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There are two “buzz sectors” that have been grabbing a lot of attention in the media in the last few years: Ride sharing services, and autonomous cars.
We’ve been dreaming and talking about autonomous cars for decades. But its only in the last decade that technology finally reached a point where building one became feasible. One of the nice things in technology is that it takes the simple concept of economics of scale to a whole new dimension. That is, once something becomes feasible to make – at a considerably elevated cost initially – Moore’s “law” starts to really kick in and it becomes a downhill race to the bottom from there.
A decade ago, it literally took a Google to pull up the intellect and research and development effort to build an autonomous car. Sure, the DARPA challenge has been there for years before, with many teams from numerous research and academic institutions participating from around the world; but it was Google, with its deep pockets and ability to tap into vast intellects in its worker pool that managed to really crack the nut.
Once Google demonstrated it was feasible, all it took was Moore’s law – the doubling of computational power every 18-24 months – and compounding over a decade. Today every car maker, major or otherwise, is working on an autonomous car. GM, Ford, Toyota, Nissan, VW, Mercedes and BMW, and even Chinese makers like BYD have an autonomous car program in full swing.
Today, the question is not whether we’ll have such cars. That horse has been beaten to death now. The question has become when we, consumers, will be able to buy one? Estimates vary between 5-10 years. The focus today has shifted from solving the technological challenge to figuring the necessary legal and liability framework of how to operate those cars. And when you reach this stage, you know change IS coming.
The second buzz sector that has been garnering a lot of attention lately is ride sharing services. Like most new things, it’s a culmination of other technologies that made this possible; namely, the proliferation of smartphones, GPS, and mobile internet connectivity. The disruption here stems from its challenge to the conventional ride sharing establishment, taxis. Ride sharing services like Uber and Lyft not only offer transport to people who need it, they also offer the flexibility to would be drivers to work at their own leisure, using their own car, and for the most part setting their own fare. But where ride sharing really has a leg up is convenience and forcing the quality of the service substantially up compared to traditional taxis. An Uber user can see what other people thought of that driver and his service. Under this model, no one can survive providing average service. Excellent becomes the new “average”, for anything other than that simply becomes unacceptable.
What will happen when autonomous cars become a commodity in a connected world where individual transportation is only a few screen taps away?
The biggest cost in operating a taxi, or ride sharing service, is not the car, nor its fuel, nor its cost of maintenance. It’s the collection of organs, flesh and bones sitting behind the steering wheel. If that is taken out of the equation, even a top of the line luxury car becomes cheap to operate as a taxi, or taxi like service.
And this brings me to my next question: why would most people buy a car, when they can for the same if not lower monthly expense, summon a much better ride to take them anywhere they want, with the added convenience of not having to worry about parking space (and its associated cost in most large cities) nor the legal expenses and liabilities associated with owning and operating this car?
Which in turn brings me to that next next-big-thing I alluded at in the title: This consolidated autonomous personal transportation service sector is where, IMO, we’ll see the next big disruption in society. I doubt we’ll see companies like Uber and Lyft dominate this new sector. The only thing they bring to the table is convenience, once you take out the service quality of the extinct driver in an autonomous car. There is no competitive advantage in convenience. Anyone can replicate that.
In such a world, car companies stand to gain the most if they chose to enter this market. People like brands, and like to be associated with a brand. Design, quality and consistency are not easy to replicate. Scaling up in order to compete by driving costs down will require substantially greater efficiency in resource allocation, utilization, and cost control; factors that are not easy to replicate or imitate.
Car companies stand in a unique place today in that they already have the infrastructure and experience to operate such large scale services. In fact, we already have the seeds of such a service in manufacturers that provide long term car leasing and renting services to consumers. Barring incompetency and lack of imagination, it’s not much of a stretch from there to providing distance-metered ride on demand autonomous services.