensive is because you’re not just paying for the car, you’re paying for the other dude in the car,” Kalanick said. As for the tens of thousands of drivers who relied on his company to support their families, he shrugged. “This is the way of the world,” he said, “and the world isn’t always great. We all have to find ways to change.”

Kalanick was being himself—blunt and unaware of, or perhaps indifferent to, how his comments might be perceived by Uber’s own key constituencies. Uber’s problems in 2014 were reflections of its CEO’s personality, the strengths that had gotten him through the ordeals of his early career and the flaws that had at times repelled some investors and colleagues. Chief among those was his furious competitive streak, his drive to win not only in Wii Tennis but in business and to rub out his rivals in the process.

The battle with Lyft, which continued to play out in 2014, was another example of this. Kalanick had regretted letting Lyft take hold in 2012 while waiting for California regulators to sanction ridesharing. He was obsessed with Lyft and its potential to outmaneuver Uber, and he worried that a more seasoned company might acquire it.

Around this time, he confronted his fellow upstart CEO Brian Chesky while he was dining at The Battery, a swank, members-only social club for the San Francisco tech set. Chesky was having drinks with local attorney Sam Angus when Kalanick came up to their table and demanded to know if Airbnb was going to buy Lyft.

“No, we are in the business of trips,” Chesky recalls answering.

“We are in the business of trips!” retorted Kalanick, who later couldn’t recall whether he was joking or if he had been responding to an actual rumor.

For a brief period in 2014, Lyft had been ready to throw in the towel, and representatives approached Uber about combining the companies. Kalanick and Emil Michael went to dinner with Lyft president John Zimmer and Andreessen Horowitz partner John O’Farrell to discuss a deal, according to three people who were privy to the conversations. The meal was friendly, despite the heated rivalry. But Lyft’s expectations were high. In exchange for selling Lyft to Uber, Lyft’s backers wanted an 18 percent stake in Uber. Uber offered 8 percent; Kalanick wasn’t a fan of mergers to begin with and wasn’t about to hand over a fifth of his prize. Neither party would budge, and the talks fell apart.

Lyft recovered quickly. That spring, with unconventional sources of capital now flooding into Silicon Valley, it raised $250 million from a consortium of investors that included hedge fund Coatue Management, Chinese e-commerce giant Alibaba, and the Founders Fund, the investment vehicle of PayPal co-founder Peter Thiel, and it expanded into twenty-four new U.S. cities, thirteen of which were midsize markets where Uber did not yet operate.21

The battle was on again. A few weeks later, Uber rushed to raise another $1.2 billion in a hastily convened Series D round from the financial firms Fidelity, Wellington, and BlackRock, as well as the venture capital firm Kleiner Perkins. The fund-raising process took all of three weeks, and Kalanick was at his charismatic best, pitching investors a compelling vision of Uber’s future.

“If you can make it economical for people to get out of their cars or sell their cars and turn transportation into a service, it’s a pretty big deal,” he told me after the round closed. Kalanick also took the unusual step of privately telling investors that if they wanted a chance to make an investment in Uber, they shouldn’t consider talking to Lyft.²² Uber was “going to Lyft’s investors and saying, ‘Hey, look, we’re open for business too. We’ll take an investment,’” Kalanick said when I asked him about the tactic. “That’s what that conversation was.” But to others, it seemed Kalanick was trying to scorch the earth behind him.

It must have seemed unfair to Kalanick that Lyft had the better reputation, even though in some ways it was the more aggressive player. It had been the first to introduce unregulated ridesharing in San Francisco, Miami, and Kansas City, yet the endeavors of its founders, Logan Green and John Zimmer, often came off as sincere idealism, not predatory ambition. “Every Lyft ride is an opportunity for positive human interaction,” Zimmer gushed to CNN in one characteristic interview. “I also feel very fortunate to be changing the future of transportation, which will deliver a more people-centered city of tomorrow.”23

That July, Lyft started preparing to launch ridesharing in New York City, where Uber operated only with licensed professional drivers. Sidecar had attempted such a feat the year before, only to see its drivers issued summons and their cars impounded by the New York Taxi and Limousine Commission. It beat a hasty retreat.²⁴ As Uber had discovered during the introduction of Uber Black and Uber Taxi in New York, the TLC could be a formidable adversary that did not tolerate disruption in the city’s already jammed streets.

But Lyft president John Zimmer wouldn’t take no for an answer. He announced publicly that Lyft would introduce its service in Queens and Brooklyn.²⁵ Then Zimmer flew to New York City with his vice president of government relations, David Estrada, and had a day of meetings with Meera Joshi, the taxi commissioner under New York mayor Bill de Blasio. Joshi informed them in strident terms that Lyft needed to register as a base and, like Uber, could use only TLC-licensed drivers. The next day, Zimmer and Estrada were called to the state attorney general’s office, where a dozen officials from the AG’s office and New York’s Department of Financial Services reeled off a list of laws Lyft would be breaking if it followed through with its plans.

Still determined, Zimmer hosted a launch party that night at the 1896 nightclub in Bushwick, with a performance by the rapper Q-Tip from a Tribe Called Quest. Local techies crowded the dance floor while a dozen taxi drivers protested out front. “We feel Lyft is coming in here to take us out of business,” Nancy Soria of the New York Association of Independent Taxi Drivers told the tech blog Technical.ly.26

Later that night, Zimmer and Estrada heard the TLC was preparing an injunction. On a conference call with general counsel Kristin Sverchek and Lyft’s outside lawyer, an impassioned Zimmer argued that they should go ahead anyway and wanted to get himself arrested for the cause. The lawyers laughed—but he was serious. Together they persuaded him that it would be a bad idea. “I don’t want to think about you in jail,” Sverchek told him. “It’s not something I can stomach.”

Backed into a corner, Lyft caved. For the first time in its history, Lyft introduced a service using professional drivers instead of regular people driving their own cars.²⁷ In New York, Lyft would look like the original incarnation of Uber, deploying only licensed drivers.

From there the battle between Uber and Lyft devolved further. In public, they accused each other of slogging—ordering and canceling rides and proffering rewards to each other’s drivers to defect.²⁸ In private, an even more rancorous struggle played out. Lyft’s chief operating officer was a creative executive in his early thirties named Travis VanderZanden whose fledgling on-demand car-wash business, Cherry, Lyft had acquired in 2013. At Cherry, VanderZanden had devised an ingenious system in which the most experienced car washers mentored and reviewed newer ones, allowing the company to enlist a large workforce of contractors without having to hire employees to train and monitor them.²⁹ VanderZanden brought the idea to Lyft and used it to help expand Lyft into new cities without ever putting employees on the ground. And he introduced an Uber Black–like service, Lyft Plus, an attempt to cut into a source of Uber’s profit advantage.

But by the summer of 2014, his colleagues from that time said, VanderZanden had become disillusioned about Lyft’s prospects against the more highly capitalized and faster-moving Uber. Without the knowledge of Green or Zimmer, he approached two Lyft board members about taking over as CEO, according to court filings.30 He also started talking privately to Uber about restarting merger discussions between Lyft and Uber. When Lyft’s founders found out about all this, they were livid. VanderZanden resigned in August and a few weeks later joined Uber as vice president of international growth.

The lawsuits promptly flew. Lyft accused VanderZanden in California state court of downloading proprietary financial and strategic documents before he left.³¹ VanderZanden denied the allegations and on Twitter called it an “audacious attack on my reputation.”³² A few months later, Uber filed a civil lawsuit in federal court in an attempt to find out who had illegally breached its computer systems and downloaded the names and personal information of some fifty thousand drivers. According to a deposition in VanderZanden’s case, Uber believed the culprit was Lyft’s chief technology officer Chris Lambert. (Lambert’s lawyer denied to Reuters that the Lyft CTO had anything to do with the data breach.)³³

Things had gotten ugly fast and the public airing of all this enmity was going to be bad for business. So, two years later, right before the VanderZanden case was set for a potentially embarrassing public trial, the two companies settled their legal dispute and Uber withdrew its civil lawsuit over the data breach.³⁴ The heated rivalry would continue to play out, but on the streets, not in the courtroom, and not on Twitter.

That summer, the rapidly growing Uber moved its headquarters for the second time in a year, and the seventh time since its founding, to larger offices, taking over eighty-eight thousand square feet in a former Bank of America building on Market Street and leasing extra space for expansion. The hulking cement structure occupied an entire city block and had a helipad on the roof and a bank vault in the basement. Inside, Uber’s offices were dim and moody, full of dark wood, chocolate-brown leather sofas, and walls covered by whiteboards and digital displays of Uber’s cities. A circuitous walking path wound amid the open desks, perfect for Kalanick’s restless pacing. True to the CEO’s combative personality, the long executive boardroom at the center of the main floor, with clear glass walls that could be frosted opaque during private discussions, was dubbed “the war room.”35

While the name suggested deeply ingrained belligerence, Uber that summer was desperately trying to professionalize its image. In August, after a protracted process of interviewing political luminaries like Democratic strategist Howard Wolfson and White House press secretary Jay Carney, Uber made a high-profile hire—David Plouffe, the manager of Barack Obama’s 2008 presidential campaign, became senior vice president of policy and strategy.³⁶ Kalanick also set about tempering his tone, and he introduced a more inspirational articulation of the company’s mission; it was no longer to destroy “an asshole named Taxi” but to offer “transportation as reliable as running water, everywhere and for everyone.”³⁷

Kalanick was trying to change his ways. But it would take more than a political craftsman to reshape Uber’s pugnacious and well-earned image. Uber’s biggest public relations crisis of the year was still to come.

In late October, journalist Sarah Lacy of the technology blog PandoDaily wrote an essay excoriating Uber, in part for a ridiculous promotional campaign out of its office in Lyon, France, that offered to pair riders with attractive female drivers who appeared to be affiliated with an escort service.38 “Who said women don’t know how to drive?” read Uber’s advertisement; around the post were pictures of scantily clad women.³⁹ When contacted by the press about the promotion, Uber quickly canceled it and pulled the post from its local Lyon blog. But Lacy, never one to shy away from bombastic pronouncements, declared that she was deleting the Uber app from her phone and accused Uber of having a corporate culture of sexism that endangered female drivers and passengers.

“I don’t know how many more signals we need that the company simply doesn’t respect us or prioritize our safety,” she wrote.⁴⁰

Inside Uber, Lacy’s post went over badly. The Lyon promotion had been an embarrassing mistake by a local office but the company prided itself on extending opportunities to women to become drivers and ensuring that, as passengers, women could order cars safely and not have to wait on dark street corners at night hoping to hail a passing cab. Lacy’s post, on top of all the mounting criticism that year, rankled.

Three weeks later, Uber invited various media executives and journalists to an off-the-record dinner at Manhattan’s Waverly Inn. Kalanick sat on one side of the long table and, after dinner, gave a short speech and answered questions. Emil Michael sat on the other side, across from New York Daily News publisher Mort Zuckerman and Arianna Huffington. Next to them sat Ben Smith, the editor in chief of BuzzFeed, who asked Kalanick in the Q-and-A session how he felt about the Affordable Care Act, aka Obamacare. When the table returned to private conversations, Michael asked Smith why he had posed a political question, and Smith volunteered that he was hoping that Kalanick would give an answer that revealed libertarian leanings.

That led to a broader conversation about the news media and its scruples, the exact content of which would become a topic of blistering controversy. Michael’s recollection of the discussion is that he told Smith that it bothered him when the press made personal accusations without evidence. Then he raised the hypothetical idea of Uber spending a million dollars to create a coalition for responsible journalism; he said it could hire researchers and professional journalists to respond when negative articles came out and turn the tables on reporters, who might have their own secrets to hide.

The dinner was on a Friday. On Monday, claiming he didn’t know the discussions at the event were off the record, Smith published an article on BuzzFeed with his version of the conversation, headlined “Uber Executive Suggests Digging Up Dirt on Journalists.” Uber’s muckrakers would “look into ‘your personal lives, your families,’ and give the media a taste of its own medicine,” Michael had said, according to Smith. He also reported that Michael theorized that the reporters could unearth unsavory details about Sarah Lacy’s private life and said that she should be held “personally responsible” for “any woman who followed her lead in deleting Uber and was then sexually assaulted.”41

Though Michael privately disagreed with Smith’s characterization of his words, he immediately apologized in a statement, saying, “The remarks attributed to me at a private dinner… do not reflect my actual views and have no relation to the company’s views or approach. They were wrong no matter the circumstance and I regret them.” A day later, in an account of the same conversation in the Huffington Post, Nicole Campbell, a White House fellow who was sitting nearby, framed Michael’s comments somewhat differently. Campbell wrote that Michael had said hypothetically that Lacy “wouldn’t like it if someone wrote false things about her or published an article that was factually wrong, because we all have done things in our private lives we are not proud of.”⁴²

The BuzzFeed story contained one additional element that fueled the immediate backlash against Uber. Smith wrote that a few days before the dinner, the general manager of the New York office, Josh Mohrer (he of the Gett slogging incident from earlier in the year), had greeted visiting BuzzFeed reporter Johana Bhuiyan outside the Uber office in Long Island City and showed her that he had been tracking her journey in an Uber car using a company tool called God View.

God View was an internal service that Uber made available to all of its employees, and it was one reason the company had grown so quickly. All of the hundreds of city offices had access to the same tools as employees in San Francisco and so could make decisions based on data in a decentralized way. Kalanick believed that a transparent corporate culture gave employees a sense of ownership of their projects, making them feel as if they were running startups within the larger company. And yet Uber had deployed God View without adequate privacy protections around the data, with little training of employees, and with no public privacy policy that informed the world of how Uber planned to use this sensitive information. It was a disaster waiting to happen.

The BuzzFeed story, with its implications of menacing corporate behavior and misused customer data, set off a media bomb. After a year of drama, news outlets were attuned to any whiff of Uber-related controversy, so nearly every major publication and television network covered the story. It was picked up as far away as Europe and Asia. The next morning, Michael and Kalanick left New York City for a Goldman Sachs conference in Las Vegas. Michael recalls walking the concourse at LaGuardia Airport with Kalanick and glancing up at a television in an airport lounge to see his picture on CNN.

It all seemed surreal. On the plane, Michael and Kalanick sat side by side with their laptops connected to the in-flight Wi-Fi and watched as a torrent of anti-Uber Tweets rolled in reacting to Michael’s comments at the dinner. “I was literally trying to distract him,” Michael recalls. “I was thinking, Oh my God, I’m going to get fired before we land.” He had never blundered in such a public way before.

At a previous point in his career, Kalanick might have gone to war with his online critics, defensively seeking to protect his beloved brand. Instead, he took to Twitter and, with Michael sitting next to him trying not to look at his boss’s laptop screen, reeled off fourteen Tweets that temporarily quelled the storm. Then he laid out a promise that Uber would strive to be a better citizen of the world.

Emil’s comments at the recent dinner party were terrible and do not represent the company.

His remarks showed a lack of leadership, a lack of humanity, and a departure from our values and ideals.

His duties here at Uber do not involve communications strategy or plans and are not representative in any way of the company approach.

Instead, we should lead by inspiring our riders, our drivers and the public at large.

We should tell the stories of progress and appeal to people’s hearts and minds.

We must be open and vulnerable enough to show people the positive principles that are the core of Uber’s culture.

We must tell the stories of progress Uber has brought to cities and show our constituents that we are principled and mean well.

The burden is on us to show that, and until Emil’s comments we felt we were making positive steps along those lines.

But I will personally commit to our riders, partners and the public that we are up to the challenge.

We are up to the challenge to show that Uber is and will continue to be a positive member of the community.

And furthermore, I will do everything in my power towards the goal of earning that trust.

I believe that folks who make mistakes can learn from them—myself included.

And that also goes for Emil.

And last, I want to apologize to Sarah Lacy.

In Las Vegas, Michael stayed in his hotel room, far from the conference at the Bellagio. Back at the office later in the week, Kalanick gathered his employees, many of whom were distraught by the public backlash, and addressed the entire mess, saying he trusted Michael and was certain that the senior executive misspoke and did not have nefarious intent. He was not going to fire him.

But Kalanick also conceded the company was so big, powerful, and vital to urban transportation that it had to grow up. The gunslinger mentality that was such an asset during Uber’s first few years was now causing more harm than good. Access to God View had to be strictly limited and controlled if the company wanted to preserve the trust of its users.

Even he, as CEO of the most closely watched startup in the world, had to change his tone, become more self-aware, and articulate the future Uber was rapidly creating with optimism and a whole lot more empathy.

A few days before Kalanick had spoken at the Code Conference and declared war on “an asshole named Taxi,” he had received a phone call from Google chief lawyer David Drummond, an Uber board member. Google co-founder Sergey Brin was also speaking at the event and, Drummond told him, was going to make a bombshell announcement: Google was planning to roll out its driverless cars as part of its own Uber-like on-demand service. Drummond wanted to give Kalanick advance warning that the search giant was going to unveil long-term plans to compete with Uber.

An hour after the call, Drummond phoned again, saying the announcement was off—Brin wasn’t going to say that after all. Kalanick was stunned. In many ways Google was an impressive, well-run company, but as he was learning, inconsistencies often resulted from the impetuous whims of its founders.

Nevertheless, the experience planted an unsettling thought in Kalanick’s head. The company he had considered an investor and ally just eight months ago now loomed as possible competition. High-tech history was replete with examples of technology companies whose prospects were curtailed by dependencies—IBM’s reliance on Microsoft for the Windows operating system in the 1980s, for example, and Yahoo’s dependence on the Google search engine in the 2000s. Uber required Google for maps, and perhaps one day it might need Google even more for its driverless cars.

That fall, as the public relations crises mounted, Kalanick was secretly preparing for this contentious future. He started meeting regularly with his new chief product officer, Jeff Holden, a fast-talking former Amazon and Groupon executive who had spearheaded the launch of the carpooling service Uber Pool, and with Matt Sweeney, an early engineer who had orchestrated a complete overhaul of the Uber application. In October, Kalanick received additional confirmation from inside Google that the search giant was planning to compete with Uber. He subsequently asked board member David Drummond and board observer David Krane to stop attending Uber board meetings.

Kalanick and his executives were plotting how they could jump-start Uber’s own driverless-car project and catch up to Google and electric-car maker Tesla. If the future of transportation was indeed going to be driverless, they reasoned, Uber had to own it.