Continue to Site

Robotics Business Review

Driverless Car Craze Calls for a Brake Check

Jim Nash explores the views, both fascinating and flawed, put forth in “Driverless Cars: Trillions Are Up For Grabs”

By |

Right now, as expectations for driverless cars are starting to bud, if not inflate, it is best to remember perhaps the most important lesson taught by the last 25 years of investing: Markets mature at their own pace. When funding and expectations grossly outpace development, a market gets oversold and collapses.

So it is with caution that investors should buy the Kindle publication “Driverless Cars: Trillions Are Up For Grabs.”

Specifically, the authors, business consultants Chunka Mui and Paul B. Carroll, claim that $2 trillion will be created or saved every year through the adoption of autonomous cars in the United States.

An estimated $400 billion alone will be saved annually through fewer auto accidents, according to Mui and Carroll.

Despite the cheerleading that buoys this book, Mui still recommends caution when investing in driverless cars.

“This is not the time to burn the ships” and switch wholesale to the new tech, he says. Mui, who co-founded with Carroll the business consulting firm The Devil’s Advocate Group, views “Driverless Cars” as more of an examination of today’s “competitive dynamics” than an investment primer.

Beware the buzz

While not particularly deep or probing, “Driverless Cars” delivers on the likely strategies and the impacts on specific industries, including carmakers, suppliers, auto insurers, energy companies and others that share in car-related revenue.

But first, this book, which began as seven popular Forbes columns written by the authors, creates some hurdles for itself.

Promising fortunes from new technology has been pro forma for ages. That it never fails to work on less-experienced investors is an enduring mystery.

The last time a book title like this one made the rounds, the buzz was about how Wi-Fi would fundamentally remake business.

Also, the authors make no bones about the fact that their premise is based solely on predictions by Sebastian Thrun, the esteemed lead developer at Google, the company that has invested more money and intellectual capital into autonomous cars than any other.

Thrun’s opinion, as distilled in “Driverless Cars” is:

  • Driverless cars will cut traffic accidents by 90%
  • They can cut wasted commute time by 90%
  • Autonomous cars will cut the number of all cars on the road by 90%

There are valid reasons why this vision could become reality, beginning with the continued advancement in computing power. (The totem-like “90%” rate of change for everything doesn’t inspire confidence, however.)

But there’s danger in hanging so many if-thens off Thrun’s three suppositions. Here, it becomes an exercise in dead reckoning when one has a functioning GPS.

With clouds of data to pore over and no shortage of informed opinion on every topic related to robotic cars, going with one source to describe long-term — and epochal — economic changes beggars credibility.

Granted, that source is Thrun at Google, but, really?

Is car insurance on the road to extinction?

Still, there is little serious doubt that this is a trend with momentum. Pieces of the technology underpinning autonomous transportation are already here:

  • Google’s got an unnumbered autonomous fleet on the road
  • Autonomous parking is no longer considered exotic
  • Lane Assist (from Audi)
  • And to really get your heart going, watch Volvo’s collision-warning and automatic breaking video below

Says Mui, “The autonomous-car market today is right about where the Internet was 10 years before it upended publishing.” According to “Driverless Cars”, both insurance and auto making will see an initial boom as autonomy takes over.

For a time, insurers will collect full premiums from drivers who are 90% less likely to wreck the car. But those will be the final salad days for insurers, according to Mui and Carroll. They allow that some car insurance will be needed, but the overall market will fall by 75% or more.

If true, car insurance as we know it will go away.

In fact, car makers could be your next insurer, the authors suggest. Manufactures will be making drastically fewer cars (because, the thinking goes, the autonomous-car model lends itself to sharing).

They will fight to sell every conceivable option — mass-customized styling, car theaters, even, in theory, insurance as part of the warranty.

Following this logic, surviving car makers will be selling what can be done in a car, not so much how it looks or even how fast it drives.

It’s a fascinating view, “Driverless Cars”, with some surprising insights, a few of which will without a doubt become established facts. But serious investors need more than one star on which to set a treacherous course.

Catch Jim’s interview with Chunka Mui for tips on targeting smart driverless car investments here.

Related Articles Read More >

Search Robotics Business Review