Uber’s Shitty Month

If there is one company that is very familiar with bad news, then it’s Uber. The transportation network provider has never shied away from taking conflicts to the courts. Typically, with every city and community that Uber is entering to offer its services, it has to face lawsuits from local taxi companies and administrators. Those come as predictably as the Amen after a prayer.

But lawsuits aren’t necessarily something bad. The more disruptive an idea, the more lawsuits one can expect. Taxi regulations for instance were introduced thanks to behaviors that exploited the information disequilibrium between drivers and non-local passengers. With Uber’s technology the reasons for some of these regulations disappear. Uber’s army of laywers and well directed campaigns that brought loyal customers to lobby at their local administrators for Uber, is a well oiled machine.

These tactics had been certainly successful in the past, and gained the company a lot of admiration. But those successes came with a cost, and not only from a monetary perspective. Being involved in a continuous series of lawsuits leaves a bad taste, and in many cities and communities the public is not always absolutely behind Uber. Uber’s often getting criticized for the remunerations and dependence of their drivers, as well as Uber’s position that the drivers are independent contractors. Also the practice that Uber bans drivers without prior notice for bad behavior, without them having a chance for a hearing or recourse.

Uber’s China Problem

The first bigger setback for Uber came from China. Not only taxi companies were the target of an aggressive Uber, but also other car sharing service providers. Lyft, mytaxi and others are not coming even close to Uber’s  70 billion dollar evaluation and the 16 billion dollar that it raised in venture capital.

But one competitor beat Uber. The Chinese company Didi Chuxing. In August 2016 Uber gave in and sold its China operation to Didi.

Tesla

A few weeks later Tesla-CEO Elon Musk announced that its self-driving technology will only be available for Tesla-customers, but not for ride-sharing services, implicitly meaning Uber. Tesla-owners will be able to use Tesla’s own future sharing service and have their cars ‘work for them.’ If not a critical blow against Uber, sure a sign that the competition is heating up.

Illegal Self-Driving Tests in San Francisco

The next hit came shortly before Christmas, but not in the core business, but with the development of self-driving technology that Uber started testing in San Francisco. This without an official permit. Uber test vehicles that barreled through red lights didn’t help either. 48 hours within the start of the tests Uber had to stop them by order of the city administration.

There was not only a pedestrian nearly a victim of those tests, but also the truth. While Uber blamed the drivers of the test vehicle for running the red light, Uber later had to admit that the self-driving technology had failed and ignored the red light.

Trump’s Advisory Board

But especially the past month was especially hard for Uber. And that started with Uber-CEO Trevor Kalanick’s role as advisor for the new US-president Donald Trump. A role that Tesla-CEO Elon Musk is also serving in. After the first Executive Orders of the new president, that was aimed against Muslims from several countries entering the US, spontaneous protests erupted at airports across the country. Uber was accused by the protesters to ignore the solidarity shown by taxi drivers by transporting passengers to the airports. A #DeleteUber-campaing on Twitter led within a few days to tens of thousands of Uber customers deleting the app from their smart phones. As a result Kalanick decided to resigned from Trump’s advisory board and apologized for the appearance of supporting Trump’s politics.

Sexual Harassment

A blog of former Uber employee Susan Fowler from this past week about her ‘very strange year’ at Uber and its insight into the culture of sexual harassment in the company led to an uproar. At least 100 female Uber employees grilled Kalanick in a meeting. Kalanick was apparently surprised and had troubles understanding how widespread sexual harassment seemed at Uber. The aggressive culture that ensured the company’s success in the past and made the quick expansion possible, but also had effects on a negative internal company culture.

It’s not the first time that Uber was accused of sexual harassment and misogyny. In 2014 reports about the existence and the abuse of a stalking tool that allowed Uber employees to follow the routes their customers and drivers took – and which was called ‘Godview’ -led to a settlement. And then there was the threat of a Ubermanager to start a smear campaign against a critical female journalist. That manager is still working for Uber.

Although Uber’s supervisory board member and founder of the Huffington Post, Arianna Huffington, and Obama’s former US-general attorney Eric Holder are now leading an investigation into the allegations, that’s all not as dangerous for the company as Thursday’s lawsuit filed by Google’s sister company Waymo.

Waymo’s Lawsuit

And this lawsuit is quite explosive and could break Uber’s neck. Waymo accuses in this lawsuit former Google and now Uber employees to have stolen company secrets from its servers. According to the lawsuit, 14,000 technical documents with the blueprints for Lidar and sensor systems, as well as supplier lists, statements of work, and test routines were included.

According to an article for The Guardian 28 former Google employees work today at Uber-Ot.to, 18 of which were in the self-driving division. Anthony Levandowski, Ot.to-founder and head of self-driving technology at Uber, who is now at the center of the controversy, was the central for the development of Google’s Lidar system.

And the lawsuit is extremely dangerous for Uber due to several reasons.

First, Waymo’s lidar technology is both in quality and price without competition. Similar lidar systems today cost over 70,000. Waymo-CEO John Krafcik mentioned at the Detroit Autoshow that Waymo could reduce the price by 90 percent. Even if Uber could purchase the technology from other vendors, the delivery times are currently several months.

Second, Waymo stated in a blog post that the decision to sue Uber was not easy. But considering the facts and the amount of the theft of IP and corporate espionage, they had no other option. The compensation amount that Waymo will ask is still unclear, but with the additional punitive damages that are usual in the US, and even with the money Uber has, this could quickly break Uber’s neck. Courts could use the amount that Uber paid for Ot.to – 700 million dollars – as a basis for the damage amount. We are potentially talking about several billions.

Third, a loss at the courts could stop Uber’s self-driving ambitions and put them back to the start. The technology would have to be developed from zero again. With all the competition out there racing towards self-driving it seems impossible to catch up.

Fourth, many partnerships that Uber signed with Volvo, Ford, or Mercedes, would probably fall apart as they were signed under potentially wrong conditions. The whole house of cards starts collapsing.

Fifth, Google has nearly unlimited cash reserves to battle Uber. And it seems they are willing to do so in order to state an example.

Waymo also listed in its lawsuit a timeline of the activities. If they are correct, it doesn’t look good for Uber.

  • In November 2015 Levandowski registers his domain for the company that became Ot.to.
  • On December 3rd, 2015, Levandowski does an internal search on Google’s servers for Lidar documents and downloads 14,000 documents from the servers on December 11th, 2015.
  • Purportedly, Levandowski tells some of his colleagues at Google about his plans to take the technology to another company in January 2016.
  • On January 14th, 2016 Levandowski meets with Uber’s top management in their headquarters on Market Street in San Francisco.
  • One day later on January 15th, 2016 Levandowski founds his company 2018 Systems (now part of Ot.to).
  • On February 1st, 2016 he founds Otto Trucking
  • Even if employment contracts in the US can be terminated by either side from one day to the other, it’s still unusual to leave a company without prior notice, especially after many years of service. Levandowski did exactly that after seven years with Google on January 27th, 2016.

In a first reaction Uber denied – as expected – any wrongdoing.

A Neck Breaking Shit Month?

With their history of aggressive behaviors Uber has created many enemies, even among loyal customers. Also that Google was often criticized as well and was accused of unfair practices, the difference between the two companies could not be bigger. Google is seen as the more likeable company. Even the star investor Peter Thiel called Uber an “ethically challenged” company.

The quick succession of blows by competitors and their own errors brought Uber into a dangerous situation. It was not only a shitty month for Uber, but also a glance into the death. And Waymo’s lawsuit may have just given Uber the death kiss.

This article was also published in German.

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