In the past three months, Uber has laid off more than 1,000 employees, including a reported 350 just today according to an internal email from CEO Dara Khosrowshahi. These cuts come on top of a $5 billion loss reported for the second quarter of this year. The most recent layoffs involve Uber Eats, driverless cars, and a variety of other departments including marketing and recruiting.

"Days like today are tough for us all, and the ELT [executive leadership team] and I will do everything we can to make certain that we won't need or have another day like this ahead of us," writes Khosrowshahi in the email. And, while Khosrowshahi has undertaken the massive task of finding a way for Uber to make money, it's time to start asking whether that's even possible. That might seem dramatic, but here's the thing--Uber should be able to print money.

When you think about what it really does, Uber should be enormously profitable on the scale of Google or Facebook. I'm serious. The company makes an app that connects drivers with an extra seat in their car to riders who need a more convenient (and nicer) ride than a taxi or subway. 

It maintains no fleet, pays few of the expenses associated with managing a car (costs like insurance, fuel, and maintenance), and takes growing cuts of the fares earned by drivers. Still, it somehow managed to lose $5 billion, mostly on marketing and because it persists in trying to perfect driverless cars. As a result, the company's stock is down 30 percent since it started trading in May.

Clearly, Uber needs to reduce expenses, but there's a bigger issue for the company, which is whether it's even capable of overcoming the pressures it faces. Those pressures includes a negative reputation, complaints by drivers about pay, and new laws like California's AB5 that dramatically change the relationship between contractors and companies like Uber.

It's almost hard to remember that Uber was once one of the most highly anticipated IPOs in a generation of high-flying tech companies. As an idea, Uber is brilliant, and observers agree that the gig economy is transforming the way people work (in good ways and bad), despite California's attempts to change the rules to make it virtually extinct.

But Uber has had an uphill fight as it has expanded to cities and states with hostile governments and strong taxi unions. In addition, it created plenty of its own problems with controversial surge pricing, aggressive company culture, public battles with states and unions, and issues with drivers--some of whom have been involved in altercations with passengers.

All of that has led the company to a point where it is faced with reevaluating everything about its business. Though he's been in place for less than three years, Khosrowshahi now faces increased pressure from investors to figure out how to turn things around.

"We all have to play a part by establishing a new normal in how we work: identifying and eliminating duplicate work, upholding high standards for performance, giving direct feedback and taking action when expectations aren't being met, and eliminating the bureaucracy that tends to creep as companies grow," writes Khosrowshahi. 

That sounds good on paper, but I think it's fair to ask whether laying off a thousand employees will fix the underlying problem. I'm not suggesting Uber is going anywhere anytime soon, and investors seemed pleased--with the stock up 4 percent on the news. Soon enough, we'll know whether it's actually enough to make a difference.

Published on: Oct 14, 2019
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