Uber’s Credibility Drought Leaves It Vulnerable In a Crisis


The NewCo Daily: Today’s Top Stories

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Reputation and track record really matter in a crisis. Say you have a ton of credibility and good will with your partners and contractors, and one day it turns out that an “accounting error” had led you to underpay them. You can probably just apologize, pay everyone what you owe, and move on.

Uber faced just this kind of problem this week — but unfortunately for the company, its reserves of good will are exhausted. For years it seems that Uber has been taking its 25 percent cut not only from the base fare but also from the taxes on each ride, which in New York are considerable (The Wall Street Journal) — and as a result it has shortchanged its drivers. Now the company says it’s going to make its drivers whole, and the amounts can add up. Recode posted a receipt for one driver’s $7000 refund, and the Journal says the total cost to Uber is likely to be in the tens of millions of dollars.

The problems Uber now faces are two-fold. First, because no one trusts the company any more, when a problem like this emerges, the first thought outsiders have is, “What else is the company hiding under those rocks?” Then, as The New York Times’ Noam Scheiber reports, it turns out that Uber may have been breaking its own agreement with drivers by making them responsible for the full amount of tax on each ride.

There’s some confusion around the accounting here. But again, who would be inclined to bet on Uber’s probity at this point? When a company’s well of good will has run dry, it stops getting the benefit of the doubt; it pays the doubt’s full price, every time.

Meanwhile, in other Uber news, the company made a lot of hay last year when it announced it was launching its self-driving car program in Pittsburgh. But the city’s love-affair with Uber has gone south (Cecilia Kang in The New York Times).

Pittsburgh officials say Uber started charging for rides that were supposed to be free. The company also pulled its support from the city’s application for a $50 million federal grant. And Pittsburgh also maintains that the jobs Uber promised in the neighborhood of its test track never materialized. Uber takes issue with all this — but given its record, who are you going to trust?

Offline Retail Isn’t Dead — It’s Just Transmuting

This year has seen a lot of obituaries for the old-fashioned retailing business, but here are two stories that begin to form a counter-narrative.

Story number one: Outside of the trendy big coastal cities, malls aren’t nearly as dead as you may have thought (The Washington Post). In small-town America, malls remain social hubs. They are where people go to bump into other people they know, and where teens throng on weekends. That means that, even as big anchor stores close, malls still have a chance to reinvent themselves. Some are adding residential units, others welcoming tenant shops that they once might have shunned.

In many regions, malls sucked the business life out of the old urban centers. To be sure, many medium- and larger-sized downtowns have sprung back to life. But in backwater counties and smaller towns, the mall may be all that’s left, and even if they’re buying more goods online, people will need services like haircuts and workouts. And they’ll need the conviviality of a town square, even if it’s only available in a semi-private space.

Story number two: Google says it’s now able to match credit-card transaction data with its online tracking capabilities to determine whether and when offline purchases are inspired by exposure to online ads (The Washington Post). If you’re a logged-in mobile user of GMail or Google Maps or any other Google service, or if you use an Android phone, Google knows a ton about you already. Add credit-card logging to that, and you have a pretty nifty way of gauging an ad’s effectiveness.

Of course Google promises that all user data is “private, secure, and anonymous.” Even stripped of personally identifying data, though, this level of personalization is bound to raise a lot of user hackles, even as it makes marketers grin.

As these and similar stories develop, it may become useful to stop thinking about online purchasing and offline retail as separate industries and begin viewing them as the two ends of a long buying continuum — one that we’re all going to be bouncing back and forth upon for the rest of our lives.

AI’s Victory March Continues

On Tuesday, Google’s AlphaGo AI beat China’s Go champion Ke Jie in the first of a three-game match. As The New York Times’ Paul Mozur puts it, “It isn’t looking good for humanity.”

The Times quotes Ke Jie: “ ‘Last year, it was still quite humanlike when it played,’ Mr. Ke said after the game. ‘But this year, it became like a god of Go.’ ”

This trajectory of “the brain’s last stand” began 20 years ago when IBM’s Deep Blue beat Garry Kasparov at chess (Steven Levy has a great retrospective on that story in Backchannel). The rate of machine-intelligence improvement — at least in definable tasks, like “win at Go” — keeps accelerating. How long can this last stand last?

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