Does it make sense for OEMs to be investing in AVs and urban mobility products?

TLDR: AVs and robot taxi services are not a near-term (3-7 year) threat to existing OEM business lines, but they are a longer-term (7+ year) threat to OEMs; and this is why they are investing so heavily in AV technology.

Investments being made by large car manufacturer (OEMs) in self-driving autonomous vehicles (AVs) and urban mobility solutions are receiving a lot of attention these days, and for good reason. AVs promise significant societal benefits and economic opportunity, but I want to contemplate and deconstruct why OEMs are making these investments.  What is the business rationalle.

The going sentiment or explanation seems to be A) that AVs and these urban mobility solutions threaten the OEMs existing business and/or B) that the OEMs’ ability to design, manufacture, and distribute vehicles makes them a natural necessity in the future value chain of AVs. While I agree with the latter explanation, I think there is room to elaborate  on the former.


Vehicle sales will not decline significantly over near-term (3-7 years) because of robot taxi services.

First, the majority of cars and trucks are sold to consumers and businesses located outside dense urban city centers. Second, as I’ve explained in a previous post, robot taxi fleets will be economically constrained–over the near-term–to being deployed within dense urban city centers. As a result, over the near-term, if anywhere, robot taxi services will reduce car ownership rates within dense urban centers, but car ownership rates in urban centers are already low, therefore little impact will be made on the number of vehicles sold by OEMs. Simply put, car ownership is already low in the areas/populations wherein AV-based robot taxi services will be launched over the next 3-7 years. It won’t be until robot taxi services slowly make their way out to lower density suburban areas that car ownership there starts to be impacted.

I would suggest that vehicle sales by volume are declining not because of ride-hailing services, but rather vehicle build quality is improving. Cars are being built better and are lasting longer, and hence need to be replaced less frequently. Again, for most people living in the suburban US, ride-hailing is not a substitute for car ownership. And for most people living in urban environment, car-sharing (eg. GetAround) and short-term rental (eg. ZipCar) services are more likely to be a substitute* for car ownership than ride-hailing service is. Sure, hailing a ride is better than renting a car for two hours in most situations (that’s why ZipCar’s business is declining significantly), so ride-hailing services might be substitute for some urban market segments but I would argue that most car owners in urban areas own their car because they have consistent weekly inter-city transportation needs. Most people decide to buy/lease a vehicle because they have consistent transportation needs that cannot be solved with a better alternative. Getting to/from work or shuttling the kids to/from five days a week, for example.

The same holds true for suburban car owners. If you live outside dense urban areas and decide to buy/lease a vehicle, it is because you have consistent transportation needs that cannot be solved with a better alternative. Getting to/from work or shuttling the kids to/from five days a week, for example. For most people, car ownership is a better alternative for these consistent trips than Uber and Lyft.

As a result, I would argue that car ownership has not been impacted significantly by ride-hailing services–in neither urban nor suburban population.

Ride-hailing platforms have become a complementary transportation solution; not a substitute. They have become a substitute only for traditional taxi services. For urban dwellers, it complements mass-transit utilization. For suburban dwellers, it complements car ownership, as a solution for infrequent trip needs such as getting to/from the airport or nights on the town to avoid drinking and driving.

Although I don’t think robot taxi fares will come down to the level of mass-transit fares, the already low car ownership rates in urban populations means that I see robot taxi trips being used by consumers as a substitute for an occasional mass-transit trip; not permanent car ownership.

It’s a long-term play for OEMs.

Robot taxi services are not a near-term threat to OEMs, but I do think they are a long-term threat (7+ years). For the reasons stated above and in this post, robot taxi ride fares over the near-term will remain prohibitively high for suburban populations, where car ownership is highest. Eventually, in the longer-term (7+ years), the technology and economic constraints will change such that serving more sparsely populated areas can be done profitably, and robot taxi platforms will start serving these areas.

This is why I think hundred-year-old OEMs are investing in urban mobility and AV tech. OEMs don’t and shouldn’t care about being relevant over the next decade; they’re aiming to be relevant over the next 100 years.


*According to Jeffrey Rifkin, “Some 800,000 individuals in the U.S. are now using car-sharing services. Each car-share vehicle eliminates 15 personally owned cars.”   

Why I am short Walmart

As someone who feels strongly about a good retail experience and that retailers can offer a lot of value to consumers, I realized that I really can’t stand Walmart.  I find the business uninteresting and lacking in providing a value-add retail experience for consumers.

From an industry perspective, I worry and hate the idea that Walmart is putting other, perhaps smaller, retailers who add value by educating consumers and curating product inventory, out of business.  In my mind, the retailer serves a wonderful primary function of being a trusted solution provider.  This involves curating product inventory, educating the consumer on how to use products to derive desired solutions, and lastly, providing customer service when the product maybe doesn’t solve the problem.    Does Walmart do this?  Overall, I would argue, no.   Walmart’s business model and strategy is instead focused on everyday low prices and being a one-stop shop for almost everything.  Eye glasses, auto-repair, groceries, televisions, etc.   How can a retailer specialize in all these different product categories?  Answer: They can’t.  And service suffers as a result.  Essentially Walmart is the brick-and-mortar version of, but probably adds more value because they can at least recommend things you might be interested in buying.

customer service is terrible   Don’t blame Walmart employees for this either.  It isn’t their fault.  The Walmart business model doesn’t focus on the potential value that its employees could add to the consumer’s shopping experience.  Walmart doesn’t care that non of its employees are not experts in any product category, and they don’t care about employee turnover, as a result.   How can we expect this employees to be excited and informed about the products being sold in the store?

penny wise, dollar stupid    When people go to Walmart, they go there expecting to save money.  Instead, they end up buying more than they had originally planned and spending more money than they would have likely spent had they gone to a specialty retailer for the specific item that they needed originally.

no curation value-add    Walmart’s idea of curating its product inventory is looking at suppliers who can supply the large enough volume at low-enough prices.  Where does fit of product features and consumer preferences of different market segments get factored into store buying/merchandising decisions?    Am I finding anything unique in the Walmart store located in my hometown versus another Walmart store location?  Am I finding anything unique at all in the Walmart?  I would argue no.  The shopping experience is void of any taste and style…it is a colorless experience, from my point of view.   I prefer spending my money with retailers who are passionate about their products and business, and who help tell me what I should want.   Walmart presumes its customers already know what it wants, and it just provides it a low price.  Boring.

boring business model    Congratulations Walmart, you’ve become an expert at supply chain and economies of scale.   This business model existed and was well utilized in the 1900s.  How exciting it must be to be all about size and volume, and that’s it.


the pivot: another entreprenuership lesson that’s relevant for business strategists and managers

The articulate and insightful Eric Ries, coined the term “pivot”.   In the entreprenuership community, we hear this term a lot.  The definition and examples he provides in a SXSW interview  are just very well explained and insightful.    He says “A pivot is a change in strategy without a change in vision.”

I highly recommend the other videos in the PIVOT Series as well.

Large American Corporations Recruiting MBA Students of Entrepreneurship

I just read a BusinessWeek article (see quote from article below) that mentioned Microsoft’s increased level of interest in recruiting MBA students of entrepreneurship, and I think it this is smart.    Ever since my introduction to corporate entrepreneurship at RPI, I started thinking that corporations could really benefit from hiring true entrepreneurial personalities to evaluate company/brand/product/marketing strategy and to look for new opportunities.   The fact that Microsoft is one of the first large corporations to publicly state their interest in us entrepreneurs proves the company believes in being an industry leader.

Overall, I think this initiative to recruit entrepreneurial minded and skilled employees reflects a smart realization that innovation and creative evaluation of new market opportunities are the skills that are needed in the most developed economies of the world.  No longer is information enough; it is what we do with the information that we are so fortunate to have.


Microsoft (MSFT), too,  tailors its recruitment pitch to entrepreneurial MBAs. Half the candidates the company targets for openings say they hadn’t previously considered applying to the software giant, say company recruiters. Microsoft’s corporate development area, which was responsible for the company’s $8.5 billion acquisition of Skype in May, often competes with startups and venture capital firms for talent.

“Even if they are only here for three-to-five years, that is actually a huge amount of work and return we are getting out of them,” says Stacey Stovall, Microsoft’s university staffing manager.”

One day, we will look forward to commercial breaks!

As data collection methods grow, advertisers will be able to better predict what information/ads would be relevant to each of us individual consumers.   And as more relevant ads are served to the consumer/individual, higher click-through rates will result, and advertisers will be able to afford an advertising model that has fewer numbers of ads shown to the user.  For example, today, say–on-average–click-through rates on ads are 10%, then this means that an advertiser–on average–has to show the consumer 10 ads before one click-through is generated; but in the future, say click-through rates on ads improve to 50%, now only two ads need to be shown to the consumer before a click-through is generated.  So this would lead us to believe consumers will have to sit through fewer ads; but in all likelihood, advertisers will not be satisfied with the same number of click-throughs per pair of eyes.

That is, say today, 10 commercials are shown to a pair eyes for a given 30-minute television episode, and one click-through is generated per pair of eyes.    Then, I am saying, that advertisers, in the future, when click-through rates improve to 50%, each pair of consumer eyes will likely be shown more than two ads per 30-minute episode.   Advertisers, content creators, and distribution channels will do this because they will know they can.  They will know that we consumers are happy to sit through 4 ads because 4 ads is still a 60% reduction in ads; not to mention these ads are more relevant to the individual.  So what will happen is total number of click-throughs generated per pair of eyes per 30-minute episode will increase from 1 to 2; and advertisers, content creators, and distribution channels will all be making more money off the same 30-minute long piece of content.

In this future state of the world of media and ad consumption, both advertisers and consumers are happier.

Data is what’s needed.

As I understand the state of the art, the artificial intelligence algorithums needed to make the accurate predictions not only already exist, but are considered quite basic now.   What is missing is the data needed by these algorithms to make predictions!

One day, an individual consumer watching TV any day of the week will be like watching the Super Bowl, when we look forward to the commercials; but it will actually be better.   Right now, many people hate ads; but ads actually serve a very useful function of informing us about things we should know about.   The problem with the current advertising system today is that ads annoy us more often then they inform us.   In the future, ads will do a better job of informing us, and will hence be less annoying.


Zediva is an almost comical, no, just comical, business model that was created to serve consumer demand for streaming DVD content without the “window” delay put in place by movie studios who fear such a window delay is necessary to prevent cannibalization of DVD sales.   As I learned from the below NY Times video, Zediva is actually streaming playback from a huge room full of DVD players.  Hilarious… but also sad and pathetic that this is the reality.    Question is, “What should/could be done about this?”

Watch this video to see what I mean.

Mid American Novelties

The Mid American Novelties website is a new favorite.  I’m sure what I like more about it.  …is it that the sight is a social commentary on the American culture, putting ridiculous American consumerism in perspective with the far poorer developing world?  …is it that you can buy hilarious stuff like the bacon wallet through it?  …or is it that the site is an incredible business innovation?

NBC, the producer of “Outsourced”, the new television show about a call center for “Mid American Novelties”.   What’s amazing about this is that Mid American Novelties was invented the for the show, and then NBC realized that they might be able to actually sell the hilarious products the show’s writers feature in the script, allowing for a profitable e-commerce business that also–as an added benefit–promotes the brand of the “Outsourced” television show.   I think this is genius business/marketing strategy.

If only General Electric would now sell or spin off the NBC division as its own stock, I’d buy a bunch of it.  The company was one of the first networks to make full episodes of its programming viewable online for free.  The company simply is a thought leader.  NBC managers seem to know where the industry is headed, and are intelligently not trying to stand in the way; but rather going with the flow of consumers.  NBC seems to understand the people who consume their products, and create much value for them.  In return, I think/hope NBC makes a lot of money off us on the advertising and, now, rubber chickens, “beer makes my clothes come off” t-shirt, the free rider fork, etc.  I only hope NBC continues to be smart and expands the online product offering to include all the hilarious and novel items featured on the television show (e.g. full-body taco costumes).

Why “TV” is on the way out

You know how commercials are played at louder volumes than the programming segments between which they are played.   I can’t help but think this is done on purpose as a means for trying to make the commercials more affective advertisements.  This is just one of the six major reasons I think internet-deployment of programming content will the business model of the future.   Frankly, why most all the players in the TV commercial industry are not sprinting towards an internet-deployment model, is beyond me.

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Bad credit application methodology

Whenever I recognize where a part of world is such that we can’t access something when we most need that something, and–worse–that we have best access to that thing when we least need it, I am confused. This kind of situation seems wrong.

So this brings me to a small example of such a paradox: the credit credit card application process. I don’t understand why the consumer credit application process is not more sophisticated in the sense that credit card companies can issue credit cards soley to refinance (a.k.a transfer) a balance from another card, allowing the individual who most needs a lower interest rate to gain access to that lower rate. this I what I wanted to do with one of the banks that i do business with a couple of days ago. Unfortunately, for me and the bank that could have not only gained my business but taken it away a competitor, the customer service representative who was taking my application was unable to specify anywhere in my application that the application was not be submitted to increase my total credit, but rather that it was being used merely to replace an existing credit account. Thus, although the risk profile would have actually improved upon securing a less expensive (i.e. lower interest and financing fees) credit account, the bank denied my application, because it could only assume that I was applying for the credit card because my other two cards were maxed out.

To a degree, I understand why lenders have to charge higher interest rates to those borrowers with more risky profiles; but one could argue that this model actually causes that which it wishes to avoid: unpaid/uncollectible loans. Why? because the borrower ran out of cash before he was able to fix his situation either with more income or lower expenses. Had he a lower rate, he might have been able to make a couple more monthly payments; and these two months might have given him the time he needed to make adjustments to his life and expenses.

I worked in the high-yield lending business for 3.5 years, and I saw predatory lending at it’s worse, so I know that more often than not, the reason lenders charge higher interest and fees to certain borrowers is because they can; not because it is neccessarilly right. For example, I have seen lenders create a lending product that frequently took advantage of borrowers ignorance and literally was lending the borrowers money back to the borrower.

A bank needs to create a credit product that gives it the opportunity to refinance other credit card balances while keeping the risk profile of the borrower in check by requiring the borrower close the card account from which the balance was transferred, and maybe even prohibit that the borrower not open any new lines of credit until the borrowers financial situation markedly improves. I think this could be a win-win opportunity for both th lender, borrower, and society.