Sunlight > Growth

In late June, Travis Kalanick "resigned" from his role as CEO of Uber, the company he founded more than eight years ago. This is the latest and most significant event to-date in the continuing saga at the ride-hailing giant.

Regardless of the motivations behind this latest development, Uber's situation is one more important reminder that growth cannot cure all ails. Growth brings with it increased attention and sheds more light on whatever mission, culture, practices an organization or individual embodies - good, bad, or ugly.

Turd Storm

In case you missed the past six months of Uber news, the company has had a seemingly endless number of damaging revelations and stories surface.

• In February of 2017, Susan Fowler pend a post on her personal blog detailing her first account of sexual harassment from her direct supervisor going unchecked and ignored by the company.

• This spring the Justice Department also announced a criminal investigation into Uber's use of software that was designed to evade authorities in areas where the service was banned or restricted.

• At the same time, Uber is at the center of a court case over stolen documents from Google's self driving technology spinoff Waymo. The company recently admitted in a court filing that it knew one of its executives had secured documents from a previous employer.

• Rather than battening down the hatches, the executive team splintered and scattered. Uber's VP of Engineering, VP of Product & Growth, SVP of Business, Head of Finance, Head of Communications, Head of AI Labs, President of Ride Sharing all departed either by choice or by force.

• Reports are that the company has lost considerable market share and several billion in valuation based on the secondary market for its stock.

This turmoil is a downward spiral. The more departures, the more information flows from former or disgruntled employees about the toxic culture and the 'win at all costs' mentality that was clearly a company core value and reared it's head in very ugly ways. This brings even further departures and it repeats.

Over the last week or two it seems investors and the board realized the troubles weren't just going to resolve themselves. The largest investors grouped together and recommended Kalanick resign. A last ditch effort to stop the bleeding, change the story, and save the company that they have poured so much money into.  

Growing pains vs growth despite pain

All in all, it's a giant turd storm. Clearly the company has many organizational and cultural issues. These cultural issues are set against a backdrop of a company that's otherwise continuing to grow and mostly dominate it's industry at least within the U.S.

It's become clear that Kalanick and the executive team subscribed the belief that growth is what matters. Grow at all costs. It doesn't matter what you do or how you do it, grow. Growth is the goal and growth is seen as the cure to any ails along the way. We have a toxic culture? We are under investigation? If we continue to grow the business, those problems will simply go away. Essentially, Uber believed it could grow it's way out of the muck.

Internally it's an easy story for any startup to sell to itself / employees that raise concerns.

Venturing out and starting a company is hard.

Creating an entirely new industry is hard.

Challenging the status quo and all of the incumbent companies and stakeholders protecting that status quo is bound to be hard.

"They want us to fail".

"They want us to get distracted".

"We need to stay focused on what matters, growing the business".

If you're an investor or a current or prospective of employee of a young company a critical challenge is being able to discern when a company is experiencing growing pains vs when a company is growing despite unrelated pain and turmoil internally.

Not having enough time, resources, communication, planning, experienced management. Those are all valid growing pains. All are likely to be present when a small group of people band together and set their sights on an ambitious goal.

Ignoring or accepting sexual harassment, bullying, threatening, theft. These are not growing pains these are basic injustices and pains that shouldn't be accepted or ignored whether the company is 2 or 2,000 or whether the company's growth is up, down or sideways.

Growth will save us...until it sinks us

Unfortunaltey, this 'growth cures all ails' mentality is very common at many companies. In particular many startups. Watching this unfold and learning more about the mentality of Kalanick and the Uber culture reminded me of Dov Charney's story. Gimlet media published a season of their Startup podcast profiling the founder of American Apparel and the company he created.

Similarly, Dov had convinced himself that growth and profits would alleviate cultural issues and lawsuits that were strangling the company. Despite his undeniably brilliant mind for manufacturing and marketing, Dov reportedly treated his company like a personal pleasure land. Even after countless sexual harassment lawsuits were filed against him and the company, Dov expresses that the board and his investors and everyone else inside and outside the company really just cares about the company's profits and success. His position was that if the business was doing well everyone would turn a blind eye and be happy to let Dov be Dov.

It's a sad statement. For both Uber and American Apparel it was partly true. Early on, the evidence would suggest that for most startups and young closely held companies (those with few owners/ investors) it's true. As long as these little entities grow and produce results in the form of increased valuations or profits, or even offer the promise of those results, those select few owners and investors and early employees seem willing to turn a blind eye. Either because they don't know anything needs to change, they don't know how to change things, or they don't care.

Sunlight

It's ironic and interesting that in both of these cases, extreme growth of Uber and American Apparel and their founders catapulted them into the broader public arena that ultimately brought attention to their toxic cultures and ultimately brought a broader set of investors and stakeholders interests to the table.

It's well encapsulated by the adage, "sunlight is the best disinfectant".

If Uber had grown modestly at a few percentage points a year it would have run out of money. Without follow on VC investment, it would have died a quiet death. The internal mentality and any transgressions committed by employees along the way would have also been largely unknown. This is the case for many startups and many companies in quiet industries.

Instead we witnessed the alternative. Uber grew aggressively. The company's position and clout grew. The world began to pay attention to what the company was saying and doing internally. Employees began utilizing that podium to describe a toxic environment they were experiencing. At the same time the body of investors and stakeholders grew. Celebrities became board members. The stakes were raised. Uber and American Apparel's stories no longer became about their founders or the cultures their founders cultivated.

For investors and board members it became about protecting their images and their fortunes. When both founders and the cultures they inculcated became liabilities jeopardizing the present and future value of the companies they created it was time for them to go.

It's hard to know for certain whether each board was motivated to oust their founder for more altruistic reasons. Were they standing up for victims of their toxic cultures and sending a message to current and future employees, investors and customers that they were not going to condone what the companies had become known for?

More realistic is that the board, investors and stakeholders involved sought to protect themselves, their reputations, their investment, and the company that they served as fiduciaries.

Either way, the added sunlight provided by increased attention and notoriety revealed an ugly situation in both cases and illuminated a path that for the time being doesn't involve either founder.

[this note was originally posted on July 10, 2017 before it was re-posted on this site]