Uber’s Dara Khosrowshahi — Bringing a culture back from the brink

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0:44It unlocks their potential. If you want to increase your team's efficiency and uncomplicate your business, try Fresh Service for IT and Fresh Desk for customer support. Learn more at Freshworks.com. Does it ever feel like you're paying for 20 platforms to do the job of what really should be just one? That's not software as a service or SaaS. It's SAD, software as a disservice. Replacing your stitched-together tech stack with one platform for all your departments? Well, that's Rippling. Rippling eliminates the bottlenecks and busy work of legacy tools and point solutions by uniting your global HR, IT, and spend teams on just one platform.

1:29And right now, you can get six months of Rippling free when you sign up at rippling.com slash scale. That's R-I-P-P-L-I-N-G dot com slash scale. Don't get sad. Get Rippling. Terms and conditions apply. Hi, listeners. It's Reid. Today, we're sharing an episode with Uber CEO Dara Khosrowshahi. Today's show will tackle some of the most fascinating and complex topics you can encounter when you lead a company from startup to scale. But at its core, this episode is based on a simple, timeless story. So simple, you could tell it to your kids at bedtime. And that's how we'll start the show. Okay, Jack, Amelia, do you want to hear a story?

2:19Yes. A story! Okay, what story should we read? A pirate story. Okay, you got it. The Adventures of Captain Jess Specklecrow. Jess Specklecrow here. Whoa. Her band of pirate rogues. Arr! Chapter 13. The Pirates Agree to Change Their Ways.

2:48Captain Jess Specklecrow and her band of cutthroat pirates were counting the treasure from their latest raid aboard their fearsome ship, the Masters of Sail. One doubloon, two doubloon, three doubloon. Excuse me, Dad. What's a doubloon? Doubloon. It's money. It's like they're counting their dollars. Oh, one money, two money, three money. One money, two money, three money. Jess looked across the deck at the faces of her pirate crew. What a sorry sight. Despite all the treasure that they had stolen, something didn't feel quite right to Jess. It was a feeling that had been bothering her for a while now.

3:35Listen up, crew. Jess yelled, but the pirates were too busy divvying up their spoils to pay attention. Over by the fossicle, a pair of gnarly sea dogs were fighting over a shiny, polished ruby. They were? Ruby? Ooh, I love rubies. Looks like you want to go for a swim. Come here, you salty dog. Find your own. That's my ruby. You got me. It is but a scratch. While over by the mainsail, a gaggle of pirates had cracked open a case of rum. What's rum? Rum is a grown-up drink. Oh. Jess sighed, drew her flintlock pistol, took aim at the barrel of rum, pulled back the hammer, and fired. Listen up! Daddy, I have a question.

4:33I went to the zoo And I had fun at the zoo And we saw some peacocks I said listen up We're known for being the most ruthless band of pirates in the Silicon Isles Arr, her motley crew cheered Arr We've smashed our year-on-year booty growth projections yet again. Arr! The pirates shouted again in excitement. Arr! And our plank walking optimization algorithm has sent more of our prisoners to Davy Jones' locker than any other. Arr! They all cried. Let me hear you say arr. Arr! Jackie, say arr! Arr. No, say it loud! Say it loud! But our fiendish reputation has got the best of us. It's time we put our pirating ways behind us.

5:33It's time we shaped up and became a navy. The pirates gasped. A well-behaved navy with shiny uniforms and disciplined officers and those things that stop you doing bad stuff. What do you call those things again? Morals. They're called morals. Morals! If we shape up, leave behind our low-down ways, and do the right thing, we can get even more treasure, not just for us, but for everyone! A silence fell upon the pirates. They looked at one another. Then, one of them began to chant. Navy! Navy! Navy! And other voices joined. Navy! Navy! Navy! Navy! Until the chorus of pirate voices echoed about the rigging.

6:32Navy! Navy! Navy! Navy! Navy! Navy! And the legend of Jess Specklecrow and her honorable Navy lived on forevermore. The end.

6:52Can I please hear another story? Please, Daddy? No. Right, I live in the video. The end. The end. Thanks to our producer, Chris McLeod, and his children, Amelia and Jack, for letting us listen in on Storytime. Thanks, Chris, Amelia and Jack. Like many stories of redemption, there's a moral to be taken from the tale of Captain Jess Specklecrow and her pirate gang. It's an obvious one that even an easily distracted four-year-old can grasp. But that said, it's a lesson many founders forget. There's a romantic notion that startups should behave like a band of pirates as they fight their way hook and cutlass towards scale.

7:36And there's nothing wrong with that. It's a view I wholeheartedly agree with. as long as you keep a firm grasp on your ethical compass and realize that your days as a swashbuckler must give way as your company matures. I believe that every startup must transition from a band of roguish pirates into a disciplined navy. Get the timing wrong, and you'll quickly be lost at sea. You've got to have incredible talent at every position. It's like this huge push. There are fires burning when you're going home. Can you believe it? Such an idiot. And then you go back to, this is totally going to be amazing.

8:14There are so many easy ways. I have no idea what to do. Sorry, we made a mistake. But you have to time it right. Oops. Working out of a three-bedroom apartment. Stuff that just seems absolutely nut balls. Ten years later, we're like, well, that's just how you do it. We haven't made it just how you do it.

8:33This is Masters of Scale.

8:38I'm Reid Hoffman, founder of LinkedIn, partner at Greylock, and your host. And I believe that every startup must transition from a band of roguish pirates into a disciplined navy. Get the timing wrong, and you'll quickly be lost at sea. For decades now, startups have had an affinity for pirates, and it began, like so many things in tech, with Steve Jobs. When Steve was building the first Macintosh, he coined the phrase, it's better to be a pirate than to join the Navy. The Mac team got on board, creating a homemade pirate flag with a rainbow-colored Apple logo as an eyepatch. In Silicon Valley, the pirate image stuck.

9:23It's easy to be seduced by this image of the entrepreneur as a pirate. Who doesn't want to leap across the rigging, cutlass in hand like Johnny Depp? And look, early stage startups are a lot like pirate ships. Pirates don't convene a committee meeting to decide what to do. They strike quickly, break rules, and take risks. And you need this buccaneering spirit to survive when the cannonballs are flying and the odds are against you. But some startups cross the line from swashbuckling hero to dirty, rotten scoundrel, especially as they grow. You can tip from a culture that joyfully flaunts orthodoxy to a culture that truly believes that winning is all that matters and ethics be damned.

10:11And there's a second problem with piracy. It doesn't scale. If you succeed as a pirate, your stockpiles of treasure will grow. The territories you control will widen. But you can't protect and patrol that much territory with only a ragtag fleet of pirate ships. This is why every startup needs to shed its pirate nature at some point and evolve into something more akin to a Navy. No less heroic, but more disciplined, with rules of engagement, lines of communication, and long-term strategy. I wanted to talk to Dara Khosrowshahi about this, because in accepting the role as Uber CEO, he's taken on the most extreme pirate-to-Navy transition I've ever seen.

10:56Uber blitzscaled to become the most valuable startup in the world. It also became notorious for a toxic culture rife with discrimination and questionable business practices. Uber has already secured its place in business history. Whether it's seen as a success or a cautionary tale or both, rests on Dara's ability to transform the company from a pirate ship to a disciplined Navy fleet. Throughout his career, Dara has built a reputation for running very large, very successful organizations with no drama. In other words, he's a classic naval leader. He was primed from a young age to act like an admiral, not a brigand.

11:37During his childhood years in Iran, his father would often bring him to work at the factories of the family business. When we went to these factories, he was beloved. The employees just loved him. And the way that he spoke with our employees was just amazing. It was very human. It made a huge impression on the young Dara. My father is the most modest person alive, and he never confused his position of authority as a manager with his position as a human. In 1978, Dara's family was targeted by the radical opponents of Iran's then leader, the Shah. Dara's family escaped to the U.S. After the revolution in Iran, their business was nationalized and lost to them.

12:26Our whole family was in this business and worked together. So to see that connection lost was very tough. I didn't understand it until later in my life. The family slowly started over in America. What it taught me was that when you think you've lost everything, you really haven't. The opportunity to rebuild showed me that you can take risk, that failure isn't final, that you can get back up, dust yourself up, and get going again. This resilience in the face of adversity, the belief that things can and will work out, is essential for any leader, and especially when leading through a turnaround.

13:10That skill will come in handy later in the story. But Dara's first job out of college was with the media investment bank, Allen & Company, in New York. It's here he met the iconic media executive, Barry Diller, who was a client. In truth, the two never should have met. I was the grunt who was doing the grunt work, which then should have translated into a beautiful presentation which a wonderfully polished vice president would deliver to Barry Diller. Barry didn't want that. He wanted to know the person who was running the numbers because he wanted to make sure that those numbers are right. Barry relied on Dara for the facts.

13:50I remember distinctly Barry Diller hovering over my computer saying, when are you going to print out the new spreadsheet so we can take a look at it? I'm under pressure. I'm sweating in my suit at the time. and Barry's waiting for the printout to happen, impatient for these slow laser printers. And then we would go through the printout. He wanted to understand himself and he wanted to go to the source. By hovering over Dara's desk, Barry was bypassing the hierarchy that can make a Navy slow to react or keep the truth from those in command. Barry grew to rely on Dara for this kind of unfiltered truth and he soon enlisted Dara as a Commodore in his new naval command.

14:34Dara ran a lot of things for Barry. He started at USA Networks and later became Barry's CFO at Interactive Corp., or in short, IAC. In 2005, he became the CEO of the travel website Expedia, owned by IAC. Expedia was experiencing intense competition, and some hotel chains had withdrawn from the site. It was up to Dara to turn the company around before its problems got too serious. I was working harder than I ever had. I was in every single meeting. I was working day and night. I was making decision after decision after decision. I thought I was doing a great job. I had no idea. Dara had been at Expedia for just one month, but already he had set a tone of openness and honesty.

15:21It meant that employees felt free to speak their minds with him. I had an eye-opening moment when a young product manager, Jen Pierce, I still remember her, came to me just to shoot the breeze in my office. She came and said, you know, Dara, you keep telling us what to do instead of telling us where to go. And we like you, so if you tell us where to go, we'll figure out our way there. But if all you do is tell us what to do, then whenever you're not in a meeting, nothing happens. So can you just tell us where to go and then let us get there? In this one conversation, Jen transformed Dara's trajectory as a manager.

16:03For me, it was like, boom, eye-popping. I had to really work very, very hard because I was a bit of a control freak to let go of what people are doing and really start talking about where we're going and trust my team to get us there. Dara had just learned an early lesson in running a navy. From the outside, it might appear to you that you command a fleet of ships by telling each one exactly what to do. But that's not how the chain of command works. The admiral doesn't tell each submarine commander the precise depth to dive to. The admiral gives broad direction and trusts that their officers know what to do.

16:45This combination of strong local leadership and a strong centralized chain of command is what defines the most successful navies and distinguishes them from the pirates. Dara successfully grew Expedia into a$23 billion giant that won praise as one of the best managed companies in its industry. During his tenure as CEO, Expedia more than quadrupled its gross bookings, demonstrating Dara's ability to command a major enterprise through a period of significant growth. And then everything changed. You get a phone call. The phone call says, hmm, we'd like you to consider Uber. Why did you take the phone call?

17:29At first I didn't. I said, why would I do that? I'm in such a great spot. I was comfortable. And I was blind that, you know, the goal of life shouldn't be comfort. Dara remained comfortable at Expedia. But then a second call came in. I had a drink with actually Daniel Ek at Spotify. And Daniel asked me, have they called you about this thing? Because I recommended you for the job. I said, yeah, but I said, no way. Like, why would I do that? I'm in a great spot. You know, I'm happy. And Daniel looks at me and says, Dara, since when is life about happiness? It's about doing something great. This is important.

18:07You have to do this. Daniel and Dara were both right. The role at Uber was important, and it would certainly not be comfortable. Let's recap Uber's situation at the time. Uber's mission was to make transportation as easy to access as running water. The company grew incredibly quickly as it pursued this mission, fueled by over$22 billion in VC funding. But as the company scaled rapidly, so did its toxic culture and bad business tactics. These led to a constant stream of nasty and very public challenges. They included political infighting, allegations of corporate espionage, and criminal investigations.

18:52Then there were the many run-ins with regulators, taxi firms, and even Uber's own drivers. Uber saw a backlash in its key markets and withdrew from some, such as China. Back home, Uber's controversial approach to charging higher fares at peak times came to a head with a hashtag Delete Uber campaign. This was all against the background of Uber's aggressive bro culture and its cavalier attitude to spending. In February 2017, six months before Dara became CEO, a blog post by former Uber engineer Susan Fowler blew the lid off the misogyny and harassment that was rife at the company. Arianna Huffington became deeply involved in trying to fix the company's culture.

19:41She was the only woman on Uber's board of directors at that time. It was very important for the board to make it very clear that we were taking the accusations seriously, that there was going to be a full investigation and that we're going to hold management accountable. And one of the things I said was something that goes beyond what's happening at Uber, which is, you know, the whole culture of, you know, worshipping at the altar of hyper-growth, and therefore, if you're a top performer, anything is allowed. I said, I promise that going forward, no brilliant jerks will be allowed at Uber. Ariana and the board set out to rid Uber of brilliant jerks, But a lot of work remained for Dara.

20:30Looking at what Uber had been through and was going through, Dara knew he would need to build trust quickly. To do this, he needed unfiltered truth. And like an admiral, stepping aboard a flagship, full control. Dara made this clear during a presentation he gave to the Uber board during his interview for the CEO position. One of the slides in that presentation said, Don't call me, I'll call you. Were you nervous about putting that slide in? I was nervous about putting that slide in, but I thought that it was very important for my relationship with the board to be one of truth and to be a frank relationship that would set us both up for success.

21:14If I'm coming in as a CEO, I've got to have authority. I needed room to affect change and to move the company in a different direction. And it was my way of telling the board and some of the founders that give me the authority and then judge me based on my actions. Dara set the tone of his relationship with the board before he was even offered the job of CEO. It was a gamble to speak to the board this way, but Dara knew that the only way he could take on the challenge of Uber was on his own terms. And one of those terms was unfiltered honesty. I think sometimes communications that are just dead honest are tough, but you have to force yourself to have those discussions because you get to the core of expectations and relationships.

22:02And ultimately, they draw very healthy relationships between individuals or companies or boards and their CEOs. Well, honesty, especially difficult honesty, is how you build trust. Absolutely. Right, because they're like, okay, look, I'm being straight with you. This is how we need to operate. If you disagree with me, talk to me about it. Yes, yes.

22:25The board chose Dara. After the break, we'll hear what he found when he arrived at Uber and what he did to start the company's long-overdue transformation from pirate ship to naval vessel.

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24:44IBM helps you turn AI into more than potential. It helps you turn it into smarter ways of working and ultimately scaling. Let's create smarter business, IBM. Before the break, Dara had just taken on the role of Uber CEO. He had walked into a situation surrounded by some very public controversy. What was that like? I asked them. So then you start and you already know that there's a lot of things broken. Broken relationships with governments, bro culture, blog posts and all the rest happening outside. There is critiques about being overly aggressive and not very ethical in terms of business practice.

25:30What does the first week look like walking into that? I'm listening to you. I'm sweating because I'm remembering that first week. You know, I think one of the wonderful surprises for me coming in was that the public perception of the company was so different from the people that I found at the company when I joined. These are unbelievably smart people who can get another job at the drop of a hat. But the team that was there, they wanted to fight because they believed in the company. And that was one of the most delightful things when I got on, which was there's a group of warriors who were fighting for the company.

26:17Dara knew that most people at Uber were not pirates, but the culture there had promoted piracy for many years. And I think it's important here to draw a distinction. While all startups have pirate-like qualities, scrappiness, inventiveness, rule-breaking, there's a difference between ethical pirates and criminal pirates. Ethical pirates may ignore conventional rules, but they're driven by their own strong moral code. Think Johnny Depp in Pirates of the Caribbean. Criminal pirates have no such moral compass. How can you tell if your company has crossed the line? The broad question you should ask yourself is, am I a creator who is trying to improve the state of the world for everyone, or am I a thief who is just trying to grab things for myself?

27:05In creating a company, you are creating something for yourself, but you also need to be making a wide variety of consumers and businesses better off. Dara knew that in transitioning from pirate to Navy fleet, he'd need to firmly end the era of criminal pirates at Uber, while encouraging the many ethical warriors he found amongst its ranks.