Out of a job!

Out of a job!

Tesla are making maps, and why not? It used to cost billions of dollars to go collect the data, now the customers do it for free. The sensor packages in phones, let alone in the car, have put the power of geography in everyone’s hands.

We used to do this with volunteers in OpenStreetMap but now even that will be superseded. Armed with cameras, GPS, radar and sonar, a car can just capture all the data and (pretty much) make a map automatically, for free. It’s happening for two reasons:

  1. The costs are now so low. The old model of paying people to drive around expensive vehicles to capture data is too expensive and takes too long. Even if you did drive every road, every year, it still isn’t good enough for autonomous driving.
  2. The incentives are so high. If you were Tesla would you want a dependency in Google for maps? Really, would you want a dependency on anyone now that the cost is zero?

I was talking to someone recently who’s 18 or so. They literally thought “encyclopedia” meant “wikipedia”. Digging in their memory they remembered that there used to be sets of books (Britannica) too, but not anything else. That’s how maps are going to go, in a sense.

When proprietary map companies drive around expensive cars to collect data they had to pay for the car, the equipment and the people. Tesla has their customers to pay for all of that. They’ll have a fixed cost in building software to capture the data and then amortize that very quickly so the effective cost for them to build one of the best maps of the world is going to be… zero dollars.

StreetView cars are going to go away, it will just be every car taking photos all the time.

Implications

The number of maps is going to explode. It used to be that pretty much just two companies held map data for the US and EU; NavTeq and TeleAtlas. Now there are five: Google, Waze, OSM, TomTom and Nokia. Correction, now there are six with Tesla. We can argue over their relative qualities, OSM lacks geocoding, Tesla probably does too and so on. But it’s coming.

And those are just the public ones. There are a bunch of logistics companies and governments who have their own maps.

The list of people who might want their own map, and be in a position to build it, is large. Every car company, every decent-sized tech company, every location company (Garmin to Strava). The arms race is now on.

As the number of maps goes up, the value per-map is going down. That means that you should probably short anyone reliant on proprietary map revenue for their future. OpenStreetMap is pretty comfortable because the dollar cost of OSM is already zero so there aren’t any adjustments to be made, except perhaps that the incentives to help complete a free map of the world are going away, if everyone has maps and the value is dropping so precipitiously.

You could argue that price of maps won’t change since Google, Waze and Tesla will keep their maps to themselves. And yes, maybe. But it’s more likely not since they are removing themselves (and their dollars) from the customer pool. One of the new maps will be made available at some point too, they won’t all be locked up.

So the value that used to be in the map data will move up the stack, right?

Actually I’m not so sure. Charlie Munger has this nice story about textiles where some factory making fabric bought some machine that made them 20% cheaper, or whatever. They were proud of this. But of course, every other factory does the same thing and the value doesn’t go to the factories but to the consumer. The consumer wins not the factory.

The primary way map service companies got their valuations was waving around the Nokia acquisition as a bellwether for value. But Nokia actually owned something – map data. If you’re providing services then you need something else, like large long-term customer deals to provide map services to anchor you.

The cost for anyone to start doing basic map service work is… zero. So we should expect a bunch of competition in that sector. And of course, thanks to Google making maps free to the consumer, everyone thinks maps are free so the actual dollars you get from developers or whatever are pretty thin.

So at the top end, your customers are going to go make their own maps and at the bottom end, Google, Apple and so on are making maps free. It’s a tough spot, but luckily there’s probably a decade in there to figure it out.

Further Out, 10-30 years

The interesting implication is that creating a map will cost zero for Tesla, doesn’t mean it’s zero for everyone. It’s very beneficial to have a convenient fleet of sensors out on the roads. But that too is changing. Everyone and their brother is building self-driving cars.

But will there be a market for them?

It’s deeply interesting. A lot of the models seem to be predicated upon everyone buying two self-driving cars like today every household buys two cars. That just seems really unlikely. It looks more likely that instead of two cars I buy one self-driving car and rearrange life a tiny bit, since when I’m done with it, it can drive home and help someone else.

So the market could easily drop 50%. But wait, there’s more!

Why would I have one at all? Pizza Hut will have them. They’ll send a car to pick me up and run an errand so long as I stop in for pizza. Or if I want to visit a friend, they can just send their car to pick me up. Or, one of the ride-sharing services. So, really, would I buy a self-driving car at all? So if it’s mostly fleets buying the things, you can kiss goodbye to the network of dealers. And since most of these things will be electric, the current network of maintenance shops is going to go away.

At minimum the landscape around driving is going to change dramatically. It’s hard to see drive-thrus working out like they do today, or taxi companies… or mapping companies.

Because in a world of self-driving cars, why do we need traffic lights? Why would we need stop signs or lane markings? How much paint do we use every year to mark lines on roads? Will we need roads? No – we won’t need roads covered in asphalt, we only need the parts the wheels go on covered and can leave a gap in the middle of weaker, or no, material. So the cost of building or maintaining a freeway is going to drop off a cliff too.

And in that world, maps themselves are going to be completely different. Why would you need street signs? In fact, why name anything at all? The name of the highway you’re on is completely meaningless since you don’t use that information, the car does.

Fun times.