Leonid Bershidsky: Uber must stop acting like a conqueror

Isolated regulatory demands are not Uber's biggest problem, writes Leonid Bershidsky. Photo / 123RF

With the British prime minister calling London's refusal to extend Uber's license "disproportionate," and Uber's chief executive heading to London to talk to regulators, a compromise is on the offing. But it shouldn't give Uber a false sense of security: Isolated regulatory demands are not its biggest problem.

Viewed in isolation, each of Uber's setbacks this year triggered a disproportionate response. Neither a to∂xic work culture, nor unequal gender representation, nor any of the specific legal or business issues that dragged down the ride-hailing company was lethal. Nor was any of these problems likely beyond former CEO Travis Kalanick's ability to fix or sweep under the rug, as he'd done for years.

That all of the crises broke out at once was the result of an emotional backlash against the company's arrogant push for global dominance. Something akin to this backlash is also beginning to catch up with Facebook and Google. They've done nothing in particular terribly wrong, it's just the general perception of large, uncaring, overly powerful corporations running on unchecked ambition.

TfL, the London traffic authority, has a list of specific problems Uber has failed to solve: the way it reports criminal incidents and does medical and background checks on its drivers.

It can all be pretty easily fixed, especially with Chief Executive Officer Dara Khosrowshahi's personal involvement. Prime Minister Theresa May wants to move on because the Uber case contradicts her party's claims that Brexit Britain will be open for business.

London Mayor Sadiq Khan has nothing to gain politically from banning Uber but everything from being seen to make it comply with rules. Khosrowshahi has nothing to gain by not cooperating -- that's why he's coming to London.

But even if his talks succeed -- as everyone wants them to -- new trouble will almost immediately crop up for Uber in the UK and everywhere else it operates. It's not well-liked, and it's fair game for politicians, regulators and judges who don't like it, as well as for the many drivers and customers who have had a bad experience with it.

This requires a big, unconventional trust-building campaign. Unfortunately, Khosrowshahi appears to have an incomplete understanding of the problem's emotional nature.

In a letter to staff after the London ban, he wrote, correctly, that "there is a high cost to a bad reputation" and "it really matters what people think of us." But he also added he didn't believe the company "did everything that is being said about us in London today" and promised Uber wouldn't abandon its principles, meaning that it would "vigorously appeal TfL's decision."

Despite Khosrowshahi's public apology to Londoners, these lines must have raised red flags with Mayor Khan, who has little respect for Uber's "principles": He's described their implementation as "unfair pressure" on the TfL and "aggressive threats about taking us to court and all the rest of it."

That's part of Uber's reputation problem; Khan's reaction to the perceived pressure is emotional, and even if Uber fixes its specific problems with the TfL after fighting it at every step, that emotion will remain. Khosrowshahi is right to try dissolving the bad blood with apologies and promises of change, but Kalanick used to do that, too. Public relations methods won't work, as they didn't at the end of Kalanick's tenure; perfunctory nods to social responsibility -- the wheelchair-accessible vehicles and "Clean Air Plan" Khosrowshahi mentioned in his letter of apology -- won't do the trick either.

Overcoming its bad reputation requires from Uber a series of surprising, disarming moves. For starters, it needs to start asking rather than demanding; rather than pursue its "vigorous appeals," it should politely request a little time to meet the TfL requirements. Uber should declare, openly and publicly, that the its first impulse will be, from now on, to follow rules rather than challenge them. The fierce resistance has already made clear it won't take over the world by sheer aggression.

So why keep provoking it?

But simply playing deliberately from a position of weakness won't be enough. On its own, it'll just let regulators bite off the whole arm, not just the proffered finger. In order to gain trust, and to guard against bureaucratic nitpicking, Uber needs to be proactive and do things it doesn't strictly have to do.

In London, the company books its rides through a Dutch subsidiary, which allows it to avoid the UK's 20 per cent value-added tax.

A TfL official apparently raised the issue during the licensing discussion, though the transport authority has no tax-related powers. Uber could voluntarily abandon the practice. It could also voluntarily offer its drivers some benefits of employment, such as paid leave or a minimum wage guarantee, in recognition that though they are technically self-employed, the ride-hailing company dictates how they must work once they log into the Uber app. Uber's fares are about 35 per cent lower than those of London's black cabs; assuming these fares are sustainable and not just a case of temporary dumping to gain market share, Uber can afford to make such gestures and still remain competitive.

It's not enough for Khosrowshahi to act nicer than Kalanick. He needs to put his money (OK, Uber investors' money) where his mouth is and show clearly and unequivocally that the company is changing, that it's putting fairness ahead of aggression on its priority list. There's no way to make the bad reputation go away on the cheap.

Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.