Driverless cars - the immunisation period begins

Ah, the curse of the long holiday. You go away for three weeks and you return, jaded and confused, to find the world has changed around you.

That's how I'm feeling this morning. It's been three weeks since I've been in the office (got married) and now I'm struggling to catch up.

Perhaps I should know better. Among other things, I publish our research on the world of technology. Technology is driven on by exponential growth, the very nature of which means even short periods of time can be filled with rapid development. You can't expect to disappear for three months and expect the world to be as you left it any longer. You may see that as a good thing or a bad thing, but it's true either way.

Case in point: driverless cars have gone commercial!

That's certainly something I wouldn't have predicted happening quite so soon before I left. But last week, Uber announced that before the end of August, its users in Pittsburgh will be able to hail a driverless taxi. It's part of an ongoing $300m partnership between Uber and Volvo. And it's a signal you absolutely have to pay attention to if you're interested in understanding, and profiting from, the technology behind driverless cars.

Out-thought by your car

"When I grow up, I want to be an Uber driver."

Said no one. Ever.

It's no secret that Uber's long-term goal is to replace its one million drivers worldwide with machines. Not content with bringing about one transportation revolution built on the back of smartphone tech – if you want the full story, ask a black cab driver to elaborate – the firm is now seeking to build a fleet of self-driving cars.

(A side note. I've always found it interesting that people are comfortable with the term "driverless" cars. There's still a driver. It's just not a human. A more accurate term would be "self-driving", but for whatever reason, people prefer driverless. Maybe subconsciously we're more comfortable thinking the driver has been eliminated altogether, rather than simple replaced by a machine.)

You can see the attraction. Having a fleet of driverless cars on the move 24/7 (or automatically responding to the needs of a given market) would likely be efficient and – once the high development costs have been dealt with – cheap.

At this point in time it looks as if that's the way most of us will first experience driverless cars. A few taxis across the capital to familiarise yourself with how it all works will likely be a lot cheaper than buying one. (Although perhaps car ownership will collapse when driverless cars arrive.)

Bloomberg had the story last week: "Uber's Pittsburgh fleet, which will be supervised by humans in the driver's seat for the time being, consists of specially modified Volvo XC90 sports utility vehicles outfitted with dozens of sensors that use cameras, lasers, radar, and GPS receivers. Volvo Cars has so far delivered a handful of vehicles out of a total of 100 due by the end of the year. The two companies signed a pact earlier this year to spend $300 million to develop a fully autonomous car that will be ready for the road by 2021."

There's a couple of points worth making here. Number one: this isn't true autonomy. The cars may drive themselves. But they'll still be "supervised" by humans, as aeroplanes are to a large extent. No one knows how proficient at driving those particular humans are, but that, for whatever reason, is besides the point in this debate. The age of the true driverless car, entirely unsupervised, is still in the future. We're in the grey, indistinct zone between one way of doing things and the next. It's harder to define, harder to understand fully, but probably a more interesting place to be living.

I think this halfway zone suits firms like Uber and Volvo, though for very different reasons. For Uber, it's like an immunisation period: driverless cars are on the roads, but they're supervised by humans. That gives people time to adjust. I'm sure the cars will be clearly branded as "driverless" – which is part of the point. Make them visible, get people used to them. Don't thrust the change on people all at once.

For a company like Volvo there are different objectives. A scheme like this allows it to position itself as a more "cutting edge" technology firm, rather than a traditional car manufacturer. That may well be worth something. Given the established car industry has been challenged by tech firms (think Apple, Google, Tesla), positioning yourself with the disruptors rather than the incumbents may well be a strategic decision.

To underline my original point though: things like this just prove how quickly things are moving. Maybe a world where driverless cars are everywhere is ultimately inevitable. But the speed we're moving at is certainly eye-opening.

High-speed change

11 January 2022.

According to Elon Musk, that's the day driverless cars will reach the point they'll be allowed on the road in a complete, regulated sense.

At least, if you read between the lines of what he's said and do a bit of maths, that's the date you get. In a blog post earlier in the summer, Musk said he believes driverless cars need to clock six billion miles of road-time before regulators will consider them safe. Current "fleet learning" is three million miles a day.

Follow that trend to its logical conclusion, from the date he was writing forward and we'll hit the one billion mark by 11 January 2022. That would make sense in the context we've been discussing – if we're in the half way zone where people are getting used to the idea of sharing the road with autonomous vehicles, by 2022 you'd expect people to be more comfortable with the idea.

But there's another way of thinking about things. What if "fleet learning" mileage is an exponential trend? What if – instead of increasing at a flat rate of three million miles a day – it doubles each year? Three million miles a day becomes six million next year, 12 the year after and so on. How quickly do we hit the six billion milestone?

Well, a rough calculation tells you we'd hit the point somewhere towards Christmas 2018. You heard it here first.

All of this really serves to make the same point though. It's clear driverless cars – and the technology behind them, which is essentially a highly specialised form of narrow AI – are on the cusp of changing the world in a very real way.

But the more important point, for me, is that when it comes to exponential growth, you don't have the luxury of spending large amounts of time watching things slowly develop. The pace of change in the world is accelerating. Understand exponential growth trends properly and it's possible to make "exponential" returns (in the illustrative sense) – but only if you're willing to see what's coming and take bold action.

Showing you how and where to invest your money in these technologies is one of the reasons I persuaded tech expert Eoin Treacy to work with us. We've spent the last year working on our tech focused newsletter, Frontier Tech Investor. If you're interested, now is a great time to try it out. We've just published a report on the five biggest exponential wealth events, of which AI/driverless cars is one – get the full story on that here.