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Wednesday, July 24, 2024

Uber’s CEO Says He’ll Always Find a Reason to Say His Company Sucks

Fifty-one dollars and 69 cents. That was the charge, including tip, for the 2.95-mile trip I took last May from my downtown New York City apartment to the West Side facility where Uber was holding its annual product event, called Go-Get. The ride-hailing company’s charges have been higher in recent years, and fluctuate in any case, but that was nuts.

As Uber CEO Dara Khosrowshahi knows, high rates are one consequence of trying to run his company as an actual business, as opposed to a scorched-earth feral growth machine. His predecessor, Travis Kalanick, had built an enormous, enthusiastic user base by subsidizing rides with the company’s vast reservoir of VC funding. Under Kalanick, Uber skirted regulations, shrugged off safety issues, and presided over a workplace rife with sexual harassment. After he got pushed out, it fell to Khosrowshahi, who left the top job at Expedia to take over as Uber’s CEO six years ago, to fix things—and find out once and for all whether Uber could turn a profit.

His grand plan was Uber-as-a-platform, one app that provides all kinds of rides and food delivery services. Amazon is the everything store; Khosrowshahi’s Uber wants to be the everything of motion. The versatility is paying off. During the pandemic, the rise of Uber Eats helped compensate for empty back seats in Uber vehicles. And while not in the black, the company is inching toward profitability. Gone are the ride subsidies. It’s a put-up-or-shut-up move that may flop when riders balk at high prices. Maybe they’ll flock to public transit, or taxis will make a comeback. (So far, people still seem to be swiping for rides.) [Update: In a quarterly earning call on August 1, 2023, shortly after publication, Uber announced its first-ever operating profit.]

When Khosrowshahi addresses the crowd at Go-Get, decked in his customary dark sweater and slacks, he exudes calm and confidence. The world still regards Uber with a measure of suspicion—journalists seize on every instance of Uber rides gone wrong or drivers struggling to make a good living. But he feels he has won people’s trust enough to introduce a feature that only a few years ago would have seemed ridiculous: Uber for Teens, which asks parents to send their precious kids on unaccompanied rides. No one laughed.

After the event, WIRED sat down with Khosrowshahi to discuss Uber’s quest for profitability, its relationship with drivers and delivery people, and what Khosrowshahi thought when he watched the TV series Super Pumped, which made Uber look like a street gang with venture capital.

Steven Levy: You just announced Uber for Teens, for teenagers traveling alone. This reminds me of when Mark Zuckerberg, in the midst of a trust crisis, unveiled a feature called Facebook Dating. Why do this when it’s so easy to imagine what could go wrong?

Khosrowshahi: It was a deeply considered decision. When I came to Uber, we decided that safety was not going to be an afterthought, but a core principle. We started innovating in safety features, whether it’s, you know, “text to 911” or “track your ride” or making sure drivers take selfies so that you know they’re the driver you think they are. We’ve put all of those and more together to create a product that’s the safest way for teens to get around in the world. The parents can track the ride, and we have built-in audio recording turned on as a default. Listen, the world is unpredictable. Maybe the safest thing to do is stay home. But if you’re choosing to get out there in the world, we think Uber for Teens is the safest way.

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It’s a bold move because it seems like every time an Uber driver misbehaves or a passenger suffers some calamity, it makes news. Like the Uber Eats driver who got chopped up. Do you feel that the attention is unfair?

Sure. We’re under a microscope, and incidents that happen on our platform tend to get more attention. You can either feel sorry for yourself or you can say, “We’re going to learn from every single incident.” It doesn’t mean we can be perfect, because humanity is imperfect. Is the attention frustrating? Sure. But ultimately I think it’s good for the company.

When you began your job, were you alarmed that safety wasn’t as high a priority?

Absolutely. Our DNA was about growth. It was the right DNA for a startup that was trying to take on the world. And a lot of the safety features we introduced hurt our growth. We had to make trade-offs. It absolutely slowed us down, but that up-front investment helped us become the most respected transportation brand. And now we’re growing faster and we’re more profitable than our competitors.

For years, Uber juiced growth by subsidizing prices. It lured riders and devastated the taxi business. You’ve now stopped the subsidies, and people are reporting sticker shock. We certainly feel it in New York City. I traveled 2.95 miles in an Uber to get here today, what do you think it cost?

Twenty bucks.

Fifty dollars.

Oh my God. Wow.

And that was my second try. Five minutes earlier, the price was $20 higher.

Yeah, surge pricing.

A surge makes no sense. It’s 10 am on a sunny weekday, and it’s not like the president’s in town. I do agree that this is higher than I normally see, but in general, an Uber now costs more. Do you worry that those who adopted the service because of attractive pricing might be rethinking their ridership?

Everything is more expensive. Inflation has become a part of our everyday life. With Uber, the vast majority of your fare is going to your driver. Earnings per week for our drivers are up 40, 50 percent over the past four years, because that is the cost of time and the cost of labor. I think that’s positive. And we’re seeing audience growth—130 million people come to our platform on a monthly basis. So while prices are higher, people are finding our services more compelling. It certainly hasn’t hurt the business. [According to some reports, Uber fares have increased at least four times faster than the rate of inflation.]

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You’re betting that the platform concept—people using a single app for multiple services—will be Uber’s distinctive edge. Right now, your two big services are rides and delivery, but you’re adding things like flights and even boat trips. Isn’t there a risk that if one of them falls short, it weakens your whole platform?

There is. In mobility and delivery we have competitors with great businesses. They’re both trillion-dollar marketplaces. When we put them together, it’s almost like an operating system for your daily life. When I joined, Uber Eats was less than 10 percent of the business, an afterthought. Now, it’s 50 percent. And we are seeing that customers use both products, mobility and delivery, and drivers will sometimes deliver food or groceries as well. It creates more engagement with the platform, allowing us to accelerate beyond the competition.

In both mobility and delivery, the gig-worker model isn’t proven. Great businesses or not, none of these companies, including yours, are profitable. Are you saying that without a positive bottom line, you’ve proven that Uber as a business is sustainable?

No, I don’t feel like we have proven ourselves. I’m very confident that we will. We will be GAAP profitable this year. [GAAP is a universally accepted accounting standard.] Every time we’ve said something, we’ve accomplished it. But once we get profitable, I’m going to come up with some other reason why we suck. Because that gets the team psyched up. We have an underdog mentality I never want to lose.

In terms of the mobility business, even without making money, you look good because your competition is doing so terribly. Lyft’s failure to build internationally and its decision not to go into the delivery business have led to a stock nosedive.

Yes, Lyft is having their troubles at this point.

What would be the impact on Uber if Lyft is diminished or goes away?

I don’t spend a lot of time thinking about it. When I came into Uber, we were hyper, hypercompetitive, constantly measuring ourselves against everyone else. But at some point, you have to compare yourself to yourself. My competition is who I was yesterday, and I want to be better today and tomorrow. I think the biggest differentiator between ourselves and Lyft, in addition to ours being a platform play, is that we pivoted to thinking about our drivers as the first-class citizens on the platform. We’ve put our best and brightest on innovating for the drivers in all aspects of their experience, in terms of onboarding and showing them up front the destination and what they’re going to get paid. If you have a happy driver, you’re going to have a good Uber ride. It might be more expensive than you’d like. But the driver was polite, the driver treated you well. Hopefully, that’ll get you to take another Uber ride.

Traditionally, the behavior of companies whose competitors fade is to enjoy their monopoly and not be as focused on quality.

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We have a bigger competitor [than Lyft]. For us, it’s people who own one or two cars. We’re responsible for less than 5 percent of the miles traveled by those people. The ultimate competitive goal for us is, how do we get you to get rid of that second car, and then, how do we get you to get rid of that first car? That requires us to keep creating more circumstances in which you can use Uber. Like reserve an Uber to go to the airport, when you want to absolutely make sure you have a ride. Or maybe renting an Uber on an hourly basis, or getting an Uber rental car. For every occasion in which you might want to use your own car, we’re building an on-demand solution.

You’re in much more of a dogfight—I don’t want to call it a food fight—with your rival in delivery, DoorDash. I want to share something I heard on a recent podcast. Emil Michael was the guest—as you know, he was Travis’ second-in-command. He said that DoorDash was going to clobber you, and the reason is that Tony Xu, who runs the company, is an entrepreneur, not a “caretaker-diplomat”—referring, it seems, to you. His claim is that Xu is a hustler and that kind of hunger is not in your DNA. Do you have a response to that?

These are sound bites. I don’t label people. If you’re a founder, you have your strengths and weaknesses. And if you’re a professional CEO, you have your strengths and weaknesses. I have a lot of respect for Tony. I think we’ve got the best team in the business and a competitive advantage in scale and in our platform. So I’ll let the results speak.

I thought you might have something stronger to say about Emil dissing you, since his legacy as part of Travis’ “A-Team” didn’t exactly varnish Uber’s reputation.

He’s entitled to his opinions. I respectfully disagree. Sometimes disrespectfully. I think these labels—founder, CEO, whatever—are meaningless.

I understand that earlier this year you took some shifts as an Uber driver yourself.

Yeah, that was fun.

What was your takeaway from that?

Driving is actually much more difficult than you would think, especially in terms of using the system. I realized the quality just wasn’t high enough. When you first start delivering, for example, where do you pick up the food? Who do you talk to? Where do you drop it off? So we have now a huge number of our ops and product folks putting themselves in the shoes of couriers and drivers. That’s allowed us to build a much better product. For example, for years drivers have said that they want to see destinations up front. So we built that.

Ah, your on-the-job experience helped fix a longtime problem. So why did it take six years for you to take a shift as an Uber driver?

It’s a fair criticism; I should have done that earlier. We had a lot to deal with. Uber was in a difficult state. I’m glad I did it, and I’m going to keep driving. I have to understand the platform and the experience.

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What was the worst moment you had as an Uber driver?

It’s actually been fun and pleasant. One thing I didn’t like was passengers who talk on their phone on speaker. It’s almost as if you’re not there. You have to respect that because it’s their ride and they’re paying for it. I do get nervous before I drive because drivers get graded on every element. As a CEO, the board gives me a performance rating at the end of year. Drivers essentially get a performance review after every trip.

Are you a 5-star driver?

So far, so good.

A constant question in Uber’s history is whether your drivers should be seen as independent gig workers or have legal rights as employees. At any given time, some state legislature or ballot initiative is dealing with this, and other countries have grappled with it as well. Will we ever get a clear definition of what’s fair for your drivers?

Gig work is just different from full-time work. Societies have to get comfortable with it. It’s in our interest to get more drivers on the platform. So while we may have wins in some places and losses in others, things are moving in the right direction, which is toward flexibility. Most importantly, it’s what our earners want. Our earners do not want to be full-time employees. They want the flexibility of being their own boss and deciding when they work and where they work.

Do you have solid metrics to support that?

Flexibility is the number one feature for 80 percent of our drivers. They want to stay independent. And we’re hoping that politicians actually listen to drivers versus trying to reverse the clock 20 years.

At one point Uber was spending a fortune to develop autonomous driving technology to replace those drivers. You ended that program but are partnering with some companies to experiment with that. What’s your view of robot drivers now?

Autonomous technology certainly has promise, though it’s proving to be a difficult technical challenge. But just as we don’t manufacture the cars that drivers use, we don’t need to manufacture autonomous cars. Autonomous driving will be a part of our future—but 10 or 20 years into our future. We’re building a network that connects riders and eaters with drivers and couriers. If those drivers and couriers happen to be robots, and they’re safe and they’re effective, we will welcome them to the network.

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Are you using generative AI at Uber?

AI is part of the Uber DNA. We use large models to predict your ETA, to process documents that drivers upload, to predict your next order on Uber Eats, or to predict whether someone wants an UberX driver or Comfort, Black, or Electric. With generative AI, we’ll be able to create a personalized assistant for drivers and couriers to maximize their earnings on their terms. If you have an issue, it will be able to talk with you in a very human, personalized way. We’ll be able to advise new drivers who may not know, say, where to go after they’ve dropped someone off.

You’ve also been leading a push in climate sustainability, setting some pretty ambitious goals.

Carbon neutral by 2030 in the US, Canada, and Europe, and by 2040 all over the world.

It’s a big hill to climb. Your most recent report said that only 4.1 percent of rides in the US and Canada were electric, and it hardly moved from the previous year. Around the globe, it’s worse.

We’re starting to get to the inflection point. In California right now, 10 percent of our miles are electric. In London, 20 percent of our miles are electric. So we are starting to penetrate. We’re investing $800 million in resources to subsidize the switch over to electric. In the next three to four years, you’re finally going to get more affordable EVs, and the penetration will really rise.

Some people might point out that every time someone takes an Uber as opposed to the subway, the environment suffers.

There are some use cases where you want to use an Uber and some where you want to take a subway. And by the way, we have subways on our app as well.

How broad do you plan to extend the platform you call One Uber? What are the boundaries?

I don’t think there are boundaries, I mean, we’re testing those boundaries. That’s what innovation is all about. We are very good as a company at wiring up anything that moves. We’ve gone from cars to bicycles, three-wheelers in India, trains, buses, but also to trucks. If you look at Uber Freight, we are wiring up to truckers and connecting them with shippers directly. I think there’s a very, very long road ahead of us. Ultimately, if you look at anything that moves in a city, we want to wire it up on demand.

You’ve been in charge for six years now. What have you found that you never expected when you took the job?

I knew that Uber was in the public eye. I read about it every day. But you don’t understand what it’s like until you’re in that seat. Expedia was an important company, but not nearly as many people cared about it. I thought I knew what running Uber encompassed, but the public glare has been a challenge.

Did you watch the TV series Super Pumped that made Uber look like a boys-club wrecking crew?

It was painful to watch, but I viewed it as a wonderful piece of entertainment. I wasn’t there during the time of the series, but from what I understand, it was a dramatization. It didn’t reflect the truth in many ways. But, hey, that’s entertainment.

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Do you ever talk to Travis?

I do. I have a lot of respect for Travis. He’s a smart person, and I would be foolish not to take his input. We talk more about the food business. Travis is building a dark kitchen business. [That’s restaurant takeout without the restaurant.] And he’s a terrific entrepreneur. So it’s mostly business, but then we’ll chat about life.

In a memo you wrote to your employees, you said, “We are Uber, a once-in-a-generation company that became a verb and changed the world forever.” Do you think that’s the way the company is going to be remembered?

I hope so. People come to this company because of the impact we have. It’s not virtual impact, it’s real-world impact. It’s how you got here. It’s how over 5 million people earn, on a full-time or part-time basis. That impact comes with a responsibility. But it also comes with a deep satisfaction when you build cool shit.


This article appears in the October 2023 issue. Subscribe now.

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