Self-Driving Electric Robot Cars! That Build Themselves! In Space!
Jason is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The headline may seem a little bit over the top, but it's really not as far-out as it seems. The bottom line is that we live in an amazing time where all of these technologies are real.
You probably carry more computing power in your pockets today than all of the research institutions in the country had combined, just fifty years ago. And while this technology would boggle the mind of someone from the '50s, it's just a mundane part of everyday life for us. As investors, we have to take this to the next conclusion. What will the generations of the future consider mundane? And how can we get in on it today? It's probably easier than you think. I bet you've already heard of a few of the "innovators of tomorrow."
Self driving cars mean more advertising revenue
Google (NASDAQ: GOOG) has a fairly well-known self-driving car program, and is easily the leader in this technology, at least based on what's publicly known. And while it would be easy to question how this fits in with Google's business, it's really not that much of a stretch. There are essentially two things that Google has done:
- Gather information (or access to it)
- Create technologies that facilitate easy access to that information
And these two things are what drives advertisers to Google in droves, and why the self-driving car is an extension of that, in several ways. Let me explain:
More than 40 million Americans spend at least 30 minutes each way commuting to work, according to the 2009 U.S. Census (opens PDF.) Simply put, that's upwards of five hours per week in mostly lost time. And if we can use technology to pop popcorn without a person having to watch it, why can't we do the same thing with driving a car? And if there's anything that we should remove human error from, it's something that can have the destructive consequences of an auto accident. Burning popcorn because you took your eye off the stove to watch a YouTube video is one thing; blowing through a red light in a three-ton SUV is another completely. But if the car can reliably drive itself, Google wins.
And you thought I was going to tell you about some start-up, didn't you? Some times the future leaders are the current leaders...
Electric cars and rocket ships
Elon Musk may be a once-in-a-generation leader. His ability to see a future based on fixing real problems the world is facing today, and how we can solve those problems outside of what is conventional and expected, is something that very few leaders ever have. And while he's been called "Tony Stark" (of Iron Man fame,) the fact is he's both actually real, and faces the challenges that he sees with ideas based in, as he says, "the first principles as in the phrase that's used in physics." This is critical, because it's not about applying problems to an existing "solution," but about actually developing systems and technologies, no matter how far from the current norms they may be, if they are the best solution to the problem. Take Tesla (NASDAQ: TSLA) for example:
While the concept of the electric automobile is as old at the automobile itself, the introduction of both cheap fossil fuel and the internal combustion engine near the turn of the 20th century made existing electric cars obsolete. They just couldn't compete on price of operation, power, flexibility, length of travel, ease of refueling ... wait a minute. This sounds familiar, right?
It's the same reasons that electric cars have been unsuccessful for the past two decades. But as the cost of oil has continued to rise in the face of increased global demand (and constrained global supply,) as well as improvements in battery technology, the balance has begun to shift a little. However, there's really one key reason that the major auto companies have failed at making a reliable, high-performing electric car: the wrong approach to battery design.
Simply put, a high-voltage battery in an auto is exposed to constant extremes in temperature, heavy vibration, inconsistent charging; in short the inverse of an optimal living situation. And where automakers have failed is by trying to "over-engineer" an automotive-grade battery that could live up to the environmental toll. However, Tesla, led by Musk's intuition, chose to accept that failure was an expected outcome, and a better approach was to design a system that limited the environmental extremes, while also "diversifying the risk" by spreading the needed battery capacity over many more, smaller cells (of a standard commercial type,) versus the fewer, larger cells being utilized by the traditional manufacturers. The outcome of this critical engineering design is:
- Controlling the climate of these "pods of cells" is more efficient
- Battery cell failure has a much smaller impact on overall charge capacity
- Maintenance and repair costs will be lower versus high-cost, larger cells
- Increased flexibility for where the cells can fit in the vehicle increase design flexibility
In a nutshell, this one, simple solution, in and of itself is just a small part of the whole, is an indication that thinking "outside the norms" actually is the norm for Tesla. And that culture is part of what will lead to the first new successful automobile manufacturer in the US in over six decades.
And while it's not a public company yet, Musk's SpaceX is rumored to be going public at some point, and worth putting on your "watch list." Already the "low cost leader" in getting goods to space, once the currently in-testing "Grasshopper" reusable rocket project becomes a reality, the cost of space travel and exploration will drop significantly. Which is important if Musk's dream of "dying on Mars, just not on impact" is to become a reality.
Building the future, in space and on Mother Earth
There has been much speculation and emotion around so-called 3D printing or "additive manufacturing" over the past year. And depending on what you believe, either 3D Systems' (NYSE: DDD) technology is old and over hyped, or it's going to change manufacturing as we know it. But the truth is actually somewhere in the middle, and where the technology will take us is a little bit of an unknown. However, here's an interesting picture of how it could realistically play out:
Hypothetically, let's say NASA decides that it's going to put people on Mars in a decade. One of the real risks of being on Mars is exposure. With a thin atmosphere and no magnetic shield, radiation levels are much higher than they are on Earth. So SpaceX teams up with 3D systems to launch a robotic "additive manufacturing plant" to Mars, that's able to manufacture buildings, and assemble them, essentially complete and ready for occupation before a single Astronaut puts a boot on red Martian soil. It's not that far off from being plausible.
The basic technology already exists, and is being used today to build all kinds of advanced items from various materials ranging from plastics to titanium to human tissues.
I hope this isn't an investing thesis
Not entirely, obviously, but think back to how things were done a century ago versus today. The microwave oven is a good place to start. Or better yet-that 60 inch TV on your living room wall, that's less than an inch thick. You know, the one that makes the display screens from Star Trek look dated?
Source: Memory Alpha
Foolish bottom line
As much as the futuristic thoughts above are a little outlandish, it's important to remember that exact prediction is something we are essentially terrible at. However, analyzing businesses, and picking a diverse selection to invest in, has a century-long track record of success. I hope you've gained some ideas from this article. Now it's up to you to do your homework and see if these companies fit in your portfolio. I can promise that they all fit in mine.
Jason Hall owns shares of Google, Tesla Motors , and 3D Systems. The Motley Fool recommends 3D Systems, Google, and Tesla Motors . The Motley Fool owns shares of 3D Systems, Google, and Tesla Motors and has the following options: Short Jan 2014 $36 Calls on 3D Systems and Short Jan 2014 $20 Puts on 3D Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!