Uber CEO Dara Khosrowshahi is about to cross a busy street in lower Manhattan, but he stops short. “Is there jaywalking allowed, or is this—”
Jaywalking is practically encouraged in New York City, I say.
“All right, there we go,” he says, stepping gingerly into the street. “I used to live here, so if I don’t jaywalk, I feel weird.”
Once, a CEO of Uber wouldn’t think twice before skirting the law; he’d just do it, consequences be damned. But Dara Khosrowshahi is not Travis Kalanick, an obvious fact that he’s nonetheless spent the last two years trying to prove. Kalanick is responsible for Uber’s lingering reputation for lawlessness and tech bro douchery. Khosrowshahi is the guy who says things like, “We put safety as the number one priority” and sounds sincere.
Khosrowshahi is nonetheless still advancing Kalanick’s goal to become the brokerage of all human movement in cities. Kalanick called it “transportation as reliable as running water.” Khosrowshahi tweaked it to becoming the “Amazon of transportation,” and now he’s polished it up again: Uber wants to be an “operating system for your everyday life in a city,” he tells me during a recent interview at The Verge’s office.
But it’s an operating system with a buggy-as-hell backend: staggering cash losses ($5.2 billion last quarter); chronic unprofitability; huge safety liabilities; and an unstable business model that could collapse if California and other states force the company to treat its drivers like employees. The app may work great, but the company behind the app is still very much in flux. Anyway, you need iOS or Android to use your smartphone, but do you really need Uber to live in a city?
Khosrowshahi and I are walking to the Bowling Green subway station to take the 4 or 5 train to Grand Central, and we’re using the Uber app to get there. I already know the way, but the Uber CEO wants to show off the app’s latest tricks: transit directions. A little dotted line shows us the way to go as well as the next train’s estimated time of departure. (Khosrowshahi starts heading north instead of west, so I do my rude New Yorker thing and steer him in the right direction.)
We’re using a beta version of a new feature that’s set to roll out later this year. Uber is already providing transit directions, schedules, and even some ticketing in cities like Denver and London. Starting on September 27th, the feature will go live in San Francisco, Mexico City, and Paris. New York City will be added later this year along with six more as-yet-unnamed cities.
Cars trips, of course, are the backbone of Uber’s business. But cars and cities are increasingly at loggerheads. I interview Khosrowshahi a few days after the Global Climate Strike when millions of people walked out of their schools and workplaces to protest inaction on the climate crisis. Uber and Lyft have been tied to rising car congestion in cities, just as they’ve been tied to declining ridership of public transportation. Uber wants to correct that by putting mass transit on equal footing with car trips.
The thinking goes: if given the choice between a $2.75 subway trip or a $30 car ride, most people will take the subway. Unless, of course, that subway is delayed. Then the car trip becomes the more attractive option.
“To some extent, we’re competing against ourselves,” Khosrowshahi says. “But we have the philosophy that if there’s a better product out there for the user, and we think an integrated movement solution is better for the user, we should be the ones competing against ourselves versus others doing it.”
Uber isn’t just adding subways and buses to its app. It’s also giving bikes and scooters more prominence, adding a raft of new safety features and bringing Uber Eats, its food delivery product, into its main ride-hailing app so both services operate under one umbrella.
It’s an ambitious play to become the de facto transportation and delivery service in every major city. But the real prize for Uber isn’t just a more equitable system or fewer cars on the road; it’s your data.
2019 has been a challenging year for Uber. Once a “unicorn” darling of Silicon Valley, it went public at a lower valuation than expected, and then its stock just kept falling. It’s down 30 percent since the IPO in May. The company lost a record $5.2 billion last quarter and has struggled to prove it can achieve profitability. Most of the loss, around $3.9 billion, was stock-based compensation related to the IPO, and the company says that should just be seen as a one-time hit. Even leaving that aside, the $1.3 billion loss on everything else Uber did last quarter was 50 percent higher than the year before.
There’s reason to believe it could get worse, too. Major investors in Uber weren’t allowed to sell their shares at the IPO, a contractual obligation that ideally lets the share price find its balance without insiders’ influence. That lockup period ends on November 6th, and it could mean early investors may decide to dump the stock aggressively until the end of the year.
And that’s not all. On September 18th, California Gov. Gavin Newsom signed a bill that could ultimately undermine Uber’s entire business model. The bill, AB5, makes it more difficult for companies to classify workers — for example, Uber drivers — as independent contractors. It could seriously increase Uber’s costs in California and eventually spread to other states as well.
“Employers shirk responsibility to safety net programs like workers’ compensation and unemployment insurance,” Newsom wrote in a Labor Day op-ed in The Sacramento Bee. “Taxpayers are left to foot the bill.”
Meanwhile, out east, New York City has moved to crack down on Uber, imposing new rules aimed at reducing car congestion and increasing drivers’ wages. Uber and Lyft responded by limiting when drivers can log on to their apps. Uber also sued the city, for the second time this year, to overturn these new regulations. But the city seems undeterred. “We will continue fighting for the people of New York City against a company that seeks to put profit first, and the people and drivers they serve last,” a spokesperson for NYC Mayor Bill de Blasio said about the lawsuit.
The 2020 Democratic presidential candidates have cheered on these moves from the sidelines. Massachusetts Sen. Elizabeth Warren slammed Uber’s “business model [that] depends, in part, on low wages for their drivers,” while Vermont Sen. Bernie Sanders decried Khosrowshahi’s $45 million pay package while “Uber drivers [struggle] to put food on the table.” The techlash is sure to heat up in tandem with the election.
Uber has had some wins, though. The company’s license in London was renewed for two months. And labor lawyers in the Trump administration have issued an opinion that ride-hailing drivers are correctly classified as contractors, which could blunt California’s efforts to reestablish them as employees.
“We recognize that, with our society now, things are changing,” Khosrowshahi tells me. There’s an expectation that even part-time workers deserve certain protections, like decent health care and the right to collectively bargain with their employer. But Khosrowshahi thinks some lawmakers have gone too far.
“My concern is that the politicians right now are playing to a reactive base, which, ultimately, is not a better solution for society — definitely not for drivers and not for our riders,” he says.
Underscoring these political battles is rising traffic congestion in cities. Between 2010 and 2016, traffic congestion in San Francisco increased by about 60 percent — and Uber and Lyft were responsible for more than half of that increase, according to a study published this year. Khosrowshahi acknowledges that traffic is a problem, but Uber shouldn’t be a scapegoat.
“More delivery vehicles and Amazon and grocery delivery and us, you know, all of it has been responsible for congestion,” he says. “Congestion has been an order of the growth of every city out there, and it’s going to continue, too. We think that we should, everyone should, be treated equally here.”
I ask Khosrowshahi whether Uber will be here for the long haul or whether it will eventually go out of business, as some have predicted.
“Well, I am very confident that we’re going to stick around in the future,” he says. “We went after our initial public offering pretty aggressively because we wanted to secure the funding necessary to keep investing in many of these innovations, some of which have long-term pay-offs.”
The transformation of Uber from “app you can use to get a car” to “app you can use to get a car, bike, scooter, train, bus, or an order of Pad Thai” is one of these long-term pay-offs. For example, Uber won’t make money by adding buses and trains to its app. Public transportation isn’t a profitable business, which is why it requires government subsidies to operate. But Uber isn’t trying to make a buck off the subway; it just wants to make sure you’re routinely opening the app.
“We have seen experimentally that [public transit data] increases engagement with the app,” Khosrowshahi says. “If more people are opening our app more often, then there will be business down the road. We’ll be able to monetize that one way or the other. So short term, it probably isn’t the greatest kind of a business bet. Long-term, we absolutely think it’s a great bet.”
There’s this great product called Google Maps that already does most of what Uber is now trying to do. It’s got transit information, detailed routing, real-time traffic updates, as well as estimates for Uber and Lyft fares. There’s a raft of other similar apps that perform similar tasks, including Transit, Citymapper, and Moovit. Even the long-maligned Apple Maps is getting better.
Perhaps what Uber is doing isn’t so groundbreaking then?
“So I think that as far as, ‘Is it a better experience?’ et cetera, we think it’s a comparable experience. But ultimately, it’s better because you have all of your choices here,” Khosrowshahi says. “And the way that I would describe it is it’s Amazon product search versus, let’s say, Google product search. Because we’re so focused on city transportation, which is where the majority of our business is, and because we’re so focused on the complete experience, it’s not just information. Ultimately, we want to integrate information that allows you to take action and purchase this transit option.”
In other words, those other apps just give you information, while Uber enables you to take action. There’s also a data play in this as well.
“We will use your data,” he says. “We won’t sell it, but we will use your data to make sure that the offerings that we’re giving to you are the right offerings. So we don’t have to offer you 10 things, but we can offer you probably the two or three best choices out there.”
Hearing “Uber” and “your data” in the same sentence is sure to set off some people’s alarm bells. After all, this is the same company that created the infamous “Greyball” program to hide its cars from law enforcement officials in a move that some consider to be obstruction of justice. There was also “God View,” which allowed the company’s employees to track riders in real time. Uber agreed to submit 20 years’ worth of third-party audits in a settlement with federal investigators over the spy software.
But data that helps cities make better-informed decisions about transit improvements could help Uber rise above the competition while also settling nagging thoughts about the company’s trustworthiness. Needless to say, cities and transit agencies want that data, too. Uber is notoriously stingy with its data, often refusing requests from cities for reasons around privacy and the desire to preserve its competitive advantage. That’s changed a little over the last few years with the launch of Uber Movement, an online tool expressly for cities to map travel times, powered by the company’s vast store of trip data.
But transit experts are skeptical that Uber will ultimately cough up enough data, or whether any of it will end up making a difference. In 2017, 31 of 35 major metropolitan areas in the US lost public-transit passengers, and ride-hailing is partly to blame, according to a study by the University of Kentucky. Researchers found that for every year after ride-hailing companies enter an urban market, rail ridership falls by 1.3 percent, and bus ridership falls by 1.7 percent.
Khosrowshahi rejects the notion that Uber is responsible for the decline of transit ridership. “Transit has competition anyway,” he says, without specifically listing what other competition he’s referring to. “We want to make sure that transit data is available to all the users, and we think we can be a constructive part of transit growing over a long period of time.”
Bikes and scooters will be another important part of Uber’s bid to dominate urban transportation, but the company’s financial problems are making it harder to grow that side of the business. Uber recently pulled its electric Jump bikes from Atlanta and San Diego. It’s keeping its scooters in Atlanta, but Khosrowshahi admits that competition from Lyft and scooter providers like Bird and Lime are making it harder to operate in more markets.
“If the business doesn’t work, then it’s no good for the city,” he says. “It’s not good for us, it’s not good for the consumers, et cetera. And what we found is to focus on fewer bets, focus on fewer cities in order to really make the model work.”
As we mount the steps at Grand Central, I finally get around to asking Khosrowshahi my most nagging question: has he read New York Times reporter Mike Isaac’s epic new book, Super Pumped: The Battle For Uber, about the rise and fall of Uber under Travis Kalanick?
“I’m reading it,” he says, patting his iPad. “But I knew it all. There are no surprises.”
Still, he acknowledges that Uber and its employees have been through hell and back. “It’s putting it all together. It’s a little rough. I have a greater respect for the employees who went through 2017 now. Everything that happened is very tough, but if you worked at Uber, and you stayed a true believer when all this was going on, that’s awesome.”
The idea that Uber’s worst days are behind it is debatable. Uber is at a crossroads. The company is bigger than it’s ever been. It is also under a larger microscope than ever before. The challenges it faces are growing increasingly formidable. And as it grows to include more modes of transportation, like buses and subways, and perhaps even autonomous vehicles and flying cars, the company will face even steeper hurdles to keep it all from coming apart.