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The main point (and fairly interesting critique) of the article; Except there’s a major problem with that utopian view. The vision totally underestimat

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.
    - jegutman 11y ago
      I actually think NY is a pretty compelling case for driverless. A large number of people go from hubs into the city, travel around the city, and then leave the city. Also there's an issue with balancing taxi load in the outer boroughs vs midtown / downtown manhattan. There's a reason uber has been so successful even in NY at increasing the total number of passenger trips and not just stealing customers away from traditional taxis.
      - 11y ago
jbob2000 11y ago
I see where the author is coming from, but uber doesn't need to own the autonomous vehicles. They can still be owned by third parties who maintain them. The owner just "recalls" the vehicle when he needs it,
- organsnyder 11y ago
  Exactly. Anyone who owns an autonomous vehicle will be able to offer it to Uber for their use. The only difference is that they won't need to also drive the vehicle. The point about outsourcing vehicle ownership to the drivers is a valid criticism of Uber, but self-driving cars doesn't really need to play into that equation.
  - maxerickson 11y ago
    With any luck, there will be more than one marketplace for buying and selling vehicle miles.
- pinkrooftop 11y ago
  As a former part time uber driver, the challenge is convincing people to send your car out to uber alone. Even with me in the car, at a minimum passengers would leave trash or gum.
  - intopieces 11y ago
    >at a minimum passengers would leave trash or gum. Doesn't the review system handle this? Goes back to one of the other points the article makes: this system depends upon your personal information being available to uber as well as the ability to 'blacklist' bad users.
    - pinkrooftop 11y ago
      one complication to that is groups of passengers, where only one person's info is available
  - 11y ago
gitah 11y ago
The main point is missing the forest for the trees. The main benefit of self-driving cars is improving efficiency and productivity. It is productivity that makes us all much richer. Which business model self-driving taxi operators go by is pretty irrelevant; the free market will settle on the best way. The productivity increases will benefits the entire society should be the most important part of any analysis.
- dragonwriter 11y ago
  > It is productivity that makes us all much richer. It is productivity that makes the owners of the productive assets richer, not "us all" (whether that somehow reaches others is dependent on factors other than the productivity boost itself.)
  - gitah 11y ago
    Nope even if you don't own assets you still benefit from increased productivity. The average person don't own airliners, but still benefit from cheap air fare tickets. With a free market and self-driving taxis, the price of transportation will collapse which will benefit everyone. The wealth that used to be spent on transportation can be used to by other goods, which will make everyone richer.
  - intopieces 11y ago
    When you factor in the safety features of self-driving cars, the automated traffic management/reduction in the number of private cars, and the ability of less-well-off people to get to work in less time and make it home to see their families... seems to benefit everyone. If we can reduce the cost of transportation (even through subsidies) for the poorest, that opens up opportunities.
  - spikels 11y ago
    This is incorrect. In order for the asset owner to gain from an increase in productivity they to interact with customers, workers and suppliers who in turn interact with others. This ends up sharing much if not most or even all of the gain with others. You are correct that many factors will determine how the gain gets allocated but only in exceptional circumstances does the owner keep all the gain. https://www.boundless.com/economics/textbooks/boundless-economics-textbook/economic-growth-20/productivity-98/the-importance-of-productivity-368-12465/ https://www.boundless.com/economics/textbooks/boundless-econ...
CamperBob2 11y ago
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. Self-driving taxis won't compete with privately-owned cars. They will compete with buses. There will be a strong case for municipal transit authorities to invest in them instead of buses, light rail, and other services that cost more and do a worse job of taking people where they want to go.
- kjksf 11y ago
  It sure makes sense, but unlike private newcomers like Uber, those are all unionized shops and unions will fight hard to block any such improvements because they would mean heavy job losses and unions exist to protect jobs. See BART strikes. Most likely they'll achieve pyrrhic victory: muni will be it's usual self for a couple of years, private system will reach cost parity but will offer better service, bus ridership will plummet, eventually it'll become evident that it doesn't make sense to pump more public money into it and it'll either be disbanded or possibly replaced by a contract with private company (because it'll be hard to rebuild muni to be competitive price-wise after giving private companies years of head start).
omarforgotpwd 11y ago
Uber doesn't need to own the cars to provide self-driving service. Suppose I as a consumer can purchase a self driving Tesla that is fully autonomous, and can have instructions provided remotely. I could use some kind of Uber app to have the car go ferry around passengers when I don't need it. Depending on how much I use the car and demand for rides, I could actually turn a profit on the month's car payments. Uber maintains it's decentralized network and I absorb the costs and risks of vehicle ownership presumably with some kind of self driving taxi car insurance. Many more people would likely join the uber network once they can do it without actually having to drive.
kjksf 11y ago
A contrarian view: asset-heavy business is good for the winner because of barriers to entry. How many competitors SpaceX will ever have? So if Uber wins the market, they'll have it for themselves. Asset-heavy transportation businesses aren't as risky as people assume. Airlines buy they airplanes. Shipping companies buy their (massive) ships. Hertz can afford the cars they rent. FedEx can afford their truck. Those businesses rarely go out of business and the "market fluctuation" is not really a thing. If there's a sudden 10% drop in flights, the airline will bump the prices by 10%, retire some routes and voila, they are profitable again. I get that there's capital and risk benefit to offloading car ownership, I don't see how that translates to low margin. Margin is whatever Uber decides it to be. If they can lower the cost of providing the service by 10x by not using humans, then they can offer a price that is only 5x lower and get obscene 50%+ margin. What might affect a margin is lots of competition, but this seems like "winner takes most" business (currently Uber is 10x Lyft, it's closest competition in US). Finally, getting money to fund such business is easy. Uber already raised ~$10 billion. Assuming cost of self-driving car to be ~$20k, that's half a million cars. Given current market condition (low interest rates, lot's of money floating around), a business with a plan will have no problem raising essentially unlimited funds.

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.
  - jegutman 11y ago
    I actually think NY is a pretty compelling case for driverless. A large number of people go from hubs into the city, travel around the city, and then leave the city. Also there's an issue with balancing taxi load in the outer boroughs vs midtown / downtown manhattan. There's a reason uber has been so successful even in NY at increasing the total number of passenger trips and not just stealing customers away from traditional taxis.
    - 11y ago

jbob2000 11y ago

I see where the author is coming from, but uber doesn't need to own the autonomous vehicles. They can still be owned by third parties who maintain them. The owner just "recalls" the vehicle when he needs it,

organsnyder 11y ago
Exactly. Anyone who owns an autonomous vehicle will be able to offer it to Uber for their use. The only difference is that they won't need to also drive the vehicle. The point about outsourcing vehicle ownership to the drivers is a valid criticism of Uber, but self-driving cars doesn't really need to play into that equation.
- maxerickson 11y ago
  With any luck, there will be more than one marketplace for buying and selling vehicle miles.
pinkrooftop 11y ago
As a former part time uber driver, the challenge is convincing people to send your car out to uber alone. Even with me in the car, at a minimum passengers would leave trash or gum.
- intopieces 11y ago
  >at a minimum passengers would leave trash or gum. Doesn't the review system handle this? Goes back to one of the other points the article makes: this system depends upon your personal information being available to uber as well as the ability to 'blacklist' bad users.
  - pinkrooftop 11y ago
    one complication to that is groups of passengers, where only one person's info is available
- 11y ago

gitah 11y ago

The main point is missing the forest for the trees. The main benefit of self-driving cars is improving efficiency and productivity. It is productivity that makes us all much richer. Which business model self-driving taxi operators go by is pretty irrelevant; the free market will settle on the best way. The productivity increases will benefits the entire society should be the most important part of any analysis.

dragonwriter 11y ago
> It is productivity that makes us all much richer. It is productivity that makes the owners of the productive assets richer, not "us all" (whether that somehow reaches others is dependent on factors other than the productivity boost itself.)
- gitah 11y ago
  Nope even if you don't own assets you still benefit from increased productivity. The average person don't own airliners, but still benefit from cheap air fare tickets. With a free market and self-driving taxis, the price of transportation will collapse which will benefit everyone. The wealth that used to be spent on transportation can be used to by other goods, which will make everyone richer.
- intopieces 11y ago
  When you factor in the safety features of self-driving cars, the automated traffic management/reduction in the number of private cars, and the ability of less-well-off people to get to work in less time and make it home to see their families... seems to benefit everyone. If we can reduce the cost of transportation (even through subsidies) for the poorest, that opens up opportunities.
- spikels 11y ago
  This is incorrect. In order for the asset owner to gain from an increase in productivity they to interact with customers, workers and suppliers who in turn interact with others. This ends up sharing much if not most or even all of the gain with others. You are correct that many factors will determine how the gain gets allocated but only in exceptional circumstances does the owner keep all the gain. https://www.boundless.com/economics/textbooks/boundless-economics-textbook/economic-growth-20/productivity-98/the-importance-of-productivity-368-12465/ https://www.boundless.com/economics/textbooks/boundless-econ...

CamperBob2 11y ago

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. Self-driving taxis won't compete with privately-owned cars. They will compete with buses. There will be a strong case for municipal transit authorities to invest in them instead of buses, light rail, and other services that cost more and do a worse job of taking people where they want to go.

kjksf 11y ago
It sure makes sense, but unlike private newcomers like Uber, those are all unionized shops and unions will fight hard to block any such improvements because they would mean heavy job losses and unions exist to protect jobs. See BART strikes. Most likely they'll achieve pyrrhic victory: muni will be it's usual self for a couple of years, private system will reach cost parity but will offer better service, bus ridership will plummet, eventually it'll become evident that it doesn't make sense to pump more public money into it and it'll either be disbanded or possibly replaced by a contract with private company (because it'll be hard to rebuild muni to be competitive price-wise after giving private companies years of head start).

omarforgotpwd 11y ago

Uber doesn't need to own the cars to provide self-driving service. Suppose I as a consumer can purchase a self driving Tesla that is fully autonomous, and can have instructions provided remotely. I could use some kind of Uber app to have the car go ferry around passengers when I don't need it. Depending on how much I use the car and demand for rides, I could actually turn a profit on the month's car payments. Uber maintains it's decentralized network and I absorb the costs and risks of vehicle ownership presumably with some kind of self driving taxi car insurance. Many more people would likely join the uber network once they can do it without actually having to drive.

kjksf 11y ago

A contrarian view: asset-heavy business is good for the winner because of barriers to entry. How many competitors SpaceX will ever have? So if Uber wins the market, they'll have it for themselves. Asset-heavy transportation businesses aren't as risky as people assume. Airlines buy they airplanes. Shipping companies buy their (massive) ships. Hertz can afford the cars they rent. FedEx can afford their truck. Those businesses rarely go out of business and the "market fluctuation" is not really a thing. If there's a sudden 10% drop in flights, the airline will bump the prices by 10%, retire some routes and voila, they are profitable again. I get that there's capital and risk benefit to offloading car ownership, I don't see how that translates to low margin. Margin is whatever Uber decides it to be. If they can lower the cost of providing the service by 10x by not using humans, then they can offer a price that is only 5x lower and get obscene 50%+ margin. What might affect a margin is lots of competition, but this seems like "winner takes most" business (currently Uber is 10x Lyft, it's closest competition in US). Finally, getting money to fund such business is easy. Uber already raised ~$10 billion. Assuming cost of self-driving car to be ~$20k, that's half a million cars. Given current market condition (low interest rates, lot's of money floating around), a business with a plan will have no problem raising essentially unlimited funds.