1. Have you used a ride-hailing service such as Uber or Lyft? How was your experience?

2. Would like to work for Uber? Why or why not?

3. Explain Uber's business model and deduce its strategic intent.

Uber: Most Ethically Challenged Tech Company? UBER'S VALUATION REACHED $70 billion in 2017 and became the most valuable private startup ever. Yet in the process of achieving such success, Uber's unethical, if not illegal, activity generated controversy after controversy. Before we look more closely at those ethical issues, we need to understand the business success that could have tempted Uber to engage in ethical shortcuts. Travis Kalanick, Uber's co-founder and former CEO, came to be seen as too much of a liability for the comfort of major Uber investors and was pressured to resign the key post. The relentlessly ambitious and combative entrepreneur was well aware of his reputation, which he described during a speech celebrating Uber's fifth anniversary: "I realize that I can come off as a somewhat fierce advocate for Uber. I also realize that some have used a different 'a'-word to describe me."1 Danish Siddiqui/REUTERS RECORD-BREAKING GROWTH In comparison, Facebook took seven years to reach a valuation of $50 billion for a private, venture-capital-backed firm; Uber only five. If we compare Uber with car rental giant Hertzwith some 150 locations, a fleet of 500,000 cars, and about 30,000 employeesit's astounding to learn that Hertz reaches only about 1 percent of Uber's valuation! Uber reached this astronomical valuation because it successfully expanded both in the United States and globally to some 500 cities in 70 countries. As a powerful platform business, Uber's popularity grows exponentially, as it already transports millions of riders daily and continues to expand rapidly here and abroad. Although Uber is still losing money as it continues to subsidize customer fares, its revenues race ahead, from $400 million in 2014 to more than $8 billion in 2017. ETHICALLY CHALLENGED? Trailing Uber's meteoric rise are multiple lawsuits and accusations, often tied directly to decisions and actions by its co-founder and now former CEO, Travis Kalanick. Consider just some of the incidents and issues in the company's short history: Early disregard for laws, rules, and regulations. Within months of its San Francisco launch, the local Metro Transit Authority and the state Public Utilities Commission had to order Uber to cease and desist. They called out Uber as an unlicensed and illegal taxi service. Similar injunctions followed in major markets, including New York City, Los Angeles, Toronto, Paris, London, Berlin, and Delhi. Uber's response? The company ignored all such warnings. Dynamic pricing. Unlike the taxi industry, in which pricing is fixed by regulation, Uber uses dynamic pricing, following the model of airlines, hotels, and other industries. Uber's fares go up or down based on real-time supply and demand. During a snowstorm or on New Year's Eve, short Uber rides can cost hundreds of dollars! Kalanick argued that surge pricing efficiently matches supply and demand. But many Uber users rant online against the practice and call it price gouging. Punking the competition. Lyft, the competing ride-share company, accused Uber of ordering over 5,000 rides from Lyft, and then canceling, so Lyft drivers lost business from legitimate rides. Punking their own drivers. Reportedly Uber told its drivers in New York that they could not work for both Uber and Lyft because of city regulations. No such regulations exist. Poaching drivers. As part of Uber's secret Operation SLOG (Supplying Long-term Operations Growth), accusers say Uber brand ambassadors actively target successful drivers from Lyft and other competitors to defect. Poisoning competitor's well. Startups live or die based on access to capital. Kalanick reportedly poisoned Lyft's efforts to raise venture capital, telling investors, "Before you decide whether you want to invest in [Lyft], just make sure you know that we are going to be fund-raising immediately after."2 Attacking critics. In 2014, Uber senior executive Emil Michael suggested spending $1 million to hire private page 420investigators to dig up dirt on journalists who wrote damaging pieces on Uber, with particular focus on Sarah Lacy, of tech blog PandoDaily. When the remarks became public, Michael apologized, Kalanick decried the attempt, but Michael was not disciplined. (In June 2017, in the wake of Kalanick's forced resignation, Michael also resigned.) Tech transfer by stealth. In 2015, Uber opened an Advanced Tech Center in Pittsburgh to develop autonomous cars and sophisticated mapping services. Funding research at Carnegie Mellon University's National Robotics Engineering Center (NREC) brought Uber access to the university's scientists. A few months later, Uber poached entire NREC research teams with signing bonuses, twice the salaries, and stock options. The NREC was left a shell, with its entire future in question. Allegations of sexual harassment and gender discrimination. In 2017, a blog post by a former Uber engineer went viral. It alleged rampant sexual harassment, persistent mistreatment of female employees, and the company's failure to respond to complaints. The former employee said that women engineers in her work group dropped from 25 percent to as low as 3 percent within a year because of the hostile work environment. She also claimed managers downgraded her performance review for reporting a supervising manager for harassment. Slow response. It took public outcry for Kalanick to act on the allegations of sexual harassment, although once he took action, he went big. He hired former U.S. Attorney General Eric Holder to lead an internal investigation, working with Arianna Huffington, Uber's only female board member. Operation Greyball. Also in 2017, The New York Times exposed Uber's use of stealth technology for a number of years to foil law enforcement and regulators investigating Uber and its drivers. In a secret operation code-named Greyball, Uber programmed its software to set up GPS rings around government offices and track low-cost phones and credit cards linked to government accounts. Thus, when law enforcement officers posed as Uber customers, Uber showed them dummy screens with fake Uber cars moving, none of which would stop and pick them up. Greyball was deployed worldwide, especially in cities where Uber was outlawed. Kalanick caught on video. Kalanick did not realize he was being filmed by a dashboard cam when an Uber driver complained about recent fare cuts. As Kalanick left the car, he told the driver, "You know what, some people don't like to take responsibility for their own sh**," and slammed the door. The driver uploaded the video to social media, where it went viral. Waymo lawsuit. Waymo, a unit of Alphabet (Google's parent company), is suing Uber for stealing Waymo's proprietary self-driving technology. Uber acquired the autonomous-vehicle startup Otto, which was founded by Anthony Levandowski, but at the same time Levandowski was working for Waymo on its autonomous-vehicle program. Waymo claims Levandowski stole more than 14,000 proprietary files. The stakes are high because experts predict that only one or two technology standards will prevail for self-driving technology. Waymo wants to become the default operating system for self-driving cars with its proprietary technology. FORCED TO RESIGN Such issues came to a head in mid-2017. In May, the results of the Holder investigation, along with 50 recommendations, were delivered to the Uber board. On June 13, Kalanick took an indefinite leave of absence, citing the recent death of his mother and his need to deal with that personal issue. And then June 21, responding to a letter from key investors, he formally resigned. The investors had expressed no confidence in Kalanick's ability to continue to lead the company he co-founded. A Reputation to Live Down. You could say the company developed a reputation to live down. Uber's ethical challenges were called out publicly throughout its rise, and as early as 2014, venture capitalist Peter Thiel called Uber the "most ethically challenged company in Silicon Valley."3 Of course, Thiel, the billionaire co-founder of PayPal and Palantir (a data analytics company), is also an investor in Lyft, Uber's main competitor. Lyft (featured in ChapterCase 9) has a valuation of only $7.5 billion, a bit over 10 percent of Uber's. Its Own Worst Rival. Echoing Thiel's assessment, The Wall Street Journal (WSJ) argued Uber itselfrather than Lyft or old-line taxi and limo servicesis its own biggest threat, thereby functioning as its own biggest rival. The competitive tactics and comments by Uber executives and constant scandals surrounding Kalanick are harming the company's reputation and becoming a liability, the WSJ argues. DISASTER AVERTED? Whether symbolic or substantive, Kalanick's resignation may mark the point at which Uber embraced the ethical standards required to thrive in the big leagues and for the long term. Kalanick's resignation may come to be seen as the step that saved Uber from itself.4