How Uber crossed the line with its threats against Sarah Lacy

You probably know that, at a dinner last Friday, Uber Senior Vice President Emil Michael suggested that his company should hire four top political opposition researchers and four journalists to investigate the personal lives and families of journalists who write negative articles about the company. Michael focused his anger on PandoDaily's founder Sarah Lacy, and said that the Uber "smear team" could, according to BuzzFeed's Ben Smith, "...in particular, prove a particular and very specific claim about (Lacy's) personal life."

Since BuzzFeed broke the story, there's been a firestorm of media attention, which led to apologies from Michael and a tweetstorm from Uber head Travis Kalanick, in which he disavowed Michael's statements and said that they didn't represent Uber, but that he wouldn't fire Michael. Uber's response, or lack thereof, hasn't dampened the firestorm one bit, and the company has managed to alienate much of the press that it needs for future publicity.

One thing to keep in mind is that it's been long-standing policy at some tech firms to retaliate against journalists and publications that report stories negative to the the companies' interests. Apple and Microsoft are most notorious for doing this, but many other companies in Silicon Valley have done the same. However, with one known exception, the method that the companies have used is to withhold information from the targeted journalists. Both Microsoft and Apple have documented cases in which they barred certain journalists and publications/websites from embargoed previews of new products, reviews of unreleased products and announcement events. Without access to new and forthcoming products, those journalists and publications were at a competitive disadvantage, because they couldn't review or cover the products until they were released.

Where Michael's threat crossed the line is that it moved from withholding proprietary information, which any company has the right to do, to digging up and revealing negative information about journalists with the intent of damaging or destroying their reputations. Even in the one case that I mentioned above, which was Hewlett Packard's hiring of private investigators in 2006 to identify the source of leaks by lying to phone companies in order to get journalists' call records, HP's objective was to find out who leaked the information, not to gather information to destroy the reputations of the journalists.

Both Michael and Kalanick have characterized Michael's remarks as, essentially, a revenge fantasy rather than anything that the company would actually do. However, by making the statements in front of Kalanick at the dinner, and with Kalanick not disavowing them immediately, both Michael and Kalanick reinforced the increasingly common view of Uber as an amoral, out-of-control company that will do anything in order to win, up to and including breaking the law and ignoring court rulings. I would remind Kalanick and Uber that Microsoft had the same philosophy, and believed that it was too big to touch by anyone. However, both the U.S. Justice Department and European Union successfully prosecuted Microsoft for antitrust violations. That in turn led to a loss of management focus, disillusionment and loss of morale for employees and damage to Microsoft's reputation, all of which contributed to the company's decline and loss of direction.

In essence, unless Uber starts making fundamental changes in the way that it does business, it's setting itself up for an eventual battle (or battles) that it can't win. There is always someone who can take you down if they really want to.

When companies get into trouble, CEOs do what they know best

Bryan Goldberg, the founder of the Bleacher Report, wrote a post for PandoDaily last week titled "You don't want experts. You want jacks-of-all-trades." His argument is that expertise in a single area is insufficient when companies increasingly depend on a confluence of skills for success. Further, expertise is much less transferable than it first appears. He points to AOL, JCPenney and Oracle as examples of companies that hired CEOs specifically for their expertise--with the results being far less than what each company's investors expected.

I'd like to propose a corollary to Goldberg's argument, which is that when a company gets into trouble, its CEO almost always falls back on their primary area of expertise. Outside of technology companies, CEOs tend to come disproportionately from two departments: Legal and Finance. (Why anyone thinks that being a lawyer is great preparation for running a company is beyond me--no insult intended to lawyers.) When a company gets into trouble, the CEO falls back on his or her experience. CEOs who started as lawyers look to litigation as their primary strategy for dealing with problems. That explains why so many record and movie companies turned to suing accused pirates as their primary strategy for dealing with digitization.

CEOs who have a financial background tend to turn to cost controls first as their way of dealing with problems. Every dollar that a company saves goes directly to its bottom line, while each dollar of increased sales may only add a few cents to the bottom line. Unfortunately, cost controls often have long-term negative impacts on companies. Layoffs, hiring freezes, capital investment freezes and divestment of underperforming businesses are all typical cost-cutting tactics that work well in the short run, but may leave the company unprepared to take advantage of future growth opportunities.

So, how do CEOs who come from other specialties respond to problems? CEOs with sales backgrounds generally pressure their organizations to sell more. Those with marketing backgrounds will focus on advertising campaigns, promotions, new product introductions and line extensions (for example, new flavors of corn chips) in order to generate revenues. CEOs with engineering backgrounds try to innovate their companies out of trouble with new technologies and products.

CEOs will, of course, use tactics that are the purview of other specialties if they have to. Cost controls are everyone's favorite (unless you're one of the people laid off,) because they get big results quickly. Steve Jobs wasn't a lawyer, nor is Tim Cook, but litigation was, and is, a key part of both men's attempts to slow down competitors. CEOs who've rotated through a variety of functions have a bigger quiver of arrows to choose from, but few companies give much more than lip service to developing their managers by rotation. So long as schools keep turning out specialists, and companies keep hiring them while giving short shrift to real management development, we'll continue to have companies led by people who see the world through the filter of their specialty.