Dividends and Autonomy part 2

In the book Autonomy – The Quest to build the Driverless Car by Lawrence Burns and Christopher Shulgan published by HarperCollins, NY, 2018. The author Mr. Burns worked  as Senior Vice President for Research Development for GM and throughout the book, although he saw shifts in how the public views vehicles, his company did not.

The reality for most of us, we park our vehicle in the driveway, we drive to work and park or the usage of the vehicle is parked most of the time. If there was a different or better way, would we still own a vehicle? If driverless cars were available at relatively inexpensive ways would we own or use them similar to taxis or Uber? Mr. Burns modeled the idea and he believes if driverless cars were the norm, perhaps 75% of vehicles would be off the road, because we would have a different relationship to the vehicle. Would you need to own one? maybe yes or maybe no.

In the book, Mr. Burns asks why Google and people in San Francisco could see the future but in Detroit lead by GM could not? Similar to most things in life there are a combination of factors:

One of the problems was is the big auto companies are located in Detroit and did not pay a great deal of attention to what was happening in the Bay area.

Another problem is the testing process – Detroit likes to test in secret often times in remote ultra secret locations. To test a driverless car you need to test them on the public roads.

Another issue is culture. It is very hard for a big companies to disrupt themselves. Google did not have a product in the area but its founders were interested it the process of driverless vehicles. The company could figure it out as they went. One of the elements to success is maps for the vehicle to determine where it is going. At Google they could and did work on the solution which turned out to be Google Maps, which helped them in their advertising which helped them make money to continue to do driverless vehicles. The auto companies had no real way of making money from map making.

The auto companies define risk differently. There are places where you wish to take a risk and those that you do not. Designing a brake system or a plant, you do not want to take a risk because of the safety factors. The culture of the company which allows very good design and being safe does not lead itself to doing a prototype or testing a different business model.

The car companies make hardware which they do a very good job at – the hardware can be used in all conditions.

Self driving cars is essentially a software and mapping problem. It requires writing lots of computer code which is not a car company’s strength. The automaker’s looked at Google’s self driving car project, they saw a future in which the automobile because the latest example in a trend that already afflicted 2 other software-heavy devices. personal computer and smartphones. Early in the onset of the personal computer revolution the hardware makers had all the power – the Texas Instruments, the Commodores and Hewlett-Packards. Then the power shifted to the software what was inside the computer and the Microsofts  and Apples rose up. The same thing with the smartphone – it is the apps that you can receive and use not the maker.

A prime reason the auto industry was slow to driverless vehicles was that they did not have a bone deep understanding of digital technology or the full capability of computers and big data. They did not understand cutting edge communications technology. They tended to believe their business was about manufacturing and selling cars – when actually the real value creation amounts to helping people get from one place to another.

Linking to dividend paying stocks, these companies have a monopoly or near monopoly and have had the ability for a number of years. It takes good management to keep it unless it is government mandated. When you invest, you always want to know what is the value proposition in the company – and do you think they follow it?

There are more questions than answers, till the next time – to raising questions.



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