One of the more exciting new technologies just starting to edge its way into mainstream society is the self-driving car. Pioneered by companies such as Google, these vehicles are still in the development phase, though there are some models that are due out within the next few years that incorporate slimmed-down autonomous features, such as self-parking modes.
Other than allowing for drivers to weasel out of the intimidating task of parallel parking, and eventually having to pay attention to the road altogether, it seems that self-driving vehicles are something we should all be looking forward to. But will the technology live up to the hype?
Business magnate Warren Buffett recently weighed in on the prospect of self-driving cars successfully integrating into society on MSN, which also posted video content of the discussion.
“It will be a reality at some point. I think it’s a long way off. The truth is, if it’s a safer way of driving, it’s good for society and it’s bad for our insurance business. But that can happen… If you can come up with anything involved with driving that can cut accidents by 30%, 40%, or 50%, that would be wonderful. But we would not be holding a party at our insurance company,” Buffet said during the conversation.
What Buffett is getting at is an important point when discussing changing or evolving technology — it’s good for some people and bad for others. In this case, society as a whole will probably benefit in a large way from the advent of self-driving vehicles. Accidents, in all likelihood, will decrease. Traffic and congestion on busy city streets and highways could be alleviated. Police officers and emergency responders will see more of their time and resources liberated. These should be considered net positives for society.
On the flip side, however, there are industries that will be hurt. Buffett pointed to the insurance industry as one (Buffett’s Berkshire Hathaway holding company owns several insurance companies, including Geico). Gas, car, and transportation companies are also threatened in a big way.
As self-driving technology continues to improve, one big question is exactly how soon it will be implemented. Car companies are already gearing up for the big switch, which gives the impression that self-driving cars may arrive at dealer lots a whole lot faster than people think. But as Buffett mentioned, it could very well be a ways off.
“If I had to take the over or under on 10% (market) penetration in 2030, I would take the under,” Buffett said. “There’s plenty of people that would disagree with me on that.”
In fact, Buffett may be off on his calculations. Some analysts think that self-driving autonomous vehicles will constitute the majority of the market as soon as 2026. ABI Research released a study that estimates approximately half of all new car sales will involve self-driving vehicles by 2032. Navigant Research says that 95 million, or 75%, of all light-duty vehicle sales will involve self-driving cars by 2035.
Clearly, we know it’s coming. There just isn’t a consensus as to when.
What remains to be seen is what happens when the new wave of vehicle technology does hit. How do incumbent businesses, like those in the insurance industry, adapt? As people are able to get by without leaving their car in a parking lot all day while they’re at work (a self-driving car would be able to run errands, or transport others on its own, after all), how will car companies change their models to make up for declining sales numbers?
There is no clear answer. There is a laundry list of industries that will be affected, and millions of people will likely see their jobs disappear as they are replaced by artificial intelligence. It’s going to be a monumental shift, that again, will have many benefits for society. The change will still be painful for select groups. Buffett knows this, and he’s fairly blunt about how it will impact his own ventures.
On the other hand, perhaps Buffett is wrong about how his business interests will be affected. The insurance industry could, after all, come out ahead. If drivers are still required to have their vehicles insured, which means they are still paying premiums, and the number of claims is reduced through diminished accident risk, it would seem that self-driving vehicles would be, in fact, a boon for business.
Again, we just won’t know until the chips actually start falling. Buffett, as always, has some interesting insight. But how things end up playing out will likely be different than anyone can predict.
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