5 ms·

It's interesting to consider how much money is required to validate this idea -- there are multiple companies, many investors, and focused engineers trying to s

by dpflan 8y ago

It's interesting to consider how much money is required to validate this idea -- there are multiple companies, many investors, and focused engineers trying to solve this problem. Are those resources emotionally driven to a short-term outcome that is proving to be far away (how far, and can this push result in a non-linear jump somewhere?). What is the real hypothesis here that bridges the idea and valuation creation?

rjf72 8y ago
There's a few interesting things about self driving vehicles. One surprising thing is that for a very large autonomous taxi company, these vehicles could, in theory, operate at a profit while charging less per mile than it costs you to drive your own car. Economy of scale + vertical integration means maintenance, insurance, and other regular costs are going to be substantially cheaper, mile for mile, than consumer rates. And just consider the amount of money in play here. In 2016 US drivers (only considering cars, trucks, minivans, SUVs) drove 3.22 trillion miles. Imagine you get a marketshare of 10% of these miles. And you have a 'negligible' profit margin of 5 cents per mile. That's $16.1 billion in profit. The potential there is quite remarkable. But it gets even more tempting because of some issues with self driving vehicles. Because of above the the biggest company will not only be able to operate for much cheaper than anybody else, but they'll also be able to offer a better service. They can have more regular cleaning/maintenance, and most importantly you'll be able to get a ride more reliably from them than from any other player and in the widest array of locations. And consider the lobbying that will inevitably happen. The instant that self driving vehicles can show a higher average safety rating, companies such as Google/Waymo will lobby governments to start banning non-autonomous vehicles in urban areas, "for consumer safety." Pair all of these facts with rapidly declining vehicle ownership among the younger generations. Things could end up changing incredibly rapidly. And whoever ends up on top is going to control what might end up becoming the most profitable business to ever exist. We talked about 10% at a $0.05/mile profit margin. That meager $16 billion is an extremely conservative estimate for a single country. --- And then you get into meta-aspects. Getting from A to B is one of the most important parts of basic modern living. It's hard to even imagine the implications if a single company was able to start gaining some significant degree of control on this aspect of life. And then there's the data. Not only would you know where huge chunks of the population is going to and fro at all times, but you'd also have a massive real time surveillance network of practically all of 'real life' society as each and every vehicle you control would need to be constantly autonomously surveilling everything around it. The possibilities there are mostly dystopic, but that sort of knowledge and power is going to be a major driver here.
tedsanders 8y ago
The market is so huge that it's worth it even if it takes decades of R&D costing billions a year. Some numbers: ~100M cars are made a year If 10% of those are self driving, and if they have $1,000 in gross margin due to self driving features, that's $10B a year to cover past R&D. Over 20 years this adds up to $200B. Optimistically, if the tech eventually reaches 80% of new cars and $3,000 margin, then we're talking $4,800 BILLION in profit over 20 years to cover R&D. Waymo is probably spending like $1-$2B/yr right now. Their engineering headcount is not huge, it's like under 1,000 based on a LinkedIn search I did last year. Really the potential market is so huge that it can justify many many billions spent on R&D. I am relatively bearish on the technology, and doubt it will be commercialized in 10 years, but I still think the investment is justified. Apologies for the poor writing - typed from my phone. I have more thoughts here: http://www.tedsanders.com/on-self-driving-cars/ http://www.tedsanders.com/on-self-driving-cars/
- Judgmentality 8y ago
  > The market is so huge that it's worth it even if it takes decades of R&D costing billions a year. This is a common trap novice founders fall into. They see that a market is huge, and simply say "well if we can just get a piece of the pie we'll be great!" It's like saying you only need to take 1% of search from Google. Yes, that is a huge opportunity, but how are you going to do it besides hopes and dreams? If ~$10 billion invested turned into an actual self-driving technology that could be generalized, it would almost certainly (if competition also develops it you essentially have a commodity and are now in the airline industry where there's a huge moat but the margins are still awful) be worth it. But people are becoming more cognizant that maybe that technology just isn't ready yet and nobody knows when the next breakthrough will occur. Is it possible one of the competing companies already has it and just hasn't shared it? Technically...but I am very confident that right now the state of the art just isn't good enough and the people in charge are naively throwing money at the problem hoping it bears fruit. I realize the person I am responding to largely shares my opinions on self-driving cars not being ready for prime time yet (I'm familiar with his website), I just wanted to point out a common fallacy that leads people to work on fruitless endeavors. In my opinion an AI winter is coming before self-driving cars are "real" - by which I mean a profitable solution that can be scaled.

by dpflan 8y ago

rjf72 8y ago

There's a few interesting things about self driving vehicles. One surprising thing is that for a very large autonomous taxi company, these vehicles could, in theory, operate at a profit while charging less per mile than it costs you to drive your own car. Economy of scale + vertical integration means maintenance, insurance, and other regular costs are going to be substantially cheaper, mile for mile, than consumer rates. And just consider the amount of money in play here. In 2016 US drivers (only considering cars, trucks, minivans, SUVs) drove 3.22 trillion miles. Imagine you get a marketshare of 10% of these miles. And you have a 'negligible' profit margin of 5 cents per mile. That's $16.1 billion in profit. The potential there is quite remarkable. But it gets even more tempting because of some issues with self driving vehicles. Because of above the the biggest company will not only be able to operate for much cheaper than anybody else, but they'll also be able to offer a better service. They can have more regular cleaning/maintenance, and most importantly you'll be able to get a ride more reliably from them than from any other player and in the widest array of locations. And consider the lobbying that will inevitably happen. The instant that self driving vehicles can show a higher average safety rating, companies such as Google/Waymo will lobby governments to start banning non-autonomous vehicles in urban areas, "for consumer safety." Pair all of these facts with rapidly declining vehicle ownership among the younger generations. Things could end up changing incredibly rapidly. And whoever ends up on top is going to control what might end up becoming the most profitable business to ever exist. We talked about 10% at a $0.05/mile profit margin. That meager $16 billion is an extremely conservative estimate for a single country. --- And then you get into meta-aspects. Getting from A to B is one of the most important parts of basic modern living. It's hard to even imagine the implications if a single company was able to start gaining some significant degree of control on this aspect of life. And then there's the data. Not only would you know where huge chunks of the population is going to and fro at all times, but you'd also have a massive real time surveillance network of practically all of 'real life' society as each and every vehicle you control would need to be constantly autonomously surveilling everything around it. The possibilities there are mostly dystopic, but that sort of knowledge and power is going to be a major driver here.

tedsanders 8y ago

The market is so huge that it's worth it even if it takes decades of R&D costing billions a year. Some numbers: ~100M cars are made a year If 10% of those are self driving, and if they have $1,000 in gross margin due to self driving features, that's $10B a year to cover past R&D. Over 20 years this adds up to $200B. Optimistically, if the tech eventually reaches 80% of new cars and $3,000 margin, then we're talking $4,800 BILLION in profit over 20 years to cover R&D. Waymo is probably spending like $1-$2B/yr right now. Their engineering headcount is not huge, it's like under 1,000 based on a LinkedIn search I did last year. Really the potential market is so huge that it can justify many many billions spent on R&D. I am relatively bearish on the technology, and doubt it will be commercialized in 10 years, but I still think the investment is justified. Apologies for the poor writing - typed from my phone. I have more thoughts here: http://www.tedsanders.com/on-self-driving-cars/ http://www.tedsanders.com/on-self-driving-cars/

Judgmentality 8y ago
> The market is so huge that it's worth it even if it takes decades of R&D costing billions a year. This is a common trap novice founders fall into. They see that a market is huge, and simply say "well if we can just get a piece of the pie we'll be great!" It's like saying you only need to take 1% of search from Google. Yes, that is a huge opportunity, but how are you going to do it besides hopes and dreams? If ~$10 billion invested turned into an actual self-driving technology that could be generalized, it would almost certainly (if competition also develops it you essentially have a commodity and are now in the airline industry where there's a huge moat but the margins are still awful) be worth it. But people are becoming more cognizant that maybe that technology just isn't ready yet and nobody knows when the next breakthrough will occur. Is it possible one of the competing companies already has it and just hasn't shared it? Technically...but I am very confident that right now the state of the art just isn't good enough and the people in charge are naively throwing money at the problem hoping it bears fruit. I realize the person I am responding to largely shares my opinions on self-driving cars not being ready for prime time yet (I'm familiar with his website), I just wanted to point out a common fallacy that leads people to work on fruitless endeavors. In my opinion an AI winter is coming before self-driving cars are "real" - by which I mean a profitable solution that can be scaled.