I’m not enamored with technology, I suck at math, and I have no aptitude for science. Lacking the smarts for these disciplines, I grew up fearing that I would go through life forever riding the proverbial special bus, as my father, a brilliant accountant, didn’t see much of a lucrative future for those attracted to the humanities. I drove a taxi while attending college, and honestly thought that might be my professional calling.
What’s propelled my career in journalism and public relations was my superior ability to know bullshit when I see or hear it. The technical term for my BS radar is common sense, a trait I’ve come to appreciate is lacking in many of those overseeing America’s technological advancements and change. Wall Street has also been overtaken by people lacking common sense, which is why there’s so much volatility and most active money managers underperform their benchmarks. Warren Buffett, Ray Dalio, and David Tepper are rare exceptions, but I doubt they make their investment decisions based on what they read in the media, watching Jim Cramer on CNBC, or heeding Kim Kardashian’s crypto recommendations.
In the past year I’ve developed an interest in electric vehicles, out of fear rather than an excitement about the technology. The rush to displace century-old gas engine technology strikes me as unwise, particularly given the effort is being driven by government fiat and championed by legacy media journalists who believe that EVs will magically mitigate climate change, despite some evidence to the contrary. While Elon Musk is indisputably brilliant, I’ve questioned his ethics and integrity, character flaws that have felled many other exceptionally talented executives. That Wall Street at times has given Tesla a valuation more than the combined values of all the legacy automakers meets my definition of insanity.
This morning I awoke to this story by Bloomberg reporter Max Chafkin, headlined: “Even After $100 Billion, Self-Driving Cars Are Going Nowhere. They were supposed to be the future. But prominent detractors—including Anthony Levandowski, who pioneered the industry—are getting louder as the losses get bigger.” Chafkin either eschews EV industry Kool-Aid or has developed an immunity to it; his story is a modern-day version of the literary folktale “The Emperor’s New Clothes,” in which only a young boy has the audacity to notice and say that despite an Emperor’s grandiose sartorial claims, he is stark naked.
Chafkin’s story validates my worst fears about EV technology, my skepticism about Musk and GM CEO Mary Barra, and my belief that Wall Street is a mug’s game that only a rare few understand or can manipulate to their advantage. I’m not being overly dramatic: Chafkin quotes George Hotz, whose company Comma.ai Inc. makes a driver-assistance system similar to Tesla’s Autopilot, as saying the self-driving industry is a “scam” where companies “have squandered tens of billions of dollars.”
Chafkin isn’t the first person to warn about the grandiose claims of self-driving technology pioneers and their journalist enablers. San Francisco’s transit bosses recently submitted a scathing 39-page letter to the National Highway Traffic Safety Administration warning that autonomous vehicles operated by GM’s Cruise self-driving subsidiary were wreaking havoc on city streets and were so problem plagued they “could quickly exhaust emergency response resources and could undermine public confidence in all automated driving technology.”
California’s Department of Motor Vehicles in August accused Tesla of falsely representing the company’s Autopilot and self-driving features. Others have also warned about Tesla’s grandiose claims.
What makes Chafkin’s story ground-breaking is his revelation that self-driving vehicles are at best years away from becoming a practical reality on America’s streets, if ever. Those sounding the alarm aren’t skeptics seated in the technology bleachers but people who were once at the forefront of touting self-driving technology.
People like Anthony Levandowski, who helped pioneer self-driving technology and was deemed so critical that when he left Google’s self-driving subsidiary to join Uber it sparked a multibillion lawsuit and allegations that would have landed him in jail had President Trump not pardoned him.
“You’d be hard-pressed to find another industry that’s invested so many dollars in R&D and that has delivered so little,” Levandowski told Chafkin. “Forget about profits—what’s the combined revenue of all the robo-taxi, robo-truck, robo-whatever companies? Is it a million dollars? Maybe. I think it’s more like zero.”
I urge you to read Chafkin’s feature, as I can’t do justice summarizing its detailed analysis backed by on-the-record quotes and insights from very credible individuals. But here are some of the details I found particularly noteworthy.
GM’s Cruise is worth more than its car and truck businesses
Chafkin says GM’s Cruise self-driving subsidiary is valued at $30 billion, as is Waymo, Alphabet’s self-driving unit. As of this writing, Wall Street values GM at $49 billion, which suggests the value placed on GM’s entire vehicle manufacturing business is less than $20 billion. This despite GM CEO Mary Barra promising by mid-century she will sell more EVs than Tesla, which is currently valued at $699 billion.
Barra earlier this year posted on LinkedIn that Cruise was “on the cusp of commercialization.” There is an abundance of evidence to suggest that Barra made a materially false claim, one that should be investigated by the SEC.
Cathie Wood’s $30 trillion projections
Chafkin says that Cathie Wood, the famed Tesla bull, was among those who projected that the self-driving industry would become a $30 trillion industry.
Wood in April disclosed that she met with GM’s Barra and was fascinated by how the executive was “really turning that ship around,” citing the CEO’s focus on “cruise automation.” Wood’s flagship technology fund is down 62 percent this year, while the ETF tracking the NASDAQ index has declined 33 percent.
SARK, an ETF that allows investors to bet against Wood’s investment judgment, is up 70 percent so far this year.
Elon Musk’s deceptive demo
In 2017, Elon Musk unveiled a demo of a Tesla driving itself with “Paint It Black” playing the background. Levandowski checked the official road-test data that Tesla submitted to California regulators. The figures showed that, in that time, the number of autonomous miles Tesla had driven on public roads in the state was zero.
Yes, zero.
Waymo’s deceptive safety claims
Waymo claims that its self-driving vehicles are safer in some circumstances than humans, and cites “test results” to back up its claims. Chafkin says the test results are mostly simulations, not real-world driving experiences. He says the real-world safety figures are much less conclusive, and that Waymo is basically where it was five years ago. (Waymo disputes this.)
The humans are bad drivers myth
The justification for self-driving vehicles is that humans are really bad drivers, and computers could navigate roads considerably more safely. But Hotz, the driver assistant technology expert, disputes this claim.
“Humans are really, really good drivers—absurdly good,” Hotz told Chafkin.
Traffic deaths are rare, amounting to one person for about every 100 million miles, according to the National Highway Traffic Safety Administration. But that number is deceptive because fatal accidents are largely caused by reckless behavior—speeding, drunks, texters, and people who fall asleep at the wheel.
The real-world data suggests that autonomous cars have been involved in accidents more frequently than human-driven ones, with rear-end collisions being especially common.
Seems to me that if safety is the primary reason for self-driving technology, outfitting vehicles with readily available technology that prevents driving while under the influence and the disengagement of wireless phones when vehicles are in motion could dramatically improve human driving statistics.
Chafkin’s feature is an eye-opening read. Bloomberg should take considerable pride for publishing it.