Spotify vs Uber: A case study on why it's sometimes better not to be an asshole
Call it the "Uber approach." Or more to the point, the "asshole approach."
It goes something like this: A company has an idea that completely changes an industry, in many ways for the better. But whenever disruption takes place, there's a risk that the good practices of the old guard -- in the case of taxis, that means insurance requirements, background checks, and safety inspections -- get thrown out with the bad -- like onerous restrictions on taxi medallions and outdated technology.
Protecting the interests of incumbents, even when they serve workers and customers, has never been in Travis Kalanick's playbook. Uber may embrace some of these older notions in response to user outrage or other market pressures, but the company rarely does anything simply because an industry or government body requests it.
Take for example Uber's recent entry into Portland and its refusal to comply with the city's existing transportation laws.
"The company said 'no' to your safety," wrote Portland mayor Charlie Hales. "It said 'no' to inclusion and 'no' to helping us work with our immigrant cab drivers, who may be laid off as a result of this new technology. Instead they chose to ignore our laws and, in doing so, have proved their disdain for our city."
And how has Uber responded to Portland's lawsuit barring it from operating in the city?
"We will continue to operate in Portland," said Uber spokeswoman Eva Behrend. Keep in mind that by Uber's own estimation it would only cost the company $100,000 in profits to comply with the city's taxi regulations, -- hardly a crippling sum considering that Uber is reportedly on track to generate $10 billion in revenue a year. This isn't about math or money. This is about principles. Dangerous Ayn Randian principles. And in sticking to its anti-government doctrine, Uber has become, quite literally, a criminal operation.
This approach hasn't always worked out well for Uber -- its poor stewardship of user data and its targeting of journalists have attracted inquiries from the US Senate -- but it also hasn't stopped the company from continuing to grow and attract capital, most recently raising at a valuation of $40 billion. Does Uber's success mean other startups should follow in Kalanick's assholish, disrupt-at-any-cost footsteps?
Not necessarily. Look at Spotify CEO Daniel Ek. Spotify is problematic for a number of reasons -- just ask Thom Yorke. But having an asshole CEO is not one of them.
Consider Ek's approach to negotiating with labels ahead of launching Spotify. During a PandoMonthly fireside chat, he explained to Sarah Lacy that one of the biggest reasons Spotify is still around while Napster and Kazaa are not, is that those startups tried to disrupt the music industry overnight, labels and artists be damned.
"I don’t know a single space that has had so many talented entrepreneurs give a go at it," Ek said. "The problem is, over time, the technology entrepreneurs that have tried to do it have been a bit too disruptive."
"Too disruptive?" Only an entrepreneur from Sweden would caution against being "too disruptive." But with all the recent attention paid to the "asshole cultures" at companies like Uber and Secret, there's something enormously refreshing about Ek's patience and willingness to compromise in order to build his company."I was literally sleeping outside an office in order to get the meetings I wanted," Ek said. "I just believed that, again, you win a lot by being super passionate and having a lot of persistence. And what really worked was that, it didn’t matter what week it was, I always ended the conversation -- we could’ve been screaming at each other -- and I always said, 'Are we meeting next week again?' And there’s something disarming about that whole approach."
The founders of Pandora, the other big success story in the music space, tell a similar story, only their biggest battles weren't fought in the offices of music executives; they were fought in Washington.
At another PandoMonthly event, Tom Conrad, then the CTO of Pandora, explained how it took two years, three acts of Congress, 11 maxed out credit cards, and $500,000 in personal debt just to ensure the company's survival. No company convinces Congress to hand down three rulings on its behalf without some serious negotiation and give-and-take.
And at our most recent PandoMonthly -- these chats really are the gifts that keep on giving -- John Zimmer, the CEO of Uber's closest competitor Lyft, spoke at length about his belief that a successful company can be built around a "nice," community-driven culture. He cited Airbnb and its founder Brian Chesky as a company that, when faced with regulatory obstacles, adopted a stance that prioritized hosts and guests over bottom-line profits.
But back to Ek -- perhaps the line that best sums up his two-and-half-year struggle to get labels onboard with Spotify is, "I used to have hair before I started this, and at the end of the process I didn’t."
Meanwhile, Travis Kalanick still has a full head of hair.