Buckle Up Silicon Valley

In the 1980’s blockbuster Back to the Future, flying cars are an ubiquitous reality in the then far-away future of 2015.  While that concept seems just as futuristic today as it did a generation ago, the autonomous self-driving car has quickly moved from prototype to reality here in Silicon Valley.

With the average car moving just 5% of the time, Google, Tesla, Uber and a number of Bay Area start-ups are competing to develop a winning shared economy solution.  In the last year alone, Uber tested its first autonomous vehicles in Pittsburgh (and then briefly in San Francisco); the self-driving truck company Otto made its first delivery; self-driving tractors began plowing fields; Google spun-off Waymo, their self-driving car division; GM partnered with Lyft on an electric self-driving car; and Tesla announced that its new cars would be fully capable of driving themselves by the end of 2017. 

Given the intensity of the current research and development effort, it is expected that within a generation, the debate will be whether humans should be allowed to take control of the wheel at all.  By the year 2025, it is now predicted that the majority of transportation in cities with temperate weather may likely be on demand, shared and likely autonomous.  And for those fortunate enough to participate in this transportation sea-change, the effective cost of car ownership is estimated to fall over this period by almost 75%. 

Eventually, owning a car will no longer be necessary or even cost effective for most of the country.  Location and distance will no longer be the barriers they are today as designated self-driving car lanes will allow these vehicles to safely travel at speeds well in excess of 100 mph.  A commute from Sacramento to San Francisco will occur in about 45 minutes and you may opt to drive to Los Angeles rather than fly, particularly without the hassle of long security lines.  With fewer cars required per person, city planners will begin reconstructing downtowns, turning some thoroughfares into pedestrian walkways - and some parking lots… into parks.  Steering wheels will disappear and car interiors will evolve to look more like comfortable living rooms.  Ultimately, accidents will dramatically decrease, making the need for heavy steel protective beams, bumpers and seat belts obsolete - creating lighter, more fuel efficient vehicles.

While it is too early to pick the ultimate winners and losers in the stock market, there will certainly be significant disruption in the world along the way, particularly for the almost 4 million people in this country who drive for a living.  The automotive industry may well be under pressure as it adjusts to far fewer cars needed per family - and people will likely stop caring about luxury or performance car brands.  Airlines will be challenged by high-speed cars over their shorter-haul routes.  And real estate industry trends will have to adjust to changing land use patterns - as reverse urbanization unfolds for the first time in close to a hundred years. 

And one day, your grandchildren will likely ask you what it was like to actually drive a car.  While some of you will miss the control - and enjoyment - you will likely respond that it was unnecessarily dangerous, very wasteful and they are lucky to have a better way of life.  But of course by then, they will be focused on how to borrow your new flying car for the weekend.

This information has been developed internally and/or obtained from sources that Sand Hill Global Advisors, LLC (“SHGA”), believes to be reliable; however, SHGA does not guarantee the accuracy, adequacy or completeness of such information nor do we guarantee the appropriateness of any investment approach or security referred to for any particular investor. This material is provided for informational purposes only and is not advice or a recommendation for the purchase or sale of any security. This information reflects subjective judgments and assumptions, and unexpected events may occur. Therefore, there can be no assurance that developments will transpire as forecasted. This material reflects the opinion of SHGA on the date made and is subject to change at any time without notice. SHGA has no obligation to update this material. We do not suggest that any strategy described herein is applicable to every client of or portfolio managed by SHGA. In preparing this material, SHGA has not taken into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, you should consider, with or without the assistance of a professional advisor, whether the information provided in this material is appropriate in light of your particular investment needs, objectives and financial circumstances. Transactions in securities give rise to substantial risk and are not suitable for all investors. No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means, or (ii) redistributed without the prior written consent of SHGA.