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Look Ma, No Hands

Sigma Investment Counselors

June 4, 2018

While our title comes from the classic anecdote of a kid riding his bike without using his hands on the handle bars, it is certainly applicable to the current enthusiasm for autonomous driving systems.

Investors interested in the potential for autonomous driving might want to devote some attention to the question of when rather than whether.  Actually the whether question is probably not going to be fully resolved for a number of years, which could stretch to decades depending, in part, on how autonomous is defined.

More important to investment decisions is, what is happening to affect the rate of progress?  This is almost certain to be reflected in the market’s enthusiasm for companies working on autonomous driving technology.

Two recent fatal accidents, one involving an Uber test vehicle in Arizona and another involving an owner operated Tesla in California, are under investigation and have given rise to questions regarding system reliability and pause to some active testing on public streets.  Recent industry and regulator comments have suggested that a greater emphasis on test track work may be appropriate.

Autonomous driving advocates frequently cite the potential for a dramatic reduction in highway accidents, even if the new systems are not 100% perfect.  Investors should note that perception sometimes trumps reality.  Accidents involving self-driving systems are attracting a great deal of media attention while current, traditional vehicle traffic fatalities are largely ignored, even though approximately 35,000 Americans die on the highway every year.

Does anyone remember the three-mile island “disaster” on March 28, 1979?  The incident attracted a great deal of media attention and alarmist commentary but, while no one was killed, no one was hurt, the incident, and public fears, effectively stopped development of nuclear power generation in the US.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA

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