Something’s been bugging me about Uber for a while. The more I watch it, the more it feels like Enron.
That’s a hell of an inflammatory statement, I know. And it’s coming from a (theoretically) pro-regulation liberal. No surprise there. But I’m not inherently anti-Uber. It’s made some amazing moves so far and I don’t particularly like traditional taxi services (or the way they treat Uber – or people involved in the debate). My one experience with Uber was passable – good trip to my destination, shady trip back. So I’m not an extremist about the issue.
But – and I recognize the extreme and silly-sounding nature of this next statement – I keep envisioning Uber dissolving suddenly in a wave of accounting improprieties. I’m not accusing Uber of Enronesque fraud here, I’ve no evidence for that. But some of their actions immediately and starkly invoke for me a path so similar to the failed energy giant.
The first thing that struck me in this way is Uber’s strong anti-regulation evangelism embodied in a vocal CEO. In Enron’s case it began with Ken Lay taking as many steps as possible to deregulate the energy market in general and the California energy market in particular. With Uber we see similar passionate advocacy from Travis Kalanick. Kalanick’s views about the free market aren’t a standalone indicator of Enronism but fit into a larger context.
Uber also evokes an image of Enron in their unflinching willingness to operate on the far border or outside the bounds of law and regulation. An early warning in Enron’s history was the Valhalla scandal, in which traders placed huge bets and engaged in crooked accounting as well as skimming profits. Once the bets were discovered and, in a panic, successfully hedged, Enron made its institutional reaction clear in a message to the traders: Please keep making us money. An SEC suit was required for any kind of consequences.
A second example becomes more relevant: unsatisfied with the level of deregulation in California’s market Enron traders and financial engineers conspired to violate both CA law and good corporate citizenship. They increased profits through schemes like exporting energy to another state and imposing an artificial scarcity so the energy could be re-imported at a much higher rate.
That’s not to mention the outright fraud committed by Enron in cleaning debt off its balance sheets through the use of Special Purpose Entities – something they self-justified as legal and defended as a phenomenon of a more optimized, less regulated market. A market that only existed in their heads and on their legal opinions.
Compare such disdain for regulation and legality with Uber’s operations in emerging markets such as India and France. Places where they’re explicitly told they’re operating in violation and continue to do so. In some cases they depend on loophole methodology and in France seem to have simply shrugged and told employees and drivers they would pay the legal fees and fines as a cost of operation, in utter disdain of law and rule.
As a second manifestation of Enron’s tendencies consider Uber’s considerations in going after critics. The latter has an established record of considering dirty tricks to hit back at those who don’t hold it in high esteem, including an executive publically ruminating about using a journalist’s Uber history against them. Enron made it a habit to force reassignment of auditor personnel who weren’t “with the program” as well as threaten to pull or withhold business from critical ratings firms.
For a third parallel consider transparency. Enron was purposely opaque, admitting and revelling in the idea that they employed a “black box” system generating profits in secret. While not as openly dismissive Uber has established a record of defiant opacity. They’ve racked up fines and judgments for refusing to turn over required data in accord with transparency regulations. Enron hid all that largely to keep the momentum of their massive fraud going forward – what’s Uber’s reason?
There are a substantial number of places where Enron and Uber diverge, of course. But Uber’s anti-regulation, market disruption and dominance rhetoric so neatly echoes that of Enron that I end up fearing the former will collapse in just as catastrophic a wave of accounting scandals.
At the time of its downfall, Enron held approximately $60 billion in assets.
Last week Uber received a valuation of $50+ billion.