October 24, 2014

Why Driverless Cars Are Still Not

Peter Kennedy
Partner

There’s an interesting piece in the current Economist magazine about “the remarkable strides” that have been achieved in autonomous vehicle technology, thanks to serious investment by the likes of Google and Audi in recent years.  And yet…the reality of driverless cars seems a long way off.  So why is this? The Economist pretty much dismisses legal, regulatory and technological explanations and raises an interesting alternative theory related to – no surprise – markets.  Stick with this; there are some important scenario-planning lessons here.

What The Economist is saying is that owing to technological progress and resulting productivity gains in other areas of the economy, middle class jobs have declined, ushering in a period of fierce competition for low-wage work.  This has caused wage stagnation and disincentives for firms to adopt labor-saving technology.  In the personal transportation case, why automate, when there are thousands of available drivers of hired cars (think Uber) competing for customers?  Add to this the reality that sensor technology required for driverless vehicle is still expensive. It’s not clear that today or anytime soon the consumer market will be robust enough to cover these costs.  There’s the wage stagnation factor, along with the reality that increasing numbers of young urbanites in rich countries do not share their parent’s attachment to the automobile.

So, we have technology and its hollowing-out effect on middle-class jobs frustrating the roll-out of game-changing developments in driverless vehicle technology. This is another great example of unintended consequences that we encounter so often in scenario analysis. And it is why we believe it is essential to understand the characteristics of the wider enabling environment of any technology investment, business plan or executive decision. The future will continue to confound and frustrate those who haven't learned this lesson.

Thoughts?