Disruptive Technology

Autonomous Cars: The Good, Bad, and Ugly

Autonomous vehicles — essentially driverless cars — have the potential to turn commuting from what is largely a waste of time to a productive stretch, as well as improve the environment and reduce traffic congestion. But they also could put many of us out of work.

According to the U.S. Census, 130 million of us spend an hour sitting in our cars commuting to work. Every day.

That’s 130 million hours in traffic, amounting to 15,000 years of largely wasted human capital. Even if you ask people who take public transport what work they do while commuting, they say ‘listen to podcasts’.

Okay, folks.

What Does The Autonomous Future Look Like?

Yet autonomous vehicles have the potential to allow us to reclaim many of those hours. Imagine, for example, that you are a working mom. You open up your autonomous vehicle app and request a ride to work. (Your employer subsidizes the cost of the service.) Five minutes later, a luxury Mercedes van pulls up. Your children pile in with you until the first stop, when they transfer to a second autonomous vehicle that takes them to school. By this time, you have solved that nagging math problem your son didn’t quite get done last night.

Now you relax, put on your headphones, and listen to Chopin. Twenty minutes later, you receive a text asking you to join a conference call. The computer screen by your chair is flashing a Powerpoint presentation. (Alas, in this particular future, we haven’t gotten rid of those.)

Future luxury autonomous van (Image: Lightspace Studios creative commons)

After the call ends, three of your coworkers climb aboard, and you resume a meeting that began yesterday. It continues until you arrive at the office. Before you leave the van, you hand in a laundry bag and a shopping list so that by the evening, the laundry is done, and the grocery bags are full. The van lets you out at the office. You take a cup of java to go.

Ask yourself, have you spent an hour commuting or have you just had the most efficient work hour of the day?

That’s Good, Because It Has Arrived

Autonomy will change the nature of where, how and when we work, and will also force us to rethink about how we spend our time. It will change the value of resources like the cost of living close to the office. Along the way, it is going to disrupt and create new industries, affect real estate values, and improve the environment.

But for our purposes, in terms of speed of adoption, it’s not coming, it’s happening now. Chief executives who haven’t thought about the reality of driverless cars because they aren’t widely deployed are making the same mistake a previous generation made when they scoffed at the idea of ubiquitous Wi-fi.

According to Internet of Things Journal, a recent study concluded the world market for automotive semiconductors will grow from $30.3 billion in 2015 to $41 billion in 2020. The markets for self-driving auto sensors and cameras are also expected to grow exponentially in just a few years.

And The Government Is Here To Help

There are no rich skeptics in Silicon Valley. This mantra is especially true of newer technologies like autonomy. Just ask anyone who invested $10,000 in Uber’s seed round when it was valued at $10 million — and who has seen their investment grow to over $50 million. Those who scoffed are kicking themselves. Or taking taxis.

Mercedes Benz driverless concept car

Savvy companies that get the importance of being a first mover are taking a variety of deal approaches to the autonomy sector. Some have opted for a home brew approach, like Mercedes, Uber, and Tesla, and have developed brand extensions. Others have cut billion-dollar deals to get in the game, like General Motors’ recent acquisition of startup Vogt. Google built its own proprietary brand, Waymo, from scratch and recently spun it out as a separate company.

It’s happening in commercial transport, too. Uber recently launched a driverless truck division, Otto, garnering national headlines. The company completed its first test drive using driverless technologies, driving autonomously for 120 miles in Colorado with a trailer full of Budweiser.

As we said, of national importance.

Uber’s Otto driverless truck (image: Uber)

Now, the government is getting in on the act.

In May 2017, New York Governor Andrew Cuomo announced the state would start testing autonomous cars on public roads, following similar decisions in Nevada, Florida, California, and Michigan. Then, on September 6, the U.S. House of Representatives unanimously passed the Safely Ensuring Lives Future Deployment in Vehicle Evolution (SELF-DRIVE) Act, which permits an increase in autonomous vehicles to 100,000 within two years from 2,500 today.

Two years from now in government time is tomorrow. Why are they moving so quickly?

First, given their dependence on technology, not human drivers, autonomous vehicles are presumed to be safer. In 2016, according to National Safety Council estimates, 40,000 Americans were killed in car accidents and there are over 100 casualties treated in an emergency room for each death, at a cost of $33 billion in 2012. Fewer accidents, injuries, and deaths would affect costs and change longevity rates — and, consequently, the insurance and healthcare industries.

Still, self-driving vehicles aren’t accident-free, not yet anyway. Artificial intelligence will eventually allow the removal of “safety drivers,” but not immediately. (If you can hail an Uber self-driving car — in Pittsburgh today, and shortly from Waymo and Cruise — you’ll notice they have “safety drivers” sitting in the front seat.)

Second, the government hears the call of energy conservation and climate change. Through ride sharing, we can expect to see as much as a 75 percent reduction in automobile traffic by adopting the Uber concept, and according to the Centre for Integrated Energy Research, up to a 45 percent savings in energy consumption.

Okay, Now Let Go of the Wheel

The advent of driverless cars should give chief executives a rich set of opportunities to think about, but there will be many questions and no easy answers.

If your staff commutes each day, what happens with that extra hour or two? Does it belong to the employee? Does the company subsidize the car service, like Facebook and Google do in Silicon Valley? For Google, it may make sense to provide for its 72,000 employees, but what if you’re Walmart with over 2 million people who need to get to work? It changes the calculus a bit.

Does the workday itself change? Do employees even need to come to the office more than occasionally? If employees are managing their lives on their way to and from work like dropping off children at school, is the company becoming ‘big brother’? When an employee is laid off or fired, are they corporate orphans, living far from a dense city and unable to access those services? Will that turn company provided driverless transport into an entitlement like healthcare?

What about the real estate impact? Do you even need a large, flashy headquarters anymore if everyone is ride sharing to multiple locations? The chief executives I know spend less than 25% of their time at headquarters. Why waste all that space on empty offices?

Any company that relies on distribution has to consider the changes as a 100-year storm. Just imagine UPS or Amazon finding out their costs of transport go down by 40 percent, part savings on drivers (assuming Unions will cooperate) and part the maintenance free electric engines. But what of long distance carriers, railroads and airline freight shippers? Do they simply shrink like the proverbial buggy whip business?

Certain jobs will take a big hit, as well. For instance, below you will see a map showing the most common jobs by state. As you can see, the truck driver is the №1 job in America, including in two of our most populous states, California and Texas. Those are scheduled to disappear early in the era of autonomy.

Map: The Most Common* Job In Every State (NPR)

The Perfect Storm Is About To Happen

Perhaps the biggest hurdle, however, is us. We will have to learn like the first time an aircraft pilot turned on the autopilot, to trust a computer to guide us through rush hour traffic at 70 mph.

There will be a litany of disruption in everything that is transported or whose business model is linked to auto usage such as car dealerships, garage mechanics, auto parts, gas stations, accident insurers, revenue from tolls and parking, rest stops and real estate relying on rush hours or short distance commuting, even policing. Police officers spend 40 percent of their day on traffic-related matters.

Parking fines will be an anachronism (New York stands to lose over half a billion a year from parking tickets). Parking lots will shut down, freeing up quite a bit of real estate, and sudden increases in capacity tend to have a negative effect on the value of inventory. In other words, more disruption for people, balance sheets, and the economy.

Autonomy will be the perfect solution for companies that see far ahead, understand technology and make preliminary and smart investments. But it will be the perfect storm for those who hang on to the status quo and wait for the changes to come to them.

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