Why Uber may never reform itself.

Why Uber May Never Reform Itself

Why Uber May Never Reform Itself

Moneybox
Commentary about business and finance.
Feb. 21 2017 4:18 PM

Why Uber May Never Reform Itself

Because even when it behaves abhorrently, its business is nearly immune to controversy.

Travis Kalanick
Uber CEO Travis Kalanick attends the summer World Economic Forum in Tianjin, China, June 26.

Shu Zhang/Reuters

If there is a single quality that defines Uber, it’s that it is somewhat sociopathic by design: An antipathy toward norms is built into the car-hailing company’s business model. Algorithms determine surge pricing, which often causes prices to spiral precisely when people need them most, like during snowstorms—unless the company opts to turn the surge off. While operating in a regulated industry, Uber has often sought to enter markets without getting the necessary permission, leading to litigation and legislative skirmishes. It doesn’t want to recognize its drivers as employees. Last month, Uber generated outrage—and inspired the #deleteuber hashtag—when drivers accepted fares at John F. Kennedy International Airport as taxi drivers went on a short strike over President Trump’s travel ban. In the aftermath of that incident, CEO Travis Kalanick pulled out of Trump’s executive advisory council.

Now Uber is managing another crisis of its own making. Over the weekend Susan J. Fowler, a former Uber engineer, detailed her horrifically sexist treatment at the hands of colleagues and the company’s human resources department. Fowler wrote that she was on the receiving end of sexually inappropriate emails on her first day at work and that the human resources department was indifferent to the complaints that she and other female colleagues lodged. CEO Travis Kalanick quickly vowed to address the problems and engaged former Attorney General Eric Holder to lead an investigation.

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For consumer-facing brands, stumbles that violate basic societal norms, or even merely leave the company on the wrong side of the zeitgeist, can be dangerous. Chipotle has yet to claw back the customers who left after its food-poisoning issues. Under Armour CEO Kevin Plank had to take out full-page ads to clarify his recent supportive comments about President Trump.

But it’s far less likely that Uber’s latest self-imposed black eye will affect its business or cause the company to alter its behavior all that much. While some Uber customers loudly canceled their accounts after the refugee-ban kerfuffle, the company isn’t likely to suffer much as a result of the latest revelations. That’s not because Uber users are particularly craven or morally obtuse but because of the nature of the business that Uber has carved out.

We tend to think of Uber as a classic disruptor, slugging it out against dozens of competitors. But its signal success is really something else: The company is now close to a utility. Of course, in any market there are oodles of mobility providers—taxis, ride-sharing and car-hailing apps, shuttle bus service, limo companies, and public bus, train, and ferry systems. But in many markets, Uber, which was the first app out of the gate, is incredibly easy to use, and offers blanket coverage, has carved out a ubiquitous presence.

Uber has become integrated into people’s lives to a remarkable degree. You use it for work instead of taxis. You use it for personal convenience to get around when the car is in the shop, to get your elderly parents to their medical appointments, to pick up the kids from soccer practice when no one else is available. High-school and college students use Uber as a safe, sober ride. At my kid’s suburban high school, finicky teens use UberEats to order in lunch when they find the cafeteria fare monotonous.

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Like your electricity or cable service or water, Uber is always there—accessible at the touch of a screen. Of course, no Silicon Valley company aspires to be like Con Edison or Time Warner Cable or the Metro-North Railroad. These are rightly seen as bureaucratic, old-line, stodgy, and ripe for disruption. But while people may not like these utilities—many people loathe their cable company, in fact—they are very slow to throw them over for alternative providers. (Assuming those alternative providers exist.)

If you sour on Chipotle, you can easily find another lunch next door or across the street. (In the town where I live, a Qdoba, a reasonably close substitute, is a few blocks away from the Chipotle.) If you want to boycott Under Amour, Nike makes perfectly good wicking T-shirts. But with utilities, it’s not so easy to switch or to replicate the service without significant costs or friction.

In some instances, like with electricity, consumers literally don’t have a choice. Replacing your cable company means scheduling appointments, waiting for service members, and having to learn a new channel lineup. If you want to stop using Uber, you’d have to download Lyft if you were so inclined and set up new accounts on all your devices and those of your family. And in many places you’d then have to settle for less comprehensive service. Those may not be huge barriers, but they are significant barriers nonetheless.

So when the utility does something that annoys consumers—jacks up prices, fails to deliver service, responds lethargically to service requests, or generally acts like a jerk—consumers make an instant calculation that the cost of not using it or finding an alternative outweighs the moral and psychological harm of continuing to use the service.

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None of this is to say that Uber will always be impervious to the wages of corporate jerkdom. Its initial moves in response to Fowler’s letter are, at least on their face, encouraging. What’s more, Uber has shown signs of greater sensitivity to its public image in recent months. But we shouldn’t expect these latest revelations to turn Uber into a sensitive workplace or a pioneer in promoting and empowering female engineers. And we shouldn’t expect consumers to punish the company as a result.

For now, because Uber for so many people is synonymous with ride-hailing and has become a utility, it seems to be Teflon-coated. Uber’s occasional bout of bad publicity won’t be an obstacle to Uber raising money or going public should it choose to do so. Utilities have remarkably durable business models.

Of course, there is one significant difference between utilities like cable, electric, and water companies and Uber. The utilities are profitable.

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