Tony Seba – The Edge of Disruption, Automotive, Petroleum and Steel Industries

Tony Seba – The Edge of Disruption, Automotive, Petroleum and Steel Industries


[Music] um so this in front of you as a glimpse into my mind which is quite scary for most people this was formed in many parts because of when I started raining Tony’s books and there’s a whole things around the edge of the possible and this is the way you know this is the way we now look at our business and while you know I’m obscene to be a lawyer I’m much more interesting when I talk about things like this end here there’s various things on here which are directly relevant to what Tony will talk about we talk about things like the terawatt initiative which is all about solar getting to zero at the same time as mobilizing the trillions and we happen to sit on trillions in Australia into the solar industry so you as happy to invest and Malawi as you are in the u.s. because effectively this financial products seven behind net which effectively encourage you to I think we just follow the Sun I also talked a lot about the hydrogen economy and what that is going to do to us in terms of something we used to think we were going to crack from coal but we now look at green hydrogen and again as the Saudi Arabia of solar what we can potentially do when you’ve got twenty four million people abundant land and there’s a Kiwi you sit here you’re going that most of the stuff you do here that’s not farming and the way I look at it that’s an intergenerational burden in many cases and we have to work out how we can use that land better with different tools in the future a few years ago you’d have all laughed at me about the sort of discussion but that’s where we’re heading now so I’ll get out of the way and let you hear from Tony and you can see why I told all of my team around the world they just had to read his books thank you thank you salmon thank you salmon for that introduction and thanks you all for being here click so I want to take you into the future and I want to tell you about the edge of disruptions but before I do that I want to take you into the past we used horses as humanity for thousands of years this is New York City 1957 ooh can anyone see the one car in that picture all horses except one car there it is one car 13 years later can anyone see the horse in that picture 13 years that’s all it took from all horse to all car there’s the one horse it doesn’t even look like a horse this is a disruption this is what’s called a technology disruption and what is a disruption it’s when new products and services do two things one is to create a new market in to either destroy or radically transform existing industries and I’ll take you to 1985 when the then largest telecom company on earth AT&T hire consulting company McKinsey and they asked him one question one question in 15 years how many subscribers will this thing called cellphone have in 15 years just give me one number so Mackenzie went off and did whatever it is they do and they came back with their number 900,000 in 15 years the real number was a hundred and nine million this is not a small mistake this is a factor of a hundred and twenty X and of course AT&T landline got disrupted but not just that they missed out on the largest wealth creation opportunity legal of the 21st century if you just look at the top 5 internet mobile companies Apple and Google and Amazon and Facebook and so on that’s 2 trillion US dollars in market valuation just at 5 top companies and those are the upper to release that you may Sauron when you miss out on technology disruptions and it’s usually smart people it’s usually the experts in the insiders who will dismiss disruptive opportunities they’ll say nah can’t possibly happen or not this quickly it can’t possibly happen this quickly and so this my work is disruption and it’s also to answer this question why do smart people in smart organizations consistently fail to anticipate let alone lead market disruptions so I have over the last few years created a new framework that not only can explain disruptions you know in the past which is not that hard but can hopefully predict and anticipate disruptions so I’ll walk you through this a little bit and then I’ll show you the disruption of transportation so the first model is disruption from below and this is a traditional form of disruption where you start out with a product that is inferior relative to the mainstream market but because it improves at a faster rate than the market it pierces and disrupts the market from below so solar energy personal computers the web web publishing so if you look at newspaper publishing revenues were going up and up and up and up and even after the web even after Netscape and in browsers and so on record revenues kept increasing so what did experts say the web who cares nobody will ever read the newspaper online I mean can you believe now that that’s what the experts were saying really smart people and of course the this is what happened boom okay when disruptions happen they happen in an instant and essentially the newspaper industry still hasn’t hit rock bottom disruption from above this is what essentially the smartphone is which was not explained before when the iPhone came out in 2007 in the Android folks were saying who would ever buy a $600 phone when you can buy the hundred dollar Nokia remember Nokia gone right this is a disruption from above this is when you have a superior product but also more expensive now what the experts miss is that this is not usually a one-to-one substitution they miss that and the iPhone is not just a phone we can make phone calls but that’s one of the many things that we can do with the iPhone same thing with the electric vehicle right when you ask the s the experts they look at you know the e V versus the internal combustion engine automobile as I want to one substitute and it’s not because you can do a lot of things with the electric vehicle and I’ll explain that but even if all you do the e v starts out that’s more expensive product but if you take the technology cost curve you can essentially anticipate when it’s going to pierce the market from above and it’s going to essentially disrupt the gasoline the petrol vehicle from above but that’s not really what’s going to happen because of this BIGBANG disruption you know come back to Big Bang later but Big Bang disruption is when products come out and on day one they are cheaper faster better more convenient and more customizable on day one so the incumbents have no chance no chance period right and so one example is Google Maps with driving direction API the day that it came out versus Garmin remember Garmin TomTom gone right and this is when the day to the day that Google came out with maps look at the stock price it went down 80% class within weeks they had no chance right this is a big bank disruption so here’s a question why how can new products be faster cheaper better more customizable more convenient on day one okay and can you anticipate that if you’re an incumbent so one of the things we have to look at is technologies and technologies have cost curves essentially how quickly do they improve on the same dollar basis and so Moore’s Law is the best known cost curve which means on the same dollar basis it says that computing improves by about 2x every two years so it improves our about 41% per year so essentially 41% improvement means or 20 years it improves by a thousand times so your smart phone $600 is the equivalent of a six hundred thousand dollar computer just 20 years ago or six hundred million dollar computer four years ago six hundred billion dollar computer sixty years ago right so that kind of improvement is what has made Silicon Valley what it is but it’s not just Moore’s law every single technology has a cost curve digital imaging and network capacity and lithium-ion batteries and so on and it’s not that these technologies are disruptive but it’s when you combine them and this is what I call technology convergence it’s the convergence of technologies that make possible new business models and new products so we need to look at technology convergence not single technologies because that’s what makes new products possible and so the iPhone and the Android both came out 10 years ago in 2007 both of them was that a coincidence it wasn’t because that was the year when all the technologies that made the smart phone possible came out and it just so happened that Google and Apple were the ones who put it together it could have been someone else it could have been motorola but they didn’t do it right so those technologies converged 2007 the other thing we need to know about technology disruptions in technology adoption is that they happen as s-curves so this is you know one example we need to know what the tipping point is going to be it may take a while weeks years decades before we hit the tipping point but when it tips essentially it grows exponentially and it’s over I mean the incumbents are over over you know a few years or a few weeks or whatever right s-curves but mainstream analysts will give you you know straight lines they’ll say that the future is just like the bus plus or minus ten percent per year it doesn’t happen that way you know when disruptions happen they happen very quickly so not only that but the S curves are accelerating if you look at the s curves of different technologies from the 1900s to the you know to the last few years they’re getting steeper and steeper and steeper that means that this means that it’s happening much more quickly disruptions are happening much more quickly because technologies are being adopted much more quickly okay if anything I mean they’re not linear at all so what am I looking at what kind of technologies am i following that I think that when they converge in different ways are going to disrupt different industries because make no mistake every single industry on earth will be disrupted over the next five to fifteen years every single last one of them okay so I’m looking at least once at least technology sensors artificial intelligence solar batteries and so on and in different combinations they can disrupt different industries so let me give you this example sensors we don’t think much about sensors but you have a couple of dozen sensors in your iPhone or your Android in sensors have improved in cost by about a thousand times since 2007 a thousand times now attend X usually means a disruption but a thousand times is incredible in just seven years and also the number of sensors that are produced every year went up in 2007 from 10 million to 10 billion in 2014 and if it keeps improving at that rate essentially what we’re looking at is 10 trillion sensors per year before to 2025 10 trillion sensors think about it 7 billion people on earth 10 trillion sensors per year that’s 1,300 sensors per person what on earth are we going to do with that think about it but you have to if you want to think about disruption so one conclusion is of course everything will have embedded sensors shirts you know fitbit’s everything everyone will have embedded sensors – so let me talk a little bit about product innovation sports for instance who thought about sensors in sports well there are companies that are doing these sensor based little devices that can help you with your swing right baseball tennis cricket if you swing with sports you know essentially it helps you with your swing right basically improve it for a couple of hundred dollars basketball it it with sensors essentially it can show you the art the push you know how hard or whatever so that you can improve it that’s a couple hundred dollars won’t you if you play basketball when I pay that to improve your game I would transportation so this is what an autonomous car sees when it uses a sensor called lidar so lidar is the essential sensor for autonomous vehicles it’s essentially it emits laser pulses about a million per second that bounced back 100 meters 200 meters they bounce back like a radar and essentially it uses a supercomputer in the trunk to generate a picture like this so that it can self drive so in 2012 a lidar was about seventy thousand dollars and what did the experts say in 2012 autonomous vehicles not gonna happen right seventy thousand dollars too expensive okay so next year it was ten thousand the following year one thousand moom right not only that last year Silicon Valley company announced a 250 dollar light our solid-state so it lasts longer and it’s about yay big so it doesn’t have to be on the top of the car ugly but you can put it anywhere 250 even if you use 3/4 of them it’s only a thousand bucks incremental cost not only that they also announced a $90 lidar the size of a postage stamp fits in your iPhone what are you going to do with it I don’t know but you know go figure right that that’s opportunity for you now all of these sensors are gonna create big data because they’re gonna be emitting data 24/7 every second of every you know day and so on and what we expect is that over the next 10 years or so the amount of data generated by sensors and in us is going to go up by about 10,000 times 10,000 do you think we have big data now just you wait 10,000 times we’re going to look back at today as the good old days of little data this is gonna be so much data and the interesting thing about this for the entrepreneurs in the crowd is that data about things may actually be more valuable than the things themselves so we wrap your head around that I mean think about Oberer how many cars do they own zero right data a lot of data about transportation a lot of data about you and me in a lot of data about the drivers it’s a data car essentially right so data about transportation may be more important than transportation itself artificial intelligence has made more progress over the last few years then over the previous three decades and just to give you an example this was the world’s fastest supercomputer the first one teraflops trillion floating point operations per second in the year 2000 it was the size of this room and it costs 50 million dollars one teraflops 50 million dollars now last year’s version of the NVIDIA GPU was a two teraflops computer for 50 bucks 1 million time improvement since the year 2000 and that’s just the hard work doesn’t include the improvement in software which has been more insane and they just announced that 20 teraflops computer that essentially is what we’re gonna need to power self-driving cars 20 teraflops in just two years 10x and they also say that essentially they’re gonna improve by about 1,000 times by 2025 so essentially anything a is going to improve by a thousand times not including software from here to 2025 so what’s going to improve well look you know today a computer can essentially read and map out and essentially give doctors a conclusion in minutes that it would take them weeks to process doctors right minutes if they could possibly do that and anything I mean what you need to remember also is that the hardware the sensors the GPU the AI that works for a self-driving car can work for a robot can also work for a ship can also work for a plane it’s portable all of his technology is portable just like computing is portable so you know robots are gonna improve by about a thousand times right if this Hardware improves by a thousand times so robots already can do surgery stitching better than the best doctor on earth already sub millimeter precision already and they’re gonna get a thousand times better you know by 2025 and robots can actually do experimental prostate surgery inside an MRI machine try that with a human doctor inside an MRI machine and so another technology 3d printing so interesting can anyone see where the statue is where is the jewelry anyone there it’s smaller than a human hair that’s how little you can print with a 3d printer but that’s not as interesting as this the whole dental braces industry was disrupted by a company called Invisalign does anyone remember metal braces well you know they don’t exist anymore because they’re all 3d printed in two years that industry was wiped out with 3d printers by this company in San Jose but you can 3d print basically anything any part of you okay and that industry is improving also exponentially you can 3d print a car and in fact this car is already out there driving of course electric car because I’ll tell you why but you can already 3d print an electric car drones are also improving exponentially so you know the Swiss postal system is already delivering letters with drones in New Zealand they’re already delivering pizza with drones and they’re improving really really quickly this is the first drone that can self not drive but fly a human a human being can fly a human being about a half an hour you just say take me here and it it’s $100,000 but if you look at the cost curve essentially you can map out when this is going to be affordable and convergence convergence remember technology convergence right so imagine a van self-driving van imagine UPS or FedEx and whatnot with drones so it doesn’t stop in double parked in triple Park to deliver but you have a number of a dozen two dozen drones that come in and out of the truck that is self-driving okay so think about what this disruption would do to logistics and a lot of these pieces are already there it’s just a matter of when not if now business model innovation is every bit as disruptive as technology innovation if not more so if you think of uber uber is actually a business model disruption why because they took advantage of the cloud they took advantage of the smartphone and then essentially we created technology a new bill not a new business model they’re a broker between two markets so it’s an old business model that they adapted to a new basically technology convergence and if you look at uber and think that they were started 2009 eight years ago and today they have bookings that are higher than the whole us taxi industry today I mean if anyone tells you that you can’t have a disruption in transportation in ten years well look at uber already they have you know bookings higher than the whole US taxi industry and in New York City there are 500,000 rights not just with over but with all right sharing come nice birthday 500,000 per day and that’s doubling every year okay Airbnb it’s also a business model innovation so again they took advantage of the cloud and and and and and smart phones and so on and they created a whole new industry and they’re starting the process of disrupting hotels so always remember business model innovation and business model innovation is enabled by technology convergence and so we’ve looked at a few of these pieces and how can we accelerate disruptions because we can openness that’s what is accelerating disruptions so if you look at some of these robots some of these robots like Baxter and and and and so on use an open operating system anyone in this room can go and download basically robot the operating system for free and use it in a robot and anyone anywhere on earth today can essentially use a free operating system and develop their own robot how disruptive is that so that tends to accelerate openness thanks to accelerate disruptions and look at you know API is APS a programming interface essentially you have all of Amazon’s infrastructure available to you you have robots you have a whole host of basically companies who open up their technology so that anyone anywhere can start a company without much investment so the cost of entrepreneurship the cost of getting into a business is going down dramatically because of this openness and of course open research so batteries are improving you know are accelerating the improvement and one of the reasons is that a lot of the research is open and so there’s the battery research open anyone anywhere who wants to participate is helping everyone everywhere so this openness accelerates disruptions so talking about battery can we anticipate disruptions so how can we use this framework to anticipate disruptions so let’s do it let’s talk about transportation transportation 2020 2030 so I just published a research report called the disruption of transportation 2020 2030 and this is how it’s gonna happen using this framework so electric vehicles are they disruptive well many reasons why they are on a per mile basis EVs are 10 times cheaper to charge than combustion engine automobiles 10 times every time we have a 10x we have a potentially disruptive opportunity an electric vehicle it has a hundred times fewer parts than a combustion engine automobile a hundred times your car has 2,000 moving parts and evey about 20 this means that maintenance for EVs are essentially zero I mean ten times at least cheaper than maintaining a combustion engine the lifetime this is something that a whole lot of people don’t see because we only drive about ten thousand miles per year but Annie we can last 500 thousand miles unless we drive a car for 50 years which nobody does the this is not a useful thing right but I’ll tell you why it’s useful when you do the numbers for disruption now if all you look at is a it’s an EVs a one-to-one substitute then you can map out when it’s going to disrupt the internal combustion engine automobile so we’re at the point now that Annie V with 320 kilometer range is 35 to 40 thousand US dollars and we can map out how soon is going to essentially disrupt the whole ice car industry but that’s not it I mean autonomous vehicles are going to be Annie of the big disruption and tournament because are not that far away I mean fly out to Singapore and you can take already a taxi that’s autonomous today and Pittsburgh you can also do the same thing with uber so over has a fleet of self-driving cars that they’re testing in in Pittsburgh and there are now 30 plus corporations large corporations investing billions of dollars in making autonomous technology why well here’s one Tesla says that by the end of this year every Tesla will be able to drive from a parking lot in San Francisco to a parking lot in New York without being touched by a human by the end of this year that’s level three level five is when you don’t need a steering wheel or a pedal level five that’s like the ultimate of the ultimate right and they say that within two years by 2019 they’re going to have level five autonomous vehicle now think about this autonomous vehicles are computers on wheels that’s what they are they have a computer they have an operating system just like a personal computer just like a smartphone so the first one to get that operating system going is going to be a big winner see so we have dozens of corporations who want to be the first because in operating systems there’s going to be just one to three that make it that’s it so what is the disruptive impact of autonomous vehicles well let’s do this let’s call it transport as a service and oh one thing that I forgot we pay $10,000 a year for cars and yet we only use them four percent of the time four percent what a waste four percent asset utilization is a disruption waiting to happen and how is that gonna happen let’s converge electric vehicles autonomous and with the business model of right and so what happens is that driving time goes from four percent of the time to forty percent so you have autonomous vehicles riding around taking you to work and basically taking then somebody from work to the supermarket and then taking somebody from there to home forty percent of the time instead of four percent of the time that means 10 times more utilization that means what they can drive a hundred thousand miles per year instead of ten thousand miles per year so they’re really driving all the time and this is where the electric vehicle which lasts 500,000 miles it’s useful as opposed to 140,000 miles so if you depreciate that cost over 500,000 miles on a per mile basis which is disruptions may bring new metrics so the new metric of the disruption of transport is cost per mile this is what you get Tass transport as a service assume that they’re approved 2021 the day that autonomous vehicles are approved autonomous electric on-demand tasks will be up to ten times cheaper than buying a new car so if you’re gonna buy a new car 2021 your decision is gonna be do I spend ten thousand dollars a year over the next five years or do i spend $1,000 a year over the next five years no-brainer every time in history that there’s been a 10x difference between similar products and services in cost there’s been a disruption every single time period right so assuming that this happens 2021 it’s going to be a 10-year disruption essentially you can map it out that’s an s-curve and this is what’s going to happen by the end of by 2030 95% of passenger miles will be autonomous electric miles 95% from 2021 to 2030 boom that’s a disruption that’s a disruption of two things of the individual ownership business model and of the internal combustion engine automobile and that’s gonna happen very quickly and what else is gonna happen so because we have cars being used 10 times as much we’re gonna need fewer cars so we’re gonna need 80% fewer cars the fleet is gonna shrink so 80% for your cars what happens with parking lots empty especially in the high real-estate areas gone parking lots 80 to 90% of parking space gone right but the u.s. the vehicle fleet shrinks by 80% which means what does it mean for the auto industry if you’re an auto manufacturer here’s what it means the demand for new cars is going to shrink by 70% so the size of the industry is gonna go down by 70% at the same time that we have hundreds of electric vehicle companies coming into the space so if you’re an auto manufacturer it’s gonna be ugly it’s gonna be ugly right what about the oil industry here’s what’s gonna happen oil demand is gonna peak 2020 and 100 million dollars per barrel because it’s all gonna be electric starting 2021 and it’s gonna go down to about 70 million barrels by 2030 so it’s gonna go down 30% but there’s something interesting about the oil industry when you go down to essentially 70 million barrels the price is going to collapse immediately so the price of oil because of the elasticity of both demand and supply of oil because you only need about 2 million barrels over supply in order for prices to crash that price crash is going to happen as soon as 2021 or 2022 which means that the new equilibrium cast for oil is going to be $25 if you can’t compete at 25 as soon as 2021 or 2 essentially you have a stranded asset so anything that is shale sands or deepwater oil that can’t compete at 25 gone stranded forever because it’s not coming back right so let me wrap it up essentially this is how disruptions happen okay we have a combination of technology cost curves and business model innovation and openness and product innovation and this is where we are in 2017 this is the point where we have the loan car in a sea of forces and disruptions happen very quickly and this is the age of disruptions when you combine these technologies that I showed you in different ways and with different business models essentially every single industry is going to be disrupted over the next five to 15 years you name the industry is going to be disrupted when you combine these technologies in different ways and these are you know the technologies that I am tracking and anything is possible I mean these technologies and new business models are you know becoming available with any convergence and every convergence of these technologies and you have to track it in your industry otherwise you know disrupt or be disrupted that’s the way that it’s going to be but everything is going to be possible essentially this is the edge of the possible and hopefully when you use this technology disruption frame or kick it can help you put together disruptive products and you know if you’re an incumbent help you avoid being disrupted and the edge of the possible is not in the future you know the age of disruption it’s not in the future it is right now thank you [Applause] [Music]


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