How Self-Driving Cars Will Make Money
What’s a better motivator than fear? Money. Or listening to Eye Of The Tiger while slapping yourself on the neck. But this article is about money.
Namely, it’s an article that aims to shift the witch hunt mentality against autonomous vehicles, in the hopes that you’ll all put down your pitchforks and pick up your wallets… because these things will be amazing investments.
Ah, there you go. That’s the kind of positive Internet rage I’m looking for.
Several surveys have shown, rather sadly, that you can stop people from babbling about how scary self-driving cars are simply by putting a pacifier in their mouths that is roughly the shape of their car insurance bill. Now, this is right for the wrong reasons, as the impact of such technology on your life and the lives of others is worth infinitely more than the hefty discount in insurance premiums cited by these surveys — and frankly, the logic is hypocritical. But people are pretty consistent in exercising poor perspective outside their own present-day needs, so it’s understandable, and it’s a start.
Let’s set a more proper stage by having everyone take a moment to consider just how much they spend to operate a vehicle. My years in the car industry exposed me to just how often consumers forget (or want to forget) what goes into owning a car, so I used to show them this handy li’l spreadsheet in an effort to educate. Did you know the average American spends more money on cars than food? Fun fact. Let’s see how your costs shake out when you fill in this chart:
So, what was your damage? Being a New York City resident, I’m a bad example… so I used the oft-cited AAA statistics to illustrate typical costs here, peppered with my recollection of expenses like parking from the more normal cities I’ve lived in. Your mileage, of course, may vary. I’m sure some of you are already clicking the note icon to tell us all about how your expenses are unique, so here’s a pat on the head in advance.
Point is, cars hemorrhage cash; they’re not investments by any stretch. Here’s how autonomous transit will change that for the governments, consumers, private investors, and businesses. If you take nothing else away from this article, remember that the granularity of trip and payment data available makes all the difference. Your transit solution can’t do this.
Let’s take it from the top:
If this is your first time reading my blog, it will help you to understand the following:
- When I talk about autonomous vehicles, I’m talking about them in fleet form — the point at which anyone in the nation can order up and hop into a vehicle they don’t own for a single ride. A few AVs on the road is a fun experiment, but it’s not where the magic happens.
- The “government” of autonomous vehicles will likely be a public-private partnership. Thus, the following section discusses how AVs will generate profits for the system’s managing operators: your city, Google, Ford — whoever it ends up being. Moving on…
Charging for luxuries. The holy grail of public transportation is an infinitely scalable model: an extremely affordable and omnipresent means of getting from A to B reliably, with enough flexibility to add speed and convenience to taste for those willing to pay accordingly. You want those high-dollar luxuries to be available, because those dollars mitigate the base cost of operation. The rich pay more to be wasteful; the poor pay less to be efficient.
That’s pretty tough to achieve when you use trains and buses. Sure, there’s always “first class”, but that doesn’t get you there quicker, or pick you up at a unique location, or bring you a specific vehicle of your choosing, or wait at your house while you get ready, or let you buy out the other seats so you can have the whole place to yourself for relaxing or singing or crying or whatever. Fortunately, all of those examples can be priced out with an autonomous model. While the average Joe might pay 10¢/min to ride in a standard vehicle with a few strangers, and those closer to the poverty line could be provided with a mass-transit solution for 3¢/min, the elite could pay for as much convenience as they can imagine — perhaps ending up with a private SUV waiting in front of their office to whisk them away to their next appointment faster than the rest of traffic… at the rate of 75¢/min. This is a big achievement for transportation, because until now, it was seemingly impossible to build an economical mass-transit infrastructure that could also pull in revenue for providing personalized convenience — and Americans do love their personal convenience, which is why everyone here drives their own cars.
Charging for trips that strain the system. Many of us know and love Uber’s questionable “surge” pricing — but the fact is, it’s an important facet of running a successful transportation system. If adding another rider to the infrastructure will have significantly adverse effects, the cost should go up as a motivator for citizens to avoid those strained hours and routes in order to maintain economic operation. But this logic can extend to almost any element of travel once we have access to smart payments, such as trips out to distant suburbs from the city core. It used to be that urban sprawl would beget personal transportation, because… well, that’s what sprawl is: there’s no longer a concentrated mass to build efficient public transit for. But the technology of AVs will solve this, charging its riders accordingly if there’s just one of ‘em asking to have a vehicle take them 30 miles from downtown to the ‘burbs.
Making bad behavior expensive. I’ve previously covered the conundrum wherein a self-driving vehicle might understand the value of the world so quantifiably that it would decide to run over a drunkard or lunatic in the name of net gains for society. It’s a vital discussion, but let’s walk before we run here. What the infrastructure operators can do to maintain efficiency is charge users microfees for any wasteful behavior they exhibit. One cent here for walking in front of the vehicle’s path, two cents there for not being where you agreed to be when the vehicle arrives, fifty dollars for being part of a protest blockade on the highway… it’s a capability afforded to us by the connected nature the transportation grid and our payment devices (be they smartphones, smart cards, whatever), so that fees are directly related to the strain on the system, rather than guesstimated and sporadically enforced by authorities.
It’s certainly an interesting approach, as we’ve never had the manpower to consider microfees until now. The cost involved to have a cop standing at every bus stop — so that he can run over to hand you a 50-cent ticket for holding the doors — makes the notion preposterous. Artificial intelligence and connected devices, however, make it a reality. And, we can test (rather than project) the impact of microfees in a country where we’ve traditionally thought of “violations” as rare, expensive, embarrassing situations, rather than part of a constant feedback loop to improve behavior. The goal here is to tie costs to economical operation, so as the microfee revenue decreases, it means the citizens are behaving more efficiently, and that makes managing the infrastructure cheaper.
By the way, if you’ve got a minute to spare, you should play this interactive game from Setosa, which reveals how even the smallest of delays causes inefficiencies in mass transit.
Running more efficient construction projects. How much more affordable would a road’s maintenance be if laborers knew there would never be a single car traveling on it? We’re about to find out, because autonomous vehicles will isolate the construction area and avoid it, allowing construction to happen faster — and even allowing it to happen less frequently, as the vehicles can learn to avoid damaged portions of roads.
Cutting investment to unnecessary projects. It’s nice to finish roadway projects faster, but what if we could prevent maintenance and construction expenses before starting the projects? Again, our ability to simply ask the autonomous fleet to detour itself from, say, a deficient bridge, will provide an amazing volume of traffic data from which to decide whether or not the bridge is worth repairing, or if it could continue un-repaired as long as we only fed it 30% of its current traffic volume. Tons of possibilities here will pave the way for better-informed infrastructure projects, and that means more value delivered.
Cutting enforcement and bureaucracy costs. Speaking of penalizing bad behavior… everything we know about managing it will change. Imagine the resources that go into policing highways (with helicopters, Virginia??), ticketing vehicles for parking violations, managing the paperwork involved, operating courts specifically for traffic cases… much of that can go away the moment all cars are autonomous. We can cut costs all day here, people… who else wants a trim? And yes, that includes salaries, i.e. jobs.
Advertising within the vehicles. God forbid. It will probably happen though, because knowing who is in the car makes for a significantly more relevant ad, which in turn makes for a significantly more profitable ad platform.
Oh, did I mention America spends roughly $500B a year on the consequences of car accidents? I probably should’ve just said that, dropped the mic, and skipped the rest of the section… because nearly all that money will be saved through self-driving vehicles.
Since most of you folks reading represent the consumer, you’re probably a little ticked off after reading all about how the gubment will be nickel-and-diming your trips in AVs. Fear not! After all, this solution needs to put more money in your pocket if you’re going to adopt it, so that’s what it will do.
Removing insurance costs entirely. I’ve published a previous piece projecting that insurance costs will shift to the corporations who build and operate the vehicles. Not only does it just make sense, it’s vital to drive the consumer’s adoption of the technology and consent in being monitored. That’s an average annual savings of around $1,000 — or as the kids call it, a rack.
Of course, any good/jerk business would simply pass their insurance costs on to you through the vehicle usage charge… but remember, we’re projecting a reduction in the number of car accidents at the rate of 90% or more — which means the new normal for the car insurance industry is that there is no more car insurance industry, and therefore no cost to pass down. AV manufacturers will simply pay out for the rare incident, which is much cheaper than carrying a policy for 300 million Americans.
Making carpools a reality. Carpooling (which I often refer to as ride-sharing here) is a concept America is just going to have to start embracing if we plan on remaining a first-world country fifty years from now — we can’t keep making more babies who drive more cars on more roads we don’t pay to maintain. To be fair, there are probably tons of U.S. citizens who would gladly share a trip to or from the office if doing so didn’t require surprise-birthday-party levels of event coordination. So, good news: AVs will do that part for you.
The vehicle that costs 40¢/min for personal use will only cost 10¢/min if there are three other passengers — and if all you have to do is walk down the block for such savings, then such savings you shall have, my friend.
Reducing operational and incidental expenses. Obviously, the costs you incur as a vehicle owner like fuel, tolls, and general wear-and-tear will be built into pricing models for usage in the future. But taking a gander at the chart earlier in this article, you’ll notice there are several expenses which exist specifically because of ownership — namely parking costs (estimated above @ $1,250/year), but more nit-picky items as well, along with an invisible $900 per year average in taxes each of us personally lays out to cover the infrastructure cost of dealing other people’s car accidents. Sure, a portion of these costs will indeed be passed down to you… but not nearly as much as you shell out now as a vehicle owner.
It’s also worth noting here that many of us currently own vehicles with more capability than is necessary. We don’t need an SUV all the time, but we pay for it regardless of whether we use it or not. In a usage-driven world, these expenses are no longer the case… you’ll only pay for what you want during that trip, which notably lowers your vehicle operation costs.
Using cars as an alternative for extended travel. A flight from San Fran to Los Angeles is about $300 and 3 hours long, if you take into account the cost and time involved in getting from door to door. Would you be willing to drive 8 hours instead, and save $200? Don’t tell me — let me sweeten the pot: you’re not the one driving. In fact, you’re not even awake, because you’ve requested a trip with an autonomous vehicle set up for sleeping, as it takes you directly to your destination overnight. So, instead of being out $300 and 3 hours of your life, you’ve paid $100 to fall asleep and wake up 400 miles away from your house. Don’t ask me how the bathroom works; I don’t know.
Providing information for discounts. These things are going to be hooked up to the governments and companies responsible for making transportation successful. To that end, the interested parties would gladly pay out discounts or reimbursements for trips wherein you’d be willing to provide them with sweet, juicy data:
- Your precious “private data” (for advertising or census purposes)
- Answers to surveys posed by interested parties
- Identification of anomalies the vehicle might have trouble with, e.g. asking you and other riders to identify an obstacle in the road
- Other information I can’t imagine right now because all I keep thinking about is Pizza Hut offering to pay for your ride if you agree to stop at a Pizza Hut for their new Cinnamon Pepperoni Shooters.
Investing in the vehicle infrastructure. Remember that gem of baby boomer wisdom, “real estate always goes up”? That was during America’s biggest period of urban sprawl. And, just like that new frontier, filling the roadways with autonomous vehicles is going to take seed money — but not from consumers, because they will no longer own the vehicles they ride in.
So, who will own the cars? You, Mr. Money Bags… if you want to. It’s the next investment boom: City X needs 1,000 autonomous vehicles and would prefer not to spend taxpayer money on them. Corporation Y who manufactures the vehicles is only willing to eat the cost of about 100. That leaves 900 vehicles someone needs to buy for City X’s use, which is precisely where investors (even people like you and I) all over the country can capitalize, taking home a revenue share on the operating profit of a vehicle they’ve purchased for the city without ever having driven or seen it.
Operating enthusiast locations. Shooting a gun in public is illegal. So is being drunk in public. What do we do when our policies deem certain behaviors to be unsafe? We create safe spaces for those behaviors.
When people are no longer driving their commuter vehicles, the feasibility and allure of isolated race tracks, drag strips, and B-roads will skyrocket. These locations will be the place to go when you want to do that really unsafe thing people used to do all the time in the 20th century: drive a car. And not just drive it, but really wring it out under the protection of a closed course owned by private investors. Personally, I would pay good money to do this every weekend in the future — many enthusiasts would. If you’re looking to invest, this is something you can start working on today.
Opening businesses inside self-driving vehicles. This seems a bit marginal for a present-day argument, so rather than pontificate on all the potential benefits and applications, I’ll leave this image of a Starbucks on wheels.
Cutting salaries and replacing with transportation reimbursement. It’s a bit silly when you think about it: you primarily own your vehicle so that you can get to work, and you primarily drive your vehicle to work, yet the company you work for doesn’t pay for your vehicle or usage… instead, they inflate your salary to compensate for miscellaneous personal expenses, and as a result, what they pay you and what you spend your money on become obfuscated and difficult to improve economically.
Certainly, corporate tax structure over the years has found ways to make this work in their favor, at least from a short-sighted perspective. Still, would it not be a more affordable use of funds to grant employees a slightly lower salary and instead pay for their trips? In doing so, we could remove the artificially inflated portion of an employee’s paycheck that — despite being taxed as income — goes directly back into expenses related to their job. The upshot is a lower salary + expenditures for travel.
It’s a much more direct and relevant exchange of money for services, and the data which emerges from this model would arm businesses with insights as to where they might want to open another office, or which employees could be more affordable if offered a telecommuting scenario, etc. The available data even businesses a neatly-packaged assessment of their carbon footprint, which they can optimize to cut their own waste, and to earn whatever deductions and subsidies exist from their local and federal governments for going green.
Shipping and delivering products more efficiently. Autonomous vehicles will drastically cut distribution costs (USPS estimates America’s shipping industry to be a $900B business), and the implication of a more modular shipping infrastructure — hundreds of shared-use AVs each carrying one product rather than one large truck carrying hundreds of products — is that businesses small and large could change the way they think about delivery. Warehouses can be smaller and localized, while packages can be sent door-to-door simply by paying the extra 20¢ or so in operating time that it takes an autonomous vehicle to divert its intended path, stop at your building, pick up a package, and deliver it to a recipient who is only a mile or so away from the vehicle’s original destination.
Analyzing employee schedules and workdays. By using tomorrow’s schedules, the right employees could be notified to work from home, or stagger their trips in to save on congestion and commute time, or host a meeting from the car — there are so many ways companies can improve the efficiency of day-to-day operations given this level of transportation data. I should probably draw up some futuristic analytics dashboard for CFOs here…
So… Who Loses?
With all this money moving around and going back into people’s pockets, someone must be getting the short end of the stick, no?
Short answer: yes, and kinda.
Yes, because the industries and jobs capitalizing on the financial drain that is automobiles will fall apart: transportation workers, insurance companies, car manufacturers, law enforcement… it’s a big list. Probably bigger than any of us can imagine in the long run. The good news is that artificial intelligence is bringing this shift to every corner of humanity, so it’s an opportunity for us to change the way we think about employment and work and salaries and life.
The point you can’t get around is that, much like the farce that is the national GDP, these jobs are validated by human inefficiency. If we find more efficient solutions, the unnecessary jobs should go away — that is to say, if we kept all the jobs that have become irrelevant over the centuries, you probably wouldn’t be doing the job you’re doing right now, because you’d be out hunting buffalo. And you’d have tuberculosis.
And Kinda, because several of the financial benefits I laid out in this article are in opposition: if governments can profit from your use of vehicle luxuries, but you can profit from using economical carpooling initiatives, then something in that equation has to give.
That’s okay. It’s not necessarily the profitability that counts — it’s the accountability. We’re on the precipice of understanding economic flow on an unprecedented level, and the result is a much more accurate and predictable representation of where America’s transportation dollars go. In clarifying that murky water, we’ll be able to make more efficient decisions, and more efficient decisions lead to a better economy for all.
You don’t mind if I put this here again, right? Thanks for reading.