A letter from a former security employee at Uber claims that
the company’s Marketplace Analytics department “exists expressly for the
purpose of acquiring trade secrets, codebase and competitive intelligence.”[1]
The letter caused the judge to delay the trial in which Uber stood accused of
stealing trade secrets involving self-driving cars from Waymo. “I can no longer
trust the words of the lawyers for Uber in this case,” Judge Alsup said.[2]
Ouch! The question remained whether Uber customers would punish the company by
turning to Lyft instead. Unfortunately, the typical customer may overlook
unethical practices at a company if a good deal is to be had. Economizing
monetarily serves self-interest, whereas “walking with your wallet” oftentimes
does not. Standing on principle may simply not register when people have their
consumer hats on.
After its systemic customer-fraud was exposed, Wells Fargo’s
management simply offered sweeter terms to entice existing customers to stay
put and even to attract new ones. Although the bank had to pay in the form of
offering better rates, society at large may have expected more in the form of
an exodus of customers from the sordid bank for such institutions in which
fraud is so systemic should arguably not continue to exist.
Even before the revealing letter was read to Uber’s judge,
the company had gotten the attention of its customers by “grabbing headlines
for ignoring complaints about sexual harassment at its headquarters as well for
a variety of corporate practices” that had piqued the interest of regulators.[3] Even so, Uber had reported a 10% increase in
second-quarter (2017) bookings over the first quarter, according to Bloomberg.[4]
Uber hit 5 billion rides in more than 70 countries during the summer of 2017.
This suggests that “for a majority of consumers, disgust over corporate
misconduct doesn’t always translate to ditching a reliable service.”[5] Managements can thus buy themselves out of
trouble by retaining the vast majority of customers by offering better terms.
Lest it be decried that such self-rescues should not be
allowed, we have only to look at the customers who look the other way as they
single-mindedly pursue their self-interest. Admittedly, they could point to
government regulators as being the proper instruments for holding wayward
managements accountable. Unethical conduct is not always illegal, however, and
where such conduct is widespread and ingrained in a company, nothing short of bankruptcy
may be just. Of the latter point, justice at the hands of a court of justice or
a regulatory agency may not go far enough to exact what is just ethically.
To be sure, Lyft was making inroads on Uber’s
turf. TXN Solutions reported in 2017 that Uber’s market share had slipped to
75% from 90% in 2015.[6]
Uber’s valuation may have fallen from a high of nearly $70 billion to close to
$50 billion.[7] Of
course, these trends could be from improvements at Lyft rather than any ethical
fallout at Uber. Put another way, Lyft should arguably have been able to make
more of a dent, given the sordid culture and practices at Uber’s headquarters.
The sad truth may be that consumers don’t really care if a company’s management
is ethical unless the consumers themselves are gouged; everyone is out for
oneself without concern for principle. I submit that such a mentality—such a
culture—is not in a society’s interest; the good of the whole is not merely the
aggregate of individual, self-seeking choices. Even Adam Smith saw a need for
government, and, moreover, of moral sentiments as enveloping a free market.
Hence his text, A Theory of Moral
Sentiments, should be read along with The
Wealth of Nations to give the economist’s full theory.
[1] Becky
Peterson, “Ex-Uber
Staffer Says in Bombshell Letter that the Company Had a Unit Dedicated to
Stealing Trade Secrets,” Business
Insider, November 28, 2017.
[2]
Ibid.
[3] Marco
della Cava, “Underterred by Uber, Lyft Says It’s Destined to Be No. 1,” USA Today, November 29, 2019.
[5] Ibid.
[6]
Ibid.
[7]
Ibid.
