Uber's CEO Just Did 1 Thing Emotionally Intelligent Leaders Never Do. Here's Why It Was a Big Fail

Uber CEO Dara Khosrowshahi apparently had no idea that a three-mile Uber ride in Manhattan could cost upwards of $50. When Wired reporter Steven Levy used Uber to travel to an interview with Khosrowshahi, he asked the Uber CEO to guess how much the ride had cost. Khosrowshahi guessed $20. When Levy told him it was $50 ($51.69 with tip, to be precise), Khosrowshahi reacted with astonishment. "Oh, my God. Wow," he said, according to the Wired interview.

He then went on to give two explanations--first, inflation is now "part of our everyday life," and second, that drivers earn 40 to 50 percent more than they did four years ago. "I think that's a positive," he said.

There are two problems with those responses. First they're both wrong. Second, they seem like guesses. Khosrowshahi appears not to know why an Uber ride in Manhattan had such an outlandish price, just as he didn't know it would cost that much in the first place. It's OK to not know every fact about your operation--with a large organization like Uber, that's pretty much inevitable. But when you're asked a question and your answer matters, you should never guess.

How do we know his answers were wrong? Because the numbers don't add up. CNBC.com reported that Uber and Lyft raised their fares 92 percent between January 2018 and July 2021. Inflation for all four years put together totaled 12.6 percent, according to Investopedia. So inflation doesn't explain Levy's $51.69 fare. Driver pay increases don't completely explain it either. While it's true that Uber and Lyft are paying better in an effort to attract more drivers, the increase appears to be less than Khosrowshahi said. In New York City, where local laws require rideshare companies to disclose this information, a UCLA analysis of public records showed that Uber and Lyft fares rose a median 50 percent between February 2019 and April 2022, while driver pay rose only 31 percent.

Why was that Uber ride so expensive?

So what is the real reason for Levy's high fare? There's one possible explanation. Uber itself is making more on every ride than it used to. During the period that UCLA analyzed, when fares rose 50 percent and driver pay rose 31 percent, the commissions Uber and Lyft paid themselves on those rides more than doubled. "In February 2019, when the [New York City Taxi & Limousine Commission] first implemented the driver pay rules, companies took 9 percent of passenger fare compared to 20.7 percent in April 2022," according to the UCLA study. It added: "In April 2022, the companies took a 30 percent or more cut of the passenger fare for 29 percent of all rides."

Both Uber and Lyft have some financial catching up to do. The rideshare companies quickly captured the market by using a simple and almost unbeatable strategy: They undercut taxi fares and used their VC funding to stay afloat while they ran their operations at a loss for years. In many places, they've already won the war. For example, after a recent early morning flight to Boston, I found the taxi line at Logan Airport completely deserted, with no taxis or even a dispatcher, whereas the rideshare area a short distance away was busy with cars and riders.

Beyond that, Uber may be winning against Lyft. Lyft chose not to operate overseas, or to provide food delivery, leaving those markets to Uber. While Lyft is still struggling to reach profitability, Uber turned an operating profit for the first time last quarter. If Lyft can't turn a profit, Uber may eventually become a monopoly, at least in some markets. And monopolies can charge whatever they want.

Uber is "under a microscope"

But let's get back to Khosrowshahi's interview, and why I think his response to Levy's fare lacked emotional intelligence. Ironically, Khosrowshahi spent part of the time lamenting the fact that Uber is so much in the public eye. "You don't understand what it's like until you're in that seat," he told Levy. "I knew what running Uber encompassed, but the public glare has been a challenge."

Knowing that Uber is "under a microscope," as he put it, Khosrowshahi should also have known that the $51.69 ride and his response to it would make news. His initial reaction of "Oh, my God. Wow," wasn't ideal, but it was at least genuine and clearly unrehearsed. After that, though, he had better options. He could have acknowledged that driver shortages and higher pricing sometimes mean local taxis cost less than Ubers. (Apparently that is often the case with New York City airport rides.) He could have talked about the need for Uber to stop subsidizing fares--which was actually the context of Levy's question. Or he could have simply said that he wasn't entirely sure why that fare was so high and that he would get back to Levy about it. Pretty much anything would have been better than blaming it all on inflation, or claiming there were greater pay increases for drivers than turned out to be true.

The full Wired interview is well worth reading, because Khosrowshahi had a lot of interesting things to say about Uber, its upcoming services, and leadership in general. I was especially impressed with his plans to keep employees on their toes. "Once we get profitable, I'm going to come up with some other reason why we suck," he said. "Because that gets the team psyched up. We have an underdog mentality I never want to lose."