Hi everyone
I have decided to transfer my blogging efforts over to Medium where I will have some public posts and some locked posts.
You can find me at Futuristpaul
Most general posts will be open to all readers. Posts about the book I am writing on driverless vehicles will be locked but you can still see three of those posts a month for free if you visit the site
I will leave this site live until the next renewal.
Paul Higgins
In a previous post, I have explored the problems with short haul bus travel once driverless electric cars are a car ride service. There is a possibility that there may be a sweet spot between long-haul bus and short haul bus services. Bus companies can save significant costs by using driverless electric vehicles. If they use those savings to pamper passengers instead of cutting costs, they may well win the medium haul travel war.
The change of buses to driverless electric buses will make them more competitive with air travel. This is especially true over distances up to the 300-km mark. Most flights in Australia are longer than that, but there are plenty of short-haul flights in other countries. Once the distances get too long the faster speed of planes starts to take a competitive toll. Bus companies might be able to offer a significantly lower price to catch a driverless electric bus from Melbourne to Adelaide (727 km). The problem is that the flight is 1 hour and 20 minutes and the bus trip is around 10 hours depending on traffic. Even allowing for the delays of getting to the airport and moving through through security we are probably talking 3.5 hours versus 11 hours. Only people who cannot afford the fare are going to be taking that bus. Especially when you can get tickets that are sometimes close to competitive with the bus fare if you travel at the right times.
As an example of the medium length trip, let’s take the Sydney to Canberra flight which is 283 km. The flight time is 55 min, and a discount airfare is about $151 plus $25 for a taxi at the other end. Flights to Canberra are often more expensive than most other major city flights in Australia. This is due to the significant demand for flights during the weeks that the Federal Parliament sits. Between the Parliamentary sitting weeks, there are a limited number of flights. According to Greyhound Buses, the bus travel time is 3 hours and 30 minutes to 4 hours.
The reality is that while the flight time is 55 minutes the real travel time is by air is closer to 3 hours. You must be at the gate 30 minutes before the flight leaves. Airport traffic congestion means leaving the CBD at least an hour before that to avoid the risk of missing your flight. At the other end, you need 20 minutes to get a taxi and get to the CBD. Of course, there is some extra time for the bus as well, but it is minimal. So, let’s say it is 3 hours for the flight versus 4.5 hours for the bus. The current saver fare for Greyhound is A$38. If we use our previous assumptions on cost reductions for driverless electric buses (see The Coming Bus Apocalypse) we could get the price down to $23.
You might not be able to attract many more passengers by that cost reduction when the airfare plus taxi is already five times the current bus cost. That is a fair argument. What you can do though is take that price reduction and put it into more comfort and services. This produces a fantastic value proposition when the airlines are just trying to cram in more people. Imagine efficient workstations, Gold Class cinema type recliner chairs, and even nap pods for customers. What about soundproof gaming rooms so your children can game while you relax and take in a movie. Two adults and two kids for $152 for a luxury bus trip versus $625 on the plane sounds like a killer value proposition. The price might remain the same but comfort and experience are much better because the bus company can offer the same price but 60 or 70% more space.
Smaller buses with much better space than planes can come and pick you up from your house or business and take you in luxury. Eliminating the driver from a smaller bus has a much more significant impact per passenger than removing a driver from a larger bus.
Most of the current airline and bus transport models use the principle of maximising capacity utilisation. Most of the costs of driving a bus or flying a plane are fixed costs. Every extra passenger contributes an enormous percentage of their ticket price to the bottom line. Electric driverless buses are likely to head in the opposite direction for journeys where bus trips take not much time than flights.
It is a matter of changing the model where costs per passenger kilometre drive all thinking.
This will have significant implications for bus companies, and bus manufacturers. Bus companies will have to rethink routes and bus configurations. They will also have to rethink customer service. Bus manufacturers will have to rethink bus size, bus interiors, and bus power systems.
Paul Higgins
I am writing a book on autonomous vehicles with Dr Chris Rice . It is called Rise of the Autobots: How Driverless Vehicles will Transform our Economies and our Communities. Follow us here to see more excerpts as we write.
Come visit our website to see more of my work.
Self-driving Uber vehicles are lined up to take journalists on rides during a media preview at the company’s Advanced Technologies Center in Pittsburgh earlier this month.
As I ponder the changes that driverless cars will cause across our societies, one of the difficulties is trying to understand what the speed of adoption might be. That is because speed of adoption has huge consequences on the levels of disruption that will occur. The speed of adoption linked into all sorts of factors including:
Some of the major problems in implementing driverless electric cars as a transport service can be largely solved by car ride companies. The problems include the following:
The technical problem is getting to level 5 automation as soon as possible. Level 5 automation is when there is no driver required in any location or conditions. Any driverless car company will have to convince the regulatory authorities of safety at level 5. The existing ride companies have an advantage here. They already have masses of data on the travel their existing cars undertake. They can also start with say 100 driverless vehicles within their existing service. That will consist of testing them in real conditions with paid drivers in the vehicles. While a lot of advances in driverless car systems are being made using computer simulations nothing fully substitutes for real world data. Especially for politicians and for regulatory authorities. That real world data can then be fed back into simulation systems to gain an advantage in simulation programs
Existing car ride companies are the most likely path to adoption of driverless electric cars. These types of cars provide significant reductions in the cost structures for car ride services. This means that if they sit on their hands someone will come along and blow their existing services out of the water. The car ride companies have the competitive imperative to go down this path. They also have some significant competitive advantages in executing the strategy. That does not mean they will be successful, just that they have a head start.
In our next post we will take a closer look at some of the players, and the tactics that might be involved.
I am writing a book on autonomous vehicles with Dr Chris Rice from Texas. It is called Rise of the Autobots: How Driverless Vehicles will Transform our Economies and our Communities. Stay tuned for more excerpts as we finalise the book.
Note: Featured image is from NPR
Electrek has reported an amazing set of numbers on a Tesla S:
The vehicle is owned by Tesloop, a company that offers rides in Tesla vehicles.
A large part of this difference is due to the fact that the car is being used within an area that has extensive Tesla SuperChargers. So all the electricity is “free” (paid for as part of the purchase price of the vehicle). Also parts of the repairs and maintenance were largely paid for under the warranty. The powertrain warranty is for 8 years and includes unlimited mileage. This means that at the same annual usage rate the warranty would cover 1.2 million miles or 1.93 million kilometres.
The key question here is whether Tesla is losing money on this arrangement. If so, the savings are artificially inflated. The answer to part of that question is in the pricing models that Tesla introduced early in 2017. Before that date all Tesla S vehicles received free power on the Tesla Supercharger Network. After that date only the first 400 kWh per year are free. After that you get charged a fee for your power when charging . The fee varies between locations.
So there is no doubt that Tesla has been heavily subsiding the Tesloop operating costs. A smart business move to spot an arbitrage opportunity.
The 400 kWh is estimated to provide power for 1000 miles of driving (1609 kilometres). In Australia the current (sic) charge on the Tesla Supercharger is A$0.35/kWh.(https://www.tesla.com/en_AU/support/supercharging). so the energy cost per kilometre of driving is approximately 8.7 cents. This compares to my petrol Toyota Corolla Hatch at 8.1 cents per kilometre (combined urban/extra urban mileage claim of 6.7L/100km and fuel at 121 cents per litre). Fuel efficiency is worse in urban driving but the Tesla Superchargers are mainly for highway travel so that this is a fair comparison.
Two other comparisons bear looking at. In Illinois the charging rate is US$0.15 per kWh. This equals A$0.188 (RBA quoted exchange rate August 30th 2017) and changes the per kilometre cost to 4.7 cents. Secondly, our current at home shoulder and off peak rates are A$0.1257, which reduces the per kilometre cost to 3.12 cents. Of course we would have to pay for a charging unit as well. If we amortise that cost then the total cost might be 4 cents per km. That is half my current fuel costs, or a saving of about $600 a year on 15,000 km.
If we use 4 cents as a reasonable figure then the cost difference for an electric vehicle travelling 100,000 km a year as a car ride service/taxi is $4,000. That is a significant advantage for an electric share vehicle over a fossil fuel vehicle. That number starts to really add up if you own 20,000 of them in a fleet ($80 million a year).
If we go to the non- fuel car costs. RACQ estimates that the private ownership costs of running a medium sized car in Australia are around 65-72 cents per kilometre. More than 50% of these costs are interest costs (about 8.2 cents) and depreciation costs (about 29.5 cents). Registration and insurance and other on road costs are at about 14.9 cents. This leaves about 7.5 cents for repairs and maintenance plus tyres after accounting for fuel costs. The vast majority of that being repairs and maintenance (median is about 7 cents). In the Tesloop case the scheduled repairs and maintenance costs were US$6,900 for 300,000 miles (482,802 km). This equates to A1.79 cents per kilometre. If we go back to my Toyota which has a fixed price service of A$480 a year then that costs is A3.2 cents per kilometre at 15,000 km per year. The reality is that I drive a little less so the cost is 3.7 cents.
If we go back to the RACQ numbers the Tesla Model S 75 version has fuel costs of 4.73 cents per kilometre. It also has maintenance costs of A8.91 cents. This seems high given the Tesla Loop experience but may just be a function of the much higher mileage.
The Tesla S is a luxury vehicle and so its costs are likely to be higher than a standard vehicle. Lets look at the Chevy Bolt. In this analysis I have been helped by an excellent article by Steven Sinofsky at Learning by Shipping and Insideevs : Chevrolet Bolt Requires Almost No Maintenance For First 150,000 Miles.
The maintenance schedule (H/T Steven Sinofsky) for the Bolt is:
Insideevs estimates that if you do the very scant maintenance yourself the cost for maintenance for the first 150,000 miles (241,000 km) is US$150 (yes you read that right) while Steven says:
“Yep you read that correctly, during my entire three year lease there’s nothing for me to do. I never have to go to the dealer” – Steven Sinofsky
So one way or another routine maintenance is very low.
In terms of fuel efficiency the Bolt is rated at 238 miles (383 km) on a 60 kWh battery although city driving has a better range due to regenerative braking, and highway driving is poorer due to a poor drag coefficient. This results in 6.38 km per kWh and if we use the off peak rate I pay then that is A1.97 cents per kilometre (note Steven was more conservative in his mileage calculations which work out to about A2.39 cents per km using my electricity costs).
This is a lot of figures so as a summary I have made up a small table:
| Fuel Costs | Maintenance Costs | Total | |
| Tesloop Tesla S | 0 | 1.79 | 1.79 |
| Toyota Corolla Hatch (Mine) | 8.1 | 3.7 | 11.8 |
| Tesla S (RACQ) | 4.7 | 8.91 | 13.61 |
| Luxury Vehicle (Ave RACQ) | 7.06 | 10.2 | 17.26 |
| Chevy Bolt (first 60,000km – but generally representative) | 1.97 | 0 | 1.97 |
Now I know that I have not made a fair comparison between the Bolt and the Tesla S. In part because they are completely different vehicles, and because I have only included routine maintenance servicing for the Bolt. There will be non -routine costs in the maintenance costs. The actual costs of those the owner will be in part determined by warranty systems. The RACQ figures appear to include a capped servicing arrangement with Telstra.
| Date | Item | Cost |
| 18/08/2016 | Replace 12V battery | 171.33 |
| 24/10/2016 | replace brake pads and rotors | 1759.42 |
| 4/11/2016 | Right Rear Door handle | 961.96 |
| 21/11/2016 | left front door handle | 962.18 |
| 20/02/2017 | wheel liner, rear diffuser, front aero shield, water ingress on headlights | 2176.2 |
| 7/03/2017 | Air conditioner , other pages to receipt are missing | 2800.12 |
| 15/03/2017 | Air conditioner, passenger door handle | 656.64 |
| Total | 9487.85 |
As you can see the majority of the maintenance costs excluding the issue with the headlights and brake replacements related to the air conditioner and door handles. Some of these are likely to be costs associated with the luxury/technology parts of the doors, and early model issues. I would expect that costs for a standard production model would be much lower.
The point of all this analysis is work for our book to look at adoption timelines and business models for electric and autonomous vehicles.
In this case it is the headline number of how much it takes to run your car. That is because people get this in their face every week whereas the main costs of finance and depreciation are more removed from their experience. Once we move to the full question of costs we have to look at those more closely. we will do that in the next few days. Then we have to look at fleet options versus personal ownership.
We will do some more sophisticated modelling as we firm up the assessment for the book.
I am writing a book on autonomous vehicles with Dr Chris Rice of the University of Texas Austin. It is called Rise of the Autobots: How Driverless Vehicles will Transform our Economies and our Communities. Stay tuned for more excerpts as we finalise the book.
I spoke at the Techspo Conference (Dirt-Data-Droids) in Western Australia last week on the future of agriculture in 2027. In part that future is tied into the future of retailing of food and fibre. On the consumer side I proposed that we are on the verge of a complete disruption of the retailing of food around the world. This will be led by changes in the advertising and distribution model as well as other factors. (see: The Supermarkets Demise – A Scenario which is also linked to an earlier post ). This piece expands some of the thinking in those posts further.
Firstly, we will move some of our purchasing decisions into the hands of technology in a similar way that Nespresso has influenced the purchasing of coffee. It will be far more sophisticated, and less subject to product substitution by the consumer than the Nespresso process. This will be because the systems will provide complete supply solutions in a way that makes our lives easier. The technology and purchasing will disappear into the background, and it will be too much effort to change them. This will solidify our habits
Jeff Bezos has long been famous for stating that “your margin is my opportunity”. One of the major margins in consumer goods is marketing and advertising. It is the reason why branded products can sell at much higher margins than home brands. What if Jeff Bezos (and others) can eliminate most of the advertising costs. Statista has estimated that global advertising costs in 2017 will be US$547.37 billion. That is a hell of a margin to take advantage of. Statista has also shown that advertising has been steadily growing. This is happening even while digital advertising takes over from more traditional methods. This means that I am bucking against that trend so let’s look at the logic of how it might happen.
Last week CNET published an article on a concept scanner from Bosch (pictured).
The X-Spect scanner is a combination of two optical scanners. Together they are able to determine which stains are on your clothes, and how they should be washed. It does this by uploading the data it creates from the scanner to the cloud. An algorithm then determines the result which is sent back to the scanner. You can then send the washing instructions to your washing machine. It is not a long leap from that process to Bosch having partnerships with laundry detergent companies. Bosch will recommend, direct order, and deliver three or four varieties of detergent to go with several wash settings. Possibly in partnership with Amazon as a logistics back end. The process of washing your clothes will be: scan, separate into piles, press this button and add this detergent for the first pile, and so on. It is not hard to then imagine that the detergent will come in pods like your Nespresso machine and pressing the wash type button will add the decided detergent. As soon as that detergent type is below a certain level in your machine it will be automatically ordered and delivered to you. You do not care about your detergent type, you care about getting clean clothes. Think about Nespresso advertising. Are they advertising the coffee or trying to get take up of the machines to lock you in?
How Stuff Works says that the average life of a new washing machine is 11 years. If the system as described above works, you will hand over your preference for washing detergent to Bosch for 11 years once you buy the system. You are no longer a viable prospect for advertising for laundry detergent on any media. This adds to the fragmentation of audience that is occurring as media choices widen. If less people in a group are valuable to advertise to then you either target them more specifically, or you come up with an alternative model.
On Wednesday night I gave the opening address at Leadership Victoria on this topic. The audience was a group of 60 leaders across a range of organisations in Victoria. The question focused around some articles from Steve Denning, Jeremy Rifkin, and Paul Mason (see links at the end of this post). My purpose was to frame the rest of the discussion for the night, and highlight some possibilities about key leadership skills for the future.
As the background articles are now 2-3 years old it is an ideal time look at what has happened in the interim. The thrust of Paul Mason’s writing was that new tools were in the early stages of ushering in a new economic system. These changes included collaborative production, reducing information scarcity, and automation of work . Steven Denning was more circumspect about what was happening. While in broad agreement with some of the principles Paul was espousing, he had differing views on their effects and implications. Denning believed that it was a new era of capitalism rather than post capitalism. Jeremy Rifkin examined the implications of areas of the economy where the marginal cost of production is almost zero. In doing so he was more in agreement with Denning than Mason, while arguing that the collaborative commons was having a significant effect.
To clearly show my biases before I argued my proposition I put up the following quote from Amory Lovins:
“The markets make a good servant, but a bad master, and a worse religion”
because while it would appear I am arguing for hyper-competition, the outcomes need to be focused on how the system benefits the general population in our societies.
The Proposition
I began my presentation, as is my wont, by arguing against the proposition of the title of the session. My view is that we are not entering a post capitalist world, but rather a real capitalist world. The technologies discussed in the articles are changing the way the world works. In doing so they are moving us towards real capitalism rather than the monopoly seeking, and rent seeking behaviours of the past. For the purposes of this discussion I defined real capitalism as:
“hyper-competition within the boundaries of a socio-regulatory system that steers the benefits to the general population rather than the few”
The reality is that true competition is hard, and so companies try to position themselves in protected positions . I have just been reading Kerry O’brien’s book on Paul Keating. In the chapter which deals with privatisation, Keating describes the Qantas and TAA privatisation process. Peter Abeles who was part owner and CEO of Ansett Transport Industries but also a good friend of Prime Minister Bob Hawke was deeply involved. According to Keating the privatisation discussions were frequently attended by Peter Abeles who was interested in keeping a cosy duopoly. Keating states that this was because although Abeles thought they could compete with a restructured and privatised government airline, it was better if they did not have to.
This was the main purpose of strategic frameworks such as Porter’s Five Forces: position yourself where you had a strong position relative to suppliers, existing competitors, customers, and new entrants. True competition, where there is a relentless focus on the customer, continual innovation, and where new entrants can appear from anywhere is a highly uncomfortable environment. Therefore, companies and people have to have true competition forced upon them. This is fair enough, you would be stupid to force additional competition upon yourself (in the short term). This is partly the role of government and society in terms of the rules and norms that govern how things should work. The new tools and capabilities that the articles described are contributing additional forces.
Part of the arguments of the authors of the background articles was that increasing connectivity, improved collaboration tools, and wider access to information was increasing the capacity of the smaller players to compete with the bigger players. My proposition is that is true, but that but power is again accruing to the larger players. The combination is creating a world of hyper-competition. Let’s look at what some of the evidence says:
In 2011 I presented to a number of tourism conferences about Airbnb. At that stage it had been running for 3 years. I was continually surprised at the lack of knowledge about it in the tourism industry. The promise of Airbnb is that individuals can gain value from their existing assets, increasing the power of the individual. Putting aside some of the more outrageous events in rented out properties Airbnb has mostly delivered on that promise.
Yet, in these sorts of large platform business models power naturally moves back to the centre. Once there are enough buyers and sellers on the platform, it is hard for others to compete with the model because of network effects. The sellers are in hyper-competition with all the other sellers, hence it is a good example of a hypercompetitive world. It is a large market with transparent pricing.
In the more egregious cases of platform models we are seeing big problems. Uber stands out as a major example. Uber has serious internal problems which I think stem from excessive power issues. There are also lots of stories of low paid drivers, and conflicts about their status as employees or contractors. There is definitely a power imbalance with power accruing to the centre of the network.
Now lets look at the music industry which really should be a poster child for the sorts of changes the authors were describing. We have seen increased capacity to create and distribute music from musicians to their audiences. We have also seen marginal costs approaching zero with the creation of digital media. So what has happened? The following pictures from Digital Music News via Vox show some of the changes:
Digital technologies have transformed the way music is sold and consumed. Now streaming services have changed that again, as shown by the following graphic from Business Insider
all of this has resulted in the following revenue changes (via Benedict Evans)
Buried in all this is the fact that Spotify is dominating the market for streaming services, with Apple a strong but distant second. Spotify’s revenue, according to Billboard is now over US$3 billion but it also lost US$581 million on those revenues. So again we are seeing power accruing to the big players and many complaints from artists.
Hunter S Thompson once said:
“The music business is a cruel and shallow money trench, a long plastic hallway where thieves and pimps run free, and good men die like dogs. There’s also a negative side.”
I am not sure much has changed.
We are also seeing other examples of power accruing to the big organisations:
So my basic proposition is that:
So within my view of the world what are some key skills that people need to be leaders? I have chose four skills, that is by no means comprehensive:
Situational awareness
In a world where there are many more interconnected and moving parts, then we need better strategic understanding. What I mean by situational awareness is a detailed understanding of the various components of your sector or industry . It also encompasses a clear eyed view of where those components may be changing. Two of the models that we use for thinking about these things are Carlota Perez’s work on Technological Revolutions and Financial Capital, and Simon Wardley’s work on mapping.
Perez’s view is that there are clearly identifiable 50-60 year cycles of technological, financial and social change. Thinking about where we are in the current cycle can help us understand more about what strategic decisions we should be taking. These cycles run from technological revolution to a financial bubble, to collapse, to a golden age and then to political collapse. The five that she identifies are The Age of the Industrial Revolution, The Age of Steam and Railways, The Age of Steel and Electricity, The Age of Oil and Mass Production, and The Information Age.
Simon Wardley takes a more granular view while stil looking at cycles and movement. Simon posits that all technologies and practices move from their original genesis, then to custom built, then to product, and finally to utility or commodity. While this is a gross oversimplification of his work, understanding where each part of your value chain is is located within a map of this framework, and where it may be headed allows you to better understand where significant change may occur. He is writing a book on the subject and all the chapters are on Medium. I highly recommend you go read them.
Scepticism
I mean scepticism in its best possible meaning: questioning assumptions and evidence. This skill is vital when thinking about models. This is because all models are incomplete and inadequate representations of the real world . They are more useful when viewed with a sceptical eye. I can best express this in the statement:
Strong Views Weakly Held
For example if we look at Carlota Perez’s work it is clear that the cycles she has described are social constructs. Each occurred under a different set of political, technological and social systems. It is also clear that 4 or 5 cycles, even if taken as true, are not a clear body of evidence of some sort of immutable laws in human society over time. So use models, think deeply about them but always with a sceptical eye.
The capacity to deal with uncertainty
The reality of the modern world is high levels of uncertainty. In my work I experience clients seeking to find certainty in the midst of uncertainty. An example is people trying to create scenarios in spreadsheets with probabilities attached to them. These sorts of reductionist approaches reduce the capacity of organisations and individuals to take effective action. They create an inherent disconnect between the organisations’ strategy and the real world they operate in.
While the scepticism I have described above is to some extent focused on making sure that we don’t take models as gospel, the capacity to deal with uncertainty is somewhat different.
The critical leadership skill here is the balance between acknowledging and working with uncertainty, while instilling confidence, purpose, and direction in the people around you. Different people have different needs in this regard. Some people want to dive into the uncertainty. Others just want to get on with the job. In a previous session with a Leadership Victoria year group there was vigorous debate on this issue. The room split down the middle. Half the room believed that it was their job to deal with the uncertainty. The other half believed that exploring the uncertainty with their staff was a critical responsibility.
The capacity to coach and stimulate networks
Networks and collaboration are a reality now in many organisations. The day of the strong visionary leader is ending, and the ability to lead and stimulate networks is critical. This applies both inside organisations and in collaborations between organisations.
I finished my presentation by analysing my relative strengths in those skills. I am pretty good at the situational awareness, and scepticism skills. I am less able in the dealing with uncertainty area, although better at work than in my private life. I am poor to average in network leadership skills. My main reason for that assessment is that the world has changed enormously in the last fifteen years. In that time I have been focusedon foresight and situational awareness when working with clients. It is a long time since I led an organisation on a day to day basis and network leadership skills in particular need deep and continual practice. The same applies to situational awareness and scepticism but I have been practicing those.
Paul Higgins
Background reading links for the participants:
A recent announcement in the United Kingdom has the government allocating 8.1 million pounds to a truck platooning trial:
Semi-automated truck convoys get green light for UK trials
Platooning is essentially like bicycle pelotons in road races like the Tour de France, where riders get sucked along in the slipstream. Until you have actually participated in one, you do not realise how much easier it is to ride in the group. I knew that intellectually, but the experience is something else. For trucks this means less congestion and less fuel use. In order to achieve these results the artificial intelligence and sensing systems that controls the trucks have to be much better than human drivers so that the trucks can drive closer together. In the UK trial the speeds and steering will be controlled by the lead vehicle.
Total autonomy for vehicles on the road is known in the industry as Level 5 autonomy. This is where vehicles can control themselves in all road conditions. We are a long away from this technologically, so the trucks in the trials will have human drivers who can take the wheel at any time. The problem with this is that driver attention will naturally wane and this may impact on reaction time. In this trial this may be dealt with by periodic blocks of time where the human driver must take command of the truck – whether there is a need or not.
The medium term adoption pathway here in Australia may be different due to the road conditions and distances travelled. Here in Australia the situation for truck driving is a little different than the UK. There are much larger travel distances between the major cities, and the major inter-capital highways are less crowded. This is mirrored in the United States, especially in larger states such as Texas and California. This means that the adoption process of the technology may be significantly different.
There are a couple of technology issues in the adoption pathway that is chosen that flow into these sorts of differences and how we might choose to adopt the technologies.
Firstly there is a significant debate in the autonomous vehicle technology world about the approach of using maps versus continuous sensing. As humans we can navigate an unfamiliar terrain because our sensing and vision systems are good enough to recognise and continually process information at a level that is useful. The technology in autonomous vehicles is still not good enough to achieve that yet, and this is where mapping comes in. If an autonomous vehicle has stored in its system a map of the territory it is about to navigate, it only has to compare the environment it is encountering versus the map. This significantly reduces the job that needs to be done, reducing the pressure on the technology. In the long run it is likely that onboard vision and sense making systems will be good enough to do without maps. In the short term having maps significantly improves performance. The timing of these changes, and the implications for strategic competitive advantage are critical when thinking about strategic decisions for individual companies, and what the overall outcomes might look like (see: Winner-takes all effects in autonomous cars for an excellent discussion on this).
Secondly, at what point will we be comfortable with no driver in the vehicle, and will this be at Level 4 or Level 5 autonomy. At Level 4 autonomy the vehicle can drive itself but is limited either by geography or conditions. This means that while the driver can be removed there needs to be some sort of geofencing, or emergency failsafe systems. For example trucks on the highway may automatically pull over if rain levels go beyond a certain level, affecting visibility. If adoption pathways can be achieved at level 4 rather than level 5 then adoption will occur more rapidly as the technology will not have to be as advanced to achieve the outcome.
So if we can build a model in a specific area of trucking where there are less complicated driving challenges, and mapping makes a significant contribution we can create faster adoption. Which takes us back to the highways between capital cities in Australia.
In Australia 18-19% of total road freight movements are inter-capital freight movements (Truck Industry Fleet Report 2015), and there has been significant improvement in those roads over the last 20 years. For example once we get outside of the major urban areas of Melbourne and Sydney the road between the two cities is excellent for trucks. An early adoption model for autonomous truck movements in Australia might start with transfers between Melbourne and Sydney and look like the following:
Many of the pieces of such an implementation pathway are already in place or soon will be. Autonomous trucks have been trialled in several locations around the world, and we already have remote control of mining systems (Mining industry looks towards a new wave of automation , Rio Tinto: rolling out the world’s first fully driverless mines ). We also have remote control of drones for military operations.
Around the world the trucking industry is seeing problems with an ageing workforce, with trucking jobs being seen as unattractive by younger generations (Wheels not in motion: Australia running short of truckies). A system as described above can solve some of this problem by:
Eventually most trucking operations will be carried out by autonomous trucks If we want to address the shortage of current workers, reduce fuel consumption for long haul freight, and possibly reduce fatigue related accidents, a model which accelerates early adoption should be trialled.
Update
Proterra has announced an 1100 mile (1772.2km) trip of its Catalyst Bus on a single charge. (Proterra Counters Tesla’s ‘Beast’ Of A Semi With 1,100-Mile Range Electric Bus). In addition Tesla will announce its new Semi truck in October. With distances between Melbourne and Sydney of approximately 865 km, Sydney to Brisbane of 928 km, and Melbourne to Adelaide of 725 km this seems to put the intercapital freight market in the sights of autonomous electric trucks.
I am writing a book on autonomous vehicles with Dr Chris Rice of the University of Texas Austin. It is called Rise of the Autobots: How Driverless Vehicles will Transform our Economies and our Communities. Stay tuned for more excerpts as we finalise the book.
Note: The featured image comes from: http://qz.com/656104/a-fleet-of-trucks-just-drove-themselves-across-europe/
*this should not be taken as financial or business advice. If you own a crash repair business please take professional advice before making any decisions.
I am just going through the process of getting some minor damage repaired on our car and have been ruminating on the future of the insurance and repair model when we have driverless (autonomous) cars. This was also prompted by a couple of stories in The Age here in Melbourne:
and
The first story describes how Ray Malone has built a Australia’s largest crash repair business, and is aiming to grow it even further. That would seem to go against the title of this post but it actually feeds into my thinking because Ray’s company provides wholesale service aftercare which will be vital in the scenario I am describing.
The second story is about how trials of driverless cars are starting here in Melbourne. This follows a large number of trials that are being conducted in various countries around the world.
Once we move to a reasonably widespread adoption of autonomous/driverless cars the local crash repair business will basically disappear except for a few large operators like Ray Malone but even his business could be under threat . The key reasons for this are:
1/ It has been forecast that autonomous cars will significantly reduce the number of car accidents that occur. This is based largely on the statistics that human error causes more than 90% of traffic crashes. So if we can eliminate the crashes caused by idiots, people under the influence of drugs and alcohol, and people driving tired or angry (Police looked into the deaths of 86 people on Victorian roads last year and found that in more than 10 per cent of cases the driver had experienced a traumatic or upsetting event.) we can significantly reduce the number of accidents.
Against this argument is that autonomous cars supplying a transport service may result in people travelling further and perhaps take more risks. Certainly it will allow elderly people who cannot drive, and young people who do not have a licence to travel in cars more than they otherwise would. There have also been arguments that because we feel safer we may take more risks as pedestrians or cyclists. If we are conservative and say that only 50% of accidents caused by human behaviour will be eliminated we still have a significant fall in accidents.
2/ It is highly likely that we will see large fleet models emerge where large numbers of people choose not to own a vehicle. If the overall travel costs are lower than owning your own vehicle, and you can get a vehicle anytime you need one then the convenience of transport as a service outweighs the personal ownership model. The economics for fleet owners are different than for individual owners when it comes to crash repair services. Fleet owners will want large scale service operations to reduce costs or will pay far less for the services of smaller scale operators. This feeds into a large supplier (such as Ray Malone’s company) snapping up more business. Larger scale crash repair businesses will benefit from the economies of scale that allow them to use new technologies such as robotics to increase throughput and reduce costs.
3/ The model for crash repair business location will change. Currently crash repair businesses are located in scattered locations throughout the suburbs and inner city. This is because if I want to take my car in for crash repairs there is a significant time cost for me to take my car to a location that is not near to my house or business. I have to travel to the crash repair business, and then get back to my home or place of work. So I want the crash repair business to be reasonably close. The location is mainly driven by the customer. If my personal driverless car needs crash repairs it can drive itself to the crash repair site, and a fleet service or a shared personal car service can replace my transport needs in the meantime.
If I was asked to drive my car (actual damage pictured below) to a service centre 40 km away I would not be very happy, but if my car can take itself then location becomes much less important and the costs of the business become far more important. Locating the crash repair business in areas of lower property costs with good transport links makes far more sense. It also means that the employees of the business will have lower property costs if they live locally. We already see this model in light manufacturing and food processing/handling facilities locating around hubs on ring roads, away from inner suburbs with high property prices.
If a fleet ownership model predominates over personal ownership this effect will be even higher as large scale fleets look for cost reductions through economies of scale.
So if we summarise all the factors together if we assume a 45% reduction in total accidents (50% of human error crashes) and a tripling of scale that comes from the changes described above we get an 82% reduction in the number of crash repair businesses in any city. I believe that the changes in scale may be even higher and we may end up with only 5-10% of the number of current crash repair businesses being economically viable.
If I own a crash repair business in any suburb in any of our major cities I will come under pressure from a high scale panel beater business set up on the fringes of the city with lower property costs.
So, if you are a crash repair business:
While these changes may take 15 years to start to significantly impact on the crash repair business, once they become obvious the window to realise the business value by sale will quickly snap shut.
This is just one of the many implications of change from the widescale adoption of driverless cars.I am writing a book on driverless vehicles with Chris Rice (@ricetopher). It is called “Rise of the Autobots: How driverless vehicles will transform our economies and our communities. Stay tuned for more writing as we develop our thinking further.
Paul Higgins
Chris Rice and I are currently writing a book on the rise of autonomous vehicles and their widespread effects across our economies (entitled Rise of the Autobots: How Driverless Vehicles will change our Societies and our Economies). One of the keys to looking at what these changes might mean and the rate at which they will occur is the speed of adoption speed of electric cars and autonomous vehicles combined together.
There have been lots of excited announcements about electric cars over the last few months including:
The reality is that the adoption of electric cars will have several bottlenecks including but not limited to:
Both battery production and electric car production are ramping up but the last point is very important when we start looking at the critical mass needed to disrupt a range of industries, including petrol stations and their supply chains, maintenance and repair systems, and the electric power grid. Even when it becomes a sensible economic decision to purchase a new electric car over an internal combustion engine (ICE) powered car, someone with a 7 year old vehicle is not going to immediately changeover. This is both due to the capital nature of the change and the fact that if electric cars are more economical than ICE cars the resale value of second hand ICE cars will fall dramatically, reducing the interest and capacity of people to purchase a new vehicle (if purchase is the model). This will be exacerbated if the new electric vehicles also have significant advantages in autonomy.
To illustrate this issue we took a look at the vehicle fleet in New South Wales in Australia If we look at the statistics at the end of the fourth quarter in 2016 it gives us a snapshot of the vehicle legacy issue. The following graph shows the year of manufacture for light vehicles registered in NSW at the end of 2016. The majority are passenger vehicles:
Source: http://www.rms.nsw.gov.au/about/corporate-publications/statistics/registrationandlicensing/tables/table113_2016q4.html – accessed July 24th 2017
While the 2016 manufactured vehicles are under-represented in this graph as many 2016 vehicles are registered in 2017, it nevertheless gives a clear picture of the ownership structure of light vehicles. If we look deeper in the data we see that 20.1% of the registered light vehicles are manufactured prior to 2001.
If we look at heavy vehicles we get a similar picture albeit with different percentages:
There are some differences in the data between light and heavy vehicles:
A very simplistic look at this data says that even if every vehicle sold new in Australia was electric from say 2025 was an electric car, and the purchase patterns remained stable after 5 years we would have between 31% and 40% electric light vehicles on the road and in 10 years it would be somewhere between 50 and 60%. This pattern is highly unlikely and so the real adoption rates will be well short of that. Every year that the purchase pattern is 50% electric and 50% ICE will slow the transition as those ICE cars will be on the road for a long time.
This adoption cycle is complicated by our view that increasing automation will result in more fleet ownership models, and shared car rides, reducing the total sales of new vehicles. While this means that battery and electric car manufacturing do not have to ramp up as much to get to 100% of new sales it changes the adoption curve.
Now both those simplistic analyses assume the normal pattern of car purchases and ownership will remain in place. That is also unrealistic. All we do know is that the adoption rates will be relatively slow because of the legacy issues and the turnover of the vehicle fleet as a whole. Cars are not smartphones. We will be doing some more modelling on the possible scenarios over the next few weeks. Follow us here if you want to see them and help us think through the changes.
Featured Image is from :
This week I had two very different experiences which had me thinking about the future of jobs. On Tuesday I was invited to a workshop host by Perpetual Trustees with the Stanford Centre for Philanthropy and Civil Society. I was there isn my role as a futurist and a venture philanthropist (I am a partner at Social Venture Partners Melbourne See : Summary Video). The subject for the session was Digital Technologies and Democratic Theory and involved a range of not for profit organisations, commercial businesses, and startups.
A lot of the discussion was on the effects of technology on our wider society, and our political systems in particular. Rob Reich and Lucy Bernholz from Stanford took the temperature of the room on whether we are optimists or pessimists about the effects and capabilities of technology. I was surprised by the fact that the overwhelming majority of the room was optimistic. I placed myself as pessimistic. I think that there is a lot to like about the capabilities of technology to connect people together, and for people to take action. I just think that the reality is a little more sobering, and that the effects of technology on our wider societies, in particular the future of work, will outpace the capacity of the technologies to bend the overall direction to the benefit of all.
While I am no means certain I fear a future where more jobs are eliminated than are created for the first time in our technological development. If such a change occurs it has the potential for both good and bad. The negative picture is one where more and more wealth accumulates in the hands of the few and is not distributed across the general population. That is a recipe for revolution. This is particularly troubling where public trust in our democratic institutions has fallen significantly.
My other experience is that we hired a handyman to move a gate in our driveway. For some reason I cannot understand the previous owners placed a gate part way down the driveway leaving a whole lot of unused space behind it. On top of that there are significant parking restrictions on our very steep street and so visitors have to park down the hill and walk up. This is getting to be a particularly serious issue as our parents age.
The original installation of the gate had not been particularly professional and so there were problems opening and closing the gate due to warping of the wood. When we got down to the details of the job we discovered that about 13 different types of bolts and screws had been used in the original gate installation. On top of that some were metric, and some were imperial (inches) and some seemed in between. On top of that some of the screws had been rounded out and were impossible to remove by standard methods. The problem was exacerbated by the fact that the concrete at the new position we were looking to install the gate on had three different levels.
Luckily we had hired an old time craftsman/handyman who had all the tricks and now the gate is safely installed (see picture). The dog has no chance of getting out, and our parents can now park in the driveway. Those are the sorts of jobs that are not going away in a hurry because of the levels of variation for each job. Our handyman (also Paul) says he reckons he has 20 years of work ahead of him in his semi-retirement. I think he is right and if you are concerned about the future employment of your children and they have aptitude for this sort of work (which includes plumbing) then keep encouraging them.
I realise that these two subjects are different ends of the same issue and the second one has no real bearing on the wider societal issues. I will keep trying to make a contribution to those wider issues.
Paul Higgins
futuristpaul.com 