Rouse on Transformation

Many pundits argue that driverless cars will soon be here.  You can argue with the timelines they articulate, but it is difficult to disagree with the distinct possibility of the technology eventually maturing and becoming an increasing portion of the vehicles on the road.  This technology will be truly disruptive.

There will be the benefits of a more efficient transportation system, dramatically fewer accidents, and commute times spent being productive or at least being more relaxing.  There will, however, be costs associated with the technology and infrastructure needed to support it.  There will still be some accidents, although the technology, unlike human drivers, will be continually improved as lessons are learned.

Many of the disruptions will be byproducts of these innovations.  As accidents disappear, the most profitable segment of the insurance industry will wither.  As car and truck services replace individual ownership, vehicles will be used 24 x 7 and the number of vehicles will steadily decrease.  Used cars will disappear, eliminating roughly three quarters of the car loan business.  The after market for vehicle add-ons will disappear.

Truck drivers will become rare, as will drivers of taxis, limos, and other car services.  The autonomous car service industry will have their own service operations, replacing corner filling stations and car washes.  The need for parking places will plummet, proving real estate for other purposes but also significantly reducing municipal revenues.  The need for traffic police and the issuing of speeding tickets will disappear, also reducing municipal revenues.

I have read that as many as 5,000,000 jobs will be eliminated.  At the same time, millions of new jobs will be created, but probably not for the same people.  This has happened before.  Electricity disrupted the marketplace in the late 19^th century and automobiles dramatically disrupted horse-drawn transportation in the early 20^th century.  The acreage and labor associated with feeding and caring for horses plummeted.  The pollution of horse manure did as well.

The process of one or more technologies disrupting a market is often termed “creative destruction.”  The creation of innovative new ways of doing things results in destroying the old ways.  This process can be very painful for those skilled in the old ways.  Efforts and resources have to be devoted to gaining new skills.  Over time, the new ways flourish and the overall economy greatly benefits.