It was easy to predict mass car ownership but hard to predict Walmart.
– Carl Sagan
I’m excited about the future of autonomous vehicles. However, my investment theses are less around the self-driving car itself. The most compelling opportunities will be the second-order, third-order, and fourth-order opportunities enabled by autonomous vehicles and the larger autonomy ecosystem.
It is likely that no full-stack self-driving car companies will emerge. There are too many challenges, and the stack has clear winners in each segment. OEMs like Tesla and Ford will commoditize the automobile itself. Furthermore, Uber, Lyft, and Google (Waze) will own the core data around routing and capacity, which are both central for the autonomy ecosystem to operate at scale.
To capture meaningful data, OEMs would need to make the unlikely transition from product companies to service ones. So, startups in the autonomous vehicle’s market are optimizing around sensors and computer vision. But this is a hyper-competitive space. Just look at the landscape around the LIDAR system.
I’m cautious about competition. I’m also skeptical of the defensibility around Horizontal AI and Deep IP startups. Companies will need proprietary, defensible data network effects to thrive in the autonomy ecosystem.
The replacement of cars with autonomous vehicles will revolutionize the world like the car replacing the horse. By disrupting mobility, cars radically transformed cities by changing consumer behavior (malls), culture (billboards), and work (suburbanization).
The entire global stock of cars today is around 1.1 billion. Autonomous vehicles will not only displace the existing car industry and supply chains. Many new consumer products will be native to the autonomous vehicle. The riding experience itself will need to be redesigned entirely and become more dynamic. Autonomous vehicles will undoubtedly be the next major point of sale; Cargo has experimented with this.
Any system that interacts with cars today will change. Dedicated parking lots will be gone (along with gas stations, convenience stores and more). Parking spaces already account for 42 billion square feet of space. As car ownership continues to decrease, the architectural design of modern homes changes too.
It’s explicit that consumer behavior and demand will completely change. I’m most interested in opportunities that will create new employment from the jobs displaced. These are often the next great platforms and most important businesses.
It’s silly to predict the anomalous tertiary and quaternary opportunities. What’s anomalous is usually hidden. I will be thrilled one day to hear a founder resolve an acute pain point they faced and be able to scale their solution because of autonomy ecosystem. I hope to be an investor and support in that founder’s vision.
As an aside, I often find the tech community to be overly technologically deterministic when discussing autonomous vehicles by focusing on the technological values of autonomy like efficiency instead of the customer-oriented ones like culture.
I’ve been thinking a lot about third places recently. The potential for the autonomous vehicle to help us better interact with new environments is vast. There will be an inevitable temptation to turn the physical world into another simulation. I don’t have the answers. But I have a high standard around empathy and design with all consumer opportunities.
I do not have a prescriptive lens of the future with my investments. I don’t make predictions about new technologies, but instead study the significant innovation preconditions for the future. With the rise of autonomous vehicles, there will be many.