Read the two articles below, and Submit a one-page Word document review of what you think will be the key benefits and challenges of this major disruption in logistics.

Hard Questions on Our Transition to Driverless Cars

by

Summary. Modern vehicles are safer and more tech-enabled than ever, but AI-enabled new mobility holds the promise to an accident-free future. Some disruptors are at the point where their systems already outperform humans on the open road. It is a matter of time before...more

Artificial intelligence (AI) is transforming the automobile. In so doing, it will transform much more than that. Given how central automotive transportation is to our cities, commerce, and daily lives, saying that AI will change life as we know it is no understatement.

To understand where this new mobility might take us, its important to distinguish between two types of AI-powered motor vehicles: self-driving and driverless. Self-driving vehicles offer the options of automated and manual driving. Either way, theres someone in the drivers seat. Driverless vehicles, on the other hand, have neither driver nor (eventually) a steering wheel. This distinction is important because the driver is typically the most expensive part of a transport business, be it taxi services, last-mile logistics, or long-haul trucking. Self-driving capabilities can boost safety and driver productivity. By eliminating the driver altogether, businesses could slash costs by as much as 60%, depending on the industry.

In combination with the sharing economy, driverless vehicles are likely to be deployed in fleets, benefiting higher utilization in urban settings. This portends a dual-track future. While sharing and driverless will converge for the 1.7 billion population living in sizable cities, the remainder of the population will also benefit, but largely from the safety advantages of self-driving cars that they will own.

Where and When the Technology Might Be Deployed

Automakers are already producing self-driving autonomy features for specific uses, such as highway driving, in premium vehicles. As expected, uptake has been slow because extra costs are limiting demand, but the rollout is growing.

By contrast, driverless vehicle adoption depends on overcoming three factors: infrastructure maturity, technology readiness, and regulation. Of the large markets, the U.S., thanks to a mature infrastructure and, thus far, supportive regulatory environment, is at the forefront, and driverless technology is undergoing real-world, large-scale testing to train machine learning algorithms. We expect Europe (excluding the UK) to lag the U.S., given the higher technical complexity of medieval cities and regulations resulting in limited on-the-ground testing. China and India are still in process of building out their infrastructure; their technology will need more effort to adapt to their complex street environments.

What Leaders Need to Consider

Its time for boards and executives to ask themselves hard questions about how the new mobility could affect their business models. For example:

Infrastructure. As mobility changes around us, how should we approach our master plans for airports, car parking, high-speed trains, energy, ports, toll roads, and so forth? These plans have investment horizons of 15 to 30 years or longer. What will happen to demand, pricing, and usage patterns over that horizon? How do we de-risk our investments, and how can we accommodate for different future scenarios?

Cities. How will autonomous vehicles affect congestion? Can we balance their benefits against the probable increase in demand as mobility costs decline? How do we navigate their integration into our emerging mobility as a service offerings and realize the benefits of less congestion and lower pollution? How will road pricing models need to change? How will we need to change urban planning in this future?

Transportation. How will driverless vehicles complement existing public transit infrastructure? How can we remain relevant in this future?

Automotive OEMs. How do we reposition ourselves to sell not just vehicles, but mobility? Whats our role in the value chain: facilitator, fleet operator, driverless driver supplier (versus vehicle manufacturer)? What should we buy or partner with instead of building? Where and how do we develop a relationship with cities? How can we help businesses benefit from greater vehicle automation?

Aftermarket automotive. What is our role in a fleet-led urban future? How can we embrace the opportunities that connected vehicles create?

Insurance. What strategic moves should we pursue as increased autonomy shrinks the motor claims pool? What products will be relevant in this evolving future where fleets and product liability become more important?

Financial services. How will vehicle ownership patterns evolve as Millennial and Generation Z customers claim a greater share of mobility consumption? How can we finance fleets through leasing and/or mobility securitization?

Energy. How does the confluence of autonomy, sharing, and electrification change the fuel mix in automotive applications? What will our retail footprint be? In a driverless world, how could vehicle-to-grid (V2G) help us create new ways to distribute and store energy?

Retail and consumer business. If new mobility can dramatically reduce distribution costs, should we rethink the industrys value chain and distribution access to customer? How does our logistics footprint need to evolve, and how can we realize the savings? What new propositions can we create? What customer segments could this mobility as a platform allow us to serve?

Health care. How do these changes help us manage the needs of our aging population? How can we use driverless vehicles to reduce health care costs?

Public policy. How will society adapt to the loss of service jobs that results from automated driving? What new roles could fill this gap, and how can policy makers ease the transition?

Modern vehicles are safer and more tech-enabled than ever, but AI-enabled mobility holds the promise to an accident-free future. Some disruptors systems already outperform humans on the open road. It is a matter of time before we start seeing robo-taxis and autonomous commercial vehicles appear and upend todays business models. Now is the time for business leaders and city administrators to get in front of the transformation.

Driverless Cars: What Could Possibly Go Wrong?

by

• Robert Hutchinson

January 15, 2016

If the enthusiasts are to be believed, driverless, electric cars will augur the end of all of humanitys traffic woes. With nifty mobility-on-demand at our fingertips, we will live in cities that as one autonomous driving start-up imagines have no congestion, zero traffic fatalities, instant parking available on demand, safe routes for cars, bikes and pedestrians and modern, efficient, up-to-date infrastructure.

There sure is a lot of hype around autonomous cars. Tech firms love the concept the vehicle is a mobile IT platform like no other. By and large, journalists and other commentators have been happy to go along for the ride. Who doesnt want to live in a future free from congestion, collisions, and pollution from combustion engines and the petroleum supply chain?

The truth is that autonomous cars do hold huge potential to make cities more safe and sustainable but only if they are introduced in the right way. Huge real-world challenges still exist to the wide adoption of the technology, but lets say for a moment we get all this working, and our cities become flooded by driverless vehicles. As for any powerful new technology, we must ask ourselves: What could go disastrously wrong? What are some of the key vulnerabilities of such a new system? What are the nightmare scenarios of a driverless future?

INSIGHT CENTER

• Innovation in Cities Fostering sustainable growth in urban areas.

Through the Rocky Mountain Institutes work with carmakers, technology firms, urban planners, and policy makers, I have identified five threats to autonomous driving with a focus on the U.S. that I hope adds diverse and contrarian thinking to discussions of a driverless future. I list them in rough order of immediate impact because some will be sudden and calamitous, and some will be more insidious, only becoming obvious over time. And I offer a few preliminary thoughts about potential solutions.

System Meltdown

The threat: Autonomous driving will rely on a digital information backbone to operate. Experience clearly shows that such infrastructure systems have a far from perfect or even close to perfect record. The U.S. electricity grid, for example, is one of the largest and oldest and is famously insecure. It has constant weather or equipment-failure driven shutdowns. Thats not even taking into account the threat of cyber-attack that any autonomous driving system will have to stay ahead of.

The Fix: More modern systems and architectures can theoretically do a much better job of preventing or at least isolating issues, so a system-level shut-down becomes technically impossible. This could also apply to protecting our electricity systems from hackers.

Public Panic

The threat: What happens if a well publicized event like a terrible accident reveals a fundamental flaw in the system? Will the public tolerate early failures? Though nasty accidents will be rare, it is still quite likely that odd combinations of events will permit them to occasionally happen, and todays press, pundits, and politicians are hardly to be trusted to wait for the unwinding of a causality to weigh in and their emphasis on truth might also be doubted. As for any transportation system, trust is essential.

The Fix: In such a data-rich environment the most egregious exaggerations and falsehoods can be easily and perhaps visually and vividly disproved. Highlighting the many system benefits will likely cause the public at large to be supportive especially when they are reminded that they already tolerate the dangerous and inefficient systems we have today.

Endless Errands

The threat: What happens if people flood the system by sending driverless cars out on constant, frivolous errands? This problem, and its variant, endless deliveries (by commercial players) is a brain teaser, because of the way the flow of goods actually shapes the systems that provide them, and the behavior of the users. They also shape the physical landscape.

The fix: It is not clear how big a problem this could become. If consumers have more time when they are not focused on driving or worrying about traffic, they are likely to do a better job of not forgetting the eggs. Errand businesses may spring up that effectively consolidate the errands. Cities may also be able to provide a gentle deterrent to driverless car abuse by switching road maintenance funding to usage-based fees, a step which is important to bring about anyway because the current fuel-based system no longer measures driving (and usage) effectively.

Car-lovers revolt

The threat: Some people love cars. Others dont. Can car-owning enthusiasts wreck the system by effectively resisting car sharing or insisting that they be allowed to drive anywhere, anytime? Could they claim an analog to the U.S. Second Amendment and argue that their freedom of movement by automobile is inalienable? This would significantly reduce overall system efficiency and savings a huge social cost, in order to preserve a so-called individual freedom. But its also hard to imagine forcing people to use driverless technology; the best we could hope for would be offering carrots like express-lane access.

The fix: This is a threat that democracy should be able to resolve but it will be incumbent on policy makers to roll-out autonomous driving where the benefits are the greatest and then share the results widely and vocally. Car lovers should be given some fun places to play. A (hopefully diminishing) set of non-sharers should have an appropriately more expensive option. While having some people opt out can be tolerated, the goal should make sure that they do not mess up the highways the rest of us really need to the workplace or the school or the shopping center.

Benefit erosion

The Threat: Because a driverless future will require totally new systems, there will be many interdependent features in the overall design, such as the number of cars, the mix of electric versus conventional vehicles, the amount of car-sharing, how effectively personal transport is linked with mass transport, and others. If some of the features get changed a bit too much, modeling indicates that overall benefits like lower congestion levels and lower cost of transportation overall rapidly diminish. And without those clear benefits, societal acceptance of change will be much tougher, if not impossible. There are many incumbent players with huge power in the existing transportation status quo that may push for accommodations examples include continued provision of excess parking at public cost (which discourages car sharing) or continued tax incentives for businesses to own rather than share vehicles. There is a chance that such compromises may add up to a poor solution that doesnt really work, leaving us with a new kind of mess on our hands that is no better, cleaner, or safer than the current one.

The Fix: This is perhaps the most dangerous threat. There is no way to ensure that accommodations not be made designers will just have to do their best to truly understand ahead of time what the key sensitivity points are and push like crazy to avoid the false compromises that endanger the overall promise of driverless technology while being reasonable about everything else.

I welcome a future dominated by driverless cities and suburbs but Im cautious. We do have one fundamental advantage when it comes to pushing this attractive set of innovations to reality there are a lot of cities. Each city can experiment, share learnings and narrow down the set of workable solutions quite rapidly. That doesnt sound like a utopian dream to me. It sounds a lot like how science, progress and maybe even politics should be done.