Silicon Valley’s tech denizens fancy themselves as above reproach liberal do-gooders, disrupting antiquated business models and government regulations for the betterment of genderfluidkind, a term I imagine they’d prefer to “mankind.” Donald Trump is among the greatest things to happen to the Valley since the creation of the microchip because tech leaders can declare their moral superiority denouncing the president and his policies while simultaneously benefitting from them.
Uber CEO Dara Khosrowshahi is a poster boy for the hypocrisy I’m talking about.
At a business summit in New Delhi last year, Khosrowshahi received thunderous applause denouncing Trump for destroying the American dream. “I’m incredibly lucky to have emigrated to the United States at a time when the U.S. was welcoming,” said Khosrowshahi, who was nine when his family emigrated to the U.S. from Iran. “The American Dream is the single most incredible brand in the world. Everyone knows what the American Dream means. I’m worried that with the attitudes that the (Trump) Administration has about immigration etc., that wonderful brand is getting ruined.”
It’s admirable that a multimillionaire corporate executive is plagued with so much angst about the less fortunate who arrive on American shores every year. Let’s take a look at what Uber and Khosrowshahi have done to help them.
Driving a taxi in San Francisco was once quite lucrative. The city had a requirement that anyone who owned a medallion had to drive a taxi for a minimum number of hours in order to keep it. This prevented speculators like Trump’s former lawyer Michael Cohen buying up medallions, creating big fleets, and then charging exorbitant fees for drivers looking to drive a taxi. San Francisco’s taxi fare rates consistently ranked among the highest in the country, and given that the metropolis is only 47 square miles, the city’s steep flag drop fee offered an additional bonanza (I drove a taxi in college and know first-hand that a driver makes considerably more on short rides than long hauls).
Uber blew up San Francisco’s taxi industry, but the company’s drivers aren’t faring nearly as well as the taxi hacks they replaced. Uber drivers say they make less than $10 an hour after expenses, which isn’t remotely enough to afford a rental in America’s priciest city let alone enjoy an appetizer at one of its organic farm-to-table restaurants. Not surprisingly, a growing number of Uber drivers are homeless and sleep in their cars to make ends meet.
San Francisco’s homeless population has risen 30 percent since 2017 and some of the increase is attributable to Uber and Lyft drivers increasingly calling their cars their homes. The problem is so acute that the city has proposed opening a “safe” parking lot where people can sleep in their cars without fear of repercussions and get access to showers, bathrooms, and social services.
I’m not certain the percentage of Uber drivers who are immigrants in San Francisco, but in New York, where Uber drivers also are faring quite badly, nine out of 10 drivers are reportedly immigrants and approximately 54 percent are responsible for providing more than half of their family incomes. New York’s taxi drivers are overwhelmingly immigrants and there have been a rash of suicides among them because Uber’s entry into the Big Apple diminished the value of the medallions many of them worked years to afford. Buying those medallions was their “American Dream.”
What’s remarkable is the shakiness of Uber’s finances. The company last week reported a $5 billion loss in its most recent quarter and some experts speculate the company will never earn a profit. One quarter of Uber’s bookings are earned in just five cities – New York, Los Angeles, San Francisco, London, and São Paulo. And Uber’s business in Los Angeles and San Francisco could be in jeopardy.
A bill known as AB 5 sponsored by Assemblymember Lorena Gonzalez making its way through the California legislature that would put an end to the corporate scam of classifying workers as “independent contractors” to avoid paying salaries and benefits. Khosrowshahi is running scared. He and Lyft’s top two executives in June penned a joint op-ed in which they admitted the legislation “would pose a risk to our business” and lamely argued why AB 5 was bad for their drivers.
It’s surprising to me that its permissible for two competing companies to strategize about their business models and co-ordinate their lobbying messages without running afoul of antitrust laws. Advocates of AB 5 are financially outmuscled by the lobbying might of Uber and Lyft. Adding to the unfairness of the battle, Trump’s Labor Department, in a departure from Obama Administration policy, has declared Uber drivers independent contractors and prohibited them from unionization and collective bargaining.
Uber’s board hired Khosrowshahi in 2017 after turfing out hard charging founder Travis Kalanick, ostensibly because he sang a lousy corporate rendition of Kumbaya. Uber has floundered under Khosrowshahi’s leadership, losing market share to Lyft and the innovation knack the company enjoyed when Kalanick ran the place. I can’t imagine Kalanick teaming up with Lyft executives to discuss business challenges and penning a joint op-ed. He was laser focused on putting them out of business.
Khosrowshahi wasn’t hired to transform Uber into a great company. Rather, his mission was to gussy it up so its venture capital funders could quickly unload their money-losing venture on the public markets, a process known in less PC-correct times as “putting lipstick on a pig.” Khosrowshahi pulled it off, but not for the lip smacking $120 billion valuation Uber’s VC investors had envisioned.
Uber was taken public with a $82 billion valuation, and its stock is down about 10 percent since its $45-a-share IPO. The company reported a record $5.2 billion loss in its most recent quarter, and its growth has slowed.
So, if Uber might never make any money, its drivers aren’t making a living wage, and the company’s public stockholders have so far taken a loss on their investments, who is profiting from Uber’s creation?
One person is Khosrowshahi, who earned $45.3 million in 2018. Uber’s VC funders have profited handsomely. Underwriters who took Uber public have also done well, including Morgan Stanley, a firm whose lofty mission is “to mobilize capital to sustainable enterprises.” If Uber’s stock remains depressed, it’s likely some class action attorneys will manage to skim some money from the enterprise. And, of course, the middle class and wealthy have benefitted because Uber has reduced local transportation costs for those wanting to avoid mass transit.
It’s telling that after Uber went public, Khosrowshahi fired his COO and streamlined his marketing, communications, and policy teams after the IPO proceeds cleared the bank. “With the IPO behind us, I felt this was a good moment to simplify our org and set us up for the future,” Khosrowshahi said in a memo. I would have thought Uber had already been set up for the future when it went public.
The American Dream was predicated on the belief that America was a fair country and that if an immigrant worked hard, he or she could live a comfortable lifestyle unprecedented in human history. The dream was alive and well when Khosrowshahi arrived in America. He’s delusional if he thinks that Trump solely is responsible for killing it.