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Automation and Self Driving Cars - Part I - Where will the drivers go?

CES is currently live and there is a whole load of information coming in about upcoming products. Some of it, either directly or indirectly, has to do with self driving technology. Technology is almost always about making things better, faster and simpler. More popular technologies usually end up replacing something that currently exists, by doing it in less time and less effort. Last year I had a 2 GB RAM phone, and this year, I will have 4 GB. Last year I had a wireless keyboard with a dongle. This year, I own a wireless keyboard that foregoes the wireless dongle, making my life that much better. This is how stuff works and that in turn makes other stuff better, and life evolves.

A similar evolution is taking place (at least in the big cities) in everyday life with app based taxi services such as Uber and Ola. As a everyday user of these services, I know a thing or two about. For one thing, the invisible hand of a larger company ensures that I am guaranteed a minimum standard of experience. Thanks to this, Of the 1000s of times I had to commute in the last 2 years, I may have had to travel by auto or regular taxi only a handful times. Today, the auto and regular taxi stuff still exists but I wont use them, instead opting to go with app based taxi services. As a result, a few years down the line, I imagine that the regular auto and taxis will completely dissapear and all we will have are app based services. This is even more evident when one sees that many existing taxi chains (who worked on a phone based or road hailing based) are either closing shop, trying (and mostly failing) to upgrade to a app based model or staying float only thanks to government based regulations and protectionist measures. One way or other, the app based model will probably win out, simply becuase it is convenient and frankly, more innovation and hence a higher chance of success.

Irrespective of who wins (app based or the old fashioned taxis), one thing is for certain. Commercial driving is poised to grow and it will continue to provide employment to people who have, perhaps, no other option. I use Uber like about 20 to 40 times a week, and I also tend to be pretty chatty. The drivers are by default chatty, and most of them or men in the age group 20 to 40. Many of them have limited education, and have migrated from the allure of city life and better earning opportunities. Commercial driving makes sense to them becuase of its low educational as well as skill requirements. Getting a drivers licence only requires basic education, so almost anybody and everybody has it. Further, obtaining a car is also easily done as the car itself acts as a collateral, making it easy for financing institutions to work with it.

The main appeal of app based services such as Uber (and by extension others such as Ola) is that they dont want people owning their own cars. Uber's propsition varies depending on the country it serves. In India, it tries to position itself as the company that provides 'a driver' for the middle class Indian who likes to be the boss who travels in the back. In Middle East, it positions itself as that company that will safely transport the women becuase women arent allowed to drive. In the developed nations, it talks about stuff like reduced traffic, pollution, parking space, debt (of owning a car) and whatever other things that bother the high income life of the wesetern economies. All in all, right now, Uber wants to have a lot of drivers under its payroll, who will ferry millions (and some day, billions) of passengers from point A to point B. Of course, let us not forget that Uber by itself does not own a single car. At the end of the day, it is a platform like Amazon. Each driver owns his own car, which shifts a substantial risk from the cab company (which is Uber) to the individual driver. Despite this shift of risk, perhaps the biggest expense for Uber are it's large collection of drivers, the same folks who bring in the money.

Folks who own shares in Uber (and Uber is, and continues to be, one of the most valuable companies in the world) are constantly thinking. Thinking about what? Increasing profits of course! They will have a keen eye on this autonomous driving technology. For all we know, many of them probably have direct stakes in these companies that are developing the driving tech. Ealier, rather than later, we will have self driving cars on that road. That would (or already has) give the obvious idea that their biggest cost on the balance sheet is the 'human' i.e the driver. If the driver is eliminated, imagine the cost savings!!!

Come to think of it, stuff like this has already happened. I remember when I was a kid, ATMs were going up everywhere in and around India. Before the advent of ATMs, a standard Indian bank branch was filled 'bank tellers' like crazy. Despite the low penetration of bank accounts in our country, those who did were still a large number. Folks would visit, and stand in serpentine queues in the bank to withdraw cash alone. The large is the bank, the more tellers would be sitting and doling out cash. Private banks had smaller queues and government banks had longer queues. Some would say, 'going to the bank to withdraw' was almost like a social event. You go there, spend half a day, and then return by evening with the cash you wanted. Then, internet finally came to India, and banks realized that they could eliminate most of the tellers and replace them with machines. That's precisely what they did. A scheme called Voluntary Retirement Scheme was introduced (which was a polite way of the banks saying to its long serving employees that they were no longer needed) which was pretty generous by all accounts. A lot of bankers took the offer because they thought it was one simple way to cash out. Further, those were the days when Indian IT industry was booming like crazy. Many who took the VRS had young sons and daughters who had ready jobs waiting for them. Back then, getting a job in software was easy. I myself saw many of my classmates (100s of them) who did not how to write a proper for loop getting plum jobs simply because the IT industry wanted people. It did not matter if they dont know the difference between a constant and a variable. This is an important note because the loss of monthly income for those who took VRS was offset by their sons and daughters who themselves had confirmed employment.

That brings us back to self-driving cars. Once companies like Uber realize that they have an opportunity to cut their 'human' costs just like the banks did, they will do everything they can to make it happen. Just like the banks, Uber will not outright tell its drivers to go home. It will probably 'phase them out' just like the banks did. It will tell them that they are no longer needed in a polite way. Of course, if the polite way is not possible, alternatives will be created. This may happen in 5 years or 10 years. Perhaps much earlier than that. By extension, individuals who wish to own their own car will also take into self driving cars. Eventually, we will have entire populations who suddenly find themselves travelling in a world which is less accident prone that gives the ultimate gift of all. The gift of time!

Continued in the next blog post, 'The gift of Time'.

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