Uber and Out

June 21, 2017, 12:35 PM UTC

Travis Kalanick, visionary and pantomime villain, has resigned as CEO of Uber—under pressure from shareholders, as the New York Times, which broke the news, would have it.

The NYT said five of Uber’s biggest investors—Benchmark, First Round Capital, Lowercase Capital, Menlo Ventures, and Fidelity Investments—were convinced that Kalanick’s decision to take an indefinite leave of absence last week didn’t go far enough as a response to the governance scandals that have engulfed it this year.

It’s not yet clear which of those scandals contributed most to their decision. There are enough to choose from: the lawsuit by Alphabet unit Waymo that accuses it of stealing self-driving car technology; its toxic workplace culture; its systematic evasion of corporate responsibility for the welfare of its drivers; and so on, and so on.

Read: Uber Sued Over Allegations That Execs Obtained Medical Records of Woman Raped by Driver in India

However, it seems at first sight strange that these things alone would force such a seismic shareholder revolt. Uber’s investors have been well aware of Kalanick’s vision and his management style from the start, after all, even if they underestimated the whirlwind of negative publicity that they could generate. (The circumstances of board member David Bonderman’s resignation even hint at a degree of indulgence for the cultural concerns.)

It’s impossible for outsiders, who don’t have access to Uber’s books, to know. But it’s hard to avoid a suspicion that Uber’s business model is simply not living up to its initial hype.

Read: Answering the Question: Is Uber Doomed?

The assumption was that its unprecedented success in fund-raising would see it through to the day when it had an effective monopoly and could expand its margins accordingly. But its opponents have been more resilient than seemed likely at first. Its price advantage, built on pushing out costs such as insurance (or, if you prefer, safety) and social security onto others, is being challenged increasingly in courts in the U.S. and Europe. After being initially dazzled by the promise of the disruptive new model, regulators around the world have wisened up quickly to its negative side-effects—traffic congestion, public safety, and erosion of the tax base—and are now much more sensitive to the complaints of incumbents.

Read: Uber is Having a Terrible Week in Brazil

At the same time, the barriers to entry are not high enough to allow Uber to achieve a monopoly. From China and India to the Middle East and Europe, it faces opponents with similarly deep pockets, sometimes in partnership with automakers whose very survival depends on rising to the challenge from the disruption of mobility. Focus is also an issue. You can reasonably ask what Uber Eats is supposed to do that a handful of other delivery services don’t already do. All of these operational challenges would tax a focused and functional management, which Uber manifestly does not have right now.

Fortune‘s Adam Lashinsky, whose new book Wild Ride: Inside Uber’s Quest for World Domination chronicles the company’s rise and stumbles, came to the conclusion that Kalanick was at once Uber’s biggest asset and its biggest liability. The shareholders have taken the liability in hand. The biggest issue now is–what’s the long-term value of the remaining assets?

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