Will Self-Driving Technology Be Uber’s Make or Break?

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MIT SMR Strategy Forum

Each month, we pose a question about business, management, technology, or public policy to our panel of academic experts. Here you can see what they think and why.
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We asked our panel of strategy experts to tell us how strongly they agree with this statement:

Uber has to develop self-driving cars in the next 10 years in order to remain viable.
RAW RESPONSES
WEIGHTED BY CONFIDENCE

Raw Responses

Responses weighted by panelists’ level of confidence

Panelists

Panelist Vote Confidence Comments

Barry Nalebuff

Yale University
Profile
Agree 9 “Not sure the question is quite right. I believe quite strongly that self-driving cars are essential to Uber’s success. But if Toyota develops them in partnership with Uber that could work fine for Uber.”

John Roberts

Stanford University
Profile
Neither Agree nor Disagree 6 “Other companies can do it instead.”

Richard Holden

University of New South Wales
Profile
Disagree 9 “They either need to do that to reduce costs, or raise prices. But the price hike required to make Uber profitable is not prohibitive.”

Ashish Arora

Duke University
Profile
Strongly Agree 7 “The driver cost is by far the biggest part of unit cost.”

John Van Reenen

Massachusetts Institute of Technology
Profile
Disagree 6

R. Preston McAfee

Economist
Profile
Strongly Disagree 8 “Being the market maker — connecting buyers and vehicles — is a better position than developing self-driving tech. Uber driverless will push the dozen other providers away from Uber’s market.”

Shane Greenstein

Harvard University
Profile
Agree 6 “Uber needs self-driving cars to justify its sky-high valuations. Without [them], the investment community will not allow [Uber] to lose as much money as they are losing now. That will hamstring their growth.”

Steve Tadelis

University of California, Berkeley
Profile
Disagree 9 “There is significant uncertainty on the regulatory environment that self-driving cars will be subject to, and the cost model of human drivers is pretty affordable.”

Anita McGahan

University of Toronto
Profile
Strongly Disagree 8 “The business model for self-driving cars is only now emerging. It will take some time for its full development. In the meantime, Uber will face a broad range of other challenges.”

Daniel Levinthal

University of Pennsylvania
Profile
Strongly Agree 8 “Uber can be thought of as being in the technology enabled point-to-point transit business. Driverless cars will provide that same service at considerably less cost than the current driver-based [business].”

Lori Rosenkopf

University of Pennsylvania
Profile
Agree 8 “Expect a merger or acquisition in less than five years.”

Rajshree Agarwal

University of Maryland
Profile
Strongly Disagree 9 “There are many strategic directions a firm can take to renew itself; narrowing the performance outcome to one particular option seems to be unduly restrictive of the potential innovative landscape.”

Meghan Busse

Northwestern University
Profile
Strongly Disagree 2 “It may be that Uber will need to be using self-driving cars 10 years from now in order to remain viable, but it seems very unlikely that Uber will need to develop those cars itself.”

Tom Lyon

University of Michigan
Profile
Disagree 6 “Many other companies are working on autonomous vehicles, from Google to Ford. I’m not sure Uber has the capacity to win this game, and anyway, they can always adopt others’ successes.”

Olav Sorenson

Yale University
Profile
Strongly Agree 7 “I’m not sure that Uber is viable now. But to the extent that they need self-driving cars, it seems that they could purchase them from a company with more expertise in autos or AI (e.g., GM or Tesla).”

Melissa Schilling

New York University
Profile
Disagree 8 “(a) Technologies that require multiple stakeholders to cooperate (e.g., manufacturers, regulators, insurers, customers) can take a long time to diffuse, and (b) Uber doesn’t have to do the development.”

Kathryn Shaw

Stanford University
Profile
Neither Agree nor Disagree 3 “I think it will take longer to roll out driverless cars than has been discussed in the press. Consumers of Uber are satisfied with real drivers and some like the personal interaction.”

Timothy Simcoe

Boston University
Profile
Disagree 2 “All of my Uber drivers are now multi-homing. That’s a short-term problem. In the long-term, it’s hard to see Uber making the switch from competing for drivers to competing with them.”

Bruno Cassiman

University of Navarra
Profile
Disagree 9 “Uber is experimenting to figure out the path toward staying relevant. Getting into the development of self-driving cars is one possible path they are exploring.”

Kathleen Eisenhardt

Stanford University
Profile
Disagree 7 “Others are developing self-driving cars, Uber can obtain them from others.”

Maryann Feldman

University of North Carolina
Profile
Disagree 5 “Self-driving cars are coming — the technology is being introduced incrementally and every model release has more automatic features. The limiting factor is insurance and assignment of liability.”

Rebecca Henderson

Harvard University
Profile
Agree 8

Aaron Chatterji

Duke University
Profile
Disagree 8

Joshua Gans

University of Toronto
Profile
Disagree 6 “If that proves to be a thing, they’ll be able to procure the technology.”

Yael Hochberg

Rice University
Profile
Agree 8 “Uber needs to be able to replace their fleet with driverless vehicles to be sustainable. Someone else can develop those vehicles, though.”

Erik Brynjolfsson

Massachusetts Institute of Technology
Profile
Disagree 8 “Self-driving cars are a strong complement for ride-hailing services. However, the technology will eviscerate half of Uber’s two-sided network: its huge installed base of drivers.”

Francesca Gino

Harvard University
Profile
Did Not Answer

Jennifer Brown

University of Utah
Profile
Did Not Answer

Topics

MIT SMR Strategy Forum

Each month, we pose a question about business, management, technology, or public policy to our panel of academic experts. Here you can see what they think and why.
Learn more about this series

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Comment (1)
Juan Ramirez
Assuming that eventually Uber will have to be profitable, it will definitely need to be mostly, if not one-hundred-percent, driverless. Which is why the company has spent so much developing driverless technology--mind you, without exclusivity nor with leadership. But technology in broad terms, at its present status, is not as advanced as we might think it is. In Seattle alone, Uber employs more than two-hundred engineers to maintain its systems operational. This includes the driver and rider apps--requests, mapping, routing, promotions, payments, etc. This system that links the needs of one-million users and ten-thousand drivers in Seattle is good, but far from perfect. Glitches occur, and the administrative burden is tremendous. Company-wide, financial losses keep piling up at  a rate of several billion per year. Driverless doesn't just mean that Uber gets to keep 100% of fares. It also means competition from the likes of Google (Waymo), GM, Ford, Mercedes Benz, Volkswagen, Volvo, Tesla, etc., which translates into fares being slashed down from present levels of approximately $1.30/mile + $0.20/minute, substantially. Perhaps by as much as 70%. Uber's most valuable asset is not its drivers, because they're disposable. It's its customers, and its knowledge of its customers' riding patterns, likes, needs, and possibilities. As a developer of driverless technology Uber sucks--as we saw in Tempe, Arizona. Uber's best chance for a driverless future is a strong, ironclad alliance with a powerful car manufacturer, one that has the capacity to produce literally millions of driverless units, perhaps all-electric...