Moneycontrol
Feb 03, 2017 08:23 PM IST IST | Source: Moneycontrol.com

Why Uber CEO‘s exit from Trump‘s council is purely economic

Often open defiance of government‘s laws may be good for brand positioning, market share and sales. It makes complete economic sense.

Uber’s defiance of the US President Donald Trump’s travel ban policies, its CEO Travis Kalanick stepping down from business council and the move to defy the ban with Karnataka government has a common thread.

Often open defiance of government’s laws may be good for brand positioning, market share and sales. It makes complete economic sense. Here’s how: 

Uber’s open defiance of repeated bans in Delhi and Karnataka, even by Courts, has led it to capture significant market share - both from existing taxi players such as Meru, Mega Cabs and local app based aggregator - Ola.

Had it complied with the ban and waited for judgements to turn in its favour, it would have lost out a lot of market share and thus on valuation of its business. It also points to a certain fact - which legislators should understand - laws will always lag technology around the world.

Just because something is written in a Constitution or legal framework of a country may not mean it remains relevant for its citizens spread across generations. A new service, technology, innovation or change in dynamics and culture of markets often make laws redundant.

Unless some entrepreneurs, thought leaders and companies revolt against existing laws even if it threatens security of their businesses, laws don’t change.

A growing army of lawyers, lobbyists and a strong technology backend is a foundation on which Uber is able to pick up fights with various state governments even as its CEO hobnobs with Presidents and Prime Ministers of the same governments.

(Source: Tracxn)

Uber’s recent India hire of Madhu Kannan, the former Public Affairs head at USD 100 billion Tata Group, is a testament to its growing need for strong public affairs teams.

Technology is also core to Uber. So much so that when Delhi’s Government wrote to Centre’s Ministry of IT asking for a ban the IP address of Uber’s - it was unable to do so technically.

Pacifying the Chinese and the Saudis by distancing from Trump

Uber also played to the gallery with its CEO stepping down the Trump’s Economic Council.

The stepping down of Travis Kalanick from Trump’s economic council will signal a distancing from the Administration policies to global investors and the Silicon Valley community, upon whom Uber is largely dependent to raise funds.


Source: CrunchBase

Uber’s large investors include foreign funds led by Chinese major Baidu as well as Muslim nation Saudi Arabia’s public investment firm that invested USD 3.5 billion in it. Trump has picked up fights both with China and Muslim nations around the world a few days within his presidency.

It’s imperative for American tech entrepreneurs to keep the Saudis happy. Saudi billionaire Prince al-Waleed bin Talal is an investor in Uber rival Lyft, as well as Apple and Twitter. It’s imperative to note that Saudi Arabia - a major source of funds to terror groups was not mentioned in the travel ban.

Trump’s travel ban on seven nations also led to protests by Silicon Valley CEOs. Major among them was Sergey Brin, who stood in protest at the San Francisco Airport. His firm - Google’s investment arm Google Ventures is a major investor in Uber.

It’s no secret that taxi industry is largely dominated by immigrants in any city in the world. It’s one of the easiest skill to pick up and requires little investment.

This is what Uber CEO Travis Kalanick wrote in a post addressing and assuring drivers of compensation. “Drivers who are citizens of Iran, Iraq, Libya, Somalia, Sudan, Syria or Yemen and live in the US but have left the country, will not be able to return for 90 days. This means they won’t be able to earn money and support their families during this period.”

Not only this step makes Uber’s brand stand out in defiance of Trump, it also will make it attract drivers from rivals who will be assured of earnings in case of more immigrant bans going forward.

Of course, it also stops people from uninstalling Uber’s app. Over 200,000 people are reported to have [deleted Uber from their smartphones via a Twitter campaign.

The developments by Uber show that sometimes refuting the governments in democracies can be good for topline.

(This is an opinion piece)

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