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Lawsuits could mean that the Silicon Valley self-driving-tech bubble is about to pop
(An Otto self-driving semi.Otto)
The gloves are coming off in the Silicon Valley race to dominate the self-driving-tech world.
Google's Waymo is now suing Uber and its recent acquisition, Otto, accusing it of stealing technology secrets.
As Business Insider's Alexei Oreskovic and Danielle Muoio reported on Thursday:
"At the center of the suit is Anthony Levandowski, one of the original members of the team that worked on Google's self-driving-car project. In January 2016, Levandowski left Google after nine years to found Otto, a startup focused on autonomous trucks. Six months later, Uber acquired Otto in a deal valued at $680 million. Waymo alleges that Levandowski 'downloaded over 14,000 highly confidential and proprietary design files for Waymo's various hardware systems, including designs of Waymo's LiDAR and circuit board' six weeks before resigning from Google."
This lawsuit follows one filed by Tesla for similar reasons. Tesla recently sued the former head of Google's car project, Chris Urmson, and Sterling Anderson, who ran Tesla's Autopilot program from 2015 to 2016, accusing them of stealing the electric-car maker's intellectual property in pursuit of a new venture, Aurora Innovation.
In that lawsuit, there was this interesting language:
"The Autopilot features that are built into every Tesla vehicle, and continually updated through free over-the-air updates, are widely regarded as the most advanced, safest, and most reliable technology in the autonomous area. In their zeal to play catch-up, traditional automakers have created a get-rich-quick environment. Small teams of programmers with little more than demoware have been bought for as much as a billion dollars. Cruise Automation, a 40-person firm, was purchased by General Motors in July 2016 for nearly $1 billion. In August 2016, Uber acquired Otto, another self-driving startup that had been founded only seven months earlier, in a deal worth more than $680 million.
"Anderson and his business partners ... decided to take a run at a similar fortune."
Compared with the ascent of the electric car roughly a decade ago, the stakes for autonomous technology seem much higher. There were some legal skirmishes back then, particularly when it came to Elon Musk, now Tesla's CEO, and one of the company's founders, Martin Eberhard.
But most of the electric-vehicle startups from back then either folded or went bankrupt, leaving Tesla more or less alone in the space. The big automakers created some electric vehicles, such as Nissan's Leaf, but their sales have been disappointing. In fact, to stoke the market, Tesla open-sourced its electric-vehicle patents in 2014.
(Tesla Autopilot in action.Tesla)
Tesla's battery and drivetrain technologies are distinctive — thousands of lithium-ion cells wired together in a rather monolithic design — but electric vehicles are hardly a huge innovation. They've been around, in one form or another, for a century.
Self-driving tech is a different story, and no one is interested in sharing.
Building a perfect bubble
Taken together, the Waymo and Tesla lawsuits strongly indicate that there's a self-driving-tech bubble developing in Silicon Valley. With less than a year of work, some engineers can sell out for hundreds of millions or a cool billion.
That's the going rate for self-driving tech that works, according to Ford's chief technical officer, Raj Nair. Ford just took a majority stake, to the tune of $1 billion, in Argo AI, a machine-learning startup, to advance its own ambitious self-driving-tech efforts. The company says that $1 billion is about what it costs to develop so-called Level 4 autonomy, which is one stage shy of the vehicle completely driving itself, with no human input.
Entrepreneurs can smell money and quick, lucrative exits. The traditional carmakers are flush with cash after several years of booming US sales, and they don't want to be left behind in the race to bring self-driving cars to market. (They were far more low-key when it came to electric cars, effectively letting Tesla assume all the early risk.)
(Skye Gould/Yu Han/Business Insider)
And a new arrival like Uber is riding high on its nosebleed valuation of more than $60 billion. Not moving into self-driving tech now would be catastrophic if the market were to shift hard in that direction over the next decade and ride-hailing services were saddled with a massive commitment to high-cost human drivers — it would have to pay up to license autonomous technologies, which is an integral part of Ford's business plan.
In other words, fear has broken out. That, rather than a meaningful market for self-driving vehicles, is swelling the bubble. Now that the lawyers have entered the picture, that bubble could be close to popping.
As autonomous vehicles have ascended and surpassed electric cars as the futuristic preoccupation of choice in the tech industry, I have the ominous feeling that I've seen this movie before. While there are impressive self-driving-tech experiments being conducted across the US, the technology is far from being commercialized.
The ambition is present, but it was also there when we saw numerous electric-car startups rise and fall after the financial crisis. As it turned out, while people wanted Teslas, they didn't want electric cars — sales today amount to only about 1% of the global market.
The frenzy to get bought — and get bought in a hurry — signals that self-driving cars could fall victim to a similar dynamic. If we see more high-profile lawsuits, I'll get even more worried.
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