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This week in 1861, the Union army surrendered Fort Sumter to the Confederates. In 1941, Japan and the USSR signed a five-year non-aggression pact. And in 2013, Travis Kalanick said screw the regulators, I’m doing peer-to-peer ride-sharing services, too.
Three years ago, the CEO of what was then a black-car hailing app published a policy paper that announced the company was going to start operating its own non-commercially licensed ride-share service in places where regulators have given “tacit” approval.
“In the absence of regulatory leadership,” the paper read. “Uber will implement safeguards in terms of safety and insurance that will go above and beyond what local regulatory bodies have in place for commercial transportation.”
Perhaps without knowing at the time, by publishing the paper, now deleted from the company’s site, Kalanick set into motion a series of events, from regulatory battles to nationally organized protests, that would play out over the next few years and result in the creation of the company’s core and fastest-growing business.
Today, Uber X is largely legal in the U.S., with the exception of some markets like Austin, Texas, which Kalanick mentioned in the original paper as a staunch opponent of ride-sharing. And Uber has gained momentum all over the world — the Philippines became the first country to pass nationwide ride-share regulation in 2015.
The paper itself is an useful benchmark to hold the company’s current policies and operations against. In particular, it’s an interesting relic of the aggressive approach Kalanick and Uber used to take when it came to competitors and was just beginning to take with regulators.
“A host of clone companies have emerged, most notably Lyft and Sidecar, whose goal is to offer incredibly low-cost transportation by working exclusively with unlicensed, non-commercially insured vehicles and drivers. This is quite different from Uber, which works almost exclusively with commercially licensed, insured and regulated entities (the only case where we haven’t is in California, where we have obtained explicit written permission by the CA Public Utilities Commission to do so).”
According to Kalanick, Lyft and Sidecar were making a bet on ride-sharing based on two assumptions: Uber is too busy fighting off regulators who were contesting its black car service, and regulators are too slow or busy to stop them from operating.
“The first assumption has paid off nicely for Sidecar and Lyft. Uber already gets so much regulatory heat in markets where Uber’s approach is clearly legal. In markets across the country, taxi companies have been pushing regulators and legislators to protect them by proposing new regulations that outlaw Uber. With such strong regulatory language against the ‘ridesharing’ approach, Uber restrained from competing with Lyft and Sidecar in the non-licensed transportation space for over a year.”
Uber was at a competitive disadvantage, Kalanick wrote, because it was operating according to the letter of the law and choosing not to offer this legal but cheaper option. Uber X wasn’t born out of necessity. It was born out of competition.
“In the face of this challenge, Uber could have chosen to do nothing. We could have chosen to use regulation to thwart our competitors. Instead, we chose the path that reflects our company’s core: we chose to compete.”
The paper lists a series of Kalanick’s observations, and in many cases and by many measures he was right. He wanted to upend the competitive advantage Lyft and Sidecar had — today, Uber is a market leader in most major markets and Sidecar had to shut down.
In his blog post about why he folded Sidecar, CEO Sunil Paul specifically called out Uber’s aggressive approach for the company’s demise.
“We were unable to compete against Uber, a company that raised more capital than any other in history and is infamous for its anticompetitive behavior. The legacy of Sidecar is that we out-innovated Uber but still failed to win the market. We failed — for the most part — — because Uber is willing to win at any cost and they have practically limitless capital to do it.”
But Kalanick also made assumptions that turned out to be glaringly incorrect. For one, regulators didn’t take kindly to Uber entering markets he decided were “tacitly” allowing him to. The three years following the publication of this paper were wrought with regulatory battles across the country, particularly in some of those cities he mentioned in the paper. New York City is the most regulated and one of the largest markets the company is operating in, as is abundantly illustrated in a transparency report the company published yesterday. Second to California, New York City requested the most trip data from Uber.
Kalanick had written:
“In New York, Seattle, Chicago, Boston and California, the regulators have chosen NOT to enforce existing regulations against non-licensed operators. This is presumably for one or more of the following reasons:
“1. The regulators believe that old rules don’t apply to transportation apps with non-licensed…new rules to address this new sector and in the meantime they will see where the new innovation leads.
“2. Regulators are exercising their discretionary power to enforce or not enforce their regs, and therefore, choosing to tacitly approve ridesharing by not enforcing against ridesharing.”
All Uber X drivers are licensed, professional drivers in New York, but it happens to still be among the company’s largest markets. In other words, the second assumption missed the mark with the premise that to compete successfully, Uber (or Lyft, for that matter) has to operate beyond the legal framework.
The paper also stated the company wouldn’t launch in a market where competitors faced regulatory opposition within 30 days of launching, requiring Uber to adopt a wait-and-see model. As we’ve seen, Uber has not only entered markets where regulators have said it was not allowed to operate (Portland, Ore., and Las Vegas, for example), but also has often launched before any competitors made a move.
Today, the paper is but a reminder of how Uber began its transition from “everyone’s private driver” to, as it would have it, the cheapest, most convenient ride on the road — in effect, the origin of the Uber everyone now knows.
This article originally appeared on Recode.net.
