This could be a good title for a song, book, or even a Broadway play – but I’m sure investors are hoping it’s not going to be the ending to what they thought was a storybook start-up company.

When I was taking my graduate courses in college, I had one professor who had a number of pearls of wisdom. Some made sense, others were laughable. The one that I carried forward into my business life was quite simple: If you are going to start a business, grow it slowly. Of course, the basic essentials for starting a business are necessary – but once you have them in place, grow your business slowly, he advised.

My professor was quite wise in his approach to economics, as I myself witnessed over the course of my professional career. Now, why did I use the above headline for this article, you might ask? The answer is pretty straightforward.

For months and years, we have been talking about Uber, and how the company’s gross revenue has grown at an astonishing rate. The problem is, they accomplished this feat in the same way that gamblers try to bolster their winnings: They knew they were playing with the house’s money (the money of the aforementioned investors), and it made them a little reckless; it made them willing to take chances that they might not otherwise have taken. Like many gamblers, they seem to have gotten caught up in the moment, and lost track of where they were. Once that happens, it’s easy to get wiped out and lose everything.

Uber’s investors are also gamblers – they have been betting that the company they staked money to will give them a big return on their investment… or more specifically, they have been hoping that the company will turn a profit, sooner rather than later. The investors also initially bet that the company would be run by competent individuals, with the right skill set to make it successful. Unfortunately, that certainly hasn’t been the case with Uber.

In the June 21, 2017 issue of the Harvard Business Review, in the Business Law section, an article by Benjamin Edelman was given a title that says it all: “Uber Can’t Be Fixed – It’s Time for Regulators to Shut It Down.” For those who don’t have access to the Harvard Business Review, I will highlight quotes from the article, due to the length of the piece and the amount of space I have here. The article opens with the following paragraph: “From many passengers’ perspective, Uber is a godsend – lower fares than taxis, clean vehicles, courteous drivers, easy electronic payments. Yet the company’s mounting scandals reveal something seriously amiss, culminating in last week’s stern report from former U.S. Attorney General Eric Holder. Some people attribute the company’s missteps to the personal failings of founder, CEO Travis Kalanick. They have certainly contributed to the company’s problems, and his resignation is probably appropriate. Kalanick and other top executives signal by example what is and is not acceptable behavior, and they are clearly responsible for the company’s ethically and legally questionable decisions and practices. But I suggest that the problem at Uber goes beyond a culture created by toxic leadership. The company’s cultural dysfunction, it seems to me, stems from the very nature of the company’s competitive advantage: Uber’s business model is predicated on lawbreaking. And having grown through intentional illegality, Uber can’t easily pivot toward following the rules.”

The article goes on to speak about how the company came into being with nothing that the industry didn’t already have. The article also went on to speak about how Uber is steeped in its illegalities. Its method of entering the industry is to NOT abide by the existing laws, rules and regulations. If Uber is to survive, it must change its methodology and become a legal and law-abiding company.

A word to the wise: Investors will only stay around for so long, and then demand that the board of directors make the necessary changes to bring the company in line, or they will pull the plug. With Travis Kalanick gone and a number of other executives also high-tailing it out of there, we can only wait and see what will be the outcome.


Article by Victor Dizengoff

Victor Dizengoff is a retired industry icon and a founder of the New York Black Car industry.

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