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Comments

A.M.

And Uber/Lyft are already facing more competition - from bikesharing, specifically dockless bikesharing.

In America, bikesharing has increased 87x in 6 years, from 320,000 to 28m rides per year. Growth in the last two years is about 25% annually, which is fairly modest by ATOM standards.

But dockless bikesharing has just arrived stateside, and has a number of advantages: 1) fixed costs are much lower because there are no stations, but GPS devices on bikes.
2) users can park the bike right at their destination, saving time and hassle of finding a station.
3) user prices are much lower, $1 per half hour, compared to prices 3-4 times that for occasional users.

China is now doing 50 million rides per day on these dockless bikeshares, and the companies operating them have received billions in venture capital. The Chinese Uber has invested in them as well, among others.

These systems deserve their own column based on their success so far in China. In America, it will take 1-2 years for that level of visibility. I think the dockless model will dramatically increase the growth rate of bikeshare.


[I had posted about this under the previous post, but that may not be seen now]

russell

Here in Chicago, there are homeless people who sell a magazine called "Streetwise." My local streetwise guy disappeared and I asked what happened to him. "He does Uber now"

Anthony Scalzi

One other knock-on effect of the crash in taxi medallion pricing-taxi operators are now underwater on loans used to purchase the medallions, rather like the housing bubble bust. Fortunately, loans with this exposure are a much smaller portion of banks' balance sheets than mortgages and related securities were.

https://www.bloomberg.com/news/articles/2017-01-30/taxi-medallion-prices-are-plummeting-endangering-loans

Also, please be careful using VM as an abbreviation in the context of car trips, as it could also be taken to mean VMT, or vehicle miles traveled. Got a bit confused for a moment how consolidating commuting trips would lead to an increase in miles traveled.

Geoman

I always wondered about uber - then I used it. As someone who has ridden in numerous taxis I noticed an immediate benefit - getting a ride is simplicity itself. Billing is automatic. No tipping. I've only ever waited a minute or two for a ride to appear. Drivers are courteous, and the car is clean. Oh yeah, and cheaper.

Prior to uber we were paying more and more, for less and less. Basically the government decided to regulate the marketplace by limiting competition. There is no reason a medallion (really just a license to work) should cost a Million $. What other industry does a business license cost a million bucks? And naturally, anyone paying that amount had to recoup the medallion costs from the consumers. They raised ride prices, but that only goes far. So they skimp on everything else - maintenance, cleaning the vehicles, drivers, electronic advancements. You need to save a lot of pennies to pay that money back.

Uber shows us exactly what the government plan to regulate taxis cost. And how taxis could make more money, and we could have better service, without it.

Now, imagine how much better every regulated institution might be. Education, the DMV - we get crappy results because of government cost and regulation.

I am not someone how advocates free enterprise in all situations, however, we should always be aware that the cost of government services is crappy results at a steep cost, and minimize government meddling whenever possible.

Kartik Gada

Anthony Scalzi,

In the ATOM publicaton, VM is described at length. When a quote is taken from there, it has to be verbatim, so I swiftly explain what VM is in the subsequent text. But yes, that is the nature of taking a quote from another source.

The loan angle is interesting. Note that this is going to happen to the much larger pile of auto loans soon as well, since electric vehicles, while expensive and in need of battery upgrades, can last much longer than IC cars, and thus are more suitable for Uber/Lyft (for those who want to do 300,000 miles in 6 years). EVs might be a tiny fraction of total cars, but their economics are already far more suited for the Uber model than the ownership model, for this reason.

Kartik Gada

Geoman,

Now, imagine how much better every regulated institution might be. Education, the DMV - we get crappy results because of government cost and regulation.

Indeed. I think the Uber effect on taxi medallions is identical to what will happen to a) brick and mortar educational institutions, and b) real estate in expensive cities. Particularly those where new supply is obstructed due to greedy incumbents. The SF Bay Area is the worst example of this in the world.

fatcat

electric vehicles, while expensive and in need of battery upgrades, can last much longer than IC cars, and thus are more suitable for Uber/Lyft (for those who want to do 300,000 miles in 6 years

while having some advantages over an ICE the electric cars also need maintenance and have other moving parts, if you exclude the engine. And if you want to use it non stop the charging time becomes a real limit. It takes 5 minutes to fill up about tank and at least an hour of turbo charging. Now a self do plug in hybrid is a story...

Kartik Gada

fatcat,

That is today. Charging speeds are rapidly improving, as is the lifespan of a battery pack.

Add to that the fact that most cars are not used 90% of the time, and tons of high-value land is devoted to parking, only for parking spaces to be empty 30-90% of the time.

Hence, the cost pressure against the current model is higher than people think. Cost pressure relative to newer technologies is one of the prime determinants of ATOM disruption (both in size and in speed).

It is possible that in 15 years time, most new cars are electric, and are used in an Uber-type manner, with self-driving lowering the cost further (down to 20% of the present cost, since that is what Uber takes out of the fare). Hence, a lot fewer cars will be on the road, but each is used 16-20 hours/day.

Six-lane highways of today will appear very sparsely used, and traffic jams will be extremely rare..

The key technologies needed are :
1) Full self-driving capabilities in cars
2) Rapid-charging, long-lasting batteries
3) Nanomaterials to lighten car weight (lengthening the miles that a charge can last).

~2032...

computer_guy524

I'd like to nominate genetic engineering. In the past this was difficult, expensive and error-prone. Enter CRISPR!

Here is an article that I like:
https://www.washingtonpost.com/news/innovations/wp/2017/07/27/human-editing-has-just-become-possible-are-we-ready-for-the-consequences/

The only problem is the author seems to think that the government will need to step in and ensure that everyone ought to have access to this technology. He's oblivious that during the late 80s, a plain cellphone was a very expensive luxury item. Now, a smartphone can be given away for free in MobilePCS with a plan of $10 a month.

Technology will evolve and prices will fall.

fatcat

Hi computer_guy524,

The genetic engineering has been around for quite a long time. For the moment ,and probably the next 10 years, it has a niche albeit nice application. The main benefits will come from improved medical and biological research and plants giving somehow better yield. However, in 15 years time, when we start understanding better the cellular machinery we will be on verge of being able to control the byzantine gene pathways and then we will have a wet-ware revolution. But for now we will have yet another glowing kitten and yet another GMO tomato that improves the shelve life by 2%...

fatcat

Hi Kartik
>The key technologies needed are :
>1) Full self-driving capabilities in cars
>2) Rapid-charging, long-lasting batteries
>3) Nanomaterials to lighten car weight (lengthening the miles that a charge can last).
>~2032...

Well, let’s not mix the concepts here. We have several concepts here
1) The current usage model of cars is inefficient and (relatively) expensive: 90% of time stays parked, lots of parking space, surge use on the highways, etc.
2) Share economy, uber-like ride hailing/sharing are already reducing the inefficiencies by better utilizing the existing fleet and available driver’s time.
3)better materials can lead to lighter cars which will be more fuel efficient
4) electric cars have reduced maintenance costs over a comparable ICE due to not having a full-blown automatic transmission, the engine itself and a couple of other subsystems. The electrical cars can also sue regenerative braking which can save energy and reduce the wear on the brakes and brake pads. Additionally charging the car with electricity is cheaper than the gas. A big benefit of a fully electrical car is that it doesn’t affect(much?) the air quality which can be really important in tunnels, closed garages and even urban downtowns.
5) A self driving car can compound on all of the above. And lead to countless other benefits.

However, we don’t have to have electric cars to benefit from all other points. A self driving car made of light and durable materials, which has excellent fuel economy and can be hailed for cheap will be a game changer regardless if it is using ICE or electric.
Correction, a self driving car with inferior mileage and increased maintenance costs would still be a huge disruption, as long as the cost is not prohibitive.

fatcat

I would say that the phase-out of ICEs will be done not because mainly for political/ecological reasons. To have a car that can drive for 20 hours a day we will need either amazing improvements in charging times (we will need a power in order of 1 megawatt to charge a Tesla battery in 5 minutes) or develop a network of swappable batteries, or some kind of liquid battery electrolytes which can be filled more or less like gas. And we don’t even mention the cost of the batteries - just how practical is to charge the car…

Kartik Gada

cg524,

Yes, that is certainly a candidate. Even thought CRISPR-type technologies are many years away from a real economic impact, the benefits of GMO crops to poor countries has been invaluable.

Kartik Gada

fatcat,

While fully self-driving cars and cost-effective EVs are entirely unrelated technologies that each carries a major benefit, I think that in terms of calendar time, both are concurrent and this comprises a 1-2 punch.

Remember that the full benefit of self-driving cars is only when the majority of the cars on the road have the capability and can communicate with each other, and this is surely at least 15 years away, partly due to the replacement process of the existing cars. Most people cannot afford to upgrade from a perfectly functioning regular car that still has 5-8 years of life left in it.

Simultaneously, batteries are improving on many metrics, and may be dramatically better by 2032. This could enable the necessary rapid-charging and/or much longer duration between charges.

When such a mature EV exists, then the economics of driving a car 300,000 miles in 5 years arrive, which itself compels a migration of most car transportation to Uber-type models, which become 70-80% cheaper under self-driving cars. Electric cars are not necessary for this to happen, but assist the migration since the usage from 150,001 to 300,000 miles made available through EVs is otherwise not utilized under current usage models. Usage adapts to make best use of this capacity that would go to waste unless a car is driven 16-20 hours/day. Miles 150,001 to 300,000 would be years 12-24 of a car's life under the current usage model of private ownership/ parked 90% of the time.

Hence, it becomes effective to have 70-80% fewer cars, each driven 300,000 miles in 5 years. This level of usage necessitates 16+ hours/day of driving, which mandates Uber-style ride sharing all day long, which becomes cost effective for the average car-owner through self-driving vehicles. The repurposing of parking-lot land is also a huge ATOM benefit, as this is a lot of dead capital that has been locked for so long that people don't even question it anymore.

So the disruptions are concurrent and complementary, even if a lesser form of it can still happen without EVs.

Geoman

Dead capital - I like that.

In the big picture, the ATOM is about releasing capital for more productive uses. Another way to look at it increasing the velocity of money in our society - ROI doesn't have to be larger, is can just be faster.

Everything around us is a machine that generates and/or consumes capital. The ATOM simply reduces consumption and increases generation.

And what is capital? Simply a notational measurement of work performed. The ATOM literally creates "more" work performed.

Kartik Gada

Geoman,

In the big picture, the ATOM is about releasing capital for more productive uses. Another way to look at it increasing the velocity of money in our society - ROI doesn't have to be larger, is can just be faster.

That is right!

In a place like California, the absurdly lopsided misallocation of parking lot/one-story commercial land vs. residential land through shortsighted zoning is a huge drag on the productivity of the entire state (and thus a significant portion of the entire US economy). Incumbent homeowners are desperate to sustain this in order to restrict new housing supply and prevent their home prices from correcting to natural levels (i.e. 50-70% below present levels in the Bay Area, and 33% below present levels in SoCal). The ATOM will topple this through a number of attacks, self-driving cars under Uber-style sharing being just one of these eventual attacks.

A.M.

" The ATOM will topple this through a number of attacks, self-driving cars under Uber-style sharing being just one of these eventual attacks."

I don't think it's that simple. If you mean that it will take some pressure off the urban areas, sure. But California's laws have motivated even places with lots of land to restrain development. Residents are costly, but commercial space brings in money, so everywhere desirable has too much commercial and not enough housing. Even places like Riverside are facing a "housing crisis" begotten by regulations.

New dockless Chinese-style bikeshare is right where Uber was in 2013. They require no subsidies, while their state competition has required millions. Their per ride prices are ~25-35% of the government sanctioned version. You should definitely take a look at the medium. Seattle recently allowed dockless bikeshare because their own bikeshare failed and shut down. The government bikeshare's week of highest ridership was already bested by each of the new bikeshare vendors.

I'm betting that dockless bikeshare will be the biggest change to American cities for the next 1.5-3 years, after which I see autonomous transit, shared electric bikes and personal rideables becoming prominent as well.

Kartik Gada

A.M.

Regarding California, I have thought about that. It is not even the commercial vs. residential problem, as tons of 1-story strip malls with expansive parking could turn into dense multi-story malls or office towers. A multi-level mall has higher density of sales-tax revenue.

It will be interesting to see if e-commerce displacement of brick and mortar retail tightens the screws on CA cities that survive on sales tax, and have obstructed residential development as a result.

Plus, because of Prop 13, new residential construction at least gets started at the higher property tax level. They should repeal Prop 13, of course, but new construction has an incentive due to the higher property tax inherent to it.

Bikeshare : We shall see. If it is a major disruption in China, that still contributes to the ATOM.

fatcat

Hello A.M.,
Actually this bike-sharing approach, if made profitable can have an impact beyond the cheaper transportation. It could also improve the health of the city dwellers. Still, I am a bit skeptical on how it can work for the hilly areas when everybody wants to ride downhill and no one wants brink the bicycles uphill.
fatcat

Geoman

Fatcat - electrobikes. uphill and downhill no longer matter.

A.M.

Agree with Geoman. With cheaper batteries, scale and decentralized redistribution of bikes, I could see ebikes costing $1-2 per 30 minute ride. Which will tend to be much cheaper and/or faster than any self-driving car.

Hell, San Francisco already has $3 electric scooters, $5 during peak. Not sure why they haven't expanded beyond SF, maybe the model isn't quite profitable enough.

Kartik Gada

A.M.,

Which will tend to be much cheaper and/or faster than any self-driving car.

Come on. This works only for rides under 4 miles, and only when it is not raining or too cold.

What about rides of 40 miles?
What about when it is 20 degrees F with wind chill below zero?

Bikeshare works in dense urban areas in good weather, but that is it. America will never abandon the car, so self-driving cars it is.

Sunny

Couldn't have said it better myself Kartik. Also what about cities like Dallas my hometown or Austin or Houston where it is brutally hot from pretty much May to October.
Besides if we weren't a car crazy country we would have adopted the bullet train concept decades ago. paradoxically the bullet train concept is coming back in vogue in the Dallas to Houston corridor this year. I would argue that we will first slowly and then all at once move the driverless way and that car driving will become a hobby kinda like motorcycle riding is today.

On a side note Kartik, you had a long and well written article about the U.S being the only superpower till 2030. Are you still sticking to that timeline or do you think things have changed. The reason I ask is I read in another blog that we have only 5 years left to change China's trajectory and then we would have reached an inflection point from which we won't recover. Arguably that could happen this year, if your projections of the Market crash and the subsequent after effects come into play. It would be nightmarish to see paxchina instead of paxamericana considering that there is not a country china has not pissed off. Love to read your thoughts on this.

Kartik Gada

Sunny,

Remember what Imran wrote in The Misandry Bubble - that the 2030 Superpower status of the US entirely depends on correcting the spread of misandry in the US. China is not a democracy, so it does not need to buy votes of those who like 'feminism'.

I agree.

fatcat

Hi Kartik,
Do you think you should re-adjust your forecasts about the next recession? What about the other predictions

Kartik Gada

Hi fatcat,

Remember, I said the downturn could *start* in 2017. It is August now, and while the market is near a high, ^vix has been 10 for about 4 months, which is usually the best indicator of a top.

I will do a post to clarify. Note that top-to-bottom took 24 months in 2007-09, and 30 months in 2000-02.

We won't know if I am wrong until well into 2018..

Geoman

Re. electrobikes - I live in Alaska and use one. Only half the year. I love it.

Still, I don't think they are a solution, but I don't think anything is THE solution, just a lot of little things that add up to a solution.

One mistake everyone makes in looking at the future is to analyze one thing by itself. Everything is changing, all at once. They don't realize that while batteries are improving, so are ICE engines (check out the latest news from Mazda for example), and so is everything else. It makes it very hard to predict the precise end state.

Regarding self driving cars...maybe. Or maybe we are being vacuum tubed around by Elon Musk, or maybe we are simply working from home more and more, or not working at all due to robots, or....? Maybe self driving cars cause people to drive even more, clogging the roads further. Cars get bigger, more luxurious. In fact I have a fully functioning office and entertainment center in my car - who cares if it takes me three hours to get to work?

"Difficult to see. Always in motion is the future..” – Yoda

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