Transcript

RSG031: Zack Kanter On Why Self-Driving Cars Are Coming Faster Than You Think (Transcript)

By December 14, 20157 Comments

Contents:

    This is a transcript of Episode 31: Zack Kanter On Why Self-Driving Cars Are Coming Faster Than You Think. You can find show notes, comments and more by clicking here. You can also listen to the podcast in iTunes, Stitcher or wherever you get your podcasts.

    RSG031: Zack Kanter On Why Self-Driving Cars Are Coming Faster Than You Think

    RSG031: Zack Kanter On Why Self-Driving Cars Are Coming Faster Than You Think

    Hey, what’s going on everybody? Thank you again for joining me on another episode of The Rideshare Guy podcast, episode 31, and we’ve got Zack Kanter on why self driving cars are coming faster than you think.

    So I actually just got back from a few days in San Francisco, even got to spend last night sleeping on the floor of San Francisco airport. So that’s always fun. But my voice is a little shot from a ton of meetings.

    Don’t worry. I’m gonna persevere. We’ve got a really great interview today, and I’m really excited for it. So thanks again for joining, and, actually, one of the companies that I met with while I was in San Francisco was Stride Health.

    So, as you guys know, they are a sponsor of the show, and they are focused on connecting independent workers who don’t have healthcare with a plan through all of the healthcare exchanges through the various states. I really love meeting with companies like this, because their success relies, in a lot of ways, on the success of drivers, right?

    Right now they are making a huge push to sign up drivers, since the deadline to getting enrolled is coming up. So if you’re someone who needs healthcare coverage, I definitely recommend you check them out, stridehealth.com/rideshareguy.

    Even if it isn’t on your radar now, it could be in the future. I actually signed up for them last year when I quit my day job to become a full time blogger. So even if you lose jobs, change jobs, whatever it is, there are lots of qualifying events, I believe they call them, that could allow you to sign up for healthcare and take advantage of a company like Stride.

    Zack Kanter is the CEO of an auto parts company called Proforged, and as Zack told me, he’s also a serial entrepreneur, and spends a lot of time thinking about the future and how it effects us. So, naturally, he has done a lot of research into self driving cars, and he wrote an extremely viral article about how Uber’s self driving cars will destroy ten million jobs by 2025. So I thought there was probably no better person to bring on to talk a little self driving cars, talk a little bit of Uber, and I’m not gonna do too much more of an intro right now, because I don’t want to spoil the interview.

    So we’re gonna get right into it, talk to Zack, hear what he has to say. If you guys have any questions, we’re gonna talk about a lot of links, a lot of articles. I’ll leave all that good stuff in the show notes.

    Zack’s definitely passionate about self driving cars, the future, and just entrepreneurship in general. So it was great to talk to him, and without further adieu, let’s get onto the interview.

    Interview with Zack Kanter

    Harry: Hey, Zack, why don’t you tell my audience a little bit about who you are, and what your background is?

    Zack: Sure. So I’m in a brand of auto parts called Proforged. We manufacture steering and suspension parts in Taiwan and China and distribute throughout the U.S., and I more or less grew up in the auto parts industry. My interest in driverless cars, which is, I guess, what we’re here to talk about, mostly stems out of that. It’s just a natural extension of having thought about the industry quite a bit, and planning a career in the auto parts industry thinking about how that might effect things over the next few years.

    Harry: Yeah, definitely.

    I mean, one of the things that kind of stood out to me, too, and your research into self driving cars is that it’s almost… It’s not necessarily the best thing for your business. Is that right?

    Zack: Yeah, it’s interesting. A lot of the time you hear people advocating for things one way or another, and a lot of times it sort of supports the direction that they are headed.

    But if this were to unfold as I think, it would not be very good for my business.

    Harry: Yeah. But luckily I think one thing that good entrepreneurs all have in common is that they are able to not necessarily come up with lots of business ideas, but they are able to adapt and change with the rising tide. So I think that’s one thing. I’m not too worried about you, from what I know.

    Zack: Well, yeah. I think it’s important to think about, because a lot of the time I think we confuse what we want to happen, or what we think should happen, with what actually is going to happen. In many ways, the future, unless you’re going out and creating it, the future doesn’t really care about what you want or what your feelings are like.

    So I try and separate those two things when thinking about the future.

    Harry: Yeah. Although it is tough. I mean, I know you touched on this in your TED Talk, right, that it’s almost human nature to want what’s best for yourself, and not necessarily want to see that happen going into the future, right?

    Zack: Sure. Yeah. Cognitive biases are very difficult to overcome.

    Harry: Yeah. It’s definitely interesting, and kind of like I’ve mentioned to you, that’s probably a whole other topic for a podcast at another time.

    The Future of Self-Driving Cars

    Harry: But today we’re definitely gonna focus on self driving cars. You’ve obviously done a lot of research into this, and just thought about it in general.

    I know when I saw your profile described in your blog, I thought it was just a really cool title that you’ve given yourself. I think it was entrepreneur and futurist.

    Is that right?

    Zack: Yeah, and futurist is one of those words you hear thrown around. I suppose you don’t go out and earn a degree in it, but it’s more an interest level and the things that you read about. So I definitely am both optimistic and enthusiastic, and also hopefully realistic, about the future. If you’re gonna pick a title for yourself, I guess that’s not bad.

    Harry: Yeah. Why don’t you tell us about, I guess, the article that brought you into my scope, my radar, and I’ll share a funny story too about that once you tell us a little bit more about what you wrote.

    Zack: Sure. Yeah. It was earlier this year, in January. I wrote an article about autonomous cars, and I think the thesis was that most people look at autonomous cars, and even a lot of the researchers out there talk about autonomous cars as something that’s gonna be… You frequently hear, 20 years it’s gonna happen. 2035, 2040. Last I checked, there was something like 250 million vehicles in the U.S., so people say it’s gonna take decades and decades for all those vehicles to be replaced by autonomous cars.

    While that’s true, I think that autonomous cars being an essential piece of our lives is much sooner than most people think.

    One thing that I threw out there in the article was that, while it might take millions of cars to replace all of the cars on the road, if you look at a city like New York City, there’s 13,00 taxi cabs, and a study by Columbia University said that we could replace all of those taxicabs with just 8000 autonomous vehicles because they are just more efficient. They don’t take breaks. They don’t have any of the downsides that are associated with a human operated cab.

    The other part of it was that you think about an autonomous car, and they are gonna be pretty expensive, which is something we could talk about more later. But there’s quite a bit of sensory technology and whatnot. They’re gonna be more expensive than a standard car.

    When you look at new technology, you always have to ask, what’s the adoption gonna be like here? What’s it gonna take for the early adopters to go out there and put down $50,000 or $100,000 for a car like this, and then how long, from when it goes from an early adopter to when it goes mainstream?

    But where I think the flaw is there is that the people primarily buying autonomous cars are not gonna be people like you and me. It’s gonna be fleet operators, and I think we’ll talk about this more as well. But I think those fleet companies are gonna be companies like Uber, who have a pretty strong profit motive to put in cars where they don’t have to pay the drivers.

    Harry: Yeah, definitely. That was one of the interesting things I saw in your article, that is… Obviously I think a lot of people are assuming that it’s going to be slower to be adapted because people like you and I, it’s going to be awhile before we go and buy a $100,000 Tesla, or before the mainstream can really adopt these.

    But if fleet owners do go that route of buying these cars and putting up the capital, that could really accelerate things, right?

    Zack: Sure, and it’s much easier to say, “I’m gonna go out and put down $200 bucks to go skydiving,” than it is to say, “I’m gonna go out and buy a plane, and do it myself.”

    I think that that’s the key differentiator there. It’s pretty easy to say, “I’m gonna take a risk here on a five dollar one time ride wit h a robot, than I’m gonna buy a car that’s operated by a computer.”

    Harry: Interesting. Yeah. I mean, that article was published awhile ago. So my funny story is that, I mean, I read a lot of tech articles, right? Anything Uber related. I just have a really big passion for tech and entrepreneurial startups and all that stuff. I mean, I’m subscribed to a couple of things like The Information and Pando, and all of these.

    It’s just funny. I mean, I basically read everything. I spend every morning, maybe 30 minutes to an hour, reading these articles. Obviously this article that you wrote is right up my alley, and for some reason I didn’t read it, or I missed it. About nine months after it was published someone shared it with me. I said, “Wow, this is a really interesting article.”

    Then someone else shared it with me three days later. I said, “All right, what’s going on here?”

    Then a third person shared it with me two days later. So it’s just funny how I completely missed your article, and then three people shared it with me within the same week, nine months after it was published.

    Zack: Yeah. It’s funny how those things work. I mean, when I published it back in January it got a lot of views. It hit, I think, the front page of Reddit, so that brought a pretty good amount of traffic. Then from time to time there’s a little bump in traffic, and then maybe three weeks ago it just started making the rounds again…

    Harry: Oh, really?

    Zack: …And almost as much traffic as the original.

    Harry: Wow.

    Zack: Interesting.

    Harry: Yeah.

    Zack: Who knows how these things happen, or why. But cool that you found it.

    Harry: Definitely. Yeah, no. I’m definitely glad I found it, and I think I watched one of your TED Talks too, and I think that you mentioned that you woke up one morning and you had 100,000 page views. I was thinking to myself, “Man, that’s probably a pretty cool thing to wake up to.” It sounds like maybe Reddit played a little part in that.

    Zack: Yeah. Reddit, Twitter and Facebook really counted for the vast majority of it.

    It’s funny. The reason I wrote it is, I had been talking about this with friends for awhile, and found myself going on one too many dinner table five minutes rants about how I thought things would unfold, and figured it’s about time I put it down into writing so that I can shut up about it.

    Harry: Well, I will say, putting things down into writing does tend to make you an expert sometimes, as opposed to just, if you tell people, right, they might not always believe you. But if you put it down in writing, sometimes it lends you a little more credibility.

    Zack: Sure.

    Harry: But, yeah. I’ll definitely link to the article in the show notes, and your TED Talk, which I thought was really interesting.

    What’s Changed Since The Article Was Published

    Zack: It’s one of those things where you write this, and then you hope that 18 months from now you don’t look silly for your predictions. It’s usually easier to predict the things that a re not gonna happen than the things that are gonna happen.

    One thing is, just to start, I mentioned that Tesla had planned to roll out their autopilot feature, which is a feature where they would be able to self drive 90% of the time.

    That did happen. So it’s good I got one thing right, at least.

    I think the biggest thing that has changed in my thinking is drawing a distinction between cars with a steering wheel and cars without a steering wheel.

    A lot of times we talk about autonomous technology, driverless technology, and of course, like, with the Tesla, if you can self drive 90% of the time, you still need a person in the car 100% of the time.

    Harry: Yeah.

    Zack: A lot of the societal shifts and economic shifts that we’re gonna see are not gonna happen until there is no steering wheel.

    Of course, you look at planes. I think, on average, pilots spend five minutes actually holding the controls today, but you still have a pilot all the time in the plane, and so the cost is still there.

    Harry: Yeah. I mean, Tesla is definitely an interesting example. I mean, probably the most mainstream as far as the self driving.

    I know a lot of new cars, and this is probably something you have more expertise in… A lot of these new cars have these self driving features, I guess you would call them. But obviously the latest release of Tesla is basically a self driving car in certain situations, and I know I’ve seen a few YouTube videos, and I actually drove in a Tesla too.

    So have you actually driven in a Tesla, and what do you think about what they are doing?

    Zack: So I haven’t driven in a Tesla.

    Harry: Oh, man. We’ve got to get you in a Tesla.

    Zack: I know. It’s embarrassing to admit here.

    I have a good friend who works in the exotic car industry, and he used to work for a company that makes multimillion dollar super cars. When he drove a Tesla, he said it was the most impressive car he had ever driven.

    Harry: Wow.

    Zack: Up ’til then… This was maybe four or five years ago. I was a little bit skeptical. But if you had asked me… Here’s another thing that has changed. If you had asked me, when I wrote that blog post, what I thought about Tesla’s strategy, you could break it into two separate strategies.

    One is the Tesla route, which is, let’s get these assistive technologies out, like automatic breaking and their autopilot feature now, which ties a lot of those features together, but still requires a driver, versus the Google roadmap, which is, we’re gonna build a car without a steering wheel, and we’re just gonna do it all at once.

    I would have said that Google is doing it the right way, and Tesla is probably missing the boat. But I’ve changed my mind on that, I think. I think that getting the real world experience for Tesla is probably gonna be pretty big in terms of them being able to collect a lot of data and refine their software and, who knows, maybe even beat Google, in the end, to a car without a steering wheel.

    Harry: I mean, that’s actually interesting, something I’ve never thought of as far as the two different approaches. It almost, kind of what we talked about earlier… It seems like maybe Tesla is taking a little bit more of a consumer approach, and Google is taking more of an industry wide, or that fleet owner approach… If Uber came along and was looking for self driving cars, they would probably more likely go for those non steering cars.

    Even if they have that assistive technology, that doesn’t help them. They still have to pay that driver, right? So they would almost opt for that Google car first, as opposed to the Tesla, right?

    Zack: Yeah, and if you look at Uber, there’s basically no incentive for them to have 90% or 95%, or 99% of the time, self driving. All that does is drive up the price of the vehicle.

    And, unless I’m missing something major, I think the real benefit for Uber is gonna come… Uber or any other fleet type operator, is gonna come when the car is 100% self driving, or what I’ll call a true driverless car.

    And the question as to why, why is Tesla taking that route versus the Google route, I’m not sure. But I would imagine it has something to do with the fact that Tesla, while they are publicly traded and pretty well funded, they don’t have Google’s bankroll, where they can just dump billions of dollars into a project that they hope to pan out in five to ten years. Tesla has to be thinking more, quote, “short term” in terms of returning to the shareholders, or they are just gonna get destroyed in the stock market.

    Harry: Yeah. That’s actually a really interesting point, and there’s some parallels to what’s going on in the startup world right now. But, I mean, you have Tesla, who obviously needs to show these returns.

    Even though Google is a publicly traded company, they are so massive that they can kind of almost siphon money into this project, and there doesn’t really need to be that expected, immediate return, which is similar to what you see right now with a lot of the startups who… They, frankly, a lot of startups that are private can’t go public right now, because they would get almost slaughtered if they went to the open market, I guess you’d say.

    Zack: Yeah. I wish I could remember the exact details, but I was at a conference earlier this year, and the architects who are designing Google’s new headquarters were on a panel. Somebody ask the question in terms of, what does working with Larry and Sergey, the two founders of Google… How has that changed your perspective?

    He told the story about, they had this plan for these moving walkways. They wanted to facilitate people moving around the campus. It’s a pretty big campus.

    Somebody said it couldn’t be done, or it would be prohibitively expensive. I think it was Larry, said, “Okay. Well, is it something that $50 million can solve?”

    They said, “Yeah.”

    Then, “Okay, we’ll do it.”

    It’s that sort of mentality that makes things like driverless cars possible, I think, where Google, money, to some extent, is no object.

    Dilemmas Associated with Driverless Cars

    Harry: Kind of heading back to the actual self driving cars itself, one thing that I think is really interesting are the safety issues. I mean, what do you think is the main argument to your… Do you think it’s safety, do you think it’s something else, as far as the main argument to self driving cars being adopted within the next 10 or 15 years?

    Zack: Hmm.

    Well, the thing you hear pretty often is, people talk about automobile deaths. There’s 30,000 automobile deaths in the U.S. every year, and there’s many more globally.

    And for the listeners of this show who are professionals, semi professional drivers, that issue might not be as relevant, at least in an initial thinking, because they are much better drivers than the average person out there. But the average person out there is not a very good driver.

    So it’s not insurmountable or inconceivable for a robot to be a better driver than the average person. But I don’t think that that’s the primary driver.

    Safety, I think, is not that great of a motivator for many people, just because of the fundamental human nature, that you don’t think that bad things are gonna happen to you. If you did, it would be hard to ever leave the house.

    So you don’t really consider those things. I think it’s primarily an economic incentive, and you think about how many industries are primarily dependent on… The primary cost driver is salaries, or however you end up paying these people on a 1099 basis.

    So I think that cost savings is the biggest thing, and I think one of the secondary benefits we’ll have is safety and productivity, with people having extra time to do things when they are not driving a vehicle.

    But, yeah. I do think it’s economic.

    Harry: Interesting. Yeah. I guess I led you in that direction, because I think safety is a really interesting aspect of what you said, right? I mean, people get into the back of taxis or whatever and don’t want to put their seat belts on. I mean, if you’re an Uber driver out there, you know how many Uber passengers don’t want to put their seat belts on, even though it’s such a simple thing to do, and I’m sure the statistics show that it helps a lot in the crash. I don’t think you need to be an expert to know that.

    But I think the safety aspect is really interesting, and what I’m curious to see how it plays out is, especially in the near future with all of these assistive technologies… Because I actually come from an engineering background. So I was an aerospace engineer, and one of the big examples of this in engineering, in aerospace, is… I think it was Air France 447, where it was an air bus, and what they kind of say is that basically the air bus started bringing on a lot of these autopilot technologies very early on in this plane that ended up crashing. They think that it was because the actual pilots had very little time behind the controls, right?

    Autopilot basically did all of the work, so when that bad situation did happen and when they did start to stall, they didn’t even realize that, hey, just tip the plane down to come out of a stall, which is pilot school 101.

    Do you think there’s issues like that, where almost the lack of driving and lack of experience could end up effecting a lot of the intermediate safety issues?

    Zack: Well, in your plane example, I don’t know all that much about aviation. But my guess is that, from the time you realize that something is wrong in a plane, to the time that something very bad actually happens, is probably quite a bit longer than it is in a vehicle.

    Harry: Yeah.

    Zack: I think the decisions in a vehicle are gonna be split decision, split instant decisions where you’re gonna have to make a decision right away. There’s also far fewer possible things that you could do in a car. So in a plane you can go up, you can go down, left, right, more throttle, less throttle, whatever. Deploy the flaps. All these things.

    In a car, you could turn the steering wheel left or right, brake or accelerate. In the vast majority of collisions, it has to do with how you apply the brakes.

    Harry: Interesting.

    Zack: So I think that it is far easier to design a very good crash avoidance system in a vehicle than it is to design one in a plane, and I think that, also, interestingly, in a plane, when things go wrong you want the pilot to take over, because it’s very complicated. In a car, what we’re already seeing is… Braking technology, instability control, is already out of the control of the driver unless you disable it.

    So I don’t know if you’ve ever experienced this, but if you’ve ever been in a car where the stability control has kicked in where you would have otherwise spun out, and the car is applying, you know, the different corners of the brakes, or traction control and things like that selectively… The short way of saying this is, we basically want the computers to take over in a disaster scenario.

    Harry: Interesting. Yeah.

    Before we move on from the safety issue, I don’t know if you’ve read this article that I shared with you that was a little of a provocative title, but, like, Self Driving Cars Must Be Programmed To Kill, and it kind of describes the situation where there’s an unavoidable accident, and the computer algorithm, right, the self driving car algorithm, has to decide whether it’s gonna kill you, yourself. Maybe you have to turn left to avoid a group of schoolchildren and you’ll run into a brick wall and most likely die, or you kill those schoolchildren.

    That just opened up my mind. That’s what really made me think about, hey, the safety issue, and all of these issues that are gonna start to arise.

    I mean, are you gonna pick a Tesla that’s more likely to kill yourself, or are you going to pick up a Toyota self driving car that’s more likely to kill kids, right, or something like that?

    Zack: Yeah. I read the article. I had seen it before.

    I don’t know how much we want to get into this, but there’s a whole…

    Harry: We’ll just touch on it.

    Zack: …Philosophical topic here, and it stems from different questions where people say, “Okay. If I’m standing at a junction and a train is coming, and I have the ability to switch the path of the train, and the train is going to hit one person if I don’t do anything… I’m sorry, hit three people if I don’t do anything, and if I pull the lever, it’s going to veer off to a different track where it’s only going to kill one person.

    So do I pull the lever, thereby actively deciding to kill one person, or do I leave the lever and passively decide to let three people die.

    These are incredibly complex, philosophical decisions where there is no right answer. Do we need to figure these things out in order for self driving cars to be adopted?

    Harry: Widely adopted, yeah.

    Zack: I don’t think so. We’re already seeing… It’s already headed in a direction. Do you think a Tesla, or, for that matter, even a Toyota with a specialized braking technology today of computer controlled breaking technology, or stability controlled, do you think they are making those decisions? They are not. They are making the decision to preserve the life of the occupants in the car, and I think that’s the only way that people are going to accept… Cars to act in your own self interest. Otherwise, nobody is gonna want to get behind the wheel of a car.

    Of course, you could say, “If I weren’t in the car, would I prefer that it protect the driver or the ten people on the street?”

    Then it’s pretty easy to say, “Well, I would rather it protect the ten people.”

    But if you’re the driver, then what do you think? Are you gonna be so noble and self sacrificing? I’m not sure.

    Harry: Yeah. It’s definitely an interesting question, and that’s why I was excited to have you on. But, at the same time, I figured we would unearth a lot of these topics that could almost be conversations in itself.

    So hopefully we’ll get a chance to meet in person at some point. WE can just talk about this stuff. It’s really interesting and fascinating to me, and I know it seems like you have spent a lot of time thinking about it. So it’s cool.

    How Self-Driving Cars Will Impact the Future

    Harry: So I want to shift a little towards Uber and self driving cars as our last topic, because obviously, in the title of your article, I think you said Uber specifically, right, is going to be the biggest proponent of the self driving cars. So, I mean, is it a given, though, that they are gonna be at the forefront of this self driving car revolution over the next ten years? Or is there somewhere else we’re not even thinking about?

    Zack: It’s entirely possible that it’s someone… Either who exists today that we’re not thinking about, or someone who doesn’t exist today. I think people often say, “Okay, well, Apple is developing a self driving car. What do you think about them?”

    I think where Apple excels is in design and usability, and aesthetics. I think that, when you’re talking about people getting into a car that’s gonna get them from point A to point B, it’s a commodity product. I don’t think those things are important.

    The reason why I think Uber is going to be the person at the forefront, at least from the perspective of where they are today, is that they control the end user, which is the most important thing. That’s the most, in my opinion, difficult thing to get, the hardest beach head to land on.

    Once people are hooked on Uber, which, I think they are the clear winner in ride sharing today.

    Harry: Definitely.

    Zack: To switch out a car with the driver to a car without a driver is a much easier switch to make than to go and try and do it all from scratch.

    So I do think, while there are people… Uber might not be the person who is going to develop the best self driving car, or be the lowest cost manufacturer. Who knows who that might be? That could be Google. That could be even phone headset manufacturers, or someone like Foxconn, who makes iPhones for Apple, could be the person to make it.

    But I do think Uber is, at least from today’s vantage point, the most likely to be the person to roll it out wide scale.

    Harry: Yeah.

    I mean, I think it’s an interesting question. The reason why people are choosing Uber now has a lot to do with the driver, frankly. Right? I mean, when you look at the taxi experience of old, I don’t know if I would say the car was worse than the driver, but, I mean, I tend to think that the experience in general was just poor altogether.

    I mean, going forward, it seems like that product, though, that Uber would have with a self driving car, might be easily replicable. It’s just they have such a head start, and such an advantage, which I think gives them the best chance of winning.

    Zack: Yeah.

    It’s an interesting question. Why is Uber successful versus taxis?

    You pointed to the passenger experience being better. I do think that that’s part of it, but I think the biggest reason is reduced friction, which is, it is much easier… Forget in New York City, where… In New York City I think it’s more of a, what you’re talking about with passenger experience.

    But I just went to L.A. for a week and took Uber everywhere where the taxicab was not really an alternative before. I would have had to rent a car before, and I think that that’s the biggest difference, is just being able to fire up an app and press and button, and get a ride on demand is the biggest factor behind the adoption of companies like Uber.

    Harry: Yeah. That’s why I think it’s interesting with self driving cars, because in ten years, right, if every car is self driving and you can just open up an app, why does it have to be the Uber app? It could be, really, any app, right?

    The technology, the algorithm that they are using, in ten years everyone is gonna have it, and everyone is gonna have their own version of it. I feel like it will likely be pretty refined, or maybe not. So that’s what I’m wondering too.

    Zack: Yeah. This is maybe more of an economics question that I’m not best suited to answer, but I’ll give my best shot at it, which is… I think you’re right. We’re talking about a commodity product which, at the end of the day, there isn’t a whole lot that is very… You could open up the Uber app and you could hire some development firm in India to copy the UI exactly.

    Of, course the secret sauce is what happens. There’s two things. One, what happens behind the scenes in terms of the math behind it, the routing, the utilization of the assets and everything. The other is their ability to recruit, train, whatever else it might be, drivers.

    So if you take the driver component out of it and say their core expertise, whether it’s Uber or somebody else, has to be in procuring vehicles, whether they are building them themselves or buying them from someone else, operating them, which means everything from deciding where they are gonna be and what the useful life of the vehicle is, and how are they gonna maintain the vehicle?

    I think, for the most part, math, data, machine learning and figuring out the best way to utilize your assets, which I think people often overlook that in terms of Uber’s strength. They say, “Whatever, it’s just a ride sharing app.”

    But I don’t think that’s the case at all. I think there’s a tremendous amount of very difficult math that’s happening behind the scenes, and I think that Uber, at least at current, is in the best position for that. They are collecting the data already, in a similar way to how Tesla is collecting the data and refining their self driving capabilities.

    Uber is figuring out how to utilize assets best.

    Harry: Yeah. That’s definitely a good point.

    Zack: So over time the question is, with any sort of commodity, is gonna be, who is going to be able to operate at the most cost effective level?

    I think, based on what I’ve seen, probably Uber is gonna be able to do that.

    But, of course, you could see some other player come in like Hertz. So Hertz, what is their expertise? Is it renting cars? Maybe.

    But it’s more so probably maintaining vehicles and optimizing maintenance of a fleet. So they could be an operator. Who knows?

    Harry: Well, and that’s why I think it’s so interesting, and I think you’re probably pretty well suited to talk about this next thing, running your business, because this is a pretty big business model change for Uber though, like you said. Their expertise right now is not in maintaining a four billion dollar fleet of Teslas.

    I think in your article you mentioned that if they bought… I’m not sure what the number was, but X number of Teslas at this price, or electric self driving vehicles, it would be four billion dollars.

    For me, when I saw that, it stood out to me. Like, wait, four billion dollars? That’s a lot of money, even for a company of Uber’s size, that is raising billions. But, at the same time, I think they have only raised eight or nine billion up until this point. Only.

    But, I mean, they have never held inventory. They have never held assets, like a traditional company, like yours that you work with.

    I’m not saying that they can’t do it. But I am saying that it would be a huge business model shift. Right now, one of the things that has made them so successful on the business side is that they don’t have any inventory, and that the drivers provide all of the cars. Right?

    Zack: Yes. It’s interesting, and I think what you’re talking about is… I mentioned there’s $170,000 some odd taxis in the U.S., and at a cost of $25,000 per car, you’re talking about four in change billion dollar rollout. Yes, it’s a lot of money.

    But the math is easy. You say, “Look, at present we’re giving…”

    And you’ll be able to tell me this number.

    “…60% of our revenue to drivers, 70% of our revenue to drivers…”

    Harry: Around there. Yeah.

    Zack: “…And we can pay this back in 18 months.”

    They will have infinite access to capital.

    Harry: Gotcha. Yeah.

    Zack: But you’re right. There’s also companies like GE.

    Harry: Yeah. I’m not too concerned with them being able to get capital. I think it’s just more the business shift in general, as far as changing to being a fleet owner, really.

    Zack: Yeah.

    Obviously Travis Kalanick is a way smarter dude than I am. But if I were CEO of Uber, I would probably create a separate company, or at least a decision, that is tasked with just fleet operations.

    So that’s in terms of procuring, maintaining, storing and allocating the fleet in the best way possible so you can keep Uber, the app company, as a certain layer, and then you can abstract another layer that doesn’t confuse the core model and acts as a services arm.

    But that is, in some ways, just semantics. It’s gonna be by the same company. It doesn’t much matter.

    I guess I, as an optimist, can tend to hand wave over some of these things that are probably more complicated than they seem. But in terms of buying, procuring, maintaining and operating vehicles, it sounds like a video game. It’s not that…

    Harry: Impossible.

    Zack: …Difficult to figure out. There are only so many inputs, and cars are getting much less complicated.

    Part of the reason why things are so exciting right now for companies like Tesla is that the cost of entering, the barriers to entering used to be so high… There were thousands and thousands of parts in a car. With an internal combustion engine, there’s the motor and the catalytic converter, and the transmission, and the drive car, the transfer case, all these things.

    With electric motors, they are basically at the drive wheels. So you don’t have any of those things. But it’s a much simpler vehicle to build, much simpler vehicle to maintain. I think it’s gonna get easier over time.

    Harry: Yeah. That’s definitely a great point.

    I didn’t even realize. I’m not really a car guy, but after checking out some Tesla and talking to some owners, that was when I realized, there are so many less moving parts, and all that you mentioned with electric cars is pretty interesting.

    I think as far as Uber… So right now there’s 400,000 drivers in the U.S. . 1.1 million drivers worldwide. What do you see happening, I guess, in the next ten years as Uber… They are in a really interesting phase right now where they are recruiting 10, 20, 30,000 drivers a month, replacing a ton of drivers. They are basically really in need of drivers in this intermediary, until they get the self driving cars. Yet, at the same time, all of these drivers also know that Uber is working really hard, and is ready to drop five billion dollars in self driving cars.

    The Future for Rideshare Drivers

    Zack: It’s an interesting problem. I don’t think that Uber is gonna have a problem recruiting drivers because of the potential self driving cars because, to be honest, there’s many, many other industries right now that are doing the same thing. Fast food workers in ten years are gonna be, I think, largely replaced by some sort of robot as well.

    So I think that, if that’s your question, are they gonna have trouble recruiting drivers, I think the answer is probably no. I think that the more urgent the need becomes to recruit drivers, and the harder problem they have doing it, and the more they have to compete with people like Lift, or any other industry to do it, drives up their economic incentive to find a better alternative.

    Of course, the nice thing about a driverless car is that it doesn’t take breaks, it doesn’t decide it wants another job, it doesn’t retire, it doesn’t do anything, other than exactly what you say it should. So it’s the perfect employee in that way. Doesn’t sue you. Any of these things.

    So there’s a lot of benefits to it.

    Harry: That’s sounds like a pretty good employee, actually.

    Zack: The thing is, though, there’s a real question. Uber is creating an entire new class of worker, an entire new segment, and it’s taking people… I’d be curious to ask you, for the full time Uber drivers, what are most of them doing before they become an Uber driver?

    Harry: Yeah. I think most Uber drivers, they didn’t grow up thinking that, “Hey, when I’m older I’m gonna be an Uber driver.” They are doing this because they lost a job, or they can’t find work elsewhere, or they might be older and companies won’t hire them.

    So there’s a lot of different reasons, with the full time drivers, that you see why they are doing it. But it’s generally more out of necessity than wanting to go out there and really kill it as an Uber driver.

    Zack: Yeah. I want to stress that, something that I mentioned in the beginning was I try to think about things, not in terms of what I want to happen, or what I think should happen, but what I think will happen instead.

    I think this is inevitable, the direction that it’s going. You can argue whether it’s a good thing or it’s a bad thing, and if I’m an Uber driver I’m gonna say it’s a bad thing. But it’s still going to happen anyways.

    But it still is a real problem in terms of what are these people gonna do next, and I can’t say specifically. You can’t see over the horizon. That’s the fundamental thing about the future, is you could say there are opportunities coming, but I don’t know what they are.

    Think about it this way. People are spending, on average, $9000 a year to own and operate a car, and when they go out and they, even without autonomous cars, even just with ride sharing, as it gets bigger and there’s more and more penetration, and more people are able to forego owning a car, it frees up a tremendous amount of income.

    The most promising thing about the future of our economy is we’re not savers. We don’t save. So if you go from spending nine grand a year on a car to $4500 a year on Uber or Lift, or any one of these services, you’re not putting that into your 401k. Most people are going out and spending that.

    When they go out and spend it, more jobs created. Like you said, people don’t grow up thinking, “I want to be an Uber driver when I grow up.” But that’s because those jobs didn’t even exist when you and I were growing up.

    So who knows where those will be?

    But I do think that the future looks pretty bright, because we’re continuing to spend money, and wherever we save, it will just create more jobs.

    Harry: Yeah.

    I mean, I think that’s really the main point. It creates opportunities. We don’t know what those opportunities are, but if you’re ready to take advantage of them and looking for them, I think that there’s definitely some real opportunities. Like you said, right, if people are spending $9000 a month, and drop that down, and now they have $4500 a month to spend, that’s a whole bunch of business opportunities, or new jobs, or whatever it is.

    Zack: Sure. Yeah. Absolutely.

    The Future Including Self-Driving Cars

    Harry: So my last question here as we wrap up… I just want to ask you, what do you envision in ten years? What’s it gonna look like?

    Not necessarily the world, but what is the future of these self driving cars? I mean, when you go and walk outside as it relates to Uber, or just in general, what are we gonna see in ten years? What do you think? Describe the day for me, if I want out of my house in ten years.

    Zack: Yeah.

    I think back to this comic strip I saw. It was 10, 15 years out. It was a father talking to his son. The son says to the father, “So when you were a kid, you guys drove the cars yourselves?”

    The father says, “Yeah.”

    He says, “Well, didn’t millions of people die from that?”

    He goes, “Oh, yeah. But we did it anyways.”

    You look at what the world is gonna be like, it’s hard to even imagine all of the changes that are going to happen. But just as a start, I heard that over 50% of Los Angeles is dedicated to parking. I’ve never been able to verify that, but looking around, you can see.

    Harry: You can see it.

    Zack: In streets… I live in Colorado, and even locally here, you have the equivalent of a four lane street, and only two lands are used for driving because two lanes are used for parking.

    So I think the first thing… You walk out your door, and I think the real estate is gonna look much different. We’re not gonna have parking garages. We’re not gonna have on street parking, and we’re gonna have a much smoother and a much quieter flow of traffic.

    You think about today, there’s horns, in many cities, which are meant to…

    Harry: New York City, anyone?

    Zack: …Alert other drivers, which robots don’t need.

    They are all gonna be electric, for the most part, many of the new cars that are coming out. So you’re not gonna hear that buzz of traffic

    It’s funny. I was in a parking garage the other day and I heard this gas powered car come flying around the corner. I managed to get out of the way, but I said, “If that was a Tesla, I would have been dead.”

    Harry: Yeah.

    Zack: Then I will refer to something one of the Uber folks said at one point, which is that their mission statement is to have transportation as reliable as running water everywhere for everyone.

    So I think that you will be able to have 30 second wait times, which is faster than you can even get to your own car in a city, car out… And I think that that’s gonna be fairly utopian compared to what we’re experiencing today.

    I think it’s gonna be really pretty cool.

    Harry: Yeah. I mean, everything that you’re describing sounds pretty cool.

    I think that’s the best way to put it. It sounds pretty cool.

    Zack: Yeah. I mean, I think for me, I am starting to look around in some ways and say, “I really feel like I’m living in the future.”

    When you see virtual reality, or when you’re reading about some of the medical devices and things… I have a friend whose son is paraplegic, and has been trying out an exoskeleton, a carbon fiber and steel exoskeleton that’s going through FDA approval. But in ten years, I mean, I think it’s really gonna feel like we’re living in the future, because we’re gonna be driving around in cars with no drivers.

    That’s something that you saw in Total Recall.

    Harry: Jetsons, yeah.

    Zack: Yeah, Jetsons or Total Recall when you were growing up. So I think it’s gonna be pretty cool.

    Harry: I think my favorite movie was probably I, Robot, when Will Smith gets into a self driving car and he’s, like, “Man, I’m gonna drive this thing myself,” or something like that, and the car, is, like, “You are driving yourself.”

    But, anyways. All right. That was probably a really bad reference. I think I botched that.

    So if people want to reach you, what’s the best way they can read about a little more of your stuff? I know you have a cool TED Talk. I can definitely link to all of it in the show notes.

    Zack: Yeah. Probably the place I’m most active is on Twitter.

    Harry: Okay. Cool.

    Zack: It’s just @zackkanter, Z-A-C-K-, K-A-N-T-E-R. My blog is zackkanter.com, but I don’t post all that often, maybe a couple of times a year. But, yeah. Twitter is usually the best way.

    Harry: But when you do post, they are pretty killer, right?

    Zack: Oh, I hope. Yeah. I pretty much do one post a year, and it seems to give all year.

    Harry: Awesome.

    Zack: So I hope it’s hitting on that trend.

    Harry: Cool. Well, Zack, I really appreciate you coming on. It was a really fascinating conversation. So wish you the best of luck, and I will see you in a self driving car soon.

    Zack: Yeah. I hope so.

    Harry: All right. Take care.

    Zack: Yeah.

    Recap

    Harry: So there you have it, another great interview in the books.

    Thanks again to Zack for coming on, and it was really fascinating for me to learn a bit about the technology behind these cars, obviously from someone who knows what he’s talking about. But also the potential impacts in the future, and just to hear what the possibilities are going forward.

    So, for me, I think the key takeaway is that technology is really always changing. It’s always evolving, and especially in today’s day and age, you have to embrace things like self driving cars.

    Frankly, whether they are here in 10 years or 15 years, that’s beyond our control. There’s people who are working on this problem, because it’s gonna be a huge revenue source, because companies are gonna be relying on it in the future, and just because you don’t want something to happen doesn’t mean that it won’t happen.

    If that’s the way life works, there probably wouldn’t be a whole lot of change, and there probably wouldn’t be a whole lot of really cool technological advances.

    So, basically, instead of fearing change, I think it really makes a lot of sense to embrace the opportunity and see what new business opportunities, or just what new opportunities in life, come out of these self driving cars.

    I mean, one thing that Zack said that really stuck out to me was, just imagine all the people who are current spending money on cars, right? Tens of thousands of dollars, thousands of dollars, and once self driving cars come around, what are they gonna spend that money on, right? We kind of touched on it, but let’s face it. Americans are not savers. They are spenders.

    So if you position yourself correctly, there’s gonna be plenty of new markets and plenty of opportunity for you to sit there and capitalize on all this newfound free cash. So I think for me, that was a big takeaway, and I really enjoyed having Zack on. Like I said, he is someone that’s knowledgeable, and if you guys have any questions, I will definitely leave a link to contact him in the show notes.

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    This is a transcript of Episode 31: Zack Kanter On Why Self-Driving Cars Are Coming Faster Than You Think. You can find show notes, comments and more by clicking here. You can also listen to the podcast in iTunes, Stitcher or wherever you get your podcasts.

    Harry Campbell

    Harry Campbell

    I'm Harry, the owner and founder of The Rideshare Guy Blog and Podcast. I used to be a full-time engineer but now I'm a rideshare blogger! I write about my experience driving for Uber, Lyft, and other services and my goal is to help drivers earn more money by working smarter, not harder.