HERE’S the job spec. Unite a deeply divided board. Keep a strong-willed founder under control. Immediately recruit a new chief financial officer. Negotiate with angry local regulators intent on closing down the business in their city. Convince courts that the company does not have to provide its contract workers with the benefits due to full-time employees. Change a cut-throat culture without curbing employees’ drive. On top of all this, deal not only with an intellectual-property (IP) lawsuit that could cost the firm nearly $2bn, but also cope with a criminal investigation by the FBI that could see some managers end up in prison.

No one sane, you would think, would even apply for such misery. But after some hesitation Dara Khosrowshahi (pronounced cause-ro-SHAH-hee), until recently the chief executive of Expedia, an online travel agency, returned the headhunter’s call. Now he is boss of Uber, which, at $68bn, is the world’s most highly valued privately-held company. Can he turn the firm, which in many ways has been a caricature of a disruptive Silicon Valley startup, into a more benign force—and take it public by late 2019?

Three weeks into the job, Mr Khosrowshahi has already made meaningful progress. On October 3rd he paid a hastily-arranged visit to Transport for London (TfL), the regulator that recently ruled that Uber was not “fit and proper” to hold an operating licence in the British capital. Both sides described the talks as “constructive” and announced further discussions. Later that day, Uber’s new boss attended—via video link—a crucial board meeting that ended in a promising truce. It not only limits the power of Travis Kalanick, the firm’s co-founder and former chief executive, but creates the conditions for a $10bn investment by a consortium led by SoftBank, a Japanese tech firm run by Masayoshi Son.

One of Mr Son’s main conditions was that power be shifted to more recent investors. Early Uber backers, including Mr Kalanick, will have to give up their “super-voting” rights. Mr Khosrowshahi’s concession was that Mr Kalanick now has at least a theoretical chance to become chief executive again (rules proposed earlier would have made that all but impossible). Benchmark, a venture-capital firm and an early investor in Uber, agreed to drop a lawsuit against Mr Kalanick.

All could still unravel. The governance compromise is contingent on the SoftBank investment, which has two stages, going through. It may seem a done deal that SoftBank and its partners would invest a first round of $1bn-1.25bn at Uber’s present valuation of $68bn. That way the new capital injection is not considered a “down-round”, ie, one that produces a lower valuation. But much about the second round is still unknown. The stake could be anywhere between 14% and 17% of Uber, for example, at a valuation of as low as $50bn.

Before Mr Khosrowshahi made it to London he had placed a full-page ad in the Evening Standard, a local newspaper, apologising “for the mistakes we’ve made” and acknowledging that “we must change”. This was meant to signal to regulators all over the world that Uber’s swashbuckling culture is a thing of the past. But he must show that this is not just a change in style, but substance.

He will not lack for opportunities to do so. A big question will be to what extent Uber will still insist on being a technology, rather than a transport, firm—a question which is on the agenda of the European Court of Justice. London, where Uber has appealed the regulator’s decision, is likely to be the test case. TfL’s complaints about the firm, for instance that it did not properly vet its drivers, suggest that the regulator wants to treat it exactly like any other taxi operator. Yet Uber’s willingness to make concessions may be limited. On September 26th it said it would pull out of the province of Quebec rather than accept new regulations.

Another unknown is the extent to which Uber will change how it deals with its drivers. It is still fighting efforts that would require it to treat many as full-time employees. On September 27th, for instance, it started an appeal against the ruling of a British court that would guarantee its drivers a minimum wage and holiday pay. But Uber seems to realise that it has to make life easier for them. It now allows tipping. And in some cities its algorithms take into account where a driver wants to end up after work.

And then there are Uber’s cultural and legal troubles. Mr Khosrowshahi appears to think that he can soften, though not dull, the firm’s edge by being more transparent than Mr Kalanick and his team. A bonus system that led to counter-productive levels of internal competition is under review. He can only hope that legal actions pending against the company do not cause too much damage, such as the one from Waymo, Alphabet’s autonomous-car unit, over IP, or a criminal probe into its Greyball app, developed to outwit regulators.

Yet turning Uber into a kinder firm may make it harder to clear the highest hurdle: making it as profitable as a valuation of $68bn requires it to be. The theory behind Uber is that by subsidising rides it sets an economic flywheel in motion that at some point powers itself. More riders attract more drivers, which will attract more riders and so on. In some big cities the flywheel is turning, generating profits, the firm has said, while acknowledging that these are still fragile. But with accumulated losses of about $6bn (see chart), it seems to be more expensive than Uber expected to get up to speed. One reason is that other firms, such as Lyft in America, have piled in. And it is not clear whether the flywheel will keep spinning once the subsidies are cut. Sceptics argue that the model is unsustainable.

Mr Khosrowshahi has yet to say publicly whether he will continue pushing for growth or focus more on profits. But he could make Uber more efficient by leaving small markets and reining in its freewheeling organisation, in which regional managers operated like entrepreneurs, doing largely what they liked to generate growth. A deal with SoftBank would also help. If he cannot invest in Uber, Mr Son, who has already made several bets on ride-hailing, would certainly finance its rivals.

But if he wants Uber to have a successful share flotation soon, Mr Khosrowshahi must give it a new Gestalt, or personality, beyond that of a ruthless disrupter. The big neighbour of his former firm near Seattle may be a good model. Amazon, the e-commerce giant, has built a well-oiled logistics and computing platform that allows it to test and introduce ever more offerings, from smart speakers to drone delivery. Similarly, a reformed Uber could become the platform for all kinds of logistics services and more (though it will need to focus more on profits than Amazon does). UberEats, its delivery arm, is growing fast. The firm is testing a similar service for medicines, called UberHealth.

The danger, if Uber’s flywheel really gets going, is that it may attract even more regulatory attention. In other words, to justify its valuation, Uber would have to become really big. Yet that, in turn, risks triggering yet more of a backlash, as Facebook and Google, which have both got into political trouble recently, can attest.

Source: economist
Dara Khosrowshahi is off to a strong start but there are miles to go