Winning the Hardware Software Game Winning the Hardware-Software Game - 2nd Edition

Using Game Theory to Optimize the Pace of New Technology Adoption
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The Technology Triangle

Years ago I attended a meeting on intellectual property (IP). One of the speakers, a sharp IP attorney named Pat Ellison, gave a talk, which greatly resonated with me. He said that a successful technology requires a balance between technology, business, and law, as represented by the triangle in Figure 1. (I recently contacted Pat about the origin of this idea and he said he was fairly sure that the idea was developed collaboratively with others, but he couldn’t remember who the other contributors were.) Very succinctly, descriptions for the requirements are:

  • Technology: The technology must work well.
  • Business: The technology must be cost effective, that is, is must able to be manufactured and sold for a profit.
  • Law: The legal and regulatory underpinnings of the technology, including intellectual property foundations and liability issues, must be sound.

A successful technology will exhibit balance in each of the three areas in the sense that if any of the three is too weak – the technology doesn’t function well, the technology cannot be sold for a profit, and/or the intellectual property is invalid or ineffective or other regulatory issues have not been settled – then the technology will not become commercially successful.

Figure 1

balance1

I’ve thought about this concept often over the years, and I’ve presented the idea to many others, all of whom were very receptive to the idea.

There are two enhancements to this concept of the “technology triangle” that I have come to appreciate over the years. The first enhancement is the idea that “technology” is not an isolated component, but rather, consists of an entire technology ecosystem.  More explicitly, every technology (i) is used in a specific context and (ii) within each context is enabled by other complementary products and services. If any piece of the essential complementary ecosystem is missing, then the technology will not succeed.

At the same time, I’ve also come to realize the importance of the social aspect associated with introducing a new technology into the market. In his pioneering work, Diffusion of Innovations, Everett Rogers defines the “social compatibility” of a technology as the degree to which a technology is consistent with the culture and beliefs of the people within a society. Especially with the advent of social media, new ideas and new technologies can be quickly accepted and adopted – and just as quickly rejected by society – depending on how compatible the ideas or technologies are with the current social norms.

So, over time, I have transformed the “technology triangle” into a “technology diamond,” in which (i) “Technology” is replaced by “Technology Ecosystem” and (ii) Social Compatibility constitutes the fourth vertex, as illustrated in Figure 2.

Figure 2

 

The Technology Diamond for Autonomous Vehicles

The advent of autonomous vehicles has garnered tremendous coverage in the media. Driverless Car Market Watch describes the arrival of the new technology as “Gearing up to save lives, reduce costs, resource consumption,” and it “lists the most recent predictions about when driverless cars will be available on the market.” According to its list,

  • Next generation Audi A8 capable of fully autonomous driving in 2017
  • Sergey Brin plans to have Google driverless car in the market by 2018
  • Volkswagen expects first self driving cars on the market by 2019
  • GM: Autonomous cars could be deployed by 2020 or sooner
  • Ford CEO expects fully autonomous cars by 2020
  • Nissan to provide fully autonomous vehicles by 2020
  • Driverless cars coming to showrooms by 2020 says Nissan’s CEO

So, Google and the car companies expect to have their autonomous vehicles available to the public as early as next year!

Let’s consider how reasonable the imminent arrival of autonomous vehicles might be within the context of the “technology diamond” for autonomous vehicles. Each of the four vertices of the diamond, illustrated in Figure 3, is discussed in turn below.

Figure 3

Technology Ecosystem

Aside from the myriad technologies embedded in autonomous vehicles (AVs) themselves, there is a vast ecosystem of complementary products and services that is needed to enable widespread use of AVs.

For example, detailed and continuously updated mapping software is a “crucial” component of the AV ecosystem, as is continuous and reliable access to the Internet. As J.C. Sullivan describes in, “What will drive the future of self- driving cars?”:

Two important infrastructure components are Internet access and mapping technology… [T]he crucial technological component of autonomous vehicles is their ability to interpret their surroundings, which relies on detailed mapping technology …. Autonomous cars will need maps that can tell them where the curb is within a few centimeters. They also need to be live, updated second by second with information about accidents, traffic backups and lane closures.” While companies such as Google and Apple have invested in this technology, the cost of building and sustaining it is another matter that a producer would have to consider before deploying the autonomous model.

Part of the reason the mapping technology is possible is that cars can transmit data about their surroundings to other cars surrounding cars [sic] and to a central map database, all in real time. This interconnectedness is beneficial … but it does rely on a fast Internet connection. In fact, a significant portion of the increased features evident in today’s cars rely [sic] on Internet technology. But Internet access and speed play a crucial role in the efficacy and safety of driverless cars in particular—to a far greater degree than their nonautonomous counterparts.

As a result, the existence and maintenance of Internet access spanning the entirety of US roads is critical to autonomous vehicle deployment.

Another crucial complementary component of the AV ecosystem is road infrastructure, such as consistent lane markings, signage, curbside sensors, etc. Emily Badger notes the importance of road infrastructure in, “5 confounding questions that hold the key to the future of driverless cars”:

Is our infrastructure ready?

…These infrastructure questions are both high- and low-tech. What kind of lighting do we need on city streets if we're trying to optimize for radar vision instead of human sight? Can a computer process a street sign that's covered in graffiti? Will automakers want to make autonomous cars if only a few places in the country are ready for them? And if we need to invest in radically changing our roadways — networking streetlights, installing sensors — how will we pay for that?

And assuming AVs are phased in gradually, so that autonomous and non-autonomous vehicles share the roadways, many believe that AVs should be restricted to dedicated lanes on the road. Todd Litman notes this point in, “Autonomous Vehicle Implementation Predictions”:

Some benefits (higher traffic speeds, reduced congestion and automated intersections) require dedicated autonomous vehicle lanes.

The complementary infrastructure required to support AVs is still greatly lacking.

Business

Google and other vehicle and technology companies have provided a convincing case that AVs present a real technological possibility. However, the question as to whether or not AVs will ultimately be able to be manufactured and sold at a profitable price still remains an open question. While the vehicles themselves may be cost effective, especially for ride-sharing applications (i.e., driverless taxis), it is not clear how the costs of providing requisite complementary products and services, such as mapping software, Internet access, and road infrastructure (see previous section) will be covered.

Law

The liability issue – who will pay for the costs associated with crashes of autonomous vehicles – remains the foremost issue surrounding the adoption and use of self-driving cars. Emily Badger describes the liability issue succinctly in, “5 confounding questions that hold the key to the future of driverless cars”:

Who will be liable when a driverless car crashes?

…Liability will inevitably rise for automakers, which is one reason they might be reluctant to see a broad and speedy rollout of autonomous cars. Google has been looking to partner with automakers on its autonomous technology. If a car designed by multiple companies crashes, do we blame the people who made the hardware? Or the software? Or the mapping platform? Or maybe we blame another car that sent a faulty signal on the highway.

Not far behind the issue of liability in importance is the issue of privacy of user data. J.C. Sullivan describes both these problems in more detail:

At the forefront is the issue of liability. The question of responsibility when autonomous vehicle technology is involved in an accident has generated debate and concern. Product liability regarding driverless cars incorporates questions of tort and contract law and is complicated by a complex web of insurers, operators, plaintiffs, and manufacturers. The legal answers to the liability questions have the potential to impact a producer’s willingness to deploy autonomous vehicles.



Another possible development on this topic is privacy measures that limit autonomous vehicles’ capabilities. Car-to-car communication is one of the most impactful technological developments for autonomous vehicles, but it also creates data that track a vehicle’s every move and its driving patterns over time. If legislators or regulators limit the collection and analysis of these data— especially the way they interacts with other cars’ data—this could vastly decrease the benefits of autonomous vehicles.

The last of the big three legal and regulatory issues relating to autonomous vehicles is the question of security of AV systems against cyberattacks. James M. Anderson, Nidhi Kalra, Karlyn D. Stanley, Paul Sorensen, Constantine Samaras, Oluwatobi A. Oluwatola highlight this issue in “Autonomous Vehicle Technology: A Guide for Policymakers”:

Software upgrades highlight a broader concern with AVs: system security. Vehicles that are connected to each other, to infrastructure, or to the Internet are increasingly open to cyberattack. David Strickland, former head of NHTSA, has noted (2013):

With this evolution comes increased challenges, primarily in the area of system reliability and cybersecurity—the latter growing more critical as vehicles are increasingly more connected to a wide variety of products . . . Whether the entry point into the vehicle is the Internet, aftermarket devices, USB ports, or mobile phones, these new portals bring new challenges.

As with complementary infrastructure required to support AVs, it appears that the legal and regulatory arm needed to balance the autonomous vehicle diamond is also greatly lacking.

Social Compatibility

The last vertex of the technology diamond is Social Compatibility. To what extent is the adoption and use of autonomous vehicles consistent with people’s culture and beliefs? The population has been divided on this issue. Having grown up within a connected culture, younger generations tend to be relatively more accepting of AVs, while older generations tend to be much more skeptical and untrusting of the technology. In “Three-Quarters of Americans “Afraid” to Ride in a Self-Driving Vehicle,” Erin Stepp reports that three-quarters of people surveyed in a 2016 study are “’afraid’ to ride in a self-driving car”:

Three out of four U.S. drivers report feeling “afraid” to ride in a self-driving car, according to a new survey from AAA. With today’s heightened focus on autonomous vehicles, this fear poses a potential concern to the automotive industry as consumers may be reluctant to fully embrace the self-driving car.

Another 2016 study, Hillary Abraham, Chaiwoo Lee, Samantha Brady, Craig Fitzgerald, Bruce Mehler, Bryan Reimer, & Joseph F. Coughlin, “Autonomous Vehicles, Trust, and Driving Alternatives: A survey of consumer preferences,” reports similar findings with more explicit age-related differences in willingness to use fully autonomous vehicles (see Figure 4).

Figure 4

 

These trust issues may very well inhibit early adoption of AVs by the majority of the population. On the other hand, introducing new autonomous features to driver-controlled cars may be an effective way of eventually garnering support for the technology. More from Erin Stepp:

Despite this significant fear, AAA also found that drivers who own vehicles equipped with semi-autonomous features are, on average, 75 percent more likely to trust the technology than those that do not own it, suggesting that gradual experience with these advanced features can ease consumer fears.



“While six-in-10 drivers want semi-autonomous technology in their next vehicle, there are still 40 percent of Americans that are either undecided or reluctant to purchase these features … It’s clear that education is the key to addressing consumer hesitation towards these features and AAA’s on-going effort to evaluate vehicle technologies, highlighting both the benefits and limitations, is designed to help drivers make informed choices.”

Another area of social resistance to AVs stems from the large numbers of professional drivers that AVs will force out of jobs, together with the large revenue losses that will be suffered by other auto-related industries. Zack Kanter describes the gory details in “How Uber’s Autonomous Cars Will Destroy 10 Million Jobs and Reshape the Economy by 2025”:

Ancillary industries such as the $198 billion automobile insurance market, $98 billion automotive finance market, $100 billion parking industry, and the $300 billion automotive aftermarket will collapse as demand for their services evaporates. We will see the obsolescence of rental car companies, public transportation systems, and, good riddance, parking and speeding tickets. But we will see the transformation of far more than just consumer transportation: self-driving semis, buses, earth movers, and delivery trucks will obviate the need for professional drivers and the support industries that surround them.

The Bureau of Labor Statistics lists that 884,000 people are employed in motor vehicles and parts manufacturing, and an additional 3.02 million in the dealer and maintenance network. Truck, bus, delivery, and taxi drivers account for nearly 6 million professional driving jobs. Virtually all of these 10 million jobs will be eliminated within 10-15 years, and this list is by no means exhaustive.

On the other hand, AVs are expected to generate tremendous social benefits in the form of saved lives, time and resources. Zack Kanter summarizes these benefits:

But despite the job loss and wholesale destruction of industries, eliminating the needs for car ownership will yield over $1 trillion in additional disposable income – and that is going to usher in an era of unprecedented efficiency, innovation, and job creation.

So while the advent of AVs promises to bring great new benefits, there will still be a tremendous amount of social resistance to the new technology.

Conclusions

An examination of the technology diamond for autonomous vehicles suggests that while companies may be able to release AVs as early as next year, the AV system is not in balance. There remain significant weaknesses in all four piece of the system: Technology Ecosystem, Business, Law, and Social Compatibility, that will seriously hamper successful adoption of AVs anytime in the near future.

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