Uber. Again. You'd think that someone would have to work at getting this much bad press, whether it's the massive leadership issues at the top -- and the reported disunity and dysfunction at the board level -- the sexual harassment reports, or even drivers allegedly gaming the software to create artificial surge pricing and make more money while you pay more.

Now comes yet another, another, another new story of disaster, courtesy of the Wall Street Journal. Uber allegedly bought 1,000 Honda Vezels in Singapore after a safety recall for an electrical problem that could cause a fire. They knew there was something wrong and put the cars on the road anyway until, in January, one of them caught on fire. Luckily, no one was hurt.

Unlike the way it operates in the rest of the world, Uber outright owned its vehicle fleet on the island nation. Reportedly, the company bought cars from grey market importers rather than authorized Honda dealers, which would have handled the recalled vehicles, likely at no cost to Uber. The company kept buying the cars in question for eight months past the official recall date.

I've got a request in for a statement or interview, but while I wait to hear back, the company told the Journal, "We took swift action to fix the problem, in close coordination with Singapore's Land Transport Authority as well as technical experts. But we acknowledge we could have done more--and we have done so."

The "more" that should have been done would have best happened before any of the cars was sent out on its rounds. So what's going on? Likely, part of the problem comes down to the economics of the company. Here are the issues:

  • Uber has taken billions in investment money and offered what is now the traditional Silicon Valley digital deal of enormous growth to drive up valuation and eventually land an IPO so investors can exit.
  • The days are long past when you could float an IPO and not be moving strongly toward a profit. Investors have seen too many lemons, so to speak.
  • Uber continues to lose billions of dollars a year. The underlying fundamentals of the business, and how much it needs to pay drivers so they can afford all the expenses and still make something, raise the question of whether the red ink will ever stop flowing.
  • Uber management is keenly aware of the money problems and wants to cut costs.
  • Buying cheap cars in one country where they own the fleet would make sense. After all, how often do the recall warnings really translate into a concrete event?
  • Uber has also been operating with corporate values that justified "poor behavior," according to the report overseen by former attorney general Eric Holder. It was routine to take chances and push things to the edge.
  • People got caught.

Unless you've been in a company that was trying to somehow break through significant financial problems and ultimately succeed, it's hard to explain the mentality. People start doing crazy and risky things to try and have everything come out right. This type of catch-up behavior -- the belief that if you just keep going a little longer, things will work out -- usually starts at the top and continues down through the ranks.

The closest comparison I've got is the behavior of someone addicted to gambling. Things start going wrong and they keep trying, literally betting that they can last long enough for the tide to turn. But the tide did turn -- after things went right for a while. You can only keep dancing for so long. Then reckless behavior catches up.

In a way, this is a perfect lesson for many entrepreneurs. When things go wrong, there's a reason. The answer is not to do more of what you did to try and catch up. Even though you may think you're facing the problems, this is a form of hiding from them and denying reality.

Instead, find the fundamental drivers for the bad performance and fix them. If you do, there's a chance you can right things and move ahead. If you don't, the whole ship is bound to tip over. It's the law of business gravity.

Published on: Aug 3, 2017