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Ready to Fly

Shares of  General Motors hit a record high on Tuesday, January 12, 2021 after the automaker unveiled an electric delivery van and revealed potential plans to further explore futuristic flying cars. GM’s potential investment into “personal air mobility” was announced as part of Cadillac’s portfolio of luxury and EV vehicles. It included an autonomous shuttle and an electric vertical takeoff and landing (eVTOL) aircraft—a flying car.

 Such investments and innovations are often referred to as “hunting unicorns,” but people my age, who were children in the 1960s have a vision of these unicorns among us. We grew up watching the cartoon, “The Jetsons.” That was the era of space exploration, when going to the moon was an incredibly exciting proposition. Looking back on it today, it is pretty remarkable how much of the future envisioned in the “The Jetsons” has come to pass—including robotic maids and 3-D printing of food! What fans of the show were most enamored with, however, was George Jetson’s flying car. It is not as far off as it once seemed. Airbus debuted a flying car at the Geneva International Motor Show in 2018. Called CityAirbus, the all-electric, four-seat, multicopter full-scale demonstrator conducted its first take-off in May 2019. We’re expected to see much more of it in 2021. Larry Page’s Zee.Aero and Kitty Hawk companies are working in the space as are Tesla and Uber.

It’s fun to think about these things. I have no doubt that they will come to pass, just as drones, which once seemed so out there, are now ubiquitous. What this means for the future of transportation gets to the question of widespread usage, which comes down to the same two things that influence most transportation considerations—cost and speed. For flying cars, there may also be an added question of practicality.

 Looking at the photos of these prototypes, it’s hard to get a sense of the wingspan and difficult to imagine how this would work for an average family on a daily basis. Does a hovercraft drop down on your front yard to pick you up in the morning, drop down in the schoolyard to deposit your children, before dropping you on top of your office building? Can we load them up with our groceries on Saturday afternoon? Are there rings of flying cars, hovering around the same airspace, each waiting their turn to land? Do we rappel down on ropes since there isn’t room for all of them to land in the same space? Do we get just as frustrated waiting for a place to land as we do sitting in traffic? 

 For the population On the Road Lending serves, will this be an affordable option? I often find myself sitting in the lobby of my office, looking out the window at the few parking spaces out front designated for our use, and see the guest who has come to meet me get out of the car. We greet each other and sit on the couches, passionately talking about innovation and impact investing, and eventually abouttransportation. Without realizing the contrast of their words with their own wants and needs and actions, no matter their age, they inevitably ask me why on earth our clients need to own a car when we live in the gig economy characterized by short-term contracts and freelance work as opposed to permanent jobs?

 We learn in Kindergarten that we are supposed to share, and some people take this to heart. Gianni Ekhart and Fleura Bardhi wrote about the “sharing economy” in Harvard Business Review: “Sharing is a form of social exchange that takes place among people known to each other, without any profit. Sharing is an established practice, and dominates particular aspects of our life, such as within the family. By sharing and collectively consuming the household space of the home, family members establish a communal identity. When ‘sharing’ is market-mediated—when a company is an intermediary between consumers who don’t know each other—it is no longer sharing at all. Rather, consumers are paying to access someone else’s goods or services for a particular period of time. It is an economic exchange, and consumers are after utilitarian, rather than social, value.”

 This is a really interesting concept to consider. This Harvard Business Review article considered the distinction between a sharing economy and an access economy that is worth pondering, specifically as it pertains to the future of transportation. The authors cite research they did on the motivation of people who use the car-sharing service Zipcar, which is different from Uber, although now Uber drivers in some cities are using Zipcars and making less than minimum wage, by the way. The authors’ premise is that people want to access convenience at a low price, rather than be provided with any kind of social interaction with strangers through a business arrangement. Maybe it is a dim view, but there are contrarians that refer to this idea as the “taking economy” or the “sharing-isn’t-caring economy.” Their argument is that these gig-economy businesses are really brokerages—middlemen who take advantage of a misalignment of knowledge—rather than value creators. Because they have developed digital ways to broker these deals, they seem new. But the broker/insider business is actually not innovative but old school. It’s the way the car business used to work—before the Internet. Dealers made a profit due to an asymmetry of information and power. They knew more about cars than buyers did and could use that knowledge to tip the scales in their favor. Buyers didn’t really know what the car they wanted to buy was worth or the value of their trade-in, and, even if they were well off financially, they may not have even known much about their credit. The odds were stacked against them, allowing the dealer to capitalize on these imbalanced dynamics to make a profit on transactions. There is not really anything wrong with this. Finding gaps in systems and weaknesses in market forces is how most businesses make a profit. We all need to make a living, and car salesmen are no different. But isn’t it better to pay less and receive more?

 As with so many other digital advances, the Internet leveled the playing field. On the Road Lending teaches a Car Buying 101. We spend a lot of time with our clients talking about how there is no longer any excuse for not being informed when buying a car—or anything else, for that matter. It’s all out there for the taking. If you know the market value of the car you own or want to buy, the dealership no longer holds an advantage. And the same goes for your credit information. You know if you are being taken advantage of and, if you are empowered with the confidence that comes from this knowledge, there is no reason for you to pay more for the car you want to buy or receive less for your trade-in than anyone else.

 Other than the idea of magnetic bullet trains and the hyperloop technology, high-speed vacuum tubes, most of this latest version of the transportation revolution involves personal transit rather than public or mass transit. The ideas are generally about cars—driverless cars, sharing cars, flying cars. Aside from the obvious issues of costs associated with bullet trains—$121 million per mile to build—and vacuum tubes—$123 million per mile to build1—there is the same issue that occurs with traditional mass transit: How do you get from your point of origin to your final point of destination? This is known in transit-speak as the first-mile/last-mile problem, and it is one of the main reasons I think many of these innovations aren’t as transformative as we’d like to think they are. Even if you can get from city to city faster, how do you get to your meeting?

 In recent years, I have found myself more often than not driving my car when I go to Houston or Austin instead of flying. When I factor in the time it takes me to get from the gate to a taxi to my final destination and the hassle factor of going through security and being on the airline’s schedule, it actually saves me time to drive. This ends up being the same issue for traditional mass transit for daily mobility needs versus business travel. It has a really hard time competing with a personal car in terms of efficiency. Most of us want to get to where we need to go in the fastest, easiest and most direct way we can.

The question I get asked most often is why isn’t Uber or Lyft the answer? Those asking go on to say that these low-income families would save by not having to spend money on gas, insurance or maintenance. Our clients have tried to make these services work. We’ve seen many people come to us paying $1,000 per month on these services.

 Whether flying vehicles or driverless cars serve anyone’s needs remains to be seen. If driverless cars are affordable enough for most people to use and their widespread adoption means that traffic flow is optimized, we will likely see the marketplace accept them. I will say this about transportation innovation—lower income people benefit greatly from innovations, as we all do. Most lower-priced cars today come with anti-lock brakes, which were a premium feature of cars 20 years ago. These ABS systems are effectively part of the driverless car movement. It is a way for the intelligent computers on board vehicles now to make decisions on behalf of faulty human intelligence that can save lives. The average vehicle today has 40 to 50 computers on board and about 20 million lines of code, more than a Boeing 787! In time all of these innovations migrate from higher end vehicles to lower cost ones so that all drivers benefit, no matter what their income.

 What really drives innovation is giving people what they want in the simplest, fastest, easiest way possible. This, I think, is at the heart of companies delving into flying cars and of what we are doing with On the Road Lending. We are giving people the gift of time by providing a way for them to have greater efficiency and effectiveness in their transportation options. Capital seeks innovation and the opportunity to benefit from it financially. If that profit-seeking motive provides ways for people to have better lives, then perhaps hunting unicorns is a good thing.