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Raz Godelnik headshot

How Arrogance Pushed Uber Out of San Francisco

By Raz Godelnik

On Wednesday I shared here my analysis of Uber’s business model, making the case why it can explain the company’s combative response to the California DMV -- which insisted Uber must obtain a permit for its testing of autonomous vehicles in the city. The headline was, "Why Uber Won’t Stop Testing Autonomous Cars in San Francisco."

A few hours later, Uber ended the testing of autonomous cars in the city.

As the New York Times reported, the company said: “We’re now looking at where we can redeploy these cars but remain 100 percent committed to California and will be redoubling our efforts to develop workable statewide rules.”

So, what happened? Did I get it wrong? Didn’t Uber read my thoughtful analysis?

I’m not sure about the latter. But I still think the analysis is accurate -- or, in other words, Uber really needs self-driving cars to sustain its business, and its conduct in this case is a manifestation of the different elements in its business model, from the creative destruction mindset to the shareholder primacy approach to value capture.

However, the one part I didn’t estimate correctly is Uber’s arrogance. In a way, perhaps I should revisit the model and change the ‘culture’ component from ‘Silicon Valley’ to ‘Silicon Valley/Hubris.' I already mentioned that Uber definitely subscribes to the Valley’s model – “taking the ‘don’t beg for permission, ask for forgiveness’ approach to the next level with its own “win-at-all-costs approach” and “always be hustling” mantra.” At the same time, in this case we see how Uber takes the hustling and win-at-all costs approach one step further to a “my way or no way at all” modus operandi.

After all, how would you explain that the company refused to reconsider its position and do what more than 20 companies testing autonomous driving in California did, i.e. apply for a permit? There didn’t seem to be a reason that the request would be denied, not to mention that Reuters reported: “DMV director Jean Shiomoto said in a letter sent to Uber on Wednesday that she would 'personally help to ensure an expedited review and approval process,' which she said can take less than three days." Three days, that’s all! And yet, Uber refused to do it.

Andrew Savitz wrote that “organizational culture is made up of three components: what you say, what you do and what you believe.” In Uber’s case, this is very clear: The company seems to believe that it's not like any other company and therefore should be treated differently – after all, even Time magazine wrote: “Uber is unlike anything the world has seen before.”

The way Uber communicated in the last week screamed arrogance – just look at the way Anthony Levandowski, who runs Uber’s autonomous car programs, explained the company’s approach: “You don’t need to get belts and suspenders or whatever else if you’re wearing a dress.” And actions? Well, Uber didn’t seem interested in reconsidering its position about applying for the permit, and it preferred to end the pilot program rather than to look for a compromise or -- God forbid -- admit the state could be right.

I believe that the company thought it could push back successfully in this case similarly to the way it managed to kill a bill in New York City last year that threatened to limit the number of Uber drivers in the city. That effort famously included the ‘De Blasio’s Uber’ feature suggesting wait time of up to 25 minutes to Uber rides if the bill will take effect. What Uber didn’t take into consideration is that this time the issue was safety. (As the Washington Post reported, “Uber’s self-driving cars broke basic traffic laws and complaints from cyclists that the cars were unsafe additions to the roadway.”) It was not about convenience, and therefore there was no public support to their fight against the California DMV.

Will Uber eventually apply for the permit? I believe it will quietly do so, but that’s just my two cents. The real important lessons to Uber from this week are that an arrogant culture can be very costly and that almost no one likes arrogant companies, not just California. Second, the company should start taking stakeholders, not just shareholders seriously – there is just no other option for a company wishing to scale worldwide. Just check with Airbnb.

Image credit: Flickr/Foo Conner

Raz Godelnik headshot

Raz Godelnik is an Assistant Professor and the Co-Director of the MS in Strategic Design & Management program at Parsons School of Design in New York. Currently, his research projects focus on the impact of the sharing economy on traditional business, the sharing economy and cities’ resilience, the future of design thinking, and the integration of sustainability into Millennials’ lifestyles. Raz is the co-founder of two green startups – Hemper Jeans and Eco-Libris and holds an MBA from Tel Aviv University.

Read more stories by Raz Godelnik