The opening sentence of the Wall Street Journal’s feature story about Uber’s CEO, Dara Khosrowshahi, occasionally driving for his own company is particularly significant. It states that “After leading Uber for five years, Dara Khosrowshahi personally took the wheel in September.”
The story’s background is that Uber has been facing a shortage of drivers and delivery workers for several years. The company has been grappling with the challenge of offering these services at a price that customers find affordable while also compensating their workers well enough to retain them.
Meanwhile, Uber has been funding a costly corporate operation that, for the majority of the company’s history, entailed investing billions of dollars in moonshot projects such as developing self-driving cars that did not yield any significant results.
At the same time, Uber has had to navigate what the Wall Street Journal describes as “legal risks,” a term used to refer to the costly and high-profile legal battle over whether drivers should be classified as independent contractors or employees of Uber.
Uber spearheaded the battle among gig economy firms that collectively spent over $224 million to secure the passing of Prop 22 in California. This nullified a state law that would have classified Uber’s drivers as employees due to their limited control over their pay and work, which is primarily guided by company algorithms.
Prop 22 was successfully passed, guaranteeing that drivers would continue to be classified as independent contractors and allowing Uber’s business model to remain sustainable. Uber emerged victorious in California’s legal battle, and a subsequent court ruling in March largely affirmed its underlying principles.
To bolster their legal position that drivers are independent contractors, Uber, and other gig economy companies have had to make an unusual assertion. They argue that their true customers are not the riders who request rides or the hungry customers who order food through the app, but instead the drivers themselves.
Uber explicitly made this argument in its filing with the Securities and Exchange Commission for its 2019 initial public offering, stating that “Because end-users access our platform for free and we have no performance obligation to end-users, end-users are not our customers.”
This brings us back to the Wall Street Journal’s story, which takes the form of an “Undercover Boss” narrative. Khosrowshahi drove for Uber under the alias “Dave K.” during the course of the story. He drove a passenger to the airport, drove another person to Oakland, and got stuck in traffic.
During the course of the story, Khosrowshahi also curated a Spotify playlist for his riders. However, he forgot to provide a passenger with their drink and then attributed it to the app’s design.
Unlike a typical Uber driver, who would face negative ratings and a loss of tips, Khosrowshahi was able to contact an executive to request a change in the app’s design.
He came to the realization that it is frustrating not to know the payment amount or destination before accepting a ride, an issue that Uber drivers have been complaining about for over a decade.
Making the app work in the driver’s favor
Drivers have developed complex strategies to manipulate the app in their favor, despite none of them being effective. These strategies only create a false sense of control that the company actually promotes.
The concept of CEOs driving for their own companies is not a new phenomenon. As far back as 2015, former Uber CEO Travis Kalanick revealed to Stephen Colbert that he drove for Uber and had a perfect five-star rating (for the record, Khosrowshahi claims to have one as well). Similarly, Lyft CEO John Zimmer has also been known to occasionally drive for the company.
The trend of CEOs immersing themselves in the daily operations of their companies and working alongside their employees is not a new or intriguing concept.
It is a well-established public relations routine that has been utilized for several years, often signaled by the presence of a dedicated photographer assigned by the publication. This trend can be traced back at least as far as “Undercover Boss” and has remained a popular practice to this day.
Other CEOs have done the same
Recently, the new CEO of Starbucks made headlines when he declared that he would work behind the counter and prepare drinks amidst a national controversy over the company’s openly anti-union practices. This controversy had previously resulted in former founder, CEO, and short-lived presidential candidate Howard Schultz being summoned to appear before Congress.
None of the problems, challenges, or irritations that Khosrowshahi encountered during his time as an Uber driver are new or unprecedented, particularly regarding critical issues like driver compensation.
In 2019, my colleague Dhruv Mehrotra and I conducted an investigation into how much Uber and Lyft drivers were truly earning for each ride, which are figures that neither company publicly discloses.
Our investigation, which involved analyzing a dataset of over 14,000 fares, revealed that Uber retained 35 percent of the revenue, while Lyft kept 38 percent. Other studies have also produced comparable results.
As with numerous media reports over the years that have highlighted the same frustrations that Khosrowshahi encountered, the company’s public relations team disputed the accuracy of our findings and took issue with our methodology. Nevertheless, when we spoke with drivers for our story, we heard many of the same complaints that Khosrowshahi expressed to the WSJ.
The significance of the opening sentence of the WSJ story lies in the fact that Khosrowshahi has been at the helm of Uber for over five years. The company’s official stance has been that the drivers are its customers, but Khosrowshahi never bothered to investigate what the actual customer experience was like until now.
Better late than never?
One might wonder what kind of CEO would wait five years to understand the experience of his own customers. The answer lies in a CEO who recognizes a legal fiction when it presents itself and can finally dispense with the charade once it has been entrenched in law.
Khosrowshahi made another noteworthy statement in the WSJ that deserves attention. In 2015, during an appearance on Colbert, Kalanick touted the idea of robotaxis as the company’s future. Kalanick highlighted the competition in this field, stating that Google, Tesla, and Apple were all developing driverless technology.
Lyft’s co-founder, John Zimmer, shared a similar sentiment in 2016, stating that individuals had a choice to either embrace or resist the inevitable future of driverless cars, which he believed would become the norm.
Zimmer made a bold prediction that the majority of Lyft rides would be driverless by 2021, though this did not come to fruition as the percentage remained at zero. Additionally, Zimmer believed private car ownership would practically cease in major U.S. cities by 2025.
Eliminating the driver was pivotal to resolving the ongoing driver classification and customer issues. However, it was a significant gamble.
This scenario brings to mind Tesla’s “production hell” during the summer of 2018, as Elon Musk aimed to automate the entire factory to accelerate the production of the Model 3. However, the automation process proved to be unsuccessful, prompting Musk to conclude that “Humans are underrated.”
As Khosrowshahi pointed out to the WSJ, the industry has perhaps taken drivers for granted. “I think that the industry as a whole, to some extent, has taken drivers for granted,” he remarked.
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