Think how Uber has disrupted the minicab – and that’s just the start. In five or so years’ time, our streets are going to be very different places.
In today’s missive, we close our eyes and imagine how those streets will be, what will change and what opportunities there might be as a result…
The future is driverless
I met with Alec Ross last week to interview him for the Virgin Podcast about his new book, Industries of the Future – a book you should all read. Alec was head of social media for Barack Obama’s 2008 campaigns (first for the Democrat nomination, then the US presidency). He then became Hillary Clinton’s head of innovation while she was secretary of state.
Of the subjects we discussed, driverless cars is the one I’ve been thinking about most. Driverless cars are coming. The only question is, “when?” I think they’re coming sooner than perhaps Alec does, but we’re both agreed that the disruption they are going to bring to existing ways of doing things is not fully understood.
Let’s backpedal and consider Uber for a moment. Almost two years ago, I was about to buy a new car. I’d just started using Uber and I rather liked it, so procrastinated about the car for a while. Uber has turned out to be so convenient that I still haven’t got around to buying that new car. Already that’s a sale and a customer that Mercedes has lost out on.
As Uber grows, more and more people – and, perhaps more importantly, companies – are going to “not get around to buying a car”. They’ll use Uber or some derivative instead. The car you, I, or company X owns, which would normally be parked, will not now exist. Car manufacturers will sell fewer cars.
And as Uber goes driverless (and it will), this trend of non-ownership will accelerate. That makes car manufacturers a potential short, particularly those who get left behind in the race to driverlessness. Ditto lorries.
A warning to Uber drivers – don’t bet on doing it for long
Many black cab drivers complain about Uber. My own experience is that, as a result of Uber, I now quite often use black cabs, especially for short journeys – it’s often more convenient to stick your arm out than it is to start plugging away on your phone. When I had my own car, I didn’t use black cabs as much.
What I never use now, however, are minicabs. Minicab companies are so far the companies which have been most disrupted by Uber – in particular Addison Lee. I always felt Addison Lee was a good company, delivering a needed service. But the speed at which it has lost market share is astonishing. Perhaps it’s my bias, but its marketing (I seem to get a lot of texts and emails) seems to be getting more and more desperate. What a short that would have been, if it were listed.
There’s a lot of hoo-ha in the press, particularly the left-wing press, about Uber drivers not being classed as employees, but as “partners”. I make no judgement, but I make an observation that few seem able to see. There’s a clear reason, aside from the costs, that Uber doesn’t want them as employees. Drivers are not part of Uber’s long-term strategy. As soon as it can, Uber is going driverless.
Some Uber drivers I speak to realise this; many don’t. If you’re an Uber driver reading this, take note. By all means make hay while the sun shines, but have an exit strategy. In three or five years’ time, your job is not going to exist. The transition to driverless cars, once it starts, is going to happen as quickly as Addison Lee’s demise. I issue the same warning to long-distance lorry drivers. This is a job that in, maybe, ten years’ time, will not exist.
Fancy buying an obsolete car park?
It’s estimated that cars spend 95% of their time parked. How inefficient. Compare that to a commercial aircraft. They are in use all day long, whether flying, loading or unloading. Something similar is going to happen with driverless cars. They’ll be in use all the time – and they’ll make better use of the roads.
Not only are fewer cars going to be sold, parking is going to take a hit. In addition to car manufacturers, there are bound to be some opportunities on the short side of parking companies, particularly in the cities which have shown themselves, by embracing Uber, to be receptive to new transport tech.
Sadly for us UK investors, most UK parking companies are not listed. NCP, for example, is owned by Macquarie. But I’m currently doing some homework on foreign-listed companies. If you have any ideas on this, please post them in the comments. I’d be glad to read them.
There will also be some opportunities for asset strippers. How much must, for example, NCP’s inner-city real estate be worth. I’d like to buy NCP’s beautiful Art Deco building on Brewer Street.
The considerable source of council revenue that is parking will diminish. If only we could short the likes of Westminster, Camden and Lambeth. They are going to be even more strapped for cash. (Will they put up council tax? Probably).
What about the rip-off shops that are motorway service stations? Will we use service stations as much in a driverless world? I doubt it. The revenue from truck drivers will go. Travelodges and so on? We’ll use them less too, I guess. You can sleep in the car while it takes you to your destination.
Again, many service stations are not listed, but there might, eventually, be some opportunities on the short side of something like Applegreen (LSE: APGN) – London-listed, but Ireland’s largest company in the sector. (If only Forte Group was still listed.)
Even that great den of rent-seeking that is Transport for London (TfL) will be affected. Already, if there are two of you, Uber is cheaper than the Tube, on a fare-by-fare basis, over short distances. Driverless cars are only going to mean even lower prices for cabs. More and more people will use them. I’d love to short TfL, if only on principle, if I could – as some kind of revenge for all the dough they’ve had off me over the years.
It’s not just TfL. If I can get a driverless pod to pick me up and drive me across the country to where I’m going, for roughly the same price as a train ticket, without having to go through all the rigmarole of getting to the station, in many cases (particularly over shorter distances) I’m going to choose that ahead of the train.
This means there’ll more demand for better-quality roads (which means opportunities on the long side for road builders and maintenance companies) and less for railways. Hopefully, this will expose another great rip-off: train ticket pricing.
There are some big opportunities here as this trend evolves. I’m going to come back with some company-specific ideas in due course. There’s no great rush to short yet, I don’t think. And, as I say, if you have any, please post them in the comments section below.
In the meantime, there’s plenty to think about…
My colleagues over at Exponential Investor are dedicated to looking for ways to profit from disruptive technologies – from driverless cars to artificial intelligence and quantum computing. Find out how they can help you profit from what they call the biggest wealth creation event of the last 200 years.
Category: Investing in Technology