In today's special episode of Industry Focus: Energy, host Nick Sciple chats with historian Dan Albert about the subject of his newest book, Are We There Yet? The American Automobile Past, Present, and Driverless. In the hourlong interview, Dan illustrates what America looked like before cars, how cars changed the landscape and society, and what history can tell us about the future of driving. Tune in and learn why electric vehicles are a lot older than most people realize, and why the diesel engine took over for so long; how infrastructure did and did not play into the car's mass adoption, and what that means for the future; what drivers will lose if self-driving overtakes traditional driving; how personalization of cars has evolved over the decades; where companies like Uber (NYSE: UBER) and Lyft (NASDAQ: LYFT) fit into the American automotive tapestry; and so much more.
To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.
This video was recorded on Aug. 15, 2019.
Nick Sciple: Welcome to Industry Focus. I'm Nick Sciple. We've got a little different show for you today. Earlier this week, I sat down with Dan Albert, car critic at N+1 magazine, automotive historian, and author of the recent book, Are We There Yet? The American Automobile Past, Present, and Driverless. We talk about how the automobile changed America, from helping drive the development of consumer debt culture to its role in pushing pedestrians and cyclists off city streets. We discuss the electric vehicle company who pioneered mobility-as-a-service, battery swapping, electric vehicle business model more than a century before the onset of Uber and Lyft. And, we consider how the infrastructure built to sustain the car has shaped the development of autonomous vehicles. I had a great time picking Dan's brain about the past and future of automobiles, and I hope you'll enjoy the conversation as much as I did.
Today I'm joined by Dan Albert. Dan Albert writes about cars and culture for N+1 magazine, and is the author of the new book, Are We There Yet? The American Automobile Past, Present, and Driverless. Dan Albert, welcome to Industry Focus!
Dan Albert: Thank you so much! Happy to be with you!
Sciple: Happy to have you here! I really enjoyed reading your book! I think one of the biggest things I learned from the book is, when the automobile came onto the scene, how it changed American society. Before dive in into the automobile and how it's evolved over time, can you give us a picture of what the world looked like when the automobile came onto the stage? What was the world like at the turn of the century?
Albert: A couple of things to understand. One is, most people in the United States lived outside cities, lived in rural places, were farmers, were small town doctors, whatever it might be. People were out there, they had some wealth, but they didn't have the kind of wealth you needed to buy an automobile. So the automobile really came into the city first. So, what did the city look like around 1890? Well, that too, had changed. Even up until 1850, 1860, the city was formed around the idea of walking. Even the transportation options that you had, such as a horse omnibus, so this big wagon pulled around by a horse, give them a nickel and you can get a ride, didn't move much faster than walking. So, you're talking about something a couple of miles square. Industrialization, massive immigration, particularly of people who were from Southern and Eastern Europe, who were Catholics, who were Jews, who were not the same kind of immigrants that there had been earlier. So, you got a lot of conflict and disagreement, I'll just call it, congestion and so forth, happening. Electrification of the street cars, very important, comes 1870s, 1880s. And that begins to spread the city out. You begin to get streetcar suburbs. The streetcar moves faster, it moves on rails, bigger, able to carry more people. And it's that city that the automobile enters. It's a city that has become very congested, very dense, but is beginning to spread out and into the metropolis.
Sciple: When the car came on the scene, you could say there were some of the same concerns today when it comes to the predominant transportation of the time being the horse, being at the time a very dirty vehicle. If you look at some of the newspapers from the time, the Times of London said, "In 50 years, every street in London is going to be buried under nine feet of manure." Today, you might say the same thing about climate change and putting a city underwater. With the car coming onto the scene, what opportunities did it open up for people that didn't exist before? And, was it at the time seen as something that would be cleaner than the horse?
Albert: Oh, absolutely! It was progressive. It was cleaner. As you say, this was not just manure, this was disease spreading. You also had horse stables. If you think about it, they're full of hay, made of wood, and they were dangerous, and they were smelly. If you're living next door to a horse stable, you might be happier with a garage. The other thing is, you begin to develop the ASPCA mentality. In other words, you begin to think of horses not as machines, as they had been for a very long time, but some people are beginning to say, "Wait a minute. We need to treat these as creatures, as animals, and we need to treat them humanely." One of the earliest automobiles is a guy named Dudgeon, and he starts running a service out to Long Island, and he says specifically, "I am doing this because of the misery of horses. I want to stop abusing horses." So, that's the world it comes into. It's progressive. They're noisy, they're smelly, they're driving too fast, but there are also a lot of electric cars and steamers that did not have a lot of those drawbacks. But, yeah, very much progressive, cleaner. In a lot of ways, safer, by the way, than horse-drawn carriage. Horses kick people in the head. It's that simple.
Sciple: You talk about the early days of the car, before the internal combustion engine came onto the scene, the vehicle being very dominated by steam and electric cars. The most interesting anecdote from your book is The Electric Vehicle Company, which at the time rose to become one of the largest auto manufacturers in the country, had a shared mobility battery swapping business model. Can you give us an overview of what The Electric Vehicle Company was, and how it compares to some of the businesses we're seeing emerge today?
Albert: I can. You're not going to believe me because the parallel is so similar. This is a company that starts out from a guy who has an electric car. And these people come in -- among them, Albert Pope, who's the largest bicycle manufacturer in the country. And they start to look at, how can we monetize electric vehicles? Electric vehicles were relatively expensive, not like the luxury vehicles coming over from Europe, but comparable to a gasoline vehicle, a little more expensive. So, selling them outright to a mass market wasn't on the table. But they were excellent in the city, excellent for wealthy women, socialites, and terrific as taxi cabs.
So, what happened? The Electric Vehicle Company forms, a lot of different players come together. And they are going to provide mobility-as-a-service. You can rent one, you can buy one if you want, but you can also basically pay by the mile, take it like a taxicab. They made sure they had lots of these machines on the road. They made sure they stayed on the road. You mentioned battery swapping. That's so important. Even now, a half hour to sit and recharge is a problem on a road trip. So, they really had that dialed in. In fact, the business was successful. It was profitable.
What happened to it? How did it die? Again, the parallels are interesting. They essentially over expanded. They went from saying, "We're going to be in New York," to saying, "We're going to have one in Philadelphia and Chicago and Boston," and they began to open up these branch offices. Again, they overextended. They took on some loans.
Two things are interesting about that. One is, they became a monopoly. And they had to be a monopoly, because it didn't work if you had 10 different companies running cabs. Just like with Uber and Lyft today, if there were 10 different companies, the economics don't work out. Monopolies were a bad thing in those days. Teddy Roosevelt came in, the trust buster. But they also were attacked by a very influential journalist who ran something called The Horseless Age, and hated them. He called them the lead cab trust. It was partly, he did not like electrics, he liked gasoline, because he thought electrics were going nowhere. But it was also this problem of the trust. He referred to them as the lead cab trust.
Finally, though, they got caught, and they got caught because they secured a loan fraudulently. That sent their stock, I think was something like $30, down to pennies, $0.30 or whatever. And that was the end of The Electric Vehicle Company.
Sciple: Some of the concerns why electrics maybe didn't take over relative to internal combustion engine are the same as what we've seen today, in range anxiety. But one of the issues that I think was really pulled through in your book is the idea that not only do gasoline cars have a longer range, but gasoline cars can go faster and stroke that part of the automotive need for people. When we look at how safety has evolved for people, how have we balanced safety and that need for risk when it comes to that part of how we enjoy operating cars, and that part of being a car owner?
Albert: You're absolutely right. It's speed. Although, it's interesting -- at one point, electric vehicles have the world land speed record, but it was a very short distance. So, in terms of maintaining speed, it's the gasoline car. The dangers are pretty apparent, because you can feel, viscerally, and hear the explosive energy going on in that engine. You might think of that greasy machinery, those thrusting pistons that exhaust the oil as a negative. But for a lot of the early adopters of the automobile, that was what they wanted. They wanted something dangerous and exciting.
The efforts at automobile safety were very early on, "The car's perfectly safe. It's bad drivers." Particularly, they focused on manners, drivers with bad manners that are rude, which is kind of like most drivers today, [laughs] I would think. But, that was the first effort to try to reign in the drivers. And this is when they're wealthy gentlemen. And they say in the highfalutin newspapers and magazines, "Come on, gentlemen. You need to behave."
The other problem that was you also had chauffeurs. Chauffeurs were working class, they would do things like take the boss's car out when he didn't notice and go joy riding, show off to his girl, or what have you. So, that was a huge draw. And I don't think there's anything special about that with the automobile. Horse racing, bicycle racing in particular; that thrill, and danger was very much a positive element of the early gasoline automobile.
Sciple: You touched on how safety has evolved over time, the orientation we have toward safety as a society. At first, it started out with, "The drivers are bad, we need to educate our drivers." And you saw driver's education and those sorts of programs come on board. And then, as Ralph Nader and those folks came on the scene in the 60s and 70s, you've seen a shift to where the car was unsafe at any speed, the vehicle itself is defective. Today, we are seeing, as autonomy and these things have emerged, the idea that the car should avoid accidents in the first place. It's not that the driver is poor and gets into the accidents, or that the car is unsafe when it does crash. So, we're developing technologies that will prevent crashes from occurring in the first place. As you see these technologies start to come onto the scene, how do you expect safety and the way we think about it, from the perspective of the automobile, to change going forward?
Albert: That's a very interesting question. I'll just quickly digress a little bit. As those safety devices came in -- things like seat belts and softer interiors -- there was a complaint from the Car and Driver editors and whatnot, saying, "Well, really, you want to be able to avoid an accident, and the problem is, these big American cars don't handle very well. So, buy yourself a BMW or something that will be able to avoid the accident." That doesn't work, just like driver training doesn't work. We know that driver education doesn't work. That effort to engineer a better human driver has been very unsuccessful overall.
The real question to me is, what we've ended up with now is really an automotive womb, right? The car is so soft and so safe in a lot of ways. It's kind of very hard to kill yourself in a car, even though it's a major cause of death. To the point where roof pillars are very thick. If you notice, it's hard to see -- our minivan or other bigger vehicles, it's hard to see past those posts. If you go back to the 1950s, it was a strip of chrome. Now, the roof got crushed in if you rolled over. Doesn't happen anymore, so it's a huge thing. But we're becoming more and more insulated, isolated from the experience of driving. And I think that is, in a way, I don't know, softening us up for the prospect of the driverless car.
Now, when you look at the concept cars for driverless cars, they are not padded on the inside. They're office spaces, sliding chairs. And this is a concept car, but I do think that is the hope, and that the expectation is, vehicles will become completely different. We can rethink the interior.
Sciple: One area I wanted to talk about is the car itself as a technology evolved over time. Henry Ford and others helped that car get in the hands of all Americans. But one way that the car was really able to flourish was through the construction of highways, things like the Interstate, through cooperation between the auto industry and the government to create this infrastructure for the car to thrive. How did that relationship come about, and how did it grow out through the interstate program in the 1950s? How was that the final flourishing of the relationship between auto industry and government?
Albert: It's a very good question. The one thing I'll say to start is, a lot of people say, "Well, the car companies were foisted upon us by the government." The reality is, we adopted the car as a nation long before the government got involved. But, beginning in the 1930s, the government began to think about cities as a problem. They were congested, they were slums, in the words of planners. Also, I think of it in terms of the flow of capital, trying to weave a market together, trying to make it more flexible, all the things we talk about now. And the highways were going to do that. The highways were built in the 50s, started in the 50s, but really, they're a product intellectually, if you will, or philosophically, ideologically, of the 1930s. So, you have to think about the politics of that period, which is very statist. The government will step in and fix the economy, fix the environment, and so forth. But once that gets going in the 1950s, the federal government puts up 90% of the money, the states put up 10% of the money. It comes from gas taxes for the most part, but it is allocated by the federal government. And there are all kinds of rules. And the result is the largest public works project in American history. I always think about the freedom of the open road, OK, but it's also pure and simple government industrial policy, if you will.
And then the last thing I always think about is, you talk about the freedom of the highway, and that's true, you can go far, but you can't get off where you want, you can't get on where you want. It's much more like a rail system, where there are stations, and you get off at the stations, and it works that way.
Sciple: In many ways, it's very similar to railways, as you said. One thing I found interesting reading your book is, if you look at the turn of the century, before the automobile came onto the scene, you had a city that was predominantly populated by people, pedestrians, you had some bicycles on the road, and you had public transit in the form of street cars and those sorts of things. If you look at the world of a lot of the biggest micro-mobility advocates today, that's the world that they would hope that we would live in -- fewer cars, more people. But, as you saw the car evolve and become more and more a significant part of society, some of those modes of transportation have been pushed out. As we see more voices pushing for a return to that system, given as fully committed as we've become to the automobile today, how do you handicap the opportunity we have to build that type of micro-mobility, pedestrian-focused society?
Albert: I'll start by saying, 100% behind that. There's no reason for automobiles to be in cities. It happened because of the interest behind it. And they were not the auto companies. They were, for example, downtown merchants that were used to getting what they called the carriage trade before the automobile, wealthy people. Well, they wanted to make sure wealthy people came downtown. So, you get street widening, you get all kinds of changes in the infrastructure to support the automobile. The ideas that were presented at the time for solving that problem was, separate things vertically. Down the bottom, you have your subway, rapid transit. Surface, streets. Above that, walkways. It's very modernist, when you look at the old pictures. There are neighborhoods in Japan, I was in Tokyo, that are very much like that, and they're wonderful. They work.
The overarching idea is separate modes of travel. You talk about street cars, mass transit, cable cars. You also had horse and wagon, you had plenty of people and you had bicycles. The theory became that mix was really the problem, and we need to get people off the streets and make the streets for cars.
The one thing didn't happen. In other words, we didn't separate people by giving them a nice place to walk. We didn't separate bicycles. So, my hope would be -- and it's going to take a commitment. If I could stop for a second, we're seeing this, for example, in New York City. There has been a spike of bicycle and pedestrian deaths. People are dying at the hands of drivers, or automobiles. Why is that happening? Because there's no safe place to bike. A bike lane painted green or with a white stripe is not safe. Bicycles need infrastructure. If you go to the Netherlands or other places, what you see is a city designed around bicycle infrastructure, and cars are demoted. Cars can come in, but they are second class citizens compared to the bicycle. I am very hopeful over time that that happens. I think clearly, there are progresses in the transportation industry, and young people are keen to this, whether it's because of climate change or a desire for urban living. So, I expect those things to happen. It's a question of how long. Those things take a long time.
Sciple: When you talk about infrastructure, we talked about how the Interstate and the building of highways really allowed breathing space for the car to come to the fore. As we see autonomy and real conversations around how we are going to shift our mobility infrastructure, the way we get around, there hasn't been as much talk about close collaboration between governments and industry to enable these new technologies. Why do you think things have changed vs. when the car was developing as a technology, where it was assumed there would be some kind of involvement between the government and industry to allow the technology to thrive? Versus today, I think you described as Ayn Randian type philosophy when it comes to autonomy. What is the barrier to real investment in infrastructure and collaboration between government and industry to make these technologies happen?
Albert: It's an interesting question. I would point to the big picture things like where we are culturally and in our politics. But I will say that if you go back to the 1950s when systems were first tested -- and in fact, in the 1990s, when the federal government tested systems -- they worked. They were designed and developed in a combination between government and industry. Even General Motors famously built hands-off, feet-off, driverless vehicles that worked with a particular kind of road. It was essentially a wire down the road. They put sensors on existing -- you see a '58 Chevy, Impala, I think it is, driving in front of another one, nobody at the wheel, and they're platooning, and they're working.
The reasons for those vehicles were to make better use of existing roads. This is particularly true in the 1990s. The Interstate highway funding was done. Basically, the interstates were built. And the government was looking for a way to maximize the use of those existing roadways. The way to do it? Squeeze more cars in together. Also, let the driver relax. There's a wonderful government video you can see online of a parade of Buicks going down a highway in San Diego, people waving their hands, reading the newspaper. So, you get all of the things we talk about now with driverless cars -- greater safety, a relaxing trip where you don't have to pay attention. But the purpose, the goal behind it, was maximizing the use of the existing infrastructure. What happened was, "We want to build more highways anyway." And you can get into, was that the highway builders that captured the government, or whatever.
Today, I think there's two things going on. Levandowski, the famous driverless car engineer at Google and then Uber, and now he's not anywhere, said somewhat famously, "Why would we put a wire in the road?" And that's how the systems work, a wire in the road? "Why would we put a wire in the road? We can't even seem to fix the potholes." So, in other words, for him and for other people in that vein, fixing infrastructure is a bad thing. It's not what they want.
Also, if we look at the origins of the current technology, it comes out of DARPA, the Defense Advanced Research Project Association. And the plan was to have vehicles that could operate in a war zone. Well, you're not going to go into Iraq and put things in the road. Things in the road blow up in Iraq. So, that was the original money behind the technology. But the biggest difference now is there's no money to be made putting sensors on lights and sniffers in the road because they're not very expensive, there's not a whole lot of reason for people to pay more for them; and also, selling cars to people is not a very good business anymore.
Ah, but on the other hand, Uber, right? -- $120 billion, down to $68 billion, but a huge valuation for a company that loses money. If they could develop a driverless car, they would perhaps get to profitability. That's what they're looking for. And again, by the same token, very hard to make money selling cars, General Motors is looking at autonomous cars, Waymo is looking at autonomous cars, because that's a subscription model. Pay by the mile, keep paying, we own the cars.
Sciple: Follow-up question there. As we see shifting to more of the ride-sharing, car-sharing, Uber technology, and we see the way we go about owning transportation change, from owning a car, making a multi-tens-of-thousands-of-dollars purchase to rideshare, pay per transit, how do you see our relationship with the car changing? And, do you see that shift actually taking place -- us moving away from individual ownership of cars, more toward a sharing economy? Do you think that's a realistic vision of the future?
Albert: I like to say, I don't predict the future, I predict the past; I'm a historian. [laughs] But, I will say, there are a lot of reasons -- people talk about peak car now, that we've reached the peak of car purchases, and it's going to go away. Two things to think about. One is, of course we've reached the peak of car ownership. There are more cars than there are licensed drivers in this country. You have to stop and think about that. That means, even if we all drove all the time, there'd still be cars sitting around, parked. I think the other thing, very practical thing you have to think about, is young people who have college debt, who are struggling to find work that pays as well as it maybe it did in the past, find it hard to purchase a car. I think also, cars have become more soporific. It's really hard to get excited about a lot of these cars unless you're looking at a real luxury car, a high-end car. So, I do think there is this transition, and I do think there's a lot to say about, particularly when you're traveling or when you're going into a city where parking is, say, $50 an hour or whatever, that mobility-as-a-service makes sense. So, I do you see that coming on.
The last thing I'll say is, that's not a good thing. What we're seeing in places like New York and others is more congestion, pulling people off of mass transit, inducing travel. That's one of the most interesting findings. About 11% of trips, people say, "Oh, I wouldn't have taken that if I couldn't have gotten an Uber or a Lyft to do it."
Sciple: One other point you mentioned -- people aren't very excited about the new cars coming out today. I think one area where folks are really excited is a company like Tesla, these new car companies coming onto the scene. You talk about in the book the real trouble that independent car companies have had to succeed against the big three U.S. auto manufacturers. Why have independent auto companies struggled so much in the U.S. since the auto industry has matured?
Albert: Auto companies, independents, have struggled to catch up with the oligopoly. General Motors owned 50% of the industry. Ford was next, Chrysler was next. The problem was access to capital and manufacturing scale. The way you make money today, the way you profit today as an automaker, is to produce 10 million cars a year. If you're not doing that, it's very difficult. Also, you need to produce a lot of different models all on one platform. That is a very hard thing for a new company coming in to do. So, it had a lot to do with access to capital and manufacturing scale. Manufacturing scale is so important.
The strange thing that's happening now is, we have Tesla, that may or may not become a major company. Now, there have been small companies started. Koenigsegg is one of my favorites, a $3 million car. So, you can start a car company, but you can't start a mainstream, mass-producing car company, or so it would seem. Tesla has been able to access billions and billions in capital from people who desire to sign onto the dream and the hope that this company's going to really change the world and is going to build a great car. And by all accounts, they do build a great car. They don't yet make money. It remains to be seen whether they will or whether they will go from being what is really a niche company to a mainstream automaker. And we don't know.
Sciple: Sure. Part of that, when it comes to the emergence of these new companies -- you have Tesla, Riviana is another one -- is the idea that the automotive industry is being reshaped by this transition to electric vehicles. We talked about earlier about The Electric Vehicle company. Electric vehicles have been around since before the beginning of the 20th century. With EVs emerging onto the market, do you see this as the start of a meaningful shift in the automotive industry, away from the internal combustion engine toward a 100% EV future long-term? Why or why not?
Albert: I certainly do. I don't know 100%, 95%, whatever it is. Two things to keep in mind. These things take time. If we're just going to do it on a market-based situation, even with a benefit for the purchase, we sell about 17 million cars a year. There are 240 million cars in the country. About 20% of vehicles are over 18 years old. So, for the entire fleet of automobiles to turn over, to become new, that has been growing and growing. We're now up to the average car being 12 years old.
That said, certainly, governments outside of the United States are pushing hard for EVs. And then, as that happens, the market does change. In fact, it goes together with driverless cars. EVs are less complicated, more reliable. You have to sort out a lot of things with the batteries, but in terms of an electric motor, it'll run forever. Jay Leno's a great car collector; he has a Detroit Electric that runs on the original flooded wet lead cells. A 100-year-old battery, still working in the vehicle. It's a more reliable technology.
So, now here I am, I'm General Motors, and I wanted to deploy a fleet of vehicles. I'm not going to deploy a fleet of old-style Chevys. I have to change the oil; I have to keep up with them. I'm going to deploy a fleet of electric vehicles. It's more efficient, costs me less in energy, or in gas, if you will.
Once the vehicle becomes something other than a consumer product -- a chrome-covered Buick -- once it becomes something that, I don't know, I might care what color Uber I get into, but that's about it, right; then, by all means, electricity makes more sense. Those two things go together, and I do see that happening.
Sciple: Again, we've seen new car companies come onto the scene with the expectation they may take meaningful market share. Is there any reason why existing major automakers -- Toyota, GM, Honda, Volkswagen -- why they would have issues adopting the EV technology and continuing into this new paradigm as the technology changes?
Albert: Yes and no. One thing to keep in mind is that building cars is a very capital-intensive, very low-margin business. And once you build a factory, you have to amortize the cost of that factory. The idea of switching from the factories they have now, crossing that valley and getting to the other side, it's going to be very difficult for them.
That said, they're smart people. They know how to transition. There are a lot of elements about electric vehicles that are the same as gasoline vehicles. If you look, for example, at the Jaguar electric vehicles -- which are not going to be mass-market, or even sell as many as gasoline Jaguars -- the insides are gorgeous. I mean, the quality of the material, the quality of the fit and finish, is like a Jaguar. It's not like a Tesla. So, they certainly do have a capacity for that. And, again, all these things go together. If you don't care much about all that stuff, the fit and finish or the leather seats, a Tesla makes sense. It's got a big screen, maybe you like that.
But, I don't see any anything that would stop them, and they have so much capital that, for example, General Motors bought Cruise Automation for $1 billion. A lot of that was in stock. That's chump change. There's no reason they can't do what other large companies do, what we see Google and Facebook do, just buy up the new guys. Now, how that all plays out in a business sense? I don't know.
And if I could, just one other thing -- the Chinese are pushing really hard for electric cars. Their cities are choked, but mostly, they don't have any oil. We produce a lot of oil in the United States. They don't. And they want to over-leap the gasoline car. They want to get on the cutting edge. Because their plan is to export everywhere. They have a huge amount of overcapacity. I think they have the capacity to build about 40 million cars a year. They sell about 30 million cars a year. So, they can start perfecting electric vehicles and selling them across the globe. They have a very good business plan, if you will.
Sciple: Sure. If you look at some of the access to cobalt, lithium, and the really important metals, you've really seen China take a really purposeful position in those places, which are going to be very important as things start to scale up.
One thing we talked about, and I don't think we've touched on very much, is the idea of the car as the consumer product. We've talked about how people like the car for its speed that it has. How has the car evolved as a consumer product over time? The famous Henry Ford line, it comes in every color as long as it's black; today, there's a model and color for every single individual. How has the car evolved over time to become more personal to individuals?
Albert: That's a very good question. It was very consciously done. So, yeah, Ford said that. It was funny. When he said that, you could actually buy a Ford in different colors. The problem was, colored paint took a long time to dry, in the order of weeks. Black paint, for different reasons, dried in a day. So, it was a production issue. It was an inventory management issue. And all of the vehicles came in black except for if you bought a very fancy vehicle. Also, the color paints didn't last.
His idea was, "You're going to buy a Henry Ford Model T and you're going to own it, and that's the last car you'll ever need to buy." And that worked for a while. And in a way, it was a surprisingly short amount of time -- 1909 was the first full year of production; by 1925, certainly, sales had fallen off a cliff. And by '27, he stopped making them. The reason? General Motors, under Alfred Sloan, most important CEO maybe in American history, got together with DuPont, and they came up with a new paint. It was called Duco. Wow, colors! Blue, red over tan, you could get two tones. And these came out, I think about '27. Actually, a little earlier was the first ones. And people ate it up.
So, his idea was, "Let's stop selling cars because there's plenty of used cars. We're not selling transportation. We're selling new." And that was the beginning of planned obsolescence. And he said quite clearly, "I want people to come to the showroom and see this year's car and have them feel like their two-year-old car that's perfectly serviceable is old, and they need something else." It was fashion. Also, he had this idea of laddering -- a car for every purse and purpose. In other words, you start with a Chevrolet, if you're lucky you move up to an Oldsmobile, then a Buick, and then if you really get into the C-suite, if you become an executive, then you can get a Cadillac, and you've really arrived.
So, those two things -- that aspiration to have a better and better and more luxurious car, which signaled your position in the society; and also to keep up, and to always have a new car -- I think is important. And it's funny. Nowadays, people lease cars. They hold them for three years, then they turn them in. So in a lot of ways, even though the cars last much longer, people still do that.
Sciple: Right. And we saw the way people purchased things changed over time. The idea of debt-financed purchases really begins with the car. Can you touch on that a little bit, about how the car drove the beginning of some of the consumer debt culture that we have today?
Albert: Absolutely. That's fascinating to me! Very early on, banks were like, "We won't give you a loan. This is a fad," or whatever. So, Willys, who built the Jeep, a very big automaker in the teens, started an in-house bank, a lending arm. General Motors did the same. Sloan was involved with Willys, then he brought it to General Motors, the General Motors Acceptance Corporation, which would give loans. And this created, ultimately, because there was a saturation in the 1920s, a bubble. Just like we've seen with housing, easier and easier credit, liar loans, whatever it was. And one of the major reasons for the collapse of the economy in the 1930s was, that bubble burst. So cars are repossessed, they're going on the market, they're cheaper, and so forth.
Henry Ford, interestingly, was always against debt. He looked at bankers as Shylocks taking a pound of flesh. He always did things out of capital, free cash. It was interesting when, in the 1920s, Ford Motor Company also got into the bank business. And by the end, it was crazy, all these Enron style farces of money moving all around.
But people became quite comfortable with that. People became comfortable with debt. Debt is a very American thing. You build equity in a home through debt, and so forth. That really began. Nowadays, we've gone through it, things seem OK now in terms of car loans, but there was a very scary time when car loans, and just as it was in the 1920s, went out from, "Oh, you can get a loan for three years with this much down," to, five years with less down, to eight years, and now we even have 12-year car loans. And you really have to wonder what happens when you get to, say, eight years, and you want to trade that in, and that vehicle's already worthless? And you still owe money on the loan, I should say.
Again, consumer society really started big time with the car. It was the king of consumer products. And also, as you say, debt financing, debt purchases. Purchasing on time, as it used to be called, became big the car.
Sciple: As we see the role of the car change, and folks continue to push back getting their driver's license, that's kind of a secular sacrament, if you want to put it that way, the rite of passage folks have, getting your first car, graduating from high school -- as autonomy comes to the fore, and our role as drivers shifts, what do we lose as a society as we get rid of that part of being an American?
Albert: Yeah, of being an American, I think, is very important. I'll take those two elements separately. In terms of being an American, we've seen General Motors go from the biggest car company in the world and the most profitable to bankrupt. That really does change our relationship with the automobile in terms of American pride. But also, the top three selling vehicles in the United States are pickup trucks. Ford has the No. 1, GM, and then Fiat Chrysler. That tells me that people still very much care about a vehicle that is uniquely American. There is nowhere else in the world where a large country is buying more pickups than sedans. It's a ridiculous vehicle. I just watched Jim Gaffigan. These pickups drive around with nothing in the trunk, nothing in the bed. The beds are pristine, and he said it's like carrying around an empty suitcase, because an empty suitcase doesn't say, "I'm going somewhere," it says, "I'm the kind of guy who could go somewhere."
That is very much signaling that. And another bit of information is that there's been this thing where pick-up trucks go and pull Teslas away from the super chargers and from the parking space. It's like the many other elements of life today. We are Americans driving pick-up trucks and if you're driving a Tesla, you are the enemy. That still goes on in terms of being an American.
The other element of that, in terms of getting your license later, and what you lose when you stop driving, to me, the most interesting thing about that is, we live in a society -- and I watch it with my kids -- with constant social media, which is really social marketing, isn't it? And, constant engagement with purchasing, and so forth. I always think, I have a thought, I pick up my phone, and the next thing I know, an Amazon box is there, right? It's so frictionless. Consumption is so frictionless now. It just happens almost as soon as you think about it. When you're in the car, certainly a car that's not self-driving, you're not able to do that. You're also not really able to work. Maybe you have the radio on, maybe you take a phone call, but you're not working. You're not consuming, you're not working. It's this interstitial space, it's a third place. And it's a job, driving, that occupies your mind. You have to pay attention to it. You can do other things, but it is, in a sense, a meditative state.
Now, could we replace that and not spew carbon in the air? Absolutely, and that would be great. But I do think it is one of the few places where that happens anymore. And all we're going to see with a driverless car is all of that social marketing, and all of that work and labor, invade the last refuge.
Sciple: Right. You talked about early on in the book how, when the car first came on the scene, it was a vehicle that took folks to the national parks. You got folks outside, you'd go out for a picnic, do all those sorts of things. As we see the rise of autonomy, there's a lot of folks who would say it goes from a third place to a third screen. You've got your computer at home, your TV at work, and that screen in the car. When you look at the shifting role that the car has played, from something that will take you out into the country to something that really takes you from screen to screen, was there a clear shift there? Or, as society has evolved over time, this is just where we've ended up?
Albert: I certainly think that there is development that begins really with GPS and the in-car navigation, and certainly as it spreads, where you really do lose that scene out the window. And, especially, you lose getting lost. You're not going anywhere new. I like to say a map is something you pore over and consider and plan on. GPS, you obey. In fact, people have studied this. This was studies with rats. If you imagine a rat maze -- the rat has an image, a bird's eye, of that maze or that landscape, and it also has that, "Oh, turn left here, turn right there, turn left there, oh, find the cheese." Those two maps need to exist. And increasingly, recent studies are suggesting that maybe that's diminishing, that we're not developing that part of our mind. Another interesting study showed that traditionally, London cabbies have to develop something called the knowledge, they have to really learn with a map their way all around. And studies of their brains find that that portion of the brain is a little larger, a little more active than average. So that definitely is a very real, physiological change.
Now, this idea of going out into the countryside, I think you have to understand one thing about driverless cars. First of all, there are no driverless cars. You can't buy a driverless car, despite what Tesla or anybody else might say. Right now, part of the reason these cars are going toward an Uber model or ride-hailing model is because that's a better business model; but also, because they're too expensive for you to purchase, that means, if you do want to go to the national parks, or even just get lost in North Dakota, you need to drive. You still need that old school vehicle. And that idea of getting lost, that idea of getting out into the wilderness, that idea of getting somewhere and actually experiencing the travel, I think, does get lost when you stop driving.
Sciple: Sure. One other thing. We talked about the car emerging as a technology. You saw a lot of big predictions from the folks who had been at the forefront of that technology. Most famously, Henry Ford and many others suggesting that we have a flying car. Those never came. Today, we're talking about driverless cars and how those could reshape society. When you look back and those predictions made about the flying car, what does that history teach us about predictions, about innovation? What could it suggest to us about the way we should be thinking about driverless cars and this new innovation coming down the line?
Albert: I think it's a very good question. I find it hard to make those predictions. I will just tell you a little bit about Henry Ford and the flying car and the cultural elements of that. There's a very good book, a man named Corn, it's called [The Winged Gospel], and he really explores this. But the idea then was, automobiles created what we call sprawl, what they called decentralization -- people can now live out in the countryside and make it to the city. And after World War Two -- a lot of people had experience with airplanes during World War Two, it was the first air war -- you could buy at Macy's a plane. And the idea was that, instead of living in Westchester, you could live out in Connecticut and fly to the city. So, in a lot of ways, it was just an extension of the automobile. That is not quite what we're hearing about with flying cars -- from the same people, by the way, who are bringing us driverless cars. Uber has a flying car, flying taxi plan. Brynn at Google is a big flying car guy. They're talking about, "Oh, there's too much congestion, there's too much traffic. We'll do it in a third dimension."
I think those predictions were, on the one hand, wrong in the sense that the technology didn't develop the way they expected; on the other hand, quite right, because indeed, sprawl has happened. You can live further and further from where you work. That obviously hasn't turned out quite the way we want it, either. But in some ways, that dream, that expectation of living further away and traveling longer distance, did happen. So, whether it's driverless cars or not, maybe some of these predictions do come true.
Sciple: What cars do you drive?
Albert: Well, mostly, I drive a minivan, a 2008 Honda minivan. Not that I'm advertising. It's an Odyssey, and it's been great. I also have an old pickup that I've been for a few grand, which I actually use. My bed actually gets dirty. It gets dense. I like to talk about real pickups. Those are two doors, eight-foot beds. That's me. And then we also have a 2000 BMW that I got for my wife. When my daughter started driving, we needed a third one. I don't drive it very much because when I do, I do bad things. So she mostly drives it. But, boy, that's still really fun to drive -- to shift, to pull that clutch out, to rev as high as you want. So, three very different kinds of vehicles.
Sciple: That just shows the different experience you have across a different number of cars. If we look into the future and autonomy presents itself, you expect to see every car look the same, some of those individual characteristics you expect to lose. Another question -- what's one road trip that every person should take?
Albert: One road trip. We've done three great road trips, but, I think more than the road trip you take, I would say you should take a road trip with an atlas. Put the GPS away. And you should take a road trip either with somebody you want to see if it's going to work out, and maybe you'll get married or live together; or somebody you already love and really want to experience the world with. I think, definitely, the loop to do is across the South, from East to West, up California -- probably not on the coast, but the Central Valley or even inland -- and then back across. You've got to go to South Dakota and see the Corn Palace. You've got to see all those places that you would not otherwise see, that you're not going to search Google or TripAdvisor and find.
And I think the most important thing about a road trip, whether it's a week or six weeks, is you're building a set of experiences. I sometimes joke, I have a friend who, we don't really like each other, but we have such a deep set of experiences that we love to see each other and be with each other. And that really is the most important thing about a road trip.
Sciple: Yeah, there's something about that experience that, again, is one of those things, what is the world going to be like when those go away... When you're going on this road trip, what does Dan Albert like to listen to in his car while he's rolling down the road?
Albert: Well, you've got to listen to the proper car music. Some of that is more of a bluegrass kind of thing. Country music, even though I'm not a country music fan. But, stuff like that. Rhythm and blues. Things that are motivating. There is a wonderful list of car songs; if you want to get a little cliché, trucker songs. You can't listen to them too long. A lot of them are really bad. But, you really want something -- Get Your Motor Running, Heading Out On The Highway, Looking For Adventure -- all of those songs that have a good beat and get you move and keep you moving. And then, also, some John Denver. You want to drive through West Virginia, listen to John Denver. Local stuff. Local stuff.
Sciple: Since we're an investing show, I've got to ask how you invest personally. Do you invest personally? How do you think about that, in your own personal life?
Albert: In terms of investing in general? Or in terms of cars?
Sciple: Let's talk about investing in general, and then, to the extent it addresses cars, feel free.
Albert: There's a wonderful book called Narrative and Numbers. The best way to invest is to look at the story, look at the balance sheet, do your free cash flow analysis, and then try to put those together. You can look at Uber, and you can say, "Oh, they're a taxi company. OK. Let me run the numbers." Or, you can say, "They're a transportation network company, and they're going to take over the world," and you can run the numbers again. So you have to have both of those.
I am much better at the story. I have a financial advisor who's excellent and quick, and he runs the numbers. So, that's the way I tend to invest. And at this stage, I'm not a stock picker like I used to be. That said, I feel like it's betting on a horse, and I will do that. People in the Tesla world fight about being long or short on Tesla, which is brutal. I'm not invested in Tesla. I kind of have to admit I'm a little pissed off because I got in on the IPO, $17 a share. It went to $35. My advisor guy said, "This is ridiculous. Let's sell it." And I'm like, "Yeah." So, now, where we've ended up, has bothered me.
I invested in a company called NIO. I'm not recommending it. It was advertised as the Tesla of China. I didn't so much buy that, but I did look at who's behind it. Tencent and so forth have money in it. I did great for a while. It went from like $5 to $17. I was like, "This is great! It's going." Now I think it's at $3. But, you invest a small piece of that. You enjoy it.
So, that's really what I do. I do the story. I have somebody else who's better with the numbers. And I tend to follow my gut on a lot of things. I followed my gut on Amazon. I'm no genius, though. The bottom line is, everything reverts to the mean.
Sciple: Last question before we go away. When you look at autonomy and transportation as an industry, it really seems to be evolving so quickly. What are you going to be paying most attention to in the next couple of years when it comes to evolving mobility? What will you be paying most close attention to and looking for?
Albert: Well, what I'd like to see is really a ground swell of support -- and I'm seeing it locally where I live -- for things like protected bike lanes, things like daylighting intersections so that pedestrians get a lot more privilege. Traffic engineers, planners, are very clear on that, and politically seem to be moving forward. So I am looking for more and more of that.
In terms of autonomy, we're starting to see the bloom go off the rose of autonomy, and that is partly because, I believe, the bloom's gone off the rose of Facebook and these others. I'm looking at how this conversation is going to change, and if it will. I'm a little cynical, so I worry we're going to keep going down the "Silicon Valley, we're here to save the world" route. But I am very hopeful that traffic calming, more bicyclers and all that, more mass transit if we can ever get around to it, will happen. That's what I'm looking at over the next few years.
Sciple: Alright, Dan Albert, thanks so much for coming on the show with us! For folks that have been listening, it's Are We There Yet? The American Automobile Past, Present, and Driverless.
Albert: Thank you so much for reading it! And thank you for having me on!
Sciple: Loved it, and I'd love to have you on anytime you'd like to join us again!
Sciple: As always, people on the program may own companies discussed on the show, and The Motley Fool may have formal recommendations for or against the stocks discussed, so don't buy or sell anything based solely on what you hear. Thanks to Austin Morgan for his work behind the glass! For Dan Albert, I'm Nick Sciple. Thanks for listening and Fool on!
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Nick Sciple owns shares of Facebook and has the following options: long August 2019 $50 puts on Tesla, long January 2020 $50 puts on Tesla, long January 2020 $100 puts on Tesla, long January 2021 $100 puts on Tesla, and long January 2021 $50 puts on Tesla. The Motley Fool owns shares of and recommends Amazon, Facebook, Tesla, and TripAdvisor. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.
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