What Is Plouffe’s Battle Plan?

The CEI Planet

Uber CEO Travis Kalanick’s decision to hire former Obama campaign manager David Plouffe raises some interesting questions. Uber, a social network offering consumers an attractive transportation option, has expanded rapidly but now faces fierce opposition from traditional car service companies, their unionized employees, and regulators fearful of losing power.

Of course, entrepreneurs have always faced such opposition. Innovation is a creative destructive process, threatening losses for vested interests. At one time, popular support for entrepreneurs and economic growth rendered such opposition a mere nuisance. However, as the regulatory Leviathan has grown over the last century (CEI estimates the costs of current regulation as around $1.86 trillion!), the power of the past to block the opportunities of the future has sharply increased.

To date, Uber has relied on the enthusiastic support of those enjoying its services, its superior service, and its ability to reach out to supporters through social networking. Yet, the opposition has become better organized, threatening Uber’s growth, if not its existence. Faced with this threat, Kalanick initially responded unapologetically: Permission? I don’t need no stinking permission!

But social media and creativity can only get you so far. In today’s politicized environment, a firm also needs political legitimacy. Uber has gained such legitimacy from its users. Moreover, it has done an excellent job in empowering its drivers in a way that makes them eager to serve as ambassadors, as legitimizers of their firm. One recently told me: “We’re not a cab company, we’re really a social network—our apps allow drivers and riders to cooperate.”

Uber must operate in cities. To continue, it must find ways of responding to the old guard’s attacks. In time, Uber’s customer base would likely reach the critical mass needed to survive, but will it get that chance to grow, to continue to innovate? Uber is not the first to face this challenge. Napster was popular—but not popular enough to survive political attacks. Other promising innovations, including agricultural genetic modification, DNA testing, and biomedical innovation, now languish in regulatory holding pens.

Kalanick, to his credit, seeks to win his battle, not simply appease his critics. Many of his allies are young urban professionals. His opponents are vested cab companies and cronyist local politicians. Thus, his selection of Plouffe, an individual familiar with both audiences, to lead that fight, may well be brilliant. Certainly he’s the ideal individual to legitimize what Kalanick, in a recent Wired article, called “Uber the Candidate.”

Kalanick, in this choice, may prove to be as innovative in the political market as in the transportation market, seeking economic liberalization to free Uber to evolve and grow in exciting, yet unforeseen, ways. Yet, this is not the course that most Washington insiders would have recommended. So it’s worth asking: Will Plouffe take on the establishment to create a more competitive transportation sector or will he seek simply to cut Uber into the current cartel? Will he achieve a more economically liberal cityscape or one even more fortified against future creative change? And which outcome should Uber prefer?

To date, Uber has been highly innovative, rapidly addressing a wide array of challenges. As noted, it has mobilized both passengers and drivers to fight back against regulatory threats. It has proven adroit at screening and enlisting quality drivers, in attracting and pleasing customers, and in negotiating innovative insurance coverage. Its use of both customer and driver reputational ratings has created the trust necessary for its cooperative network to flourish. And its successes have forced traditional cab companies to become more innovative, by for example, expanding their use of GPS systems, providing more data about drivers, and even allowing reputational ratings.

Uber and Kalanick are demonstrating anew that competition encourages innovation, that ours is an Alice in Wonderland dynamic world where firms must run to survive and must run even faster to grow!

But innovators rarely seek survival in a static world. And history shows that the firm’s initial innovations soon beget even more creative ideas. The history of Apple illustrates this well. Thus, being allowed into the game if it entails accepting restrictions on future innovations will not likely be in Uber’s longer term interest.
Given Plouffe’s experience, I have little doubt of his ability to mobilize and train the army Uber needs. But will he and Kalanick use that army to defend Uber as it now exists? Or, will they go on the offensive, seeking the freedom to become the mobility sector Apple of tomorrow?

Kalanick has chosen Plouffe as his general. The question: Did he get McClellan or Grant?