Harry here. Today, senior RSG contributor John Ince takes a look at a stock buyback program for Uber employees but not drivers, a strange partnership between ZipCar and Uber, and trouble brewing for Uber in Pittsburgh.
Uber Gives Restless Employees a Way to Cash Out [Bloomberg]
Sum and Substance: Many longtime employees of Uber Technologies Inc. are multi-millionaires, at least on paper. But with no initial public offering in sight and a strict policy blocking most private share sales, they’re stuck in limbo.
However, there’s a little-known option available to Uber loyalists looking to cash out. Those who work at the San Francisco company for at least four years can sell as much as 10 percent of their shares, people familiar with the matter said.
The program has a built-in incentive to entice staff to stick around. The seller gets paid out over many months and must remain at Uber during that time, said the people, who asked not to be identified because they weren’t authorized to discuss the program publicly.
The formal plan, which has been in effect for a couple years but was previously unreported, caps buybacks at well below $10 million per employee, one of the people said. Fewer than 200 of the some 10,000 people employed by Uber currently qualify for the program, the person said. A spokesman for Uber declined to comment.
My Take: Okay, here’s how this game really works. Uber raises $17 billion from investors selling the next, next thing in tech. First it was the total disruption of taxis, then China, then food delivery, then driverless cars, then humanoid deliveries, then flying cars.
Selling one dream after another, Uber’s CEO Travis Kalanick ratchets up the value of the company – each round enriching the previous rounds investors – at least on paper. This all happens within a very close circle of investors – and without public markets and financial analysts getting a good look at the innards of the company or their financials.
But how can employees get a piece of the action and liquidate their stock if Uber indefinitely postpones their IPO? Uber does so to avoid the inevitable public scrutiny of their books, while amassing the largest losses for any startup in history, $3 billion in FY 2016 alone. So employees are stuck with stock that could tank in value before they can offload it, unless…
This buyback program solves these problems legally by taking some of that $17 billion ($10+ billion in the bank as of June 2016) and putting it in employees pockets, in tidy’s sums somewhere south of $10 million at a time. Uber does it with no public scrutiny, nor any market based valuation of what the company is actually worth.
With all this hidden from public view, Uber’s PR team then makes a big public splash when it rewards a long time Uber driver with a check for $2,000 after completing 20,ooo rides – an average bonus of 10 cents/ride. Who makes out better on this: the select few who pocket millions from stock buybacks or the driver who worked at least as hard and gets a check for $2,000? What about the other half a million drivers – many of whom are renting vehicles, sleeping in them and barely making minimum wage? Ah, the wonders of capitalism.
Uber, Zipcar partner up for drivers [Boston Globe]
Sum and Substance: Uber drivers can now offer rides around Boston using Zipcar vehicles, under a new agreement between the two transportation-technology companies.
Boston-based Zipcar and its parent company, Avis Budget Group, will park 20 sedans at Uber’s Dorchester office for exclusive use by Uber drivers. Drivers will be able to rent the cars on an hourly basis through Zipcar to pick up passengers.
Uber has worked with other companies to allow drivers to offer rides in rental cars, as has its rival Lyft. In Boston, Uber drivers can rent cars through Hertz and Enterprise. Uber also offers leased cars to drivers.
The Zipcar deal may require less upfront costs for those drivers who want to work only a few hours at a time. Rates for drivers will start at $12 an hour to rent the vehicles, plus a $7 monthly fee. The rental program with Hertz and Enterprise, by contrast, requires Boston drivers to take out cars for a minimum of seven days.
The lease program requires an upfront payment of around $250 and weekly payments in the $100 range, according to Uber. Neither Uber nor Zipcar is paying the other as part of the agreement, but Zipcar spokeswoman Lindsay Wester said both companies will benefit from the deal.
For Uber, the deal represents a chance to expand its driver ranks, at a time when the company has emphasized recruiting and retaining more drivers to meet passenger demand. The drivers, who are classified as independent contractors, will need to pass background checks through both the company and the state, like all other Uber drivers.
“This partnership opens the way for more people to drive when they want and earn what they need, even if they don’t own a car,” Meghan Verena Joyce, Uber’s East Coast general manager, said in a statement. Zipcar, meanwhile, gets the chance to sign up Uber drivers as new customers. Uber drivers will pay the same monthly fee as regular Zipcar members; the $12 hourly rate for sedans, meanwhile, is around the middle of Zipcar’s offerings in Boston.
My Take: Some of these deals that Uber is striking with car rental companies really put the driver behind the eight ball financially, right out of the gate. For only $12/hour (plus a $250 deposit) you can have the opportunity to make roughly $12/hour, the figure most often tossed around for the real hourly earnings of Uber driver after expenses.
Related: Uber Vehicle Marketplace
Pittsburgh has finally realized it’s in a toxic relationship with Uber [Quartz]
Sum and Substance: The honeymoon is over for Uber and Pittsburgh. After bending over backward to accommodate the ride-sharing company’s driverless car ambitions, city officials are tired of being taken for granted.
“We’ve held up our end of the bargain,” Pittsburgh mayor Bill Peduto said last week, “but we haven’t seen much from Uber. This is a two-way street, not a one-way. I need to see more interest from them in our communities, both locally and internationally.” City controller Michael Lamb took the analogy even further: “Unfortunately, to this point, the relationship with Uber appears to be a one-way limited-access highway,” he wrote in an email to Peduto. “They currently operate as though they have been given carte blanche access to our city.”
Pittsburgh has put up with Uber for a long time. The city stayed quiet as Uber gutted Carnegie Mellon for robotics talent in early 2015, and welcomed the Advanced Technologies Center it later set up. Pittsburgh wrote a letter in support of Uber when the company was fined $11.4 million for operating in Pennsylvania without permission. And in September, Pittsburgh opened its streets to tests of self-driving cars with real people, and played along with Uber’s hasty and elaborate press event.
From Uber, Pittsburgh wanted help winning the 2016 Smart City Challenge, a US Department of Transportation competition with a $50 million prize. In May 2016, Peduto asked Uber to spend $25 million on a new transit connection from Carnegie Mellon to the neighborhood where it would be testing autonomous vehicles. Uber not only refused, but came back with a laundry list of things that Pittsburgh could do to better accommodate Uber, among them access to bus lanes, designated pick-up and drop-off spots for self-driving cars.
The final straw seemed to arrive last weekend after #deleteUber—a movement that started over a taxi protest in New York—unleashed years of accumulated ill will against the company. Pittsburgh officials took the opportunity to criticize Uber’s treatment of the city.
Just five short months ago, Pittsburgh was still positive on its new relationship. … But … Uber’s biggest show of affection remains a $10,000 donation to a local women’s shelter.
My Take: The storyline here seems to fit the ongoing narrative about Uber as a cold soulless corporation that only cares about itself. But there’s another way of interpreting things here. Pittsburgh’s Mayor Peduto could just as easily be playing the media seeking to extract concessions and cash from their deep pocketed partner. I have no idea which is closer to the truth.
What is clear, however, is that Uber is running out of friends in city halls across the country. Pittsburgh was thought to be one of the enclaves where Uber had a green light from local authorities. No more, at least until TK pulls out his checkbook to jump start this troubled relationship.
Brazil judge rules Uber drivers are employees, deserve benefits [Reuters]
Sum and Substance: A Brazilian judge ruled that a driver using the Uber ride-hailing app is an employee of the San Francisco-based company and is entitled to workers’ benefits, adding to the global debate over labor rights for drivers on the platform.
Uber said on Tuesday it would appeal the decision by Judge Marcio Toledo Gonçalves, who issued the ruling late Monday in a labor court in Minas Gerais state. Gonçalves ordered Uber to pay one driver around 30,000 reais ($10,000) in compensation for overtime, night shifts, holidays and expenses such as gasoline, water and candy for passengers.
The consequences for Uber, if the ruling is upheld, could be far greater if more drivers follow suit and if state and federal regulators and tax agencies start treating it, as the judge suggested, as a transportation company rather than a tech firm.
Similar cases in the United States, Britain, Switzerland, and Europe’s highest court have threatened to increase Uber’s costs and subject it to stricter regulation, with implications for peers building platforms for part-time work in the so-called ‘gig economy’. Uber said in a statement that it was appealing the decision, citing a contradictory ruling by another labor judge in Minas Gerais two weeks ago.
The company said drivers are free to set their own hours, cancel or pass on trips and use competing apps, making them service providers rather than employees. The ride-hailing app has also raised concerns about the safety of its drivers in Brazil. A Reuters investigation revealed a 10-fold increase in attacks on drivers, including several murders, after enabling cash payments on its platform at the end of July. Questions were raised within the company as to why it did not act faster to address the problem.
My Take: Looking down Travis Kalanick’s list of existential issues threatening Uber’s business model, this independent contractor / employee legal dispute has to be near the top. The issue has been out of the news lately as San Francisco’s Judge Chen deliberates on whether to approve the most recent proposed settlement. But this ruling is a reminder that this issue has repercussions well beyond the shores of the United States.
Meanwhile TK spent last week at the “World Government Summit” in Dubai, talking about humanoids, flying cars and, well, here’s what the New York Post reported: “‘On Feb. 12, the tech titan is headed to a government summit in Dubai, which is scheduled to discuss the topic of global happiness — something that’s in somewhat short supply in today’s unstable political environment. The event will feature the first international gathering of experts on happiness,’ according to promotional material for the fifth annual World Government Summit.”
Uber CEO predicts humanoid robots will deliver pizza, AI chatbots to be in self-driving cars [CNBC.com]
Sum and Substance: Humanoid robots could be delivering our pizzas while driverless Uber cars could be equipped with artificial intelligence chatbots, the chief executive of the ride-hailing giant predicted on Monday.
Speaking about the future of Uber at the World Government Summit in Dubai, Travis Kalanick declared that his firm is “at the beginning of becoming a robotics” company as vehicles become autonomous. “Imagine now a car that is delivering food but doesn’t have [a] driver. How do you get the food? You could come down and get it but if you have three kids … you want somebody to bring it up. And at some point there is going to be a humanoid that crawls up your stairs .. and hands you your pizza,” Kalanick said. The Uber boss spoke about the situation today when people are unable to find their driver. In this instance, users of the app call the driver to locate them.
“But when the car doesn’t have a driver who do I talk to? I’m going to talk to some AI agent or what they call a chatbot. I’m going to talk to an AI to get connected to that car,” Kalanick forecasted. Uber has been investing heavily in self-driving cars and has partnered with automakers to bring these to market. But Kalanick is also heavily focused on the future.
Uber recently hired Mark Moore, a 30-year NASA veteran, to head up the firm’s flying car project. The start-up, which is reportedly valued at more than $60 billion, has also launched other features using its vast transport network such as UberEATS, its food delivery service.
This is where something like a humanoid robot to deliver pizza could come into play. “It sounds futuristic and sci-fi but that’s where the world is going,” he added, speaking about a five-to-ten-year time frame. Kalanick used a lot of his talk to tout the benefits of self-driving cars and ride sharing such as improving traffic and reducing pollution. He also said the rise of ride-sharing is reducing the appetite of millennials to own cars.
My Take: If you’ve been to as many thinkfests as I have, you can easily imagine the scene here: multi-tasking audience members only partially paying attention to high powered CEOs predicting a future nobody knows, these CEOs lacing their talk with all the operative buzzwords – humanoids, chatbots, artificial intelligence.
Who knows, maybe TK is prescient, but seriously – can you imagine passengers sitting in the back seat chatting with a artificial intelligence actuated voice box, then pulling out their smartphone, rating the chatbot five stars and adding a compliment to the chatbot for being a “great conversationalist.” If this really is the future that awaits us, then I’m booking the first available flight to Uranus.
Readers, what do you think of this week’s round up? Are you looking forward to a robot crawling up your stairs and delivering pizza to your family?
-John @ RSG
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