Driverless Cars, Easy Money and Crypto (Food for Thought)

In my previous article Sports Gambling and Volatility (Food for Thought), I received a little bit of some criticism and compliments on the accuracy of my writing.  Let me state again, that my food for thought articles aren’t meant to be taken literally and they aren’t meant to serve as definitive statements, but rather light-hearted articles that seek to bring ideas to the table and stimulate discussion.  With that being said, two topics over the past weekend have really been on the forefront of my mind: driverless cars with relation to the allure of “easy money” and crypto.

First off, to approach the topic of driverless cars with relation to the allure of “easy money”, one first has to wind back to roughly 2014-2015.  Since then, there are three significant waves of optimism that come to my mind. The first being bitcoin, which is a movement that carries with it an undercurrent or belief in its ability to become a new global currency.  This belief and optimism was manifested in bitcoin’s rocketship like rise in value. The second, is the green rush, which coincided with companies associated with the process of selling marijuana and the estimated future annual $28 billion dollar United States legal weed industry.  With regards to the green rush, companies such as Aurora Cannabis and Canopy Growth saw respective price gains of over 2,000% and 3,500% since 2016. The third and last significant wave of optimism is the most current and is manifested by companies such as Beyond Meat, which has jumped nearly 600% since it’s May IPO under the optimistic future for plant-based protein and a seismic shift away from the American public’s meat heavy diet.  Now, whether these wild rises in value and price are logical or under the guise of a “bubble” soon to burst is besides the point. These significant waves of optimism are very real and my food for thought article seeks to possibly answer the question for investors of what’s next?

“It’s the lure of easy money it’s gotta very strong appeal” – Smuggler’s Blues by Glenn Frey

While riding public transportation to work, my spotify discover playlist forked up an old gem by Glenn Frey and it was the one line above that really caught my ear.  With regards to the recent significant waves of optimism, behind each existed a “lure of easy money.” Bitcoin and blockchain is the future my neighbor always adamantly states, the legal weed industry is a can’t miss investment opportunity the media exclaims and plant-based proteins are going to revolutionize the American diet!  In hindsight, we are totally unsure of these statements and beliefs will actually come true, but if one invested at the right time, they certainly had the opportunity to make quite a pretty penny. With that being said, this leads us to our next potential wave of optimism/future changing technology: the driverless car.

Why the driverless car?  Well there are three simple elements of public’s mindset when approached by the idea or attributes of driverless cars.  The first is the most obvious, being the fact that in reality a large percentage of people would prefer not to expend any effort when transporting themselves, for example from New York to Washington D.C.  The allure of getting behind the wheel and weaving through traffic for 4+ hours on I-95 is very miniscule and yes car buffs who will always enjoy driving for example a classic stick-shift car, do exist, but are numerically insignificant in relation to the total car market.  The second element is the trucking industry. There are reportedly 3.5 million professional truck drivers in the United States and the U.S. Bureau of Labor Statistics stated in 2016 that a truckers median pay was $41,340, which equates to $19.87 per hour. The third element is the taxi industry, in which there are approximately 230,000 professional drivers in the United States earning a 2017 median pay stated by the U.S. Bureaus of Labor Statistics of $25,880.

The first element and it’s total importance, is hard to quantify, but the second and third element can be understood and are completely related.  Now just using short-hand math, please note the potential driverless industry is way more complex than this, but let’s multiply 3.5 million truckers by $41,340 and add it to 230,000 taxi drivers x $25,880.  This gives us an overall number of $150,642,400,000 or $150.6424 billion. Also note there will be additional costs that significantly cut into and dwindle the $150 billion number, but as one can see just from a glimpse, through the lens of element two and three, that the driverless industry annually in the United States overshadows the annual estimated $28 billion legal weed industry, nearly matches bitcoins total market cap of $168 billion and completely dwarfs the plant-based protein industry, which is expected to reach $7.38 billion by 2025.

So the driverless industry has the potential to be HUGE!  I personally have heard that statement too many times in relation to the future and current fads, but by analyzing the paragraph above, one can see how the “allure of easy money” could possibly appeal to this emerging technology.  Now my next part is the real chunk of the food for thought. I asked myself this morning, how could I potentially profit off this by deploying only a small amount of capital. To answer this proposed question, I’ve made a small table with a list of large car companies, subsidiaries companies and little guys all working on driverless technology.

What I see developing here is a little similar situation to the United States and Canada with regard to the current legal marijuana business in terms structure.  Driverless cars, within the United States, are caught in a web of legalization/legislation for each individual state, similar to current marijuana laws. While driverless vehicles are being rolled out onto roads throughout the UK, hence the full-legalization in Canada vs. U.S. individual state legalization comparison.  Where are going with this, is that in the upcoming years, the stock market for the driverless industry could reflect similarities to the current marijuana industry, with regards to small Canadian companies realizing large valuation gains, while large American companies, i.e. Altria or Phillip Morris, sort of lurk on the sidelines until full federal permission.  Hence, an interpretation of the comparison, would assume smaller U.K. firms IPO, then see rapid short-term gains while big U.S. firms such as GM and Ford wait for the full federal greenlight. Therefore, the attraction as an investor seeking short-term gains should be more toward the U.K. market since it is more aggressive in the complete roll-out of the driverless car.     

“It’s the lure of easy money it’s gotta very strong appeal” – Smuggler’s Blues by Glenn Frey

Enough with driverless cars, let’s come back to that lyric by Glenn Frey.  After reading Irrational Exuberance by Robert Shiller, I’ve started to investigate more into bubbles and their relation to human optimism.  I faintly recall a passage that stated something to the extent of a young international student of Shiller’s used to go into town, at the order of his homebound mother, to go read the local stockboard and report back to her the prices during one of the Southeast Asian market booms of the 1990’s.  Another passage talks about the early mainstreet gurus, janitors and bus drivers all giving out stock advice right before a big crash. I find this all eerily similar to the current crypto faze of today and today, while riding the metro to work, found something of interest and concern.

This billboard, targeting users of public transportation, represents more than mundane advertisement, the colored coded words “REGULATED” seek to provide a sense of safety to the public.  While the exchange may be “REGULATED” and safe from hacking, I have no idea if that’s actually the case, I can tell you that there is absolutely no safety in losing all of one’s money. As an app, the Gemini Exchange makes it that much easier to access from your wallet and is nothing more than an online broker.  The company will charge you when you first buy a crypto and when you sell your crypto. It does not care whether you personally make or lose money, and it’s revenue derives from the volume of transactions.

With that being said, I think billboards like these are an indication of greed extending it’s arm to far into “mainstreet.”  Most, if not all of these crypto currencies are completely worthless. If my voice of concern isn’t enough, take it from Warren Buffet who stated bitcoin has “no unique value.”  This wraps up my food for thought and I’ll finish by making one single definitive statement: crypto’s are reminiscent of the dot.com days in late 1990’s and at least some of the companies that fell, i.e. AOL, actually existed and were a real company and product, meanwhile these crypto’s are backed by utterly nothing and the purchase/sale of crypto currencies is equivalent to gambling.

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