Silicon Valley CEOs are supposed to be sacrosanct. So how did it all go wrong at Uber?

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A year ago, before the investor lawsuits and the federal investigations, before the mass resignations, and before the connotation of the word “Uber” shifted from “world’s most valuable startup” to “world’s most dysfunctional,” Uber’s executives sat around a hotel conference room table in San Francisco, trying to convince their chief executive officer, Travis Kalanick, that the company had a major problem: him.

The executives were armed that day with something unusual for Uber Technologies Inc.: the results of a survey. Kalanick operated by gut feeling and with a stubborn sense of how people should feel, not how they did. Jeff Jones, Uber’s new president and former chief marketing officer for Target Corp., wanted more substantial insights. Conclusions drawn from the survey were printed and hanging on the walls. About half the respondents had a positive impression of Uber and its convenient ride-hailing app. But if respondents knew anything about Kalanick, an inveterate flouter of both workplace conventions and local transportation laws, they had a decidedly negative view.

As usual with Kalanick, the discussion grew contentious. Jones and his deputies argued that Uber’s riders and drivers viewed the company as made up of a bunch of greedy, self-centered jerks. And as usual, Kalanick retorted that the company had a public-relations problem, not a cultural one.

Then a top executive excused herself to answer a phone call. A minute later, she reappeared and asked Kalanick to step into the hallway. Another executive joined them. They hunched over a laptop to watch a video that had just been posted online by Bloomberg News: grainy, black-and-white dashcam footage of Kalanick in the back seat of an UberBlack on Super Bowl weekend, heatedly arguing over fares with a driver named Fawzi Kamel.

“Some people don’t like to take responsibility for their own shit!” Kalanick can be heard yelling at Kamel. “They blame everything in their life on somebody else!”

As the clip ended, the three stood in stunned silence. Kalanick seemed to understand that his behavior required some form of contrition. According to a person who was there, he literally got down on his hands and knees and began squirming on the floor. “This is bad,” he muttered. “I’m terrible.”

Then, contrition period over, he got up, called a board member, demanded a new PR strategy, and embarked on a yearlong starring role as the villain who gets his comeuppance in the most gripping startup drama since the dot-com bubble. It’s a story that, until now, has never been fully told.

Featured in Bloomberg Businessweek, Jan. 22, 2018. Subscribe now Illustration: Patrick Leger for Bloomberg Businessweek

The melodrama began, in a sense, with Donald Trump. On Jan. 27 the newly inaugurated president issued his executive order imposing border restrictions on people from seven Muslim countries. Outrage erupted. People took to the streets; tech workers in Silicon Valley walked out of their offices in symbolic protest. And in New York, a small union called the New York Taxi Workers Alliance declared that there would be no taxi pickups from 6 p.m. to 7 p.m. on Saturday night at John F. Kennedy International Airport.

For Uber, that would create extra demand at the airport, which meant it could charge more—but this would probably cause a backlash. That had happened before when the company let its “surge pricing” algorithms do their thing. So the New York managers decided to be good citizens and suspend surge pricing for the night.

The backlash hit anyway. After years of negative revelations—spying on passengers, dubious driverless-car experiments in San Francisco, the CEO’s bragging about sexual conquests, to name just a few—the public was already inclined to believe the worst of Uber. If the company wasn’t price gouging this time, maybe it was trying to break up the JFK strike. A new hashtag was trending on Twitter: #deleteuber. Users deleted their accounts by the thousands. Lyft Inc., the rival service that branded itself the anti-Uber, capitalized on the moment and donated $1 million to the American Civil Liberties Union.

Further stoking the flames was Kalanick’s decision to join Trump’s business advisory council. Kalanick argued that his participation in the council wasn’t an endorsement of the president; he just wanted a seat at the table, along with Elon Musk, International Business Machines Corp.’s Ginni Rometty, and Walt Disney Co.’s Bob Iger. But intentions didn’t seem to matter. Criticism from riders and drivers intensified, and Kalanick spent days talking to his executives about what to do. They considered whether he should go to the first meeting and find some pretense to object and leave; he even floated the idea of wearing a protest T-shirt to the council meeting, according to people familiar with the discussions.

Ultimately, Kalanick decided the whole thing wasn’t worth the trouble and his minders set up a call so he could politely say no to Trump. A chronic pacer, Kalanick walked away from his desk at the appointed time. The first call from the White House came—and went to Kalanick’s voicemail. Then came the second call. Trump was on the line, and Kalanick walked into a glass-walled conference room to deliver the news. The conversation apparently went as one would expect. Kalanick emerged to tell his colleagues that the president was “super un-pumped.”

“You could go into Uber on any given day and half the T-shirts were Uber T-shirts. They disappeared overnight”

In mid-February, an engineer named Susan Fowler penned a blog post, “ Reflecting on One Very, Very Strange Year at Uber,” about the sexual harassment she had witnessed in her time at the company. The explosive response to that post prompted Kalanick to hire Eric Holder Jr., the former U.S. attorney general and a partner at the firm Covington & Burling LLP, to lead an investigation into Fowler’s claims. “We will leave no stones unturned,” Holder told Bloomberg News at the start of his inquiry. “This company has one opportunity to get this right.”

But the hits kept coming. The infamous dashcam footage surfaced; a few weeks later, the New York Times reported on a secret Uber technology called Greyball, which the company developed to identify and deny service to riders who had violated the company’s contractual terms. In some cities and countries, Uber managers used Greyball to avoid picking up taxi inspectors and other law enforcement officials who might want to ticket drivers or shut the service down.

A common factor in all these crises was Kalanick’s unrelenting combativeness. In meetings, he would alternately impress and alienate employees, investors, and his board. Over time, he turned a lot of friends into enemies with stories to tell. Jones, the president who had commissioned the public survey, resigned in March after only six months on the job, citing differences over “beliefs and approach to leadership.” In exit interviews with Uber board members, he was more specific, excoriating Kalanick’s shotgun management style and unwillingness to listen. Jones seemed so eager to leave the company that he declined to negotiate an exit package, potentially leaving millions of dollars behind.

Google, too, should have been an ally. The company invested in Uber in 2013 and, four years later, owned a stake worth billions. But the two companies began to look more like competitors as both raced to build self-driving cars. What might have remained a friendly rivalry soured irrevocably when Uber bought the self-driving trucking startup Otto for more than $600 million in stock. Most of Otto’s core employees were former Googlers, led by their own brash co-founder, Anthony Levandowski. Google co-founder Larry Page had already grown to loathe Kalanick. Now he was fuming.

Google filed a lawsuit in late February, accusing Uber of stealing its secrets. Its allegations were devastating, the most damning one being that Levandowski had downloaded 14,000 Google files before he quit to start Otto.

The legal fight, expected to go to trial shortly, may have been avoided if Kalanick had listened to his senior executives. Salle Yoo, Uber’s general counsel and typically not someone inclined to challenge her boss, expressed serious reservations about the deal, according to two people familiar with the discussions. Kalanick’s top deputy, business chief Emil Michael, stayed away from the transaction—he didn’t think it made much financial sense and risked a backlash from Google.

Meanwhile, private investigators hired to conduct due diligence on Otto before the acquisition closed learned that Levandowski had possessed five disks of data from Google’s driverless effort and other information that included “source code, design files, laser files, engineering documents and software related to Google self-driving cars,” according to the investigators. (Levandowski told investigators he’d destroyed the disks, a claim they said they couldn’t verify. Uber says its self-driving car technology doesn’t borrow from Google’s and that it never possessed Google’s files.)

Kalanick, who says he never read the investigators’ report, went forward with the deal anyway. And he agreed to protect Levandowski from legal attacks by Google. Kalanick was placing an enormous bet on someone who liked to play things fast and loose, even by the standards of Silicon Valley’s eccentric engineers.

Then, after Google filed its lawsuit, Levandowski told the court he was likely to invoke the Fifth Amendment’s protection against self-incrimination. He would no longer help defend Uber, further imperiling the company’s case. Uber’s top lawyer, Yoo, who was traveling, videoconferenced into a meeting with Kalanick and demanded Uber either put Levandowski on leave or dismiss him. Yoo’s deputy, Angela Padilla, who oversaw the case, agreed. Kalanick insisted that the company stick by Levandowski—that Kalanick’s “brother from another mother,” as he once described Levandowski, would eventually be vindicated.

“It was like a bomb went off inside the company”

By spring the public outcry against Kalanick was coming in loud and clear on the company’s surveys. On a question asking respondents what they thought of specific business leaders, he ranked dead last among tech CEOs and only slightly above the CEOs of Goldman Sachs Group Inc. and Wells Fargo & Co. Employee morale was falling along with the CEO’s reputation. “Until 2017, you could go into Uber on any given day and half the T-shirts were Uber T-shirts,” says one executive. “They disappeared overnight. People didn’t want to wear Uber stuff.”

Kalanick was unable or unwilling to right himself. If anything, his judgment deteriorated. He decided that he should apologize privately to Kamel, the driver he berated on video. The plan was simple: meet with Kamel at some neutral and nonthreatening location, engage in five minutes of pleasantries, say sorry, and leave.

The meeting went on for more than an hour, with Kalanick re-debating Kamel over Uber’s pricing policies. Somehow, by the end, Kalanick suggested that he give the driver Uber stock, according to people familiar with the discussion.

Wayne Ting, who ran Uber’s San Francisco business, was in the room with Kalanick and Kamel. In an email later circulated among employees and directors, Ting said he was deeply disturbed by what he saw. He told people he called his own father to seek moral counsel. He worried that paying the driver off with Uber’s own shares was financially irresponsible—would Uber compensate all of its drivers who felt mistreated? To Ting, the incident reeked of a lack of self-control. In the email, he wrote that Kalanick “no longer had the moral standing” to lead Uber. After Uber’s lawyers insisted the company wouldn’t pay Kamel to clean up Kalanick’s personal scandal, Kalanick agreed to pay Kamel $200,000 out of his own pocket, according to a person familiar with the matter. “The meeting ended on a positive note, and Travis appreciated Mr. Kamel’s openness and forgiveness,” a spokesperson for Kalanick said in a statement.

In late March, the tech publication the Information published an account of a visit by Kalanick and other Uber executives to a karaoke bar in Seoul in 2014. Kalanick’s then-girlfriend Gabi Holzwarth, who went along on the work trip, told the Information that the bar was staffed by “escorts,” each woman labeled with a number so customers could pick them out more easily. (Holzwarth said she and Kalanick left the bar together after about an hour.)

Uber execs allegedly hung out at a Seoul “karaoke” bar. Illustration: Patrick Leger for Bloomberg Businessweek

In June, Bloomberg News and the tech blog Recode reported that Eric Alexander, Uber’s president for Asia-Pacific, had obtained and carried around the confidential medical record from a horrific December 2014 rape of a 26-year-old passenger by an Uber driver in Delhi. Alexander, Kalanick, and other executives had discussed among themselves a preposterous theory—that the rape may have been a setup by Ola, Uber’s primary rival in India. Through a spokesperson, Alexander declined to comment.

The Asia news—especially the India revelations—resonated as loudly inside Uber as outside. “It was like a bomb went off inside the company,” said one senior exec. After the story was published, many employees stayed home. There was a feeling that the company had gone too far.

A short time later, six members of Uber’s ELT, or Executive Leadership Team, sent a confidential letter to the board. The letter, according to a person familiar with the matter, asked for an independent board chairman to be appointed and for accountability at the highest levels of the company. They implored the board to fire Emil Michael, Alexander’s boss at the time as well as Kalanick’s closest deputy, and demanded the board force Kalanick to take at least a three-month leave of absence.

The Fall of Uber's Travis Kalanick

Over the years, Kalanick had a simple method for dealing with Bill Gurley, one of his earliest backers and board members. Kalanick told colleagues that all he had to do was ignore Gurley’s phone calls and Gurley would call less often.

The silent treatment never seemed to bother Gurley much. A tall, affable Texan and a partner at venture capital firm Benchmark, he often appeared at conferences and on television evangelizing Uber and praising the entrepreneurial abilities of its CEO. In 2016, along with the rest of Uber’s board, he turned over more control to Kalanick as part of a $3.5 billion investment from Saudi Arabia’s sovereign wealth fund.

As 2017 wore on, Kalanick became even less communicative than normal. He was regularly missing or canceling leadership team meetings and wasn’t delivering on his declaration, made in a public letter, to hire “a Chief Operating Officer: a peer who can partner with me to write the next chapter in our journey.” In March, after years of trying, Gurley finally got himself appointed to the board’s audit committee and learned of the steep losses in Uber’s subprime vehicle-leasing division, which helped its drivers finance cars.

Gurley’s cheerleading turned into anxiety and then horror. Benchmark’s stake in Uber was worth billions; could that fall by half? Could it fall to zero? Would they all end up in court? People at Benchmark worried that the Uber situation was affecting Gurley’s health.

Gurley and his partners declined to talk about the controversies at Uber and about what they did next. But in conversations with colleagues, relayed to Bloomberg Businessweek, Gurley expressed frustration over Kalanick’s handling of the Google lawsuit and his inexplicable reluctance to fire Levandowski, even though his senior advisers were urging him to do just that. In May, as part of Gurley’s gradual campaign for more influence at Uber, he and David Bonderman, co-founder of private equity firm TPG, drafted a resolution that would empower the board to fire Levandowski. Kalanick finally relented, and Levandowski was dismissed at the end of May.

By the time the six executives sent their letter to the board urging that Kalanick take a leave of absence, Gurley was ready to consider it. The directors met on Sunday, June 11, at the Los Angeles offices of Holder’s law firm, Covington & Burling. They reviewed Holder’s report, which detailed not only a sequence of sexual harassment incidents at the company but also a culture of legal noncompliance that systematically equated rule-following with bureaucracy and failure. The board voted to adopt Holder’s 47 recommendations, including rewriting Uber’s absurdly bro-ish cultural values (“toe stepping,” “always be hustlin’ ”), restricting the consumption of alcohol at company events, and instituting an anonymous complaint process for employees.

There was no discussion about asking Kalanick to resign, but the board agreed to a temporary sabbatical for the CEO, on his own terms. Kalanick was grieving from a recent family tragedy—his mother, Bonnie, was killed and his father, Donald, seriously injured in a boating accident in Fresno, Calif. After the accident, Kalanick had been saying he would acquiesce to taking time off, as a way to both mourn and try to end the media storm.

Two days later, Arianna Huffington, the media entrepreneur and Kalanick’s staunchest ally on the board, led an all-hands meeting at Uber’s Market Street headquarters in San Francisco, announcing the board’s recommendations and Kalanick’s leave of absence. A 16-member committee of senior execs would run the company and institute a round of image-repairing changes, such as adding a long-debated tipping feature to the Uber app and updating the entire driver support operation.

Kalanick wasn’t at the all-hands meeting, nor did he come to the office over the following week. But employees and board members never stopped feeling his presence. According to numerous insiders, Kalanick was dialing into conference calls, reviewing internal data, and recruiting candidates to fill the open spots on the executive team. Gurley also heard from several major investors, saying that Uber’s finance team was quietly spreading the word that Kalanick was still in control.

Even in top-level conversations where Kalanick appeared to be absent, other executives and board members suspected that Huffington was serving as his proxy. The founder of the Huffington Post was a constant presence at Uber’s offices, making suggestions that seemed to promote her new wellness company, Thrive Global Holdings LLC. For example, she wanted to put “nap pods” at driver hubs and give drivers meditation wristbands. Huffington’s company received $50,000 in consulting fees from Uber. The perceived self-dealing didn’t go over well internally, and she had the money returned, according to a person familiar with the matter. A spokesperson for Huffington says that Thrive provided services at cost, and that Huffington refunded the fees when events required her to take on a more active role at Uber.

Founders enjoy an exalted status in Silicon Valley. Apple Inc. once fired Steve Jobs; then he came back and led it to historic greatness. The dismissal of a successful founder has been considered a cardinal sin ever since. Benchmark is very Silicon Valley: You’re either 100 percent behind a CEO or against them. There is no in-between.

In a meeting at the firm’s offices in Woodside, Calif., a few days after Kalanick went on leave, Gurley and his partners came to a decision: Kalanick had to go, for good. They quietly reached out to other investors—First Round Capital, Menlo Ventures, Fidelity Investments, and Lowercase Capital—which all called meetings of their respective partnerships. Five signed a letter imploring Kalanick to resign.

On June 20, Benchmark dispatched two partners, Matt Cohler and Peter Fenton, to confront Kalanick in Chicago, where he was interviewing Walter Robb, the former co-CEO of Whole Foods Market Inc., for the open COO spot. The venture capitalists surprised Kalanick at the Ritz-Carlton hotel and presented him with a letter, titled “ Moving Uber Forward.” It accused him of a number of leadership missteps that put the company in legal peril. It asked for his resignation as CEO and to relinquish the board seats he controlled.

Uber being Uber, nothing went as scripted

Benchmark viewed its letter as an opening gambit. The firm and the other investors represented only about 40 percent of Uber’s voting shares—not enough to force a resignation. But it had other kinds of leverage. Cohler and Fenton told Kalanick he had a few hours before they went public with their allegations. They also said that if he resigned, they would tell the world he had quit on his own terms.

Kalanick spent the next few hours in a panic, consulting with Robb and calling allies, lawyers, and investors. In the late afternoon, Huffington called Kalanick and prodded him to step aside. The two agreed that the letter was the first move in a lawsuit for fraud and the likely start of a bitter fight for control that would further damage the company he helped build.

Kalanick later told friends that, after “five months of pummeling,” he lacked the energy for another fight. So, to the surprise of the two Benchmark partners and Gurley, who saw little chance that he would acquiesce, Kalanick signed the documents at the Ritz in Chicago.

Uber being Uber, nothing went as scripted. The New York Times ran a detailed story about the resignation, infuriating Kalanick. What he believed was going to be a graceful departure now looked like the Benchmark-administered ouster it actually was.

Kalanick reneged on his agreement to let go of his board seat and the two others he controlled. He also began calling early Uber employees, asking whether he’d have their support should he call for a shareholder vote. On Aug. 10, Benchmark’s Cohler started contacting his board members from a safari in Africa to alert them: Benchmark was suing Kalanick in Delaware court, accusing him of fraud and of breaching his fiduciary duty. A few days later a group of investors loyal to Kalanick filed an amicus brief in support of him and against Benchmark. (Kalanick has denied Benchmark’s claims. Benchmark has agreed to drop the lawsuit once a deal with SoftBank Group Corp. goes through. Kalanick plans to sell one-third of his stake in the deal.)

The ex-CEO is really into a smartphone puzzle game. Illustration: Patrick Leger for Bloomberg Businessweek

Although he no longer came into the office, Kalanick managed to keep himself in the middle of the company’s affairs. He lobbied for his own pick as successor, former General Electric Co. chief Jeffrey Immelt. The Uber directors would have none of that—they suspected that Kalanick had secured an agreement from Immelt to serve for only two years, paving the way for his Jobs-like return. Kalanick also flew to Seattle to interview a wild-card candidate referred by investor TPG: Expedia Inc. CEO Dara Khosrowshahi, who later marveled to friends that it certainly felt like Kalanick was still in charge.

Indeed, Kalanick had some tepid support inside the company. But his vote counting rankled even his defenders. He was also calling executives daily, asking for detailed information about the business. Even worse, he ordered the security team to dig through an employee’s email to see if that person was leaking a potentially damaging story. It all proved too much for the 16-person executive team, which signed a letter to Uber’s board—but clearly directed at Kalanick—asking them to refrain from reaching out to employees or meddling in the company’s daily affairs. Kalanick’s own handpicked executives turned against him.

Somehow, amid the dysfunction, Uber hired Khosrowshahi, who impressed the board with a thoughtful PowerPoint presentation that included a slide that read, “There can be only one CEO at a time.” Khosrowshahi was all that Kalanick wasn’t or couldn’t be: humble, a good listener, and a diplomat. In a pointed reversal of Kalanick’s mantra, he would say: “We don’t have a PR problem; we have an ‘us’ problem—we have behaved poorly.” And when the city of London revoked Uber’s operating license in September, Khosrowshahi visited, met with taxi regulators, and published an open letter. “On behalf of everyone at Uber globally, I apologize,” he wrote. “We will appeal this decision on behalf of millions of Londoners, but we do so with the knowledge that we must also change.”

It would be Khosrowshahi’s responsibility to find capital infusions (such as the recent investment by a consortium led by SoftBank), cut the company’s burn rate (2017 losses: $4 billion), settle some of its legal problems (lawyer fees over two years: an estimated $500 million), and march toward a 2019 initial public offering.

Kalanick has privately told people he thought the apology tour was a mistake. But his opinion no longer matters—Uber’s new COO, Barney Harford, says he was hired without ever meeting him. The SoftBank deal will make Kalanick a billionaire. Friends say he’s trying to keep busy. He’s setting up a family office and spending time with his father in Los Angeles. And he’s getting very good at 2048, the single-player smartphone puzzle game.

For more on Uber, check out the Decrypted podcast: