TIME Autos

How Silicon Valley Suddenly Fell in Love With Cars

Tesla Model S.
Tesla Tesla's battery makes it cleaner than gas-guzzling alternatives—but think about what else it's made of.

The last great remaining American preoccupation tech hasn't yet tackled is the automobile. That's about to change

“The American really loves nothing but his automobile,” Gavin Stevens says in Faulkner’s Intruder in the Dust. “Because the automobile has become our national sex symbol.” Given that longtime infatuation, you’d think Silicon Valley’s tech companies would have been eager to get into the auto industry before now. Instead, many are surprised that it’s happening at all.

Ever since the personal computer became mainstream, Silicon Valley has been inventing or reinventing new gadgets: the music player, the phone, the computer itself, first as a portable, now as a tablet. Amazon remade the shopping mall and put it on a screen. Netflix and YouTube subverted the TV set, and now Google’s Nest is going after other household appliances. This year, Apple is reworking the wristwatch, casting tech as jewelry.

The last great remaining American preoccupation that tech hasn’t yet tackled is the automobile. Much of this has to do with logistics–selling phones or music players is child’s play next to the expensive, highly regulated business of manufacturing cars–but there’s also a historical mindset at work. Detroit, with its combustion engines and metallic gears, was the epitome of an analog era that Silicon Valley displaced. The car was an anachronism, however beloved.

No longer. Google has been working on self-driving cars for a number of years. Uber has started looking into them as well. Now, according to the ever-churning Apple rumor mill, the Cupertino giant is working on a stealth car project. For tech companies, the automobile has gone from a super-sized docket to park a smartphone while you drive to a gadget that can be reimagined from the ground up with digital technology.

The sudden shift is happening for a few reasons. First, with PCs, tablets and smartphone markets close to saturation, tech giants are looking for new markets to invade with their innovations. Second, the car market seems ripe for a makeover. American automakers like GM may be reviving post-financial crisis, but the U.S. looks to have reached “peak driving:” Annual miles driven per person is down 9% from 1995, and even more among young drivers.

But the biggest single reason tech suddenly loves the car is Tesla. The company founded by Elon Musk in 2003 to make electric cars has become much more: It has fused the automaker with the tech company, and not only built a cultural bridge between Detroit and Silicon Valley but showed that both were converging toward each other.

Tesla was a wake-up call to automakers that had grown complacent about innovation. It showed that technology was a powerful way to differentiate a particular model from the herd, and that if automakers wanted to reach out to younger consumers, they should embrace the kinds of technology they enjoy. Soon, you began to hear auto executives talk about “smarter cars” and roadways as “connected networks” structured like the Internet (15 years ago, that simile ran mostly in the opposite direction).

Read more: How Apple Is Invading Our Bodies

Google CEO Larry Page has said his interest in driverless cars stems from the inefficiency of roadways, which not only cost lives but waste worker time in traffic jams. (It doesn’t hurt, either, that driverless cars could offer commuters more opportunity to look at Google ads.) Uber is also researching self-driving cars to lower costs for its passenger service as well as a planned delivery service.

The loudest buzz surrounds Project Titan, a rumored Apple car that in reality could be pretty much anything: an electric vehicle, a leased minivan, a driverless car, a ploy to acquire Tesla, a bluff to pressure automakers into putting its CarPlay software in their vehicles, or a clever Apple hoax trolling Apple rumor-mongers. Wall Street analysts, though, think an Apple car is the likely bet, and if so the marriage of Detroit and Silicon Valley is a matter of time.

If nothing else, Apple’s rumored entry into automobiles seems to have turned up the heat. Last week, Musk said Tesla would start offering “autopilot” technology in its cars this summer. Google said its more ambitious driverless-car system would be ready for broad consumption in five years.

But the dark-horse in this new race may be Samsung, which according to Thomson Reuters has “has the largest and broadest collection of patents in the automotive field including a very large interest in batteries and fuel cells for next generation vehicles.” If automobile technology boils down to a patent race, Samsung may end up having an edge. Samsung even has some history in car manufacturing.

The end goal of these tech aspirations in the automotive industry may well be partnerships with established manufacturers. After all, what company is dying to break into a low-margin heavy industry? Many auto executives scoff at the idea that jumping from smartphones to cars is good idea. They may be surprised. Cars are just another form of technology, albeit one in need of an upgrade. And who is better positioned to upgrade them Apple or Google?

TIME

UN Women Breaks Off Partnership with Uber

Just weeks after they announced partnership to create 1 million jobs for women

UN Women has cancelled a partnership with Uber that aimed to create jobs for women at the company after objections were raised about Uber’s safety record with women and treatment of its drivers.

On March 10th, UN Women and Uber announced a partnership to create one million Uber jobs for women by 2020, as part of their endeavor to increase economic empowerment for women around the world. But on March 12th, the International Transport Federation published a letter criticizing the partnership, noting that Uber drivers often lack basic job protections like minimum wage and health care. “Women already make up a high percentage of the precarious workforce, and increasing informal, piecemeal work contributes significantly to women’s economic dis-empowerment and marginalization across the globe,” the ITF wrote. Uber jobs, they said, would “not contribute to women’s economic empowerment and represents exactly the type of structural inequality within the labor market that the women’s movement has been fighting for decades.”

So in a speech last week, UN Women Executive Director Phumzile Mlambo-Ngcuka quietly cancelled the partnership. “Not only are we listening, we are aligned,” Mlambo-Ngcuka said. “I also want to assure you that UN Women will not accept an offer to collaborate on job creation with Uber, so you can rest assured about that.” (UN Women is the branch of the United Nations that works to empower women and girls and to end gender discrimination.)

[H/T Buzzfeed]

TIME Transportation

Uber Cars Outnumber Yellow Cabs on Streets of New York

Taxis New York
Mario Tama—Getty Images Taxis pass Broadway theater billboards in Times Square in New York City.

Statistics from NYC’s taxi regulator reveal an important milestone for the ride-sharing service

Uber cars have overtaken yellow cabs on the streets of New York City.

There are 14,088 registered Uber cars compared with 13,587 yellow taxis, according to new statistics from New York City’s Taxi and Limousine Commission.

The figures, reported by the AP, reflect the rapid expansion of the ride-sharing service, which was introduced in New York in 2011.

But as the AP notes, the numbers don’t mark the demise of the yellow cab just yet. While there are more registered Uber cars, there are still roughly 15 times as many daily rides in yellow cabs as there are in Uber vehicles.

Uber drivers are likely to own their car and drive less than 40 hours per week, while yellow taxis are generally owned by companies that find drivers for the cars during all hours of the week.

[AP]

TIME Companies

French Police Raid Uber Offices in Paris

Uber called the raid an "attempt at intimidation"

French Police raided Uber’s office in Paris on Monday as part of an investigation into the company’s controversial UberPop carpooling service.

A French prosecutor ordered the 25-officer raid at Uber’s Paris headquarters, seizing emails, documents and smartphones used by Uber drivers, French media reports.

The raid is the result of the company’s controversial UperPop service, which connects clients with non-professional drivers, the Verge reports. UberPop was ruled illegal in France under a new law that requires all chauffeurs to be licensed and insured, conditions French authorities say UberPop doesn’t meet.

Uber called the raid “an attempt at intimidation” and said it plans to “vigorously defend the rights conferred upon it by EU law and the French Constitution.”

[Le Monde]

Read next: Uber’s CFO Steps Down

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TIME Transportation

Uber, Lyft Lawsuits Could Spell Trouble For the On-Demand Economy

Lyft Car
Justin Sullivan—Getty Images A Lyft customer gets into a car on January 21, 2014 in San Francisco, California.

Judges allowed the lawsuits over drivers to be heard by juries

The ride-app services Uber and Lyft were dealt a setback by two separate California judges Wednesday, who ruled that juries would decide the fate of lawsuits that could have broad implications for a range of tech startups.

The lawsuits were filed by workers who allege they are misclassified as independent contractors so the businesses don’t have to reimburse the drivers’ expenses like they would for employees. The plaintiffs believe they’re owed money for outlays like gas, insurance and vehicle maintenance—costs that could be enormous if juries determine they’re owed to tens of thousands of active drivers working for Lyft and Uber in California. The companies had sought separate summary judgments dismissing the cases, but the judges in California’s North District Court denied them, saying their peers would have to determine the status of the drivers.

“This is a huge milestone and major victory for drivers in both cases,” says Shannon Liss-Riordan, a Boston-based labor lawyer working on both cases. Her firm has brought cases on behalf of a range of low-wage workers, from Starbucks baristas to exotic dancers to house cleaners. “There’s this whole wave of companies who seem to think that they’re above the law and don’t need to comply with employment and wage laws,” she says. “They’re claiming there’s something new and different because their services are provided through technology, through a smartphone … but there’s nothing new about this.”

A spokesperson for Lyft says they are not commenting on pending litigation. Uber sent TIME a similar statement.

The legal fight is being closely watched by the many other startups who depend on the growing “1099 workforce,” people who are generally willing to trade a 9-to-5 work week and health insurance for a more flexible job. The ranks of this workforce have been growing along with the public’s appetite for the services they provide, like on-demand rides, groceries, hot meals, flowers and house cleaning. “It’s not only the consumer who says ‘I want it on demand.’ The supply is on demand,” says Ravi Dhar, a Yale management professor.

Businesses that use these on-demand workers have been able to scale fast partly because they are not on the hook for treating their personal shoppers or drivers or deliverymen like employees. Among the other startups that could be affected by the eventual rulings is Instacart, a company that organizes workers who shop for and deliver groceries to users in as little as an hour. The company is less than three years old and has been valued at $2 billion. Just as Uber has long insisted that the company is a not a transportation service, executives at Instacart say that they are not a grocery delivery company but a software platform whose app allows people to deliver groceries to other people who want them.

Liss-Riordan notes that in rejecting the companies’ requests to have the cases dismissed, the judges were also rejecting the notion that Uber and Lyft are not in the business of providing transportation. As U.S. District Court Judge Vince Chhabria wrote in his ruling:

Lyft tepidly asserts there is no need to decide how to classify the drivers, because they don’t perform services for Lyft in the first place. Under this theory, Lyft drivers perform services only for their riders, while Lyft is an uninterested bystander of sorts, merely furnishing a platform that allows drivers and riders to connect, analogous perhaps to a company like eBay. But that is obviously wrong.

Yet that doesn’t mean the juries will have an easy decision to make. Chhabria noted in his ruling that the labor laws at issue were written in a pre-sharing economy era. “As should now be clear,” he wrote, “the jury in this case will be handed a square peg and asked to choose between two round holes. The test the California courts have developed over the 20th Century for classifying workers isn’t very helpful in addressing this 21st Century problem.”

For now, these cases apply only to drivers in California, though Liss-Riordan says she has been contacted by hundreds of drivers and intends to create a nationwide class-action suit. She expects Uber to invoke an arbitration clause that prohibits many drivers from joining a class-action suit, forcing the them to bring any claims against the company on a individual basis. Lyft has waived a similar clause. “If Uber really wants to try these cases one by one in arbitration, we’ll do that,” she says.

If the juries find that drivers for the two biggest players in the new ride-app economy are owed for gas, that could lead to other standard employee benefits. The companies could be on the hook for workers’ compensation and unemployment insurance. They could be forced to pay drivers overtime and make sure they’re at least making minimum wage. Uber, the larger company, would also be looking at larger payouts. While Lyft has been valued at $2.5 billion, Uber has garnered valuations of $40 billion.

Read next: Cab Drivers No Longer Required to Learn N.Y.C.’s Streets

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MONEY stocks

Why You Shouldn’t Reach to Grab New Stocks

150312_ISK_SkepticalInvestor
Taylor Callery

As Shake Shack's recent slide demonstrates, while the IPO boom gives you lots of hot companies to take a flier on, you’ll most likely fall flat.

Do you regret missing out on the stunning debuts of Alibaba ALIBABA GROUP HOLDING LTD BABA 0.61% and Shake Shack SHAKE SHACK INC SHAK -0.96% ? Are you now waiting to hail Uber or snap up Snapchat when they go public, as expected?

Before you jump in, remember that when you pick a stock, you’re already taking a leap of faith—but with a newly public company, you’re taking two leaps. First, do you really know enough about the business? Second, has the market had sufficient time to draw its own conclusions so that you are buying at a fairly rational price?

“Anything that’s been trading for a while has been vetted by a whole host of investors,” says John Barr, a manager with the Needham Funds. Not so at or just after an initial public offering, and that’s why you have to tread carefully.

You’ll pay for the honeymoon

IPOs attract big headlines on day one, but surprises inevitably crop up. From 1970 to 2012, the typical IPO gained just 0.7% in its second six months, after the honeymoon effect had a chance to wear off. That’s five percentage points less than other similar-size stocks, finds Jay Ritter, a finance professor at the University of Florida. The year after that, the average IPO lagged by eight points.

Chinese e-tailer Alibaba, which soared 38% on its first day in September, is getting its dose of reality a bit ahead of schedule. Shares are down 28% lately, after the company surprisingly missed revenue-growth forecasts.

Themes get overdone

It’s easy to be lured by a story. Shake Shack doubled on its first day, thanks to the buzz surrounding high-quality fast-food chains like Chipotle CHIPOTLE MEXICAN GRILL INC. CMG -1.07% . But riding a food trend is hard. A decade ago, overexpansion killed investors’ ravenous appetite for Krispy Kreme doughnuts KRISPY KREME KKD -1.14% , and the company’s shares remain 56% off their peak.

Shake Shack has also entered a crowded battle for foodie dollars: the Habit Restaurants HABIT RESTAURANTS HABT -0.76% , Potbelly POTBELLY CORP COM USD0.01 PBPB -2.67% , and Noodles & Co. NOODLES & CO COM USD0.01 CL'A' NDLS -1.23% all went public recently, and all more than doubled in the first day. Odds are the market is overoptimistic about most of them. Since 2013, 15 stocks have doubled on day one; only two—both biotech firms—are trading above their first day’s close.

The fact is, unless you gain access to an IPO at a great price at issuance, you can’t view those stocks as buy-and-hold investments. And you should avoid any richly priced new stock altogether.

Shake Shack trades at 650 times its earnings. To justify that valuation, Ritter figures the burger chain must grow from 63 stores to nearly 700, each half as profitable as a Chipotle restaurant. That’s a big leap indeed, given that Shake Shack locations aren’t even a third as profitable at the moment.

This story was originally published in the April issue of MONEY magazine. Subscribe here.

TIME Companies

Uber Rival Lyft Valued at $2.5 Billion

Lyft Car
Justin Sullivan—Getty Images A Lyft car drives along Powell Street on June 12, 2014 in San Francisco, California.

The ride-sharing service still trails its much larger competitor

Investments in the ride-sharing firm Lyft have valued the company founded three years ago at roughly $2.5 billion.

Lyft raised $530 million in its latest round of funding, including $300 million from Japanese online retailer Rakuten Inc., as it looks to continue expanding, Reuters reports.

But the private company still lags behind Uber, the largest startup in the U.S, which has also rapidly expanded abroad. Uber is valued at around $40 billion.

[Reuters]

Read next: Uber, Lyft Lawsuits Could Spell Trouble For the On-Demand Economy

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TIME Transportation

Uber, Lyft Plan to Leave San Antonio

Uber At $40 Billion Valuation Would Eclipse Twitter And Hertz
Bloomberg/Getty Images The Uber Technologies Inc. logo is displayed on the window of a vehicle after dropping off a passenger at Ronald Reagan National Airport (DCA) in Washington on Nov. 26, 2014.

If a revised ordinance on the ride-sharing companies goes into effect

Ride-sharing companies Uber and Lyft said Thursday they plan to shut down their operations in San Antonio after the city council passed an ordinance, requiring drivers for transportation companies to pass city-reviewed background checks, which was meant to keep them in the city.

More onerous regulations about permits and registration and inspections, as well as a high insurance policy, were initially set to take effect on March 1, but Mayor Ivy Taylor had asked the city council to revisit some of the more tough rules in late February. Uber, however, says even with the revisions its still too restrictive to keep them operating in the city.

“The revised ordinance remains one of the most burdensome in the nation,” Uber spokeswoman Debbee Hancock told TIME via email. “We are disappointed that we will not be able to operate in San Antonio when this ordinance is implemented.”

Under the ordinance that passed 8-2 on Thursday, drivers for “transportation network companies” would be required to undergo fingerprinting and pass a background check administered by the city. Uber says their background checks for drivers should be enough to operate.

The San Antonio Express News reports Lyft will also roll back operations in the city if the standing ordinance goes into effect. “We very much hope the council revisits the ordinance before the implementation date,” said Lyft spokeswoman Chelsea Wilson.

The city has not indicated it will review the regulations again before they are implemented, but local ABC affiliate KSAT reports the council will review the changes’ impact in September.

The companies’ battle over regulations in San Antonio is just the latest in a string of similar ones across the country. Uber has consistently held that intense regulations are too often pushed by taxi-companies and are designed to stifle competition.

TIME Security

Uber Data Breach Put 50,000 Drivers’ Info at Risk

Berlin's Taxis As German Court Considers Uber Technologies Inc. Ban
Bloomberg—Bloomberg via Getty Images A passenger holds a HTC Corp. smartphone displaying the Uber Technologies Inc. car service application (app) as they sit in a taxi in this arranged photograph in Berlin, Germany, on Monday, Nov. 24, 2014.

But it isn't aware of any foul play as a result

A data breach at Uber last spring put tens of thousands of drivers’ personal information at risk, the company said late Friday.

Uber said it first realized its systems may have been breached by a third party in September of last year. After an investigation, the company found an “unauthorized access” by a “third party” occurred on May 13 of last year, which resulted in the names and license numbers of 50,000 drivers being leaked.

The car-hailing company didn’t specify who the third party was. However, Uber says it has since blocked further access to the database in question as well as alerted affected drivers.

Uber isn’t yet aware of any identify theft or other foul play as a result of the breach. It’s also offering one year of fraud protection to the drivers involved.

“Uber takes seriously our responsibility to safeguard personal information, and we are sorry for any inconvenience this incident may cause,” a blog post from Uber Managing Counsel of Data Privacy Katherine Tassi said. “In addition, today we filed a lawsuit that will enable us to gather information to help identify and prosecute this unauthorized third party.”

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