I always had a strange feeling as well as a respect for the automobile industry because they manage to persuade people to spend an outsized portion of their income (and yes many time an amount that exceeds their spending limit) in purchasing a car. It is strange in the sense that we often have a perfectly rational alternative to buying a car: such as public transit. If we think for a moment, we spend the money for something that we will be using for ~5% of our time AND for something that creates continuous cash outflow items such as insurance, gas, and parking. What is worse is that we rarely get to drive the car in a condition that is depicted in the advertisement. Instead of an empty city street with green lights, we often face a jam-packed street and instead of cruising on a scenic seaside highway, we are stuck in a high way filled with lorries, SUVs, trucks and emergency vehicles. Hence, respect to the automobile industry for convincing millions of people into buying one of their product.
Has it always been the way? Will such irrationality continue in the future? My verdict is that technology will change this long-lived irrational behaviour for good and for the first time in history, we might see cars being treated as a commodity.
Prior to the industrial revolution and until the car was invented in1886, the primary mode of transportation, other than on foot, was horses and coaches. The incremental value of these two modes of transportation was tremendous. On foot, one could travel 5km/h whereas horses could carry you 60km/h and coaches would carry as many as 6 people plus a load at a speed of 12km/h. It meant that you would travel faster and further which, in turn, produced a positive impact on your ability to conduct commerce and build wealth because your boundary of influence was increasing proportionately to your ability to travel.
Therefore, if one could afford, owning a horse or a coach was a rational decision and was an investment rather than a luxury. Unfortunately, however, owning a horse or a coach did not come cheap. You had to have extra space in your home for the horse, extra food and extra money to buy things like a horseshoe, saddle…etc. As a result, the ownership of a horse or a coach was, in some way, another source of hurdle in social mobility (along with other things such as literacy and education), acting as an unfair competitive advantage with a strong moat. As a result, owning such ‘investments’ not only increased one’s chance of success but also acted as a proof of one’s social status.
Thank the industrial revolution, technology was about to wreck the ship and redefine the definition of mobility in a much deeper way than anyone would have anticipated.
*I wrote about how such decentralisation is increasing the size of the pie as well as freeing social mobility here.
Becoming more common
For the past one hundred years, our mode of transportation was getting reinvented almost on a continuous basis, thanks to the rapid innovation in technology. In fact, innovations happened so fast that my grandparent’s generation, who are now in their early 90s, grew up riding horses, witnessed the spread of train, bus, the subway system, car, and now about to witness yet another transition into electric vehicles and self-driving cars.
All along, the definition of mobility and what it means to our society has also been changing. Thanks to the positive impact technological breakthroughs had to our mobility, for the first time in history, mobility is widely available to most and has levelled a playing field in our society, enabling freer social mobility. In other words, mobility was getting commoditised and the fruits of its benefit were no longer concentrated on the privileged few and are no longer correlated to one’s ability to create value. We can readily notice this for, today, unable to travel or living too far is rarely a culprit of one’s failure in life. Similarly, no one will measure your ability to carry out a job based on your ability to travel.
In my observation, we are at a peak in the era of private ownership of mobility because the incremental value is diminishing. In other words, ownership of a mode of transportation has transformed itself from a rational investment to an irrational luxury. For instance, owning a faster car no longer means you can travel faster or further. Regardless of your car’s top speed or horsepower, your average speed on the city will be ~40km/h and you will arrive at work around the same time as your colleagues. This is apparent on how we are being sold to a car as well. New car models often have incremental changes that are remote to the true meaning of mobility such as better sound system or better entertainment system rather than an ability to travel faster and further. Clearly, car companies also realise that the definition of mobility is no longer about moving faster and further. (I will discuss what it would mean in the future in the next section).
The future of mobility
Technology never stopped innovating itself and is innovating at an incremental speed. End of the combustion engine and an increase in shared ownership of cars is inevitable and we will soon see self-driving cars filling up our roads. What this means is that the mobility will get further commoditised and we may see a time where we will feel archaic of words such as ‘private cars’, ‘car dealerships’, and ‘parking meters’. In fact, the mode of transportation, for the first time in our history, may become fully commoditised similar to a water supply system (whether you live in a $200k apartment or in a $10m mansion, both have the same access to the public water system). Soon, the portion of the mobility-related expense in our income and time may drop which will free them up to be allocated to the next best thing (as I argue here, it will most likely on a software).
Meanwhile, there is a tremendous amount of opportunity in owning a piece of this market because whoever wins the market, is likely to be the last player in the industry, at least for a few decades, similar to how Ford and GM dominated the North American automobile industry for over a century.