"Why Uber Has To Start Using Self-Driving Cars"

We've suggested that the end-game is not only to get rid of the drivers but to mandate the use of autonomous vehicles, whether owned by individuals (probably not, less profitable), or by fleet operators who really, really like the recurring revenue model. There is a misconception that companies like Uber are Libertarian when what they actually are is bro-culture authoritarian.

What with the talk of a drivers strike for higher wages this weekend (it fizzled) this is a timely piece from Nautil.us:

In the span of nearly 5 years, Uber has gone from a limited launch in San Francisco to offering rides in more than 300 cities worldwide. In China alone, despite existing in a legal gray zone, the company claims it arranges 1 million rides per day. That means 35 Chinese people hop into an Uber there every time you blink.But are there limits to how much Uber can scale? There might be: Us.

“The natural end point has to rely on autonomous driving technology”—not humans, says Emilio Frazzoli, director of the Transportation@MIT Initiative. He thinks robots could be taking the wheel in the next 15 years, certainly within the next 30. The reasons, he says, are economical and cultural.

First, as much as 50 percent of an Uber ride’s cost goes toward paying the human behind the wheel, Frazzoli says, and that’s money that could be going into Uber’s pocket. Replacing human operators has already begun in Singapore, a city that relies heavily on public transit. It’s not widely advertised, Frazzoli says, but the subway trains there “are completely automated. They are just horizontal elevators.”

Felix Oberholzer-Gee, a professor at Harvard Business School, agrees. Uber, he says, is a perfect example of a business that benefits from network effects, where the value of its service increases with more use. But, unlike other companies that benefit from strong network effects, such as Facebook, Uber has to deal with bringing two different types of users—and networks—together: drivers and riders. The network effects of getting rid of human drivers, he says, “will make the platform even stronger.”

Plus, for reasons from supply to quality control, Oberholzer-Gee says getting drivers will likely always be more of a headache than finding more riders. With autonomous vehicles, he says, “You could have a guaranteed supply of one of the sides, and particularly of the side that is harder to manage.” Uber might already be learning how cheap they can pay their drivers during a transition to vehicle autonomy. “They want to test the bottom line,” a Chinese Uber driver told MIT Technology Review, “just to see how much lower they can go before you quit.”

Second, Uber’s urban saturation is making a lot of people rethink the idea of owning a car, Frazzoli says, “versus just taking an Uber.” That’s no accident: As Uber’s general manager in Vietman recently told Reuters, “Our goal is to replace private car ownership.” Carnegie Mellon computer scientist David Andersen is on board. “What an unfortunate waste of resources,” he wrote in his blog, referring to the cost of using his car, which he recently sold. “Taking public transit, uber, or cabs…wouldn’t have been free, but it would have been better for my wallet.”

Uber is a perfect example of a business that benefits from network effects, where the value of its service increases with more use.

Stowe Boyd, lead researcher at GigaOM Research, which specializes in emerging technology, thinks more and more people will follow Andersen’s lead once self-driving cars arrive. They will “radically decrease car ownership,” he told Pew Research Center. “Perhaps 70% of cars in urban areas would go away.” Uber CEO Travis Kalanick has already acknowledged this potential future. “This is the way of the world,” he once said, “and the world isn’t always great.” Apparently to bring it about, Uber hired away 50 researchers from Carnegie Mellon’s National Robotics Engineering Center, a third of the department’s staff, for a developmental project on self-driving cars. (A month later, in February, the company and school announced a “strategic partnership” that makes the hiring seem a little less like brain poaching.)

If the custom of car-ownership dramatically dissolves, then Uber’s mass of potential drivers will, too. Driver scarcity will serve as another forcing function on Uber’s business model, further compelling it to evolve toward autonomous cars.

Oberholzer-Gee, however, doesn’t think it would be in Uber’s best interest to manufacture its own fleet of self-driving cars. That would change its strategy from, he says, “a very asset-light business model that Wall Street and the investors love, to sitting on billions and billions of dollars of invested assets.” That is a particularly difficult proposition given the dramatic fluctuations that happen to ride demand and availability. A large fleet of vehicles is needed at peak times, but a fleet that sits idle during off hours is just an added expense. “Regular drivers and autonomous vehicles have similar properties that I think make the Uber model difficult to scale,” says Oberholzer-Gee....MORE

Some of our Uber posts:
UPDATED--Here's the Real Problem With Uber: You Can't Trust Them
"It’s Already Over And Uber Has Won"
Uber Executive Suggests Digging Up Dirt On Journalists
"Uber Is Stealing Scientists, But Only So It Can Lay Off Drivers" 
Night of the Long Knives: "Google Vs. Uber in the Rush To Drive You Around, Driverless" (GOOG)
The End Of Mass Car Ownership Is Coming Mr. Ford
Data Scientists Have Isolated the Exact Times a Yellow Taxi is a Better Deal Than an Uber 
I've Got Your Disruptive App: How To Get Around Uber's Surge Pricing
"On the Uber Rollercoaster: Narrative Tweaks, Twists and Turns!"
As Three More New Economy Companies Are Sued For Employee Misclassification, Uber Thinks It Has the Golden Ticket
Corrected--Starting July 15 Uber Will Track Your Location Whether You're Using the App Or Not
Uber Bids for Nokia Maps Service to Lessen Google Reliance
Prof.Damodaran's Handy Uber Valuation Template (or, How to Price a Narrative)
How Big Can Uber get?
"Uber can't be stopped. So what happens next?"
Peak "Like Uber For...": "Why there won’t be an Uber in every vertical"
For the record we completely agree with FT Alphaville's David Keohane that the "Like Uber for..." formulation should be banned and go further than he in postulating that it's usage is a sign of a weak mind and probably indicates underlying pathologies in the user's character in addition to retarded social development.
And poor fashion sense.
UBER+PIKETTY=2014: "The secret to the Uber economy is wealth inequality"
“Lyft seems like a respectable company, and Uber seems like a bunch of thugs.”
"Uber has an asshole problem"
After Car Attacked By Paris Taxi Drivers, Uber to Toughen Image With Umlauts

And many more, use the search blog box if interested.