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> 4) Software tends to be a winner-take-most industry. That's true of software generally, but not will not be true of automated driving software. Windows, iOS

by MarkMc 9y ago

> 4) Software tends to be a winner-take-most industry. That's true of software generally, but not will not be true of automated driving software. Windows, iOS, Facebook and YouTube have strong network effects. Google search and Microsoft Office offer a familiar user interface and superior features. Self driving software will have none of these benefits - there is no network effect, no significant user interface, and no feature differentiation. As soon as there are 3 self driving software products on the market that meet minimum safety standards, competition will force the price down to little more than the cost of development. What's more, that cost of development will diminish over time: If in 2027 a company decides to develop self driving software, the development cost will be much less than the $1.1 billion Google has paid. So over the long term the economics will be similar to airlines - suppliers offering a commodity product and generating thin margins. Although the long-term trend is bleak, Waymo does have two short-term advantages: 1) possibly being first to market; 2) its suite of patents on self-driving tech. Personally I don't place much weight on these advantages so I would value Waymo much less than the stock market. As an Alphabet shareholder I very much hope that they spin off Waymo so I can sell my interest in self-driving tech.

georgeglue1 9y ago
There are massive economies of scale. If Google is first to mass market, they will have a large information lead. From there, their cars could take better routes and handle more edge cases. There's a similar network effect and economy of scale that applies to Waze + Google Maps' lead in mapping.
ballenf 9y ago
Agree for the most part, but question the lack of network effects here: Is there not a potential interoperability / safety gain if all the cars on the road know how all the others will react? In a game of chicken they know they should each veer right to avoid an accident, so to speak. I guess the answer depends to some degree on just how much inter-car communication is part of the future and whether those will be fully standardized. And even if standardized whether additional proprietary communications will be permitted between the same species. Finally, isn't there a race on to collect as much detailed driving data as possible to train these systems? So the more a system is deployed the faster it will improve and therefore be more attractive? I guess my question is really whether meeting minimum safety standards is going to be the sole question that purchasers of self-driving tech ask before buying. It's not too hard to fathom different techs being a "smoother" drive or maybe even able to handle more side roads (and thus more shortcut options) that other techs aren't ready for yet.
- MarkMc 9y ago
  That's a good point - I didn't think about network effects of having autonomous cars communicate with each other. No doubt it will boost safety, but I strongly suspect that such technology will be heavily regulated and standardised. If Boeing and Airbus each developed a mid-air collision avoidance system, wouldn't regulators force them to interoperate? Of course there will still be an autonomous car company with a superior safety record and perhaps better navigation routing, but these are not strong advantages. Consider that budget airlines can compete effectively with established airlines even when they have a worse safety record and fewer direct routes.
  - icebraining 9y ago
    Nitpick: as far as I know budget airlines, at least in Europe/US, don't have a worse safety record than others.
    - secfirstmd 9y ago
      True. And Ryanair have the youngest fleet.
adrianN 9y ago
That is, if somebody figures out how to make good autocars without absolutely massive amounts of training data. For now it looks like whoever gets their software out in world first will have a huge advantage just because they get much more telemetry than the competition.
- MarkMc 9y ago
  I agree you need massive amounts of training data. But the marginal value of that data diminishes rapidly after a certain point. Let's say Waymo spends $2 billion to get the training data necessary to produce a fully automated car. A few years later Uber has also spent $2 billion and has a the necessary training data. By that time Waymo has 10 times as much telemetry data, so its cars might be somewhat safer. But as long as Uber cars are safe enough to get regulatory approval they can compete effectively with Waymo. Beyond a certain point people generally care more about cost than safety - look at the airline industry. Also consider that Tesla seems to be getting telemetry data for much less than Waymo or Uber - they have thousands of drivers who are willing to pay for sensors and test automated driving software for free.
  - adrianN 9y ago
    People are not very rational. Almost all trips in cars are very short, yet people are still very concerned about range in electric cars. Being able to cover more exotic driving conditions ("Our cars also work during a severe hurricane") could be a very effective marketing strategy.
    - randomstudent 9y ago
      > People are not very rational. Almost all trips in cars are very short, yet people are still very concerned about range in electric cars As they should be... What good is a car if it can't be used for the occasional long trip? I expect my car to be up to the task to go visit friends or family 200km away on a whim, after coming home from work, instead of sitting idly while my battery is charging for a couple hours... I'm sure many users have the same expectations. Are we irrational?
the8472 9y ago
> 1) possibly being first to market; If you are first to market with selfdriving cars AND manage to transform transportation into a ride-hailing service then you might get a natural regional monopoly wherever you build out the fleet support infrastructure, similar to other utility services. Plus brand recognition for that service.
- user5994461 9y ago
  First to market AND have the most well known brand.

by MarkMc 9y ago

georgeglue1 9y ago

There are massive economies of scale. If Google is first to mass market, they will have a large information lead. From there, their cars could take better routes and handle more edge cases. There's a similar network effect and economy of scale that applies to Waze + Google Maps' lead in mapping.

ballenf 9y ago

Agree for the most part, but question the lack of network effects here: Is there not a potential interoperability / safety gain if all the cars on the road know how all the others will react? In a game of chicken they know they should each veer right to avoid an accident, so to speak. I guess the answer depends to some degree on just how much inter-car communication is part of the future and whether those will be fully standardized. And even if standardized whether additional proprietary communications will be permitted between the same species. Finally, isn't there a race on to collect as much detailed driving data as possible to train these systems? So the more a system is deployed the faster it will improve and therefore be more attractive? I guess my question is really whether meeting minimum safety standards is going to be the sole question that purchasers of self-driving tech ask before buying. It's not too hard to fathom different techs being a "smoother" drive or maybe even able to handle more side roads (and thus more shortcut options) that other techs aren't ready for yet.

MarkMc 9y ago
That's a good point - I didn't think about network effects of having autonomous cars communicate with each other. No doubt it will boost safety, but I strongly suspect that such technology will be heavily regulated and standardised. If Boeing and Airbus each developed a mid-air collision avoidance system, wouldn't regulators force them to interoperate? Of course there will still be an autonomous car company with a superior safety record and perhaps better navigation routing, but these are not strong advantages. Consider that budget airlines can compete effectively with established airlines even when they have a worse safety record and fewer direct routes.
- icebraining 9y ago
  Nitpick: as far as I know budget airlines, at least in Europe/US, don't have a worse safety record than others.
  - secfirstmd 9y ago
    True. And Ryanair have the youngest fleet.

adrianN 9y ago

That is, if somebody figures out how to make good autocars without absolutely massive amounts of training data. For now it looks like whoever gets their software out in world first will have a huge advantage just because they get much more telemetry than the competition.

MarkMc 9y ago
I agree you need massive amounts of training data. But the marginal value of that data diminishes rapidly after a certain point. Let's say Waymo spends $2 billion to get the training data necessary to produce a fully automated car. A few years later Uber has also spent $2 billion and has a the necessary training data. By that time Waymo has 10 times as much telemetry data, so its cars might be somewhat safer. But as long as Uber cars are safe enough to get regulatory approval they can compete effectively with Waymo. Beyond a certain point people generally care more about cost than safety - look at the airline industry. Also consider that Tesla seems to be getting telemetry data for much less than Waymo or Uber - they have thousands of drivers who are willing to pay for sensors and test automated driving software for free.
- adrianN 9y ago
  People are not very rational. Almost all trips in cars are very short, yet people are still very concerned about range in electric cars. Being able to cover more exotic driving conditions ("Our cars also work during a severe hurricane") could be a very effective marketing strategy.
  - randomstudent 9y ago
    > People are not very rational. Almost all trips in cars are very short, yet people are still very concerned about range in electric cars As they should be... What good is a car if it can't be used for the occasional long trip? I expect my car to be up to the task to go visit friends or family 200km away on a whim, after coming home from work, instead of sitting idly while my battery is charging for a couple hours... I'm sure many users have the same expectations. Are we irrational?

the8472 9y ago

> 1) possibly being first to market; If you are first to market with selfdriving cars AND manage to transform transportation into a ride-hailing service then you might get a natural regional monopoly wherever you build out the fleet support infrastructure, similar to other utility services. Plus brand recognition for that service.

user5994461 9y ago
First to market AND have the most well known brand.