Contents:

10 min read

    10 min read

    It looks like Uber’s search for a new CEO is not going so well, but the difficulty in finding a replacement (if that’s truly the case) for Travis looks to be more complicated than just “internal divisions.” Could Travis come back to Uber in some capacity? Is he engineering his re-hiring? In today’s round up, senior RSG contributor John Ince covers the hold up for finding a TK replacement, an article about Uber being “too expensive” for passengers, and Uber cars catching fire.

    Uber's search for a new CEO is not going so well, but it may be due to more than just TK interference. That and more in this week's round up.

    Uber’s Search for New C.E.O. Hampered by Deep Split on Board [New York Times]

    Sum and Substance: SAN FRANCISCO — Some members of Uber’s eight-person board were excited about the idea of Meg Whitman becoming the ride-hailing company’s next chief executive. Ms. Whitman, the chief executive of Hewlett Packard Enterprise and a former leader of eBay, appeared to have many of the right traits for the job: experience, maturity, a level head — the kind of qualities that Travis Kalanick, the Uber co-founder who stepped down as chief executive last month, mostly lacked. She had even personally invested in the company in the past.

    instacart

    Over the past few weeks, Ms. Whitman met with several Uber board members individually, offering advice on how to address the company’s problems. The members were encouraged by the discussions, and some believed that she was a natural fit for the vacant chief executive role. And after weeks of searching for a top candidate, they were eager to try to win her over. 

    That group did not include Mr. Kalanick. He and several of his allies had a competing agenda that included their own preferred candidates for the top job and the possibility of returning Mr. Kalanick into an operational role, perhaps even as chief executive. His surrogates had also recently begun talks with the Japanese conglomerate SoftBank about an investment in Uber that could provide Mr. Kalanick a route to regaining power.

    The jockeying between factions has put billions of dollars on the line, as the Uber board fights over control of the $70 billion ride-hailing giant. Interviews with more than a dozen people close to the process, who spoke on the condition of anonymity because the discussions are confidential, indicate that board members’ relationships have been damaged by leaks, shifting wildly as alliances are forged and then broken.

    The backbiting has taken a toll. After it was reported that she was a candidate for the chief executive job, Ms. Whitman said last Thursday that “Uber’s C.E.O. will not be Meg Whitman.” She made her announcement in a series of messages on Twitter just as the Uber board was holding a quarterly meeting, at which they had planned to call a vote on whether to appoint her to the job. The internal divisions mean the search for a new leader may drag on. Even as board members speak with other candidates, including Jeffrey Immelt, who is departing as chief executive of General Electric, about the chief executive job, a lack of cohesion is apparent. Some board members are not convinced that Mr. Immelt is the right choice, given that G.E.’s stock price and profits have stagnated in recent years.

    My Take: According to this New York Times piece, the recruitment of Meg Whitman as Uber’s CEO was more advanced than many of us knew. She had several conversations with key Uber board members, and the board was all but ready to vote on her appointment as Uber’s new CEO, when suddenly, she withdrew from consideration. So what happened to change her mind?  Here’s a tantalizing theory that comes directly from one of our most astute readers and commentators. Recently, Scott Myers uncovered a piece of information that strikes right to the heart of Uber’s hype. Apparently Uber and Lyft have been pulling a fast one with their accounting of pool rides. This gets a little tricky so stay with me here.

    On regular rides, both companies recognize as revenues just the agency commissions paid to them by drivers who use their apps, per the FT. However, on the growing category of carpool or shared rides (called uberPOOL and Lyft Line, respectively), Uber and Lyft claim to be the principals actually providing the service, and count as revenue the full fare paid. Since these shared rides actually are provided by non-employee drivers and non-company-owned cars, they will be reclassified under the new rules as agency transactions on which only commission revenue can be booked by Uber and Lyft. The impact on Uber is very large: its first quarter revenues would fall from $3.4 billion to $1.5 billion under the revised accounting standards, per the FT.  

    Burnt Out Talking To Passengers? Deliver Food With Caviar!

    caviar_logo

    Make up to $25/hour. No minimum hours required, work outside, and get paid weekly. Click to Sign-up!

    In other words, almost overnight Uber’s strongest case for investors to stick with the company will be negated. With one new accounting regulation, Uber’s revenue growth rates are going to be slashed in half.  Uber’s price/revenues numbers will look twice as bad.  The chances that this missive from Scott Myers was actually read by Meg Whitman are small. The chances that it was decisive factor for her decision to withdraw from CEO consideration are even lower. But none of that diminishes the significance.

    Uber Costs Too Much Because Drivers Trick the System. Here’s How to Fight Back [Inc.com]

    Sum and Substance: Lord knows Uber’s been taking a beating — of its own making. The problems have played into the hands of rival Lyft, which is watching its business grow. But you know who else is paying a price? You are. A brand-new study finds that Uber drivers in the U.S. and U.K. work together to game the company’s algorithms. Many coordinate their use of Uber’s app to create a perceived driver shortage, setting off higher surge pricing so rides are more expensive for consumers. Other techniques leave the passengers untouched but cause Uber to pay more per ride than it otherwise would. … Uber responded with the following statement: “This behavior is neither widespread or permissible on the Uber platform, and we have technical safeguards in place to help prevent it from happening.”

    Mareike Möhlmann and Ola Henfridsson of Warwick Business School in the U.K. and Lior Zalmanson of New York University interviewed drivers in New York City and London and analyzed 1,012 blogs on UberPeople.net, a site for Uber drivers. The researchers found that drivers organize mass “switch-offs,” or periods in which they log off the app. Uber software that oversees driver performance through the app that drivers have to use registers the condition as a sudden lack of available rides. The company then applies surge pricing as it does to manage a mismatch between supply and demand. As a result, you, the passenger, pay more and both Uber and the driver make more. Once surge pricing is in place, the drivers log back in and quickly make extra money. The researchers found that drivers coordinate when to log off, because it takes a certain number to trigger the perceived lack of drivers.

    It’s complete manipulation, possibly stemming from the relatively low amounts of money many Uber drivers make. Or maybe it’s a reaction to how Uber reportedly psychologically manipulates drivers to its advantage. Drivers use other techniques that hit Uber rather than riders. For example, they will accept an UberPool ridesharing fare and then immediately log off or ignore other requests so they can go directly to a destination. They effectively get a larger amount from Uber for the trip. (According to the RideShareGuy.com site, multiple trips under UberPool often aren’t worth the extra work.) 

    You, the passenger, have no direct control in any of this, particularly when it comes to surge pricing. But there is one thing you can do, which is take a basic smart consumer action and comparison shop. Find out if Lyft and other rideshare providers operate in your location. Download the apps and check who offers the best deal. (If a service turns out to be unreliable or an otherwise poor choice, you can always delete its app going forward.) There’s a reasonable chance someone else can get you where you need to go for less.

    My Take:  This is a misleading if not irresponsible article that extrapolates from comments on message boards to a completely unfounded conspiracy theory. Furthermore, the title of the article in is based upon the fallacy that “Uber Costs Too Much.” How can it cost too much when Uber is losing billions of dollars by undercutting taxis on prices and offering a valuable service at well below market rates?

    Yes, now and then there are posts on driver message boards urging drivers to coordinate action on when to log off in an attempt to cause a surge. But the author of the article (and the researchers who did the study) are clearly out of touch with what is happening on the street. Had they dug in a little further, they would have learned that surges have greatly diminished recently.  They also would have learned that coordination between drivers is notoriously bad, because it’s extremely difficult for drivers to communicate with each other while out on the road.

    I suspect that if driver coordination was better, they probably would pile onto a strategy like this, but when this happens Uber usually detects it and nips it in the bud – as they indicated from their statement (included in an updated version of the article).  As to the claim that drivers attempt to get out of multiple pickups on Pool and Lyft Line, probably some truth to that. What is your experience with strategies like this? Have you done this stuff? If so, does it work?

    Safety concerns over recalled Uber cars in Singapore [BBC.com]

    Sum and Substance: Uber has said it could have done more to pull unsafe cars off the road in Singapore, amid allegations it rented out faulty vehicles to drivers. The Wall Street Journal reported on Thursday that Uber was aware of a Honda Vezel recall when it purchased more than 1,000 Vezels that were then leased to drivers. One of these cars caught fire in January, according to the report. Honda recalled the Vezel model in April 2016 due to a faulty component that could cause overheating. According to the Wall Street Journal, Uber subsequently bought more than 1,000 of the models and leased them to drivers in Singapore through its affiliate car-leasing company, Lion City Rental. The leasing arrangement was designed to meet strong demand in the country where the cost of owning a vehicle is extremely high.

    In January, one Uber driver had flames burst from the dashboard of his Vezel, causing damage to the interior and windshield, the report said. He was not injured. “As soon as we learned of a Honda Vezel from the Lion Cit Rental fleet catching fire, we took swift action to fix the problem,” Uber said in a statement to the BBC. It did not provide details of what action was taken. However, the firm said “we could have done more” to deal with the issue. Uber said it had responded to six vehicle recalls since the beginning of the year.

    My Take:  You really do have to wonder about the judgement of some of these Uber execs.  What in the world were they thinking by scooping up 1000 Hondas with known defects – probably at a deep discount – then putting both drivers and passengers at risk? It’s the same kind of thinking that has plagued the company – let’s do this and if something bad happens, we’ll apologize for it later.

    Readers, what do you think of this week’s round up? Do you think other drivers are manipulating surge? How do you think Uber’s search for a new CEO will play out?

    -John @ RSG

    John Ince

    John Ince

    John Ince is a former Fortune reporter and Wall Street banker. He has about 1,000 rides under his belt driving part time for Uber and Lyft.  He’s writing a book about his experiences entitled:  Travels With Vanessa:  A Rideshare Driver Tries To Make Sense of It all - For a sneak peak visit the link above.

    Share Post