Welcome to episode 194 of The Digital Life, a show about our insights into the future of design and technology. I’m your host Jon Follett, and with me is founder and co-host, Dirk Knemeyer.
On this episode of the Digital Life we’re going to discuss Ford’s recent billion dollar investment in self-driving cars and what that means for the future of the auto industry. Ford Motor recently announced a $1 billion investment which is going to take place over the next five years in a startup out of Pittsburgh actually, and the startup is called Argo AI and they’re developing autonomous vehicle tech. They just got going in December, so this is a fresh organization and it has technologist formerly from Google and Uber that were focusing on these self-driving technologies who are going to be leading the effort for Argo.
Pittsburgh is the place of choice because it’s a robotics hub. We know that they have a great university system there and a burgeoning hub for robotics and self-driving vehicle research. It will also have some satellite offices as you might expects, there’s one on San Francisco and also one in Michigan which makes sense given the car industry’s dominance of that region.
I found this particularly interesting because there’s an inflection point coming here with the autonomous car technology. I think we’re starting to reach it or are very close to that. The reason I say that is the level of investment has increased from both technology companies, so you’ve got your Ubers, your Googles, possibly Apple. Of course Apple is not saying anything, and then sort of the company that’s straddling tech and the auto industry which is of course Tesla.
On the other side you have your mainline manufacturers of cars who have been in business for decades and decades, folks like GM and Chrysler. Now Ford is throwing their hat in the ring. What this says to me is that the autonomous vehicle race is on, it’s not quite a moonshot but there’s a lot going on there, there’s a lot of things to sort out. This is a technology race that is heating up for sure. Based on that, I’m very curious as to what are the enabling technologies, what are the governmental regulations and insurance, sort of guidance that’s going to make this all happen.
Because we have a lot of those regulations in place for managing cars that we drive ourselves and now we’re going into this period of transition, and I think it’s going to get really complicated really quickly. With that preamble, Dirk, what are your initial impressions of this fairly sizeable investment from a major American automaker in AI and autonomous vehicle technology? Do you see this inflection point coming at least in terms of investment?
Yes, I mean it’s interesting to see. It reinforces that they’re not completely buying the times and clueless, they’re making an effort. I don’t know much about Argo specifically as a company, so whether they’re betting on the right horse or not, who knows? Maybe not. Superficially, their eye is on the right ball. You mentioned the self-driving vehicle is sort of a moonshot. To me, the self-driving vehicles are more of the, I want to say short-term but I’ll call it medium term.
In the 2020s we’ll start shifting over in quantity to self-driving vehicle. To me that’s sort of a known and it’s within our current field of vision. Where I think the moonshot lies is the future of transportation. Somewhere between now and 2050 there’s going to be significant consolidation of transportation types. Right now there are all these distinct things that are distinct structurally and they’re also distinct in the technology they use to power them. Whether it would be motorcycle, car, bus, train, subway, airplane, among others, right now these are super fragmented and they’re treated as though like their own thing where it’s different manufacturers who are making the thing.
We as citizens we see them as sort of inhabiting almost different ecosystems even if they’re sharing the same roads in some cases. What is going to happen is this consolidation where single companies are going to produce vehicles that cover multiple of those use cases, they’re killing some sub sections of the different transportation technologies and moving them into a more technologically advanced, a more modern, a more appropriate for where we are intact as well as the green considerations that we’ll need to be making in the future things.
For me when I see Ford invest in Argo, that’s a signifier to me that maybe Ford will be one of the companies left standing at the end. It’s trying to sort of plan ahead, it’s probably more likely that a true tech company would buy Ford and just gobble them along the way. I think Ford is at least positioning itself to have that happen in a meaningful way as opposed to just being left behind and have its value go precipitously down and either be bought for a very little or die.
You’ve piqued my interest in terms of the consolidation paradigm there that you outlined. What kinds of consolidation do you see happen? One can imagine horrible sci-fi visions of hey, this vehicle can fly, and that can also become land transport as well. Do you have any examples of areas that you think will become merged into one as this consolidation happens?
I think it’s really use case based. If we look for example currently our cars, how we use our cars, there is some percentage of that. I’m not an expert so I’m not even guess, it’s some harebrained percentage. There are some percentage of that where it is necessary that I as an individual enter a vehicle and go to a specific place. There’s another percentage where I as an individual could get into a larger vehicle of some kind and be part of a group that is taken to a place. Right now the car covers a bunch of use cases, some of which should, into the foreseeable future given and it’s focusing in the United States, given the physical infrastructure here, it more or less has to be that way. A lot of it can be part of more mass transportation.
Jump to a different vehicle, jump to a bus. Right now a bus is serving a function of taking people to places all in a mass vehicle, there are some of those use cases that would be better … I don’t know if better is quite the right word, but would be more appropriate assuming the financial ability to pay for it to be an individual vehicle or a more private vehicle whereas some of the use cases are better to all be together. We could say the same thing for a subway. That’s talking about more consumer transportation.
I think in those use cases where it’s about vehicles that are using wheels, they’re on the ground that are primarily focused on taking people to the different things that they need to be taken to hither and yon, that there’s going to be some crunching and consolidation there. I don’t know what it’s going to look like because if we go back decades even, there’s always been this push like the high speed rail, like high speed rail is where it’s at.
There’s been lots of investment in that in the US, in different places, and it’s almost uniformly a failure. Even though logically people like, “Yeah, this is the right solution for the right thing. It’s the most efficient. It does the job”, it fails for a whole bunch of reason. I’m not going to stab at a solution, I haven’t researched this area enough and I don’t feel qualified to do it in a way that it isn’t silly, but I think that’s where it’s going to happen.
It’s going to be new forms of moving individuals around and those use cases will become more refined, and it’s going to be more refined ways of moving groups around that are more use case dependent. The big unknown of course is just one about money. One of the reasons people take public transportation now in some cities like New York it’s very convenient, I mean Boston to a lesser extent as well where we are, but often times it’s just money. Cars are expensive, like there is the car, there’s insurance, there’s the gas, there’s the parking lot. It’s just cost, and cost and cost and cost. Whereas public trans, it’s really affordable. There are socio economic issues here as well.
The other thing I’ll comment on Jon is on our last episode we talked about drones, and I think we’ll start to see not just in citizen, sort of citizen reorganization of how we’re getting around, but we’re going to see just logical decisions made around moving boxes, moving stuff. The example I talked about was with drone home delivery. I actually kind of expect drone home delivery to be a real thing and not just silly, and I think it’s because at this point Amazon and companies like it are sending a lot of boxes around that are basically air.
I don’t know what proportion it is but it’s certainly more than 10%, I’m going to say more than 20%. When I order on Amazon I get a box, it’s taking up a fair bit of space but it’s light, I mean there’s something like a little notebook, or an air freshener or just some random thing. It’s both really expensive to put that box that’s taking up cubic meters, cubic space into a truck. Whereas if you have a drone technology similar to the Facebook drone we looked at can be more solar powered so the green cost is very low, and it also can be more right to the door. Just send the drone out, you don’t need to wait for the next truck, it cuts the whole supply chain down.
Sorry if I’ve been a little long-winded here, but those are a couple of different ways in which I think it’s just the use cases are going to find their way to the tech right solution.
Dirk, that’s a great breakdown and the drone certainly engenders visions once again of people moving drones and things like that. So transportation is definitely an area right before, as you said, consolidation and innovation. One area that I think goes a little bit unnoticed as we have these tech discussions is the infrastructure that’s required to support these new forms of transport whether they’d be autonomous vehicles or in the future, people moving drones, or your aforementioned sort of combination public transport/private transport however that manifest.
The infrastructure I’m talking about is not just the roadways of course but also the legal and insurance realms that are so important to enabling these technologies to happen. An example of what people are struggling with right now is sort of the insurance responsibilities for something like an autonomous vehicle. If you get into a car accident you weren’t driving really, it was the software, right? So are you responsible now? Who’s supplied the autonomous vehicle, are they responsible? Is the other vehicle and its AI responsible? Who knows. That needs to be worked out.
Additionally, we have at the same time this new forms of energy sources that are being used to power our vehicles. One can imagine the … Everything’s battery operated and electric in the future which means that the petroleum based gas stations are going to need to be changed into or at least modified to include charging stations. Right now all of these charging stations take awhile. You’re going to need a parking lot, you can’t just pull into a charger … At least so far and just plug it in and it’s immediately totally charged, and I’m sure that technology will come but it’s not here at the moment.
These infrastructure questions were answered very definitively by the US government when it came to the auto industry. There was nationalization of the federal highway system is a huge accomplishment. It enables people and goods to move freely across the US and that was all built on tax payer dollars. These questions like how do we enable these technologies, those things haven’t been answered even remotely yet. I am thinking there is going to be some bottlenecks here, and those bottlenecks are going to be where it comes to passing laws and to figuring some of the stuff out. I’m always surprised at the difficulties of getting smart regulation done in Washington. I think that’s going to be a bigger challenge than the technology side, I can almost guarantee that.
Yes, it’ll certainly be slower when it needs to be fast that’s for sure.
I do think that there are interesting competitive issues that arise if the government is not able to facilitate companies to develop technology in a rapid way. It’s a global economy now, what’s to say that the Chinese equivalent of one of these companies make a big splash first. The playing filed is much broader as we outlined. There’s tech, there’s car companies and you broadened it even further to include other companies that are involved in transportation and might start consolidating some of these areas.
I think this is an area that we need to continue to watch, and I’m pretty excited to see it play out although I can’t imagine that it’s going to be all that smooth. I see a bumpy ride coming for the autonomous vehicle market.
Yes, and I think the specific ways in which it ends up manifesting will probably surprise us.
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You can follow me on Twitter @dknemeyer. Thanks so much for listening.
That’s it for episode 194 of The Digital Life. For Dirk Knemeyer, I’m Jon Follett and we’ll see you next time.