ME302C - The Future of the Automobile: Mobility Entrepreneurship Weekly Blog Post with Bryson Gardner, CEO and Co-founder, Pearl Automation

BY CHRISTOPH MEYER

ME 302C - The Future of the Automobile - Mobility Entrepreneurship is a Stanford course taught by Reilly Brennan and Stephen Zoepf in Spring 2017. This course will feature a series of guest speakers across the spectrum of the mobility industry, with Pearl, Turo, and Lyft featured among others.

In order to provide an inside view to mobility enthusiasts not enrolled in the course, I will be publishing a weekly post on the CARS blog. These posts will feature a high level summary of a brief discussion with each of the guest speakers. While the content shared in the classroom will be kept confidential and off-the-record, I will interview them for 15-20 minutes afterwards. I may probe them on topics that were covered in class but the interviewee will have the discretion as to how they answer. The goal will be to learn more about their companies as well as delve into the speakers’ views on general trends in the industry and predictions of where things are headed.

Keep your eyes out for these weekly updates - full speed ahead!

After several years at Apple working on the iPod and iPhone, Bryson co-founded Pearl to develop aftermarket products for the automotive industry. They have taken a differentiated approach in entering the crowded AV space, as they launched their backup camera system before creating a full autonomous system. In hearing and talking with Bryson, it became clear to me that the aftermarket will have a big role to play in the coming years. Even if AV technology becomes available in the short term, it will take many years before older vehicles are phased out. During this transition period, aftermarket products could bridge the gap and accelerate the future of mobility. Additionally, Bryson stressed the importance of data as we move forward. While vehicles have traditionally been somewhat of a black box with regards to performance of safety features, this will change. The ever-increasing availability of data will put more pressure on automakers and Tier 1’s as well as provide more granular information to the insurance industry to better tailor its offering and pricing. Finally, I really valued Bryson’s point about AV maturity. The industry and those who follow it tend to focus on the first AV that hits the market. However, it will take many years before we see mature products and many things can happen until then. Consumer preferences will obviously have an impact but so will regulation, that could define what types of AV technologies are suitable for public use.

How do you think aftermarket products will impact the industry going forward?
“Aftermarket products will certainly change the insurance industry. We’re just starting to get a lot of vehicle data that will help us make more informed decisions and create an overall safer driving experience. That being said, we still need to understand how effective these systems are. In spite of their reputation, we really don’t know how good some systems because we don’t have the necessary data collected yet. Traditionally automakers and Tier 1’s have been cost focused. This approach might not hold going forward as cutting costs may hurt performance and that tradeoff won’t work anymore. Data collection will force them out of the checkbox approach. Even luxury vehicles may have systems that aren’t as good as we thought.

As we start to better understand how certain products affect driver performance and safety, insurance discounts will inevitably become available and incentivize people to purchase aftermarket products. This will be further compounded by the fact that insurance claims are likely to continue to go up because the technology in cars going forward will be more expensive and thus repairs will be more costly. I think aftermarket products will especially make sense at the point of sale for a used car. Rolling these products into the price at this point in the lifecycle will be easier for the consumers to want to buy and they’ll understand the break-even points better. This will be an inflection point for us.”

How do you think the industry dynamics play out between Tier 1’s, Tier 2’s, OEMs and other players going forward?

“The OEM’s mission is the one that stands out clearly to me. They are working to recapture parts of the supply chain that are providing value. Collecting data is a key example. Even when they start to collect the data, it’s still undetermined how they will use it to make the technology and products better.

The direction of the Tier 1’s is not clear. While they collect data during the testing phase, they lose access once the car ships. The Tier 2’s are also going to be challenged. They can no longer optimize for cost on the component level — it needs to be done at the system level. While some OEMs will want a whole system from a Tier 2, many do not.

Throughout the industry, there is going to be some reestablishment of the boundaries. Things move much slower than people think. Compared to consumer or tech, the timeframes for automotive are glacial — it’s in series of 5 or 10 year increments. The really interesting part will be when the first autonomous cars ship in 2020 or 2021.”

A lot of people have talked about trying to make the car as user-friendly as the mobile phone has become — what’s standing in the way of that vision?
“First, we have to recognize that the technologies disrupting automotive are coming from the consumer space. GPUs, AI, image sensors, and other technologies went mainstream due to changes in the consumer space. The automotive industry is realizing that its products will need to take on more and more characteristics of consumer products. For example, people are realizing that cars need OTA updates — while some think it’s mostly for infotainment, it’s critical for safety as well.

The reason why cars aren’t as user-friendly as other devices we use daily is due to two reasons. First, there are the operational requirements. These are at a much higher bar — they are almost military application level. Second, there’s the user interface of the car. The problem here is that OEMs don’t have data on a lot of the ways that their consumers engage with their products. Thus, it’s hard to really understand what the consumer wants and how they’ll use it. It’s important to take the perspective of the human as a driver. The focus needs to be on safety but also on making this experience easier. There are so many tasks that are taxing for drivers, such as stop-and-go traffic. It would be great for the vehicle to take more control in these situations. Additionally, it’s important to try and remove as many of the distractions as possible in a car. Voice should really be the interface as much as possible. But even higher, as we’ve made leaps in area of voice in vehicles, but we’re still not seeing it implemented in cars as much as we should. Google, Amazon, etc. have all developed their own solution but we don’t see each vehicle offering all these as options as an interface. It’s absurd that each car is likely to have its own different system — all options should be available in each vehicle.”

What is the greatest obstacle to having a full autonomous system right now?
“I believe it’s going to be liability and regulation. Technically I think people’s assessment on the time frame of the autonomous vehicle is pretty close. But the real variable is around human activity. How people behave, in random circumstances, such as crossing the street or riding a bike will affect edge cases that will potentially delay timelines.

In those situations, we will need to come up with a way to “fail gracefully”. If an AV doesn’t know what to do, it can’t just stop on the public roadway. Handling these situations is going to be really difficult and it will raise ethical questions as well. We’re going to ask people to make up ethical rules that nobody is willing to make. Still, those rules will need to be made and approved. We have so many people dying and getting hurt in accidents today — we need to lower that number drastically. This is another argument for why aftermarket solutions will be important — if we wait for these safety functions to only come out in new cars, it will take a while.”

How are you differentiating yourself in a very crowded space?
“For Pearl, we are really focused on the consumer aftermarket. There’s a large appetite there.

The consumer aftermarket could easily be a $10-$50 billion business. The cost of crashes is $300 billion and with collision avoidance systems you can reduce claims by about 12%. With new technologies, such as ours, you could get reduce claims by up to 20%. That’s a total market of $60 billion — there is a lot of value there.”

How do you think about building a culture in a startup when so many founders come from one company?
“We are very sensitive to culture and the fact that all of us co-founders came from one company. As we put together the team, we pulled from many of the different groups that exist within Apple, and each of those has a slightly different culture. When we were part of the iPod team, all three of us co-founders were part of the first 100 people in the group and helped create that team’s culture. We knew that we needed to build a culture at Pearl so we might as well be proactive and invest in it. We created a culture and values document that really set the tone — it is a statement of who we are. Apple obviously doesn’t have one of these. It’s just a different kind of company. That being said, it’s not fair to pick on Apple, they are such an exception. As Pearl, we want to have a strong culture but have to be sensitive for people joining the company. We want to integrate their new ideas and thoughts and need to have a culture that enables this.”

What do you see as the biggest differences between the automotive and tech industries?
“The big difference is in terms of the performance requirements. As opposed to tech, automotive is mission critical. The big advantage of tech is the time to market: as soon as a new technology is ready, it’s in the consumer’s hands. It’s an almost immediate transition between maturity and customer access. In the car world, that timeline is extended due to design cycles.

In the past, the tech industry went from architecture to execution phase. The car companies need to follow the same path and go away from a separation of R&D and blend R&D together and get it as close to customer access as possible. We are seeing a lot of the same technologies spilling over into both industries.

OEMs are still arrogant as the folks from consumer product industry are seeing. They judge consumer products from a perspective of operational requirements. You can see this by how much they criticize Tesla. If Tesla hadn’t come along, it would be hard to even discuss this topic.

In many products, if you fix everything that might go wrong, it starts getting really expensive. If Tesla had validated a car the way GM or Ford does, they could never had brought a vehicle to market. They realized that they needed to do a good job in engineering and fix problems as they come up. It’s always possible to make something better — it doesn’t have to be perfect immediately. The key is for it to be safe and good initially and continuously improve it. You can always make something better, but at some point you need to ship a product — it’s key to find that point and it’s usually when consumers love your product and will forgive small imperfections.”

What is the biggest misconception in the industry right now?
“There’s a huge misconception around what an AV is. Everyone is currently talking about the timelines until AVs are available to the public. But, if you think about any new product, they don’t really get mature until 5–10 generations in. The iPhone took about five generations to reach maturity. The AV that comes out five years in market is going to be drastically different. To me, it’s unclear what will happen to previous generations of AVs. People think that there is 1 autonomous car, but that doesn’t capture it. It might be level 4 in some conditions and not in others. There’s a huge spectrum about the performance for an AV. This is going to lead to a huge educational challenge. How are all the different companies going to roll that information up and market their product? Furthermore, how will the consumer really understand what each AV can do? There really are tradeoffs in performance. It’s not possible to put all the hardware in — it’s just too expensive. Companies will need to decide what is important and useful.

The other interesting implication of this is how regulators respond. By approving one approach, regulators may affect older models or AVs with different solutions and technologies. This could really favor one company over others. There is going to have to be a segmentation of this continuous spectrum. That segmentation has to come from regulation, which is going to be hard to establish in this space.”