The Last Driver’s License Holder Has Already Been Born: How Rapid Advances in Automotive Technology will Disrupt Life As We Know It and Why This is a Good Thing

By Mario Herger

How the radical disruption of the auto industry affects you—and how you can prepare for the soon-to-be “new normal”

The combined effect of autonomous driving, electric vehicles, and the sharing economy is on the verge of changing the auto industry—all within the next decade. And this tech/economics revolution will touch virtually every industry.

What exactly will change?

Jobs: Demand for commercial vehicle drivers, car dealers, mechanics, doctors, and many other professions will shrink
Laws: Manually driving cars will be forbidden—and car ownership will be almost nonexistent
Housing: Prices will drop and cities and towns will be planned differently
Healthcare: Infrastructure will shrink as traffic accidents dramatically decline
Global trade: China will become the world’s biggest automotive exporter

The Last Driver's License Holder Has Already Been Born provides the information and insight you need to position your company for these groundbreaking changes.

It reveals the disruptive technologies now taking shape and provides a timeline of when they will take hold. It examines the impact on the industry itself, as well as adjacent sectors, including jobs and professions, city and street design, hospitals, insurances, politics, security, hospitality industry, the oil industry, real estate, and society at large.

And it provides the knowledge and insight you need to keep yourself and your organization ahead of the curve—and in front of the competition.

• Language: English
• Publisher: McGraw-Hill Education
• Release date: Jul 26, 2019
• ISBN: 9781260441390

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For Gabriel, Darian, and Sebastian.

And for May Kou.

Contents

Introduction

Part I

The Last Coachman, or the First Automobile Revolution

Chapter 1    Electrician, Gunsmith, Physicist

Automobile Pioneers Then and Now

Chapter 2    Love for Cars

Passionate and Fickle

Chapter 3    The iPhone Moment for the Automotive Industry

Part II

The Last Novice Driver to the Second Automobile Revolution

Chapter 4    Data and Facts

About the Automotive Industry

Chapter 5    The Drive Goes Electric

Chapter 6    The Future Comes Rolling In

Autonomous and Self-Driving Vehicles

Chapter 7    Artificial Intelligence

America Invents, China Copies, Europe Regulates

Chapter 8    Hey There: Connected Cars in Conversation

Chapter 9    Research, Innovation, Disruption

More Money, More Features

Chapter 10    Timescale

What Will Happen to Us and When?

Chapter 11    Wave Effects and Leaps of Faith

Forward, March!

Part III

En Marche! Tools and Methodologies for Automotive Manufacturers and Suppliers

Chapter 12    Types of Innovation

Chapter 13    A Psychologically Safe Environment

Fall Down, Get Up, Go On

Conclusion   En Marche! Politics and Society on the Move

Afterword

Notes

Index

Introduction

I’m just trying to think about the future and not be sad.

—ELON MUSK

Allow me to introduce you to Max, who just celebrated his first birthday with a lot of cake, colored balloons, and a huge pile of presents. Max is not only a sweet little boy; he is also probably the last person to take a driving test.

You think that’s unlikely? Not in your lifetime? Well, I grant you, you may have a point. Actually, I don’t know whether it’ll be Max, or perhaps Sofie or Julian. It may even be a child from your neighborhood. One thing is certain, however: the last person to take a driving test has already been born. And I collected lots of data and facts, which we will examine more closely in the subsequent chapters of this book. You’ll be surprised at how far the development of the electric robotaxi has already progressed.

Max (or Sofie, or Julian) won’t even be able to imagine how we could ever have come up with the idea of wanting to own and drive a car, one of those contraptions that are difficult to handle with their pedals and steering wheel, which kept us from working or dedicating ourselves to video games during the drive, and one that in addition claimed many lives not just in the United States but around the world every year. Just how antiquated was our life then? Well, just as antiquated as we now perceive a ride in a horse-drawn coach. The coachman sat outside in front, exposed to the elements, and had to look at the horses’ behinds while jolting over bumpy roads.

Even today, the joy of driving is often diminished when once more we are caught up in traffic during the rush hour and we’re struggling to cope with tiredness, looming deadlines, and the search for a parking space. In the future, traffic will be even more concentrated in metropolitan areas than today. Sixty percent of the world’s population will live in cities by 2030.¹ In the United States, 80 percent of the inhabitants live in cities already, compared with 74 percent in Germany and 66 percent in Austria.² The demand for transport services in the cities will grow. The available space and today’s infrastructure won’t be capable of handling that additional demand. After all, there isn’t enough room even now to accommodate more cars in cities, to provide more streets and parking lots.

Silicon Valley alone today has in excess of 600 autonomous cars on public streets, managed by more than 60 manufacturers, and the number in the United States has already reached 1,400 vehicles. More than 1,000 companies are developing technologies for autonomous cars. At the same time, the center of the automotive industry is moving to one of the most expensive locations, where multiple manufacturers are producing or working on electric cars, trucks, and buses—Tesla, Lucid Motors, NIO, and Proterra, to name but a few. You can find more than half a dozen test tracks within a few miles of one another in Silicon Valley. In China, 25 million electric mopeds are produced in one city alone, and three dozen manufacturers are building electric cars. On a global scale, there are six autonomous taxi fleets in trial operation today, already transporting passengers. California started allowing driverless autonomous cars on its streets in 2018, even without any person at all on board.

Since 2016, Tesla has included hardware allowing for a self-driving function in all its vehicles. A software update expected in the next two or three years will allow any car produced by Tesla—so far more than 500,000 vehicles—to travel fully autonomously. At the same time, the first taxi companies are closing because they cannot compete with Uber and Lyft anymore. And the bounty for engineers having the much-desired expertise in artificial intelligence, sensor technology, or self-driving algorithms is at $33 million.

The new developments mainly come from two regions: Silicon Valley and Asia. While Silicon Valley seems to proceed according to some kind of natural evolution and will migrate from the American way of life, where everyone owns a car, to a lifestyle with electric robotaxis, some Asian countries skip entire levels. In China, for example, many people have become reasonably wealthy in just one or two generations, moving from simple farmers and workers into a newly formed middle class. And this middle class wants cars, or at least access to individual means of transportation. All the signs indicate that something is about to happen there that resembles the events after the Eastern bloc crumbled. Hungary had a better cell phone system than Germany. While the German Telekom wanted to amortize its investment into dedicated subscriber line (DSL) cable installations, Hungary did not have any such encumbrance, and instead of laying expensive cables in the ground, the country immediately built cell phone towers. And thus an entire technological generation was skipped completely. Detroit, Germany, Europe in general, and many other regions with strong traditional automobile manufacturing are lagging behind in all the areas of the new automobile industry. They do not have any leading role anymore because innovation is something that happens elsewhere. Germany invented the automobile and built the best cars, but apparently the future is being planned without them. Detroit is a shadow of its former glory. Even today, Germany’s traditional manufacturers are lagging behind, and the distance is steadily increasing. This has little to do with others using some kind of magic formula or simply being high-fliers. The problem is not the fact that there are companies from out of nowhere attacking the traditional automobile industry but rather automotive engineers joining digital companies and creating a completely new form of mobility experience.

As I will outline in this book, the danger for traditional automobile companies is not so much coming from new technologies as from the attitude and mindset. Even though I am from Europe and have lived in the United States only since 2001, I am acutely aware of mindset differences in cultures and countries, and more so between the pioneering automotive industries and those in regions such as Silicon Valley, Israel, China, and the rest of the world.

A 2015 article that I had written on the differences between German and Silicon Valley innovation approaches for developing cars by comparing Tesla and Porsche led to some resonance that took me by surprise—and led to this book. If you follow similar comments in other media, you will quickly notice just how much the topic of automobiles hits the public nerve. One element that is striking in the midst of the furious exchange of opinions is the merciless criticism expressed on the topic of this proud economic sector. The announcements from manufacturers regarding new electric vehicles and the statements from top managers in the automobile industry calling self-driving vehicles a hype are heaped with scorn and ridicule. Perhaps the car manufacturers should use this as food for thought. They are about to lose the trust their own compatriots place in them—once and for all. The diesel emissions scandal, the unbelievable scope of the price fixing, and the fraud collaboration among the German manufacturers, the bankruptcy of Detroit’s automobile industry in 2008, and several other severe mistakes made in recent years just serve to aggravate the situation.

Accordingly, I found it a logical next step to investigate this topic in more detail, to describe the current state of developments and combine the individual puzzle pieces into one coherent picture. And this despite the fact that I am myself anything but a car fanatic. Personally, I think driving a car is a waste of time; I would much prefer to spend my time reading. I was born and bred in Vienna, a city with an excellent public transport system, and thus at first saw no reason at all why I should have a driver’s license. Consequently, I waited until I was 22 to take my driving test. My first car had to wait until I was forced to buy one on moving to California. Even while I lived in Germany for a couple of years, a country that also has a very good system of public local and intercity transportation networks, I found the car to be more of a problem than helpful in my daily life. Of course, occasionally I would have need for one; some things just were easier using a car. By contrast, when I think back to how often my car was damaged in those narrow streets of the historical city center of Heidelberg and how difficult it was to find a place to park, I know that I would have preferred life without a car even then.

I understand that there are still many drivers who enjoy their time behind the wheel, listening to the radio, relaxing, thinking deep thoughts, or listening to an audiobook. However, I can do the same on the bus or a train. But what will it be like in a vehicle that drives for me?

I’ve been living in Silicon Valley since 2001, an area mostly known as a place of pilgrimage for computer nerds and origin of so many things that we today perceive as perfectly natural, both at work and at home. Computers, smartphones, Facebook, and Google are just some of the new technologies from Silicon Valley, and it would be easy to reduce this relatively small place in California with its barely 3½ million inhabitants to just that.

In recent years, I became aware of the rapidly growing number of activities concerning automobiles. There is not a single day that I do not see one of Google’s self-driving vehicles in or around Mountain View, and Google by no means is the only company that has such cars out on the streets of Silicon Valley. During times when a startup called Tesla can cause Apple-style hype with its Model S and buyers are waiting in line at dawn to get on the list for the latest model, the Model 3, which is being built at one of the most expensive locations in the world, Silicon Valley, one should really wake up to the signs. And if you then start reading about Apple’s ambitions in the automobile sector, about Chinese manufacturers with billions of dollars available, and about the flood of hundreds of automobile startups, then you cannot possibly try to deny that something is up. The more I looked at this phenomenon, the clearer the picture became. The days of cars as we know them today are coming to an end. We are right in the middle of the second automobile revolution.

The signs are there. All the parts a robotaxi would require are available, that is, the ones that have provided us with the picture of the self-driving electric Uber. It is just a question of time for the combination of sensors, algorithms, artificial intelligence (AI), and apps to really take off. In many countries, discussions about new ways of thinking about automobiles have only recently started—discussions that previously would have been unthinkable. This means that awareness on the part of the public and political institutions is also changing. A technological revolution that is closely linked to an adaptation of behaviors and rules leads to disruption, to the destruction of a market.

Watch out for the telltale signals. Once there are several of them together, the disruption is already under way. A revolution is happening, one that will fundamentally alter our relationship with our sacred cow, the automobile, and one that will have a similar, if not greater, effect on our economy and our society than the transition from horses to engine-driven vehicles. The first question is not whether but when those changes will affect us. A look at the exponential curve to which technological developments are subject and an evaluation of the facts already in evidence in Silicon Valley tell us that those changes are closer than many may think. And the second question that inevitably follows is, will Detroit or Germany still play a role in and after this second automobile revolution? Why do German manufacturers, which until now built the best cars in the world, and Ford, which revolutionized the way cars are mass produced, suddenly appear so antiquated? And how could they avoid sinking into oblivion?

Harvard professor Clayton Christensen has concerned himself with this phenomenon for several years now. His studies show that 50 to 80 percent of the top companies in a sector are no longer among the top ten in the next generation after a disruptive innovation has taken place. These findings are similar regardless of the industrial sector he analyzed. According to this logic, at least half the corporations that are the home of brands such as General Motors (GM), Ford, Honda, Toyota, Hyundai, Volkswagen, Mercedes, BMW, and Porsche will no longer be independent or no longer even exist at all.

I admit that from a traditional carmaker’s point of view, this may seem very unlikely, but this is the same kind of thinking we saw in Detroit, the American automobile center, a decade ago, when large cars and pickup trucks were the key to success. And similarly, nobody at the Nokia headquarters in Espoo near Helsinki, Finland, would have thought it possible: they regarded the iPhone with great skepticism. And people in Rochester, New York, were equally sure that digital cameras would never pose a danger to the film and photographic paper industry. Nevertheless, today Kodak and Nokia are names that are used as excellent examples for lessons in economic studies that illustrate missed chances. Do we really want GM, Ford, Volkswagen, Daimler, and BMW to become synonyms for companies that did not see the big changes coming? Do we want them to lose the glamour of being the companies that invented the automobile, that opened the great wide world for people to explore, and that fired up our appetite for travel adventures?

We can agree that the best cars are built in Germany, the most beautiful sports cars come from Italy, France contributes the most elegant designs, Sweden is the first in safety standards, Japan is totally focused on reliability, and America created a car lifestyle. Unfortunately, the criteria for what makes up a really good car are changing right in front of us. A car’s safety soon will no longer be mainly determined by a stable passenger cabin and an airbag but rather by the algorithm that guides the driverless vehicle. An elegant and beautiful design is less important if I am sitting in a taxi. Reliability will have more importance for fleet managers than for passengers. And the public is likely to base its decision on what constitutes a good car more on the integrated entertainment system, an area that, in the past, car manufacturers have completely ceded to others. In the future, we will perceive the car not so much as a single object but as an element in a larger transportation service provider offering.

Just as the best photographic paper lost its importance when people stopped printing their digital photos and the most superb telephone keyboard was replaced by touch screens and voice commands, the automotive sector will undergo an extreme change whose effects are not limited to that one economic sector alone. Our understanding and handling of mobility will change drastically, and cities, regions, and other players in this game will have to adapt to new conditions. A number of industries will be obsolete, and new ones are going to develop.

In the following chapters, we will take a closer look at all this: how it all started, how the automobile modified our daily life and our towns, the new requirements that have to be met, the technologies behind them, the legal framework that is affected, the behavior it will influence, and the effects all of this will have on our society, the job market, and business sites and the economy. We in Detroit, Asia, and Europe have the same technologies and processes available as everyone else, so the reason why we are lagging behind is our behavior, our mindset. Accordingly, we will take a closer look at this aspect in the last part of this book so that we can see how every one of us can and must contribute to the development of an innovative, entrepreneurial mindset for the benefit of our society and humanity as such.

About Davids and Goliaths

If we have data, let’s look at data. If all we have are opinions, let’s go with mine.

—JIM BARKSDALE, CEO OF NETSCAPE

Goliath, that invincible giant, had no reason to believe that David, this little shepherd, could pose any threat at all. David was not even a soldier, and he stood there without any heavy armor, totally unlike a real fighter. To Goliath, the simple fact that his opponents did not send an experienced soldier to the battle was ridiculous and reeked of despair. Still, Goliath lost and never even saw it coming. The fight was over before it had really begun.

This story of the outsider winning against an overwhelming enemy sounds good, but as a matter of fact, Goliath never really had a chance. Malcolm Gladwell, author of David and Goliath: Underdogs, Misfits, and the Art of Battling Giants, describes the starting point on the basis of the original text. And now it is perfectly clear that Goliath was a very sick man. The things he said and the way his contemporaries described him make it likely that this man of 8 feet height suffered from gigantism, an illness with considerable side effects. Goliath therefore was nearsighted, and could only see his opponent clearly when he was close up. His joints were aching, and he needed aides to bring his shield to the fighting arena. His impressive height earned the respect of his opponents, and his long arms ensured sufficient distance in a normal sword fight, so he could strike his enemy without being hit.

David, however, was an underdog who was underestimated in two ways. First, because he was a simple shepherd, he selected a sling as his weapon, unworthy of a real soldier. Second, David was of normal size, much smaller than Goliath, but more nimble. His weapon allowed him to attack his opponent from a distance, and very effectively at that. A trained sling shooter may get a stone flying approximately the velocity of a bullet fired from a pistol. Even if David could not place a golden shot at his first try, he was quick enough on his feet and far away enough to retry just as often as he had stones available.

So if you look at the starting scenario with this information, Goliath was destined to lose from the get-go: he brought a knife to a gun fight. Precisely because David went to the battle using an unorthodox weapon, he had advantages—not despite this choice. David did not follow the usual rules of a duel between sword fighters, which said that the opponents had to come into close physical contact. And David did not care a bit that it was unsoldier-like behavior to use a slingshot. After all, he was no soldier—he was a shepherd.

The outsider who apparently has no chance, who then employs unorthodox means, who does not comply with the rules, and who does not care what experts think about him and as a consequence surprises all those around him: this is the central element of many such scenarios depicting a David and a Goliath. We tend to root for the underdog but should actually also feel sorry for Goliath—at least sometimes! However, we often have to deal with giants who think too much of themselves because of their past successes. This book is also about such Goliaths and Davids; we will learn why you should never underestimate Davids, why giants are more vulnerable than they appear, and why it may be too late for some of them already. But Davids will play a role, too: why some Davids should not let their victory carry them away or rest on their laurels. Davids can quickly turn into Goliaths themselves and then fall victim to the next David. The crucial factor for the underdog’s victory is the fact that he changed the rules, because those who let their opponent choose the weapon have only a 30 percent chance of winning. Those playing their own game have a 65 percent chance.³

Just how much the David and Goliath relationships have been reversed in the automobile industry is illustrated by an example of a delegation from a German premium car manufacturer visiting Silicon Valley. The cars from this manufacturer are among the most desired in the world and feature unrivaled quality, a fact that regularly helps to polish the annual reports of the parent corporation. Prototype vehicles covered in camouflage film, which the manufacturer uses on the streets for testing, are coveted by car fanatics and car magazine photographers and discussed in detail. And then you see the delegation members of this manufacturer suddenly turning their heads to follow every Tesla Model S and X, observe them running excitedly to the garage where Google keeps its fleet of self-driving vehicles, and watch them cling to the bars blocking the entrance like little children at the door to a sweets shop—just to get a photo of ugly little cars that look like balls of metal and plastic. Critical change is in the air, and traditional car manufacturers can no longer deny it, although they are doing their best to appear as if everything is under control and that they are on top of it all.

A Volkswagen (VW) employee traveling in a borrowed Tesla from southern Germany to a meeting at the company’s Wolfsburg headquarters in the north really roused interest among his colleagues. They all stood around the car, wanted to test-drive it, experience the acceleration, see how much room there was in the vehicle, and play with the large touch screen. Normally, this is a scene you see when other car manufacturers examine German premium brands—or possibly when German manufacturers are impressed by a Ferrari. The difference is that a sports car is a luxury for most people, but when you see a Tesla, you immediately understand that this is the future coming. And the future is already here, much sooner than expected.

It’s not Tesla hitting the traditional automakers; it’s the future that’s hitting them.

The example of an industry related to one of humanity’s longest-held dreams shows just how quickly something like this can happen: flight. Orville and Wilbur Wright were two bicycle mechanics from Dayton, Ohio. Even as boys they had watched birds, observing how the animals moved their wings in order to stay up in the air. The two brothers were so deeply involved in their observations that they were able to imitate the various movements with their arms. Needless to say, their first attempts with wing-like contraptions attached to their arms with belts only gained them some scraped knees. Their neighbors regarded them as totally crazy. They had to be—only madmen had nothing better to do than stand outside for hours on end and look at birds.

And yet slowly but steadily, the pair tinkered with objects that would fly and eagerly absorbed any publications by other pioneers of aviation such as Otto Lilienthal and Octave Chanute. They even built the first wind tunnel to study aerodynamics. After countless attempts at gliding, they accomplished the first successful motor-driven flight ever in Kitty Hawk, North Carolina, on December 17, 1903, with a duration of 59 seconds. The distance traveled was 852 feet. The local population only knew about this several days later: the message was either presumed to be fake or thought to be irrelevant. The reaction in Paris, France, however, was in total contrast to the indifference at home. The Paris Aéroclub had already been aware of the Wright brothers’ work through their correspondence with Chanute, and the club invited the brothers to France for a demonstration. Their home country only became interested in them after this journey.

While the Wright brothers followed their inventive intuition largely undisturbed by the public, another American flight pioneer was at the center of attention. Samuel Pierpont Langley was a renowned scientist, director of the Smithsonian Astronomical Observatory, and member of the American Academy of Arts and Sciences, as well as the Royal Society.⁴ He was desperate to achieve a feat similar to that of his friend and colleague Alexander Graham Bell, who had invented the telephone. Langley regarded manned flight as the next threshold to be overcome and saw it as his chance to immortalize his name. Given his good network of relationships and good reputation, he had received $50,000 from the War Department and an additional $20,000 from the Smithsonian Institution to build an aeroplane. The New York Times followed his work closely and regularly reported on his progress. However, all his attempts did not have the desired result, and quietly and determinedly, the Wright brothers won the race. When Langley heard about the Wright brothers’ success, he immediately stopped all his aeronautical activities. While he had been focused on his personal gain and reputation, the Wright brothers had concentrated their efforts on allowing humans to fly.⁵

But why am I writing about the pioneers of flight when this book is about automobiles? The simple answer is that this example serves to show a pattern that is typical for many disruptive innovations.

First, disruption is often introduced into an industry by outsiders, not by the experts in that field—outsiders who at first are thought to be naive, detached from reality, or simply completely crazy. Nevertheless, these outsiders are exactly the right people to perceive matters clearly and without prejudice and to provide unconventional approaches. And because they are not involved in the history of their respective disciplines and have no obligations to anybody in the hierarchical structure, they are able to approach matters without showing any respect or deference to anyone. They do not have to worry about the unwritten rules or be afraid to alienate someone to whom they owe something. They can look at the problem to be solved from a more general perspective.

This approach is called first principles or thinking in basic terms. The basic term cannot be traced back to any other term and relates back to the original problem that was posed. The question that is closer to the basic term and the problem to be solved is not, How can I improve a carriage?, but rather, What do we need carriages for? And with this approach, you soon discover that the quantum leaps necessary for solving the problem do not involve a step-by-step improvement of existing technology but the discovery of completely new starting points.

This way of thinking, however, requires more mental energy. An innovative leap almost always surprises the experts in the industry, who never tire of pointing out the difficulties or the impossibility of any venture but continue to think only within their own limited framework.

Second, disruptors usually are not so much interested in personal fame but rather want to bring forward the actual cause. They want to change the universe or make the world a better place and help people. This is precisely what Tesla CEO Elon Musk meant when he talked in an interview with the German Handelsblatt business newspaper about his reasons for stopping his collaboration with Daimler and Toyota.

The problem that we found with programs we did with Toyota and with Daimler was that they ended up being too small. They basically just calculated the amount they needed to keep the regulators happy and made the program as small as possible. We don’t want to do programs like that. We want to do programs that are going to change the world.⁶

Musk wants to make the world a better place and wants to help people improve their life circumstances. In the German-speaking world, Weltverbesserer (literally improvers of the world) are regarded as naive, starry-eyed dreamers of pipe dreams who will probably end their lives in an asylum. Being called a Weltverbesserer, therefore, is not really a compliment in Germany. But what would you then call people not aiming for that? World deteriorators/impairers? That would certainly have some internal logic.

It is not without reason that management is understood to be something in sharp contrast to traditional entrepreneurs. In his book The Future: Six Drivers of Global Change Al Gore quotes a survey in which CEOs and CFOs were asked whether they would consider a good investment now if it meant that they would not meet their targets for the next quarter. It won’t surprise you to hear that 80 percent of the people interviewed said no.⁷

In his work, behavioral economist and 2017 Nobel Prize winner Richard Thaler points out the internal conflict in companies surrounding the macro and micro assessment of risky projects. During a meeting of 23 managers with the company CEO, the managers were asked whether they would start a project if the chances for success were 50 percent. If the project turned out to be really successful, there would be a gain of $2 million per project; in case of failure, the potential loss would be $1 million. In total, there would be 23 independent projects. The results: of the 23 managers, only 3 opted for the risk; the other 20 rejected the idea.

When the CEO was asked how many of the projects he would authorize, he immediately replied, All of them! And from his point of view, this absolutely makes sense. Half of the 23 projects probably would fail and lead to a total loss of $11.5 million. The successful other half of the projects, however, together would make the company $23 million. This means that at the end of the day, the results would be a plus of $11.5 million. Managers were asked to give their reasons for not undertaking such projects, and they said that in the cases where the projects were successful, all they had to gain was a pat on the back and a small bonus, but if they failed, they not only would lose their reputation in the company but would have to face being fired in a worst-case scenario. For them, the risk was much too high for the potential gain.⁸

Even if the company CEO is aware of the fact that from a macro point of view, the company should approve all 23 projects, the company’s focus and reward system are aimed at the micro view (i.e., the individual project). When you think this through, you see that a failed project that nevertheless was tackled involves a large commitment and should at least be rewarded in the same way that a successful project is rewarded, because, after all, someone was willing to risk something here. From the company’s macro point of view, this would make a lot more sense. And this leaves us with the astonishing conclusion that we should rather punish the mediocre projects with average success, which are those aimed at keeping within safe limits, and which are in any case pushed back by extremely successful projects. We are surrounded by mediocrity because a lot of people don’t have the courage or do not receive sufficient incentives to embark on something extraordinary. The micro point of view that is deeply embedded in our working life today punishes all those who take risks and regards failure as a personal and not as a learning experience.

Coming back to all the news about the diesel emissions scandal, illegal price fixing, and government subsidies, we might come to the conclusion that a wrong approach and the usual reward systems simply induce people to muddle through. People strive for short-term gains and rewards, and such aims are not necessarily in line with corporate missions. Furthermore, it appears that highly profitable car manufacturers have also become experts in getting access to public subsidies. Porsche received more than $6.8 million from the German government, Daimler received more than $68 million from economic incentive programs, and BMW received subsidies of $50 million from 2010 to 2012.⁹ This list could be continued ad infinitum.¹⁰ It is a fact, however, that those amounts were only used for minimum innovation—if you take the results so far as a measure—and more effort seems to have gone into finding reasons to explain why a new concept could not possibly work. The main motivation seems to be less a desire to create a better world and more a striving for power and glory, or at least for a good feathering of one’s own nest. This works until the moment when external players show you how it’s done if you just have the necessary willpower and endurance.

Third, directly after a new technology is accepted, many new players appear on board in an extremely short time. Only one year had passed from the moment Wilbur and Orville Wright had completed their first public flight presentations in the United States and France with great attention from the public when there were already 22 pilots signing up for the first great flying competition in Reims, each one with his own flying machine.¹¹ Ever since Google’s self-driving vehicles appeared in the news headlines and electric Teslas started to fascinate their new owners, dozens of new players have joined the game. In 2019, there were more than 1,000 companies working on technologies for self-driving vehicles. We will have a closer look at those companies a little later, but there is one thing we can already disclose: the vast majority of traditional automobile companies are not among the leading companies, although they would like to make us think that they are.

Cars have become an integral part of our society. The kind of transportation we choose is not just a statement on our personal status but also a comment on our society. We spend more time in traffic than we do enjoying holidays, or eating with our families, or having sex. Traffic has become a kind of lifestyle. Such a lifestyle forces innovation on us. Entire industries, from Starbucks’ drive-through and food-to-go establishments to audiobooks, only developed or introduced adjustments when the mobile society required such services.

But before we get into all this too deeply, let us take a step back and return to the romantically transformed good old times. Just when the Wrights were busy with their pioneering work on flying devices, another age-old kind of transport underwent a drastic reconfiguration engineered by outsiders. And it all revolved around the horse.

From the Horse Manure Crisis to Climate Change

Anyone who has visited Vienna, Austria, surely knows them: the special hackney carriages there, the fiakers. I am talking about those horse-drawn carriages you can hire in the town center to enjoy a trip through the history of the town slowly and comfortably, powered by two horses. Some attentive tourists are bound to have noticed a chute-like leather bag underneath the horse’s tail. This contraption is called a horse diaper and was introduced to avoid horse droppings all over the streets of the city.

This idea, which today invariably makes us smile, actually addressed a huge issue that burdened city administrators more than 100 years ago. As the cities grew, the number of carriages on the streets increased, and thus so did the number of horses on the streets. Around 1900, there were 11,000 carriages in London serving as taxis, plus several thousand horse-drawn streetcars, horse-drawn buses, and countless transport carts for all kinds of goods and products. At least 100,000 horses were required to keep the citizens of London and New York City moving. And those horses left traces. A horse’s solid digestion products amount to 15 to 30 pounds every day, plus half a gallon of urine. Just try to imagine how a metropolis at the time must have smelled. Try to envision the danger of epidemics and the slalom courses pedestrians had to take to avoid tracking too much of all that refuse into their homes. The dried horse manure was kicked up into the air on hot summer days and turned into a gluey mass when it rained. It was also a preferred breeding ground for house flies. Whatever its state, horse manure was definitely unpleasant—and surely you now also realize that mudguard is a bit of a euphemism.

Nevertheless, what was stinking horse manure for one observer was a valuable resource and fertilizer for another. Entire professional groups made a living collecting, recycling, and selling horse manure. And now think of all the specialists working in the horse industry, such as farriers, bridle makers, carriage builders, horse breeders, stable managers, feed producers, veterinarians, and horse trainers, all working to keep the horse business running. The use of horses as means for transport and work meant that the average lifespan of a horse was just two to three years. Animals that collapsed or died on the streets often could not be removed immediately. Instead, they were left where they fell for several days until their cadavers had dried out somewhat and were easier to transport. It is almost impossible for us today to imagine the stink and the unhygienic conditions, especially during the hot summer months—fortunately impossible, you might want to add.

It comes as no surprise that the London Times in 1894 predicted a 9-foot-thick layer of horse manure on every single street of the city just 50 years ahead. The great horse manure crisis of 1894 was the initial impetus for the first international urban planning conference in New York in 1898. The conference was dedicated to outlining solutions for this imminent danger.¹²

Mind you, this was before the number of horses had reached its peak. In the United States, peak horse was reached in 1915: that was the year with the greatest number of four-legged transport devices (>21 million horses).¹³ There was one horse to every three Americans. And exactly 100 years later, car manufacturers sell more vehicles than ever before. In the United States, we count 260 million vehicles; there are 43 million in Germany and 2 billion all over the world—the highest number of automobiles that ever moved on our globe. We have reached peak car or are just about to do so. At the same time, though, the automobile industry is facing the biggest upheavals in its entire history. Is it possible that the car manufacturers are about to come to a similar end as the horse industry, now, at the height of their economic power?

Management consultant James C. Collins, author of How the Mighty Fall, analyzed well-known cases of companies that faded into irrelevance within a fairly short period of time, although they had just before been the most successful corporations in their field.¹⁴ Using global players such as the Bank of America, Motorola, Merck, Hewlett-Packard, and Circuit City, he identified five levels a corporation could pass through (although some can be skipped). All those corporations had a history of success that tricked them into thinking they were invulnerable. This is followed by arrogance and a rampant desire for more and the denial of danger and risk: all this together caused the companies to make more and more mistakes and to rely on old success models for too long, until it was too late (see Figure I.1).

FIGURE I.1   The five steps of decline

The automobile industry is currently at level 3. The number of cars sold is higher than ever before; there are always more powerful, more economic, larger models available; and strongly growing promising markets in Asia hide the fact that the traditional sales markets in Europe and North America are stagnating. The latter point, however, is not at all due to the fact that people no longer need any means of transportation—quite the contrary. But change is in the air. We are witnessing a change in how we feel about accessing or owning a means of transport, as well as its availability; the importance of the drive and the experience of a drive differ from day to day. In order to understand the underlying dynamics, we have to take a closer look at who manages the companies and the time when they were founded. One aspect that is apparent immediately: the CEOs of the companies that pose the most serious competition for traditional car manufacturers today are also the founders of their companies. In contrast, traditional automobile companies are managed mostly by, well, managers, which really is all you need to know to explain the difference. Managers are not entrepreneurs.

Throughout its history, the United States has always managed to encourage and enable entrepreneurship. A list of the most famous American entrepreneurs includes:

•   Alexander Graham Bell (Bell Labs)

•   Thomas Edison (General Electric)

•   Henry Ford (Ford)

•   Andrew Carnegie (Carnegie Steel Company)

•   Walt Disney (Disney)

•   Thomas Watson (IBM)

•   Bill Hewlett (Hewlett-Packard)

•   David Packard (Hewlett-Packard)

•   Gordon Moore (Intel)

•   Bill Gates (Microsoft)

•   Michael Dell (Dell)

•   Jeffrey Bezos (Amazon)

•   Steve Jobs (Apple)

•   Larry Page (Google)

•   Sergey Brin (Google)

•   Mark Zuckerberg (Facebook)

•   Elon Musk (Paypal, Tesla, SpaceX)

Just one glance at this list shows that there are a number of names on it that we all have known for decades. And now let us think for a moment about German entrepreneurs. Do any names come to mind? Here is a (most certainly incomplete) list of the most important names:

•   Carl Benz (Daimler-Benz)

•   Karl Rapp (BMW)

•   Ferdinand Porsche (Porsche/Volkswagen)

•   Rudolf Diesel

•   August Horch (Audi)

•   Claude Dornier (Dornier)

•   Werner von Siemens (Siemens)

•   Karl Albrecht (Aldi)

•   Adi Dassler (Adidas)

•   Konrad Zuse (Zuse KG)

•   Heinz Nixdorf (Nixdorf)

•   Hasso Plattner (SAP)

So do you notice anything in particular when you compare the lists? First, only very few large German companies were founded in the recent decades; the most famous entrepreneurs worked in the late nineteenth and early twentieth centuries. Second, the American list is dominated by technology companies.

There were five technology corporations in the list of the six most valuable companies issued in April 2017: Apple, the Google parent corporation Alphabet, Microsoft, Amazon, and Facebook. Those corporate giants alone accounted for a market capitalization of a breathtaking $4.2 trillion in October 2018. In comparison, the market capitalization of all companies quoted on the DAX-30 list was $1.6 trillion—a third of the former amount. Those five U.S. companies are digital corporations, three of them were founded less than 25 years ago, and the other two were founded just about 40 years ago. Two of them have their origins in Seattle; the other three in Silicon Valley. The dominating German corporations, such as Bosch, Siemens, Mercedes, BMW, and Volkswagen, all have 100 years of history or more behind them, with the exception of SAP, which celebrated its forty-fifth anniversary in 2017. Twenty-four companies on the DAX-30 list are older than 100 years; only three are younger than 45 years. SAP is the only German digital company—and the most valuable at that.

So there is absolutely no reason to develop any kind of hubris—that is something that is slowly but surely destroying the companies. The most spectacular example is the Volkswagen Corporation. The drive for power of the owner families and management resulted in ethically and legally questionable decisions leading to the emissions scandal and had the company tottering on the brink of a