AP Photo/Jonny Mattsson

Did they or didn’t they? Everyone wants to know if the rumor is true. Did UBER order 100,000 Mercedes-Benz type-S cars? If they did, UBER could provide a “driverless” taxi  service AND  set a new low price for car and transportation services. Some report that UBER is on the verge of buying the cars while others report that the deal is already consummated. The truth is… it doesn’t really matter!

Whether UBER placed an order or not, the rumors are an indicator that UBER is far enough along in negotiations with Mercedes-Benz (and other manufacturers?) to start leaving an evidence trail that they need to buy cars soon. I said it before and I’m saying it again… the robot revolution is on its way, and UBER is the tip of the spear. The future is as early as tomorrow morning, and tomorrow morning is when YOU WILL GO TO WORK WITH AN UBER DRIVERLESS TAXI. Today, we look at the UBER phenomena and the inevitability of driverless cars.

First, and perhaps most importantly, I told you so. Now that that’s out of the way, here’s what you can expect. The first step, the pilot of driverless cars in a taxi service, will start in New York City. Second, by the end of that year, 15,000 to 20,000 taxi driver jobs will be eliminated in New York City. Third, within 5 years, 1 million driver jobs in the Metro New York area (not just taxis) are eliminated, and a total of 5 million driver and transportation positions are eliminated or targeted for elimination across the US. Fourth, after 5 years of “disruption”, we pick up speed as consumers embrace driverless cars. The auto insurance industry crumbles, healthcare and legal industries lose billions of dollars of revenue from car accidents, garages and gas stations close due to a lack of fender benders, and the car industry has strong growth for a few years before changing direction and losing 90% of its workers. This is what the robot revolution will bring about in transportation.

If you haven’t read my earlier articles, here’s some key background. UBER never made a profit. In 2015, UBER lost $250 million. A primary cost, fuel, has recently had a dramatic decline. This makes driver’s compensation even more prominent. Mix in stories about UBER drivers killing and raping passengers. If UBER goes driverless in just Manhattan, a mere 23 sq. miles of territory, UBER would go from a $250 million loss to at least a billion dollars of profit. Even if they fully loaded the cost of new robot cars into the first year. The numbers are really stunning. This will motivate UBER and its competitors to do anything in their power to get driverless taxies on the road. Here’s another number. If UBER can ride this wave and stay in business, their fleet of 100,000 cars will grow to 10,000,000 in 10 years.

That’s a lot of big numbers and big projections. You must be thinking, “Surely it’s not possible for me to predict how this part of the robot revolution is going to play out over the next decade.” Or is it? Here’s your playbook for the coming revolution!

Ground Zero: Autonomous cars today drive as well or better than human drivers. However, while it is legal for a driver to turn on an autonomous driving  feature, it is not clear if an autonomous car is allowed on the road without a driver. The more counties and states you drive through, the more laws and regulations you may break. However, New York City is UBER’s biggest market, with both the highest revenue and the greatest driver costs.

In just a few years, UBER created a fleet of 15,000 cars in NYC, more than all of the Yellow Taxis (which held a near monopoly since the 1930’s). Manhattan, just 23 square miles of land, is responsible for 90% of UBER’s NYC revenue. UBER could not hope for a better location for a driverless taxi pilot than Manhattan.  UBER’s aggressive “just try to stop me” operating model in NYC is how they out-grew the Yellow Taxi industry, and it is how they will beat the City government once again if the City blocks autonomous cars.

Lost Jobs: It took UBER just a few years to build its fleet of 15,000 taxis in NYC, and they could replace it in just one year. The fact that they haven’t purchased the garages and gas stations they would need for this transition is a sign that they are not yet ready for the rumored order of 100,00 cars.  But the infrastructure need for a pilot could be in place in a few weeks. By offering a Mercedes Benz type-S (or any similar car), New Yorkers would have a choice between riding in an UBER luxury car or a low to mid-end Yellow Taxi. If the UBER ride is cheaper, Yellow Taxis could disappear in just 2-3 years.

Lawsuits, regulations, and government foot-dragging give Yellow Taxi’s another year or two, but that’s it. After all, can City government be against autonomous cars that virtually never have an accident or kill a citizen? Taxis that electronically cooperate could also reduce traffic jams. An autonomous car is really the auto industry’s greatest safety feature, and will save more lives than seat belts, airbags, and anti-lock brakes put together. As driverless taxis take over NYC, commercial trucks, buses, trains, and airplanes will also adopt full autonomy.

The US: Driverless cars will succeed in New York, and they will spread throughout the US. Some states or counties may form pockets of resistance, and former drivers will protest and vandalize robot cars (that’s the pattern for employment disruption). But it won’t change the outcome. Consumers will adopt “autonomy” in the next 3-5 years. They will let their car drive them to work. This will drive changes in car design: removal of the steering wheel, drivers seat, perhaps having all seats face each other, add a work table, WiFI, and maybe a bed for the owner with a long commute to work?

Now, we enter UBER’s next stage, making American’s give up car ownership. Why have a second (or third?) car that spends most of the time in your garage? Instead of giving your teen a car, give them an UBER account. Shouldn’t you get your parents to stop driving at night with their limited vision? Will super-moms welcome some help picking up and dropping off the kids at school and other activities? Dump the extra cars, the cost of gas, the lease, and insurance costs, and get everyone pre-paid UBER accounts! UBER’s fleet rises to 10 million cars or more. Then UBER can turn its full attention to taking over truck transport, bus services, messenger delivery, etc.

Disruption: Just as moving from vinyl to CD’s made us all buy many of the same albums in a new format, as the “office on wheels” becomes the car of the 21^st century, old cars with a driver’s seat will be ditched and new cars purchased. A couple of years later, when the average American family has 1 car or less, the auto industry crashes and half of all transportation (5 million) and auto manufacturing jobs (also about 5 million) go away.

By year 10 this rises to about 18 million lost jobs. All of those driverless cars start to eliminate car accidents and deaths. The auto insurance industry collapses. A million lawsuits a year don’t happen, and 4 million accident victims don’t need medical care. Without a steady stream of fender benders, thousands of garages close. Without many repairs and with highly reliable cars, a third to a half of car dealerships are wiped out. Patrol cars around the US become autonomous, reducing the nation’s fleet of police and patrol vehicles. Round that up to about 20 million lost jobs, in about 10 years.

End Game: If you continue to drive your own car, the cost of insurance soars. If you have an “accident”, it will have only occurred because you made a conscious decision to disable a safety feature of your car (autonomous driving). You have just surrendered your defense against damages, especially if anyone has been injured or killed. If it is even possible to get insurance to drive your own car, the price will be so high that only a handful of Americans will  be able to afford it!

In 10 years we’ll all gather in the living room and say, “That’s how it happened.” You think this isn’t possible, or that something will come along to change it? Look at the history of America. The 1800s was the century of the horse and the wooden ship. The 1900s was the age of steam, with an iron horse (trains) and iron ships. The 20^th century was the age of oil, which gave us the car and airplane.

Today we are in the age of data and computers. Cars, trains, ships and planes will continue on, we will simply add artificial intelligence to drive them. Cars are already highly automated, with airbags, anti-lock brakes, and other safety features. Automatic braking will be a standard feature in a few years. Autonomy just ties together all of the features that are already in your car, and adds a few new features, and turns the whole set into a more effective service.

Driverless cars will be a chaotic disruptor simply because of the speed and thoroughness of the transition. During previous disruptions, new jobs (often better jobs) replaced jobs that were lost. This transition will destroy jobs faster than they can be created. We’re going to lose 10-20 million jobs in the next 10+ years, but replacement jobs may not arrive until after the “disruption” ends… perhaps 15 to 30 years later.

One or more generations of relatively unskilled labor will have very few choices, but higher paid workers and the wealthy retired will see many benefits. Think of changes to society as being pretty much like taking a car ride on an unfamiliar road… but the future will feel like you are driving at twice the speed while wearing a blindfold. A big wave of changes will hit our labor market in just a little while. If you want to stay ahead of that wave, keep reading this blog! At least, that’s my Niccolls worth for today!