- Thanks for coming everyone and welcome
to today's Britt Technology
Impact Series session.
We are excited today to
have Kyle Keogh as a T99
back to campus from Google
on Google's 20th birthday.
- Yes, as I found out when I came here.
- Yes.
- Yes.
(class applauding)
- Pretty good testament to
the transformational power
of technology just in 20 years.
I was talking to someone
else this morning about this
and she said, "That's it, 20?
"Boy, I thought it was
a lot longer than that."
They must've meant a part
of our lives for so long.
This year the Center for
Digital Strategies Series
is focusing on emerging technologies
and we're gonna turn it
over to Kyle in a bit
to talk about the disruptive
power of technology
and emerging technologies
and self driving cars
in the auto sector and
kind of what's happening.
I'll let him introduce
himself but please join me
in welcoming Kyle back to
campus on this nice fall day
and happy birthday.
(laughing)
- Thank you.
Thank you very much, thank you.
(class applauding)
So it's great to be back,
it is very strange to sit in this room.
I've come up here for Google recruiting
a few times and we're
in the newer building,
but this is literally I
remember my first class in this
room in 1997.
It's a little nicer, don't get me wrong,
but it definitely feels the same.
So thank you guys for taking the time.
In a minute I'm gonna
ask you what you wanna
cover in this session and
what you wanna get out of it.
So just think about that a little bit.
I have a stead of things
to cover, don't worry,
but I also wanna make sure
this is really relevant
for all of you and I teach a class at NYU
and I do the same approach,
'cause you're paying
for your own education.
You're paying your money and your time,
I wanna make sure you
get something out of it.
So we're gonna talk
about digital disruption
in the auto industry in particular,
but I can go a lot broader than that.
By way of background on me,
I went to Hamilton College.
I spent my Junior year at the
London School of Economics.
Met my wife in college, I
then worked at JP Morgan
for three years.
I got married and my wife
and I were coupled together
at Tuck, so we were actually
both, we were classmates.
Is there anyone this year
right now who are couples
that came in married?
- [Student] No, not married,
but yeah we're coupled.
There's actually six couples.
- Okay.
- [Student] There's two
20s, I think two or three
of the couples are married.
- Very nice, okay, yup.
So we're still married, we're doing great,
we had a great time.
It's been 22 years now.
So my wife Liz and I
came in and I remember
specifically being in this room.
Coming out of here I went to McKinsey,
so I actually followed
the exact inverse path
that Stephanie did.
I was at McKinsey for about
three and a half years.
I spent two years at
a late stage start up,
two years at IBM and I've
been at Google for 11 years.
Part of it was running part
of strategy and operations
and then I ran our media
sales to the telecom industry.
Did a brief stint in Google Fiber,
should we talk about it at all?
And then for the last 15 months,
have been leading our industry efforts
for the imports in the auto industry.
So that's sort of a rough on me,
just to give you some background.
I was gonna talk in particular
about digital disruption,
some overall principles and then apply it
to the auto industry.
But are there things that
people wanna make sure,
burning questions people
had that they wanted
to make sure we addressed?
- [Patrick] Don't be shy.
- I can make sure to work
it all in, don't worry.
Go ahead.
- [Student] Let's hear a little
bit about your experience
working on Fiber--
- Sure.
- [Student] And the sort
of real estate element
of getting into an industry
which is so dominated by titans.
- Sure, Google Fiber and
the impact of that industry
and where Google Fiber is
right now, yep, fair enough.
Good question, I can do that.
- [Student] I'm wondering about not just
what the automotive
industry would look like
when there's self driving cars,
but just generally what
the world would look like.
Because once all cars are
driving around themselves,
that would change a lot of
things if you love parking,
about city, about infrastructure,
if there's a larger vision
for what that might look like
in 20, 30, 40 years.
- Sure.
So I'm actually modifying
a bit a lecture I did
at Stern, which was half
of it was a debate actually
on when will driverless cars occur
so I'm encouraging you
guys to get involved
and then the second half
is what will it mean
for all the other industries
and what we have discussion on.
Because no one knows the answers,
but it's a good set of questions.
Okay, others?
- [Student] Because autonomous vehicles
have such big implications on a mass scale
what is your approach to policy,
'cause governments are gonna get involved.
The government reach is that
you can have smart cars.
- Totally.
Okay, great, others?
- [Student] So what's a good revision for
should the infrastructure
prepare for self driving cars
or the self driving cars are so new,
so smart now to continue
to the real world.
- Okay, fair enough.
Right, next question right here.
- [Student] Yeah, I'd love
think to understand more
how you can give out buy versus build
in some of the innovative aspects,
like what makes an
acquisition really attractive
versus wealthy technology in house.
- Okay, great.
- [Student] I kind of wanna
build these new driverless cars,
half is it the company's liability,
the person who's not driving
it, but riding in it?
- Yep.
Yep, a very good question.
- [Student] My question
is about how Google deals
with innovation in terms
of when you are looking
at a certain development and
if Google looks on the market
how other possible competitive,
competitive technologies
are also developing.
I also have in my mind
the example of the airship
and the airplane, where the airship
was almost reaching
engineering perfection,
then came the airplane and
all of this was destroyed.
And not just for self driving cars,
it's like how does Google find lots
of innovation in this context.
- Okay, so the impact on
other industries, okay.
Okay.
Others?
Okay.
- [Student] Car ownership
versus on-demand transportation
and specifically how you think
about pricing between those two.
- All right.
Next over here.
- [Student] Yeah, is Google thinking
of building software that
can be applied to every car
or only the main Google cars?
- Okay, software versus--
- [Student] Android versus iPhone.
- Okay.
And then this last one.
Okay, any others?
All right, that's a good list.
Okay, wow, that really rushes
us through the first portion
of it right to the second, which is great.
Okay, so I'll talk a little
bit about some of the features
around digital disruption,
how we think about it,
and how I think about it.
Then we'll go into the particular
sum of the auto industry,
what's happening now, but
I'll spend most of the time,
I'm gonna go through that
in about five, 10 minutes,
and then I'll spend most
of the time it sounds like
on the driverless cars part
of it, which is good to know.
So as an overall guiding
thought on any disruption
that goes on, which is Bill Gates,
interesting for a Google person to come in
and give a Microsoft quote,
but less happens in two years
than you think, but
more happens in 10 years
than you'd imagined.
Goes back to Google's
20th birthday, right?
If you'd pictured Google 20 years ago,
you never would have pictured
where Google is today.
Seven products with over a billion users,
85,000 employees, $130 billion in revenue,
growing at 20% year on year in sales.
20 years ago I sat in your seats,
clearly if I thought of it
I would have tried to get
into Google at that point
instead of gonna McKinsey
that would have been a much better call.
I wouldn't actually be here,
I'd be hanging out somewhere else.
Because when you sit inside
Google on a daily basis,
you actually get frustrated.
You're like, we're not moving fast enough.
You'd actually say a company like Google,
well you must clearly move very fast,
but if you're sitting in our seat
it feels like it's glacial sometimes.
But then you have to look back
over a longer period of time
and you see incredible
change and the changes
are very different than you
would have actually anticipated.
I took a year and a
half off, well not off,
I went for a year and
a half to Google Fiber.
A lot of stuff actually
changed a year and a half
and it was very helpful to see it.
Because if you see it every day,
you sort of don't breathe it.
But the interesting impact of this,
is we'll talk about with driverless cars.
The debate I had with
my class is in 10 years,
will more driverless cars be sold
or will more regular driver cars be sold?
And that's not will there
be more on the street,
because it will probably
take more than 10 years
to have more driverless cars in the street
but how do you think about
what are those characteristics
and what would happen and
the answer probably is
that what I'm thinking
about and what we're gonna
talk about here in 10
years will not look like
what actually comes through
to your airship versus airplane analogy.
But you have to actually figure out
what those right questions are
and prepare for a future either way.
But very likely not much will
happen in the next two years.
There are four main considerations
that I'll roll through
pretty quickly here, but they'll come back
as we talk about driverless cars.
Great Harvard business
school professor focused
in on you have to think about
what is the job to be done
on any innovation, right?
Not am I replacing an existing product,
but what is the end need
that I am going after
and when you solve that
you generally succeed.
If you build a better mouse
trap, you do not succeed.
If you look at disruptions in any market
the airship verses the airplane,
airplane got the job done a lot faster.
The job was I needed to
be from New York to L.A.
in a period of time, not I
want a beautiful scenic ride
and it wants to feel like a train
and all these other things.
The job was I need
transportation from here to there
and it did it very, very well.
When the iPhone came out
and eliminated basically the Blackberry,
it did a totally different job.
It didn't just build
a better mobile phone,
it did a totally different function.
In the autonomous industry,
we're gonna have to make sure
that on cars for instance that it does,
it talks about that job
and that will inform a lot
of the questions here I think
on ownership versus on demand.
Because the job is not owning a car,
the job is I need transportation
from one spot to another.
When I want it, where I want
it and at an affordable price,
and that's the job to be done.
The second is, you need to
think about the value chain.
And the best spots to make changes
are when you are only
changing a small portion
of the value chain,
when you take advantage
of all the other areas.
So one of the things going on
in the auto industry right now
is there's something called Android Auto
and Apple CarPlay, I imagine
some of you have seen them
if you don't already have it already.
They have to fit in a certain
spot in the value chain,
but they leverage off your phone.
So it's actually a relatively seamless way
to get you in there.
It's products you've already
used, it's Waze, it's Pandora,
it's Spotify, it's maps.
It starts with those products
'cause it's an easy, simple thing to do
and all you're doing
is changing one thing.
So any change that goes on,
you should think about how
am I using the value change
to get advantage out of it?
How am I not trying to go
in too many different spots?
When you go in and BMW
came out about 10 years
with run-flat tires, they
actually totally failed.
I think one of your professors
did a fantastic book
on it and didn't work because
it changed too much stuff.
You need to slide in to
make the change easy.
The third is, there's something
called the Perez Surge Cycle
which is, stuff starts, it
takes a long time to get started
and then when it hits an inflection point,
it goes from multiple
competitors to just a couple
and where are you in that cycle?
Do you have the funding
to last through this?
How are you thinking about your business,
around how you get to that?
Lastly, is the market
ready to be disrupted?
Some markets are, some
markets don't make sense.
Like automotive dealer model,
doesn't make a lot of sense
but it's not yet ready to be disrupted.
Because, we'll look at some
of the other things later on
that I don't think it's
fully fundamentally ready
to be disrupted.
Like we looked at should you go out
and eliminate auto dealerships
' cause I imagine almost
everybody's bought a car
at some point now and
going to an auto dealership
is one of the more painful
experiences right up there
with the DMV and paying your taxes,
but it's still sort of a necessary evil
until we find the right area.
So if we look at those,
the jobs to be done
is what are you trying to accomplish?
You don't buy a hammer,
you buy the ability to
pound in nails, right?
How are you trying to do that
should change the way you think about it.
If you think about the value chain,
there's sort of four main
functions of value chain.
There's content, there's
curation, there's the device
and then there's distribution.
If you're gonna chain your
driverless cars for instance,
it goes back to the question of
do you use software and/or hardware?
If you try to build the
car, change the software,
build all the programming
capabilities for it,
what are your odds of success?
Would you find a way to take
advantage of the value chain
and change just one or two things in it?
In an ideal world, you'd
wind up with driverless cars
that would be able to work
with any existing car.
That's probably gonna be
hard, interoptability's tough.
But should you be able to
get it so that it plugs
in to almost any car
that's newly manufactured?
That would take advantage
of the entire value chain
and make things a lot simpler.
That is what Android Auto is doing
is saying I'm not gonna build new cars,
I wanna slide in to
every car that gets made.
Right now you have
something like Android Auto
or CarPlay already, it's your phone.
Like how many of you
use Waze on your phone
while you're driving?
Okay, good.
Even up here it's probably helpful, right?
Definitely as you get
down to New York City,
extremely helpful.
You're just basically by
putting Android Auto or CarPlay
in the car, you're just
taking what was already
an existing behavior and
making it easy to change
'cause you're changing one
thing within the value chain.
The other one is you actually
need to be number one
or number two in almost
any market to win, right?
When people talk about Facebook and Google
as a digital duopoly
and they talk about it
in not the nicest ways, but underneath it
in almost any market there
are one or two winners.
They're increasing
returns to scale, right?
This is not a new phenomenon.
It very much exists in the digital world
and it happens faster in the digital world
than it does in other markets, right?
Google's been around for 20 years,
10 years in it was
fairly clear that Google
had sort of won in search.
What's interesting is Amazon
now is coming out with Alexa
and may actually obviate
the need for search, right?
The threat is not that someone does
search better than Google,
the question is that
someone solves the thing
that you're trying to
solve with search, better.
That they don't look
and require key words,
they don't require you to go in there,
they don't send you to different pages,
they just give you the answers.
And they anticipate your
questions and they help you
in your life and they
solve an underlying need.
So that all of a sudden
you're just not going
to Google 50 times a day, you're going 30,
and then you're going 20,
then you just don't go at all.
But it's unlikely that's someone's
just gonna beat out
Google at what Google did.
You see it in some markets occasionally,
I would argue Facebook
was not that different
than Myspace, but you see
Spotify beat out Pandora
and Pandora had an early lead,
but it's not that common.
You usually tend to see stuff like you saw
in the cell phone market.
So probably everyone's old
enough that they at some point
had a Razor phone, right?
And you didn't change up off the Razor,
you probably bought one,
you might've even bought a second one,
then you came around and what
came next after the Razor?
Pardon?
(faint speaking)
Yeah, but it never really took off.
What was the next big one?
Blackberry, and the
Blackberry crushed the Razor.
Google bought Motorola for a while
and it was one of those things of like
it was the highest flying
and when the Razor came out
and then they made it different colors,
they did all these little tweaks,
but the Blackberry came out
and solved a fundamentally
different issue.
It was an e-mail machine
and it just so happened
to have a phone.
Blackberry's the top of
the world, who comes next?
iPhone.
And now Blackberry is?
How many people own a Blackberry now?
Right, okay.
The iPhone has stayed for a
while because no one's come out
with anything that's
fundamentally different than it.
Android's done okay, but it's been
sort of a comparable product.
The next one will have to leap frog it,
but the iPhone did stuff
that you never even tried
to solve with the Blackberry.
It wasn't just an e-mail
machine, it was access
to the entire internet and
then it got integration
so it could get all the apps in there.
It did your music, it did things
that the Blackberry never tried.
Those were innovations where it leaped
and created sort of a new market.
Otherwise, these markets
tend to be stable.
Right, if you look up here
and you look at a lot of these
for five, 10 years you should expect them
to be roughly stable
unless they discontinue
as chains takes place.
I'll dig in to one other, music.
If you go back 10 years,
Pandora was around,
but it was relatively
small scale still to radio.
Then Sirius XM came out, Sirius XM started
to change the market.
Then Pandora came out and really,
really sort of grew share.
And then Spotify came in,
which is a much better service.
It's one of the few examples
where Spotify just did
it better than Pandora
across the board and won out on that one.
But now how many of you guys have Spotify?
Nope.
How many of you have any
service besides Spotify?
Okay, a couple, okay.
But Spotify's basically won that market
as much as there's Google
Play music and other things
it's gonna take a discontinuous
change to win that.
The Perez Surge Cycle, has
anyone seen this before?
So it's an application of
what's called the s-curve.
But it essentially says,
you're gonna have an
early gestation period.
You're gonna have sort of
a big bang and an eruption,
this is usually when you get a lot
of venture capital funding,
and then the thing's gonna get
to a spot where you really actually know
what the use case is
and it's gonna take off.
I'll give you a couple examples, mobile.
I've been at Google 11 years.
First year I got there,
it's gonna be the year of mobile, not.
Second year it's gonna
be the year of mobile.
Third year it's gonna
be the year of mobile.
It wasn't until I think
actually 2006 or 2007
when the iPhone came out that it really
became the year of mobile
and then it went from,
I'll give you Google inside language,
I remember being in a meeting
and they were like 10%
of searches take place in a mobile device.
I was like that's a real market.
That's actually interesting
and it went from 10 to 50 in four years.
And so it just took off.
You see Spotify, Spotify's
doing really well now,
early on it was a slow burn,
then it really took off
once everybody decided,
okay, I don't need to
buy all these things.
The idea of ownership over to on demand.
So some of the earlier
discussions really took off
and it found scale.
You generally tend to see this,
what you see is lots of players.
Let's look at this to Bitcoin,
to some of the financial markets
you guys are probably looking at.
There's dozens of players,
probably some of them
recruiting up here, some of them probably
you may go work afterwards.
There's 100 probably plus players,
within a couple of years there
will probably be two to three
and when that market really takes off.
Right now it still
hasn't found it's groove,
but it will find it's groove.
Hey Steve, how you doing?
I didn't see you back there (laughs).
And then the last things
is what are the signals?
How do you know the market's ready, right?
If you think about it,
in order for a market
to really be ready you
need solid economics
and a large scale.
All right, to really be a market
that's worthwhile to go after.
You can see innovation and
disruption in smaller markets,
but it's much less likely
because it takes a lot of energy
and up front work to do it.
So you want a large addressable market
and you wanna have some idea
of what your financial model's gonna be.
So to the question of
Waymo and Google cars,
the model is probably likely
gonna be either a sale model
or subscription model.
It is unlikely that Waymo
will build its own cars.
They've already partnered
with Jaguar and with Chrysler
to build them and a few
other manufacturers.
It's likely that that will
be the model associated
with it, but they have a good idea.
It's a massive addressable
market, almost everybody
in the world drives.
It's got a likely model that
you can sort of see there.
Second, there's gotta be
clear value to the consumer.
The consumer needs to get
it and immediately see it.
If you go back to search,
when Google was started,
we talk about 20 years ago,
I think in the second year
they tried to sell it for 5 million bucks.
No one wanted to buy it,
because everyone was like
eh, it's just sort of
part of the portal page.
I've got AOL, I've got
MSN, this thing's really
not gonna be that valuable.
There was clear value to
the end consumer, though,
that Google saw but the
competition didn't see
and now clearly search became
sort of the core of it.
The last is low trial
and subscription costs.
It should be relative to your value.
The more value you create,
the more people are willing
to go through some pain to change over.
But it's much easier if you
have lower switching costs.
In autonomous vehicles,
it's unlikely that the first time you ride
in an autonomous vehicle you will own it.
It is much more likely that you
will do something like Lyft.
Get in it, take it, and
be like okay that worked,
that was good.
And then you'll still keep your car
and then it'll probably
get to an inflection point
where you're like okay
I've had this car sitting
in my garage, I'm living in New York City,
I'm paying 500 bucks
a month for this thing
and I never take the thing out.
Insurance, everything else,
I should just get rid of this
or in the very least my
transmission went out
and I need to buy a new car,
at this point I will decide
not to buy a new car.
And that's how you'll likely
see the transition go on this.
But if you had to first move
to get a driverless car,
buy it to use it for the first time,
that's probably too big a switching cost.
Makes sense?
Okay, there's also some,
I've sort basically covered all these
so I'll just skip that over.
I'll switch over to the auto industry.
I'm gonna talk quickly through
the near-term challenges
and then we'll go to driverless cars.
There are a couple of key trends going on
in the auto industry.
One is you're seeing the
emergence of new models
and particularly the autonomous come out
and crush the financials
of a lot of the companies.
In the last six, nine months
the car companies have lost, what?
25, 21% of their value.
If you're sitting in Detroit
and you work at General Motors,
you work at Ford, you work at Chrysler.
You're looking ahead,
and basically the market
and all the stock analysts,
a lot probably who came
from up top are saying,
you don't have a future,
and that is actually
impacting their decisions now.
Because when they look forward
the Ford CEO got fired,
not because they weren't
selling cars today
but because he didn't have
a plan for the future.
That required them to start
to think about things
fundamentally differently.
When you have that kind of impact
and your board fires your CEO,
you'll start to see changes.
Does anyone know what Ford's decided to do
in the last six months?
It relates to the second
point of the page.
- [Student] Making trucks and SUVs.
- Yup, they're gonna leave the car market.
They were the car market.
They had an amazing set.
They're gonna move over.
The second trend is now 68%
of all sales are trucks
and SUVs, 32% are cars.
Five years ago, almost exactly flipped.
You know how long it takes
to launch a new vehicle?
About five years, because
there's a lot of technology going
into running one of these things.
Tesla does it a little
faster, I'm about to get one.
We'll see if it works really well.
But it takes about that long.
So you've got a fundamental
shift in the industry
that is helping all the US manufacturers,
because they're the ones
who make most of the SUVs.
And almost the entire
truck market is dominated
by US manufacturers.
But that's gonna wash through
as you've got everybody else
starting to launch all these areas.
So you're seeing those
as the near-term shifts
as the imports like a Nissan,
like a Toyota, like a Honda
step in or even a Jaguar step in
and sort of go after this market,
you're gonna see a lot
of SUVs get launched
and you're gonna start to see
a lot of cars get deprecated.
Ford has been the only one
who's bold enough to say,
I'm just gonna stop making them.
I'm gonna make the Mustang,
I'm gonna make like one or two others
that are sort of iconic,
but I'm gonna get rid of the
entire rest of the market.
Which is an interesting view
because part of the view
was SUVs came around
because gas was cheap.
Now they're saying really
regardless of gas prices
this consumer shifted
and it's probably done.
The other thing you're
seeing and not seeing
is the e-commerce adoption.
And it's really hard to read
up here, but it's actually
the question is what is
the shopping preference?
Not how many cars actually
get sold this way.
But which would you rather buy.
And if you start at the bottom
most people like to buy my
books online other than gonna
the Dartmouth bookstore,
which I still love to do and
I'm gonna go there tomorrow,
and later today, I don't
really go to a bookstore.
Toys and games has been decimated.
Used to be toy shops in
every town in America.
I live in New Canaan, Connecticut,
that thing's on its last
legs, unfortunately.
As you work up, though, automotive people
are still hesitant to buy a car
without actually getting into
it, touching it, driving it,
and that's even with a few statistics.
There are twice as many
people watching test drives
on YouTube as there are
people doing test drives.
So for every test drive that someone takes
in a dealership, you've
watched two or three online
just to get a feel for the car.
But you're still gonna go drive
on the car before you do it.
And most people will
research four to five cars
or vehicles but only visit
one to two dealerships.
But they still feel like I
need to go to the dealership.
I'm gonna spend $40,000 on this thing,
I wanna be there and discuss and negotiate
and do everything else.
So it's an industry where you'd say
there's 17,000 dealers,
why aren't we having consolidation?
Well the consumer still
looks down at it and says,
I actually wanna go through that.
As painful as it is, but I
also wanna negotiate the price.
I wanna see the thing,
I wanna trust the person
then I'm gonna get service
and those sorts of things.
So it pretty surprised me when I saw this,
'cause I got in there thinking
no one's gonna wanna buy cars this way.
Comes out it's regional, no surprise.
In L.A. 12% of cars, or
actually 12 to 15% of cars
actually get sold and
delivered with someone never
going to the dealership.
New York's gonna get
to the same direction.
You get to Cleveland, probably gonna take
a little bit longer.
You get to more rural areas,
probably gonna take a whole lot longer.
Some natural adoption
curves of the two coasts,
in particular New York, L.A.,
San Francisco tend to lead.
No different than Uber and Lyft adoption,
and then the rest of the
nation sort of catches up.
- [Student] Do you believe
a company like Carvana
is gonna make a shift
in that kind of process?
Like simplifying the process
of having buying a car online
or you think it's gonna be slow.
- I think it'll have part of it.
The question will be,
people like to negotiate.
As much as we've been
attuned to negotiating.
I think that'll have some impact,
the other part of it is you
wanna know that someone's
gonna take care of your car.
I think they'll have an impact.
The interesting question,
I mean I was talking
to an entrepreneur about doing
something in the auto space
is how long will Carvana be relevant?
The dealer could go away
and I realize this is being recorded.
If hypothetically speaking
the dealer were to go away
I don't think it would
be because the market
all of a sudden said,
hey I wanna buy cars in a different way.
I think it would be because people
stopped buying cars period,
or because you had a
significant consolidation
of no ends of less differentiation,
and it became a much simpler and more
transparent transaction.
Right now there's so much
complexity in how you buy a car
that it actually is somewhat
helpful to go there.
You'd have to reduce a
lot of that complexity.
But the most likely thing
actually I think at the end
and I'll sort of put my view out there
is I think it goes subscription much more
than it goes purchase.
- [Student] How much do you
think that that behavior...
(faint speaking)
- It can be part of that.
It definitely can be part of that.
And as a result the OEM, the automakers,
are not incentivized to actually build
the e-commerce capabilities, right?
Cause they're not allowed to sell cars.
They have to go through the dealerships.
To your point it's the old model.
So therefore, most of the
e-commerce stuff needs to be built
by individual dealers where the economics
are not quite as compelling.
So that definitely could be part of it.
The question is, what
would cause that to change?
So there's about 10 dealers
that own at least 100 plus,
or 10 dealer groups that own 100 dealers,
they could step in and
start to change this.
The OEMs have a tough time changing it
and they're launching stuff in the UK
where they don't have
these issues and in Europe.
So that complete over, but
if you can't sell the cars
and the OEMs can't be the ones to do it,
it's gotta be the dealers that
actually start to do this.
You are seeing some examples in New York,
there's one Honda dealer in
New York who's out in Queens
who will actually do
everything for you remotely.
You never have to go to the place.
So you could see some steps
in that direction definitely.
So of the complexities still
seem to factor in for folks.
But it's a very fair question,
what is causing it and what is keeping it
from actually happening.
Okay.
So that's most of what's
going on in the industry.
What I'd love to talk about
then is self driving cars
and sort of when we see
this technology happening.
I'd actually love to, if
it's okay, have a little bit
of a debate with everybody.
So the debate would be,
what needs to happen
in the next 10 years for
actually it to switch over?
I'll give you a couple facts
to sort of consider on this
and I'm gonna make the
argument that in 10 years
there'll be more driverless
cars sold that year
than there will be sold regular cars.
Not on the road, but at least cars sold.
And I actually had this
exact debate with digital TV
about seven years ago in this room
and I said it would happen
and Google would drive digital TV.
The class was entirely right
and I was totally wrong.
It does to some degree take a question
of how long do these
things tend to happen.
In that case, digital
TV wound up not being
what we expected, it took
10 years rather than two.
But it wound up being different
than what we expected.
So the debate here is one,
can anyone tell me how many cars are,
what percentage of cars are
used at any given moment?
- 5%?
- 5%, okay.
At night it gets to that,
during the day it's about 15 to 20%
of cars are used at any given time.
So what you've got is 75 to 80%
of your capacity sitting idle.
Most of you probably drove here,
'cause we got a lot of second
years, live off campus,
your cars have been sitting there all day.
You probably drive twice a day
and then probably a couple
times there later on.
So there's a real question
of your car sits there,
it is an asset that you've
paid a lot of money for
and generates no returns
throughout the day.
Now you've seen some
services that allow you
to now rent your car
while you're not using it.
It's a little bit coogie.
If all of you could use Lyft
and it could get you here
and take you back home
and you knew you could get
it whenever you wanted it
and you could do it for 3
to $5 every time you do it.
Would you rather do that?
Or would you rather own a car?
- So for me to (mumbles) for example,
owning my own car can provide
me an additional value.
For example if I notice my car
and store some things inside my car
for long for (mumbles).
So this can allow you to do something.
- Okay, others?
- I also enjoy the value
of a spontaneous trip
somewhere further and that seems like
it would be very expensive.
- Okay, fair, okay.
- I would prefer not to have a car.
Having everything taken care of,
I don't have to deal with service,
I don't have to deal with
the stress of worrying
if my car's gonna get broken into
or paying for parking, et cetera.
So an on demand option
would be my preference.
- Okay, others?
So did anyone read Mary Maker's,
well probably most of you read
Mary Maker's latest report,
but it is 200 pages and it
was one page at like 156.
It is actually cheaper in five
cities in the United States
already to use Uber and Lyft
for anything you wanna do
than it is to own a car.
The economics roughly break
in New York of owning a car,
you have to ride about
15,000 miles a year.
When you go to driverless,
if you took the belief
that you could do driverless
with subscription,
you've eliminated some
of the maintenance cost,
but you've eliminated the driver.
The cost should probably be half.
So that will say that anyone
who drives in New York City
20,000 to 25,000 miles should
actually not own a car.
But it will also change
the breakeven economics
in a lot of other cities,
assuming you have broad availability.
(faint speaking)
- [Student] You won't
believe me when I say this,
but I'm actually not trying
to disagree on your argument.
What is the split for urban and rural?
Because I feel like in a rural area,
the dynamics and the economics
change fairly (mumbles).
- They do.
It will be the last to adopt, right?
Because you won't have the
instantaneous access to it.
In New York City you
can get an Uber probably
within three to five minutes,
in San Francisco definitely.
When you get to rural
Ohio it's gonna be harder.
If you live on 40 acres,
it's gonna take a while
to get to that spot.
It will take much time.
(faint speaking)
Yes, although the trip
would be the exact same for
whether you're driving
or whether you're in it.
- [Student] I mean like in
comparison to someone in New York
might be going Uptown or (mumbles).
- There is a real question of,
some people call it the Bubba Effect, too,
which is like I own a
car, this is what I do,
I'm not gonna get into
some other thing like that.
And also from an economic
standpoint, the economics
in less densely populated
areas would be much tougher.
It would be much slower to
adopt there much the same way
as Uber and Lyft have done it.
Hate to say it but in general
you see technology adoptions
(noise drowns out speaker).
- [Student] I actually think
that people like the ones
in this room are probably
(mumbles) living in rural areas,
some of the last to the adopt,
because we're perfectly
comfortable driving.
But if you think about
maybe lower income people
who don't have as much
access to transportation.
Maybe they only have
one car in their family,
or someone who's elderly and
lives far from the hospital.
There are a lot of services
that are popping up
around shared (mumbles) and
I think eventually those
(mumbles) like whether the
ability now is in the Midwest
that service a way for people to access
various essential services.
- That's a very good point there.
There's a lot of argument
that says you have
to figure out what is the
first or second thick use case.
What is the first use case
that people would do for it?
People who are older
who have trouble driving
at night in particular.
For me even if I don't get rid of my car,
I don't drive at night to go to dinner
all that often anymore.
Even if you have two drinks, why risk it?
Then you've got a lot of
folk who are handicapped
and have other issues to that.
The other one is the long
haul truck driving industry.
It is a very expensive,
challenging industry
that might be a use case.
But you're right, you're
gonna work through use cases
and there's gonna be use cases like rural
that are gonna take a lot longer to work.
- And another consideration
is that driving
is actually a learned skill,
so I think don't drive
because at Singapore you're
not allowed to start learning
until you're 17 and that's by then.
So the question I would ask
is what would make parents
be okay with not having their
child learn how to drive?
Because now you have a whole
new generation of people
who actually can't drive.
- Fair.
How many people grew up in New York City
or any major city area?
Okay.
Were you in Manhattan?
- [Student] Just outside.
- How far outside?
- [Student] Half hour.
- Okay, so you had to drive.
- Yeah.
- But if you look at the
people who go to college
who grew up in Manhattan,
there's a fair number
that go without an ability to drive.
We wind up with that question,
it's sort of like Dartmouth
instituted a swim test.
Maybe might not require that,
but you would get that
question of should you
at some point as a life skill learn
how to drive in the very least.
I do know some people who are older
who don't have a driver's license.
But it's a very fair question.
What else would keep it from adopting?
- [Student] Alternatives.
Really in the sense of just
creating public transportation,
which in New York City already exists,
you think about places like L.A.,
with like trying to build more tunnels
to make that more efficient.
Why do you need an individual driving car?
Or an individual car running around
when you could use some form
of public transportation?
- Have you been a lot to L.A.?
- What's that?
- Did you grow up in L.A.?
- [Student] Yeah I lived
in L.A., it's terrible.
Public transportation is
terrible although the one train
(faint speaking).
But yeah I think that there's
real value in creating
public transit in like (faint speaking)
and seeing how effective it is there.
(faint speaking)
- Yep, okay.
So New York City, I think
you're totally right.
There's enough buses, enough subways
and everything else like that.
I go to L.A. probably
once every six weeks.
The industry that first got hit by this
was the car rental industry.
I will not rent a car when I go to L.A.,
it's just not worth it, right?
I take Uber and Lyft everywhere I go.
I would love to say that I figured out
the public transportation system,
but I've not yet done that.
It's fair, you will in some spots
have such good public infrastructure
that the question will
be is it worth it, right?
Having known route and I'm
using that known route over
and over again, then
yes, I would not do that.
Fair.
Others?
- Some of the form factors,
obviously there's been
a lot of talk about Uber
and Lyft investing in
personal transportation, electric scooters
motorized transportation
not restricted to roads.
- That can be fair, I
could definitely see that.
There's actually a question of whether
it would actually go
straight to the drones.
- Yeah.
- I'm not sure I'm really willing
to think on that question.
Okay.
- What do you think the status
on the function and safety (mumbles).
They're still working
out the redundancy units.
When something fails on a vehicle,
are you staying that level for autonomy?
Or are you saying that
this car could go anywhere?
Someone from Detroit might be trying
to go to the Upper Peninsula.
Are you even leaving state boundaries?
It could be in a state localized unit
and they could be going
from the sand dunes
to ice in a matter of hours.
- Yep, so yes, I think there's
some very fair questions.
If we go through some of these areas,
have they covered all of the use cases?
Like I would not get in a
driverless car like a Tesla
and actually take it around
in this area in the snow.
We're having this discussion this morning,
like, that would terrify me.
Waymo was mainly testing
in Arizona and California,
very nice climates, very
easy, good visibility.
Yes, it will take some
time to get through that.
The question that winds
up being machine learning
and how fast you can
actually get the technology
and how fast you can get the inputs.
Right now I think Google's
at eight million miles driven autonomously
with someone either as a secondary
or even without a secondary.
The basic view is the more data you get,
the better your machine
learning algorithms will get
and the better you'll be able
to anticipate those things.
So the Michigan one where you're going
from Detroit to the Upper Peninsula
through multiple climates,
and through different types of roadways,
highways and other areas,
you'll get so much learning on it
that it'll actually be
able to cover all those.
But it will take time
'cause the early users won't
have quite as good of that and
it will only be as it builds.
- [Student] What happens, the
best of redundancy aspect,
what happens when one piece in that system
or that algorithm goes down?
The cars break?
So how does it--
- You tow it.
Yep, that's a fair question, right?
I drove up here yesterday,
there was a very good chance
my car wasn't gonna make it,
but I'm not very good, relatively new car.
Tesla has the same issue with these
do I have enough charging stations.
There are issues like
that that will come up.
The questions on those ones will be,
do you have some system in place
that can sort of accommodate for that.
If the Lidar goes, do you have the ability
to just back up into, you
know the levels clearly,
from level five autonomy,
which is the top level
autonomy back to four.
Right now Google's built,
Waymo's building their cars
with no steering wheels.
So you would have no
back up way to do that.
So that's a definite risk.
- [Student] I think the
transition period (mumbles)
in the transition period
of having real drivers
and self driving cars on
the road at the same time.
Because there's a bunch
of problems including
self driving cars
(mumbles) might be worse.
You're either gonna go super slow
'cause you'll always be limited,
to the (mumbles) that can occur
because you have this blend
of human and autonomy of the (mumbles).
So that's one of the things
I see it holding back
for a long period of time,
where that tipping point comes from.
- Yep, so in Arizona apparently
they're testing all these vehicles,
and a bunch of people adopted
who just are using the autonomous vehicles
and people are getting annoyed
because they drive so slow
and they stop so frequently
that they're going around
them at stop lights.
The vehicle's like I gotta
make sure I don't hit anybody.
If you hit somebody it's a massive story.
If you go slow, it's just an inconvenience
for the people locally.
Very fair.
- What's the conversation around privacy
because if every mile
driven increases the ability
of the algorithm to take
that data and use it to apply
to several different other
potential environments,
like do you see people opting in
to give all of their
driving data to companies?
Or is it just something where
you don't make it an option?
It's just, this is just what you give up
by driving a car like this.
- So, one, good question.
I would assume you'd have to give up that,
but on the flip side of it,
you should be able to get anonymity.
But just like you personalizing
and logging in to Google
or logging to YouTube,
but when we go to use
all the data for you,
we hash you in to something
so we can't back hash it
to somebody else.
So you would essentially get all the data
and you would know this person
with this hashing did all these things
but I would not know that's you by name.
So that's where the general
data privacy restrictions
in other areas that are going on
are gonna have a real impact on this.
Interestingly, it sort of goes then also
in the world of security.
If anyone watched The
Fast and The Furious 8,
like could somebody hack into these things
and take them all over?
There's a nuclear type
thing that you worry about.
These are all really good questions.
The other ones that I would
think of is, there's a big,
I'll come back to Google Fiber.
The government policy,
they have to do national,
state, and local,
and you have to make a lot of changes,
and governments are not
the fastest thing to move.
That's why you've seen
certain states go much faster.
California, Arizona, you'll probably see
a couple other states who'll
see the advantage of it.
Michigan will probably
be the next one to go
because if you're the big three
and you're like we need
one of these guys to win
otherwise our economy's in trouble.
So you will see some government policy,
but it's gonna be a real challenge
to get through the whole thing.
In particular, you get one bad accident,
like Tesla has had a couple of them,
and it gets massively highlighted.
And the statistic that per mile driven
you have a lot less issues
with a driverless car,
the statistic gets lost in the story.
10,000 people are a statistic,
one person's a story.
And the one person's a story
can overcome a lot of that.
In particular you might
get a government official
who's not willing to take that risk.
The infrastructure, the
belief is you're gonna
have to work on existing roads,
like changing the roads
would just be way too hard.
Go head.
- There are recent vehicle to
vehicle communication thing
that GSA wanted to do,
but it got shut down.
I was like the vehicles, to your question,
the vehicles kind of talk to each other.
I feel like that pushes the
time that self driving cars
can come actually quite
a far away down the road.
I didn't see a good answer
not to do vehicle to vehicle.
- Fair, although on the
tech value chain ideas
if you required all the cars to be able
to talk to each other, you would then need
to change 450 million, what is it?
150 to 300 million cars,
that's kind of hard.
So I think you're likely
to see autonomous cars
and regular cars out there.
Will you see some bad
behavior because of that,
to the extent that it happens?
Sure, once you know
it's an autonomous car,
you know if you cut them off,
you know they're gonna stop.
People might just start
cutting them off, right?
They might start going around.
They might start doing
some things like that,
but I can't see a world where you would go
straight from no autonomy
to full autonomy.
That's just too hard a
change to go through.
What will be interesting
to see is do you start
to see people just
naturally do it themselves?
One of the biggest challenge to the iPhone
was that corporate execs
when they got the iPhone,
they went back into their IT department
and they said hey I've got this iPhone
and I need to use it on my service
and the IT people went,
yeah, that doesn't work,
it's not secure, blah, blah, blah.
You have to stick to your Blackberry.
And the CEO said, yeah,
yeah, you're not hearing me,
I need to be able to use my iPhone.
And then they switched
all the corporate
infrastructure to do that.
So you start to see as
you get a tipping point
some of those changes actually do occur.
But it takes a long time to get there
and that was not the first use case.
Buy versus build, let me see.
This is the current number of folks
working on connected cars.
515 companies, clearly
it is not in the middle
of the Perez Surge Cycle, yet.
All of them have some kind of stake in it,
if you look at it, the venture
capital, much the same way
that venture capital's going
after the cryptocurrencies,
bitcoins, et cetera, you're
seeing massive investments here.
The question is, who's gonna win?
We know from some of
the earlier discussions,
there's gonna be one or two winners.
There can't be 515 companies,
but you'll see acquisitions,
you'll see companies get merged
and you'll see new ideas emerge
that'll make this better and better.
But the other thing you
see is 515 companies
that wanna do this will lobby,
they will push for this.
And they will create an
ecosystem 'cause they all
have something to gain.
What really changed in the
last two to three years
is GM really went after this,
now Toyota's going after it.
All those people are lobbying
against driverless cars,
'cause it hurts their business.
Now if they think they can win,
they will lobby for driverless cars.
So you get your buy versus
build, you're gonna sit down here
as a company and Google's done
this and Waymo has done this
and others will, and say what
is it I uniquely need to do?
Then where is it that I can leverage?
And I don't wanna build everything myself.
So Waymo decided not to
build the cars, right?
They helped design it, someone else does
actually all the manufacturing.
There's components in the
car, all the electric stuff,
I want someone else to do.
I strictly wanna do
the software, the Lidar
and the driving, and making
sure that it drives safely
and gets you to the right
space at the right time.
I don't wanna do the tires,
I don't wanna do the acceleration,
I don't wanna do other stuff.
So that's buy versus build.
Liability of self-driving,
massive open issue.
You guys were pointing out,
there's a lot of open
massive issues on this,
and all of these could keep
this from happening in 10 years.
When a driverless car gets in a crash,
so the Tesla one, when it
was in self driving mode
and the person got in an
accident, who pays for that?
Right now you're choosing to
put it in self driving mode.
And I think they're making
the end consumer do that.
If you have no steering
wheel, how can you be held
accountable for an accident?
You couldn't do anything.
So someone's gonna have to step in
and say they're gonna pay for that.
I hate to say that, but
that's more than likely
a large company.
A small company can't take that risk,
one accident could take them out.
But insurance is clearly
gonna need to emerge.
The Google Innovation, next waves,
the impact to the winners,
we're doing a lot around
the automotive industry.
There's Android Auto,
there's a lot of things we do
from a media standpoint,
they buy 3 to $5 million.
Globally they buy $5 billion
in advertising from us
and we're about to go into
competition with those clients.
That creates some innovation
and some checks and balances.
The interesting challenge
I think people have gotten
better and better about is
everybody knows they're gonna
collaborate in some areas
and compete in other spaces.
And to the the extent that
you just chain your swim lane,
your probably long term potential's
probably not that great.
So the people have
gotten just more and more
comfortable with that.
- [Student] What are the
likely business models
do you think, 'cause Google
hasn't had too much success
outside of the advertising business model,
but in terms of providing
software or devices necessary.
Is there still gonna be
advertising in the cards?
Or is it going to be
some other thing that--
- Yeah, I think we're gonna have to make
a model besides advertising work.
I think advertising at this point
is 85 to 90% of Google's
revenue, which yes you'd say,
okay, we're predominately that.
The cloud business has done okay,
couple of other businesses have done okay.
When we say it's 85 to 90%
that actually tells you
that 15 to $20 billion comes
from outside of advertising.
That would be a descent
size company somewhere else.
Yes, that is an issue though.
The core things we're really good at,
it's gonna have nothing to
do with the core things.
I will not be touching at all.
I work in the media sales side of it.
I will not be helping them figure out
how do we monetize that.
There might be some advertising in it,
you might do some portions of that,
but it'll be a small thing
relative to the overall service.
So, yes, there's a challenge
for Google and for anybody else
to make sure that they can do that model.
Thankfully Lyft and Uber
started to prove that model.
If you wanna do it as
a subscription model.
They started to prove it out.
Ownership versus on demand.
I think the interesting
question here is just what
is the advantage to own versus on demand.
If you know you can get a
car, so your rural question
becomes a very real one, but
if you're in an urban area
and I know I can get a car
and they'll guarantee me a car
within two minutes, why
would I ever wanna own one?
Unless it's a big
economic advantage to me.
But I probably need to
do 25,000 miles a year.
Do I wanna do that?
Now you say, car ownership's been
an important fundamental right for people
for their entire lives, but
look at all the things you now
do that are on demand that my generation
when I was growing up or
Steve's generation didn't do.
Like the idea that you would go Airbnb
and stay somewhere and not own it.
The idea that even renting versus owning
was such a big change.
People have already made that decision.
Rent the Runway came in and
created a whole new market.
Those things I think a lot of those,
there will be those
issues, the question is
will you get enough adoption without it.
Then lastly, software versus hardware.
To the earlier point on the whole frame,
if you wanna do the entire thing
you're probably hurting yourself.
The question will be
how can you interoperate
with what's already out there?
How can you make this work in most cars,
not just five or 10?
Or how can you get those five or 10
to pump enough volume that
they could really work?
I know we're gonna finish
up here, what I would say is
I don't know what the answer is.
The Google TV thing, I sort
of adamantly argued for
and I was wrong.
But I would go back to
the Bill Gates quote,
less will happen in the next two years.
There will not be a ton.
Google will go from,
or Waymo specifically will go from
eight million miles on the road
to probably 40 to 50 million,
if not a 100 million roads
and get phenomenally better.
But this is the kind of
thing we need to be perfect.
It's not like search where you're like,
oh I got a bad link, I'll just go back.
Something goes wrong it's a bigger issue.
But if you look at the value
that get created on this
and you go back to the
jobs to be done and you say
I need to get from place A
to place B and I don't wanna
spend that incredibly much money.
If you actually look at how
much you spend even sitting here
in this room on your
cars on a monthly basis,
if you could take that down by
half and get the same quality
of service, would you
be willing to do that?
And not worry about DWIs,
not worry about taking
your kids to school.
My mother's 82 and she
still drives her own car.
I'm like, oh God, that gives me anxiety.
Versus not worry about those things.
If you can fit within the
existing infrastructure
and make it so that it's a
smaller change for individuals
so that the first time you
do a car it's not I'm gonna
go switch over and go whole
hog and buy this thing.
It's that I'm gonna increment
it the same way I did
Uber and Lyft, and then when
a big decision comes up,
then I make that decision.
I don't switch from I'm not
gonna have a driverless car
to I'm only gonna be self driving.
You're gonna go and take it a few times
in probably major cities
'cause there'll be a service.
You'll keep buying that
service for a little while.
Then you'll start to get to the point
where you're like, okay,
I'm using it more and more
and it comes to your area.
And then you finally get to
the spot where you're like
I need to buy a new car,
do I wanna spend $50,000 to do that
or am I better off just
actually relying on the service.
And so you'll have a slow road to do that.
That is sort of the
question that I would argue
that something like this is gonna happen.
But I would also then say
that's the current path ahead
which you can see and I'll
go back to Bill Gates,
less happened in two
but more happened in 10
and say that's probably actually bigger
than what I'm actually anticipating.
You could see the drones, you
could see other models emerge,
but I personally think it's
highly likely that my children
will drive, my kids are 10 and 15,
they're definitely gonna drive.
And I won't let them go off to college
without actually having learned to drive,
nor will they let themselves.
But I think it's likely
that children of the people
in high school or even your generation,
that could be 20 years from now,
will they drive predominately?
Or will they even just say I
don't even need to do it all?
I think that's a real question.
Thanks for the debate,
that was a lot of fun.
- Thank you.
- Thank you.
(class applauding)
- [Patrick] I just wanna
thank you for coming.
