Transportation

Innovation Will Power Growth

A long, long time ago, when I was on the trading floor, I’d run into and interact with some very smart people. One of them was Peter Yastrow. He and I would do CNBC/Bloomberg/Fox Business hits every so often. YAZ ran a desk and sent options and futures business into the Eurodollars. He lives in Miami now, and we are still good friends.

One conversation I had with him always stuck with me. It was the early 2000s. We were talking about innovation and where we would find growth, or exponential growth. YAZ asserted that when we saw huge jumps in worldwide standards of living and growth, inevitably, it was tied to transportation innovation.

Think back over human history. We walked. Someone invented the wheel. We pulled stuff and then had animals pull stuff. Animals pulled stuff for humans for centuries. We went from rowing boats, to sails, to steam to diesel. That made it quicker to go against the current in rivers and over waves in the ocean. The military uses nuclear-powered submarines and ships. Trains were invented. They went from steam to diesel. People could get places. The reason Chicago beat St. Louis in terms of city growth and size was that all the train lines came to Chicago. The internal combustion engine made it possible to deliver the last mile by car or truck, which was way more efficient than animal and cart. We innovated by building planes. That got cargo and people places faster.

In Peter Zeihan’s book, “The End of The World Is Just Beginning”, he talks about transportation as it pertains to supply chains. Cargo boats can only cross the ocean so fast. When Trump envisions re-shoring, my guess is that it relates to supply chains and inventory costs. It’s not about how the mainstream press frames the issue.

Of course, all these forms of transportation became more efficient, meaning better and faster.

One thing about some innovation. It takes about 30 years to manifest itself deeply in the economy to have an outsize impact. Trains might have been invented, but we had to lay the track. The internet went mainstream in the early 1990s, and we now have integrated it everywhere. AI, crypto, robots, driverless vehicles and other innovations are just beginning.

For transportation, though, as long as the infrastructure is good enough, people can adopt faster and turn that adoption into economic gains more quickly.

In the early 2000s, we were sort of stuck. Sure, high-speed rail happened, but it only works in certain areas for a lot of reasons. It’s still faster to fly from Chicago to St. Louis than it would be to take a high-speed bullet train, assuming one existed. We have seen folly after folly with high-speed rail in America. Boom Planes are more exciting.

That is until today. I saw this article, and it’s pretty exciting. You’d have to watch the videos.

Here is the thing. It’s early in the game for driverless vehicles. When I went to a Chicago Economic Club speech by the CEO of GM, Mary Barra, back in 2014 or so, she said it was 20 years away. She said we needed “sensors” in roads and signs, and other infrastructure modifications to accomplish full self-driving.

She was wrong. Not by a little. By a lot.

I lease a Tesla($TSLA). I have used the full self-driving and it is freaky at first, but it is amazing. That’s anecdotal. It is a fantastic around-town car. I have solar panels, so I charge for free. It is much safer to drive than my other cars.

How about some data?

In San Francisco, driverless Waymo is already beating Lyft and soon will overtake Uber. No tips for a Waymo driverless taxi. No health insurance. No unions. No sick days. More importantly, far fewer accidents.

Data from Tesla shows they are in fewer accidents. Here is their data from Q1 of this year: In the 1st quarter, we recorded one crash for every 7.44 million miles driven in which drivers were using Autopilot technology. For drivers who were not using Autopilot technology, we recorded one crash for every 1.51 million miles driven. By comparison, the most recent data available from NHTSA and FHWA (from 2023) shows that in the United States there was an automobile crash approximately every 702,000 miles.

Using Grok to just do fossil fuel vehicles, this is what it said: Using the general U.S. average from 2021 NHTSA and FHWA data, approximately 652,000 miles are driven per car crash across all vehicle types. Since fossil fuel vehicles represent the vast majority, their crash rate is likely close to this figure, potentially ranging from 500,000 to 700,000 miles per crash depending on factors like driver demographics, vehicle age, and driving conditions.

Insurance rates in America should drop precipitously.

Someday soon, we will have driverless freight on interstates. Driverless freight trains. They may or may not be powered with electric batteries, but frankly, it doesn’t matter. Did I mention robots? Robots in factories, in grocery stores, on loading docks, in all types of construction. Robots at home.

The change is going to have big and everlasting effects on more than just the energy and insurance industry. The snack industry does a huge business at the service station, and when people aren’t going to them, that volume goes somewhere else. Service stations may or may not need people. Robots might be able to do what’s needed to refuel or repower vehicles.

But, this stuff will take mountains and mountains of energy and data centers to store programs, which need mountains and mountains of energy.

There is only one way to get it. It’s not drill baby drill, though we do need to do that. Having a ton of natural gas and crude oil at our disposal is a great idea. But, for an on-demand innovation energy economy, it’s nuclear power. Nuke baby nuke.

I am pretty sure that neither YAZ nor I saw AI/Robots/self-driving vehicles back in the day, and for sure, we wouldn’t have been able to project how big of an economic impact it would make.

But Peter’s core thesis stands the test of time over human history. When we innovate on how we transport from here to there, unbelievable economic impacts are felt, and society propels itself forward.