Article Highlights:

  • Autonomous vehicles could generate $7 trillion per year in revenue by 2050.
  • Tesla is on pace to surpass 1 million cars at the end of this year.
  • Google announced that it reached 10 billion miles driven in simulation.

On Thursday morning, I was walking my two dogs along the beach at sunrise. We ran into another dog owner who was carrying this plastic water bottle that doubles as a dog bowl.

Without even asking where he bought the canine hydration accessory, I pulled my iPhone out of my pocket, opened the Amazon app and ordered the item. With Amazon Prime, it would be delivered in two days with free shipping.

This is how I do most of my shopping nowadays.

The day before, I ordered a plush Gruffalo doll (don’t ask me to explain what the creature is) for my nephew’s third birthday. I also ordered replacement earbuds for my Beats headphones. I have no idea where else I would find them.

I’m on a first-name basis with all of my UPS delivery people. I’m sure many others are in the same boat.

I don’t remember life without Amazon Prime’s free two-day shipping.

But I do remember when people (especially investors) were skeptical as to whether or not consumers would be willing to buy things online.

They worried their credit card info would be hacked. They worried items would arrive damaged. They worried shipping would be too costly. They worried the service costs would be too much.

All of these concerns eventually subsided. If you remained skeptical on Amazon’s growth, you missed out on a 20-bagger over the last decade.

Today, I hear the same voices worry about self-driving cars like they worried about e-commerce a decade ago.

But if you disregard the naysayers, you’ll see that the technology is right around the corner. And this will be the biggest investment bonanza of the 21st century.

Self-Driving to $7 Trillion in 30 Years

Commercialized autonomous vehicles are still in their infancy. However, they will be the biggest growth sector in the next few decades.

Chipmaker Intel believes autonomous vehicles could generate $800 billion per year in revenue by 2030 and an astounding $7 trillion per year by 2050.

Before you know it, you won’t remember what life was like when you had to sit in traffic on the way to work or spend 45 minutes a day driving the kids to soccer practice.

That’s because the most important commodity needed to operate an autonomous car is growing exponentially: data.

Of course, cars will still need the same gas and electric power they use now.

But they’ll also need large datasets to train the self-driving cars’ algorithms. These are necessary to teach the vehicle how to make split-second decisions when a kid chases a ball into the street or some jerk runs the red light as you approach an intersection.

And the two companies with the biggest datasets on the planet are Tesla and Waymo, Google’s self-driving car company.

The data is growing so rapidly that Morgan Stanley analyst Adam Jonas said in a note that data might be more valuable to Tesla than the Model 3. That’s how valuable these datasets are

Both of these companies are attempting to collect and process enough data to teach a car how to drive itself. However, they’re getting there in different ways.

Billions of Miles of Data

Tesla is gathering data through its network of consumer-owned vehicles, which is on pace to surpass 1 million cars at the end of this year.

Tesla doesn’t make any public statements on how many miles have been collected, but the company collects data on the entire Tesla fleet.

You don’t even need to be using the partial self-driving feature Autopilot, as the cars simply log instances when Autopilot would have taken an action while a human is in control.

Late last year, Tesla reached 10 billion miles logged. That number will likely double in 2019 as Tesla sells another half-million cars this year. With more cars on the roads, the amount of data collected is growing exponentially.

Waymo takes a different approach. It uses powerful computer simulations and translates that data into a smaller real-world fleet.

Recently, Waymo announced that it reached 10 billion miles driven in simulation and 10 million self-driving miles in the real world. The main drawback here is that computers can’t come up with every unique real-world scenario.

That’s why it matters that Tesla leads in real-world driving. CEO Elon Musk estimates that regulators will want to see at least 5 billion miles driven autonomously before green-lighting our robot chauffeurs.

The More Difficult Path

The other big difference between Tesla and Waymo is how the cars collect the data.

Waymo’s self-driving minivans use three different types of LIDAR sensors, five radar sensors and eight cameras. Tesla’s cars rely on eight cameras, 12 ultrasonic sensors and one forward-facing radar.

LIDAR is similar to radar. However, instead of radio waves, it sends out millions of laser light signals per second and then measures the time it takes for them to bounce back.

This creates a high-resolution picture of the world around the car in all directions. It can even work in the dark since the sensors are their own light source. That’s important because cameras are worse in the dark, and radar and ultrasound aren’t as precise.

Musk eschews LIDAR. Instead, Tesla wants to use cameras and develop image-recognition capabilities so cars can read signs and truly see the road ahead.

This is the more difficult path. But if Musk develops a better system, he won’t need the bulky and expensive hardware that comes with LIDAR.

He took the more difficult route with electric vehicles, going straight for a battery-powered car and not a hybrid. That bet paid off. Perhaps this bet on autonomous vehicles will too.

Final Thoughts on Tesla and Google

The jury is still out as to who will perfect the autonomous system first. It’s going to be an interesting race to watch.

Maybe we’ll never have a perfect autonomous system — although I’d feel safer if a computer with sensors was passing me on the highway instead of a human operator ordering Amazon goods on their iPhone while driving.

In the same way we currently wonder how anyone ever died of polio or smallpox, our grandkids will wonder how anyone ever died in a car accident.


Ian King

Editor, Automatic Fortunes

P.S. I’ll be talking next month at this year’s Total Wealth Symposium , an annual investment event in beautiful Amelia Island, Florida.