The future of self-driving cars: CNBC Explains

Google predicts that by 2020, self-driving cars will be ubiquitous.

What Uber 'employee' ruling means
What Uber 'employee' ruling means   

A San Francisco-based driver for ride-hailing service giant Uber is not an independent contractor but an employee, according to a ruling from the California Labor Commission that received a lot of press earlier this year. But should Uber worry?

In the near term, the answer is yes — and Uber has already appealed the decision. Uber stated that the ruling is not broadly applicable and contradicts other rulings: "The California Labor Commission's ruling is non-binding and applies to a single driver," Uber told CNBC in a statement. "Indeed it is contrary to a previous ruling by the same commission."

Still, Uber's business and $50-billion-plus valuation has been built on a business model that doesn't require it to own anything — cars or the individuals who drive them.

The commission said Uber is "involved in every aspect of the operation."

In the long run, though, Uber's drivers may not need to be involved in any aspect of the company's operation: Uber is among the Silicon Valley firms pushing furthest into a self-driving car future.

Google Chairman Eric Schmidt sits in a Google self-driving car at the Google headquarters in Mountain View, California.
Getty Images
Google Chairman Eric Schmidt sits in a Google self-driving car at the Google headquarters in Mountain View, California.

Uber recently poached 40 of the scientific minds working at Carnegie Mellon's National Robotics Engineering Center. Uber and Carnegie Mellon already had a partnership to work on robotics formed this past February that would include the creation of the Uber Advanced Technologies Center in Pittsburgh.

At the time of the initial deal, Uber's chief product officer, Jeff Holden, said the Carnegie Mellon team's "breadth and depth of technical expertise, particularly in robotics, are unmatched. ... We have the unique opportunity to invest in leading-edge technologies to enable the safe and efficient movement of people and things at giant scale."

Today, Uber targets professional taxi drivers and chauffeurs through ads strategically placed on buses and billboards along popular taxi routes, among other methods. It's also been accused of some ethical breaches by its competitor Lyft in recruiting drivers.

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Some tech experts say the long-term driverless-car plans are at odds with Uber's recruitment of drivers today. But the company hasn't shied away from the issue.

Uber CEO Travis Kalanick said last year that self-driving cars will one day replace all of the drivers they're now utilizing. He said at last year's Code Conference, "'Look, this is the way the world is going. If Uber doesn't go there, it's not going to exist either way," he said, explaining that there would not be a company to employ drivers anyway.

Kalanick hedged his bold comments, though, in a subsequent tweet—at least as far as the on ramp to a driverless future—writing that it would take decades to reach the driverless future. "Let's take a breath and I'll see you in the year 2035," he tweeted, noting that drivers with Uber are making competitive salaries today.

Silicon Valley in the driver's seat

How close is Silicon Valley to producing a self-driving car?

Google has said that self-driving cars could be available to consumers as early as 2020. That would be ahead of the date futurist Ray Kurzweil predicts computers will become like humans: 2029.

Apple and Google are both pursuing opportunities to remake the car from the inside out—literally. Apple poached a team from electric-car battery maker A123 Systems, a move that led to a lawsuit and stoked a lot of speculation about the tech giant planning to produce its own car in the next decade.

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Already, if you have your iPhone in your car giving you turn-by-turn directions, you're using a computer to enhance your driving experience. Even integrating technology with your dashboard is equipping your car with a new technology to enhance your driving experience. But that's a far cry from true automation.

"There is a major difference between BMW building a car with a computer in it and what the technology companies are planning to do in the car market," said Brad Templeton, founder of ClariNet and a consultant on Google's self-driving car project, speaking at the recent Exponential Finance conference in New York City sponsored by Singularity University and CNBC. "It is the difference between a car with a computer in it and a computer on wheels," Templeton said.

In that scenario, the car has basically been transformed into the biggest app ever.

A brief history of the car's future

Self-driving cars have been a figment of the collective imagination for decades. As early as 1935, science-fiction writers dreamed up magnificent ideas of a future in which everyone would ride in autonomous vehicles. In the late 1950s, the Firebird III emerged as one of the very first experimental show vehicles that represented a hybrid between fantasy and science.

Meanwhile, GM and RCA collaborated to test the concept of automated highways to magnetically propel and guide ordinary vehicles. With the development of the digital computer in the 1960s and '70s, the public's imagination for how the technology could be integrated into cars took off. Self-driving cars, however, did not. Rather than being revolutionary change occurring at breakneck speeds, artificial intelligence and robotics advanced in a much more incremental manner.

It wasn't until the 1980s that Ernst Dickmann, a German computer scientist, developed the first self-driving vehicle, a Mercedes van, and drove it hundreds of miles on German highways. In the U.S., it wasn't until 2004 that the U.S. Defense Advanced Research Projects Administration (DARPA) challenged researchers to develop a self-driving military vehicle. They hoped that a third of all military vehicles would be self-driving by 2015.

Some think the development of self-driving cars will be a revolutionary change much like the global transition from horse and buggy to automobile, and some believe the timeline will be greatly accelerated due to laws of technological advancement, like Moore's Law and Wright's Law.

Robo-chauffeurs, specifically, are already here—to a degree.

Autonomous "pod cars" have already arrived. Twenty-two self-driving pods have taxied travelers around London's Heathrow airport since 2011. While they can only travel up to 25 mph, they represented progress in terms of turning the robotic task of driving a car into a truly automated experience.

Warner Brothers | Getty Images

The major carmakers

The automotive industry in general has taken a much more incremental approach to introducing a consumer-available self-driving car. By introducing features one by one, automakers are seemingly easing into the technology.

Tesla Motors is introducing its auto-steering feature this summer.

In the automotive industry, experts like Mike Tinskey of Ford predict that cars may never become fully automated. Due to roadway hazards like unpredictable pedestrians and dangerous weather conditions, Tinskey says that cars will always need a human element to aid in their decision-making processes. He foresees a future in which vehicles are fully automated but can be overridden remotely for assistance in driving situations that may require a human touch.

This could include driving situations like taking a right turn while pedestrians are crossing the street. Prototype self-driving cars would theoretically wait eons to take the right turn until pedestrian traffic cleared up. Tinskey believes that a remote driver should override the automated controls in situations such as these.

Matching Google's aggressive target, in March 2014 Nissan released a futuristic vehicle as part of its "plans to have commercially viable autonomous drive vehicles on the road by 2020."

Regulation

Several states have created laws that allow the testing and operation of self-driving cars, typically placing speed caps on the test drives around 25 mph.

Virginia recently opened up 70 miles of its highways to be called the "Virginia Automated Corridors." On this stretch of I-66, I-95 and the Beltway, the Virginia Tech Transportation Institute will oversee highway road-testing for self-driving cars.

California, Nevada, Florida and Michigan all allow driverless cars to take part in public road testing. Still, a human driver has always accompanied every test drive to date in case the technology makes an error and a human override is necessary.

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In California, the state government has sought further regulation to establish a government process by which the state can measure the safety of driverless cars. Google has come out in opposition of further regulation, warning that it will slow the development of self-driving technology if we regulate too heavily.

According to Google's self-reported records, its self-driving cars have been involved in 12 minor traffic accidents in California. The report states, "Not once was the self-driving car the cause of the accident."

Indeed, at the recent Exponential Finance conference in New York City, Salim Ismail, former head of innovation at Yahoo and Singularity University founding executive director, related this anecdote: "A few years ago when there was a BlackBerry text message outage in Abu Dhabi for a few days, accidents dropped by 40 percent." Ismail added, "In a couple of decades we will look back and say 'Why did we ever let humans drive?'"

A collision course for many industries

Today the No. 1 and No. 2 autos sold in the U.S. are not compact cars; it's a Ford truck and Chevy truck, because when people are buying an auto, the No. 1 thought in their head is, "What might I need this car for in my life?" and that life might require an SUV or a truck at one time or another, leading to less-than-optimal car-buying decisions, Templeton said at the Exponential Finance conference.

What Google and Uber and others can potentially do with self-driving cars is a shift in that psychology to "What do I need the car to do today?" And only today. You don't need to own it. You get the car or truck you need when you need it, Templeton explained.

This has ramifications for industries beyond the obvious ones: auto insurance, auto financing and energy.

Real estate, for one, because there are no more parking lots needed as individuals are no longer parking their own cars and the self-driving cars are cycling from customer to customer. Instead of parking lots, there could be more parks—or even more likely, more luxury condo buildings.

The health-care industry is also affected due to the lack of accidents, while the retail sector and food and grocery industries are upended industries due to on-demand self-driving car deliveries—already a major focus of Silicon Valley funding.

—By Andrew Wood, special to CNBC.com

CORRECTION: The California Labor Commission's ruling about an Uber driver was revealed Wednesday. The timing of the decision was misstated in an earlier version of this article.