It's not easy to blow my mind. But earlier this week, I sat down and read a research report by RethinkX. I've been picking up the pieces of my consciousness ever since.
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I'm now convinced that I -- and you -- will probably never buy another car again. Ever.
No -- seriously!
Image source: Getty Images
I won't bury the lead: The report convincingly argues that in just 13 years, 95% of all passenger miles traveled on U.S. roads will be provided by fully autonomous fleets of electric vehicles. This is a very different forecast than most mainstream predictions, which posit that such a transition will take a generation or two.
What's the source of that significant disagreement about the pace of change we can expect? According to the ReThinkX authors, here's the crux of the matter:
The authors predict that using TaaS (i.e., Uber without drivers) will reduce costs of transportation by up to 90%! And this transition will start before the decade ends.
What will send those costs plummeting so dramatically, practically overnight? There are three key factors:
- Higher vehicle utilization: Instead of sitting in our garages and driveways, and being used (on average) 4% of the time, TaaS cars will be used 40% of the time, spreading costs out more.
- Much higher lifetime miles for vehicles: For several reasons, they posit that the average TaaS car will last for 500,000 miles; The current average for consumer owned vehicles is 140,000.
- Ancillary cost declines: There will be massive drops in what we pay for insurance (machines are safer drivers), maintenance (thanks to technological advances and simpler engines), and fuel (no more internal combustion engines).
The obvious boon
Disruption like this offers some huge advantages. Here are the primary ones outlined by the authors:
- For your household: The average family will see a boost in disposable income of $5,600 per year.
- For the American economy: Major productivity gains will be realized because people will be able to work while traveling. GDP could increase by between $500 billion and $2.5 trillion.
- For the government: We'll see a steep drop in costs associated with infrastructure, and huge income from selling land no longer needed for transportation.
- For the disadvantaged: There will be a virtual elimination of transportation costs, opening up opportunities for employment, and increased mobility for senior citizens.
- For the environment: Carbon emissions will be drastically reduced.
Obviously, those are very exciting prospects. Between insurance, gas, and car payments, my own family spent over $7,000 on transportation last year. Seeing that number potentially fall below $1,000 would drastically accelerate our path to financial independence.
But there's a dark underbelly to this forecast
The plight of some oft-overlooked segments of the American population was thrown into sharp focus by the 2016 presidential election. As a former high school teacher in a rural town, I could see where many of those unhappy voters were coming from: Their communities were often crumbling before their very eyes.
Unfortunately, these same populations could suffer the most from the coming swift transition in transportation. Why is that?
- Cuts in manufacturing: In the U.S., millions of people are employed in car and auto parts manufacturing. With the shift to TaaS, the number of vehicles on American streets is expected to drop from 247 million to 44 million, meaning large numbers of those jobs could disappear.
- Cuts in fossil fuel demand: The shale energy boom helped energize local economies in several American regions. That business has slumped since the price of oil fell; a major shift to electric vehicles means oil likely won't see a comeback.
- Cuts in the number of driving jobs: Most of us don't fully appreciate just how many people are employed as drivers. This graphic from NPR offers a telling illustration of the point.
Image source: NPR
The RethinkX paper suggests that Uber, Lyft and Didi are the companies with the greatest potential to win in the coming environment. But what of Ford (NYSE: F) and General Motors (NYSE: GM),two of the country's bigger employers? Their recent investments in autonomous driving might be too little too late if the U.S. driving fleet shrinks by 80%.
And then, there's the Middle East. On the one hand, that already unstable region will become far less important to America as our need for oil diminishes. On the other, it could become significantly more destabilized, and it's impossible to tell how far the repercussions of that could travel. Consider that Kuwait, Iraq, Saudi Arabia, Libya, Iran, Kazakhstan, the UAE, Algeria, Russia, and Nigeria all counted on oil rents to provide over 10% of their GDP as recently as 2014.
We have no idea what will happen... and that's OK
Recently, I read a story about how a large segment of economists thought the U.S. economy would be ruined due to high unemployment when baby boomers entered the workforce in the late 1960s. As more and more people looked for work, the reasoning went, competition would be sky high, and many would be left without jobs.
The first-order prediction -- that there would be an influx of young workers -- was correct and easy to forecast. But second-order assertions -- how we would react -- are just about impossible to predict. If you find yourself worrying about what will happen as the pace of change accelerates, that's important to remember.
The most helpful mental/emotional stance I think one can take in the face of such rapid change is illustrated by an ancient Taoist story about a farmer's interpretation of his luck. This version of the tale comes from Alan Watts' The Watercourse Way:
Will the rapid adoption of autonomous electric car fleets be a boon for Americans and the U.S. economy, or cause dangerous upheaval. The only honest answer is: "Maybe."
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