Once again, a company, built around the hottest tech in the industry, stole the spotlight at CES. This time, though , the product was not a smartphone, and the company was not Apple. For my money the most interesting news of last week came from a most surprising source: General Motors.

First up was the news that the century-old American car maker was investing $500 million in ride-sharing startup Lyft. Then, a few days later, the company formally introduced the Chevrolet Bolt, a (relatively-speaking) no-frills electric car that promises to go 200 miles on a charge for about $30,000. 1 Perhaps it was the company in question, or simply the timing, but it reinforced the sense that fundamental change is coming to the world of transportation.

What is interesting, though, is that while change is certainly coming, it is coming on multiple axes: The Lyft news is about the secular shift from individually owned-and-operated automobiles to transportation-as-a-service, while the Chevrolet Bolt is about how the cars themselves are made. Meanwhile, Google, Uber, Tesla, and others are working on obviating the need for a driver at all. To put it another way, when it comes to questioning the future of transportation, the “What?”, “How?”, and “Where?” are all in play.

The Future is Here?

It’s easy to predict a future where all of these trends coalesce: electrically-powered self-driving cars, summoned from our smartphones, take us where we need to go with plenty of time to finally beat Candy Crush. After all, the trends all reinforce each other:

• The simpler drivetrain of an electric vehicle rearranges what matters when it comes to building a car: the engineering that matters is more software and less mechanical, opening the door to software companies that are vastly more suited to developing self-driving technology
• Electrical vehicles have (relative to gas-powered cars) higher fixed costs but lower marginal costs. This is a natural fit with ride sharing services focused on reducing the average cost per ride. Range is a concern, but a car with an exchangeable battery based out of a central depot (much more viable for a transportation company than an individual) could work well
• Similarly, self-driving cars remove the largest cost from ride-sharing services: the driver. This has import beyond any one ride in question: the big prize is consumers giving up cars completely, which would result in ride-sharing utilization increasing exponentially

So it’s set then. Welcome to our carless future.

Except for the small detail that car sales are headed in the wrong direction — they are skyrocketing. Last year saw a record 17.5 million cars and trucks sold in the United States; China sold a record 21.1 million (although growth is slowing), and India a record 2.03 million. The United Kingdom sold a record 2.6 million, Australia a record 1.6 million…are you sensing a theme?

To be sure many of these purchases were the result of pent-up demand from the Great Recession, when sales plummeted below 10 million in the U.S.; the average car in the U.S is 11 years old. But that stat itself suggests that transportation, at least in the U.S., won’t be changed overnight: the biggest argument for things staying the way they are is the sunk cost in your driveway.

This leads to three more questions: “When?”, “Who?”, and “Why?”.

When Will the Future Arrive?

What makes this moment in the transportation industry so fascinating is that while the three trends I described above are broadly related through their reliance on computers, each of them are independent of the other. An electric car could be owned and operated by its owner; a self driving car could be powered by an internal combustion engine and used exclusively by its owner; a ride-sharing network could rely on drivers operating gas-powered vehicles.

Indeed, that’s exactly what the market looks like today: while self-driving cars are obviously not yet available, Tesla, Nissan, and soon General Motors sell electric vehicles to owner-operators, while Uber and its competitors utilize drivers operating traditional cars. Of course all of these taken together are only a fraction of the market: the majority of us still get around the old-fashioned way, by pointing our own cars in the direction we want to go with a stop at the gas station on the way.

Moreover, each trend faces its own headwinds: the case for electric vehicles, particularly at the low, non status-concerned side of the market, was already hard to make given the propensity of buyers to anchor on the up-front price instead of the total cost of ownership. The task has only become more difficult with the plunge in oil prices. Add in the fact that low-price buyers are less able to make compromises to the car’s actual driving performance (someone buying a Chevrolet Bolt can’t take the family BMW to Grandma’s house 500 miles away) and I suspect the Bolt will end up like the Volt, General Motor’s disappointing electric+. 2 Indeed, the drop in oil prices in particular has made Tesla’s decision to focus on the high-end consumer who buys the car for status and performance reasons look much smarter than most business theorists would admit . 3 The same logic applies to Apple’s rumored entry.

Self-driving cars, meanwhile, face significant challenges when it comes to technology, data, and regulation. As with most complex technologies, the first 90% — driving down a highway with decent visibility — is the easy part; It’s that last 10%, especially the last 1%, that is devilishly difficult. Google is attempting to solve the problem exactly the way you would expect them to: by gathering an overwhelming amount of data. The problem is that traffic conditions can change rapidly; as of last year, for example, Google’s cars couldn’t handle a temporary stoplight. In other words, it’s not simply that Google needs to map the entire world in far more detail than they have previously — after all, the fact they have already done it shows just how capable the company is! — but rather that the maps need to be updated far more frequently than Google Street view ever needed to be. Existing car companies, were they to leverage all of their cars on the road, have an advantage here, but nothing that compares to Google software expertise (I suspect this mismatch is behind Google’s rumored tie-up with Ford ).

Meanwhile California, the largest car market in the United States and the one who’s regulations are almost always copied by everyone else, has come out with proposed rules for self-driving cars that require a specially-licensed driver be capable of taking over a self-driving car in an emergency, a far cry from Google’s concept of cars that don’t even need a steering wheel. These regulations do, though, work well for the semi-autonomous driving capability focused on the 90% problem that is already being implemented by Tesla, Mercedes-Benz, and a host of other incumbent car companies (and, again, presumably Apple). Just like with electric cars, it seems likely the revolution will be gradual and from the high-end, at least for now.

That leaves Uber and the other ride-sharing companies. An underappreciated strength of Uber is the fact it relies almost completely on technology — on phones, in the cloud, and especially in the car — that already exists. To be sure, the service is still too expensive to replace cars for most people, but were the company to ever crack true ridesharing — where the driver is a rider — the cost of going car-free could be competitive far more quickly than anyone expects, especially for those who have not yet bought a car.

Who Will Drive the Future?

These answers are vaguely unsatisfying: I want my future transportation network, not piecemeal implementations that I can’t afford! Indeed, there is an aspect of car talk that reminds me of TV: specifically, folks have been claiming that the traditional cable bundle is dead for well over a decade in large part because they wish it were so, yet the bundle has kept trucking along. Admittedly, over the past 12 months the same folks have worked themselves into a frenzy as cable subscribers have finally started to decline, but I for one am a little stingy with credit for any prediction made annually for years.

What I suspect is happening with TV is a little more nuanced than long-standing cable customers getting fed up with the cost of bundled TV and cutting the cord. Rather, young people, who have grown up in a very different entertainment environment than their parents — i.e. an online one — are simply not signing up in the first place. The decline, slight as it is, is the older generation that was raised on TV dying off.

This generational pattern of adoption will, in the history books, look sudden, even as it seems to unfold ever so slowly for those of us in the here and now — especially those of us working in technology. The pace of change in the technology industry 4 — which is young, hugely driven by Moore’s Law, and which has largely catered to change-embracing geeks 5 — is likely the true aberration. After all, the biggest mistake consistently made by technologists is forgetting that for most people technology is a means to an end, and for all the benefits we can list when it comes to over-the-top video or a network of on-demand self-driving vehicles, change and the abandonment of long-held ideals like the open road and a bit of TV after supper is an end most would prefer to avoid.

Instead, the change is gradual. Netflix here, a bit of YouTube there. Or, in the case of cars, first hybrids and assisted parking, later electric vehicles that look and operate like normal cars, and the ability to take your hands off the wheel on the highway.

Why the Future Will Come

Make no mistake, though: change is happening, and as I hinted at above it’s of the morbid variety: people raised to value things like car ownership or sitting down to channel surf are, well, dying. Meanwhile, a new generation that doesn’t understand why you would want to sit behind the wheel — much less own the damn thing — when you could instead be on your smartphone is coming of age. It’s a bit over-used at this point but the Ernest Hemingway quote about bankruptcy seems appropriate:

“How did you go bankrupt?”
“Two ways. Gradually, then suddenly.” </br>

Netflix is instructive in this regard: sure, the company is primed to be the biggest beneficiary when and if the cable bundle falls apart, but its position was secured years before that through a series of moves ( which I recounted in detail last week ) that primed the company to have the right user base and the right business model for a future that would eventually arrive.

Similarly, when it comes to evaluating who is in the best position to take advantage of future revolutionary changes in transportation — incumbents, technology leaders, big brands, startups — my money is on those that own the customers and have the right business models in place. 6 Startups looking to disrupt other decades or century old industries should take note: be patient, get your business model and core user base right, and wait for the fundamental changes wrought by the Internet and mobile to come to you.

1. After U.S. federal government electric vehicle subsidies [ ↩ ]
2. It has a gas engine that acts solely as a generator [ ↩ ]
3. I responded to the “Tesla isn’t disruptive” gripe here and here [ ↩ ]
4. IBM to Microsoft to Apple and Google in a career! [ ↩ ]
5. Tech Twitter basically devoting an entire day to David Bowie was no accident; rest in peace [ ↩ ]
6. I.e. Uber [ ↩ ]