Usually journalists writing about Silicon Valley have a hard time getting deep enough into the subject to keep me interested. But I really liked The Everything Store by Brad Stone, which covered the rise of Amazon. So I was excited when I saw that Brad wrote another book about the tech scene, The Upstarts, which focuses on Uber and Airbnb.
I feel like I already heard a lot of the “Airbnb legend” via the YCombinator mafia in one way or another, but most of the Uber stuff was new to me. So as I read it, I was trying to do this Straussian reading thing and think, what secrets about Uber are hidden within this book?
This book has a wealth of anecdotes - let’s investigate some of them.
Anecdote 1: Fighting San Francisco
First off, four months after it launched, back when Ryan Graves was the CEO, the California and San Francisco government together tried to shut down Uber:
Four months after the launch, when Graves was at a board meeting at First Round Capital with Travis Kalanick and Garrett Camp, four government enforcement officers walked into the tiny UberCab office. Two were from the California Public Utilities Commission, which regulated limousines and town cars, and two were from the San Francisco Municipal Transportation Agency, which regulated taxis. The plainclothes officers flashed badges, and then one of them held up a clipboard with a cease-and-desist letter and a large, glossy head shot of a smiling Ryan Graves. Waving the photograph around the room, he demanded: “Do you know this man?”
Presumably most companies respond to a cease-and-desist from the government by ceasing and desisting. For Travis Kalanick this reminded him of his time with Scour and so his reaction was:
“For me that was the moment where I was like, for whatever reason, I knew this was the right battle to fight.”
“The great thing is I’ve seen this before,” he said. “I thought, Oh, man, I have a playbook for this. Let’s do this thing. When that happened, it felt like a homecoming.”
After some stressful legal battle, Uber got to keep operating their service without any changes. Meanwhile, competitors like Taxi Magic and Cabulous kept obeying the previous rules.
Anecdote 2: Fighting Washington, D.C.
In Washington, D.C. the taxi industry was powerful and a city councilwoman proposed a law that would prevent Uber from lowering prices to compete with taxis:
The regulations, added to a broader transportation bill, would give Uber legal sanction to operate. But they also added a price floor, which required Uber to charge several times the rate of a taxicab.
Uber’s lobbyists wanted to compromise; Uber’s leadership wanted to fight.
He supplied the phone numbers, e-mail addresses, and Twitter handles of all twelve members of the DC city council and urged his customers to make their voices heard. The next day he posted a public letter to the council members, writing ominously, “Why would you so clearly put a special interest ahead of the interests of those who elected you? The nation’s eyes are watching to see what DC’s elected officials stand for.” Mary Cheh was taken aback by the ferocity of the response. Within twenty-four hours, the council members received fifty thousand e-mails and thirty-seven thousand Tweets with the hashtag #UberDCLove.
DC ended up allowing Uber with no restrictions. Internally, Uber codified this strategy, with a principle called “Travis’s law”:
“Our product is so superior to the status quo that if we give people the opportunity to see it or try it, in any place in the world where government has to be at least somewhat responsive to the people, they will demand it and defend its right to exist.”
Uber doesn’t actually publicly promote this law. But they worked with Brad Stone, they gave him a lot of access, and Brad’s calling it “Travis’s Law” in this book. So it has to be what Travis and a big chunk of Uber really believes, right? And it doesn’t sound that bad on the face of it, does it?
The one part of this law which feels a bit roundabout is the phrase, “any place in the world where government has to be at least somewhat responsive to the people”. What does that mean, exactly? Does that just mean “a democracy”? It seems like it is trying to be a bit more expansive and include not just democracies but also societies that are half democratic or even “somewhat” democratic.
So flip that around. If you believe in Travis’s Law, and you notice that Government X does not allow Uber, what do you conclude - that Government X must not even be “somewhat” a democracy?
Anecdote 3: Following The Rules
I kind of knew about Uber fighting the government a lot. What I didn’t realize before reading this book is that there were times when Uber took the strategy of “not fighting the government”.
In particular, in 2012 Uber required every driver to be commercially licensed. At the time, that was a clear legal requirement, and even Uber didn’t want to fight that law. When Jason Calacanis asked Travis if he would consider using unlicensed drivers:
Kalanick fervently believed that services using unlicensed drivers were against the law — and would get shut down. “It would be illegal,” he said on the podcast This Week in Startups. “Unless the driver had what’s called a TCP license in California and was insured.”
“You don’t want to get into that kind of business?” asked host Jason Calacanis, the Uber angel investor.
“The bottom line is that we try to go into a city and we try to be totally, legitimately legal,” Kalanick replied.
At the time, Lyft was a small competitor, but they were willing to break that law. A year later, in 2013, the California government gave up their fight against Lyft, and Uber realized they had made a key mistake.
Travis Kalanick had watched, waited, and even quietly agitated for Lyft to be shut down. Instead, they spread, undercutting Uber’s prices. Now that their approach had been sanctioned, Kalanick had no choice but to drop his opposition and join them. In January 2013, Uber signed the same consent decree with the CPUC and turned UberX into a ridesharing service in California, inviting nearly anyone with a driver’s license and proof of insurance, not just professional drivers, to open his or her car to paying riders.
There’s a lot more in this book and it’s really a fascinating story. I could have written a section for Fighting New York City and Fighting London. And half the book is about Airbnb! So if you’re interested in this sort of thing I really recommend buying The Upstarts.
To me, this book explains Uber’s culture. At every turn, they were rewarded for breaking the law, and punished for obeying the law. A culture that can survive that Pavlovian conditioning seems dangerous. And yet a hundred years of Taxi Magic competing with Cabulous may have just led to nothing. Perhaps Uber is not the startup we need, but the startup we deserve.