Computers and people have different talents.Math that is hard for us is easy for them. Actions that are easy for us, like driving a car, are very, very hard for them. When the group which evolved into Alphabet’s (NASDAQ:GOOGL,NASDAQ:GOOG) Waymo unit first tried to make a car drive itself, in a 2005 “race” in the California desert witnessed by, among others, John Markoff of The New York Times, the result was a fiasco. Five years later, he was shocked to learn that teens were being paid to sit in self-driving cars.
In some ways, creating self-driving cars is still not easy, as Waymo is learning in Arizona, according to The Information. Waymo’s Chrysler Pacifica vans are having trouble gauging when to turn left and learning how to merge and navigate “T” intersections. They also (gasp) follow traffic laws to the letter, as they wait three seconds at stop signs.
As a result, some people are asking whether self-driving cars are still the wave of the future.
Well, they are.
Waymo’s Plans and Promises
Waymo insists it will launch a taxi service this year, but it notes that human “chaperones” will be in the cars so they can take over when needed. But an autonomous car with a human “chaperone” isn’t really a self-driving vehicle.
Still, a mostly self-driving car may be better than your 90-year old Aunt Minnie, who needs to go to the hospital but doesn’t really need an ambulance. An assistant can help her get in and out of a self-driving vehicle, and a light should be placed on top of the vehicle so other drivers let it pass. There would be no need for the highly trained EMTs who would be present in an ambulance. An enormous amount of money would be saved on each trip, enough to generate a handsome profit.
There are other ways the self-driving technology could help without completely taking over. It could be used to help drunks get home and for driver’s education courses. Self-driving technology could also be used to direct buses that have defined routes. The people who used to drive the buses can concentrate on collecting fares and policing disputes. Meanwhile, the technology is already being used by delivery vehicles.
Research firm Evercore ISI thinks that Waymo can generate revenue of $1 billion per year by 2020 while Morgan Stanley estimates that the unit is worth $175 billion. By contrast, Ford Motor (NYSE:F) is worth $40 billion.
Can Silicon Valley and Detroit Work Together on Self-Driving Cars?
But the real deal-breaker for autonomous vehicles may be the need for tech companies and automakers to work together on self-driving cars. How will Silicon Valley and Detroit marry? On what terms?
Morgan Stanley’s estimate of Waymo’s value indicates that self-driving technology is worth more than cars. Waymo is using Chrysler Pacifica minivans for its Arizona tests, and Fiat Chrysler Automobiles (NASDAQ:FCAU) had a market capitalization of about $27 billion as of this afternoon. At Google, which has a market cap of $871 billion, that’s seat cushion money.
But making cars on a large scale is hard, as Tesla’s (NASDAQ:TSLA) Elon Musk has learned. All of the big car companies have their own groups working on autonomous systems. General Motors (NYSE:GM) claims to be ahead. Toyota Motor (NYSE:TM) has invested $500 million in Uber, with whom it’s collaborating on self-driving cars, in large part because the Japanese automaker doesn’t want to lose its own autonomy.
Negotiating the surrender of Detroit, and the Detroits of Germany, Japan, China and India, is not going to be easy. Software engineers can make cars drive themselves, but car companies make cars.
The Bottom Line on Self-Driving Cars
The bottom line on all of this is like the story of the two men running from a bear. One says, “We can’t outrun the bear,” and the other says “I just have to outrun you.”
Self-driving cars don’t have to be perfect. They just have to be better than human drivers. Think about that next time someone on the freeway cuts across three lanes of traffic to take the exit in front of you.
Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he was long Ford stock.
