
Do the economics of self-driving taxis make sense? - joosters
http://ftalphaville.ft.com/2015/10/20/2142450/do-the-economics-of-self-driving-taxis-actually-make-sense/
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mikeyouse
The main point (and fairly interesting critique) of the article;

    
    
        Except there’s a major problem with that utopian
        view. The vision totally underestimates the true value
        humans bring to the car market or the degree to
        which Uber’s “urban saturation” depends on a
        dedicated human element to absorb the bulk of the
        capital cost and risk of public vehicle ownership, with
        very little personal reward.
    
        As Felix Oberholzer-Gee, a professor at Harvard, 
        tells Nautilus, if Uber can’t outsource costs and
        market fluctuation risk to contractors, especially the
        cost of maintaining idle fleets during off-peak hours
        directly to Uber, it quickly swaps an asset-light
        business model for an asset-heavy low-margin
        model instead.
    
        This is problematic because Uber’s already low-
        margin business model depends heavily on being
        able to overstep regulation, licensing and — most
        importantly — transfer maintenance, cleaning,
        insurance and market-risk exposure to drivers. It
        also benefits from drivers’ ability to draw value from
        vehicles in personal time.

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jbob2000
I see where the author is coming from, but uber doesn't need to own the
autonomous vehicles. They can still be owned by third parties who maintain
them. The owner just "recalls" the vehicle when he needs it,

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pinkrooftop
As a former part time uber driver, the challenge is convincing people to send
your car out to uber alone. Even with me in the car, at a minimum passengers
would leave trash or gum.

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intopieces
>at a minimum passengers would leave trash or gum.

Doesn't the review system handle this? Goes back to one of the other points
the article makes: this system depends upon your personal information being
available to uber as well as the ability to 'blacklist' bad users.

~~~
pinkrooftop
one complication to that is groups of passengers, where only one person's info
is available

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Xcelerate
Perhaps my perspective is too nescient (I'm an engineer — not an economist),
but this claim seems sketchy to me:

> How does [sharing] add value to the economy over the longer term? There is
> no production. It is entirely consumption. Recycling is all very well – and
> we do need secondary markets – but we cannot build an economy solely on
> sweating existing assets. An economy that exists solely on consumption has
> no long-term future.

Sharing is a process that optimizes usage of available resources. Why should
we make more cars than we need? Why should everyone have a boat if not
everyone needs a boat? Sure, more boat-building jobs are "created" if we feel
everyone really needs their own personal boat, but there seems to be a strong
opportunity cost that is being forgotten here: the labor necessary to build
boats could instead be directed into a more _useful_ form that advances
society as a whole much more quickly.

What do I mean by advance? Well, I guess to some degree that's subjective. But
I'm fairly certain everyone can agree on at least _some_ universal goals that
humanity would like to achieve, and artificially increasing the number of jobs
available for the sake of having more jobs available seems like it would hurt
our overall progress in the long run.

I think this quote from Warren Buffet sums up what I'm trying to say much
better than I can:

> The way I see it is that my money represents an enormous number of claim
> checks on society. It is like I have these little pieces of paper that I can
> turn into consumption. If I wanted to, I could hire 10,000 people to do
> nothing but paint my picture every day for the rest of my life. And the GNP
> would go up. But the utility of the product would be zilch, and I would be
> keeping those 10,000 people from doing AIDS research, or teaching, or
> nursing. I don't do that though. I don't use very many of those claim
> checks. There's nothing material I want very much. And I'm going to give
> virtually all of those claim checks to charity when my wife and I die.

~~~
username223
That Buffet quote certainly reminds me that the rich are different from you
and I. He could also hire those 10,000 people to do AIDS research, etc., but
he really wants to die with the most toys. "Charity" can have them afterwards.

~~~
organsnyder
That's certainly true for many super-affluent people, but Warren Buffett is
hardly the poster child. He lives a relatively modest lifestyle, and has
already given away a large portion of his fortune.

~~~
username223
I agree, he seems not to have lost his moral compass -- he's no Larry Ellison.
But something about the phrase "enormous number of claim checks on society"
suggests that he's collecting points, and trying to rack up a high score by
the end of the game.

~~~
13thLetter
If Buffett wants to try to rack up a high score, and plays by fair and equal
rules in the process (not hurting anyone, not pressuring people into
transactions, paying his taxes on time, et cetera), what's wrong with him
doing that?

~~~
joosters
I'm veering off-topic here, but Buffett's large deals are often cunningly
crafted so that taxes are eliminated. He's got the right to do that, but it
doesn't make him a shining example of a taxpayer.

Still, the charities he is giving his wealth to will get some of this benefit!

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boxy310
Interestingly enough, all of the bullet-pointed problems are problems inherent
in physical plant management for manufacturing (except privacy). This is
possibly due to the lessons capital-intensive industries that have to date
been manufacturing are also applicable to capital-intensive services that are
largely commoditized and interchangeable (like getting transported from point
A to point B). Taxi service is a good textbook example of a service that
requires a minimum level of knowledge, but is extremely repetitive and doesn't
benefit exponentially from human intervention.

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mdorazio
Since they didn't provide any numbers, here's an analysis I did on this topic
using estimates for LA: [https://www.linkedin.com/pulse/how-cheap-can-uber-
self-drivi...](https://www.linkedin.com/pulse/how-cheap-can-uber-self-driving-
ride-get-michael-dorazio)

Uber can absolutely make money even if they own their own cars, provided the
up-front cost of the cars is low enough. You can think of it like a high-use,
low-distance rental car fleet - the same car economics down-sides apply to
Hertz and Enterprise and yet they still make money.

~~~
saturdaysaint
And as self-driving fleets take over and cease to be tied in to the driver's
self-image, my guess is that the cars will look more like the $15,000 Toyota
Yaris. I also imagine that as fleet owners gain greater control of design,
they'll find ways to make maintenance easier and cheaper. Insurance should
also get cheaper with fewer human drivers (and by the time automated cars are
on the road, there will be a lot of cars with crash-mitigating technologies
too).

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spikels
This article and the 2 linked source articles are a big hot mess of half baked
thoughts and misunderstandings. However it did remind me again to think of all
the impacts that driverless cars will have.

Does anyone know of a thoughtful analysis of how things (like public transit,
parking, etc) will likely change as driverless vehicles become more common?

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tlb
Brad Templeton's essays are the place to start:
[http://www.templetons.com/brad/robocars/](http://www.templetons.com/brad/robocars/)

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sharemywin
IHS Automotive forecasts that the price for the self-driving technology will
add between $7,000 and $10,000 to a car's sticker price in 2025

Uber will probably use it's own fleet supplementing people during peak times.
if you can get 70% utilization that's about 60k/yr you don't pay a driver.

~~~
intopieces
Do you happen to have a link to this forecast? I've never heard of IHS
Automotive but it sounds interested. Could the 7-10k increase be offset by
other efficiencies in engineering that bring down the cost?

Side note, could we be entering the era where one person does not own one
vehicle, but many people own a few? I could see something like an apartment
complex offering a few self-driving cars as an amenity, or cities investing in
them like they do bike-shares. Lots of the discussion has focussed on the
extremes: individual ownership or megacorp ownership. There might be a place
for this technology in between.

~~~
mdorazio
Not sure which IHS article OP is referring to, but BCG did an analysis as
well:
[https://www.bcgperspectives.com/content/articles/automotive-...](https://www.bcgperspectives.com/content/articles/automotive-
consumer-insight-revolution-drivers-seat-road-autonomous-vehicles/)

Relevant section is "The Price Tag". Here's a helpful image from the paper as
well:
[https://www.bcgperspectives.com/Images/Revolution_Drivers_Se...](https://www.bcgperspectives.com/Images/Revolution_Drivers_Seat_ex06_large_tcm80-185056.png)

The biggest cost driver is the LIDAR, which is anticipated to cost Google $8k
per car next year when they move to a cheaper system.

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milge
Anyone else getting a paywall?

~~~
mikeyouse
FT has a free registration as well, do it once, stay logged in.. Their content
is pretty good all around.

~~~
spikels
I was a long time subscriber to FT and still think it is above average but
sloppy articles like this make me think the quality has been declining with
the rest of the industry.

