Big flashy billion-dollar investments. Leaders optimistically pronouncing totally unrealistic launch dates. Geeky engineers becoming the darlings of the moment. Yes, the story of Ford’s foray into autonomous cars has it all!
The autonomous driving bubble inflates
The Defense Research Advanced Projects Agency (DARPA) kicked off the modern race to invent self-driving cars with its 2004 Grand Challenge, an invitation to scientists and engineers to traverse 142 miles across the challenging terrain across the desert in Primm, Nevada. The winner would earn a prize of $1 million. Nobody won the prize because nobody finished.
Not to be deterred, the agency sponsored a second challenge in 2005, and five teams completed it. Stanford’s entry, a car nicknamed “Stanley” won the prize – $2 million.
A third challenge, named the DARPA Urban Challenge in 2007, put more pressure on the software powering the cars, calling on them to handle more complex tasks, like obeying traffic laws in a mock urban environment. This time, a team from Carnegie Mellon University in Pittsburgh claimed the prize with their entry, “Boss.”
DARPA definitely succeeded in one of its goals, namely to create a critical mass of talent focused on the challenge of autonomy, which it was interested in for military and defense purposes.
Google entered the commercial market for self-driving cars in 2007 by hiring Sebastian Thrun, the leader of the Stanford team that won the second challenge. By the time Anthony Levandowsky, who’d also been on the Stanford team managed to have a driverless car complete a trip around San Francisco in 2008, the scene was well and truly set for a bubble of epic proportions. Pundits, analysts and observers predicted a complete up-ending of the automotive industry as we know it.
Everybody jumped into the fray. Google, Hyundai, VW, Apple, General Motors, Ford, Tesla, VW, Uber and Amazon’s Zoox all plowed resources into the nascent arena – to the tune of over $100 billion, according to Bloomberg. Confident predictions were made, including Elon Musk’s declaration that autonomous driving was a “solved problem.”
The problem, though, is that the technology, while astonishing, is still unable to cope with things that wouldn’t faze ordinary human beings. As reporter Max Chafkin points out, “there’s an entire social media genre featuring self-driving cars that become hopelessly confused. When the results are less serious, they can be funny as hell. In one example, a Waymo car gets so flummoxed by a traffic cone that it drives away from the technician sent out to rescue it. In another, an entire fleet of modified Chevrolet Bolts show up at an intersection and simply stop, blocking traffic with a whiff of Maximum Overdrive. In a third, a Tesla drives, at very slow speed, straight into the tail of a private jet.”
If one person’s career symbolizes the bubbly period of autonomous driving, it would be that of Levandowski. He quickly became one of the sector’s biggest stars. He ended up joining Google to work on their business, but also started an independent company, Ottomoto, to develop autonomous driving for trucks. That company was acquired by Uber for $680 million, which planned to have him run its autonomous driving project. That led to an ugly series of lawsuits and accusations of trade secret theft, with Levandowski only avoiding jail time through a presidential pardon!
Today, however, even Levandowski is disenchanted with the very technology he helped pioneer. As he said to Max Chafkin of Bloomberg, “You’d be hard-pressed to find another industry that’s invested so many dollars in R&D and that has delivered so little. Forget about profits—what’s the combined revenue of all the robo-taxi, robo-truck, robo-whatever companies? Is it a million dollars? Maybe. I think it’s more like zero.”
Here is the entirely predictable thing, as I pointed out in Seeing Around Corners. When a potential strategic inflection point emerges, particularly one with the potential to disrupt a huge sector, speculative investment flows in. After all, the $2 trillion global automotive business is a juicy target. Each of the investors during the hype cycle hopes to reap the rewards of having an early lock on the sector. The early hopes are often dashed as the genuine inflection point takes much longer to arrive than expected, ushering in a period of disillusionment.
So here we are. In 2015, Ford was granted permission to test its driverless cars on public roads in California. In 2018, it announced that it would put all its driverless car assets into a separate unit, called “Ford Autonomous Vehicles, LLC.” And just last week, the company decided, well maybe not.
It’s going to wind down Argo AI, its joint venture with Volkswagen, a project intended to usher in mass-market, level 4 autonomous driving. Given that Argo is widely considered one of the more mature and solid leaders in the field, that’s a pretty strong signal that, as writer Darrell Etherington says, that “It’s Time to Admit that Self-Driving Cars Aren’t Going to Happen.”
Argo, which consumed over $3 billion in investment during its short life, seems to have simply taught Ford that the road (no pun intended) to profitability for autonomous cars is a long, long, way off. As science fiction writer Cory Doctorow notes, the hype was great for Uber and Tesla, but not so great for their credulous investors.
The inflection point will come, but it will be through a stepping-stone strategy
Here’s the thing. For true level 4 autonomous driving to become a reality, there is more than technology that needs to be worked out. We’d need to establish an ownership regime. We’d need to figure out a business model (as in, who owns the things?). We’d need to develop a risk regime. Costs would have to come down dramatically. What you have here, in short, is an ecosystem that is too unripe to be commercially viable.
The smartest strategy in such a case is to pursue what I call the stepping-stone strategy. This involves finding small, profitable, niche markets in which the technology you have in its current form solves a real problem for a real customer.
Examples in autonomous driving are all around us. Lewandowski himself is developing technology to use it in closed systems – and writes about his plans here. The military is using it in leader-follower systems, in which the robots follow vehicles used by humans. And a slew of startups are inventing new uses for the technology every day – but without the deep pockets of the big players, they are having to be much smarter about finding early markets.
From trapped in traffic to a greener future
The unraveling of many players’ fascination with autonomous cars may be just the prompt we need to question whether encouraging more driving is a good thing. Perhaps it’s time to rethink mobility altogether. Economist Carlota Perez invites us to imagine what a non-car-dependent future might look like. As she says,
Just as we took advantage of the low cost of oil and the possibility of petrochemical materials to produce more and cheaper products for mass consumption, we now need to take advantage of the low cost of information, its processing and transmission to massively dematerialize GDP and lifestyles. By changing the relative cost and tax structure to favor sustainability, green investments and innovations can become the most profitable, and green products and services can become the most desirable among consumers.
We can now replace the American Way of Life (which seemed so good at the time) with a smart Green Way of Life, centered on health, exercise, caring, creativity, nutritious fresh foods, experiences, learning, communication, rental and maintenance rather than possession and waste. It’s already being adopted by the young and the more highly educated…
And this is not only good wishes. We need the ICT industries to shift their creativity and the power of the technologies they master towards solving humanity’s greatest current problems: the environment, inequality and health.
Imagine if we’d spent that $100 billion on figuring that out!
Meanwhile, at Valize
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