After a string of scandals and embarrassments, Uber’s embattled CEO Travis Kalanick was forced to resign. The assumption is that he was pushed out for bad behavior. The truth is more prosaic: The other problems compounded the basic one that he lost a lot of money. Uber lost $2.8 billion on $6.5 billion of revenue in 2016.
Many years ago, Fred Wilson, one of the top VCs in the world, famous for his role in companies such as Twitter and Zynga, put it succinctly: “VCs have control when things don’t work. Entrepreneurs have control when they do.” That’s common sense in most of the business world. But as the Uber debacle shows, legal provisions such as board seats or shareholder voting rights matter much less than actual performance in Silicon Valley too.
The prevailing mythos of Silicon Valley says that it is visionary founder-CEOs – think Bill Gates, Steve Jobs, Mark Zuckerberg – who create great companies and need to be insulated to work their magic.
And yet, Kalanick, one of those visionary founders, was just ousted from the company despite having a great deal of control.
Steve Jobs never had formal legal control at Apple. He was ousted from the company in the 1980s because the visionary products he shepherded – the Apple Lisa desktop computer and then the Mac – were commercial failures. When he returned to the company in 1998, he put out a string of highly successful products that brought the company back from the brink and then ensured strong profitable growth; his leadership was never subsequently questioned.
Facebook has had various growing pains as a fledgling social network, but its user numbers and revenue never stopped growing.
Many have fretted about the corporate-governance implications of Snapchat going public by releasing only nonvoting stock to the public; but if the company ends up cratering, CEO Evan Spiegel is likely to be outgoing.
As an Uber watcher (and mostly satisfied customer), Kalanick’s ouster feels bittersweet. Uber’s aggressive, macho culture caused problems; but it also seems clear that without it, Uber would never have managed to become the behemoth it is today, one which has changed transportation forever, and that culture came from Kalanick. His ouster is another reminder that meteoric growth and arresting vision are never enough. A CEO who is making a healthy profit for his firm has a secure position; but, even in Silicon Valley, a company that needs investors to stay afloat will sacrifice a founder if needed, whatever the company’s by-laws.
Pascal-Emmanuel Gobry is a fellow at the Washington, D.C.-based Ethics and Public Policy Center. Distributed by Bloomberg View.
