In less than a decade, Airbnb and Uber have demonstrated Schumpeter's creative destruction on a worldwide scale, upsetting the established taxi and hotel industries and their regulators while diffusing “a new trust economy,” decreasing the cost of travel for millions of people, and generating “nearly non-stop controversy” (p. 9). These firms evolved impressively, not just in scaling up in size and impact but also by rapidly experimenting with new technologies and methods. The S curves of growth look smooth but the underlying reality was anything but.
Brad Stone, the Bloomberg News senior executive editor of global technology, has provided an excellent first draft of that history. Stone has covered Silicon Valley for almost two decades and his experience and contacts show, not least in his ability to interview many of his story's key figures, an area of research denied most historians.
This intertwined story of Uber and Airbnb is a deep, well-researched, and balanced account that extends far beyond the dominant personalities of Airbnb's Brian Chesky and Uber's Travis Kalanick (though the picture section does have the mandatory color photos of the two billionaires together). Stone includes a vast array of actors including other founders, upper staff, investors, lobbyists, municipal employees, drivers, hosts, and competitors.
Airbnb's founders and its hosts emerge as more idealistic than Uber's founders and drivers, but both sets of leaders had “the most essential characteristic of great entrepreneurs: mental toughness, the ability to overcome the hurdles and negativity that typically accompany something new” (p. 38).
The Upstarts situates Airbnb and Uber within evolving economic and technological environments. Furthermore, Stone devotes significant space to explaining the rise and, almost always, the fall of their many competitors. Another major strength is the emphasis on financing and financial innovation, including the roles of networks of investors and institutions like Y Combinator in fostering opportunities. Even more important than the ideas for sharing rooms and cars was securing the resources to turn them into reality, adapt, and expand rapidly. Stone's knowledge of the infrastructure of Silicon Valley enables him to trace the near-continuous search for capital from a few hundred thousand dollars in 2008–2009 to $630 million before 2014 and an astonishing $15 billion by 2017.
What emerges is the capriciousness of success and failure. A subset of the financing story consisted of firms and individuals who declined to invest in Airbnb or Uber for what seemed good reasons at the time (such as clunky technology, a visible lack of users, and a limited market). The lack of imagination (or the experience with other promising firms that failed) was not limited to venture capitalists. What if Taxi Magic or Cabulous had accepted venture capitalist Bill Gurley's offers of funding before he invested in Uber? What if Couchsurfing had switched from a nonprofit to capitalist approach?
Nor were investors passive. The financially dragging slugfest between Uber and Didi in China in 2016 ended when big investors forced the two firms to the negotiating table, so their money would be spent expanding ride-sharing and autonomous vehicles instead of subsidizing a Verdun of direct competition.
Uber and Airbnb needed abundant funding in order to grow as large as possible as fast as possible to deter competition in a version of “winner take all” economics. The “fearsome trio of German brothers,” the Sawmers, justified that haste (p. 135). They successfully created European emulations of Facebook, Twitter, Zappos, and other web-based businesses and made money by selling them to the original firm or rivals. After a bitterly fought struggle, Uber beat them.
Handling rapid expansion proved as challenging as creating a successful startup. Uber and Airbnb worked continually at finding good people (and getting rid of poor fits quickly) able to handle the intense work atmosphere, acquiring cash to finance their growth, and effectively engaging in multiple political battles and negotiations with local authorities over the legality of their operations.
Uber and Airbnb hurt as well as benefited cities. While Uber threatened a specific market, Airbnb threatened to reduce housing for residents and hotel taxes for local governments as well as threatening hotels and their employees. The image (and often reality) of Airbnb was someone offering a spare room. The reality in New York City was that 6 percent of hosts produced 37 percent of Airbnb's revenue. That is, New Yorkers seeking housing were losing out to landlords who rented multiple rooms and apartments to visitors for more money.
Former Attorney General Eric Holder has benefited from both firms. As I read The Upstarts, Kalanick stepped down as CEO and Uber released Holder's report on the firm's culture of sexism. A year earlier, Holder had worked with Laura Murphy, a former ACLU director, to produce a plan for Airbnb to fight discrimination and become more inclusive. These documents should become essential digital appendices to this history (https:// www.scribd.com/document/351186221/Covington-Recommendations-for-Uber).
Stone notes media critiques of Kalanick's “Boob-er” corporate culture of sexism and covers the lawsuit against Airbnb for discrimination that produced Murphy's report. If Kalanick's resignation had occurred while Stone was writing, I doubt he would have minimized the importance of Silicon Valley sexism and discrimination, which he attributed mostly to “the so-called tech bros, vaguely defined stereotypical males who could be relied on to regularly Tweet or blog something racist, sexist, or generally insensitive, thereby indicting the entire tech industry” (p. 283). In this case, Stone's deep knowledge of Silicon Valley may have blinkered his vision.
While openly antagonistic about the dysfunctional taxi industry— a sector not just technologically clueless, but with no penalties for bad service, no relationship with riders, and a rent-seeking monopoly—Stone also recognizes how Uber is destroying the middle-class livelihoods of taxi drivers by creating an army of contractors beholden to Uber and not independent businesspersons. Although the occasional cliché creeps in—must taxi drivers always be “grizzled”?—Stone has produced a stimulating and probing account (pp. 74, 183).
