8 ms·

Do the economics of self-driving taxis make sense?

37 points by joosters 11y ago

milge 11y ago
Anyone else getting a paywall?
- gruez 11y ago
  view the site via google (search for the title, click on the result)
  - milge 11y ago
    While I appreciate the help, I shouldn't have to.
    - codyb 11y ago
      This has been discussed before. Please see [0]. [0] - https://news.ycombinator.com/item?id=10178989 https://news.ycombinator.com/item?id=10178989
- mikeyouse 11y ago
  FT has a free registration as well, do it once, stay logged in.. Their content is pretty good all around.
  - spikels 11y ago
    I was a long time subscriber to FT and still think it is above average but sloppy articles like this make me think the quality has been declining with the rest of the industry.
mikeyouse 11y ago
The main point (and fairly interesting critique) of the article; Except there’s a major problem with that utopian view. The vision totally underestimates the true value humans bring to the car market or the degree to which Uber’s “urban saturation” depends on a dedicated human element to absorb the bulk of the capital cost and risk of public vehicle ownership, with very little personal reward. As Felix Oberholzer-Gee, a professor at Harvard, tells Nautilus, if Uber can’t outsource costs and market fluctuation risk to contractors, especially the cost of maintaining idle fleets during off-peak hours directly to Uber, it quickly swaps an asset-light business model for an asset-heavy low-margin model instead. This is problematic because Uber’s already low- margin business model depends heavily on being able to overstep regulation, licensing and — most importantly — transfer maintenance, cleaning, insurance and market-risk exposure to drivers. It also benefits from drivers’ ability to draw value from vehicles in personal time.
- tlb 11y ago
  The problem with asset-heavy models isn't the cost of capital, which is extremely cheap these days. The problem, as the article alludes to, is that regulator or unions might shut it down, and then their expensive asset sits idle. That only happens if you have a single market without production mobility between them. But if one city shut down Uber's self-driving cars, they could quickly truck them to a new city.
- deleted 11y ago
  [deleted]
- ghaff 11y ago
  The article sorta veers around so it's hard to isolate its main arguments. I'm not sure why Uber is really the relevant model however. A more obvious starting point is autonomous taxis. And then the question becomes: Are self-driving vehicles really all that more interesting because you eliminate a $10/hr driver? For a lot of scenarios, I suspect the answer is not really.
  - jegutman 11y ago
    You bring up a valid point, but it's worth considering that Taxi drivers have homes. Let's think about driving from SF to Palo Alto at 11pm. This is probably not great for a taxi driver who: a) might have wanted this to be his last shift b) lives closer to SF There are other ways of selecting for this, but a self-driving taxi doesn't need to care and can just be managed as a fleet. Yes, some miles will need to be driven by an empty car, but for the most part demand for transportation has a balance, but this balance is very hard to reach in practice with actual drivers.
    - ghaff 11y ago
      There are certainly scenarios where the cost delta between our hypothetical fully-autonomous vehicle and a taxi as we know it today is greater and where it is less. I'd argue that in Manhattan, the distances are short enough and the utilization high enough that self-driving probably buys you very little over a taxi today. With the scenario you describe, the cost difference is probably greater. (On the other hand, if that's 50% of today's taxi costs, most people won't be using it to commute every day.) Of course, there are still other cases where it's not feasible for most people to hire a driver today--say going away for the weekend because the driver costs start to dominate the vehicle rental costs. (And in that scenario, you just rent a car today if you don't own one.) In any case, when such vehicles become available in however many years, they will probably reduce car ownership. But, as with Zipcar, I suspect the difference will be at the margins.
Xcelerate 11y ago
Perhaps my perspective is too nescient (I'm an engineer — not an economist), but this claim seems sketchy to me: > How does [sharing] add value to the economy over the longer term? There is no production. It is entirely consumption. Recycling is all very well – and we do need secondary markets – but we cannot build an economy solely on sweating existing assets. An economy that exists solely on consumption has no long-term future. Sharing is a process that optimizes usage of available resources. Why should we make more cars than we need? Why should everyone have a boat if not everyone needs a boat? Sure, more boat-building jobs are "created" if we feel everyone really needs their own personal boat, but there seems to be a strong opportunity cost that is being forgotten here: the labor necessary to build boats could instead be directed into a more useful form that advances society as a whole much more quickly. What do I mean by advance? Well, I guess to some degree that's subjective. But I'm fairly certain everyone can agree on at least some universal goals that humanity would like to achieve, and artificially increasing the number of jobs available for the sake of having more jobs available seems like it would hurt our overall progress in the long run. I think this quote from Warren Buffet sums up what I'm trying to say much better than I can: > The way I see it is that my money represents an enormous number of claim checks on society. It is like I have these little pieces of paper that I can turn into consumption. If I wanted to, I could hire 10,000 people to do nothing but paint my picture every day for the rest of my life. And the GNP would go up. But the utility of the product would be zilch, and I would be keeping those 10,000 people from doing AIDS research, or teaching, or nursing. I don't do that though. I don't use very many of those claim checks. There's nothing material I want very much. And I'm going to give virtually all of those claim checks to charity when my wife and I die.
- aidenn0 11y ago
  A old Canadian critique of jobs for the sake of jobs: > Taking up the policy of a public works program as a solution for unemployment, it was criticized as a plan that took no account of the part that machinery played in modern construction, with a road-making machine instanced as an example. He saw, said Mr. Aberhart, work in progress at an airport and was told that the men were given picks and shovels in order to lengthen the work, to which he replied why not give them spoons and forks instead of picks and shovels if the object was to lengthen out the task.
boxy310 11y ago
Interestingly enough, all of the bullet-pointed problems are problems inherent in physical plant management for manufacturing (except privacy). This is possibly due to the lessons capital-intensive industries that have to date been manufacturing are also applicable to capital-intensive services that are largely commoditized and interchangeable (like getting transported from point A to point B). Taxi service is a good textbook example of a service that requires a minimum level of knowledge, but is extremely repetitive and doesn't benefit exponentially from human intervention.
mdorazio 11y ago
Since they didn't provide any numbers, here's an analysis I did on this topic using estimates for LA: https://www.linkedin.com/pulse/how-cheap-can-uber-self-driving-ride-get-michael-dorazio https://www.linkedin.com/pulse/how-cheap-can-uber-self-drivi... Uber can absolutely make money even if they own their own cars, provided the up-front cost of the cars is low enough. You can think of it like a high-use, low-distance rental car fleet - the same car economics down-sides apply to Hertz and Enterprise and yet they still make money.
- saturdaysaint 11y ago
  And as self-driving fleets take over and cease to be tied in to the driver's self-image, my guess is that the cars will look more like the $15,000 Toyota Yaris. I also imagine that as fleet owners gain greater control of design, they'll find ways to make maintenance easier and cheaper. Insurance should also get cheaper with fewer human drivers (and by the time automated cars are on the road, there will be a lot of cars with crash-mitigating technologies too).
sharemywin 11y ago
IHS Automotive forecasts that the price for the self-driving technology will add between $7,000 and $10,000 to a car's sticker price in 2025 Uber will probably use it's own fleet supplementing people during peak times. if you can get 70% utilization that's about 60k/yr you don't pay a driver.
- intopieces 11y ago
  Do you happen to have a link to this forecast? I've never heard of IHS Automotive but it sounds interested. Could the 7-10k increase be offset by other efficiencies in engineering that bring down the cost? Side note, could we be entering the era where one person does not own one vehicle, but many people own a few? I could see something like an apartment complex offering a few self-driving cars as an amenity, or cities investing in them like they do bike-shares. Lots of the discussion has focussed on the extremes: individual ownership or megacorp ownership. There might be a place for this technology in between.
  - mdorazio 11y ago
    Not sure which IHS article OP is referring to, but BCG did an analysis as well: https://www.bcgperspectives.com/content/articles/automotive-consumer-insight-revolution-drivers-seat-road-autonomous-vehicles/ https://www.bcgperspectives.com/content/articles/automotive-... Relevant section is "The Price Tag". Here's a helpful image from the paper as well: https://www.bcgperspectives.com/Images/Revolution_Drivers_Seat_ex06_large_tcm80-185056.png https://www.bcgperspectives.com/Images/Revolution_Drivers_Se... The biggest cost driver is the LIDAR, which is anticipated to cost Google $8k per car next year when they move to a cheaper system.
spikels 11y ago
This article and the 2 linked source articles are a big hot mess of half baked thoughts and misunderstandings. However it did remind me again to think of all the impacts that driverless cars will have. Does anyone know of a thoughtful analysis of how things (like public transit, parking, etc) will likely change as driverless vehicles become more common?
- tlb 11y ago
  Brad Templeton's essays are the place to start: http://www.templetons.com/brad/robocars/ http://www.templetons.com/brad/robocars/

37 points by joosters 11y ago

milge 11y ago

Anyone else getting a paywall?

gruez 11y ago
view the site via google (search for the title, click on the result)
- milge 11y ago
  While I appreciate the help, I shouldn't have to.
  - codyb 11y ago
    This has been discussed before. Please see [0]. [0] - https://news.ycombinator.com/item?id=10178989 https://news.ycombinator.com/item?id=10178989
mikeyouse 11y ago
FT has a free registration as well, do it once, stay logged in.. Their content is pretty good all around.
- spikels 11y ago
  I was a long time subscriber to FT and still think it is above average but sloppy articles like this make me think the quality has been declining with the rest of the industry.

mikeyouse 11y ago

The main point (and fairly interesting critique) of the article; Except there’s a major problem with that utopian view. The vision totally underestimates the true value humans bring to the car market or the degree to which Uber’s “urban saturation” depends on a dedicated human element to absorb the bulk of the capital cost and risk of public vehicle ownership, with very little personal reward. As Felix Oberholzer-Gee, a professor at Harvard, tells Nautilus, if Uber can’t outsource costs and market fluctuation risk to contractors, especially the cost of maintaining idle fleets during off-peak hours directly to Uber, it quickly swaps an asset-light business model for an asset-heavy low-margin model instead. This is problematic because Uber’s already low- margin business model depends heavily on being able to overstep regulation, licensing and — most importantly — transfer maintenance, cleaning, insurance and market-risk exposure to drivers. It also benefits from drivers’ ability to draw value from vehicles in personal time.

tlb 11y ago
The problem with asset-heavy models isn't the cost of capital, which is extremely cheap these days. The problem, as the article alludes to, is that regulator or unions might shut it down, and then their expensive asset sits idle. That only happens if you have a single market without production mobility between them. But if one city shut down Uber's self-driving cars, they could quickly truck them to a new city.
deleted 11y ago
[deleted]
ghaff 11y ago
The article sorta veers around so it's hard to isolate its main arguments. I'm not sure why Uber is really the relevant model however. A more obvious starting point is autonomous taxis. And then the question becomes: Are self-driving vehicles really all that more interesting because you eliminate a $10/hr driver? For a lot of scenarios, I suspect the answer is not really.
- jegutman 11y ago
  You bring up a valid point, but it's worth considering that Taxi drivers have homes. Let's think about driving from SF to Palo Alto at 11pm. This is probably not great for a taxi driver who: a) might have wanted this to be his last shift b) lives closer to SF There are other ways of selecting for this, but a self-driving taxi doesn't need to care and can just be managed as a fleet. Yes, some miles will need to be driven by an empty car, but for the most part demand for transportation has a balance, but this balance is very hard to reach in practice with actual drivers.
  - ghaff 11y ago
    There are certainly scenarios where the cost delta between our hypothetical fully-autonomous vehicle and a taxi as we know it today is greater and where it is less. I'd argue that in Manhattan, the distances are short enough and the utilization high enough that self-driving probably buys you very little over a taxi today. With the scenario you describe, the cost difference is probably greater. (On the other hand, if that's 50% of today's taxi costs, most people won't be using it to commute every day.) Of course, there are still other cases where it's not feasible for most people to hire a driver today--say going away for the weekend because the driver costs start to dominate the vehicle rental costs. (And in that scenario, you just rent a car today if you don't own one.) In any case, when such vehicles become available in however many years, they will probably reduce car ownership. But, as with Zipcar, I suspect the difference will be at the margins.

Xcelerate 11y ago

Perhaps my perspective is too nescient (I'm an engineer — not an economist), but this claim seems sketchy to me: > How does [sharing] add value to the economy over the longer term? There is no production. It is entirely consumption. Recycling is all very well – and we do need secondary markets – but we cannot build an economy solely on sweating existing assets. An economy that exists solely on consumption has no long-term future. Sharing is a process that optimizes usage of available resources. Why should we make more cars than we need? Why should everyone have a boat if not everyone needs a boat? Sure, more boat-building jobs are "created" if we feel everyone really needs their own personal boat, but there seems to be a strong opportunity cost that is being forgotten here: the labor necessary to build boats could instead be directed into a more useful form that advances society as a whole much more quickly. What do I mean by advance? Well, I guess to some degree that's subjective. But I'm fairly certain everyone can agree on at least some universal goals that humanity would like to achieve, and artificially increasing the number of jobs available for the sake of having more jobs available seems like it would hurt our overall progress in the long run. I think this quote from Warren Buffet sums up what I'm trying to say much better than I can: > The way I see it is that my money represents an enormous number of claim checks on society. It is like I have these little pieces of paper that I can turn into consumption. If I wanted to, I could hire 10,000 people to do nothing but paint my picture every day for the rest of my life. And the GNP would go up. But the utility of the product would be zilch, and I would be keeping those 10,000 people from doing AIDS research, or teaching, or nursing. I don't do that though. I don't use very many of those claim checks. There's nothing material I want very much. And I'm going to give virtually all of those claim checks to charity when my wife and I die.

aidenn0 11y ago
A old Canadian critique of jobs for the sake of jobs: > Taking up the policy of a public works program as a solution for unemployment, it was criticized as a plan that took no account of the part that machinery played in modern construction, with a road-making machine instanced as an example. He saw, said Mr. Aberhart, work in progress at an airport and was told that the men were given picks and shovels in order to lengthen the work, to which he replied why not give them spoons and forks instead of picks and shovels if the object was to lengthen out the task.

boxy310 11y ago

Interestingly enough, all of the bullet-pointed problems are problems inherent in physical plant management for manufacturing (except privacy). This is possibly due to the lessons capital-intensive industries that have to date been manufacturing are also applicable to capital-intensive services that are largely commoditized and interchangeable (like getting transported from point A to point B). Taxi service is a good textbook example of a service that requires a minimum level of knowledge, but is extremely repetitive and doesn't benefit exponentially from human intervention.

mdorazio 11y ago

Since they didn't provide any numbers, here's an analysis I did on this topic using estimates for LA: https://www.linkedin.com/pulse/how-cheap-can-uber-self-driving-ride-get-michael-dorazio https://www.linkedin.com/pulse/how-cheap-can-uber-self-drivi... Uber can absolutely make money even if they own their own cars, provided the up-front cost of the cars is low enough. You can think of it like a high-use, low-distance rental car fleet - the same car economics down-sides apply to Hertz and Enterprise and yet they still make money.

saturdaysaint 11y ago
And as self-driving fleets take over and cease to be tied in to the driver's self-image, my guess is that the cars will look more like the $15,000 Toyota Yaris. I also imagine that as fleet owners gain greater control of design, they'll find ways to make maintenance easier and cheaper. Insurance should also get cheaper with fewer human drivers (and by the time automated cars are on the road, there will be a lot of cars with crash-mitigating technologies too).

sharemywin 11y ago

IHS Automotive forecasts that the price for the self-driving technology will add between $7,000 and $10,000 to a car's sticker price in 2025 Uber will probably use it's own fleet supplementing people during peak times. if you can get 70% utilization that's about 60k/yr you don't pay a driver.

intopieces 11y ago
Do you happen to have a link to this forecast? I've never heard of IHS Automotive but it sounds interested. Could the 7-10k increase be offset by other efficiencies in engineering that bring down the cost? Side note, could we be entering the era where one person does not own one vehicle, but many people own a few? I could see something like an apartment complex offering a few self-driving cars as an amenity, or cities investing in them like they do bike-shares. Lots of the discussion has focussed on the extremes: individual ownership or megacorp ownership. There might be a place for this technology in between.
- mdorazio 11y ago
  Not sure which IHS article OP is referring to, but BCG did an analysis as well: https://www.bcgperspectives.com/content/articles/automotive-consumer-insight-revolution-drivers-seat-road-autonomous-vehicles/ https://www.bcgperspectives.com/content/articles/automotive-... Relevant section is "The Price Tag". Here's a helpful image from the paper as well: https://www.bcgperspectives.com/Images/Revolution_Drivers_Seat_ex06_large_tcm80-185056.png https://www.bcgperspectives.com/Images/Revolution_Drivers_Se... The biggest cost driver is the LIDAR, which is anticipated to cost Google $8k per car next year when they move to a cheaper system.

spikels 11y ago

This article and the 2 linked source articles are a big hot mess of half baked thoughts and misunderstandings. However it did remind me again to think of all the impacts that driverless cars will have. Does anyone know of a thoughtful analysis of how things (like public transit, parking, etc) will likely change as driverless vehicles become more common?

tlb 11y ago
Brad Templeton's essays are the place to start: http://www.templetons.com/brad/robocars/ http://www.templetons.com/brad/robocars/