Written by Zach Babb
This article was originally published on October 23, 2017
It seems like everyday has a new post about how ride sharing and TNCs are going to upend life and usher in a new era of no car ownership. I don’t like to make sweeping generalizations about how large groups of people are wrong, but I’m going to do that here–the people predicting lessening car ownership are wrong. To understand why, we need to take a look at the systems through which we transfer wealth.
Wealth is a difficult notion to pin down as it’s not just money or stocks or even financial instruments as a whole, after all a big pile of gold would work for wealth transmission. For our purposes though let’s say that the transfer of wealth is the transfer of anything with monetary value–even if money does not change hands. Economically there are three large subjects that go in to an economic endeavor: Land, Labor, and Capital.
– Land is any place where work can be done
– Labor is anything that is done by humans
– Capital is everything else, mostly tools, machines, and other physical goods which allow Labor to work Land
Worthy of Your Time: TNC Capital Asset Use
Cars are a capital asset. We use cars to take us from one piece of land to another so that we can do work (among other things). We can gauge how useful a car as a capital asset is by examining how much economic value is produced by the person who owns the car and/or through the operation of the car. An increase in the utility of a car through additional usage is called marginal utility. In order to determine the economic value of this marginal utility, most people weigh it against the benefit of their time spent elsewhere. This is why not everyone delivers pizza on their off hours.
Transportation Network Companies (TNCs) are innovative and successful because they have introduced a way to increase the utility of an owner’s vehicle that is sufficiently lucrative to get enough people to use their cars in a way that sustains the service. This means that some people can replace their jobs, and other people can use their car for a second job, and that the money made is sufficient such that people will do it. Note that simply allowing for additional utility is not sufficient–if there was an app that let me sweep your floor, I doubt I would do it for a reasonable price. Similarly the market for TNCs can ebb and flow with unknown supply and demand. As people stop traveling, drivers exit the market lowering supply. As demand goes up, people can enter the market and make premium money.
Loaning an asset, say a cordless drill, to someone for money has been around for a long time, but TNCs are rocketing up in value because no one has figured out how to do this with privately owned cars, which for the vast majority of people are the highest value capital asset they own. Since cars are the most useful thing that most people own (you can’t sleep in your computer, and you can’t drive your house), the TNC is a high-value entrant into the mobility space. This fact, combined with some data around ownership-levels in general have led some to posit that once autonomous electric vehicles replace humans driving exploding dinosaurs, our car owning days will be over.
Car Use As Land Use
What these prognostications are failing to see is what the shift to autonomous vehicles will actually look like. It will be much bigger and much more drastic than people are realizing and it will drive car ownership up. You see, once human input is no longer necessary to operate a car, the car will no longer be Capital and instead it will be Land. This is admittedly a long-term view (especially given my past article on autonomous vehicles), but that’s the future we’re heading towards. Once we don’t need to use our cars to be productive and instead can have our cars be productive while we’re doing something else, the limit is only defined by human ingenuity. And if there’s something humans are good at it’s dreaming up uses for land.
Let’s crunch some numbers. An autonomous vehicle earning $1/mile driving 20 mph around a city 40 hours a week, 52 weeks a year would earn just over $40,000 a year. If all it took to make that $1/mile was joining some transportation network, and cars cost under $100,000 who wouldn’t buy a car? Even with ongoing maintenance of driving 120k miles in three years you’d still probably make your money back, and even if you didn’t you’d still have a car whenever you wanted. At more dollars/mile or a lower cost car this investment becomes more and more attractive. And if I can do my shopping (or drinking) in a car $1/mile seems on the low end.
So in the future we’ll still need to get from one place to another, but if that happens without the need of our attention and effort what could we do with that time. Everyone is focused on the taxi model where a human is replaced by robotics and you pay to be ferried around, but that’s missing the larger shift–if I can do anything while getting from one place to another, then I’m going to spend my time in much the same way I spend my time when I’m not commuting. That is to say, I’ll work if you pay me, I’ll use your space for business or pleasure and pay you, and I’ll expect some land to be public. Simply being ferried around won’t be sufficient, just like how it’s hard to just own a space where people can sit without doing anything.
Re-envisioning Public Transportation as Public Land
With fixed land we have parks, museums, etc which are public lands that are free for people to use. Why not have that with vehicles? It might seem far fetched to line the floor of a bus with grass and replace seats with benches, but if it’s running on electricity, and doesn’t have to worry about accidents, why not have a glass-enclosed park on wheels?
But the interior possibilities aside, consider what entering the bus network could mean. People could own vehicles which can support public transit during peak hours and then earn money in different ways during off-peak hours. Maybe there’s an augmented reality museum experience which takes donations, and during peak hours operates as a bus. Cities would incentivize this the same way cities incentivize anything: through taxation. Cities could tax vehicles for usage during peak hours unless the vehicle is used as part of the public transportation network. We don’t do that now in our non-connected world, but autonomous vehicles will need some connection and that type of taxation could be used to relieve congestion and relieve the fleet management problems of large transportation organizations.
Rethinking Paying for Transportation and More.
No doubt there will always be a need for the taxi offering, but if I were in charge of a gigantic corporation I would buy a grocery chain. Then I’d make a transportation network where we load up a car with groceries you want to buy (maybe we even remember prior purchases!) and send that to pick you up from work and take you home. When you exit you pay for the groceries you picked and a little extra for the transportation. Make it so you don’t have to maintain a fleet of cars, but rather people can add their cars to that network and you might just have yourself a winner.
Of course shopping isn’t everything. Would you pay for a taxi that doesn’t have a Nintendo when the Nintendo network has them? How about Blizzard’s network? Is there a network that remembers where you were in the audio book? How about one that resumes the Netflix show you were watching? How about one where you can ride with your friend who’s in another car? The taxi model is old and it will be replaced by real entertainment providers, and I would be wary of any TNC not preparing for that.
Finally how about having a second job on your commute? Sure the extended workspace will be a thing, but once this future comes around I’m gonna outfit a van with a bunch of dials and widgets and then use it to train space AI and sell that data to Space X and NASA. Then I’ll pay you to ride around with a bunch of friends solving space simulation puzzles like that episode of Community. I’d like to see your robo taxi compete with that.
Economically things are going to get really weird as virtual reality and autonomous vehicles allow us to rethink what land is. I’m starting to get really excited. I hope you are too.
Please note that this article expresses the opinions of the author and does not reflect the views of Move Forward.