Speaker 1: Text technology with tech Stuff from half stuff works dot com.
Speaker 1: Hey there, and welcome to tech Stuff. I'm Jonathan Strickland,
Speaker 1: an executive producer here at how stuff Works, and I
Speaker 1: love all things tech, and today we're going to take
Speaker 1: a ride with Uber. Actually, this is going to be
Speaker 1: a two part episode because even though Uber as a
Speaker 1: company is only about a decade old, the story is
Speaker 1: a really complicated one and it has a lot of
Speaker 1: consequences that are rippled into other areas of the text
Speaker 1: space and beyond. And the Uber story isn't just a
Speaker 1: tale about a startup that hit the big time, although
Speaker 1: it is that in part, but it's also a story
Speaker 1: about disruption, automation, corporate culture, and controversy. So this first
Speaker 1: episode is really going to be about the founding of
Speaker 1: the company and the challenges that it faced getting started,
Speaker 1: as well as it's early rise to prominence in the
Speaker 1: text sphere. In the second part will take a closer
Speaker 1: look at what the company has been up to over
Speaker 1: the past few years, but mainly throughout seventeen because that
Speaker 1: was a truly tumultuous year in Uber's history. But I
Speaker 1: thought it would be helpful to begin by looking at
Speaker 1: the co founder of Uber, whose behavior at times seemed
Speaker 1: to be closely aligned with some of the more criticized
Speaker 1: elements of the company's overall culture. This is a guy
Speaker 1: who has received a lot of attention, both positive and
Speaker 1: negative throughout the years, and that co founder is Travis
Speaker 1: clanic Uh. He is a bit of a character. I mean,
Speaker 1: he definitely has earned himself a reputation among the Silicon
Speaker 1: Valley as someone who is really aggressive and really visionary
Speaker 1: in many ways. But who is he? Where did he
Speaker 1: come from? And how did the idea of Uber come about? Well,
Speaker 1: spoiler alert, the story I'm about to tell you is
Speaker 1: only half the tail. This is the official story of Uber,
Speaker 1: the one that the company lists as its own history,
Speaker 1: and it traces everything back to a cold winter's evening
Speaker 1: in France in two thousand and eight. But the truth
Speaker 1: ends up being a little more complicated. But let's start
Speaker 1: with Klanic. So he attended the University of California, Los Angeles.
Speaker 1: He majored in computer engineering, but he never graduated. He
Speaker 1: dropped out just a few months away from graduating in
Speaker 1: that final year in nineteen and he went on to
Speaker 1: go work as part of the original team behind a
Speaker 1: business called Scour s c O. You are. Now. That
Speaker 1: might not sound familiar to you, and that would not
Speaker 1: be a big surprise because it didn't last that long.
Speaker 1: Within a few years of its founding, it was obliterated
Speaker 1: out of existence. But I'll explain. Scour was a peer
Speaker 1: to peer file sharing service. Now, that means you could
Speaker 1: download some software onto your computer and that would allow
Speaker 1: you to designate specific folders on your computer's hard drive
Speaker 1: as shared folders, which would be shared with the rest
Speaker 1: of the network. So other people who had also downloaded
Speaker 1: that same software would have access to those shared folders,
Speaker 1: and you would have access to the stuff they put
Speaker 1: in their own shared folders, so you could download files
Speaker 1: stored in other people's computers. You would launch the app
Speaker 1: and let's say you're looking for something specific. You you
Speaker 1: start to use a search engine to look for a
Speaker 1: very particular file. And let's say it was a piece
Speaker 1: of freeware that someone had created but had no easy
Speaker 1: way to distribute. It's a really big file. They don't
Speaker 1: want to pay for the hosting fees to put it
Speaker 1: up on a website and have to deal with all
Speaker 1: that bandwidth, so instead they've put it on a shared folder,
Speaker 1: and they've made it accessible by a peer to peer network.
Speaker 1: You could download that file to your folder, and if
Speaker 1: you kept it in your shared folder, it would mean
Speaker 1: the next person to download the file would have an
Speaker 1: extra source to pull from. They could pull some of
Speaker 1: the data from the original source and some of the
Speaker 1: data from you, and this would actually make the process faster.
Speaker 1: So the more people sharing a particular file, the less
Speaker 1: time it would take to download that file in general,
Speaker 1: so it would become much faster the more people got
Speaker 1: access to it. It was a really effective way to
Speaker 1: distribute large files across a network of computers. Now, that
Speaker 1: in itself is not a problem. In fact, it's a
Speaker 1: pretty great solution for large file distribution, particularly in the
Speaker 1: era before broadband speed's really got fast. The problem comes
Speaker 1: when you start asking yourself what types of files are
Speaker 1: particularly laur because a few things that fall into that category,
Speaker 1: like movies or TV series or computer games or other
Speaker 1: types of software, tend to be the property of very large,
Speaker 1: very powerful corporations. And here's a spoiler alert. These corporations
Speaker 1: understandably aren't too keen on people getting their grubby little
Speaker 1: hands on the products without paying for them, so we're
Speaker 1: talking about piracy. In other words, Now, I got to
Speaker 1: be clear, there is nothing inherent in peer to peer
Speaker 1: networking that suggests it is meant for piracy, But a
Speaker 1: lot of people used it for that purpose, enough of
Speaker 1: them to get the wrath of various big studios involved
Speaker 1: in a massive lawsuit against Scour. How massive, well, they
Speaker 1: claimed damages to the tune of one hundred thousand dollars
Speaker 1: per file. So if you added up all the files
Speaker 1: on the system that fell into the proprietary nature that
Speaker 1: belong to one of these studios, it amounted to about
Speaker 1: two hundred and fifty billion dollars. Now, the lawsuits scared
Speaker 1: away scours financial backers, including their majority shareholder who was
Speaker 1: a former Disney president, Michael Ovits, and it became clear
Speaker 1: that the Hollywood studios would put the screws to anyone
Speaker 1: who tried to swoop in to fill the void left
Speaker 1: by the previous investors. Essentially, it was like the mafia saying, hey,
Speaker 1: if you support these guys, we're gonna come after you.
Speaker 1: So this left Scour without any real financial support and
Speaker 1: the company had to file for Chapter eleven bankruptcy protection
Speaker 1: by the end of two thousand. It was no more.
Speaker 1: Its assets were auctioned off to a company called Center
Speaker 1: Span Communications, and Scour was a thing of the past.
Speaker 1: Now klan I took the whole thing as a learning experience.
Speaker 1: His contemporaries would describe him as being incredibly intelligent, ambitious,
Speaker 1: and a restive and they say things like he's a
Speaker 1: big thinker and he's relentless, which can be both a
Speaker 1: good and a bad thing. His move after the Scour
Speaker 1: disaster was to create what he would describe in a
Speaker 1: talk as a quote revenge business end quote. So what
Speaker 1: does that mean? It sounds really ominous. Well, in business terms,
Speaker 1: it was pretty clever. It wasn't so dark as what
Speaker 1: it might sound like. What he meant was that he
Speaker 1: was determined to create a business that would appeal to
Speaker 1: the very entities that had sued Scour out of existence.
Speaker 1: So he wanted to take the people who had filed
Speaker 1: lawsuits against him and turned them into customers, effectively taking
Speaker 1: money from them, which you know now that I say
Speaker 1: it does sound a little mafia esque, but pretty pretty
Speaker 1: clever and completely legal. Obviously, you have to create the
Speaker 1: business and you have to convince people that it's worth
Speaker 1: using the business. So it's not like it was a
Speaker 1: done deal from the beginning, And in fact his idea
Speaker 1: was not a big departure from scour. Actually he wanted
Speaker 1: to take that peer to peer technology and turn it
Speaker 1: into an enterprise software package. So the idea would be
Speaker 1: that big businesses like movie studios often need to move
Speaker 1: large files around in house, right Like, there might be
Speaker 1: one department that has a very large digital file and
Speaker 1: they need to transfer it to another department. But even
Speaker 1: within a company, there wasn't always an easy way to
Speaker 1: do this. Using the peer to peer network, which would
Speaker 1: be locked to a particular studio or company, they could
Speaker 1: do that much more quickly than with other methods. So,
Speaker 1: in other words, instead of downloading a piece of software
Speaker 1: that would give you access to all the shared files
Speaker 1: in the network, each one would be its own little,
Speaker 1: self contained island of computers, its own intra net, and
Speaker 1: you could use the peer to peer network to move
Speaker 1: files around that way, but no one from outside the
Speaker 1: company would have access to it. So he created this
Speaker 1: new company and he called it Red Swoosh, and this
Speaker 1: all started in two thousand one. But he also had
Speaker 1: some pretty hefty obstacles in his way, and a lot
Speaker 1: of it came down to timing. For one thing, this
Speaker 1: was just around the time that broadband prices were starting
Speaker 1: to come down, which meant that other options for companies
Speaker 1: that needed to share large amounts of data across multiple
Speaker 1: machines were opening up. Another problem for him was that
Speaker 1: the dot com bubble had burst and the Internet startup
Speaker 1: world was totally upside down as a result. You can
Speaker 1: listen to episodes of tech Stuff where I talked about
Speaker 1: the Internet dot com bubble. It was spectacular and it
Speaker 1: had really an incredible effect across the industry for years
Speaker 1: and years, and no one at this time was really
Speaker 1: bullish about getting into startup companies because so many had
Speaker 1: just gone belly up over the course of about a
Speaker 1: year and a half. So it was really hard to
Speaker 1: find financial back. According to a Fast Company article I read,
Speaker 1: at one point, red Swosh got down to just two employees.
Speaker 1: You had Klanic and you had an engineer, and Clinic
Speaker 1: himself had to move back in with his parents, and
Speaker 1: eventually his one engineer left the company too, so it
Speaker 1: became a one man operation. But he didn't give up.
Speaker 1: He kept plugging away, He kept looking for investors and
Speaker 1: eventually he found one in Mark Cuban. Cubans investment allowed
Speaker 1: Clinic to get red Swush on track, hiring a new team,
Speaker 1: although a small one, and landing a client named Echo Star,
Speaker 1: which is a satellite TV service provider, And this was
Speaker 1: enough to make red Swoosh and attractive property. And in
Speaker 1: two thousand seven, another company called akam I made an
Speaker 1: acquisition offer to that which Clinic accepted. He said sure.
Speaker 1: He sold his company for an amount that has been
Speaker 1: reported to be between fifteen and eighteen million dollars, which
Speaker 1: is not a bad chunk of chain age, though by
Speaker 1: no means the enormous amount of money represented by other
Speaker 1: acquisitions we've seen in the text space. Still, this experience
Speaker 1: reinforced Calantics confidence in himself and his ideas. He bought
Speaker 1: a home in San Francisco and became kind of an
Speaker 1: angel investor, and he would invite lots of younger people
Speaker 1: to come by and pitch ideas to him for various
Speaker 1: businesses because he loved that part of the experience. He
Speaker 1: seems to be the kind of guy who just really
Speaker 1: enjoys innovative ideas and disruptive ideas, whether they come from
Speaker 1: other people or he can take an idea that he
Speaker 1: thinks is maybe seventy of the way there, and help
Speaker 1: try and get it all the way there. Sometimes he
Speaker 1: would just argue with people and say, your idea just
Speaker 1: doesn't make sense, it's not a it's not a big
Speaker 1: enough idea for a business. And he would have these
Speaker 1: discussions on a regular basis and invited a lot of
Speaker 1: people over to be part of them. And he seems
Speaker 1: to have the instincts really necessary to go from practically
Speaker 1: nothing to something and in an accelerated amount of time. Well,
Speaker 1: in December two thousand eight, Clinic attended a conference in
Speaker 1: Paris called loeweb I Love the French. During his stay there,
Speaker 1: it snowed, which is a pretty rare event in Paris actually,
Speaker 1: and the snow was sticking to the ground, which is
Speaker 1: even more rare, And he found himself in need of
Speaker 1: a taxi cab and he was frustrated that he couldn't
Speaker 1: find one. He happened to be with another attendee. That
Speaker 1: guy was named Garrett camp who is the other co
Speaker 1: founder of Uber. And it was this experience of being
Speaker 1: stuck in snowy Paris near the Eiffel Tower with no
Speaker 1: cab in sight that inspired the two to dream up
Speaker 1: the service that would become known as Uber, or so
Speaker 1: the official story goes. The real one, Well, let's talk
Speaker 1: about Garrett Camp for a little bit. He was born
Speaker 1: in Canada, and while attending the University of Calgary's graduate
Speaker 1: school program, he and a friend named Jeff Smith founded
Speaker 1: a service called stumble Upon. Now, this was a recommendation
Speaker 1: engine and discovery platform. In other words, stumble Upon was
Speaker 1: a service that let people share the cool things they
Speaker 1: came across on the web with their friends. Now keep
Speaker 1: in mind, this is before you have stuff like Facebook
Speaker 1: or Twitter. This was a way for you to say, Hey,
Speaker 1: I just happened to find this really great web comic
Speaker 1: that hasn't really taken off yet, and I think you
Speaker 1: need to know about it. You can use stumble Upon
Speaker 1: to help your friends discover this stuff. It was one
Speaker 1: of the first services to hit upon this formula, and
Speaker 1: it became very successful. By the mid two thousands, Camp
Speaker 1: and his team had to relocate to San Francisco, largely
Speaker 1: because that's where the investment money was coming from. So
Speaker 1: they actually left Canada and moved to San Francisco, and
Speaker 1: stumble Upon grew into an enormous endeavor. In two thousand seven,
Speaker 1: eBay acquired the company for seventy five million dollars, making
Speaker 1: Camp a wealthy guy. Camp would continue to work with
Speaker 1: the company as an eBay employee. A couple of years later,
Speaker 1: eBay would spin out stumble Upon so that it would
Speaker 1: once again be an independent company, and Camp was CEO
Speaker 1: until two thousand twelve, when he moved off to pursue
Speaker 1: other interests, and by two thousand fifteen, stumble Upon was
Speaker 1: in trouble, but Camp came back and reacquired the company
Speaker 1: because he didn't want to just see his baby go
Speaker 1: away anyway. During those years when Camp first moved to
Speaker 1: San Francisco, he found getting around in the city to
Speaker 1: be a bit of a challenge. He was never really
Speaker 1: a driver in Calgary, and he hadn't really planned on
Speaker 1: becoming a driver in San Francisco. He had been vexed
Speaker 1: by the problems he saw on the taxi cab industry
Speaker 1: for a while, and he saw that there were too
Speaker 1: few cars servicing too many people who needed to go somewhere.
Speaker 1: He had actually bought himself a really expensive sports car
Speaker 1: once eBay came in, but he found driving in San
Speaker 1: Francisco was way too stressful, and if you've never driven
Speaker 1: in San Francisco, the first time you come to an
Speaker 1: intersection at the top of an extremely steep hill, you'll
Speaker 1: start exploring lots of philosophical and religious concepts and the
Speaker 1: hopes that you can make it through the light once
Speaker 1: it changes. But options outside of personal transportation were pretty
Speaker 1: limited or lackluster. Public transportation in San Francisco has often
Speaker 1: been the subject of consternation, let's say, so, Camp began
Speaker 1: using what The Guardian called in an article the gypsy
Speaker 1: cab fleet of San Francisco. Now I'm not a big
Speaker 1: fan of the word gypsy, I mean, it's essentially a slur,
Speaker 1: but what the paper meant by this was that there
Speaker 1: were people trying to earn extra money by driving black
Speaker 1: sedans and transporting people to various places in the city.
Speaker 1: Most of this was unofficial stuff, and they might be
Speaker 1: livery drivers, but they might be doing this on their
Speaker 1: own time, not on company time, So essentially it was
Speaker 1: kind of like a black market for taxi services. And
Speaker 1: Camp found that many of the drivers were reliable and
Speaker 1: friendly and they weren't overcharging him, so he began to
Speaker 1: collect phone numbers of the drivers he liked so that
Speaker 1: he could use them instead of the official taxi service,
Speaker 1: and that led Camp to envision an app that would
Speaker 1: allow you to hail a ride at any time. It
Speaker 1: would also keep you informed of where your driver was,
Speaker 1: how long it would take the car to reach you,
Speaker 1: and when you could expect to arrive at your destination.
Speaker 1: Now this was all just in the concept phase, but
Speaker 1: sometime in early two thousand and eight, Camp wrote down
Speaker 1: an idea for the services name. He called it Uber,
Speaker 1: but he actually put an umble out over the you,
Speaker 1: which I, I guess means you would call it Uber anyway.
Speaker 1: Camp decided he would call the service uber Cab. He
Speaker 1: registered uber cab dot com in August two thousand, eight
Speaker 1: months before he would have that snowy meeting with Clanic
Speaker 1: in Paris. Now that same summer, Apple had launched the
Speaker 1: App Store for iPhones, which opened up the opportunity to
Speaker 1: create a smartphone app that could do exactly what Camp
Speaker 1: had been imagining. So that things were falling into place.
Speaker 1: On the other side of the equation where the drivers,
Speaker 1: Camp had figured out that a lot of those drivers
Speaker 1: were spending a huge amount of time not transporting anyone
Speaker 1: at all, They were just waiting for a potential fair,
Speaker 1: maybe at an airport or at out front of a hotel.
Speaker 1: They would just park in these areas and wait, which
Speaker 1: was wasted time. Camp knew that the driver's side of
Speaker 1: such an app could help them maximize their time and
Speaker 1: their fares, which meant everyone would benefit. Cars would be
Speaker 1: able to move throughout the city going to where they
Speaker 1: were needed, and drivers would have less downtime and therefore
Speaker 1: make more money while they were actually working for this
Speaker 1: app service. Camp registered uber Cab as a limited liability
Speaker 1: company on November two thousand and eight, still a month
Speaker 1: before he has that meeting in Paris. He was trying
Speaker 1: to decide if it would make sense to purchase several
Speaker 1: cars so that a small group of people he knew
Speaker 1: could become the first drivers in the service. He talked
Speaker 1: of an engineer named Oscar Salazar about developing the app
Speaker 1: side of the business. Now, Salazar was in the United
Speaker 1: States on a student visa, and as such he could
Speaker 1: not accept cash as payments, so instead Camp offered Salazar
Speaker 1: some ownership of the company. If it paid off, Salazar
Speaker 1: would make a profit. As it turned out, Salazar would
Speaker 1: make hundreds of millions of dollars. As for Camp, he
Speaker 1: took a little trip to Paris in December two thousand eight, where,
Speaker 1: through a mutual friend, he was put into contact with
Speaker 1: a certain Travis Kellenic. And while the story goes that
Speaker 1: the two started coming up with Uber while trying to
Speaker 1: get a cab on that snowy Parisian night, the truth
Speaker 1: of the matter is that Camp and Kalanic had been
Speaker 1: talking about it all week, and you had two different
Speaker 1: arguments here. Kalin Nick wanted to create a startup that
Speaker 1: was a lot like what Airbnb would turn into. He
Speaker 1: was thinking of a sort of a luxury apartment kind
Speaker 1: of business that you could book using an app, whereas
Speaker 1: Camp was advocating for the idea that would become Uber.
Speaker 1: And eventually they decided to go with Camp's idea. So
Speaker 1: what happens next, Well, I'll tell you, but first let's
Speaker 1: take a quick break to thank our sponsor. So Clinic
Speaker 1: and Camp get to talking at LOWBB in Paris and
Speaker 1: they decided to work together on Camp's Uber cab idea. Immediately,
Speaker 1: the two founders were at a disagreement, so Camp wanted
Speaker 1: the business to purchase several Mercedes luxury cars and own
Speaker 1: the cars outright and just hire the drivers. Clinic felt
Speaker 1: that this was a mistake and that the business should
Speaker 1: instead rely on drivers supplying their own cars in return
Speaker 1: for access to the app, and eventually Clinic convinced Camp
Speaker 1: to try it his way, and Camp backed off of
Speaker 1: making the purchase. At the beginning, uber Cab focused on
Speaker 1: contacting limo drivers only. It was a black car service,
Speaker 1: so a bit posh and definitely not something that relied
Speaker 1: on the average automobile. That would come a couple of
Speaker 1: years later. Camp got to work with Oscar Salazar, the
Speaker 1: engineer who was working on the promise of equity in
Speaker 1: the company, and they started to build out the uber
Speaker 1: Cab app for real zs. He also reached out to
Speaker 1: a friend of his named Conrad Wheland. Now, Wheland had
Speaker 1: worked for a Canadian company called excel Aware, and he
Speaker 1: had cashed out of that and he wasn't exactly looking
Speaker 1: for a new job at the time, but Camp called
Speaker 1: him up, or he called up Camp, and Camp was
Speaker 1: able to convince him to come on over and join
Speaker 1: the uber Cab team as the first official software engineer
Speaker 1: for the company. Now in a piece in Fortune, Whelan
Speaker 1: revealed that when he joined the Uber Cab apps development
Speaker 1: it was in its earliest stages. It allowed a user
Speaker 1: to order a car, but there was no link to
Speaker 1: create an account or associate a payment method with the service,
Speaker 1: so you would have to pay in some other method. Now,
Speaker 1: this was all in the development phase. Nothing was rolled
Speaker 1: out to the public at this stage, but it was
Speaker 1: still pretty primitive. Wheland got to work building out the
Speaker 1: various aspects of the app that would allow you to
Speaker 1: create an account and associate a credit card or PayPal
Speaker 1: account with it, so that that way you could pay
Speaker 1: for everything seamlessly. It was an idea that would appeal
Speaker 1: both to writers and to drivers, and he also wanted
Speaker 1: to guarantee that Uber would get a cut of the action.
Speaker 1: You had to have some sort of way for the
Speaker 1: company to earn some money from every transaction. Whelan also
Speaker 1: worked on creating algorithms for the dispatch side of the service.
Speaker 1: So when you look at what Uber does from a
Speaker 1: macro level, it's pretty fascinating. On the one hand, it's
Speaker 1: an app that allows you to send out a message
Speaker 1: to nearby drivers, and that message essentially says, I need
Speaker 1: a car to drive me somewhere the app connects to
Speaker 1: an account and payment method so that no cash is
Speaker 1: needed to change hands, which is pretty useful as more
Speaker 1: and more people are going cashless in their day to
Speaker 1: day lives. But on the other side of that app
Speaker 1: is the management system that decides things such as which
Speaker 1: drivers will get contacted for specific jobs. So it's both
Speaker 1: proximity based and takes into account what sort of service
Speaker 1: is being requested and whether or not the Uber drivers
Speaker 1: in the area are currently engaged in another job. So
Speaker 1: the goal on the corporate side of things is to
Speaker 1: do two things. Cut down on the idle time a
Speaker 1: driver experiences between dropping someone off and picking up the
Speaker 1: next fair because whenever they're idle, they're not making money
Speaker 1: for themselves or for the company. And the second thing
Speaker 1: is to cut down the wait time for someone who
Speaker 1: needs to get a ride, because if the wait times
Speaker 1: are really crazy, no one's going to use your service.
Speaker 1: Wheeland worked on that technology to improve the experience for
Speaker 1: both sides, both drivers and riders. Now, according to that
Speaker 1: same piece and Fortune, Uber's second engineer are was a
Speaker 1: guy named Ryan McKillen who found things in a pretty
Speaker 1: unusual state for a startup in San Francisco. At that time,
Speaker 1: Uber was using a small space in the office of
Speaker 1: another company called Zozie. The story of Zozie is also
Speaker 1: filled with lots of ups and downs and tons of drama.
Speaker 1: It was acquired in seen by another company called Peak. Anyway,
Speaker 1: that's a story for another time. The important thing here
Speaker 1: is that this is before Uber having any sort of
Speaker 1: headquarters of its very own. It was just cohabitating with
Speaker 1: another company. So McKillen comes in and he walks into
Speaker 1: the conference room that's serving as Uber's offices and sees
Speaker 1: on the table there that there's a bunch of books
Speaker 1: and most of them are on coding and database management
Speaker 1: and computer science, but none of them looked like they
Speaker 1: had really been used very much. But there was one
Speaker 1: book that obviously had seen a lot of use, and
Speaker 1: so he takes a look at it and he sees
Speaker 1: that it's a Spanish to English dictionary. So why was
Speaker 1: it there? Because Salazar, who had done that initial coding
Speaker 1: on the app, was from Mexico, and he coded in
Speaker 1: his native language. And so the engineers who were building
Speaker 1: out the early functionality of Uber, we're doing so on
Speaker 1: a foundation written in another language. So they needed that
Speaker 1: dictionary there on top of all the coding books. Now.
Speaker 1: In August two thousand nine, Garrett Camp and Travis Kellanic
Speaker 1: invested two thousand dollars of their own money into the company,
Speaker 1: and at this time, Uber the service still didn't exist.
Speaker 1: The company existed, but they hadn't had anything that was
Speaker 1: public facing yet, so there were rumors about it. There
Speaker 1: was a lot of buzz in the tech space, but
Speaker 1: there was no way for you to actually use the
Speaker 1: service yet. The engineers had to build out the technology
Speaker 1: that would make everything work. So while Uber the company
Speaker 1: was rolling along in two thousand nine, it would not
Speaker 1: be until mid that Uber would officially start taking customers
Speaker 1: for rides in San Francisco, and it wouldn't be until
Speaker 1: October twenty that the company would receive a round of
Speaker 1: funding from angel investors. There would be twenty nine angel
Speaker 1: investors in that round and they contributed a total of
Speaker 1: one point three million dollars of first round capital. Sticking
Speaker 1: with investments for a second before we get back on
Speaker 1: track with Uber rolling out its first rides. The company
Speaker 1: has had several rounds of funding and debt financing throughout
Speaker 1: its history. By August, Uber had raised more than four
Speaker 1: hundred million dollars in various rounds of funding. The most
Speaker 1: recent round, which happened in December, was for one point
Speaker 1: three billion dollars. So if you total it all up,
Speaker 1: the company has raised at least ten point seven billion
Speaker 1: dollars in various series funding rounds and private equity rounds.
Speaker 1: There are other ones that we could talk about two,
Speaker 1: but the point is it was a crapload of money. Okay.
Speaker 1: Back to those early days of Uber, in Jenue wary ten,
Speaker 1: Travis Clanic needed to find someone to oversee the business
Speaker 1: side of Uber, so he sent out a tweet, because
Speaker 1: that's how things work at these levels. I guess the
Speaker 1: tweet read looking for that's the number for darn Twitter
Speaker 1: limitations entrepreneurial product manager slash business developer killer for a
Speaker 1: location based service pre launch, big equity, big peeps involved
Speaker 1: any tips wells. Tweet got a response from a guy
Speaker 1: named Ryan Graves. Graves would be brought on to act
Speaker 1: as the general manager for Uber before eventually becoming the
Speaker 1: CEO of the company. For a short while, he took
Speaker 1: over that role from Clanic, but then in December he
Speaker 1: would step aside and Clanic would become CEO again. Graves
Speaker 1: would also serve as present for a while before taking
Speaker 1: on the role of senior vice president of Global Operations.
Speaker 1: His first day on the job was March first. According
Speaker 1: to Klanic, I found some sources that would refer to
Speaker 1: him as quote the first Uber employee end quote. But
Speaker 1: based off my knowledge of the engineers, that seems a
Speaker 1: tiny bit misleading. But maybe there's some particulars I'm not
Speaker 1: aware of. Actually, there are probably many particulars I'm not
Speaker 1: aware of. Anyway. Graves would stay on with Uber until seventeen,
Speaker 1: when he would step down from the company, and I'll
Speaker 1: talk about that more in the next episode. In the
Speaker 1: summer of Uber still known as Uber Cab at this point,
Speaker 1: launched its app in the iPhone store and began connecting
Speaker 1: drivers with writers, but only in San Francisco. It was
Speaker 1: the only city where they were active at that time. Now,
Speaker 1: when they did this, a ride cost about one and
Speaker 1: a half times more than it would cost in a cab,
Speaker 1: But the whole point was it was really hard to
Speaker 1: get a cab in San Francisco, depending upon the time
Speaker 1: and place. Uber, on the other hand, was user friendly
Speaker 1: and gave writers a sense of what was actually happening
Speaker 1: when they were looking for a ride, unless like the
Speaker 1: less tech savvy cab services that were operating in San
Speaker 1: Francisco at that time. Now I've covered how this works
Speaker 1: a little bit just in the earlier section. The app
Speaker 1: consults your phones location data, such as your GPS coordinates,
Speaker 1: and uses that to help guide drivers to your location.
Speaker 1: A later building the app would add in the feature
Speaker 1: where you could designate a specific pickup spot. You would
Speaker 1: put a little virtual pin on a map that would
Speaker 1: designate where you wanted the driver to meet you, and
Speaker 1: once a driver accepts a job, the writer will see
Speaker 1: the driver's car appear on the map with an estimated
Speaker 1: arrival time for pickups. So you can actually follow the
Speaker 1: little graphic and watch the drivers slowly make their way
Speaker 1: to your location, which I have done on numerous occasions.
Speaker 1: The initial response from customers in San Francisco was largely positive,
Speaker 1: but a couple of big organizations were not nearly as
Speaker 1: happy be about Uber Cabs operations. They were the San
Speaker 1: Francisco Metro Transit Authority and the Public Utilities Commission of California.
Speaker 1: The two sent a message to Uber Cab, which was
Speaker 1: cease and desist all ride hailing services or face hefty fines.
Speaker 1: Uber cabs response was, quote, we believe that the service
Speaker 1: we offer is in compliance with the cited regulations end quote.
Speaker 1: The taxi business in San Francisco was in an uproar
Speaker 1: about Uber Cab, and this would become a familiar story
Speaker 1: to the company over the following years. In fact, it
Speaker 1: would play out repeatedly in city after city around the world.
Speaker 1: Sometimes Uber would make a quick, solid case for this
Speaker 1: business and the taxi cab companies had to grit their
Speaker 1: teeth and just accept it. But other times things went
Speaker 1: a little further, and I'll cover a few of those
Speaker 1: in the next episode. The taxi cab companies said their
Speaker 1: concerns were prompted by the following issues. Uber Cab was
Speaker 1: operating much like a cab company, but did not have
Speaker 1: a taxi license. Its cars did not have the insurance
Speaker 1: equivalent to taxis insurance. Uber cab would possibly threatened taxi
Speaker 1: dispatchers ways of earning a living, and limos in the
Speaker 1: United States have to have a pre book period, usually
Speaker 1: about an hour in advance by law, While only licensed
Speaker 1: taxis would be allowed to pick someone up right away
Speaker 1: for example, when they were being hailed. However, Uber Cab
Speaker 1: was operating as a limousine service but behaving like a
Speaker 1: taxi service and without a taxi license. Now, one of
Speaker 1: uber CAB's responses to this complaint was to drop cab
Speaker 1: from its name, so it became Uber, the one we
Speaker 1: talked about today. What's in the name? Though a cab
Speaker 1: by any other name would smell as well, Let's let's
Speaker 1: not think about what a cab may or may not
Speaker 1: smell like. The point is that changing the company's name,
Speaker 1: while a prudent step, might not have been seen as
Speaker 1: significant enough to escape legal troubles. So what did the
Speaker 1: company do in the face of this resistance, Well, it
Speaker 1: kept going as if nothing had happened. Ryan Graves, who
Speaker 1: was the CEO at that time, said that the company
Speaker 1: was working with s F M t A to fix
Speaker 1: the problems that the organization said Uber was causing, and
Speaker 1: the taxi cab industry was still quite upset. But why
Speaker 1: is that. Well, to understand the taxicab industry's concerns, it
Speaker 1: helps to know how they work in general, as well
Speaker 1: as get a kind of brief overview of the history
Speaker 1: of regulations in that industry. So we'll get to that
Speaker 1: in just a moment, but first let's take another quick
Speaker 1: break to thank our sponsor of King. So you got
Speaker 1: the taxicab industry. Clearly, Uber services and all ride hailing
Speaker 1: services for that matter, pose a competitive threat to establish
Speaker 1: taxicab companies. But competition is healthy, right, I mean it
Speaker 1: pushes companies to create more compelling products and are for
Speaker 1: more competitive rates than their rivals, which ultimately benefits the consumer. Right,
Speaker 1: So what exactly is the issue? Well, one big issue
Speaker 1: is that taxicab drivers have specific rules they have to
Speaker 1: follow taxicab companies to Actually, these are rules that Uber
Speaker 1: drivers didn't necessarily need to observe. So you could argue
Speaker 1: that Uber is more convenient than a taxi, but the
Speaker 1: taxi industry said that was largely because Uber could ignore
Speaker 1: the protections that were in place to keep the taxicab
Speaker 1: industry from causing big problems. The history of taxicab regulation
Speaker 1: dates back in the United States to the Great Depression.
Speaker 1: During that era, many people found themselves out of work,
Speaker 1: so some people in big cities like New York City
Speaker 1: became entrepreneurs by offering unlicensed taxi cab service. This led
Speaker 1: to an increase in accidents with more drivers on the
Speaker 1: roads competing for fairs, and that in turn had a
Speaker 1: ripple effect and created new traffic woes which impacted everybody.
Speaker 1: And then there was the fact that many people didn't
Speaker 1: have very good insurance coverage, which minimustate could become very costly.
Speaker 1: It could be difficult to figure out who could pay
Speaker 1: for what if someone was injured in the process. That
Speaker 1: made things even more difficult to figure out, and this
Speaker 1: affected people who are already in a vulnerable financial position.
Speaker 1: Cities around the United States responded by passing local laws
Speaker 1: that were intended to improve safety and assign liability in
Speaker 1: the event of an accident. They also looked to regulate
Speaker 1: taxi cabs to make certain qualified drivers were the ones
Speaker 1: picking people up and not just anyone who happens to
Speaker 1: have access to a vehicle. Now. In the seventies and eighties,
Speaker 1: some ease eased off on regulations because it was politically
Speaker 1: advantageous to do so. The word regulation has often been
Speaker 1: associated with negative consequences, such as stifling innovation and investment
Speaker 1: in infrastructure. But when those cities eased up on regulations,
Speaker 1: several things happened that made those cities question their decisions,
Speaker 1: and those things probably will not surprise you. For one thing,
Speaker 1: taxi prices went up. For another, without the regulations requiring
Speaker 1: vehicles meet certain standards, the quality of vehicles decreased and
Speaker 1: the average age of vehicles increased. Before there was a
Speaker 1: limit on how old a car could be and still
Speaker 1: be used for taxi cab service. With those regulations lifted,
Speaker 1: suddenly you could use any old vehicle, didn't matter how
Speaker 1: decrepit it was or badly maintained. There were less incentives
Speaker 1: to keep cars in good shape and to phase out
Speaker 1: older cars. Fares would become really complicated, with lots of
Speaker 1: different variables that could affect the price, and most of
Speaker 1: them were so convoluted that the average writer had no
Speaker 1: clue how much a cab fair was going to be
Speaker 1: in any given situation. Driver quality also would decrease because
Speaker 1: those regulations no longer meant that you had to meet
Speaker 1: certain criteria, and accidents increased. So in short, taxis were
Speaker 1: causing a big mess, the same mess that we saw
Speaker 1: in the Great Depression. So, of course, most of these
Speaker 1: cities started to enact new regulations to address these problems,
Speaker 1: saying whoop seedes are bad. Turns out, regulations in this
Speaker 1: sense are totally realistic and important, and they are good
Speaker 1: for the protection of not just the people but the
Speaker 1: cities themselves, and therefore taxi cab companies had to follow
Speaker 1: these rules in order to be licensed businesses. Part of
Speaker 1: those regulations included a cap on how many drivers a
Speaker 1: taxi company can employ at any given time. Now you
Speaker 1: get in with ride hailing services like Uber, and suddenly
Speaker 1: you've got a service as doing the same thing that
Speaker 1: tax cabs do, picking up people and taking them to
Speaker 1: a destination for a fee. But it was largely unregulated,
Speaker 1: so no wonder there's been stiff resistance from the taxi
Speaker 1: industry in various cities around the world. One regulation that
Speaker 1: many cities require from taxi cab companies is that all
Speaker 1: drivers submit fingerprint based background checks. Now this is not universal,
Speaker 1: but in many cities in the United States it is
Speaker 1: a prerequisite. These checks are administered, typically by the respective
Speaker 1: state governments. Uber and other right hailing services claim they
Speaker 1: do extensive background checks on perspective drivers themselves, and that
Speaker 1: those background checks negate the need to file paperwork like
Speaker 1: that with state agencies. They don't need to do this
Speaker 1: fingerprint background check that taxi cab companies do, and some
Speaker 1: cities have agreed to that exception. Others, such as Austin, Texas,
Speaker 1: stood their ground. They held a referendum and the voters
Speaker 1: said no, we want fingerprint fingerprint background checks to happen
Speaker 1: for right hailing services. And they said that this would
Speaker 1: otherwise create an unfair advantage for right hailing services over
Speaker 1: other companies. And that's why services like Uber and Left
Speaker 1: left Austin, Texas. But why put up a resistance? Why
Speaker 1: would Uber or Lift or any right hailing companies say no,
Speaker 1: we don't want to do fingerprint background checks. Well, this
Speaker 1: comes down to a business reason more than a technological reason.
Speaker 1: Uber drivers are considered contract workers in most states, not
Speaker 1: employees of Uber. And this designation isn't just trivial. There
Speaker 1: are lots of tax issues, there are benefits that can
Speaker 1: come into play. There are a lot of things that
Speaker 1: could affect Uber's bottom line if their staff, if their
Speaker 1: drivers are considered employees rather than contract workers. So does
Speaker 1: that have to do with fingerprinting. Well, the i r
Speaker 1: S states that if a company exerts a certain amount
Speaker 1: of quote control end quote over those who work for it.
Speaker 1: Those people might be considered employees rather than contractors. So
Speaker 1: in other words, if Uber can boss you around, Uber
Speaker 1: is your boss, and there are certain obligations the company
Speaker 1: has to meet if that's your relationship. Uber and other
Speaker 1: ride hailing services don't want to go down that path
Speaker 1: because it would mean a complete overhaul of their business model.
Speaker 1: So there was this fear that if Uber were to
Speaker 1: require fingerprinting, then the I R s would say that
Speaker 1: seems like you have some control over your drivers, and
Speaker 1: they could mean that drivers if they ever had a
Speaker 1: labor dispute with Uber, could claim that they are employees,
Speaker 1: not contractors, and therefore they have other protections in place.
Speaker 1: The whole matter would likely have to be settled by
Speaker 1: a court. But it all boils down to the fact
Speaker 1: that Uber and Lift and other right hailing services would
Speaker 1: much prefer to avoid that problem entirely, and thus they
Speaker 1: resist any move to our choir companies to fingerprint their drivers. Unfortunately,
Speaker 1: that opens up the possibility that the drivers that the
Speaker 1: companies do employ could be problematic citizens, so in some
Speaker 1: cases they might have criminal backgrounds. Typically, a new company
Speaker 1: will partner with a third party provider to conduct background
Speaker 1: checks on staff, and sometimes those background checks are cursory
Speaker 1: and could easily miss important information. And this is not
Speaker 1: just a hypothetical situation. In two thousand seventeen, state regulators
Speaker 1: in Colorado went after Uber, saying that the company had
Speaker 1: hired more than fifty drivers with criminal records or serious
Speaker 1: vehicle offenses in their backgrounds. The regulators find Uber eight
Speaker 1: point nine million dollars. Now, according to the regulators, it
Speaker 1: wasn't just that Uber had allowed these people to drive
Speaker 1: for the service, It was also that the company was
Speaker 1: aware of their backgrounds. New whose Week quoted Doug Dean,
Speaker 1: director of Colorado's Public Utilities Commission, and he said, we
Speaker 1: have determined that Uber had background check information that should
Speaker 1: have disqualified these drivers under the law, but they were
Speaker 1: allowed to drive anyway. These actions put the safety of
Speaker 1: passengers in extreme jeopardy. Now, according to that same Newsweek article,
Speaker 1: the list of drivers included twelve who had felony offenses
Speaker 1: in their background. There were three who had drunk driving
Speaker 1: convictions of recent nature, and there were a whopping sixty
Speaker 1: three drivers on Uber's payroll in Colorado who had issues
Speaker 1: with their driver's licenses. Some of them might have had
Speaker 1: suspended license or driving with an expired license, that kind
Speaker 1: of thing. Uber's response was that this was all just
Speaker 1: a quote process error in the quote and not really
Speaker 1: as big a deal as the story made it out
Speaker 1: to be. That Rather, Uber's process was just in consistent
Speaker 1: with Colorado's regulations for ride sharing, and this was all
Speaker 1: an honest misunderstanding that could be adjusted by just changing
Speaker 1: up that process a little bit. If that is the case,
Speaker 1: it's not the only time it's ever happened. Uber had
Speaker 1: earlier been accused of hiring drivers with criminal records in
Speaker 1: Los Angeles and San Francisco, and there have been numerous
Speaker 1: stories of drivers who made passengers uncomfortable or outright scared
Speaker 1: during their experiences. But we should remember these problem drivers
Speaker 1: are outliers. Most of the people driving for Uber and
Speaker 1: other services like it do not have criminal backgrounds. They
Speaker 1: are responsible adults. They're just doing a job. The instances
Speaker 1: of Uber falling short of expectations should not reflect on
Speaker 1: all the people who work hard for the service. Rather,
Speaker 1: I would say this is a cautionary tale for investors
Speaker 1: and customers, and it points out the issues that the
Speaker 1: company should work to resolve rather than just attempt to
Speaker 1: explain away. Now getting back to Uber's history, By two
Speaker 1: thousand eleven, the company was looking to expand in numerous cities.
Speaker 1: One big one, New York City, was a huge target.
Speaker 1: Uber started operating there in May two thousand eleven. To
Speaker 1: say things when smoothly would be incorrect. In other words,
Speaker 1: Uber's operations in New York City have been really rocky,
Speaker 1: but it didn't stop the company from expanding in New
Speaker 1: York City and beyond. By the end of two thousand eleven,
Speaker 1: Uber tested out service in its first country outside the
Speaker 1: United States. And how fitting should it be that that
Speaker 1: first place where Uber opened up operations outside of the
Speaker 1: United States was in France, in Paris. For it to
Speaker 1: be really specific, and as we learned, that city is
Speaker 1: the city of Uber's origin according to the company's own
Speaker 1: official history, if you ignore all the stuff that Camp
Speaker 1: did before he went to the web. But yeah, according
Speaker 1: to the official Uber story, Paris, France is where the
Speaker 1: whole idea got started. Uber would face much more resistance
Speaker 1: in multiple markets, including outright protests. In fact, in France
Speaker 1: there were some extremely violent ones. I'll talk a bit
Speaker 1: about some of those in our next episode, but my
Speaker 1: real focus for part two of the Uber story is
Speaker 1: going to be two thousand seventeen. Now, a lot did
Speaker 1: happen between two thousand and eleven and two thousand seventeen,
Speaker 1: but a lot of it can be summed up with
Speaker 1: Uber made a bold move into a market, face resistance,
Speaker 1: and either persisted or bailed. There are a few other
Speaker 1: things will need to look at. There's some battles between
Speaker 1: Uber and the competitor Lift that got really nasty and
Speaker 1: involved some seriously shady behavior allegedly on both sides. But
Speaker 1: as I said, most of the episode is going to
Speaker 1: focus on the chaotic and tumultuous events of two thousand
Speaker 1: seventeen and how Uber changed as a result of those events.
Speaker 1: In the meantime, if you guys have suggestions for future
Speaker 1: episodes of tech Stuff, maybe there's a company you would
Speaker 1: like me to cover, or specific technology you would like
Speaker 1: to learn more about, or a guest I should interview
Speaker 1: on the show or have as a guest co host
Speaker 1: for an episode. Let me know your thoughts. You can
Speaker 1: send me a message. The email address is tech Stuff
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Speaker 1: That's how sausages made. All right. That wraps up this episode.
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