The Driver-less Car Bet

We have talked in previous posts about how to be a successful investor one needs to be optimistic about the future. This optimism can be seen in the tremendous progress that technology is having in many aspects of our lives.  Technology is making our lives easier, more productive and allowing us to remain healthier longer than any generation before us.

One of the great future breakthroughs will be the driver-less car.  I currently have a running friendly bet with my youngest daughter Elizabeth that there will be many driver-less cars operating in the United States before the end of 2025.

Elizabeth believes that there will be too many accidents caused by the driver-less cars. You can tell she’s only been driving a few years as her faith in other drivers’ skills is overrated.

According to insurance industry experts,  this huge leap in technology will in fact reduce the number of automobile accidents.  Every year 40,000 people are killed in traffic accidents in the U.S. and regulators estimate that human error caused approximately 95%.

So much so that the leading auto insurance industry carriers such as Allstate, Geico and State Farm are coming to terms with the fact that these innovations may in fact  significantly  reduce their revenues. Donald Light, head of the North America property and casualty practice for Celent research firm has stated the following:

Premiums consumers pay could drop as much as 60% in 15 years as self-driving cars hit the roads

We’ve spoken in the past about the creative destruction that capitalism causes. This may be one more example with the outcome of this change being that all of us will have the opportunity to be more productive as we commute to work or to visit friends and family.  In addition, even with the added safety features of the modern-day cars such as airbags and anti-lock brakes, the reduced accidents using this technology will result in reduced deaths and thus longer longevity.

Some very successful companies such as Google and Uber have divisions working to accomplish a self driving car.  The early results are very promising and they are working on trying to overcome the issues related to weather conditions (such as fog) or construction zones (which divert cars into off-road lanes to avoid the construction zone).

General Motors’ (GM) President Dan Ammann has stated in the past that the technology is available to make autonomous cars, and the change that is taking place with personal taxis (such as Uber and Lyft) as well as ride sharing will drive the innovation forward. GM has autonomous cars currently being tested in San Francisco, CA, Scottsdale, AZ, and in Michigan.  The company is planning to tackle New York City soon.  Ammann stated that the company is collecting tremendous data which will help them achieve this process.

We have already seen improved safety and decreased insurance claims from some of the technologies being added now with the driver.  The 2014 study of insurance claims data by the Highway Loss Data Institute documented that bodily injury liability losses dropped 40% and medical payments decreased 27% in 2013  with the recent technology improvements in the Honda Accord.  The technology involves having a beep when cars get too close to the traffic ahead.  It is just the beginning.

I don’t believe we will need to wait long to be able to purchase one of these driver-less cars.  Who thought we would be able to experience what are ancestors experienced when they got to move from horse driven transportation into the horseless carriage developed by Henry Ford.

Who will be our generations’ Henry Ford of mass transportation?

And now this just in….

Volvo Cars said it has agreed to supply Uber Technologies with a fleet of 24,000 self-driving taxis beginning in 2019–one of the first and biggest commercial orders for such vehicles.

The deal between Volvo, owned by China’s Zhejiang Geely Holding Group, and Uber was disclosed as a framework agreement without financial terms. Such an order, though, would account for about 4.5% of Volvo’s current total sales, based on 2016 figures, and is estimated to be worth just over $1 billion, a person familiar with the situation said.

I, for one, look forward to picking up my winning bet from daughter Elizabeth in 2022 when I sit in the back seat of my driver-less car.

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The foregoing content reflects the opinions of Crimmins Wealth Management and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. All investing involves risk, including the potential for loss of principal. There is no guarantee that any investment plan or strategy will be successful.

About Dan Crimmins

Dan Crimmins, co-founder of Crimmins Wealth Management, is a financial coach and fee only financial planner. Have a financial question? ASK DAN

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