Travis Kalanick, CEO of Uber. Photograph courtesy of Uber.
In December, a new for-hire chauffeured car company opened in Washington, but with a technologically advanced twist. Uber is an app. The cars are ordered, paid for, and tracked with the app. It’s been a popular service—almost too popular on New Year’s Eve, when some customers claim they were charged much higher rates than expected. The company said it was using “surge pricing,” the only way it could remain competitive on a night with typically epic demand for hired cars.
Travis Kalanick, the millionaire cofounder and CEO of Uber, called us from San Francisco to talk Uber, the Washington customer, and New Year’s Eve. At the same time, DC Taxicab Commissioner Ron Linton accused the service of operating illegally, and said he planned to do something about it. That’s where we started our conversation.
What do you have to say to Ron Linton’s assertion that the Uber service is operating illegally in Washington?
We launched in Washington, DC, last month, confident that we are compliant with the rules and regulations in the District. Prior to launching, we had a conversations with representatives of the taxi commission that helped us understand the regulatory landscape and convinced us that the Uber transportation alternative was legal in the city of Washington, DC. We have reached out to Ron Linton and the commission so that Uber can understand the concern that Linton voiced at the taxi commission hearings this morning.
Before we talk about what happened on New Year’s Eve, how about a bit of background on you?
I like pralines-and-cream ice cream.
Where are you from?
So you probably know all about cars.
I know about traffic. I spent a disproportionate amount of my time in a car in LA. I’m 35 years old. If you add up the hours spent in cars, it would be years.
Where did you go to school?
UCLA to study computer engineering.
What did you plan to do with that degree?
I’m a geek. A techie geek. The idea was following my passion.
When did you graduate?
I did not graduate.
Oh, you’re another one of those.
Yes. I’ve been an entrepreneur since I was 18. I started a company with a bunch of buddies that got funded in my senior year, and that’s when I finished school. It was called Scour, a peer-to-peer service, file-sharing. We ended up declaring Chapter 11 bankruptcy after being sued by 29 of the largest media companies in the world for $250 billion. That’s billion with a B.
Did you have to pay?
We settled in court. We paid the media companies $1 million in cash and turned the technology off. A million is a lot less than $250 billion.
How did you get from there to the limo business?
After Scour, I started a company called Red Swoosh. The idea was to take those litigants who sued us for a huge amount of money and turn them into customers with the same technology. I wanted to get them to pay me. It was a revenge business.
Did you have your revenge?
When you first start something like that, it feels like revenge, but at the end of the day we had content from 23 of those 29 litigants flowing through our system, and then we sold to a company in Cambridge, Massachusetts. I stuck around for a year and then did some angel investing. I needed a little recharge. One day, my cofounder and I noticed it was very hard to get a cab in San Francisco. We thought, Man, what if we could just push a button and a car would come?
And so you began Uber. Was that the original name?
No. It was called Uber Cab. But we had to take the “Cab” off because the city of San Francisco sent us a cease and desist order. They were trying to shut us down. Their claim was that we were marketing ourselves as a cab company. So instead, we took “Cab” off the name.
What year was that and when was your first expansion?
We rolled out in San Francisco in 2010. New York was May 2011, then Seattle, Chicago, Boston, and Washington and Paris in December.
You weren’t worried about growing too fast?
No. As an entrepreneur I try to push the limits. Pedal to the metal. And the good thing is that the numbers are looking good in all the cities we’re in.
You also just got a nice little windfall, right?
We raised about $35 million from Jeff Bezos, Goldman Sachs, and Menlo Ventures.
Did you go after it aggressively?
No. Basically we had a lot of inbound interest from investors. We didn’t need the money, because the operations are doing phenomenally well. But it was an opportunity to get investment and to expand rapidly in Europe and Asia.
What have you learned about Washington, DC, since you opened here? Is it a typical market?
It’s not typical. It is a special place. We’ve never seen an adoption of our service so rapidly as in DC. We are less than a month in DC—we opened December 16—and we are where San Francisco was after nine months.
Who are the Washington customers?
People who want a convenient and classy way to get around town. Both genders. The age demographic is very broad, from mid-twenties all the way up. The most activity is at rush hour in the morning and evening, and nightlife.
Do you find it easy to compete with Washington’s cab system?
DC actually does not have hard limits on how may taxis are in the city, which is very unusual. There are more taxis per 1,000 residents than anywhere in the country.
How does Uber actually work?
We’re connecting riders and drivers. They are not our cars and not our drivers. They have their own companies, or they’re freelancers. We partner with these limo companies and help fill empty times of demand for them.
You don’t own any of the cars?
So in theory, a person could hire a limo from a conventional company, and while that customer is in the Kennedy Center for two hours, his or her hired limo driver could pick up a job with you during that time without them knowing.
We don’t recommend that during jobs. But between jobs we recommend that.
What happened on New Year’s Eve?
There was an unprecedented demand nationwide.
But some customers complained about fees. Where was the disconnect?
I think the question is whether dynamic pricing makes sense in a transportation system. That’s the big question. I don’t view it as a disconnect but as people having different opinions on this.
What did you learn?
Dynamic pricing is something that is necessary on the biggest transportation night of the year. I think we did a decent job. We were straightforward about the multiples of the price. The screen was very clean, showing, “This is going to be two times the price.” But people wanted to see a minimum price, an average price. We can make that user interface better so they see a dollar figure. Nobody wants to have to do math on New Year’s Eve.
Were there any problems unique to Washington that night?
There was a huge demand in Washington, and the surge pricing multiple got very high. We had to take it down. It was too high.
What are your thoughts looking back?
Every day I get a little smarter. It was an interesting experience.
On average, what should a customer using the Uber app expect to pay?
We charge time and distance like a taxi, but it costs 50 percent more than a taxi. But it’s a town car. You call it entirely on an app. You can see the car coming to you on the app. The drivers are high-quality and nice guys, very courteous. Our motto is: “Everyone’s private driver.”
With your background, does it feel like a good fit being in the chauffeured car business?
For me, it’s a math problem and a business problem put together. You have an industry that hasn’t changed much in 30 to 40 years, and we’re changing it through lots of math and interesting technology.