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Why Uber's Travis Kalanick Is Not The Worst CEO

At least, not yet

2Mar

When Isaac Newton famously said: 'What goes up must come down,' he probably didn't acknowledge that the saying would be applicable outside the laws of gravity, and would represent the state of some companies.

Today, Uber is one of the best known companies in the world, but internal problems that started in the company a while ago, started to worsen and have become more serious, with the last three months being especially tough. From accusations of breaching drivers' working rights and sexual harassment within a team, to a potential lawsuit with Google over Otto patent technologies, there is a lot to deal with for Uber's CEO Travis Kalanick.

Whilst accompanied by two female companions in an Uber journey recently, an Uber driver's dashboard camera captured some unpleasant conversation between Travis Kalanick and his driver. Towards the end of the ride, Kamel Fawzi (the driver) expressed his concerns over the future, based on unfavorable changes in fares and an introduction of Uber Pool which lowered fares even further. Kalanick said to the driver: 'We didn't go low-end because we wanted to, we went low-end because we had to.' As the conversation was heating up, Mr Fawzi suggested: 'We could go higher and more expensive', adding that he lost $97,000 because of Uber's CEO. When leaving the car, Kalanick impatiently snapped at the driver, saying: You know what? Some people don't like to take responsibility for their own s**t. They blame everything in their life on everyone else.'

Issuing public apologies has recently become a routine for the CEO, and in the most recent Kalanick acknowledged: 'It’s clear this video is a reflection of me - and the criticism we’ve received is a stark reminder that I must fundamentally change as a leader and grow up.' However, ‘changing’ when the company's valuation is over $60 billion may not be easy.

During the course of their careers, many CEOs make awkward or shameful statements along with strategic mistakes, as at a large company, nothing ever run completely smoothly. The only difference between these CEOs, though, is that some manage to stay afloat and others fail. Inadequate behavior or decision-making are by no means a norm, and may set a bad example for corporate culture and generally, damage the company. Travis Kalanick has been on the wrong course with his behavior from a PR perspective for quite a while now, but from a business perspective, some of his motives are understandable.

As in many entrepreneurial success stories, Kalanick gained his business experience from making mistakes and having ups and downs with his earlier projects (like Scour and Red Swoosh), before he struck gold with Uber. It may be the case that he is not the 'admirable' type of CEO and may lack some charm that is present amongst others, but based on how he and his team reshaped the entire industry, Kalanick learned quickly enough how things should work if you are one of the world's biggest disruptors and want to remain in this position.

In 2009, UberCab, as Uber was known, offered customers an option to hail a car from their smartphones for the first time. Since then, the company has spread like wildfire. A disruptive element of their success has put a company in a position, where in order to keep their promises to shareholders, grow and retain their customer base, and survive rival projects, there must be an aggressive business model, which is often not the prettiest.

In 2010 an Uber ride was more expensive than an ordinary taxi journey, but the fact that the car could be ordered with the press of a button made it a hit. According to Business Insider, later that year, Uber closed a $1.25 million seed funding round from First Round Capital. Ryan Graves, who was CEO at that time, stepped down in favor of Kalanick, who was the company's 'Chief Incubator' and 'Mega Advisor'. Year after year, investments continued to flow, and the service is still dominating in the market. But there are some issues.

The problem with private startups is that no one really knows their value and how long-lasting their success will be. Once a disruptive idea is found, it's only a short period of time until it takes mass effect. However, considering that disruption happens at the bottom of the market, the business model can only allow for growth in the longer-term, valuations can be growing, but profits may not be growing fast enough. Therefore, these companies are in search for continuous improvements of their product idea to drive more revenue.

As for Uber, the company has a large enough customer base to beat their rivals, but the internal 'working' concept they created - and which became one of the pillars of the sharing economy - doesn't quite resonate with their external business aspirations. Similar to how the car-hailing service disrupted the taxi market, the job market has been disrupted too.

New models and concepts always need some time to settle into society, but sometimes, the company may not have time to wait. New regulations must be put in place, there must be a clear distinction between a self-employed worker and an employee, and generally, all sorts of questions must be answered before the new model fits organically without causing a conflict. Uber decided not to wait. Even though there is no shortage of Uber drivers, many rightfully feel frustrated as any operational change in the company directly affects their work and profit. So, in the end, there is a problem - drivers are frustrated because there is not enough protection of their rights and they can't rely on the company (based on the self-employment status). On the other hand, we have the tech giant who must push for aggressive approaches, in order to retain their leadership position and customers.

Aswath Damodaran, a professor at NYU's stern School of Business who specializes in equity valuation believes that if Uber doesn't find a way to make the business profitable soon, they may continue to grow, but revenues may be concerning. Essentially, Uber is driving at a high speed but ignoring all the roadblocks - in the form of disappointed drivers, few regulations, and reputational disputes - these are scratching and damaging the company bit by bit, until there is a chance of a breakdown.

Uber and Travis Kalanick may not experience problems with creativity and bold thinking, where development and deployment of these bold ideas - such as driverless vehicles, new fares, and an excessive customer first approach - may bring them desired profitability. However, if these approaches are pushed forward, the company may collapse under the pressure of legal and internal disputes. And that's where Travis Kalanick may need to make a tough choice between being a good or bad CEO.

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