Transportation 2.0

This post is on drafts now for about 2 years, it’s a concise summary of my Tesla investment thesis. My mental carburetor chocked at AI and autonomous driving… and guess what? I still have a shallow understanding of machine learning, neural nets, PyTorch, TPUs and all the technical stuff to deep dive into the AI stuff. And bear with me this stuff is crucial in my mind rational as Tesla’s business model is like a Trojan horse to deploy autonomous driving.

BUT no way that I could overcome my technical limitations… SO this post could stay in Drafts indefinitely, OR just like a IRL conversation with friends (congrats for the ones that actually invested) just wrap it up, and put out the general ideas to all my friends that unfortunately don’t have the opportunity to meet IRL so often.

Disclaimer: this is just my stream of consciousness, do not to take it as financial advise. DO YOUR OWN research and thinking. This can be the ramblings of a insane mind.

Humans, are quite an unsuccessful species about self conservation. We have a (declared) stockpile of nukes to destroy the total earth landmass SEVERAL times. The most important leader today doesn’t “believe” in climate change, and most of the others humans happily let the poison of the atmosphere, the water and the land to continue despite all the warnings.

Imagine a visitor from another world looking at this madness, probably we would be cataloged as “Technological savvy but totally schizophrenic species”. One must ask what legacy are we leaving to the next generations?

Anyway let’s be optimistic, continue the exercise and indulge into random thoughts and speculations about the future. Look and behold when one day the measure of computer RAM will be not in gigabytes, but in terabytes.

Transportation 2.0

There is a revolution about the way people and cargo move around, probably the Jetsons flying car is not coming around soon (or probably it is in the form of electric VTOLs), but billions and billions are being spent into electrification of vehicles.

And this an extremely good thing, because a big chunk of total world CO2 and pollution is generated by burning stuff inside ICE (internal combustion engines), and the BEV (battery electric vehicle) is so much more efficient that it’s operation is much cleaner. And as the power grid gets greener with more renewables in the mix, the overall gap just gets bigger and bigger.

There are two metrics about batteries that don’t lie, the energy density Wh/L and the cost USD/kWh, and the trend is simple for both, higher energy density and less cost every year. It’s nothing at all like Moore’s law, much slower, but even predicting a very conservative 5% increase in density and 5% decrease in price every year, around 2050 (perhaps much sooner considering the massive resources allocations) BEVs will have the equal energy density at a fraction of cost of ICE. Factoring in the difference in engine efficiency, supply chain, and environmental impact, probably much sooner than 2050 will be the end of the ICE age.

Perhaps in a far future there will be internal combustion engines in museums showing the exquisite materials and craftsmanship of a time that the world was powered by an ordered symphony of tiny explosions. I imagine like something like a starting up and revving up event with all the attendees in highly protective gear…

Sometimes i see this video just for the comic entertainment value:

It’s so funny, this was June 2010, each TSLA share was selling at 17USD (3.4USD split adjusted…). Guess the market had different view… why was Jim Cramer so wrong?

Tip of IcebergBecause he couldn’t understand inside his primate brain that the real transportation revolution is not the transition from liquid fuel to electric. No, that is just tip of the iceberg, the real revolution that’s going to turn everything upside down, it’s autonomous driving.

Think of all business around moving people and cargo, think of all the payrolls for professional drivers, think of all social security for professional drivers, think of all the road fatalities, think ride sharing and no ownership, think of long distance truck hauling, think of your car leave you on the spot and then proceed to park itself, think about drinking a coffee and finishing that report on your boring morning stop and go commute, think about going home drunk with no problem at all, think about catching some sleep on that long journey, think about elderly or disabled people who want to continue to go places by themselves…. etc, etc, etc…. it’s going to be a beautiful new world.

How much does it worth to have a total autonomous car system that can drive better than the top human drivers? That can operate 24/7 and doesn’t get tired, sleepy, drunk, nervous, over optimistic or distracted? A lot, really a LOT.

The race for the jackpot is on, with billions and billions being invested now. And where there is strong competition there will be results, and here Moore’s law is king, so expect this future to be nearer than generally expected. The company in the pole position is Tesla, and if they can deliver first probably they will become one of the most valuable companies in the world, probably the most valuable company in the world as autonomous driving implies solving computer vision, and computer vision achieved unlocks much more than autonomous driving.

Pushing forward deep into the future. We can ask this question, when an autonomous vehicle will be say 10x, 20x, or 100x safer than an average human driving, will human driving in public roads should be even allowed? Guess not, so I bet a lunch in the best restaurant in town with everyone that accepts the bet, that in 100 years from now human driving in Sweden (or Norway) will only be allowed in closed circuits (lets us hope the Nurburgring is still up and running).

AI

1951 First AI program
1956 Los Alamos chess is the first program to play chess
1997 Deep Blue defeats Garry Kasparok
2007 Checkers is solved paper published
2015 Baidu Deep Image outperforms average human in image sorting and recognition
2017 AlphaZero learns chess self playing itself 24h and crushes the strongest chess AI
2017 AlphaGo beats Lee Seedol in the game of Go (10^170 valid board configurations)

as we can see with these few examples the machines are learning, and are learning more complex tasks and are learning faster. As of now machines are already at super human level at many  tasks.

Sure driving is a task that one must parse several complex inputs  (vision, sound, proper acceleration) and compute with context real time outputs (turning, accelerating, braking), but there is nothing magical or physical impossible for a machine to perform, and perform well better than an human.

Assuming hardware will keep improving offering better performance at lower price each year, and computer science AI and machine learning will also keep improving over time, there will be a point in time that these factors will compound and intersect to unlock autonomous driving, and Tesla with silicon valley tech know-how, best engineers in the world,  huge fleet collecting real world data for training the neural networks, own chip designed specifically for artificial intelligence, etc, etc… will be (in my mind) the one company to unlock it first.

According to Tesla 2021 2q safety report, they recorded one crash for every 4.41 million miles driven in which drivers were using Autopilot technology (Autosteer and active safety features). For drivers who were not using Autopilot technology (no Autosteer and active safety features), they recorded one crash for every 1.2 million miles driven. By comparison, NHTSA’s most recent data shows that in the United States there is an automobile crash every 484,000 miles.

Some of the typical questions i have been asked IRL about the thesis:

Won’t legacy auto crush Tesla by sheer volume?
Well if that was to happen, it should have happened many moons ago. Tesla is a big boy now, growing fast with probably the strongest balance sheet in the industry. Besides legacy auto strength is in metal casting and folding, it can’t even put up a decent infotainment system… much more develop an autonomous driving system.

Besides legacy auto is in a world of pain, declining sales, convert factories and human resources to electric powertrains, battery supply, huge debts…. they are giants on clay feet.

OK, but the actual stock value has already risen tremendously, didn’t I missed the boat?
It’s a fact, the stock price already skyrocketed. If you invested 1000 USD back in the IPO and hold it (Jim told you to sell… big shout out to Jim) you would have today around 200.000 USD…

You can make a case to justify the current valuation on current business alone, you can go trough profit margins, growth rates, CAGR, ROI and other financial indicators, you can value Elon Musk as the modern Edison, but for me the equation is simple, if you can envision a near future with autonomous driving with Tesla leading, the valuation is cheap. If you can’t envision this, probably the valuation is more on the pricey side.

I’m not a big fan of reasoning by analogy, but I must also point that for disruptive companies, companies that change the world, with strong leadership and mission, companies that enter a positive loop feedback system it doesn’t make much sense to cap an upper limit.

“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” – Benjamin Graham

Moving around in Lisbon

So, here you are in beautiful Lisbon! Now there are so many places to visit, sights to be seen, monuments, restaurants, bars… how to get around to all these places?

First rule, very important to be an happy tourist, AVOID taxis like the plague. They exist in two color schemes: green/black or beige color, but they have only one goal, to rip off tourists and non locals.

A good alternative is Uber, the cars are new, the drivers polite, and most important you will know beforehand the price range of your trip so you will NOT be ripped-off.

Use this link to get €5 off your first ride


But unless you are wealthy, or lazy, or american, you don’t need/want to go by car to everywhere. So I invite you to also use the Lisbon subway network, it’s cheaper, eco friendly, and one of the best ways to move around in Lisbon specially at the rush hour (but sometimes a bit crowded though).

It’s called Metropolitano de Lisboa, or simply “Metro” and they do have an english version of the website, where you can find the network diagram (yes there is a station at the airport), ticketing and price information, and so on. The trains start running at 06:00am and stop at 01:00am. The stations are clean, safe, and the trains well maintained.

About the ticketing and pricing, it can be a bit tricky (even for locals) as you can mix subway, bus and trains, several time frames, and rechargeable tickets… my advice is to always keep the ticket during and after the journey as quite probably you can recharge it for other trips.

Cycling in Lisbon. The bad news is that we have lots of hills, not so good roads, nor cycling culture. The good news is that for most of the year the weather is perfect, there are more and more bicycle paths and more people cycle. It can be a perfect mean of transportation for short distances, or for a leisure ride by the river.

In some places of the city, you will find the city municipality shared bicycle stations, called Gira. They do have e-bicycles that assist you in the climbs, and the equipment is quite new. But the stations are not in touristic spots, and please beware this is almost a government funded scam, you see the daily pass, and think, cool for 10 euros one gets a bicycle for a whole day, right? WRONG, it gives you the possibility of using the service in that day. In practice it means for 10 euros you can do multiple trips of 45 minutes maximum time. If you make a 46 minute trip they charge plus 2 euros. And after 90 minute they charge more 2 euros for each 45 minute additional time. For example:

Let’s say you get a bicycle in the middle of town, go downtown (there are no stations to return the bicycle and stop your trip), then by the river (also no stations by the river), then go by the river to Belém for the monuments (again no stations there), take some pictures eat the pastries, and get back to the middle town and finally park/deliver the bicycle at a station.

It can easily take 5 hours, the total cost will be 10 euros for the “daily pass”, plus 12 euros for the extra time, for a total of 22 euros.

So if you enjoy ciclyng, maybe better off to rent a bike in a rental agency, or trough the bike peer to peer Spinlister.

A very cool alternative to cycling is the eCooltra electric scooter sharing service. You install an App (there is always an App…), take a picture of your drivers license, pick a nearby scooter, and go.

The cost is 0.24 cents per minute, but you can get the first 30 minutes for free with this code: jbvsg

The scooters are 100% electric and 0% emissions, and so easy to ride (low center of gravity, no vibrations), in my opinion a bit under-powered but it will take you where you want to go, in my book it beats any public transportation by a mile. The best thing is that you don’t need to find a specific station to park, just leave it (at least reasonably parked) when you finish your trip and carry on with your life.

With all the cheap and convenient means of transportations, don’t forget to walk, it’s the best way to fully enjoy the streets, the city stairways and charming alleys, so bring your best walking shoes.

And just one more thing, this is Lisbon, it’s not Bangkok nor Mumbai, don’t make yourself look like a dumb fool, and just don’t go around in a Tuk-tuk. It’s stupid, nobody likes them (maybe except for the Tuk-tuk owner, maybe), they bother people, they bother other vehicles on the roads, they can be quite expensive “for a tour” that would be much nicer to walk… Please just don’t do it.