Why petrol cars will not exist in 10 years

tesla charging

If you haven’t already realised, cars are no longer machines, but rolling computers. This also means that cars will move from being powered by fossil fuel engines to electric motors. It’s already started, and it is going to happen much more quickly than we anticipate. I’d go as far to predict that there will hardly be a petrol car on the road in 10 years. Here’s why:

When cars transition to rolling computers, the Law of Accelerating Returns applies. Innovation goes from incremental and factory-based to curve-jumping and technology-driven. You’ve probably heard of Moore’s Law – the maxim that states that computing power will double roughly every 18 months while prices halve. This maxim and many other accelerating technology laws will apply to the production of cars, laws which make the end product better and cheaper by significant degrees. The revolution which transformed smart phones, cameras, laptops, solar panels and flat screen TVs is about impact the auto industry.  Let’s take the pricing example of the Tesla Electric car range:

1st car – Tesla Roadster:  $109,000 (released 2006)

2nd car – Tesla Model S: $75,000 (released 2012)

3rd car – Tesla Model 3: $35,000 (projected – release due 2016)

Not only has each model been progressively cheaper, but also far better in terms of range (distance per battery charge), safety and features.

It’s the same pricing pattern we saw during the personal computing revolution. Here is where we get an entire curve jump. The Tesla model 3 is so cheap that an electric car is no longer a plaything for Silicon Valley types, but a viable new car option for everyone. This is because the switching costs get very close to zero. Why? Because the running costs of having a Tesla Electric car does not include the cost of petrol. (Tesla already have 453 free super charging stations and the cost to fully charge the battery at home is around $3). This means the average consumer can use their saved petrol money towards acquiring a brand new car without increasing their weekly expenditure. For example:

Model 3 Tesla

  • Cost to buy = $35,000
  • Avg petrol p.a. = $3,120
  • New funds available = 8.9% of purchase price.
  • Avg Cost new car finance = 6-7% unsecured interest rate.

When the Model 3 arrives, it only takes some creative financiers to change the landscape of the auto industry virtually overnight.

Want a new car at no cost?*

*Just give us your weekly petrol bill and drive away in a sexy new high tech Tesla!

It’s when this happens that we transition to an all-electric car world. The transition will be as swift as the smart phone – in a few short years, non-electric cars will be a lot like feature phones.

This is exactly how disruption happens. It’s not the product itself, but often the change in the business model around it which leaves industry incumbents blindsided. When there’s an opportunity for consumers to get into a superior product with low or no switching costs, they will always take it.

Buckle your seat belt.

Australia’s top rated TV show – Do you know it?

Screen Shot 2015-06-29 at 1.40.31 pm

This is Troye. He is the host of Australia’s top rated TV show. He gets more than a million viewers every week. He has been around for a few years now and yet I never see him featured in the Nielsen ratings. I find it curious.

Sure Troye isn’t on channel 7, 9, 10, ABC, SBS or even on Foxtel. He’s on Youtube. But tell his 4.3 million subscribers that he isn’t on TV and you’ll get a dumbfounded look. They might even tell you they already watch it in their lounge room, stream it from their phone to the family flat screen, watch it on their laptop or on any audio visual enabled device. And that’s exactly the point, what is TV? A screen in a lounge room, or something which serves up audio visual content?

The easiest way for any company to get disrupted is to define the market by traditional infrastructure instead of how needs get met.

New Book – The Great Fragmentation – out now.

Yes, the robots will take your job, but…

Bison Hunter

…there are not that many bison hunters any more.

This is a very short way of saying that all jobs eventually get replaced by technology. Technology will take the role of many white collar jobs, just like machines have taken away many blue collar jobs, just like the plough took away many farming jobs. Technological Unemployment will always be a fixture in human existence – and always has been. It just so happens that it doesn’t sell newspapers (or provide click bait) to tell the truth that new jobs will be created. But it seems like a week doesn’t go past without a new report flagging the end of millions of jobs. So here’s a counter mind jam of some new jobs recently created that no one is writing economic reports on:

UX Designer, App developer, Drone Pilot, Crowd Funding Advisor, Smart Phone Game Developer, Blogger, Podcaster, Social Media Specialist, Wikipedia Moderator, Content Curator, Community Manager, Uber Driver, Airbnb Host, Web Videographer, Youtube Content Creator, Vine Artist, e-Book Publisher, Bitcoin Trader, Bitcoin Miner, E-Commerce Consultant, SEO Specialist, Genetics Counsellor, Sustainability Advisor, Citizen Journalist, MOOCs tutor, Big Data Analyst, Cloud Services Specialist…

And this list is just small sample set from my perspective. I’m sure your industry or worldview could make the list much larger. In fact, there are currently more than 500,000 app developers in the USA alone. A job that didn’t exist pre smart phone.

A simple economic fact is that if a person has $100 in their wallet, it still gets spent. In 1995 $10 of that $100 might have went into getting filmed developed. Now it goes elsewhere, maybe towards the cost of a smart phone monthly fee. The money always gets spent, saved or invested. The allocation just changes. And so do the jobs around those expenditure allocations. If you want to be future proof, I suggest you pay close attention to what your friends are spending their time and money on. It’s always where tomorrows jobs and startup opportunities lie.

The crazy thing about all those ‘new jobs’ above is this: They are all learnable, and mostly for free. All you need is these two assets: (1) The ability to read. (2) A connection to the internet (I’m guessing you have these). But yes, they all take effort. And no, the Government or your Boss won’t save you, or pay you to learn any of them. No one can do your push ups for you. But if you’ll make the effort, the rewards are there. The new jobs, and more importantly ‘business opportunities’ around them are ripe in these realms and they often pay more than job X did yesterday. Guess who earns more: A small screen UX Designer, or a Graphic Designer doing page layouts for a print magazine? Same realm, but a different iteration and attitude to learning. It’s really just a choice between taking advantage of the opportunities, or wishing the world was like yesterday.

Yes, the pace of change is scary. Yes, things are changing at a rapid pace, but it’s never been more possible to up-skill, re-skill or new-skill in the history of humanity. So next time you read a report on the impending doom of your industry, job or financial future, just remember that it is your decision on how it will affect you.

New Book – The Great Fragmentation – out now.

How toilet paper weirdly tells a story of industrial disruption

Screen Shot 2015-04-12 at 8.49.08 pm

If you’ve been wondering recently why you use so much toilet paper. Why it seems every year you’re buying more rolls than ever before. Wonder no more. As a bonus you’ll also find out with a weird example how so many industrial companies sow the seeds of their own disruption.

The first every job I held with a big company after graduating was with Kimberly Clark. An American multinational paper goods manufacturer. A big brand of theirs is Kleenex. The market leading toilet paper which we now buy giant packs of up to 24 rolls. But it wasn’t always this way. When I started working there more than 20 years ago the best selling package size of toilet paper was a 4 pack. Did we all of a sudden start going to the toilet more frequently to require more toilet paper? If not, then how is it that most families could survive on a 4 or 6 roll pack from the weekly shop and now we need to purchase to a 24 roll pack?

Here’s how:

When I started working at Kimberly Clark most toilet rolls had between 300 and 500 sheets (paper squares) per roll. Some brands had up to 1000 sheets per roll. But what I discovered as a few years went by is that instead of raising the price, the company would simply remove 10 or 20 sheets per year. They did this as they believed that consumers are more sensitive about price than quantity. It’s a popular fast moving consumer goods ‘pricing‘ tactic to maintain profitability without changing the selling price. Kleenex Cottonelle is now down to 180 sheets per roll. In addition to this Kleenex Cottonelle is 1 ply, and the Kleenex brand it replaced was 2 ply. Some toilet papers are down to 100 sheets per roll. They even increase the size of the core of the roll to keep the same perceived roll width. So there is your answer. Each roll we buy these days has far less paper on it. Often by a factors of 4, 6 and even 10. This is why we need to buy packs which are 4x times the size. But the paper companies got what they wanted, they kept their prices per roll roughly the same.

But this goes deeper than a story of bathroom anthropology. It tells the story of how many large legacy companies are coming undone. It’s a story of their industrial mindset. And that mindset is as follows: They’d rather give their customers less for the same price than be transparent. In fact, it’s exactly what industrialists do, they want to get more for less, every single year. But in a strange kind of reversal, they end up costing themselves more and giving themselves less. Their cost per roll in distribution, and packaging goes up. And their cost per tonne of what they sell in retail margins increases. And it is of course a race to the bottom. A brand can only cut product delivery so far until the product is no longer. It also creates a worse product experience for the end consumer. I know I don’t want to carry home toilet paper packs four times the size in my trolly or buy it 4 times as frequently.

Above all of that, it shows where the focus is for these companies: On selling stuff they already sell, as cheaply as possible, using the machines they’ve already got, with a short term focus. At no point is the end user considered, or part of a strategy which doesn’t involve trickery. They have a mindset of scarcity, not abundance. On the flip side we have many startups and technology companies focused on giving more for less, and creating platforms for consumer creation and collaboration. It’s no wonder half of the the Fortune 500 lost their invitations to the party in the past 10 years.

New Book – The Great Fragmentation – out now.

The culture of the power flip

upside down house Many of the economic ideologies we learned in business school are turning upside down. What once worked, now doesn’t. What was expensive, is now cheap. What was impossible, is now humdrum. But unless we stop, consider and look, we just might miss some of these changes in what is true. Capital used to be expensive, and labour used to be cheap. Now it’s moving in the opposite direction. We used to think that the accumulation of capital was the key to success. But we forget it was a substitute to try and uncover intrinsic value. Thankfully we are starting to remember money is a tool, and not an end. Creativity used to be chosen by gatekeepers, now it’s chosen by us through sharing. We got tricked into believing that we should leave creative pursuits to others in the media, in the movies, and to the rock bands with recording contracts. To those who got picked. But now we know that was just because they owned expensive tools and could afford to buy our attention. We’ve now proved there is no monopoly on art, we’re all artists. Technology used to be expensive, and walled behind industrial barriers. We could only experiment with it while ensconced in corporate quarters building things for them as employees. Now we have NASA in our Pocket, maker spaces and collaborative tools to make better tech than those who gave us the tools to do it. The best tech now comes from hacking entrepreneurs because it’s accessible to all now, at disposable price points. The challenge most established businesses face isn’t technology, or ideas but belief systems. They develop a culture that makes them fall in love with what made them successful. It’s why big business is being disrupted after years of relative stability. Sometimes the most important thing ‘Big Co’ can do is forget what they know, and maybe even burn the map that got them to their current destination. New Book – The Great Fragmentation – out now!

You say ‘ello’, I say goodbye

elli sign up page

While it is around 6 months old now, and still in beta, there has been a lot of noise about Social Networking Startup Ello. And rightly so. A decade or more deep into this social connection thing people are starting to realise, that corporations like Facebook and Twitter, are well, just corporations. They just have incredibly compelling and usable products, from which they’re motivated to deliver what all public corporations aim to do – increase shareholder wealth. Nothing new there. And while some of the founders may have had, and possibly even still have rather altruistic visions…

A more open and connected world

Change the world 140 characters at a time 

… once any company becomes public, its DNA changes somewhat, it mutates and we end up with what we’ve always had. Profit centricity. This isn’t necessarily bad, profits are good, and only companies with great (or addictive) products ever turn one. It’s more about understanding things for what they actually are, or in this case, have become.

Ello, on the other hand believes there is a better way. And I agree. You can read their manifesto here. In short they promise never to sell ‘you’. What they don’t mention is that they’ve already accepted venture capital funding as part of their growth plan. Call me a cynic, but in general people who provide funds usually want some kind of monetary return at a later date.

If any social network wants to arrive and actually be, what Ello is positioning itself as, then it can never be a for profit corporation. It also probably should never be controlled by a limited number of people, or even an organisation. It needs instead to be a gift to humanity, a bit like the World Wide Web. It needs to be open source, and uncontrolled. A bit like a language really. One thing is for sure, it can never be about a financial return on investment.

New book – The Great Fragmentation – out now!

recent thoughts

Pollenzier logo

I’ve been publishing a few thoughts for the good people at Pollenizer – two recent articles are below:

History repeats: The seminal article written in 1960 by Theodore Levitt of the Harvard Business School called the Marketing Myopia is having a sequel. I wrote about it here and why startups are eating the lunch of many fortune 500’s.

Why we don’t have to invent the future: Sometimes it is enough just to participate and facilitate – I wrote about the feeder startup here.

In fact just yesterday I was doing a keynote for the financial services industry and I spoke about the GFD, ‘Great Finance Disruption’, which I believe is on the way given the recent developments in crowd funding, micro payments and crypto currencies. And I got asked a question about it.

And this was the question:

There are many banks in the audience, what advice can you give them to keep an eye on these trends in non traditional banking?

And here is my answer: 

It’s not about watching from a distance, it’s about getting involved, even in a small way, maybe set up a skunk works or a division for radical finance for dissident customer groups. Instead of watching it or trying to fight it, get involved and even facilitate it. It’s very difficult indeed to shape or benefit from something when you are not participating in it.

New book – The Great Fragmentation – out now.