Thursday, March 30, 2017

How Lyft Is Capitalizing on Uber’s Scandals - TIME Business

Posted: 28 Mar 2017 03:00 AM PDT

For the companies that believe that touting their values can be a path to profits, these are heady days. Customers have not only come to expect that companies stand for something, in addition to selling whatever they’re selling, but many Americans are more attuned to expressing beliefs through how they spend. And one company posed to reap benefits from that zeitgeist is ride app company Lyft.
“We’re woke. Our community is woke, and the U.S. population is woke,” Lyft President John Zimmer tells TIME, sitting in his five-year-old company’s San Francisco headquarters. “There’s an awakening … Our vote matters, our choice matters, the seat we take matters.”

Many of the millions who have used ride apps live in urban markets where residents were left feeling like their votes didn’t matter in the last election and have turned to their wallets to feel a sense of agency. So when Lyft’s massive rival Uber started becoming the subject of a relentless stream of bad headlines in late January, some users started questioning Uber’s values as a company — and looking around for an alternative.
“We’re not the nice guys,” Zimmer says. “We’re a better boyfriend.”
Lyft did its best to demonstrate that behavior during the final weekend in January. President Trump had just issued his first controversial immigration order, which temporarily banned refugees and limited travel from seven Muslim-majority countries, and taxi drivers were striking in protest at New York City’s JFK airport on a Saturday, along with crowds of angry locals. That evening, Uber sent out a tweet noting that the company was still offering rides to the airport and there would no surge pricing, hikes that typically take effect in times of low supply and high demand.
Though Uber later explained that the move was meant to let riders know they still had a way to catch their flights and to show respect for the taxi drivers — by making sure the company was not profiting off the strike, much like the company limits surge prices during disasters — Internet critics were fast to interpret the move as heartless strike-breaking behavior. A #DeleteUber hashtag started trending Saturday night into Sunday morning, as people shared screen shots of flushing the app off their phones on social media.
By some counts, more than 200,000 users left Uber as January gave way to February, an exodus that Lyft employees started noticing in the form of an influx — one boosted by the fact that Zimmer and Lyft CEO Logan Green decided to make a $1 million donation to the American Civil Liberties Union that same weekend.
Some of the company’s employees cautioned against the donation, suggesting that taking a political stance might alienate some users. “There was risk,” says Zimmer, whose wife is in the U.S. on a green card from Spain, “and that was part of the reason we wanted to take action. It should be more okay to stick your neck out.” The executives scheduled an email on Saturday night that would announce the donation on Sunday morning, as Uber CEO Travis Kalanick said that he would maintain a position on Trump’s business advisory council despite the “unjust” order.
“In our minds, there’s been a contrast in the values, there’s been a contrast in the type of business we’re building,” says Zimmer. “And so we weren’t shocked that there was a contrast. There’s been that contrast.”
As media stories about the rival companies swirled that weekend, Lyft saw a 40% increase in installations of the app, the company says, and more than a 60% increase in activations of the app (meaning people put in their credit card details so they can actually hail a ride), compared to what might normally be a low single-digit increase week over week.
The pop happened in New York first, says VP of operations Woody Hartman, before spreading to nearby cities like Boston and Philadelphia, and then to the West Coast, “where the ACLU investment, or donation, really resonated.” Hartman says they questioned whether they’d see defectors in more conservative markets like the areas surrounding Atlanta and Dallas, but downloads ticked up there too.
Employees scrambled to alert drivers through emails and texts — both active ones and those that had lapsed— that there would be increased demand, knowing the company had one shot to deliver sufficient supply to new users if they were to keep them around. The operations team offered bonuses to get drivers on the road, and Hartman says that in major markets, Lyft was generally able to hit three-minute-or-less wait times as Sunday evening rides gave way to Monday morning commutes.
That weekend marked a turning point for the company, employees say, one the company has been able to stick to in part because Uber has had so many tough PR days since then.
Some Lyft employees sat in disbelief as a female engineer who left Uber wrote a viral memo alleging sexism and mismanagement at the company; as Uber weathered allegations that it had deceived local government regulators through so-called “greyballing”; as CEO Travis Kalanick was caught lashing out at an Uber driver on a dash cam and made promises that he would “grow up”; and as Uber’s president left after less than a year on the job and early investors wrote an open letter criticizing “toxic patterns” in the company’s culture. Under pressure from riders and company employees alike, Kalanick resigned from Trump’s advisory group.
On a March 21 conference call, Uber board member Arianna Huffington and other company representatives said the company “must change,” as reporters repeatedly asked whether the board was considering asking Kalanick to step down. They acknowledged that relationships with many drivers are “frayed” and that the company was working to engage those workers in a “more human” way. An investigation into company practices by former Attorney General Eric Holder’s law firm is ongoing, they said, expected to be concluded in April, when those findings will be made public and shared with the press.
The ride-app market, including Lyft, has been blasted for plenty as a whole. Both Lyft and Uber have been criticized for their employment practices, including how they deal with worker status. Drivers for both companies have been accused of racially discriminating. Both have been challenged for not releasing reports on company diversity — though both say those are forthcoming.
But Lyft has had a reputation as a more welcoming, friendly company than “other rideshare programs,” as one survey commissioned by the company put it, since the ride-app war began. From early days, Uber and Lyft positioned themselves as different services, even though they provide essentially the same function for customers. Lyft, founded in 2012, was all fist bumps and fluffy pink mustaches, advertising ride-sharing as a way to build community and encouraging drivers to invite riders to sit in the front seat. Uber, launched in 2009, was all black-cars and cool factor, advertising the promise that everyone deserves their own private driver, the type of employee with whom one has little obligation to chitchat.
Lyft’s feel-good vibes certainly didn’t stop Uber from growing into the most valuable startup in the world, worth more than $60 billion, 10 times the valuation that Lyft reportedly is chasing. And Zimmer says it took time for Lyft to realize that a reputation for warmth wouldn’t mean much until the company’s wait times and prices were as just as good as “the other guys.” He says they are competitive on both those factors in U.S. markets now and believes cultural “contrasts are becoming more and more important.”
Lyft has tried to play up those contrasts in the recent past, as in ads released late last year that featured a thinly-veiled “Ride Corp” and painted Lyft as the bright-side alternative to callous guys hatching evil plans in a board room. But Zimmer says the company is done with such attacks. “Let’s be Lyft and let’s focus on our customer,” Zimmer says. “That’s what we can control and that’s what ultimately is going to enable us to win. Honestly. That’s how we are.”
On Sunday, Lyft announced a new feature called “Round Up & Donate” with a splashy ad in the New York Times. In the app, the ad explains, users will have the option to round up their fare to the nearest dollar and donate that money to a specified charity. The ad does not mention Uber by name but says “treating people better” is part of how Lyft does business.
There can be big drawbacks to overtly going after No. 1 in a marketplace when a company is No. 2. “It’s often a thin line in a consumer’s mind between attacking the competitor,” says Rohit Bhargava, who teaches marketing at Georgetown University and runs a firm called the Non-Obvious Company, “and attacking them as a consumer for buying from that competitor.” That’s the kind of strategy better suited to a “very distant” No. 2 or a No. 3 trying to establish itself, he says.
Lyft is still a pretty distant No. 2. After the #DeleteUber hashtag started trending, about 5% of Uber’s market share shifted to Lyft (“It may have been a little more than that,” Zimmer says), according to TXN Solutions, which tracks debit and credit card spending. Still, that meant Lyft was capturing about 20% of the ride app market to Uber’s nearly 80%.
On the conference call, amid the mea culpas, the Uber representatives said the company has still experienced faster growth in the first quarter of 2017 than it did the previous year. Though Lyft now covers areas where more than 70% of the U.S. population lives, Uber reached that point about two years ago. But both have room to grow: though two-thirds of U.S. adults had heard about ride apps by the beginning of last year, according to Pew, only 15% had actually used them.
Georgetown’s Bhargava believes that Uber has benefitted from what he calls passive loyalty, the kind that exists out of convenience and can quickly evaporate when a consumer is given a reason and opportunity to go elsewhere. “And the cost to switch in the case of Uber versus Lyft is pretty low,” he says. “You press a different button and you get your ride.”
Zimmer tells TIME that Lyft now has 40% of the market share in multiple U.S. markets and that however ambitious it may seem, the company is serious about plans to be the top ride-app in the U.S. eventually. When asked how he would characterize the historically fraught relationship between the two companies these days, with headquarters about 15 minutes apart, the talkative Zimmer goes quiet. He pauses for a full twenty seconds.
“We’re out to win,” he says. “And they’re our competition.”

What Cold War Intrigue Can Tell Us About the Trump-Russia Inquiry - New York Times

What Cold War Intrigue Can Tell Us About the Trump-Russia Inquiry
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By JAMES RISEN
MARCH 29, 2017
WASHINGTON — It began with evidence of a breach of the Democratic National Committee’s computers and has now evolved into a sprawling counterintelligence investigation to determine whether there was any coordination between members of Donald J. Trump’s presidential campaign staff and the Russian government, perhaps even influencing the 2016 election.
When James B. Comey, the F.B.I.director, went before Congress on March 20 and confirmed the existence of the Trump-Russia investigation, it echoed of the Cold War investigations in which the bureau and the C.I.A. searched for agents hidden in the government who had spied for Moscow.

A look back at those Cold War cases may reveal lessons for today’s investigators. Above all, those past cases show it could take years before the new investigation uncovers any answers.

It starts with an unexplained incident.
Spy hunts usually begin with an unexplained incident. In the Trump-Russia case, there was the hacking of the D.N.C.’s computers. In 1985, there was an arrest on the streets of Moscow.
In June 1985, Burton Gerber, the chief of the Soviet-East European division of the Central Intelligence Agency, was about to sit down to dinner at his home in Washington when he received devastating news. Paul Stombaugh, a C.I.A. case officer, had just been arrested by the K.G.B. in Moscow. Mr. Stombaugh had been caught while he was on a clandestine mission to meet the C.I.A.’s most important Russian spy, Adolf Tolkachev, a scientist at a secret military design facility who had been providing the Americans with top-secret information about Soviet weapons systems. Mr. Gerber knew that Mr. Stombaugh’s arrest meant that Mr. Tolkachev, an agent the C.I.A. had code-named GTVANQUISH, had certainly been arrested as well.
The arrest and subsequent execution of Mr. Tolkachev was the most damaging of a series of mysterious spy losses suffered by the C.I.A. in 1985. In fact, there was so much espionage activity between the C.I.A. and the K.G.B. that burst into public view in 1985 that it became known as the Year of the Spy.
But why?
Debate swirled inside the cloistered world of American counterintelligence. Could all the spy losses be blamed on C.I.A. incompetence? Or had they resulted from something more sinister, like a Russian mole inside the agency?
That 1985 debate has in some ways been mirrored in the public debate about the hacking of the D.N.C. during the 2016 presidential campaign. Did some hacker simply take advantage of the committee’s cyber-incompetence, or was an American political party the specific and premeditated target of Russian intelligence?
It took years for counterintelligence officials at the C.I.A. and the F.B.I. to put the pieces together and finally solve the puzzle of 1985. Eventually, they realized that they had been confused because there were so many investigative threads to try to follow at once. For example, in August 1985 — just two months after Mr. Stombaugh’s arrest — a K.G.B. officer, Vitaly Yurchenko, defected to the United States, and identified a C.I.A. officer, Edward Lee Howard, as a Russian spy. Mr. Howard escaped to Russia, and Mr. Yurchenko then redefected to Moscow.
American officials were left to wonder whether Mr. Howard had been responsible for the spy losses — and if Mr. Yurchenko’s defection had been genuine or whether he had been ordered by the K.G.B. to defect in order to point them toward Mr. Howard and confuse the Americans.
Ultimately, the C.I.A. and the F.B.I. discovered that it had been difficult to determine what was causing all of the losses because the Russians had more than one mole hidden in the United States government. Both Aldrich Ames, a C.I.A. case officer, and Robert Hanssen, an F.B.I. agent, began spying for the Soviets in 1985. Both gave Moscow the names of Soviets working for the United States, but Mr. Ames and Mr. Hanssen didn’t give the Russians the same exact information.
It was only after Mr. Ames was arrested in 1994 that counterintelligence officials realized there had to be another mole, because Mr. Ames had not known certain things that had been compromised, including the existence of an espionage investigation of a State Department official, Felix Bloch. After Mr. Ames was arrested, the United States secretly began a new mole hunt, which ultimately led to the arrest of Mr. Hanssen in 2001.
Thus, the counterintelligence investigations into the 1985 losses lasted 16 years.
Like their Cold War predecessors, American counterintelligence investigators today face the daunting task of trying to unravel myriad business and personal connectionsbetween the Russian government and other Russian entities and people associated with the Trump campaign. It is certain to take officials time to determine which connections are the most significant to their investigation.
Counterintelligence investigations are conducted jointly by the C.I.A. and the F.B.I., with support from other agencies like the National Security Agency. Today, the new Trump-Russia investigation is being conducted by a joint interagency task force, as were the spy hunts of the Cold War.

But interagency counterintelligence operations are often bogged down by competition over jurisdiction, which can lead to frustrating bureaucratic delays and sometimes missed opportunities.

Turf wars badly slowed the investigation of Mr. Hanssen and allowed him to continue to spy until long after the Cold War.
For years, the F.B.I. was convinced that the mole they were hunting was another C.I.A. officer like Mr. Ames, and refused to believe it was possible that an F.B.I. agent was a traitor.
Their fixation on the C.I.A. led investigators to focus on Brian J. Kelley, a longtime C.I.A. counterintelligence officer. The F.B.I.’s obsession with Mr. Kelley was reinforced because of a series of incredible similarities between his life and Mr. Hanssen’s.
Mr. Kelley, like Mr. Hanssen, had known about the investigation of Mr. Bloch. Mr. Kelley lived on a street in Vienna, Va., where Mr. Hanssen had once lived while he was a Russian spy, and Mr. Kelley jogged in Nottoway Park in Vienna, the same park where Mr. Hanssen arranged a series of dead-drops with the K.G.B. An F.B.I. team covertly broke into Mr. Kelley’s house and found a map of Nottoway Park with X’s marked on it, which the F.B.I. was convinced was Mr. Kelley’s spy map.
When they later confronted Mr. Kelley with the map, he asked them, “Where did you get my jogging map?” It turned out that he liked to time his runs from point to point in the park.
Defectors play a key role.
Almost every major spy case is finally solved thanks to defectors from the other side. The lengthy counterintelligence investigation into Mr. Ames was aided by a Russian spy, code-named AVENGER, who provided critical information that pointed toward Mr. Ames. The Hanssen case was also finally solved with the help of a Russian spy who brought out K.G.B. files that helped identify Mr. Hanssen.
The C.I.A. and the F.B.I. do not like to admit that they rely so heavily on defectors to solve their cases. But it is possible that the Trump-Russia case may not be cracked until the C.I.A. or the F.B.I. persuades a Russian intelligence officer to change sidesand provide incriminating information.
But in such a highly politicized case that has the potential to change history, a Russian defector will be met with enormous skepticism, even inside the counterintelligence world. Probably the closest Cold War parallel is the bitter case of Yuri Nosenko.
Mr. Nosenko was a K.G.B. officer who defected to the C.I.A. in 1964 and brought with him the answer to one of the biggest mysteries of modern times: Was the Soviet Union responsible for the assassination of President John F. Kennedy? At the time, the C.I.A. was not certain, since Lee Harvey Oswald had defected to Russia and then returned to the United States before killing Mr. Kennedy.
Mr. Nosenko told the C.I.A. that the K.G.B. was not behind the Kennedy assassination. In fact, he said that the K.G.B. had been so alarmed after the Kennedy assassination that it searched its own files and could not find any evidence that Mr. Oswald had ever worked for the K.G.B.
But C.I.A. officials, led by the counterintelligence chief James Jesus Angleton, were convinced that Mr. Nosenko was a double agent sent by Moscow to muddy the waters. An earlier K.G.B. defector, Anatoliy Golitsyn, had convinced Mr. Angleton that every K.G.B. defector after him would be a double agent. As a result, Mr. Nosenko was held incommunicado for three years in a secret prison at “the Farm,” the C.I.A.’s training center at Camp Peary, near Williamsburg, Va. After the C.I.A. finally realized Mr. Nosenko was telling the truth, he was released in 1967, given $80,000 by the C.I.A. and resettled under a new name.

It ends with damage assessments, political posturing and untold secrets.
Even after an arrest is made, counterintelligence officials can spend several more years trying to determine exactly how much damage was inflicted. Often that damage assessment takes on a political tinge, because officials want to either inflate the damage or play it down, depending on what an official or an agency or a department stands to win or lose. That will almost certainly be true with the Trump-Russia investigation.

Frequently, the damage assessment reports remain classified, and the American public is never told how the story really ends.


NYT