Episode 2,

The following is Episode 2 from @oliverbruce.  Thanks, man!


 

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SPK01

Oh or so. Park

SPK01

as number to today’s topic is test

SPK00

So what what yeah well I start but

SPK01

S. let’s come up in the comments and you mentioned that the target let’s let’s start with the one positions

SPK00

it’s a great case study like I’m very curious about what’s gonna happen there the the the problem okay so here’s the the dilemma of the if you follow if you follow the innovators solution which is the the book that describes the the keys to to a successful disruption. Um and you go through the list of things that an innovator needs to do to be successful as a destructor it tends to be everything that S. doesn’t do or that test of this and do the things that are are enumerated there. So so the challenge therefore is either the prescription the innovators prescription four or or or or disrupt or the algorithm is wrong or or or test lies and disruptive so we have to we have to we have to get to the bottom of this so oh there are anomalies I mean first of all right off the bat you should declare that this this recipe is not cast in stone it’s not I I it’s not irrefutable there are success stories which are not following that recipe. But we have to ask exactly if if Tess lies an anomaly why and how exactly how we make how we make sense of it. So the thing is this that so let me let me go through some of these items and then we’ll get into some of the paradoxes as well all of all of test one first it’s it the first thing I look at is question of asymmetry no asymmetry of what’s typically what I look for is asymmetry of business model not asymmetry of technology not asymmetry of of management style or organisational structure I look simply for the reasons why someone who is incumbent in the business wouldn’t wanna do exactly what the entrance is doing. Um and the the logic of it is that if you’re entering a my market like at David versus Goliath you set new differently you set new rules and you you don’t need to engage in a head to head battle with the with the incumbent that preserves you because I mean typically what happens is the bigger guys when and most head to head battles or sustaining battles. Um they’re just have all the resources they have no incentive not to win well we’ll get back to that whether in the there something anomalous not so much in passionate but in the incumbents in this case but it at first glance it looks like Tess la is trying to make cars sell to the same customers using similar methods although yes there are some just there’s differences. But they are part of the same value network although again and there are some distinct differences as well. Um so the dramatic level yeah but they’re making money the same way the ideas use you buy a car for a certain amount of money and why wouldn’t an industry that has been cross inter breeding for so long where most or a large auto maker and or makers on a piece of another auto maker which share platforms which tend to share a lot of engines disappointed sharing suppliers to just tend to share even the even the even the distribution in terms of dealerships you have a dealership which handles multiple brands very common now. So why would they look at this new producer of cars and say well we don’t want any piece of it that is a real oh okay I think it power train in itself I mentioned this last time power train in itself isn’t something that would put people off yes it’s a quantum leap in terms of technology yes you may have to adapt a lotta process easier to link. But fundamentally user things with four wheels that drive on the same road subject the same regulation suffers the same economics I guess the fuel systems are different but then again you have various fuel systems available like diesel verses now ethanol and have some natural gas is coming up as well. So if if you’ll systems are different power train technology’s already which call have it the same value network. So that’s one issue I asymmetry the other issues are related to for example job to be done is the newer new the new newcomer addressing the job that’s an unmet need typically again this is a new market disruption not not a particularly low end one so you you would see for example what apple did in in the in in the making our phones more computer like it has essentially taken a new job to be done for the phone and and and exploited that and and sure enough people rushed in in to get hired a product for this new job does the S. that higher is the test was gonna be hard for a new job to be done in transportation well if they had a weird business model with you didn’t own cars for example we mentioned this again last time which would be well you don’t actually own test let you maybe deliberately said you rented or you it’s a shared car scheme or you know we take away the all the hassles of ownership we can take away the hassles of insurance we take away the hassles of a parking we take away a lot of issues which come along with ownership. That’s a service that’s an interesting you job many people have that problem especially in cities they’re not looking for more transportation there’ll actually actually looking for how do I not have transportation as much errors.

SPK01

it is like the car and and a few others out there that that are abstract yeah right and and taking that hassle from you and interestingly for the the card manufacturers abstracting you from the regular network from their sales process they’re releasing their financial the whole thing so you know that practically so symmetrical approach

SPK00

So so there’s there they are taking something is that they are taking and and at a distinct approach with respect to retail and that is you know the network issue L. go again we’ll get to that I think there is an exception there but I’m not sure how scalable it is as as a global infrastructure because again the the the dealer networks are actually quite strong politically and may actually be able to to stop tests like the the the the the impetus might be that the laws can change you know tessa will be powerful enough politically in its own right but we we can’t get into that quite to see what the dynamic will be but that’s that’s one of the the other thing is when you talk about the structure you have to sort of ask yourself what is a low and or is it a new market and this has been sort of the dichotomy of disruption that’s been going on for a long time. And it you know the words you you have to you have to understand will how exactly will this product compete. So on the basis that it’s low and it means it competes with non consumption typically it competes with over serving products that that have moved up market well the auto industry so broad that there are very few spots at the bottom truly in the in the markets that apple that the test lies attacking. So we’re not sure and obviously they’re not Christ as a low end product they’re actually price for the one percent of the world. So that is indeed a almost almost hyper high end because in fact these people are are or the buyers are expected to kind of be almost altruistic. And not not economically minded enough to to really that make a decision on the basis of of economy. So it’s

SPK01

almost a fashion statement at least I I consider Seymour castles even in my home of Madison which is interesting in the winter but the you know the different colours and I I think that one with environments that and all those

SPK00

right right so you know you you you’re still trying to go down to chop checklist here and saying okay I’m not I’m not sure it’s a low and so the next question would be Newmarket but again you market as we talked about in the zip car model it’s about really changing the job to be done looking outside of the core so is it really doing that it could be there is a sort of possibility that we’re not quite seen the market that the test lies enabling here. Um then there is a bunch of things about the value network that are troublesome does it conform or comply with the world that is is is that as we have it today or you’re trying to create a new world which is a very hard thing to do especially if you’re starter startup or an entrance well there’s this question about charging stations they’re trying to not only take on the car industry they’re trying to take on the dealer need the dealer industry that are trying to change the oil industry and and the but the actual people who own filling station I do that sort of work because it is a it is very different in that in the in the way the probably approaches that model now again it there might be asymmetries all those three in which case you could succeed but it’s very hard to make sure that you’re you’re not gonna get into the had to head battle with all those players I think the the the the interesting thing is the mentality of of the of the cup of the company I think the management they’re they’re they’re really not all the mind with that says we are humble we are meek we are going to go about this lonely. I think it’s exact opposite mentality to a sort of the disrupt there’s credo be hungry for profit be patient for growth it had it it’s none of these things it is bold it is brash it

SPK01

is there nodding have anybody that’s for sure

SPK00

yeah it is not not self effacing in anyway not try to hide and fly under the radar is the exact opposite of that it is a moon shot it is it is a a railroad building exercise in a way let’s let’s change the world in the in as as as as a aggressively as possible. So that that’s you go down the list and I’m finding it difficult to find conformance to the rulebook and that’s that’s what that’s why. I initially looked at it and said this doesn’t seem to comply. So that is one way to look at it but the the real question is maybe I’m missing something maybe there’s something going on here that would would allow them to succeed and prosper now one thing that is possible and this is thing coming up as as one of the potential keys is that the industry maybe so bad is so inept that they really and and this is this is so this is also yeah is it have yet to the to the to the the structure and hypothesis is that you normally in in most cases the incumbents will have motivation to respond. But in some cases they really do fall asleep at the switch. So that’s the question about that now first of all it’s hard to believe because they’re really a lot of incumbent. So if it’s not G. M. if it’s not for if it’s not Chrysler it could very well be one of the dozen other large manufacturers and it’s not them then there’s probably a few more which are smaller and mid mid size manufacturers who might be interested in what what certainly tell your is not full of fools and certainly the the koreans and and and japanese George and the chinese are no fools. So it it’s it’s this question I I was watching again the latest top gear I saw showed a Mercedes electric super car is it the C. L. S. or something like that it’s it’s a based on one of the top of the line sort of super cars we make but it has an electric power train with four different motors super high performance it’ll actually almost the the the the best performing equivalent all that hard so it’s yeah if it it the the you know six point three litre A. M. G. equivalent is isn’t is actually slower in some cases than this lecture vehicle it has some issues of range but it also has an architecture very similar to the test like having hundreds if not thousands of batteries it is it is a four wheel drive it has regenerative braking it has a very smart electronic control system to manage the the attraction not only through breaking but actually regeneration so that when he goes round corners really quickly criteria low centre of gravity lots longer process and yeah lots of software lots of processing power

SPK01

yeah yeah yeah be you has the I same

SPK00

idea coming all same idea but is or not and

SPK01

you know and if in Provence and the Monaco also it’s it’s targeting obviously very high yeah but it you know same tools from test are similar

SPK00

yeah so so already now couple beers only down the road of test was program progress already the larger more well resourced more engineering focused more more visionary manufacturers are beginning to actually reuse some of that’s ideas not to say that that they’re they’re copying but it’s it’s it the point is that that’s the nature of business. Um the engineers are certainly not gonna feel like hey these guys are smarter than we are I’m sure the German engineers who by the way our french or whatever I mean the they’ve been in the industry for decades they’ve been studying elect electrical systems and all these other things for decades and controls and so on. So they’re going to look at this as as a challenge and and so they’re going to respond very very effectively. So that’s one one piece of evidence to sort of say well maybe the from the lingerie and the the those makers will be building product that will compete with the model has now of course the others argument counter argument is that yes but test was going down market pretty quickly so they’re going to reach lower price points lower tiers of the market as they go forward but again. It’s gonna take a couple of years and I think also from the bottom we’ve seen lots of electrical or electric vehicles coming from citron some coming from the sound so

SPK01

it’s officially titled obviously

SPK00

and then we and and G. M. with with that so very and the ball. So there isn’t an absence and complete you know ignorance of the opportunity there either. Um but there’s one more thing which puzzles me and that is that one I had the if this is the the the electric vehicle is more about the job to be done is is the question yeah is more about economy being being efficient then why haven’t the people actually buy on vehicles on the basis of cost and efficiency I. E. not consumers. Why haven’t fully purchasers really said runs full speed towards electric vehicles because you would think delivery trucks you would think service roughly fleets of vehicles all these people would sort of look at the economics and say you know I’ll drop internal combustion in an instant because this thing is more efficient besides on my routes are predictable I I and the the the the the vehicle is parked every night you know fuel depot. So or in the depot where I can get it fuelled I have I can regulate everything about the way the vehicle is operated I can I can manage everything perfectly and thus for me as as a flea part electric would be the answer no manufactured that I’m aware of has addressed that market tessa mentioned it briefly I think in two thousand ten in in the sort of saying they’re gonna go there someday. But if that’s the it that’s the job to be done I. E. efficiency and economy why has has a U. P. S. why hasn’t that like haven’t why haven’t those guys jumped on it and specially in in Europe where where they’re dealing with smaller vehicles typically more more more urban areas and and and logo in higher density of of a of C. d.s. So you you have this collection of well the the E. if economy was the job to be done in efficiency that the route would have gone through the not the you know outside of the consumer space. And as as as the cases for example with these all these all is the absolute standard in high contracting that’s also in in distribution because it is extremely efficient. And you know the Miles per gallon on on these all are typically thirty percent off and higher than that then then you would get a on on on a gas vehicle and so of course if you fleet by are you gonna go for the the diesel of bands and so on. So that group of of binders hasn’t even been approached by manufacturers probably because it still doesn’t make sense on on the initial cost to purchase on the maintenance longterm it for that’s of the batteries not of the vehicle the vehicle will probably be cheaper to maintain but the batteries are gonna probably wear out. And and then you have to fold into the you know these are people who do nothing but sharpen their pencils and figure out that the the total cost of ownership. I there is another

SPK01

angle on the and I agree with you diesel remains the power plant choices that space but T. boone Pickens is then lobbying advocating marketing for natural gas power for large fleets yep run the country

SPK00

and I know this great engine technology there that hasn’t been deployed I think there are several car companies that are in the diesel business or thinking the switch out to light a natural gas for fleets and that makes a lotta sense folks there are probably thinking hey the economics of this this technology are perfect for us. So why yeah that’s the puzzle to me it’s electric seems to be something position for consumers not for those who are really concerned about efficiency. And the consumer pitch as was the case with the price which by the way again why has a hybrid window approach to fleet say everything right right right. So so hybrid is great it it does improve efficiency of gasoline engines but it still doesn’t add up in terms of

SPK01

the cost absolutely the tax for yes there’s

SPK00

a tax port so so this is again I’m not saying there’s an actual proof here. But there’s a weirdness about it. Why hasn’t the industry gone through that path police assistance it seems the the past is going through a psychological job to be done rather than truly an economic rational job to be done and so the psychological job is much more round feeling good about your purchase and showing that’s in that’s why I say that the the job of tests la. And the job of price to some degree is to give people comfort about their consumption. And that’s nothing wrong with that I’m not judging here I think that’s a fine job lots of lots of businesses have been built on the notion of providing psychological comfort. But it we just have to be clear about it because that will will that means you don’t have to fight a battle of just a few key ish and and have to simply say and and and many brands do this all the time. It’s it’s about motivation it’s about feeling good it’s about solving that job to be done and and that’s why I’m I’m I’m thinking that perhaps that you know it’s a case point these luxury cars and and it’s you may we mentioned Mercedes but I think there for example I’ve heard a range Rover I’ve heard of a Bentley in in in in in something some examples doing show showing off concept cars which are hybrid or and or a like traffic and the idea is that again that if you are going to spend hundreds of thousands of dollars which is what these cars cost you you might want to feel good about your purchase because you getting some green credentials with with the fact that the power train is is is a little bit more green. So it doesn’t make an impact really but it is in in economic sense but it is there as a as a job to be done. So I get would just kind of circling around the right person. So yeah the

SPK01

certainly one thing we’re saying is a crime and I’m in the software business incredible growth in software in these cars I was really review the U. G. T. I. and they were talking about software that uses the brakes to give you different facts you know depending on your settings both in the suspension and in you know when you’re cornering to give you a bit of the overseer runners you’re depending on your perspective and all those sorts of things and obviously that S. all world. B. U. B. M. W. I. three the a Mercedes you mention the certainly that were pretty as they have incredible amounts of software and that’s all gonna grow so wonder if some of those players maybe it’s apples on whether I was in the car if they have another angle market both from a customer relationship perspective value chain all those

SPK00

right you know and that’s another thing that and usually breaks through the disruptive breakthrough comes from outside industry now you mask is from outside in the car industry so you kinda qualifies along. But he hired people to build a business very much in the same. So as as as as as you know the the the line I talk about this last time it was about the fact that from my point of view the production methods are that are put to use our actually they the they’ve argued well we’re gonna have a different power train we’re gonna have a different dealer network we’re gonna have a different charging system or fuelling system. But we’re gonna make art the same exact way as every other car we know by the fact that plant that used to make cars free mount California we’re gonna build them using the same tooling the same machines the same sheet metal the same unit body the same level than technology as far as welding it together and so on up paint everything is is is more or less copy paste or or a forklift technology right you pick it up when you drop ship that and that’s you got yourself a car factory. And there are people who suggest that the problem is is not the things with that that text slice solving the problem is actually that very thing all the productions just that the production system is one that forces you to be happy big security guy and an inefficient and especially because the capital required also forces you into a scale mentality that means that that so the real asymmetry and I think also the question of what’s what’s over serving what’s always serving the market today. Um is not the current cars because actually they very all across the spectrum you can get yourself from the cheapest card to divorce most expensive prices for cars vary from I don’t even know what the bottom is that maybe fifteen thousand up to you know hundreds of thousands or millions even so there’s no there’s no gap in the price band really maybe can global fifteen but there are some issues with that in terms of just simply getting regulation and all that so the the the problem is that I think the or services in in in the production systems which are in use today that they’re more than good enough that you need to think about how can you make a production system that costs ten percent of what exists what is what is in in use today and it it produces one tenth the volume. So you have this sort of threshold beyond which your project will not get approval you better sell three hundred thousand a year or something like that would probably fill the plant

SPK01

I thought about that that’s an excellent point and you weary every no the wall street journal reviewed a class of these new off road vehicles cool side by side a couple weeks ago and he mentioned that they are mutating and up to seventy five Miles an hour. And you know Kawasaki makes them yeah Polaris D. lease states. And you know you want and I thought it looked like

SPK00

original then we’re more clear and

SPK01

obviously really bottle teens early cars obviously much more sophisticated but the interesting part of the article was the fact that the consumer product safety commission in U. S. has gone after some of them for different safety issues and all these things and one can imagine how different the car industry would be if you had to start today with all those regulations and requirements and so it

SPK00

one of one of the curious things about safety. And this is always a as a great gem of the story is that if you think about motorcycles. Um motorcycles or horribly unsafe I mean they are lethal force of they are but they are because basically to turn operators into organ donors you can sort of think of them as that as

SPK01

a positive efficient absolutely yeah

SPK00

it’s an organ donor that created creation product. But the funny thing is that if you imagine if they didn’t exist if someone were to say hey I think that that a two wheeled vehicle that you just kinda hang on to it in a go hundred fifty Miles an hour. Um and it’s protecting you with the you know in some places with a thin sheet of plastic over your head and that that’s that’s the if someone put that out there they would just not be a they’ll be laughed out of out of existence but motorcycles or grandfather right so in that sense you you have carmakers being put to increasingly onerous safety requirements but motorcycles are nor for example are trucks but the the point is that the the year we as consumers don’t value. But the safety say that it it’s it’s a purely artificial construct in the sense that most buyers are not conscious of all of this all all the subtlety as far as a safety we have to simply entrust what’s already is was supposedly know what they’re doing to certify these products and and they’re given very vague ratings in in you know one to five on some on some scale. It’s it’s a yeah to

SPK01

consider the safety questions to back up a minute well my favourite writers now deceased car magazine the U. K. was O. J. K. separate room article some years ago and so that if people had worn seatbelts for many years we would never had the explosion and all the around vehicles in vehicle safety requirements the bumpers airbags and all these other things. Um that what about that obviously the point

SPK00

we we don’t it’s there isn’t the market mechanism work safety has not been driven by market forces. It’s been driven by by is yeah well it it it there are simple east things which are felt to be the right thing and then you simply impose a blanket requirement. But you except a few things like we set of motorcycles trucks certain vehicles which aren’t cool cars. And and that’s that’s the the the the the interesting thing is that in order for you to innovate now you you you have to somehow jump out of the classification of car to make something that actually solves a job. That’s different this is this is sort of the the the and I I don’t argue against safety regulation but we have to you using there isn’t room within that to think about where do we go from here. Um and it also you can’t think outside of the the the the network affects because we have also roads. And service stations and all of the the paraphernalia that come along with car roll

SPK01

Texas tools you expects always use all insurance costs all the teachers are aligned

SPK00

exactly and that’s all a an interconnected a mash that with that prevents anything from really changing it. And there are places in the world which may still be open to innovation but most places aren’t and that’s even emerging markets are instead of thinking well how can we create an infrastructure for transportation they simply say okay we’ll have whatever they’re having will will just adopted the standard quote best practises. And so we don’t get even experiments that happened with the do you know people be immediately say but the this wouldn’t have happened if you adopted the best standards. So in that sense it’s a little bit depressing and I I’m I’m maybe test was simply doing the plastic can best given the circumstances given the fact that they are an American company but it’s it’s still it’s still a struggle to me to think outside this box and and maybe maybe you know pressure builds up over time as you know the the the the fact is more more more young people are choosing not to own a car more and more so you’ll have potentially in the future less driving which means lower taxes from all of these fuel and in cars and road yeah is

SPK01

that what’s the talking yeah well alright.

SPK00

So so they’re going to squeeze right people so that those were remain with with cars and and and the main thing is that it actually may affect all kinds of things I mean the U. S. has been built in the last century glass half century or you or I would argue even the whole let’s say last century has been built around your automobile meaning that we’ve had urban planning or lack thereof we’ve had the the road network itself which is one of the most impressive networks in the world with the like trick or or or not and and and and the way homes are built the way people live the with the the the way people shop the the retail environment the Mall concept to the the and then all that is been built on the premise of a car now I didn’t say internal combustion car I simply said car. So what what would enforce or what would perpetuate the network and make sure people don’t have to abandon their homes and don’t have to it’s a change jobs and moo moo moo from where they live a lot of that will allow the car to be sustained as it is in terms of as a vehicle for finite number of passengers et cetera you’re not going to see suddenly a new road network that’s probably the bicycles when new rail or public transport network that will emerge these are not economically viable because even if you can come and engineer the the the the the the trains and the and the and the vehicles you can’t rebuild the infrastructure easily enough. So their questions about land use their questions about zoning their questions about laws their questions about millions and millions of hundreds of millions of people having bin a vested in the system

SPK01

all of the like people have then fairly successful certain places tapping some of the gas tax revenues to build bike lanes are separate bypass but I wanna go back even farther because I think this cultural or political or economic incentive to maintain the car environment we have auto increment it tells us a little bit of the story from segue way you know everyone’s say it was super hyped and and I know one of the first things I ran into was getting political approval to operate these things in different places. And that seem to just stop a Walmart money

SPK00

and and and and curiously yeah that’s a great story segue way even sold. They the utility of of what is not the word they use the the this roughly type vehicle which was supposedly for mail carriers the mail carriers could use the the big this thing to to deliver mail and and the funny thing was the unions were against it because actually make them more productive right. And so you can see

SPK01

how you can just on of the lab sure

SPK00

end and just there’s resistance and it of course then the meeting you know you the municipalities or the local councils or whatever you in there called in different countries said no this no room for this it’s not a lot on the sidewalk it’s not a lot on the road and they try to lobby they lobby the for for all kinds of concessions but no it was the answer to all of them in in the ended up in in some really tiny in each is and that was a very low and you go back to me felt very disruptive because it had this this idea of mobility a at a at a tiny incremental improvement beyond walking. And it it was called the only thing it didn’t have which again is a deal killer is conform ability with the current network the current transportation and and and yeah well that’s all you can call it the egg and we go back to the question if you find countries which have adopted bicycles to a large degree you find that they did build a lot of by cats but they have to do it over decades you’ve been thinking about it since the seventies just to holland true even of of the nordic countries even though the weather is miserable here in Finland most of the year we have white hats everywhere you can go from almost any point at any other point in you can get a map urban map tell you exactly how it and people get on their bikes year round even in the snow any actually drive around with bikes would studded tires sees be change to winter tires and you and they’re not even mountain bikes these are people driving you know even old people driving Riding their bicycles in the snow. I’ve seen it the speaking of mail carriers mail carriers also use bicycles here and they do it in the winter so it. I should you know post some pictures I’ve taken over the years of bicycles in in the winter no yes we have two

SPK01

people directed Madison as well.

SPK00

yeah but I sense here it’s it’s just a normal person it’s not some kind of guy showing off you know

SPK01

But is is said wait example of first the market first fail and I say that because I posted something on the sim car river the total ounce. This would not surprise me that they cut a deal with the city of school to begin as public sidewalk demonstration oh we’ll which looks quite similar to the segue way at to that or a personal transport assistance robot they’re calling it yeah I’ve seen

SPK00

I’ve seen some concepts of those so they’ve been looking at this personal transportation question knowing these vehicles I could be you know go from being scooters or or so essentially wheelchairs to to somehow more road friendly. And these are brilliant people and and and the robotics that that the technology in robotics in in in electric motors in battery technologies and or in in in the stabilisation all these are huge anything going to huge leaps which allow the side way to be born at lowe’s now all of these and again the japanese are no fools about these things that they they everybody have a very good process and a very good institutionalised engineering culture that allows the refinement of these great ideas and so the problem for Japan is the same as the problem for everyone else how do you make that conform and what they’ve done with this with the with the price is really impressive that they’ve actually managed to make that a great product but it wouldn’t succeed in the recent price doesn’t succeed very much ah but outside of of the U. S. and Japan is because it competes with these all in in in morning when you’re right in Europe there isn’t there is but you would essentially becomes a very expensive. So so mileage car those mileage figures that it it’s a blue cat are not not particularly good relative to diesel cars in Europe so it. It’s in Japan diesel is very rare and the U. S. it’s very rare but but that’s not the case in Europe and that’s why we’re seeing and in in Europe we have we have amazing you know seventy mile per gallon cars that that you know run circles around the price in terms of efficiency. They D. these are engines also that automatically stop right when when you’re the lights only more left for right yeah that part of the problem that price all well sort of saying we we provide motion or or energy in those moments when the internal combustion engine is inefficient those have been mitigated by a lot of a lot of wizardry with respect to software as you said and also the having stronger batteries and things like that just to start the engine. And and so for example great example of all the supervision engine is this is from here it’s it’s when it’s cold that when they’re right it’s about eight hundred C. C.s and yet it delivers about eighty horse power which is which is plenty enough for you know something like a have like a better for yeah tiny little car. But plenty good for Europe and that that number of H. P. is about one hundred H. P. per litre which is super car territory in the way it does it is is through turbo charging and the the engine is that when someone there but the is that this on theirs are essentially locked together. So they’re not actually reciprocating and and in in so it has a very very compact design very light weight and it delivers excellent excellent a performance not the mileage isn’t as good as a diesel. But it is good enough so it you you you can see how the the industry’s responding even to the hybrid notion by cranking up the improvement inefficiency walking down as extra insist yeah so so I still think a a diesel with and you said be some like for example many in the next generation many will have a three so the one point five litres the standard engine across both diesels and and internal combustion at three on there is is one of these weird configurations is very rare because it’s very unbalanced it’s not a it’s not an engine configuration that lends itself to symmetry

SPK01

but force foresight are console

SPK00

it’s it’s oh yeah oh yeah the four cycle problem or affect you have a four cycle engine means that there’s a there’s a there’s gonna be a lot of weird weird forces acting on the engine one it’s was only three but I think this all that somehow either through Dallas shafts which for J. add weight but you can probably hack it in such a way. So I agree it’s not a great configuration and the the best configuration is in in line six but the people moved away from that for very many years ago. I just yeah yeah I don’t think there’s any online sixes it’s also packaging problem in line six is a is a horribly big a hunk of metal to just take an accord that that you wanna have this as small space as possible for your engine. So I don’t know who makes them anymore thing maybe only B. M. W. still makes and then line six

SPK01

right and master volume anyway so sounds

SPK00

like our our discussion about the

SPK01

it is a metric aspects of tests let me is concluded that it’s mostly operating within the current structure maybe pushing the envelope here and there. But so where others you know with power trains or software the the last one I wanna mention is in again I find this interesting from an apple perspective that forty appears to be one of the few big carmakers trying to go their own way on soft and they have announced the developer program you can write apps for their Microsoft software their cars I don’t think it’s got traction I can see but I just wonder what that means you know if since apples middle cut deals with certain carmakers for trying to go on their own and obviously others are thinking U. W. goes their own you know where you see is there a value proposition or a disruption potential in in that experience your that’s

SPK00

yeah you know so this is gonna get a they should get it we should get a whole show going already on that because it is it yeah so let’s let’s just say that way a lot will depend on what we hear from apple is four hours of what they do with I was in the car I I think it’s it could be simply a protocol somewhat similar to the air play where where the device can use an internal display and in interpreters and controls and the whole thing maybe run over wife I so that they can they don’t even have to have a a physical wiring connection and the whole thing can be configured in software the there are two classes of software there’s the software which which drives your entertainment your navigation. And or your maybe some limited degree oh over of car control or or a control over over the environment you’re in but the the the the the the service offers the embedded stuff that controls the engine controls the the brakes suspension embraces Mormon Singers yeah okay yeah it that that that is probably off limits for for the time being because we think the you don’t want to have someone hacking just like when you have a mobile phone remember one the mobile phone became an applet platform a lot of operator said we need to be involved in that decision making as to whether map is a lot of not right because they used to wanna be involved even in to the point where we don’t we’re not sure if any phone at all that switched onto the our network is certified should do used to have to certify all kinds of phones and maybe still do. But famously eighteen T. didn’t even allow you to buy a phone but the phones even the old style rotary phones with their phones that you would least to you so that you can formula close yeah was a completely close the they will all terminals in the network and the term was something had to be certified compatible

SPK01

with network monthly fee the whole thing yes yeah

SPK00

so so to to some degree you’re seeing the industry holding on to this idea that we need to certify every piece of software everything connects to the grid which means the car that then we we have to ensure safety usually safeties the last the last have bastion of of the have the incumbent. So we’ll see how long it takes them to do allow E. P. I.s into the depths of the of the of the car. But also sort of future so yeah yeah seven some some I think the this’ll be a a gradual discussion I think the the the the main thing we’ll see is probably a display with which allows you to essentially mare your eye pad alrighty fall onto the the cars display and a lot a lot of the functionality to be to be visible and uncontrollable that way so we’ll see I I’m I’m really interested in them press that apple has managed even get this for that the car has become a potentially in accessories

SPK01

I don’t think cutting deals well what’s interesting about for dessert I think a sensual link a few months ago Jim Farley marketing guy said in the conference the auto industry has taught incorrectly about this that they you to think about the phone or the voices D. centre and as you say the cars at accessory and they have tried to put everything in the car now for this is going on their own with these that so it’s it’s and so

SPK00

my G. gonna be a yeah B. M. W. a lot of these guys are actually best that they have some cost and they have the same will be a that everyone who has a some cost mentality has that that you know you can’t let go

SPK01

I’m million but I can’t I can’t write that off. I can’t yeah okay that’s my job

SPK00

I it’s it’s it’s it’s a some cost that’s it and and those we know that means I mean you know it’s it’s not doesn’t help them well I I don’t know I will say some have run down the road with Microsoft and not gotten far right and we’ll see we’ll see and and it’s very very fragmented in some divisions of of a car company will do something and other divisions will do something completely different there’s no there’s no sort of tsar overrule overrunning the you know the little or talking about information systems in the car it’s not a that’s not a a a position to reporting directly to the C. D. L. so so we’ll we’ll see I I think that’s an interesting topic I think it might be an interesting way of breaking into the whole thing right but fundamentally I still worry about the ability of of the industry to accept an entrant that that is predicated on on manufacturing things. I ice you know I still think of the auto industry as being something that’s production oriented as much as people think that it’s about marketing it is that but it is also the the the cost structures so driven by the way the infrastructure manufacturing oh

SPK01

and and actually software is made that even stronger I think it has created increasing returns to that mentality as an example my sister just bought a new Honda minivan and she once various dealers in the twin cities and and they said if you buy this one not any these other ones which are the same configuration but this one because it’s been sitting here of course the inventory tells them that they’ll give you an extra thousand off whatever and and certainly they manage their mentor diminish the month and yeah the the production system is everything there’s no

SPK00

well what’s the cover they well

SPK01

look for the chatting

SPK00

Yeah

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Episode 2,

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