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When Sarah Lacy first heard about Uber, she loved the concept. But Lacy, the founder and editor-in-chief of the tech news website PandoDaily, quickly began seeing red flags in the way the company was operating. She soon became one of Uber’s — and its head, Travis Kalanick’s — most vocal critics, covering everything from the tactics the company used to discredit victims of assault to harassment allegations within the organization.
Lacy’s reporting had an unintended effect: In 2014, she herself became the subject of an alleged million-dollar smear campaign, which was reported after senior vice president for business Emil Michael threatened her at a dinner party. (Michael later sent an email apology to Lacy for the comments).
Earlier this month, Kalanick’s reign as CEO of Uber ended. After years of scandals plaguing the ride-hailing giant — from Susan Fowler's sexual harassment allegations to a Google lawsuit over stolen intellectual property to a smear campaign against a rape victim — investors demanded he step down from his post, which he did.
Kalanick is not the first CEO to face charges of mistreating women, and won’t be the last. Days after he resigned, Justin Caldbeck, co-founder of the startup venture capital firm Binary Capital, was forced to leave his company after six women reported that he had made unwelcome sexual advances toward them.
I spoke to Lacy about the end of Kalanick’s leadership of Uber and what it means for Silicon Valley’s “bro culture.”
Our conversation has been condensed and edited for clarity.
Hope Reese
Uber has faced a long series of scandals and lawsuits and allegations. What was the tipping point that forced Travis Kalanick to step down?
Sarah Lacy
It's certainly the last big scandal — this account that he and Emil Michael and this other executive had accessed a rape victim's health records in an attempt, reportedly, to smear her.
Classic oppo research is accessing someone's health records. It's one of the things people try to do to discredit or smear or destroy a person.
Hope Reese
And it’s something they’ve been doing for a while now, right?
Sarah Lacy
One of the first issues I had with them, about four years ago, was how they were smearing women who were assaulted in Ubers just to my reporters, off the record, and I'm sure to many others.
And then there was this case where they used these oppo researchers, this company Ergo, to go after a plaintiff [and his lawyer] in one of the class-action lawsuits against them. ... They were like, "Let's move this into an encrypted channel so it can't be discovered." So the judge forced them to give him the encryption key, basically. And he called it disturbing and possibly criminal behavior.
So we literally have four years of them smearing rape victims behind the scenes. Of them threatening to do oppo research. Of a judge discovering they had done it. And then everyone was shocked when this came out.
Hope Reese
Ultimately, how much did Susan Fowler’s harassment allegations, and other reports of Uber’s treatment of women, play into the investors’ request for Kalanick's departure?
Sarah Lacy
If Uber was doing well financially, if they did not have the Waymo lawsuit hanging over them, I don't think the board would have done anything. According to their own numbers, they're not really growing that fast for a company that's valued this high. They're losing money. They lost China. I mean, of all the things they said justified that valuation over the years, none of those are really happening. I don't think the moral stuff, the sexist stuff, was enough.
It's three years of scandals that, finally, investors had the luxury to care about because there were also issues with the business.
Hope Reese
You've been critical of Uber's funders for a while. You've said that they've been afraid of Kalanick. How did he get so much power?
Sarah Lacy
We've been in this whole era, in Silicon Valley since basically the early 2000s, of the cult of the founder. It really started with Facebook. [Before then,] founders were seen as replaceable. There was a lot of simmering resentment of that — that these huge companies would get built and the VCs would get rich and, by the end of the day, they'd had to raise so much money that founders just didn't have that much ownership and weren't making that much money, even though they had built the company. There was the dot-com bust. And then [early Facebook investor] Sean Parker advised Mark Zuckerberg to strike a deal with his VCs that no one ever had. Particularly not a 19-year-old kid.
So [Zuckerberg] controlled the board: There are five board seats — Sean had one, and Mark had two. And he got a good enough deal that he controlled the stock. And he and Sean and Dustin [Moskovitz] each got a million dollars.
Those things would all come to dominate how deals were done. Both partial liquidations, which is basically getting money upfront before your company sells or go public, and board control. And having a bigger stake in the company because the costs of building a business were lower and you didn't need as much upfront.
That's how things have been for the last 15 years. This is just the apex of it. And so under the cult of the founder, basically every VC is vying to look like they're the most entrepreneur-friendly.
There's really, really good things about the cult of the founder. Like entrepreneurs should have more power, and there were a lot of excesses and bad behavior from board members in the dot-com years. All of this kind of started with good, noble intentions. But it created these situations where founders had no accountability.
It shifted from, "You're an investor in Uber," to, "You're an investor in Travis Kalanick."
Hope Reese
Is Uber a good representative of startups?
Sarah Lacy
It's just more extreme. Uber is so emblematic of everything that's gone on in the last 15 years with this cult of the founder era, this bro era, this unicorn era.
The bro thing is interesting. Companies before either had young, awkward, geniuses running them or older people who had worked at Cisco or Intel and lived on the peninsula and had kids building them. You didn't have these fratty guys. So the party scene became very different. There was always sexism in tech, but it became much more tied in with this hypermasculinity that we've seen in the country as a whole.
The movie The Social Network was dangerous [because it mirrored] the values [associated with] Wall Street. Wall Street is supposed to be a cautionary tale, but all these people were like, "Oh, I want to be that guy," and started moving to Wall Street, and it became that culture. The same thing has happened with The Social Network. When I hear the stories of what's gone on at Binary Capital, they look like scenes out of that movie. When I first saw that movie, I laughed about because I was like, "Oh, my God, that's so not Silicon Valley. That's so the Hollywood version." Well, it's now unfortunately become the reality, and we've seen the repercussions of that.
Hope Reese
Pando has been critical of Uber. Do you think there have been too many apologists in the tech media? Celebrating the good stuff about companies like Uber and ignoring actual problems?
Sarah Lacy
The biggest problem is less about apologists or critics as much as it is groupthink.
Groupthink is really scary. No one said anything about Theranos until the [Wall Street] Journal broke the story, and now everyone thinks Theranos is the worst thing. Now everyone's super critical of Uber. Before 2017, that simply wasn't the case. And there were three years of undisputed evidence. Of oppo research, of misogyny, of smearing victims. The UN women's group three years ago canceled a partnership with Uber because they were like, "We can't be associated with you."
Now there's more leaks, more impact, more truth coming out. I just wish we didn't all have to get together and agree that now is the time we're gonna be critical on Uber. I wish reporters could be on their own journey.
Hope Reese
At a dinner back in 2014, Emil Michael told BuzzFeed reporter Ben Smith about plans to go after you. What exactly happened?
Sarah Lacy
Emil bragged about it, and Ben Smith wrote up what he heard. Emil detailed a team of people, including former journalists and oppo researchers, and a budget, to go after my family. Giving me a taste of my own medicine. He also said that if women got assaulted in cabs after they canceled Ubers, I should be held responsible.
He was very clear — he would go for my family. And he was very clear that it would be done in a way that wouldn't be traced back to Uber.
Hope Reese
It must have been particularly scary knowing that Uber had a history of using data to track people. A blog post in 2012 described how the company used data to track "Rides of Glory" — rides that took place after one-night stands.
Sarah Lacy
Yeah. And they have a network of drivers, some of whom shouldn't have passed background checks.
Hope Reese
This happened a few years ago. What's it been like since then? You got an email apology, but are you still afraid?
Sarah Lacy
It's definitely been horrible. I didn't get [a real] apology, let's be honest.
I've spent three years basically operating in a macro hostile environment. Uber's the highest-valued company in Silicon Valley history. There is $70 billion of paper money no one can sell or exit. And I'm presenting myself as an obstacle. That was a dinner full of journalists, and Ben Smith was the only one who wrote it.
Hope Reese
You said in a Bloomberg interview that the whole experience could be a litmus test for whether investors had a conscience. What will people put up with. How did that turn out?
Sarah Lacy
Everyone failed except [investors Mitch Kapor and Freada Kapor Klein]. They were the only ones who came forward and said, "We tried to work with this company. They just won't have it." No one else.
These investors suddenly deciding to kick Travis out? If there weren't very real threats to the business, it wouldn't be happening. There was none of this outrage at anything else the company has done. And frankly, I think it was pretty crappy of them to pick a vulnerable moment when Travis was in mourning for his mother to pounce on them. I think that was cowardly in and of itself. Even the way they finally did the right thing was not super admirable.
Hope Reese
With Kalanick leaving, will the culture change?
Sarah Lacy
It's really, really hard to change. What makes that particularly difficult is that there's a thousand people in the company who don't want it. They like the culture the way it is. They've written a letter saying, No, we want this guy back. We think doxxing rape victims is fine. We think stealing documents from Google is fine. I don't know — step one is you would have to get rid of a thousand people. And that's not gonna happen at a Silicon Valley company. The war for talent is too great.
Hope Reese
So many people use Uber because of convenience. What would it take for the customers to actually drop the app and switch to Lyft?
Sarah Lacy
Frankly, on some level, what this is really about is access to capital for these companies. Uber and Lyft are commodity products. The two operate, they have the same drivers, their apps look almost identical except for the logo, they have the same price point, and they get you from one place to another exactly the same way, literally by the same person. It's like Coke and Pepsi.
One of the reasons Uber got so big is because of execution. I think Lyft's execution has been lacking, and there were many things that, in the short term, Travis was really good at. But the other thing is [Uber] used cash like a weapon. They would do aggressive subsidies and bonuses and driver bonuses to get drivers to drive more for them. This market has shown whoever has the most money gains market share. Lyft, when they were spending more money, gained more market share. When they capped their spending, they lost market share.
The thing that's gonna kill Uber has nothing to do with who's at the company, has nothing to do with scandals, has nothing to do with any of this. The thing that's gonna kill Uber is when Uber finally has to charge what it costs to get a car to you.
Hope Reese
What did it mean when Susan Fowler stood up to Uber?
Sarah Lacy
What's shocking about Susan's story is that she experienced so much sexism in one year at one company. A lot of women, if they worked in the Valley for 10 years, might have that many stories — but they didn't get them all in one year at one company. That's just a culture of sexism that's run amok and then [is] rewarded in many cases.
There's a lot of women who are in pain at Uber who feel like they can't leave, because they feel so beaten down by what they've gone through. They feel like their worth has been taken away from them. It's all the classic abuse things.
I'm not saying every woman at Uber feels that way — I don't know. There's certainly been women who've come out and said it's great. It's hard to know if that's authentic or not. Sometimes people feel pressured to say that to keep their job. But, give the benefit of the doubt, maybe some people are totally fine with that environment. But there's a lot of women who feel ... I know for a fact, who are at the company right now and it makes them sick, but they feel like they have no other alternatives.
Hope Reese
You started out as friends with Kalanick. When did you first think, "This is messed up"?
Sarah Lacy
In the first year of Pando, someone wrote a really innocuous story about Uber hangover syndrome. The company was still pretty young, and surge pricing was a new thing, and it wasn't quite as spelled-out as it became later. It was about how frictionless the first mobile payment applications were. How people waking up on Monday would check their bank account and be like, "I spent how much on Uber without ever swiping or signing or seeing a price?"
So it was just kind of like this fun culture story about Uber hangover. It was in no way anywhere near as hard-hitting as what we would write in the future. But Travis freaked out, reached out to me, and demanded the story be pulled down. He was screaming at me. I was like, "Who do you think you are?" We got in a huge profanity-laden back and forth and never spoke to each other again.
Hope Reese
How does it feel now that he's gone?
Sarah Lacy
Definitely feels like there's a chapter over. After Travis was gone, the next morning, I woke up and felt this amazing, palpable sense of relief that I've not felt in three years. That my family wasn't in danger, for the first time in three years, because of retaliation.
There were all these things he'd done, and I constantly felt like there would be something I wasn't even expecting.
But the important thing is that Susan Fowler got justice. That is the only thing that matters in this story. We have become a place where women come forward and their careers aren't destroyed. They get justice.
That's also what's been really encouraging about this situation with Binary Capital. Ellen Pao didn't get justice [in her gender discrimination lawsuit against the venture capital firm Kleiner Perkins]. Part of what weakened support for Ellen was this idea of there was no massive smoking gun. There were just these constant micro indignities, these constant exclusions.
What's amazing about the Binary Capital thing is that women who came forward did not have the most extreme stories we've heard about abuse or about sexism. It was not the worst thing that we've heard — it was very everyday. It was what women go through every time they raise money. I don't know a single woman who hasn't had those things happen to them.
These wins have two impacts.
The first is that finally this culture is being held to account. The second is every other man is served notice that this can happen. There is not a single VC before Friday who thought he could lose his job by asking a woman to sleep with him. That's just an insane sea change in this industry.
I'm so happy that the women who are putting themselves out there to come forward are getting the right reaction, getting celebrated by a lot of people in the ecosystem. That did not happen a few years ago. I've suffered a lot of retaliation and I've gone through a lot with taking on Uber, but ultimately I'm doing my job.
This was not Susan Fowler's job. This was not Niniane Wang or Leiti Hsu or Susan Ho's job or any of the women who just came out against Justin Caldbeck. In fact, this is risking their career. The women of Silicon Valley should be holding a ticker-tape parade for those women every time they see them. They are heroes.
Hope Reese is a staff writer for TechRepublic (a division of CBS Interactive) based in Louisville, Kentucky. Find her on Twitter @hope_reese.
