Wednesday, May 24, 2017

The Coming Seneca Cliff of the Automotive Industry: the Converging Effect of Disruptive Technologies and Social Factors

This graph shows the projected demise of individual car ownership in the US, according to "RethinkX". That will lead to the demise of the automotive industry as we know it since a much smaller number of cars will be needed. If this is not a Seneca collapse, what is? 


Decades of work in research and development taught me this:

Innovation does not solve problems, it creates them. 

Which I could call "the Golden Rule of Technological Innovation." There are so many cases of this law at work that it is hard for me to decide where I should start from. Just think of nuclear energy; do you understand what I mean? So, I am always amazed at the naive faith of some people who think that more technology will solve the problems created by technology. It just doesn't work like that.

That doesn't mean that technological research is useless; not at all. R&D can normally generate small but useful improvements to existing processes, which is what it is meant to do. But when you deal with breakthroughs, well, it is another kettle of dynamite sticks; so to say. Most claimed breakthroughs turn out to be scams (cold fusion is a good example) but not all of them. And that leads to the second rule of technological innovation:

Successful innovations are always highly disruptive

You probably know the story of the Polish cavalry charging against the German tanks during WWII. It never happened, but the phrase "fighting tanks with horses" is a good metaphor for what technological breakthroughs can do. Some innovations impose themselves, literally, by marching over the dead bodies of their opponents. Even without such extremes, when an innovation becomes a marker of social success, it can diffuse extremely fast. Do you remember the role of status symbol that cell phones played in the 1990s?

Cars are an especially good example of how social factors can affect and amplify the effects of innovation. I discussed in a previous post on Cassandra's Legacy how cars became the prime marker of social status in the West with the 1950s, becoming the bloated and inefficient objects we know today. They had a remarkable effect on society, creating the gigantic suburbs of today's cities where life without a personal car is nearly impossible.

But the great wheel of technological innovation keeps turning and it is soon going to make individual cars as obsolete as it would be wearing coats made of home-tanned bear skins. It is, again, the combination of technological innovation and socioeconomic factors creating a disruptive effect. For one thing, private car ownership is rapidly becoming too expensive for the poor. At the same time, the combination of global positioning systems (GPS), smartphones, and autonomous driving technologies makes it possible a kind of "transportation on demand" or "transportation as a service" (TAAS) that was unthinkable just a decade ago. Electric cars are especially suitable (although not critically necessary) for this kind of transportation. In this scheme, all you need to do to get a transportation service is to push a button on your smartphone and the vehicle you requested will silently glide in front of you to take you wherever you want. (*)

The combination of these factors is likely to generate an unstoppable and disruptive social phenomenon. Owning a car will be increasing seen as passé, whereas using the latest TAAS gadgetry will be seen as cool. People will scramble to get rid of their obsolete, clumsy, and unfashionable cars and TAAS will also play the role of social filter: with the ongoing trends of increasing social inequality, the poor will be able to use it only occasionally or not at all. The rich, instead, will use it to show that they can and that they have access to credit. Some TAAS services will be exclusive, just as some hotels and resorts are. Some rich people may still own cars as a hobby, but that wouldn't change the trend.

Of course, all that is a vision of the future and the future is always difficult to predict. But something that we can say about the future is that when changes occur, they occur fast. In this case, the end result of the development of individual TAAS will be the rapid collapse of the automotive industry as we know it: a much smaller number of vehicles will be needed and they won't need to be of the kind that the present aotumotive industry can produce. This phenomenon has been correctly described by "RethinkX," even though still within a paradigm of growth. In practice, the transition is likely to be even more rapid and brutal than what the RethinkX team propose. For the automotive industry, there applies the metaphor of "fighting tanks with horses."

The demise of the automotive industry is an example of what I called the "Seneca Effect." When some technology or way of life becomes obsolete and unsustainable, it tends to collapse very fast. Look at the data for the world production of motor vehicles, below (image from Wikipedia). We are getting close to producing a hundred million of them per year. If the trend continues, during the next ten years we'll have produced a further billion of them. Can you really imagine that it would be possible? There is a Seneca Cliff waiting for the automotive industry.







(*) If the trend of increasing inequality continues, autonomously driven cars are not necessary. Human drivers would be inexpensive enough for the minority of rich people who can afford to hire them.

19 comments:

  1. Philippe GauthierMay 24, 2017 at 10:53 AM

    Still rather skeptical. Will automotive companies really want to accept a sharp decline in sales, replacing the individual car by collectively used ones? Also, comparison with cell phones don't really stand, as cell phones were new products. that didn't displace anything. Land lines didn't disappear. Moreover, cars last for 10-15 years, meaning that even if the shift does appear, it will take time. A large stock of cheap used cars will be created, allowing the «have nots» who can't afford autonomous cars to cling to individual cars.

    Another thing to keep in mind is that autonomous cars will require many new city infrastructures to release their full potential, while contributing very little, at least initially, to city income. As infrastructures are already crumbling, money will bein short supply to make the necessary changes.

    For all these reasons, I suspect that the autonomous car revolution, while likely, will not be as fast or as complete as techno-enthousiasts suggest.

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  2. I live in a rural area based around a small town in the Sierra Foothills of California. The nearest big city is 50 miles away, and the small town itself is 6 miles away (and there are thousands of people much further away than me).

    I and my neighbors couldn't function without a car or truck. When cars go away around here, everyone will have to go back to horse-drawn carts. There is no mass transit worth discussing, and I can't see it ever happening.

    I get that cars (maybe even industrial civilization) are unsustainable in the long run, but my neighbors will never voluntarily move to the big city where "TaaS" might happen....

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  3. I agree that innovation ultimately creates problems but you are wrong to imply that innovation doesn't start out attempting to solve a problem. Even your example of nuclear energy is an attempt to solve a huge and obvious problem.

    I am sorry but driverless cars solve nothing for anyone but a very small demographic and it comes at a cost of major losses on dozens of industries all across the economy. I am sure they will keep poking around because they are somehow exciting for some people to think about but to receive the kind of broad appeal that you are proposing...na gunna happem!

    Now if people had more free time and didnt have to constantly fear lack of money, healthcare, education, affordable housing, healthy food, well then I do predict that there could be a huge increase in biking, walking, skating, rowing, etc.

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    1. Jef, that's exactly my point. Driverless cars won't solve problems, but they will happen anyway

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    2. Autonomous driving is a important piece to make TaaS to work. Car renting was always a alternative but reting is too costly because associated risks of bad human behavior.
      Ownership makes that repairing costs are private, so it lower the costs for good drivers and encorage good driving. Shared costs promotes less carefull and soft driving that reduce mechanical fatigue in the car.

      With autonomous driving all these costs goes under the control of the rental company, so it would go lower.

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  4. I fail to see how TAAS is truly disruptive if automotive passenger miles go up by 50% in the next 13 years. Even if people don't own the cars they ride in, the number of cars produced will still need to match the increased mileage. And where are all those corporate Cars2Go going to park? Not in my garage.

    A truly disruptive technology would be one that could get more people to stop riding in cars. It was supposed to be telecommuting, but that hasn't done much either.

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  5. EV industry needs RethinkX type of papers to promote its ideas. Industry always needs growth, therefore the prediction of increase in passenger miles in the paper. It's the only way to persuade public to use more EVs which requires increased production in that industry. The paper suits the needs of industry, not the needs of public. TaaS concept is at best short term alternative and at worst just another persuasion tool for the public that suits the needs of industry. If industry knows that there is less and less oil in the world they need to offer some kind of alternative that would still create profit.

    But in order to function properly TaaS concept would require relocation of huge number of citizens to big cities. Many people would have to abandon and disregard their village property. That would make more megalopolises and we all know that megalopolis is by definition too complex and therefore, at the end, the return is no more diminishing but negative.

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    1. I’m also less than convinced by these projections. There are too many variables to simply pose the availability of a new technology 4–5 years from now, graph its adoption curve out of thin air, and then rely on that as evidence. Further, a TaaS fleet doesn’t yet exist, and EV vehicles are in no way solutions to the problems of fossil fuels. They merely move combustion from the engine/tailpipe to the generating plant, thus, out of sight and out of mind.

      Three other factors dispel this unwarranted thesis: (1) people (Americans especially) identify strongly with their vehicles as both extensions of themselves and as embodiments of freedom, (2) the very act of driving (when not bogged down in traffic) induces an enjoyable flow state not so readily discarded except perhaps by hyperrational types, and (3) the inversion of population demographics between town and country over the last two centuries has not entirely emptied out the hinterlands. The sizeable population still living outside cities and suburbs would likely not be well served by TaaS projects just as with mass transit.

      That said, I will grant the two main suppositions, namely that innovation does not solve problems and is always disruptive. The second is far easier to demonstrate than the first, especially as advances in medicine in particular demonstrate the value of innovation.

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  6. I see that there are several comments that disagree with my take of this story. This is normal; predictions are always difficult. However, I still think that we have here an explosive combination of social and technological factors which are going to lead to a rapid and disruptive change. About the criticism, let me try to summarize:

    1. The technology is not ready or won't work. I think it is a weak criticism. The technology is already there and it works; further innovation will further improve, but it is not strictly necessary. Neither electric cars nor self-driving cars are critically needed. The only crucially needed things are GPS and on-line credit. And that we have.

    2. People won't want this technology, they will prefer to drive their own cars. This is, admittedly, a qualitative judgement. My take is that when driving a car will be perceived as something for old people, farmers and provincials, being seen while driving your own car will mark you as a hillbilly or something like that. People will rush to get rid of their old cars as if they were infected with rabies.

    3. There won't be enough time for the transition: collapse will come first. This is perfectly possible. It is a close race.

    4. TaaS is too expensive for farmers. Perfectly correct. The idea of TaaS is for suburban and urban areas. Farmers will still drive their own personal vehicles - if they will still exist (both or either farmers and vehicles)

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    1. @Ugo

      You write: " The only crucially needed things are GPS and on-line credit."

      Leaving aside the major issues you bring up, the immediate problem is that Uber is a private monopoly.

      As you probably know, I always try to reduce my horizon to what I know well, and it is a very small place: our city of Florence, Italy.

      Imagine if the town government had the power to forbid Uber, but do the same thing: coordinate semi-private transport on line, with a tax on every trip.

      The town government would have a grasp of the overall situation of traffic, flows, pollution...

      It could strategically push things in the best direction, say cutting or increasing taxes at a certain hour or to certain destinations by taking a smaller percentage of drivers' income.

      It could set ecological rules for accepting Taas suppliers.

      And the income would be enough to cover a great deal of the infrastructural costs of the city.

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  7. Ugo, I understand the argument about technology (innovation) not solving problems but creating them. I also understand that in cities and metropolises the idea of TAAS is well underway via Uber (viability is another issue). The first post raises the critical issue of rural areas where TAAS is simply impossible. One problem is the solution won't work over long distances. In my country (Australia) development and expansion was hindered always by what was called the 'Tyranny of Distance', simply small population spread over a huge island continent. Both the motor car and aeroplane were enthusiastically adopted and incorported for speed and convieniance. The interesting problem that emerged was the death of small towns, why well every town in Australia essentially was founded before the arrival of the motor car, in the era of rail and the horse, that meant villages and towns arose approximately 25kms apart or the distance you could travel on a horse in a day. Farming power was provided essentially by horses well into the 1950's. Electricity had a similar uptake and approximately over the same time period, towns first country last. I live on a farm, it is 5 km from the nearest village and 30kms from the nearest town which means reversion to horses is possible, where they would come from is another story. The uptake of the first wave of technology was severely disruptive and also demanded a lot of capital but farming was profitable so it was possible, this wave will not be because there is no viable electric or other vehicle that can cover the distances in this country insufficient range and endurance. Modern farming is capital and chemical intensive and highly dependent upon petrochemicals including fuel and there is no innovation that can replace these inputs other than traditional fertilisers and methods, which demand 10 times the labour input alone. I suppose that yes there will be disruptive technologies for cities but they will rupture completely the linkages and functioning of rural communities and farming for who cities and metropolises are completely dependent for food and other products. As usual nobody is thinking about the consequences as the grab for continuation of personal transport gets underway. It will be interesting.

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  8. Carz going off the Seneca Cliff in Alaska

    https://www.youtube.com/watch?v=KbMYzMUu06Q

    I'm adding it to your article on the Diner to better illustrate the issues. lol.

    RE

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  9. i think these 'car less drivers' could be the solution to our global warming and running out of oil predicament. what an innovative idea! what will the plutocrats think of next.

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  10. Slightly off topic but interesting from the point of view of stability of the US deniers fortress - might denialism fall off a seneca cliff soon?
    https://theintercept.com/2017/04/28/how-a-professional-climate-change-denier-discovered-the-lies-and-decided-to-fight-for-science/

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    1. No, sorry. There is a majority of climate deniers that are totally resistant to logic. Its a hard concept to swallow for any scientist, but there are really a lot of humans that are incapable forming their opinions due to logical thought processeses.

      As Bob Altemeyer studies about right wing authoritarians show:

      "In both studies high RWAs went down in flames more than others did. They particularly had trouble figuring out that an inference or deduction was wrong. To illustrate, suppose they had gotten the following syllogism:

      All fish live in the sea.
      Sharks live in the sea..
      Therefore, sharks are fish.

      The conclusion does not follow, but high RWAs would be more likely to say the reasoning is correct than most people would. If you ask them why it seems right, they would likely tell you, “Because sharks are fish.” In other words, they thought the reasoning was sound because they agreed with the last statement. If the conclusion is right, they figure, then the reasoning must have been right. Or to put it another way, they don’t “get it” that the reasoning matters--especially on a reasoning test.



      This is not only “Illogical, Captain,” as Mr. Spock would say, it’s quite dangerous, because it shows that if authoritarian followers like the conclusion, the logic involved is pretty irrelevant. The reasoning should justify the conclusion, but for a lot of high RWAs, the conclusion validates the reasoning. Such is the basis of many a prejudice, and many a Big Lie that comes to be accepted. Now one can easily overstate this finding. A lot of people have trouble with syllogistic reasoning, and high RWAs are only slightly more likely to make such mistakes than low RWAs are. But in general high RWAs seem to have more trouble than most people do realizing that a conclusion is false

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  11. I don't own a car, live in a medium-sized city and use car-sharing. Never have I felt being part of the wave of the future and it continues to amaze me how enthusiastic and fatalistic people are about TaaS and self-driving cars.

    In what fundamental way is it different from the existing taxi-services? It makes you not having to drive a car and getting from A to B. Is it that much more convenient to reserve a car by smartphone than it was over the phone? If it is to be disruptive, it is going to have to be very cheap. And why would it be? Sure, they can "save" on the wages of the drivers, but car-sharing isn't that cheap either and it makes you very aware every time you use it, which I consider a plus.

    Sure, it will be a booming marked, but disruptive? As much as the electrical bikes I imagine: an important niche.

    I think your social inequality argument holds as well for traditional car-owning and TaaS.


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  12. Isn't TaaS just another term for taxis, except for being driverless? Don't see how it's going to revolutionize transportation. Perhaps in already densely settled cities.

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  13. They had a remarkable effect on society, creating the gigantic suburbs of today's cities where life without a personal car is nearly impossible.http://www.autolinereviews.com/

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  14. https://seekingalpha.com/article/4078988-rethinkx-report-taas-illusion-wrapped-mirage-inside-fantasy

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Who

Ugo Bardi is a member of the Club of Rome and the author of "Extracted: how the quest for mineral resources is plundering the Planet" (Chelsea Green 2014). His most recent book is "The Seneca Effect" to be published by Springer in mid 2017