Pando

“Money has karma”: Is the tech world’s standing ovation for Dara Khosrowshahi premature?

By Sarah Lacy , written on August 29, 2017

From The Travis Shrugged Desk

We’ve seen a full 24-hour media cycle now on the news that Dara Khosrowshahi is Uber’s presumed new CEO.

It’s gone like this:

WHO? -> WHAT HAPPENED TO PEOPLE WE HEARD OF?-> AMAZING CHOICE -> Aw, Uber was never so bad, it just needed change at the top!

And that’s not a surprise. Most journalism centers on access, both on a macro level (conference business/TV appearances) but also on a micro-level of getting leaks and scoops.

There is a reason that, say, UN Women took a hard line on Uber because of its toxic behavior years before Re/Code or even The New York Times. Indeed, we’ve argued for the better part of a year, that the best thing for Travis Kalanick’s own stake in the company was to step down because the change in narrative alone would shift in the press in Uber’s favor. A line would be drawn in the sand. Anything that comes out post-Kalanick, whether Waymo, another rape victim smear attempt, or otherwise, could all be blamed on a previous regime. Business reporters love to give giant corporations nothing more than the benefit of the doubt. Just like the American public with teary-eyed celebrities or politicians.

And so expect more of this. Khosrowshahi is here, and let’s all give him a chance to do his job. The past is the past! Forget the 1,000 people who wanted to have Kalanick back and the board in open turmoil over what his role should be! Indeed, people were pointing out on Twitter yesterday that he handled Barry Diller in his job at Expedia. Is Travis Kalanick more prickly?

Who knows or cares? It’s a false analogy. Barry Diller did not see Khosrowshahi as a threat to the only thing that’s given him fame, billions, magazine covers, and meaning. He did not see Khosrowshahi as the thing standing between him and his rightful “Steve Jobs-esque” legacy.

The question isn’t “Can Khosrowshahi handle a board member with sharp elbows?” It’s “Can he handle a founder who still commands the loyalty of more than 1,000 members of the team and much of the board who believes he has a right to name even more independent board members and is locked in a bitter legal battle with the other board members and absolutely, fundamentally, without a doubt wants your fucking job?”

Many people who’ve managed a turnaround of an ailing public Web asset (OK, admittedly, there aren’t many of those, but still…) lack that skill set. A lot of people don’t want their jobs.

Kalanick for his part, acting to type, chose Monday to intensify his fight with Benchmark, filing with the court to move the case to arbitration, calling Benchmark’s suit a “personal attack.”  So much for the CEO who prided himself on smiling at rivals and smugly saying, “Bring it.” It’s more like “Ok, if you have to bring it, than please do so behind closed doors…”

The mounting battle has lead some reporters to wonder why Khosrowshahi would have taken a job amid such board turmoil. If people thought someone being hired to take Kalanick’s place -- and the choice being celebrated by the tech world-- would make Kalanick happy, well…. You don’t understand what this board fight is actually about.

Up until recently everyone on the board saw Kalanick and Uber as one in the same. Benchmark no longer does. Kalanick (and seemingly some other board loyalists) still do. Khosrowshahi’s new job does nothing to change that fundamental disconnect that will end in a juicy lawsuit, total dysfunction or one party winning.

As a side note: As of press time, Uber still hadn’t yet confirmed the news, and it was not on the agenda for today’s Uber all-hands. The public excuse that Expedia is a publicly traded company seems plausible enough. But this is Uber-- a company that has publicly floated name after name during this process. So who knows what the real back-story is. Either way Khosrowshahi’s little known name has so far gotten the most universal applause.

I would expect Benchmark’s Bill Gurley to be cheering the loudest, standing and really whooping it up, for all the reasons Ben Thompson articulated best here. I wouldn’t be surprised if he and his crew were manning the phones to whip other journalists up “off the record” as well. This is a CEO after Gurley’s own heart if I’ve ever seen one. Someone who has turned around a publicly traded asset under the glare of the public markets, someone unafraid to take on massive challenges while still providing liquidity to investors. Someone who doesn’t seem to court drama or make everything about his ego.

Someone who has been a CFO, FFS. Uber hasn’t had one for some time, despite breaking all known private fundraising records in Silicon Valley and having little idea how much it was paying in driver bonuses in a given week, according to The Information.

Indeed, we argued the day Kalanick was ousted that the best thing Uber could do was not hire some big brand name tech visionary, but rather a boring, operational, effective expert, preferably having held a CEO job in the logistics or transportation space. Credit to the dysfunctional board, that appears to be exactly what the company has done. And it’s managed to hire someone that excited the tech world, but someone who didn’t carry the kind of baggage that a Meg Whitman or a Marissa Mayer or a Tim Armstrong would have.

I don’t know Khosrowshahi’s track record when it comes to treatment of women, or rape victims, or threatening critics or engaging in potentially “criminal” tactics to silence critics. The fact that no one in the press seems to is one reason they’ve already so effectively already shifted the news cycle.

On the one hand, pretending Kalanick alone managed to build a toxic culture is silly. Thinking that the culture problem is solved by Kalanick “merely” running the board and serving as Khosrowshahi’s boss is even sillier. And the silliest view yet may be the idea that anything at Expedia prepared Khosrowshahi for a major trade theft lawsuit and board fight roiling a company that should be in its pre-IPO prime.

There is still much more we need to see to know what this move means and whether Uber is changing. For instance, it’s hard to know how Khosrowshahi will grapple with Uber’s free-spending culture of using money as a weapon, maximizing valuations with any and all takers, pushing off the mounting problems tied in with this strategy for another day.

The reasons Khosrowshahi’s fans seem to laud his appointment is based on his comparatively sober approach to operations. But many of those same people, applaud Uber’s dominant market position, which came from nothing approaching operational sobriety.

It will be a hard needle to thread in pitching future backers, not to mention employees: If you applaud Kalanick’s moxy in having disrupted industries, played dirty with competitors, and spent like it was 1999… well, then why are you so jazzed about Khosrowshahi? And if you are hoping for a new more sober Uber… will that have implications on culture, valuation, strategy and its market share? Will he do something bold like pull back dramatically on Uber’s so far lousy attempt at “world domination”?

These are real questions I’d need to get some answers to before joining in the applause.

Additionally, what were his motives for taking a job at a company with a track record of treating drivers, women, critics, even rape victims so poorly? It may not portend much confidence in his depth of understanding-- and concern-- over just how toxic the situation is. Does he get just how impossible and unprecedented it would be for someone to truly change a culture this rotten? Or is he in the camp of “it doesn’t need to change”? His first words uttered on these topics will set a tone internally and externally.

Bozama Saint John’s blase remarks that Uber hadn’t yet crafted a brand hardly inspired confidence. Nor did remarks like these: "Quite frankly, what has happened in the past is nothing that I can control.”

Khosrowshahi is going to have to do much much better.

One thing seems likely and another seems clear. The “likely” is that this is another strong voice that will side with the Benchmark worldview. What’s more: If Khosrowshahi succeeds, Benchmark doesn’t look like the “anti-founder” firm Kalanick and Shervin Pishevar have been trying to paint. It looks like the only board member that (belatedly) decided to take action in a management crisis. It’s a win for any VC who has wanted to oust a founder, but felt it politically couldn’t. (Thank Travis Kalanick’s extreme dysfunction for that one, founders, and not so much Benchmark...)

What seems clear: Uber and Kalanick are now separate whether Kalanick accepts it or not. If Khosrowshahi is as good as people say, and Uber has always been as transformative a company as everyone says, we should see changes soon.

But none of those immediate changes will include that Waymo lawsuit, the DOJ investigation, or that Benchmark/Kalanick board fight going away anytime soon.

It’s impossible to miss the irony in the sad, wounded projection of Kalanick and his allies. The allegations that Benchmark is trying to smear a man who hired professional oppo researchers to aggressively go after his critics, even threatening to go after their families. That he’s trying to force both Waymo and Benchmark into arbitration and take this fight out of public view. Kalanick: A man who was said to relish public fights with large incumbents.

I’m reminded of something Naval Ravikant of AngelList (one of scores of Uber investors, by the way) said about the short term gain, long term loss of raising money at terms that fuck over everyone but yourself.

“Money has karma too. If you treat it badly it will treat you badly. The wheel always comes around I feel. You have to be balanced about it... a good rule of thumb in negotiations is, negotiate hard, get what you're fairly due, and in the end, give something back. Because you have to work together for the long term. I actually now firmly believe that everything you do in life, all the returns in life come from compound interest. If comes from the length and strength of your relationship.”

If Ravikant is right, that karma is only now becoming due for Uber. And Khosrowshahi has inherited it.