Hot Wheels

06.30.14

Inside Uber’s Political War Machine

The ride-sharing firm is an outlaw in many cities. So it’s launched a full-blown campaign—with consultants, lobbyists, and a ‘grassroots’ organization—to make itself Kosher.

“We’re in a political campaign, and the candidate is Uber, and the opponent is an asshole named Taxi,” Travis Kalanick, the CEO of ride-sharing company Uber, said while on stage at a conference in late May. “Nobody likes him, he’s not a nice character, but he’s so woven into the political machinery and fabric that a lot of people owe him favors.”

Kalanick wasn’t bluffing. Uber really is the candidate: It has been interviewing potential campaign managers--real ones, from real presidential campaigns--for months. A source close to the hiring process told me, “They want somebody who has been steeped in that political warfare.”

And for good reason.

In the process of trying to force regulators to concede to its enormous popularity, “Uber” has become, in some ways, a loaded political term. And observers and participants alike are questioning, in real time, how much government interference is too much.

Uber, which in June was valued at $17 billion, appears to be launching a full-scale political operation—complete with backroom operators and face-saving strategists.

To combat governmental hostility, Uber has hired political muscle all over the country: in D.C., it has the Franklin Square Group (Apple, Google). In New York, it has Bradley Tusk (Michael Bloomberg’s former campaign manager). In Chicago, it has Michael Kasper (the lawyer who got Rahm Emanuel on the ballot). Additionally, it has lobbyists in Miami, Baltimore, Houston, and Denver.

And Uber’s not the only member of the new sharing economy who’s gone political. Airbnb, a housing and rental service estimated to be worth $10 billion, has hired one of the most-connected operators in New York—and even formed its own “grassroots” political organization.

Kalanick (who did not respond to multiple requests for an interview) looks like a television preacher, appears on Gwyneth Paltrow’s Instagram, and once joked to a journalist about how the success of Uber increased his desirability to women: “Yeah, we call that the Boob-er.”

For a time, Kalanick’s Twitter avatar was the cover of Ayn Rand’s The Fountainhead—which he has repeatedly said was not the sort of bold political statement some have made it out to be. (In other interviews, he has indicated Rand has influenced his thinking.) But it is difficult to not see some parallels between Uber’s business model and libertarianism.

Given that, it’s not surprising that Uber is gaining friends on the right side of the political aisle. For example, Grover Norquist, the anti-tax activist, on Thursday Tweeted “Today, there are two political parties/movements in America. One is UBER, the other is with taxi commission. Choose.”

Overwhelmingly, the political types who openly support Uber—Norquist and Republican Senator Marco Rubio, to name two—are the ones who were demonizing regulators long before the phrase “call an Uber” had ever been uttered. But now, of course, the phrase has been said millions of times in multiple languages across the globe.

Companies like Uber—along with Airbnb and less popular services like Zilok (which lets you rent “anything” from strangers)—make up the sharing economy, a community in which individuals rent out their possessions or their labor, and businesses act as middlemen, helping to arrange plans. Uber and Lyft (another ride-sharing service) will connect passengers with drivers, but won’t provide a car. Similarly, Airbnb will introduce homeowners to those looking for a place to stay, but doesn’t own properties.

The distinction of not owning any hardware, sharing economy companies would like customers and regulators alike to believe, should make all the difference when it comes to the law. Except, it doesn’t—at least not yet. The fact remains that Uber and Airbnb have built multibillion-dollar empires by operating in places where they are illegal, and so they are turning political to protect themselves.

***

Ride-sharing companies like Uber and Lyft are apps which allow users to summon a private car with a few swipes on their smartphone. All that’s required to participate is a valid credit card. No cash ever gets exchanged. In short: It is so convenient that it makes a taxi seem about as high-tech as a camel.

Uber provides a variety of vehicles to choose from: SUVs, “black cars” like Mercedes and BMWs, and the lower-end “UberX,” which can be anything from a dated, smelly Lincoln Town Car to a new Toyota. Lyft cars, where passengers sit in the front seat and greet drivers with a fist bump, are adorned by an identifying pink mustache. Other ride-sharing apps include Sidecar and Hailo--but Uber, which operates in 34 countries, remains king.

Uber functions like the free market: Drivers and passengers alike are given mandatory star ratings, on a scale of 1-5, after each ride. If a driver’s average rating falls too low (below 4.5), they can be kicked off the app without notice. If a passenger’s does the same, they could risk being skipped over for rides by drivers. (Although passengers are not informed about their ratings, a driver told me mine was 4.7.) This system is meant to self-regulate by weeding out the bad eggs.

And self-regulation is an important concept when it comes to understanding the government-averse sharing economy.

Uber and Airbnb—the most successful services of their kind—are “disruptive” innovations. It’s a term which has been employed, sometimes incorrectly, by tech companies trying to brand themselves as being different, but actually has a specific definition first introduced by Harvard Business School professor Clayton Christensen in 1995. New York magazine’s Kevin Roose described in layman’s terms the actual meaning of “disruptive” to be “The process by which ‘technologically straightforward’ services and products target the bottom end of an established market, then move their way up the chain until, eventually, they overtake the existing market leaders.”

And unsurprisingly, being overtaken is not something market leaders—or their defenders in government—particularly enjoy.

This month, Uber and Lyft launched in Miami, the former incentivizing locals with $200 worth of free rides. That’s despite the fact that, in Miami, law mandates an hour of wait time before a private car can pick up a passenger after a request has been made, as well as a minimum fare of $70--meaning ridesharing is totally, obviously illegal. Miami’s taxi industry responded to Uber and Lyft’s arrival by calling for drivers to be thrown in jail. Before Uber had even launched, some 150,000 people had opened the app in the city--there was demand, and Uber responded to it.

Uber and Airbnb have built multibillion-dollar empires by operating in places where they are illegal, and so they are turning political to protect themselves.

In California, where Uber and Lyft (having both been founded in San Francisco) operate, the State Senate insurance committee has approved a bill requiring ride-sharing companies to ensure that drivers have $750,000 worth of insurance coverage from the moment they turn on the app. Currently, Uber claims it is only liable for damage if a driver has a passenger in the car—a policy which came under severe scrutiny when a passenger-less Uber driver hit and killed a 6-year-old girl on New Year’s Eve. The family, who supports California’s measure, is suing Uber.

In Washington, D.C., a similar bill is under consideration by the City Council that would allow ride-sharing services to operate legally, so long as they comply with insurance requirements. But D.C.’s taxi commission is trying to impose an additional regulation: a limit on how many hours drivers without a taxi license can operate.

Also serving to embolden regulators: Uber’s bad press. In addition to the New Year’s Eve fatality, there have been accusations of rape, stalking, and physical assault lodged at drivers. (Perhaps because of this, Kalanick has expressed his desire to one day have driverless Uber vehicles.)

Uber isn’t the only one in the crosshairs. In New York, where it’s illegal to rent out your apartment for fewer than 30 days, Attorney General Eric Schneiderman has gone after Airbnb. (However, when Schneiderman subpoenaed the firm, requesting personal information and data about its users, a State Supreme Court tossed it out.)

State Senator Liz Krueger, one of Airbnb’s biggest opponents in New York, told me, “The problem is that companies like Airbnb--and it’s not just them--have chosen to ignore and intentionally avoid explaining to their users that there are laws and they could be breaking them.” (This is not entirely true. Although Airbnb doesn’t go out of its way to advertise the fact that it might be illegal in some places, it took all of about five seconds to find an item in their website’s Help section which advises potential users “to understand how the law works in your city.”)

Krueger said Airbnb isn’t “being honest with their users.” And whether that’s accurate or not, many Airbnb users are indeed breaking the law. In May, Nigel Warren was fined $2,400 by New York officials for illegally using the service. The city argued that apartments like Warren’s “may only be used as private residences and may not be rented for transient, hotel, or motel purposes.” (Warren appealed the decision and won. The NYC Environmental Control Board reversed his fines.) 

But the law itself is hard to enforce unless there is a specific complaint about a tenant. A more practical concern—one Krueger has noted—may be the fact that Airbnb is “encouraging” users to violate their own lease agreements, putting them in danger of eviction.

Additionally, Krueger said, Airbnb is posing a safety risk to its users and to those living in close proximity to them. “The website’s response is: ‘We have no liability for any of this.’ And that is personally outrageous to me.” However, Airbnb did form a trust and safety division and implement a 24/7 customer service hotline and $1 million host guarantee, after a 2011 incident when a host named EJ returned home to discover her San Francisco apartment had been trashed and robbed by her guests. But Krueger is right that the fundamental issue of one of your neighbors permitting a total stranger to roam your apartment building--which may or may not have security--is potentially problematic.

In response, Airbnb has hired Emily Giske of Bolton-St. John’s, described by the New York Times as “one of the best-connected and most popular lobbyists at City Hall and in Albany.” Giske’s relationship with former Council Speaker Christine Quinn is so close that the Times ran an entire article questioning whether or not it could harm Quinn’s mayoral prospects.

Airbnb’s head of community co-founded Peers, a lobbying group which created a petition decrying opposition to the company in New York.

Additionally, all three of Airbnb’s co-founders—Brian Chesky, Joe Gebbia, and Nate Blecharczyk—donated the maximum amount possible to Bill de Blasio in 2013.

***

On Friday afternoon, I found myself in the dorm-like headquarters of the Internet Association, a D.C.-based lobbying group devoted to Internet freedom that boasts Uber, Lyft and Airbnb among its members. (IAC, The Daily Beast’s parent company, is also a member.)

A handful of young staffers lounged on couches or hunched over their computers at makeshift desks. Notes were scrawled on a large white board, and “The Internet Association” was written in chalk on a blackboard.

“We couldn’t do anything to Uber. We don’t have any legal authority on the company—they don’t own cars.” But they could do something to the driver. “The driver had four or five violations, and he was ticketed--$1,600 worth of tickets! It made big headlines, ‘The Great Sting,’ and all of that.”

In the conference room, its walls sparsely decorated with a few press clippings and an early ad from the company, reading (in digital-clock-like lettering) “PROTECTING THE FREEDOM AND INNOVATION OF THE INTERNET,” President and CEO Michael Beckerman expressed his belief that regulators were denying people rights: “It’s my right if I want to rent out my apartment with Airbnb, or it’s my right to be able to get a ride or give a ride to whoever I want, and I think [sharing economy companies] have tried to comply with the law where they can, but at the end of the day, the other side isn’t really playing fair,” Beckerman reasoned: “They’re trying to keep out competition.” No municipal government shares Beckerman’s view that renting out one’s apartment or offering strangers rides for profit is a “right.”

Beckerman, like most people I’ve encountered who are pushing the sharing economy’s agenda, is young and good looking. His tan suggests he just stepped off a yacht or out of the pages of a J. Crew catalogue. Juxtaposed with the characters on the regulatory side: It’s not hard to see where the sharing economy has an advantage.

In the lobby of the W. Hotel the next morning, I met Ron Linton, D.C.’s taxi commissioner. “Hold on,” he said, staring at his smartphone and poking at its screen. He raised the device in front of his face, eyeing it suspiciously from behind his Eugene Levy eyebrows. “Do you like these things?”

Linton is 85 years old. He became commissioner in 2011, after a long career which, he told me, saw him go from newspaper reporter, to JFK flack, to the Defense Department, and then into lobbying and law enforcement. But Linton’s impressive resume could be an indictment of how behind the times he is—someone just not equipped to handle the incoming tech boom.

It’s something Linton is aware of: “I’m an old guy,” he told me, laughing. “When some of these young people find out [how old I am], they can’t take that. ‘This old guy!’” he said mockingly. “And once I get my hip fixed, I’m going to be back out on the street just as I’ve always been.”

On the street is, in fact, is where Linton waged his most public act of war on Uber.

A month after Uber arrived in D.C., Linton downloaded the app. “The ride arrived, and it was a limousine-type car with a Virginia plate,” he recalled. “They picked me up in the District, and I gave them a place to drop me off in the District—around the Mayflower Hotel.” When Linton arrived, hack inspectors met the Uber driver. “They knew what my plan was.”

Linton laughed to me as he recalled the story. “We couldn’t do anything to Uber. We don’t have any legal authority on the company—they don’t own cars.” But they could do something to the driver. “The driver had four or five violations, and he was ticketed--$1,600 worth of tickets! It made big headlines, ‘The Great Sting,’  and all of that.”

As if the great sting wasn’t enough, Linton told me that since April, hack inspectors have just been impounding vehicles driven by Uber drivers. According to the commission, 15 “illegal private vehicles” have been impounded. Although the commission claims it was not specifically targeting Uber, all 15 of the vehicles were said to be driven by Uber drivers. (A spokesperson for Uber did not respond to multiple requests for comment.)

I asked Linton if I could bring him home in an Uber. He apologetically declined. What would people say, he asked, if he agreed to get in the vehicle he had so demonized? Linton walked out to the lobby, headed for his next appointment. I called an Uber to take me to Union Station. My driver, who came to the East Coast from Las Vegas just a few months ago—after 24 years on the job—said he did so because he heard there was more money to be made here using ride-sharing services (Uber does not operate in Las Vegas). So far, he said, he was disappointed.