Transportation as reliable as running water, everywhere and for everyone.
—Uber mission statement
Uber too sat on the threshold of corporate maturity. But first, it had to get through its final years of awkward adolescence—stormier, more adversarial, and even more eventful than the ones navigated by Airbnb. Uber was a gangly athlete who grew a foot in the span of two years and no longer fit into his clothes—and who had problems with aggression. It was, quite frankly, a marvel to behold.
By the beginning of 2014, Uber had introduced the ridesharing service UberX in twenty-eight cities. By the end of 2016, UberX and other flavors of Uber ridesharing were in more than four hundred and fifty major cities around the world. Allowing nonprofessional drivers to pick up passengers in their own vehicles had become a global phenomenon, bringing a new type of flexible work to drivers, lowering the price of transportation, and changing the way people traveled around cities.
Propelled by lower prices and higher ride volumes, Uber’s already vigorous business exploded—exponentially. Uber booked a cumulative two hundred million rides by the beginning of 2014, one billion rides by the beginning of 2016, and two billion rides only six months later. Its employee base grew from 550 to 8,000 during this time. A $1.4 billion investment led by Fidelity Investments and BlackRock in June 2014 valued the company at $18 billion. That had already seemed bonkers then, but two years later, its valuation had more than tripled, to $68 billion, making Uber the most highly valued privately held technology startup in history.
The rise of ridesharing also sparked another wave of conflict in nearly every major city and country in the world. Travis Kalanick had promised a more optimistic and mature style of leadership during Uber’s PR calamities of 2014, but while he toned down his rhetoric, he didn’t modulate his ambitions. And that engendered more regulatory combat and fierce competition than any technology startup had ever seen.
London was one of the first European cities to grapple with the disruptive implications of ridesharing. The city had a proud taxi heritage, with drivers of its iconic black cabs required to study the city’s demanding street grid for three years to pass a test grandiosely referred to as “the Knowledge.” London’s cabbies were proud and skilled, and they earned a comfortable middle-class wage. They were also furiously resistant to any kind of change other than fare increases, which they championed with periodic appeals to the regulator that set their fares, Transport for London (TfL), and backed up with threats of taxi strikes.
When Uber first came to town, in 2012, the black-cab drivers were already feeling threatened by the swell of minicabs and four-door sedans that could be booked by telephone or in person at a minicab office. Minicabs were legally prohibited from running taximeters or picking up passengers on the street.
Uber blew away all the distinctions between the black cabs and minicabs, while the ubiquity of GPS rendered the Knowledge essentially superfluous in an unkind instant. Then it introduced a version of UberX in London in June 2013, after operating its luxury car service there for a year. Like minicab operators, UberX drivers would have to obtain a private-hire license and commercial insurance. They did not have to pass the Knowledge. Unlike minicab drivers, UberX drivers would respond to requests from the Uber app and wait for rides while they were on the road. Uber did not ask for permission before proceeding with UberX; it simply judged that fifty-year-old regulations had not accounted for new technology such as electronic hails.
UberX operated quietly in London, at first. But the black-cab drivers were attuned to new competition and did not tolerate it graciously. On June 11, 2014, they objected to the city’s embrace of UberX by gridlocking the city with a midday strike, blocking traffic on Lambeth Bridge over the Thames and paralyzing the city center.1
“All the years I’ve been driving a cab I had people fighting over me. Now it’s a miracle if I get a job,” John Connor, a black-cab driver from the East End with forty-four years of experience, said as he ferried me from Heathrow Airport into Shoreditch a few months later. He was one of the ten thousand taxicab drivers who had participated in the strike. “We had to let people know that they can’t shit on us!” he said.
Many of the new UberX drivers, he noted, were immigrants from countries like Pakistan, Bangladesh, Somalia, Ethiopia, and Eritrea. They were happy to work eighteen-hour days for below-minimum wage. He had a family to support! These were the same issues—immigration, globalization, and middle-class anxiety—plaguing all Western countries in the early twenty-first century. “I’ve never seen a change like this in my life. The game is finished,” he said as the car idled in the city’s stalled traffic.
Uber said sign-ups jumped 850 percent after the strike. Drivers had inadvertently brought Uber more attention. Seven thousand people were driving for the company in London by that fall. At the same time, Jo Bertram, Uber’s steely London-based regional manager, was subject to such vicious online hostility that she was forced to abandon social media. She had repeatedly faced the combative British press, but the vitriol on Twitter was too much. “There was a barrage of abuse,” she told me. “My friends said, ‘Stop reading this. It’s not healthy.’ We just handed it off to a colleague.”
The antagonism toward Uber in London simmered that year as UberX grew more popular. In 2015, swamped with mounting driver complaints, the embattled TfL moved to suppress the Uber insurgency. It proposed rules that, among other restrictions, would prohibit Uber from showing available cars in its app and require drivers to wait a minimum of five minutes before picking up passengers who had solicited a ride.2 These were irrational measures, mostly meant to curtail Uber’s appeal. Emotions were running high. “That Travis, he’s so smarmy, I could just punch him,” Steve McNamara, general secretary of the Licensed Taxi Driver Association, a black-cab trade group, told me on my visit.
At the eye of the storm was London’s mop-topped Conservative mayor, Boris Johnson, who would later rise to international attention as a main backer of Brexit, Great Britain’s withdrawal from the European Union. Johnson was in a tough spot. He had solicited the support of black-cab drivers during his mayoral run in 2008, even printing his campaign slogan on taxi receipts.
At first Johnson noted that Uber was systematically breaking minicab regulations by allowing its drivers to cruise the streets and wait for passengers. But he also observed that technology had wiped away any rationale for the distinction between black cabs and minicabs. At an open question-and-answer forum in September 2015, he called the black-cab drivers who had packed the auditorium “luddites who don’t want to see new technology.” The drivers rose in a chorus of angry jeers, creating pandemonium in city hall and getting them ejected from the building.3
But just like in U.S. cities, Uber held the dominant hand in London because residents loved the service. The company mobilized not only an army of practiced lobbyists but two hundred thousand customers who put their signatures on a petition calling for the TfL to drop its proposed restrictions. In January 2016, it did. Johnson conceded that the regulations “did not find widespread support” and said that lawmakers could not “disinvent the internet.”4
Boris Johnson’s counterparts in continental Europe did not necessarily agree with him. In France, the institutional reflex against Uber was strong. In early 2014, with Uber growing in Paris—the city had become the startup’s sixth market more than two years before—the French legislature ruled that drivers had to wait fifteen minutes before picking up a passenger that hailed a car on the Uber app. A French administrative court overturned the ruling but it was indicative of the fight to come and of the influence wielded by the country’s two largest taxi companies, which had consolidated control of the taxi market.5
At that point Uber was using only professional drivers in France. But a private chauffeur’s license cost three thousand euros and there were provisions meant to protect taxis, such as one that required drivers to pass a written test. To unlock the true potential of an on-demand transportation service, Uber needed to grow its supply of drivers without such obstacles. In February 2014, with the French government unwilling to relax the licensing requirements, Uber introduced ridesharing in France that allowed drivers without professional taxi licenses to pick up passengers using their own cars. Because Uber already had UberX in the country, a service that used licensed professional drivers, the company called this offering UberPop; regional general manager Pierre-Dimitri Gore-Coty chose the name with colleagues because it reminded him of the phrase peer to peer.
UberPop grew steadily in France until the summer of 2015, when taxi drivers across France protested, snarling highways, overturning Uber cars, and blocking access to Charles de Gaulle Airport. The Interior Ministry, which regulates French taxis and enforces French laws, was sympathetic to the drivers and apparently to traditional taxi interests. Uber’s Paris offices were raided and drivers were fined.6 On June 29, 2015, authorities arrested Gore-Coty and Thibaud Simphal, Uber’s general manager in France.7 They spent the night in jail, and a few days later Uber shuttered the UberPop service, though it maintained its licensed-driver services in the country. After a 2016 trial, the executives and the company were found guilty of “misleading commercial practices” and ordered to pay a fine.8
And so it went in Italy, where a Milan judge outlawed UberPop in May of 2015, citing unfair competition;9 in Sweden, where thirty drivers were convicted of operating an illegal taxi service, forcing the company to suspend UberPop there;10 in Spain, where a judge banned Uber for a year, charging it with “unfair competition,” and ordered Spanish internet providers to block access to the Uber app within the country; this came after a formal injunction from Spanish taxi companies and their powerful trade group, the Association Madrileña Del Taxi;11 and in Germany, where judges ruling on claims by taxi trade groups found that Uber violated competition laws and should be required to use only professional licensed drivers.12 Uber withdrew from the German cities Frankfurt, Hamburg, and Düsseldorf while maintaining its services using licensed drivers in Berlin and Munich.
The fight over Uber in each European country was revealing. On the one hand, it reflected Uber’s clumsy aggressiveness, its proclivity to roar into cities with guns blazing and without cultivating allies in government, only to face an inevitable backlash later. “We made some mistakes,” says Ryan Graves, Uber’s head of operations. “We were a little more bull-in-a-china-shop than we needed to be.”
On the other hand, Uber’s expansion also measured the will of local governments to update antiquated transportation laws for a service that many of its own citizens desperately wanted. This was a litmus test for democracy itself, exposing whether regulators and legislators were more beholden to their own people or to powerful taxi interests and unions. The countries of continental Europe struggled with this test. They had encountered an innovative and arrogant new player out to disrupt a stagnant industry, and their impulse was to repel the upstart.
On the other side of the world, however, things were quite different. Asia’s response to Uber’s global ambitions—unlike Europe’s—was primarily entrepreneurial. In fact, Travis Kalanick was about to come face to face with someone just as driven and aggressive as he was.
Back in the spring of 2012, news of the funding and imminent expansion of the British taxi-hailing service Hailo flooded the tech blogs. As we have seen, Hailo’s premature announcement pushed Kalanick to quickly add vehicle choices to the Uber luxury-car app. Hailo was forced to retreat from the United States and return to its niche facilitating taxi rides in England and Ireland. In 2016, it was acquired by Daimler.
But Hailo’s ill-fated expansion attempt in 2012 had another, even more profound effect on the progression of this story.
Halfway around the world, in the headquarters of the Hangzhou-based Chinese e-commerce giant Alibaba, a talented young salesman named Cheng Wei read about the coming Hailo-Uber showdown in the tech blogs and started plotting to take advantage.
Cheng Wei was born in Jiangxi Province, a landlocked region in eastern China famous for being the cradle of Mao Zedong’s Communist revolution. His father was a civil servant, his mother a mathematics teacher. He excelled at math in high school but says that during his college entrance exams, he neglected to turn over the last page of the test, leaving three questions blank.
He got into the Beijing University of Chemical Technology, less prestigious than the upper-echelon schools. Cheng had planned to major in information technology but was instead assigned by his university to business management. He worked during his senior year, as Chinese students often do, selling life insurance. He didn’t sell a single policy—not even to his teachers, one of whom told him that “even my dog has insurance,” Cheng says. At a job fair, he applied to be a manager’s assistant at a business that billed itself as a “famous Chinese health-care company.” But when he showed up for work in Shanghai, luggage in hand, he discovered it was actually a chain of foot-massage parlors.
In 2005, out of school at twenty-two, he got an entry-level job at Alibaba by showing up at the front desk of its Shanghai office and asking for work. He landed in sales and earned 1,500 yuan, or $225, a month. “I am very thankful toward Alibaba,” Cheng says. “Because someone stepped forward, didn’t shoo me away, and said, ‘Young people like you are what we want.’”
Despite his earlier insurance fiasco, Cheng proved to be good at selling online ads to merchants. He moved up the ranks and eventually reported to an outspoken executive named Wang Gang. When he first met Cheng, Wang says, the young man’s sales numbers were strong, but his real talent was in emceeing customer events.
In 2011, Wang, unhappy about being passed over for a promotion, gathered Cheng and other underlings to brainstorm ideas for startups. They tossed around business models for companies in education, restaurant reviews, even interior decorating. In early 2012, they started tracking a smartphone app called Momo that allowed people to identify the locations of other users on an online map. The notion of tracking attractive females on their phones got them interested in a smartphone’s GPS capabilities. That’s when Cheng Wei read about Hailo’s coming expansion to the United States.
To Cheng Wei, the Hailo news was a wakeup call. The United States and the United Kingdom were battling to drag the taxi industry into the smartphone era. Cheng knew that China had a massive taxi market that was regulated, stubbornly analog, and highly fragmented, with dozens of taxi companies in every major city.
He left Alibaba in 2012 and named his new taxi-hailing application Didi Dache, or “honk honk call a taxi.” His boss Wang Gang also left Alibaba and became Cheng’s primary financial supporter, investing 800,000 yuan, or about $100,000, in the startup. (Estimated value of Gang’s stake at the end of 2016: around $1 billion.)
Cheng and several ex-Alibaba colleagues initially set up shop in a warehouse in northern Beijing, a shabby hundred-square-meter space with a single conference room. It turned out that their idea for a Hailo-like app for Chinese taxis was not really that novel. At least thirty other groups of entrepreneurs either saw the Hailo announcement or sensed the frisson of excitement in the air around electronic taxi hailing and were developing similar startups inside China at pretty much the exact same time.
Electronic cab hailing caught on especially fast in China, with its crowded subways, congested highways, and chronic smog that made it unpleasant to walk or bike. But at first, the business didn’t seem like a particularly good one. Competition was fierce, and the taxi-hailing startups had to pay cabbies to help defray the cost of owning cell phones. The Chinese government, worried about any increase in transportation costs, prohibited the startups from collecting commissions on fares and in some cities even ruled the apps illegal—though drivers used them anyway, often carrying spare phones to show to inspectors if they were pulled over. Cheng says he dispatched two of his first ten employees to launch the service in Shenzhen, home to Foxconn’s iPhone factories, because he thought of all of China’s cities, Shenzhen had the most liberal regulatory attitude. Didi was promptly halted by local authorities.
Cheng is cherubic and bespectacled—he wouldn’t look out of place in a video-game arcade at two a.m. He’s recalling all of this from his spacious office, furnished with business books and a desktop goldfish tank, in the north part of Beijing.13 On clear days, which are rare in the city, he can see the mountains in the northwest where the Chinese strengthened the Great Wall in the fifteenth century to protect against invasion from the Mongols. Considering everything that was about to happen, this seems apt.
All the early Chinese ridesharing startups lost money, and the ones that arrived late to the market or tried to replicate Uber’s original strategy of starting with the more expensive but rarer black cars were critically handicapped. But Didi was scrappier than most of its rivals. When Yaoyao Taxi, a rival backed by Silicon Valley’s Sequoia Capital, won an exclusive contract to recruit drivers at the Beijing airport, Didi employees descended on the city’s biggest railway station to promote their app. Instead of imitating competitors and giving away smartphones to drivers, an expensive proposition for a capital-strapped startup, they focused on providing their free app to younger drivers who already had phones and were likely to spread the word about Didi.
During an epic Beijing snowstorm late in 2012, when it was impossible to hail a cab on the street, residents turned to the app, and the company surpassed one thousand orders in a single day for the first time. That got the attention of a Beijing venture capital firm, which put in $2 million, valuing Didi at $10 million. “If it didn’t snow that year, maybe Didi wouldn’t be here today,” Cheng says.
Then, in April 2013, one of the startups established an early advantage—and it wasn’t Didi. Kuaidi Dache (“speedy taxi”), based in the eastern city of Hangzhou, raised a round of funding from Cheng Wei’s old employer, Alibaba.14
Dominant market share on the internet in China is often established by the startup with the strongest link to one of the Big Three—the entertainment portal Tencent, the search company Baidu, and the e-commerce giant Alibaba. These companies control the online landscape in the world’s most populous country and are able to send torrents of traffic to their partners. Didi was catching on among techies in the cities of Beijing and Guangzhou, but to survive, Cheng Wei realized, he would need to forge an alliance. A few weeks after the Kuaidi-Alibaba deal, he raised $15 million from Alibaba’s archrival Tencent in a round that valued the still-tiny company at $60 million.
With the backing of two rival Chinese internet giants, Didi and Kuaidi trained their sights on each other. During one notoriously difficult week, reverently known at Didi as “Seven Days, Seven Nights,” both companies had intermittent technical problems, sending drivers and riders scurrying from one service to the other and back again. Cheng says engineers were holed up in Didi’s cramped offices for so long and worked so hard to resolve their issues that one employee had to have his contact lenses surgically removed.
Finally, Cheng called Pony Ma, the founder and CEO of Tencent, for help. Ma agreed to lend him fifty engineers and a thousand servers, and he invited Didi’s team to temporarily work out of Tencent’s more comfortable offices.
But Didi wasn’t making any money, and Cheng needed to raise capital. He visited the United States for the first time in November 2013, only to be rejected by multiple investors. “We had burned a lot of money,” he says. “Investors were like, ‘Whoa.’” There was another snowstorm that Thanksgiving in New York City but this one was less serendipitous. Cheng Wei says his Uber got caught in the storm on the way to the airport and he ended up missing his flight. “I was very depressed after I came back to China,” he says.
In early 2014, everything changed. Over the 2014 Chinese New Year, Tencent had a huge hit with a mobile app called Red Envelope, which allowed users to send friends and family members small financial gifts for the holiday, an ancient Chinese custom.
Suddenly Alibaba and Tencent awoke to a new battleground in their long-standing war—mobile payments. Managing the primary online wallet for smartphone users in China could be a powerful strategic position. So both companies scrambled to establish their payment apps. Didi and Kuaidi were turned into proxies in this mad dash. Didi was integrated into the payment feature of Tencent’s hugely popular chat app, WeChat, while Kuaidi allowed customers to pay using Alibaba’s mobile-payment subsidiary, Alipay. Both Alibaba and Tencent started funneling cash into their affiliated taxi apps, which then offered generous guaranteed payments for drivers and discounts for riders as a way to lure users to the dueling mobile-payment services.
Between 2009 and 2014, Uber had expanded in the United States with extraordinary speed, carried along by a great wave of booming smartphone usage. But in China, largely thanks to the furious competition between the tech giants and their desire to push their messaging and mobile-payments products, the wave nearly resembled a destructive tsunami. By doling out generous subsidies in 2014, Didi was burning through a hundred thousand dollars every day in the proxy war with Kuaidi, according to one of its investors. That year it raised $800 million in two separate rounds of funding from Tencent and the Russian venture capital firm DST Global, among other investors, while Kuaidi raised nearly as much from Alibaba, the Japanese tech conglomerate Softbank, and the private equity firm Tiger Global.15 Cheng Wei was proving himself a clever and adaptable CEO, but at this rate, the battle with Kuaidi was going to be financially ruinous for everyone involved.
Didi’s and Kuaidi’s investors eventually realized the folly of their mounting rivalry. With Travis Kalanick starting to eye China as Uber’s next big opportunity, they urged an armistice between the two startups and their corporate backers.
The savvy Russian venture capitalist Yuri Milner of DST helped to broker the merger, shuttling between Alibaba and Tencent’s headquarters. Thanks to Cheng Wei’s scrappiness and the strength of Didi’s integration with WeChat, Didi now had more ride volume and ended up controlling 60 percent of the combined company. Cheng Wei “was essentially as aggressive as Travis,” says a Didi investor. “He was like a perfect match.”
Uber had been laboring quietly in China for two years. After completing the Series C funding over the summer of 2013, Travis Kalanick had traveled to Asia on a celebratory trip with executives from TPG Capital. Before he left, he asked a group of colleagues to meet him in Beijing. Austin Geidt; Allen Penn, the former Chicago manager; Sam Gellman, an Uber executive living in Asia; and Corey Owens, the head of public policy, met Kalanick in Beijing, where they spent two weeks working from several “shoddy apartments in some corner of Beijing that I have yet to ever find again,” Penn recalls.
For U.S. internet companies, expanding into China had long been considered a suicide mission. Google, eBay, Amazon, Facebook, and Twitter had all tried and failed to crack the world’s second-largest economy, repelled by government censorship, the native advantages of the Big Three, or both. Kalanick, characteristically, was undeterred. With colleagues, he put together a list of all the reasons he believed they were different than their tech predecessors and concluded that they were creative and patient enough to succeed. He was a problem solver and this was the ultimate problem—one no other tech entrepreneur had overcome.
That week in 2013, Uber’s away team fanned out in Beijing, experimenting with the local taxi-hailing apps, meeting with lawyers and regulators, and learning everything they could about the rules and realities of the country’s taxi industry. Kalanick met with a number of startup CEOs, including a young Cheng Wei, who was only six months into running Didi at the time and who impressed Uber’s boss. “Travis had met him even before I started,” says Emil Michael. “He told me that among all the ridesharing founders, Cheng Wei was special. He was just a massive cut above anyone else in the industry.”
The Uber execs all discovered the challenges of getting around in Beijing. Allen Penn recalls leaving himself ninety minutes to make it to a meeting across the city and spending half an hour trying unsuccessfully to hail a cab; eventually he went back inside, frustrated, and called into his meeting on Skype.
Everyone they met that week urged the Uber execs to proceed cautiously in China and forge a joint venture with a local player. “Take your time. Do not rush this. American companies will get this wrong” was the gist of the advice, says Austin Geidt.
But as he was demonstrating in Europe, Kalanick was not in the habit of moving slowly. One day on the trip, he retrieved a few spare iPhones from his luggage and slipped in local SIM cards. He called and woke an Uber engineer in San Francisco and asked him to hack together a version of the Uber driver app for Beijing. Then Allen Penn and Patti Li, a TPG investor who spoke fluent Mandarin, found some willing drivers, and that night the visiting execs became the first Uber riders in China. “From a GPS standpoint it was a mess,” Geidt recalls, since many Google services were blocked in China and Google Maps was an unreliable guide.
It would take another year for Kalanick and his execs to grow comfortable with the idea of launching in China. In early 2014, Uber rolled out its luxury black-car service in Shanghai, Beijing, Guangzhou, and Shenzhen. It charged in U.S. dollars only, at first, to position it as a tool for tourists and expats. Careful not to provoke the Chinese government, it intentionally didn’t solicit any media attention. “We didn’t want to come here loudly,” Geidt says.
Uber muddled along quietly in China for a year as Didi and Kuaidi dueled under the aegises of Alibaba and Tencent. Then, in the fall of 2014, buoyed by Uber’s success elsewhere in the world, Kalanick and his execs decided to introduce ridesharing in China. “This is where true entrepreneurs show up,” says Emil Michael. “We thought, What’s the worst that could happen? We’re not an incumbent, so let’s take the bet.”
In October 2014, in Guangzhou, Shenzhen, Hangzhou, and Chengdu, Uber introduced the equivalent of UberX, which it called the People’s Uber, allowing any drivers who cleared background checks to pick up passengers with their own vehicles. At the same time, it found a strategic partner who could offer money, valuable technology, and political connections with the Chinese government—the one member of the Big Three that had missed the expensive taxi-app wars and was late to the mobile-payments landgrab. In December, Baidu announced it was making an investment in Uber and that Uber would now run on the more dependable Baidu Maps in China.16
The strategy seemed to work, at first. With Didi and Kuaidi consumed with their merger, Uber started gaining ground on the strength of ridesharing and clawed its way to what it estimated was 30 percent of the Chinese market for on-demand transportation apps.
As usual, there was drama. Taxi drivers went on strike in half a dozen cities, including Changchun, Nanjing, and Chengdu.17 The police raided Uber offices in Guangzhou and Chongqing.18 In January 2015, the country’s Ministry of Transport ruled that private car owners were not allowed to use ride-hailing apps for profit. But strangely, Uber and its rivals were allowed to continue to operate. The Chinese government showed little appetite for a total crackdown. It wasn’t going to exterminate a service that promised to address the country’s considerable transportation woes.
Uber now had leverage, and Travis Kalanick was going to try to use it. On a trip to Beijing, Kalanick and Emil Michael visited the Beijing offices of the newly merged and renamed Didi Kuaidi (“honk-honk speedy”) and met with a group of executives that included Cheng Wei and his new chief operating officer, Jean Liu, a former managing director at Goldman Sachs. The meeting started well, by all accounts. Cheng Wei greeted Kalanick with the words “You are my inspiration,” but after that the mood became tense.19 Emil Michael remembers what he thought might have been a form of psychological warfare: “They served us maybe the worst lunch I’ve ever eaten,” he says. “We were all just poking at our food, wondering, Is this some kind of competitive tactic?” (It wasn’t. Jean Liu later apologized to Michael for the food.)
At one point during the meeting, Cheng walked over to a whiteboard and drew two lines. Uber’s line started in 2010 and went up sharply and to the right, depicting its rapidly rising ride volume since its inception. Didi’s started two years later, in 2012, but had a steeper curve and intersected Uber’s line. Cheng said Didi would one day overtake Uber because China’s market was so much larger and many of its cities restricted the use and ownership of private cars to manage traffic and pollution. “Travis just smiled,” Cheng recalls.
According to Cheng Wei, Uber’s CEO wanted to invest in Didi Kuaidi. He asked for a 40 percent ownership stake in the company and, in return, promised to cede China to Didi. In a speech, Cheng Wei later said that Kalanick threatened an “embarrassing defeat” for Didi in China if he rejected the offer. “We could tell from the way they looked at us that they thought of us as just another local taxi app from Sichuan,” Cheng Wei said. “Foreign companies see China as a territory to be conquered.”20
Jean Liu, a native of Beijing who spoke English fluently and who was Didi’s primary liaison to the global business community, said that Kalanick came off as a bully. “Imagine someone coming to your office saying, ‘Give me this much stake of your company, otherwise I will fight you,’” she says. Uber later disputed Didi’s account and characterized the meeting as “super friendly.”21
Didi execs rejected the proposal and soon introduced their own version of ridesharing in China, as well as carpooling options and commuter buses. Didi would prove a powerful incumbent, capable of raising billions of dollars of venture capital and going head to head with Uber to entice Chinese drivers and riders with discounts. It was going to be a global mega-unicorn death match—over the largest transportation market in the world.
On the afternoon of June 3, 2015, Uber invited local journalists to its Market Street headquarters in San Francisco to mark a momentous occasion: the fifth anniversary of the company opening its app to drivers and riders. Garrett Camp kicked off the event marveling that “a crazy idea” had turned into a globe-spanning juggernaut. Austin Geidt and Ryan Graves each recalled when Uber was composed of only a few employees sitting around a cramped conference-room table in borrowed offices near the Transamerica Pyramid.
Then Travis Kalanick took the podium, looking nervous and emotional, with his parents sitting in the first row. Over the next twenty minutes, speaking awkwardly from a teleprompter, he acknowledged the aggressiveness that had made Uber such a polarizing company over the last half a decade. “I realize that I can come off as a somewhat fierce advocate for Uber,” he said. “I also realize that some have used a different a-word to describe me.”
Kalanick then made a political case for the company that he had never before so artfully articulated. Uber, he said, brings new transportation options to low-income neighborhoods that aren’t served well by yellow taxis. It creates flexible jobs for the unemployed, for immigrants, and for students looking to finance their education. By combining riders in the same car via the carpooling service UberPool, the company was further lowering the price of for-hire vehicles and potentially taking cars off the road and reducing CO2 emissions. “That’s what we believe is the real game changer and those are the things we’ll be working on in years to come,” he said.
The scripted event attempted to showcase a more introspective and optimistic Kalanick. It bore the fingerprints of Uber’s increasingly professional communications team led by David Plouffe, who would soon be replaced by Rachel Whetstone, the former head of communications and public policy at Google. But the message had another target besides the journalists in attendance—regulators and legislators in Europe and, particularly, on the East Coast of the United States, where a new wave of opposition to Uber was gathering at that very moment in New York City, the biggest taxi market in the country.
In spite of the victories that had allowed the taxi apps to establish their businesses there, New York City under Mayor Bill de Blasio was largely hostile to Uber, just as it had been to Airbnb. In early 2015, the city and Uber battled over legislation to cap surge pricing22 and over whether the company should turn over its trip data to the Taxi and Limousine Commission.23 That May, the TLC considered severe restrictions that would, among other things, give it the authority to review any changes to the Uber application.
There was mistrust on both sides. The city accused Uber of being intransigent and refusing to play by the rules. Uber and its surrogates alleged that de Blasio was listening to his friends in the yellow-taxi industry, which had donated significantly to his mayoral campaign.24 Both accusations were likely true. It was also true that the ground was shifting dangerously under the taxi fleets in New York. The value of a taxi medallion had peaked at more than $1.2 million in 2013, making them affordable only to fleet owners with access to bank loans or multiple drivers who could pool their money. They were selling for less than half of that by 2016.25 David Yassky, the chairman of the TLC between 2010 and 2014 (and a Lyft advisor), told me he felt the new restrictions were “pure protectionism.”
Uber organized protests with riders and drivers at city hall, urging the city to abandon the new rules. On June 18, 2015, the TLC seemingly backed off. There was a brief respite from conflict, with both sides praising each other in the press.26 But then, twenty-four hours later, Meera Joshi, Yassky’s successor as TLC commissioner, called Michael Allegretti, a public-policy manager at Uber, and told him that a law was about to be proposed in the city council to cap the number of new private-hire licenses granted to Uber, Lyft, and other app companies, pending the outcome of a study on congestion in lower Manhattan. “There’s nothing you can do to stop that one,” Joshi told Allegretti. “The votes are there.”
The bill was proposed the next day, and it was as bad as Uber could have imagined. Under the legislation, Uber and Lyft could grow their supply of drivers by only 1 percent a month while the congestion study was conducted, which could take a year or more.27 Capping Uber’s supply of drivers was paramount to freezing its growth and could provide a road map for opposition forces in places like London and Mexico City. The city council planned to vote on the bill in twenty-one days.
This, Uber execs reasoned, was a hit job. The downtown streets had indeed slowed to a crawl, but that was the result of many factors, including the proliferation of bike lanes, reduced speed limits, a booming economy, an increase in e-commerce delivery trucks, new construction, and on and on. Uber would have to fight this the old-fashioned way, in the trenches.
Summer 2015’s three-week battle for New York’s streets offered a fresh look at what was now a well-funded, well-organized, and ruthless political operation. The campaign hit the progressive Democrat de Blasio from the left on jobs and equal access to transportation in the outer boroughs, issues that mattered to the constituencies that had gotten him elected in the first place. Uber’s campaign included mailings, robo-calls, a rally of drivers in Queens, and a pair of brutally effective television ads that ran widely that month in the New York area.
The ads featured a series of African American and Latino Uber drivers talking to an off-camera interviewer, crediting Uber for giving them work and levying some indirect charges against the yellow-taxi industry and the mayor.
“People have access to an Uber in places where they never thought they would be able to be picked up.”
“This is New York. We live in five boroughs!”
“The mayor is giving in to the taxi industry.”
“He should know the struggles that most New Yorkers go through. Embrace the fact that people want to go to work!”
“When the mayor came to town he promised to provide jobs.”
There was little subtlety to the parade of minority faces; Uber was beating de Blasio over the head with an implicit race-based appeal. David Plouffe, now an Uber board member and adviser, hammered away with that message, appearing on TV, meeting with newspaper editorial boards, and holding a press conference with African American community leaders at Sylvia’s, an iconic soul food restaurant in Harlem.
And in a clever display of political jujitsu, the company added a feature to its app called De Blasio’s Uber, which showed New York’s two million Uber users a dystopian future where the wait to be picked up was a horrifying twenty-five minutes. Kaitlin Durkosh, a junior member of the communications team, had come up with the idea, which was catnip to media covering the fracas. “This is what Uber will look like in NYC if Mayor de Blasio’s Uber cap bill passes,” the app informed its users. It then asked them to e-mail city hall and make their displeasure known.
Lyft lobbyists were also active in the fight, though quieter. Lyft’s representatives met with city council members that month to press their case and highlight the congestion-relieving benefits of their own carpooling service, Lyft Line. Their most effective argument was that freezing the number of private drivers would only entrench Uber’s advantage. That resonated, says one Lyft exec. “Whoever we were meeting with said, ‘Look, I hate those Uber guys. They are the worst. Help me figure out how to make only Lyft legal.’”
The end for de Blasio in the Uber fight was swift and humiliating. A day before the vote, New York governor Andrew Cuomo, who had sparred openly with de Blasio on issues such as charter schools and upper-income tax increases, announced his opposition to the bill and suggested the state might get involved. “I don’t think that government should be in the business of trying to restrict job growth,” the governor said, twisting the knife in his political rival.28
The next day at noon, Allegretti, the Uber public affairs exec, got a phone call. The mayor’s office wanted to talk. He went to city hall, on 250 Broadway, with East Coast regional manager Rachel Holt, NYC manager Josh Mohrer, and Justin Kintz, Uber’s head of public affairs, and met with de Blasio’s political director and deputy mayor, among other officials. The conversation was brief—the mayor was going to drop the cap provision pending the outcome of the congestion study. (The study would show that tourism, increased construction, and deliveries were mostly responsible for lower Manhattan gridlock.)29
It was another victory for Uber, total and sweeping. In less than a month, the company had put together an unlikely coalition of affluent riders and minority drivers from all five boroughs. It had demonstrated that Travis’s Law still reigned in the United States, that as long as people loved Uber they would fight for it, and that the taxi industry had few friends. These lessons would prove handy in other American cities, like Las Vegas, Austin, Portland, Miami, and wherever battles over ridesharing were being waged. Uber would win many of these fights, lose a few, and demonstrate that it still had capital, political connections, a great many thousands of fervent customers, and the grand arc of history itself on its side.
In the fall of 2015, Travis Kalanick treated his five thousand employees to a lavish, four-day, all-expenses-paid retreat in Las Vegas. It was part all-hands meeting, part gaudy celebration of… well, it wasn’t quite clear of what, or even that the company needed a reason to celebrate. But Uber’s PR team recognized that the trip was likely to play poorly in the press and among Uber’s drivers, so it impressed upon attendees that they were not allowed to post anything about it on social media. The secrecy was so extreme that Uber created a special logo for the occasion, two Xs inside a box, so that bystanders couldn’t identify the company. Nevertheless, the Daily Mail, a British newspaper, ran an account of the event, and several current and former Uber employees later shared with me their recollections.30
Employees were put up, two in a room, in five hotels on the Vegas Strip. During the day there were seminars on topics such as supply growth and business development as well as optional philanthropic expeditions to local food banks. In the afternoons, employees luxuriated and drank standing in the hotel pools in the 90-degree desert heat. At night there were dinners and talks, including one Q-and-A session with Kalanick and media entrepreneur Arianna Huffington, a future Uber board member, and another with Uber investors Bill Gurley and Shervin Pishevar. Afterward there were dance parties and more poolside revelry, which apparently wasn’t for everyone. “That’s when I realized how millennial the company was,” said one employee who quit a few months later, worn out by the grinding internal pace. “I’m thirty-five. I don’t want to stay out until three in the morning. I felt ancient.”
Tuesday night was the main event and an indication that Kalanick was endeavoring to coax his upstart into adulthood. Employees filled the amphitheater at the Planet Hollywood Resort and Casino, where Kalanick commanded the stage for two and a half hours, wearing a white laboratory coat and unveiling the company’s newly conceived cultural values.
Cultural values can be a rudder for large companies, a way to align thousands of far-flung employees and guide the hiring of new workers with a set of rigorously defined ideals. Airbnb had formulated its six values back in 2012 (“Be a host” and so forth), and they had helped to shape its conciliatory manner of dealing with unanticipated crises and regulatory turmoil. Uber had skipped this step earlier in its history, which was apparent in its more slapdash and aggressive approach to unanticipated obstacles.
Kalanick called his new values a “philosophy of work” and said he had deliberated over them for hundreds of hours with colleagues, including his chief product officer, Jeff Holden. Holden was a former Amazon executive and a disciple of Jeff Bezos, and it showed; many of Uber’s principles were comparable to those of the widely admired technology giant, and, like Amazon, Uber had fourteen of them. Onstage at Planet Hollywood, Kalanick discussed each (the parenthetical descriptions are mine):
Customer obsession (Start with what is best for the customer.)
Make magic (Seek breakthroughs that will stand the test of time.)
Big bold bets (Take risks and plant seeds that are five to ten years out.)
Inside out (Find the gap between popular perception and reality.)
Champion’s mind-set (Put everything you have on the field to overcome adversity and get Uber over the finish line.)
Optimistic leadership (Be inspiring.)
Superpumped (Ryan Graves’s original Twitter proclamation after Kalanick replaced him as CEO; the world is a puzzle to be solved with enthusiasm.)
Be an owner, not a renter (Revolutions are won by true believers.)
Meritocracy and toe-stepping (The best idea always wins. Don’t sacrifice truth for social cohesion and don’t hesitate to challenge the boss.)
Let builders build (People must be empowered to build things.)
Always be hustlin’ (Get more done with less, working longer, harder, and smarter, not just two out of three.)
Celebrate cities (Everything we do is to make cities better.)
Be yourself (Each of us should be authentic.)
Principled confrontation (Sometimes the world and its institutions need to change in order for the future to be ushered in.)
Kalanick showed several slides and a video for every value and ended each topic by calling on an executive to illustrate it with a story or observation. Here was an encore for some of the main figures in Uber’s history; Ryan Graves, Austin Geidt, Rachel Holt, Allen Penn, and Holden himself all took their turns with the microphone, sharing their personal stories with the company.
Employees who hadn’t sufficiently glugged the company Kool-Aid thought it was an overly long and self-indulgent display. Others called it their most formative experience at the company. “It was one of the most moving moments I had at Uber,” says Austin Geidt. “You could see how big we were, how many different countries were represented, and all the different types of people. It was awesome.”
Afterward the employees lined up for buses to take them to another nightclub, where the DJs Kygo and David Guetta performed. And the next night, the lucky Uber employees were treated to a private performance by an Uber investor, the megastar Beyoncé.
A few months later, on February 1, 2016, a few hundred Uber drivers gathered in front of the company’s offices in Long Island City to protest the latest round of UberX fare cuts. Uber had recently reduced its fares by 15 percent in many cities, part of its annual effort to stimulate demand during the winter slowdown and increase the frequency of rides (and, no doubt, to apply further financial pressure to its domestic rival Lyft). NO ONE WINS THE RACE TO THE BOTTOM! read one sign. GIVE US THE RATE BACK. SHAME ON UBER! read another.
The drivers that day in Queens were angry about what now seemed like a sub-minimum wage, about Uber’s ever-increasing commission, and about the need to work longer hours to eke out a living. Uber promised to pay drivers a minimum hourly rate if their earnings fell below a certain level, but the drivers said that the company found a myriad of ways to disqualify them from the guaranteed wage. They also complained that Uber, unlike Lyft, had consistently refused to allow passengers to give them tips over the app.
“Nobody in America wants to work more and earn less,” said Mohsim, a Pakistani driver wearing a silver badge—a symbol, he said, of the Ottoman Empire. “It’s modern-day slavery.”
Another protester, Angel, forty, said he expected his pay to drop 20 percent from last year. “What if I took ten thousand dollars out of your annual salary?” he said. “It’s double the work for less money.” Angel said that Uber had also drenched the city in billboards and bus ads soliciting new drivers, which had oversaturated the market and made it more difficult to get rides.
Uber insisted that the fare cuts were going to prove beneficial to drivers and promised to roll them back in cities where they didn’t result in more rides and better earnings. But those promises, at least to the vocal subset of drivers in Queens that day, seemed empty. They felt disempowered, overworked, and even nostalgic for the government-set fares of the yellow-cab industry.
If the drivers had unrealistic expectations about Uber, that was at least partly because Uber itself had helped create them. A central premise of the company was that electronic hailing liberated drivers from the tyranny of taxi-fleet owners and mandatory twelve-hour shifts. “We give riders high-fives, but we give drivers hugs” was an oft-repeated phrase from Kalanick. And in a 2014 blog post, the company claimed that drivers in New York City earned $90,766 a year, while drivers in San Francisco earned $74,191.31 These were easy numbers for journalists to debunk, and surveys showed they were inflated, particularly when you factored in the expense of commercial insurance and car leases.32
Uber referred to its drivers as small-business owners and entrepreneurs. But as enterprising fleet owners had discovered years before, it was impossible to maintain a business of any size on Uber, which remorselessly discarded all middlemen in favor of a direct relationship between individual drivers and the company. Drivers weren’t really small-business owners. They most closely resembled taxi drivers at the whim of a distant master who had the principal goal of any corporate concern—to build as big a business as possible.
In this sense, Uber was part of an American business trend that had been playing out for decades: the categorization by profit-minded companies of workers as part-time contractors instead of employees. Since the early 1980s, companies had been circumventing minimum wage and other protections for employees, who filled out W-2s, by reclassifying them as contractors, who filled out 1099 tax forms. Labor groups and lawyers went to court repeatedly over the years to reclaim employment rights on behalf of truck drivers, waiters, housecleaners, exotic dancers, and even yellow-cab drivers. They mostly lost these cases, defeated by deep-pocketed corporations and, in 2011, a Supreme Court ruling that allowed companies to force their workers to sign arbitration clauses that prevented them from bringing class-action lawsuits.
Uber, Lyft, and the other companies in the so-called sharing economy gave plaintiff attorneys a high-profile opportunity to argue once again that workers were being stripped of protections. In 2013, Boston plaintiff lawyer Shannon Liss-Riordan brought such lawsuits against Uber and Lyft in the two states where she thought the law was most favorable, California and Massachusetts. She had previously brought similar, largely unsuccessful cases against FedEx and several yellow-cab companies. Uber’s claim that it was facilitating a whole new kind of internet-enabled, on-demand work bothered her. “The mere fact that there is flexibility does not mean that the people who are doing the jobs shouldn’t get benefits and the protections of employment,” she says. “That is the reason we have these laws.”
Both Uber and Lyft tenaciously fought against the cases, arguing that the great majority of their drivers didn’t actually consider themselves full-time chauffeurs and wanted to remain independent and free to take other work.
The cases against Uber and Lyft drew widespread media attention and produced an unrealistic expectation that they might somehow change the nature of the sharing economy and undermine Uber’s business model. (This was unlikely, as class-action lawsuits do not change the law.) The perception deepened when Liss-Riordan scored impressive victories in March 2015: judges in both cases said they could proceed to jury trials.
But a year later, the Ninth Circuit Court of Appeals agreed to hear Uber’s argument that the lawsuit had been improperly certified as a class action and violated the drivers’ arbitration agreements. Liss-Riordan, who had lost many such appeals on this issue, knew there was trouble ahead. Instead of proceeding to trial, she leveraged her victories into a settlement. Uber agreed to pay as much as $100 million to a group of tens of thousands of drivers and to institute new policies, such as giving drivers explanations if they violated company rules and got kicked off the app and creating an appeals process for those decisions. But Uber and Lyft drivers were going to remain contractors.
“Drivers value their independence—the freedom to push a button rather than punch a clock, to use Uber and Lyft simultaneously, to drive most of the week or for just a few hours,” wrote Kalanick in a blog post titled “Growing and Growing Up” that announced the settlement. He conceded that the company hadn’t “always done a good job working with drivers,” but reiterated that Uber presented “a new way of working: it’s about people having the freedom to start and stop work when they want, at the push of a button.”
In August 2016, the entire settlement was struck down by a federal judge, who ruled that the payout to drivers was inadequate. It looked increasingly unlikely that the question of whether Uber drivers were being treated fairly or if they should be considered employees was going to be adjudicated in the courts.
But it did come into clearer focus for me at the Uber Partner Support Center on Chicago’s economically distressed South Side, across the street from a fenced-off, abandoned mall. A former Marine named Robert Davis helped to run the center and spent his day onboarding new Uber drivers and explaining how to use apps and smartphones to non-tech-savvy people. He had grown up in the nearby Auburn Gresham neighborhood and said Uber brought jobs and transportation to a community that historically had not had much of either.
Over the past year, he said, he had signed up single mothers, college students who needed extra cash, and widows looking for something to do with their time. Driving for Uber was sometimes a primary job but often a secondary one, supporting the other things they were trying to do with their lives. (In fact, the company says, 60 percent of Uber drivers are on the road ten hours or fewer a week.) “I can see both sides of everything,” Davis told me. “I don’t know why this is controversial. To me it seems like Uber is very targeted. It helps people who need extra income.”
Meanwhile, in China, the mega-unicorns battled. It had once seemed that Uber enjoyed insurmountable advantages. It had a better app, powered by more stable technology. At the beginning of 2015, investors were valuing it at $42 billion, about ten times Didi’s valuation. “At that time we felt like the People’s Liberation Army, with basic rifles, and we were bombed by airplanes and missiles,” says Cheng Wei. “They had some really advanced weapons.”
Cheng was a student of military history and was particularly interested in heroic conflicts like the battle of Songshan during World War II, when Chinese nationalist troops tunneled under a mountain to surround the invading Japanese army. Uber execs met in San Francisco in what they called the war room, and Cheng held morning meetings with the Wolf Totem, his senior staff. The name, based on a popular novel set during the Cultural Revolution about urban students sent to live in Inner Mongolia, connotes aggression. The Wolf Totem studied Didi’s daily results and adjusted the subsidies given to drivers and riders. Cheng would regularly warn employees, “If we fail, we will die.”
In May 2015, Cheng went on the offensive. Didi said it would give away one billion yuan in rides. Uber matched it. Cheng and his advisers searched for ways to fight the American company on its home turf. Uber, they reasoned, was like an octopus—its tentacles were everywhere in the world, but its mantle was in the United States. Wang Gang, the early investor and board member, suggested at a meeting that Didi “stab Uber right in its belly.”
Gang says Didi contemplated expanding into the States. Instead, in September 2015, it invested $100 million in Lyft. Then it established an anti-Uber ridesharing confederacy with Lyft and the regional ridesharing startups Ola, in India, and Grab Taxi, in Southeast Asia, all of them agreeing to share technology and integrate with one another’s apps. According to Gang, it was less about undermining Uber than about gaining negotiating leverage. “The purpose of them grabbing a lock of our hair and us grabbing their beard isn’t really to kill the other person,” he says. “Everyone is just trying to win a right to negotiate in the future.”
At the peak of hostilities, Didi and Uber were each burning through more than a billion dollars a year in China, giving unprofitable subsidies to drivers and riders. As Kalanick had expected, the ridesharing business in China was massive. Six of Uber’s top ten cities by ride volume were in the country. Subsidizing rides at that scale made each company desperate for new capital. Uber raised over $4 billion in 2016, including a controversial $3.5 billion round from an unlikely investor—Saudi Arabia’s Public Investment Fund. It pushed off an initial public offering and funneled capital to its Uber China subsidiary.
Didi Kuaidi, now renamed Didi Chuxing (“honk-honk commute”) went toe to toe with its U.S. rival, raising $7 billion in 2016 and swelling its ranks to over five thousand employees, about a quarter of them working out of a collection of prefabricated five-story buildings on the periphery of Zhongguancun, Beijing’s technology district. That summer, Didi claimed an 85 percent market share in China and operated in four hundred Chinese cities, while Uber was active in only one hundred. Uber’s large institutional investors were worried and began pressing Kalanick to negotiate a truce.33
Cheng says the initial call for peace came from Uber; Emil Michael from Uber contends that the Saudi money forced Didi to the table—the investment suggested there was simply no end to the capital Uber could tap. Regardless, both sides agreed it was time to stop the bloodletting and focus on guiding their companies to profitability and investing in coming technologies, like driverless cars. “It was like an arms race,” Cheng says. “Uber was fund-raising; we were also fund-raising. But in my heart I knew our money needed to be put into a more valuable field. This was why we were able to join hands with Uber in the end.”
Emil Michael and Jean Liu hammered out the deal terms in two weeks. Uber agreed to depart China and hand over its operations in the country to Didi; in return it got a 17 percent stake in its Chinese counterpart and a billion dollar investment from Didi; the companies also took observer seats on each other’s boards.
Michael and Liu met Kalanick and Cheng at a hotel bar in Beijing to raise glasses of baijiu, a traditional Chinese spirit made from sorghum. Over drinks, the CEO’s spoke of mutual respect for how hard both sides had competed. “We are the craziest companies of our times,” Cheng says. “But deep in our heart we are logical. We know this revolution is a technology revolution, and we are just witnessing the very beginning.”
By fighting hard and being every bit as dogged as Uber, in investor boardrooms and on the battlefield, the Chinese CEO had repelled a foreign invader, ended the global mega-unicorn death match on auspicious terms and secured for Didi Chuxing its rightful place among the upstarts. “Cheng Wei is a fierce competitor. He has a champion’s mindset,” Kalanick told me, referring to one of his prized cultural values.
It was the highest possible compliment the chronically combative Kalanick could pay to an archrival. But it disguised a subtler truth: he too had pulled off something remarkable. Uber had spent more than $2 billion on a losing effort in China. But its stake in Didi, plus the $1 billion investment, was now worth $7.2 billion, at least on paper. It was an impressive return on capital. And through his stake in Uber, investors in both companies told me, Kalanick now owned nearly as much of Didi as Cheng Wei, whose personal stake had been diluted by the ceaseless mergers and fundraising rounds.
Colleagues say it took a few months for Kalanick to come around and agree to a surrender in China. Previously he had known only one mode of operation—aggression. Now, like his company, Kalanick was maturing and yielding to the lessons of a dynamic age. Pragmatism beat missionary zeal. Selective partnerships trumped solo adventuring. A disorganized and decentralized taxi industry had been conquered, but fresh challenges, with new sets of dangerous competitors, always loomed on the horizon. It had been eight adrenaline-fueled years of nearly non-stop conflict. With the Didi deal, the CEO of the world’s richest, most valuable, most scrutinized upstart freed himself and his colleagues to finally confront the future.