True autonomy is worth almost nothing

Saturday, January 15th, 2022

True autonomy is worth almost nothing when it comes to trucks, Stefan Seltz-Axmacher of Starsky Robotics explains:

At Starsky we modeled that our robotrucks could achieve 42% margins even if each had a dedicated remote person paying attention 100% of the time. Those margins would jump to 58% if that remote driver only needed to pay attention for the first and last miles.

True autonomy, on the other hand, would have added less than 2% to our bottom line. Which means that the technological achievement $70b has been invested in over the last decade is worth less to the trucking industry than automatic billing.

The US trucking industry is structured around the systemic shortage of long-haul truck drivers. The 3.5 weeks/mo an over-the-road (OTR) driver is expected to spend in a truck is so miserable that few will do it for even $60k/yr. On the other side, trucking is a highly fragmented commoditized industry, which puts no fleet in the position where they can raise prices sufficiently to afford to pay drivers more. The result is that the market typically has at least 50,000 too few drivers to meet demand.

This shortage defines everything in American trucking — it’s why our trucks have nice comfortable cabs (worse fuel efficiency but better driver retention), it’s why our railroads are so profitable (which is why Warren Buffet buys them), and why our supply chain has even been shaped to minimize how much time trucks need to drive in cities (drivers get paid by mile and hate driving in slow-speed cities).

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$60k/yr isn’t enough to entice over-the-road drivers but it is more than enough to recruit drivers who get to sleep at home.

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Trucking is a business with both high fixed and variable costs. For every dollar that comes in, the best run firms typically spend 75% of it evenly divided between fuel, equipment, and labor. They then spend another 17% or so of administrative overhead per truck before eking out an 8% profit margin.

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American truck drivers are paid only for the miles they haul freight — the hours spent waiting to be loaded or unloaded and taking mandatory breaks are all unpaid. As a result, the $200/day drivers typically earn is really only for the 7 hours/day they move freight and not for the 14 total hours they’re on-duty. This delta is big — it means that the trucking company feels like they pay drivers $28/hr while drivers feel like they only get $14/hr (or $8/hr if you consider the 24 hours/day drivers spend in a truck).

Drivers who aren’t physically in a truck don’t need to lose productivity when the truck stops moving. Rather than twiddling their thumbs at a distribution center the driver could simply switch to a different truck in the fleet which has been loaded and is ready to move. The driver actually cares about earning $200/day — if they earned that by driving for 11 hours (vs being on duty for 14) their hourly rate would increase. The fleet would see their $200 buy them 57% more hours of a truck moving which would drop their labor cost by 30%, bringing it to just 17.5% of gross.

As a result a robotruck which is remotely monitored 100% of the time by a teleoperator who is looking only at that truck while it moves would cut labor cost from 25% of gross to 16.5% and have profit margins of 42.5%.

95% of the hours an OTR truck moves is on the highway. If you were able to eliminate remote supervision for the bulk of those hours you would see per-truck labor cost drop to just 1.75% of gross and profit margin would soar to 58%.

The hardest 1% of the technical problem, automating the surface streets and interchanges, would end up being worth only about $600/truck/yr. Level 4 truck autonomy has less value than a daily coffee.

Comments

  1. Harry Jones says:

    So what happens if the signal gets disrupted?

  2. David Foster says:

    The problem of lost communications exists in aviation…it does happen, though not often…and the procedure to be followed is that the flight crew continues in accordance with their flight plan, and air traffic control works to keep other flights out of their way. Disruptive, but essentially safe.

    In the case of trucking, I guess the truck could pull itself off the side of the road..*if* there is room to do so…and wait for communications to return. But the article mentions ‘interchanges’ as one of the conditions in which remote-manual help will be necessary…implies that the remote person will have to give the truck turn-by-turn guidance…so what happens if the truck is in the middle of a complex interchange when lost comms happens? I guess the best approach would be to get off *somewhere*, pull off *when possible*, and wait for comms to return.

  3. Gavin Longmuir says:

    “For every dollar that comes in, the best run firms typically spend 75% of it evenly divided between fuel, equipment, and labor.”

    So, about 25% of what the customer pays goes to the driver in the truck.

    “They then spend another 17% or so of administrative overhead per truck”

    And then the trucking company spends about 2/3 of what they pay to the driver for someone else back in an office to do “administrative overhead” — which seems rather high. There is obvious room for improvement there — perhaps that is where software could really help?

    A Central Planner would see a great opportunity here to invest in expanding railroad capacity for long haul freight, which would also get a lot of trucks off inter-city freeways, reduce the need for expansion & maintenance of those roads, and make life more tolerable for drivers. It is unfortunate that Central Planning does not work.

  4. Gwern says:

    Lost signal is a nonproblem. ‘Drive yourself to the edge of the road’ a few dozen times a year across your entire fleet involving a few miles of autonomous driving is far easier than driving millions to billions of miles autonomously 24/7. It is also extremely susceptible to being solved by just spending some more money (buy higher-power/gain rigs; buy cellphone & radio & satellite backups; buy mesh networking to bunnyhop your way to somewhere with connectivity; buy…), in a way that ‘solve all problems of autonomy perfectly’ is not. If you have enough money, you can get signals to even submarines at the bottom of the ocean; meanwhile, there is at present no perfect autonomy solution for sale at any price, because it just doesn’t exist.

  5. Felix says:

    Have Amazon or Walmart bought those Starsky patents?

    It was a shame that Starsky couldn’t get the dough to keep plugging. Odd, too, when you think about negative yields being so popular these days. And it’s wonderful that they are, engineer-like, putting out information about their experience. Let the whole world do the postmortem!

    Remote-operating seems like something that will make a lot of little changes, that, over time and in sum, will be serious world-changers. Imagine roofing and garbage pickup mostly by remote operation.

  6. Freddo says:

    Intriguing read. However, the ease with which they claim to be able to entice the notably conservative industry to update their administrative processes, and then this industry also cedes the benefits of these improvements to Starsky, makes me weary on their other claims.

    They are walking the fine line between “this technology isn’t needed” and “we cannot make it work therefore this technology isn’t needed”.

    The likes of Walmart and Amazon can probably dictate to their suppliers what technology to use, the rest of the industry not so much. On the other hand, online brokerage of freight through various apps is a competitive market and will eventually lead to standardization of electronic processes.

    Be sure to also read their last post, including their comment on the technology S-curve: https://medium.com/starsky-robotics-blog/the-end-of-starsky-robotics-acb8a6a8a5f5

  7. VXXC says:

    I guess…? the trucks can pull over. I guess? I guess…

    I make a good prediction, not even a guess, that a couple of baby pics run over by Robo-Truck as it pulls over to the side of the road will ‘erode margins.’

    As usual the problem is these damn people are in the way, if there were just less of them we could automate everything!

    It’s like Ireland in the mid-19th century; the problem was solved by replacing difficult people with literal sheep. Sheep you know are extremely low-maintenance, high-profit and will absolutely follow commands promptly [seriously, I've seen sheep formations manoeuvre with a precision that would make Sergeant Majors weep with envy].

    If we could only perhaps CRISPR sheep docility into Homo sapiens we’d have a winning and high-margin design. I’m sure someone’s working on it now…

  8. WOPR says:

    “And then the trucking company spends about 2/3 of what they pay to the driver for someone else back in an office to do “administrative overhead” — which seems rather high.”

    That’s not high. Administrative overhead mainly means dispatchers, schedulers, and the guys who handle getting the equipment fixed. Then you have to comply with legal, regulatory, tax, and safety rules. Running a truck company isn’t for the faint of heart.

  9. David Foster says:

    “Administrative overhead mainly means dispatchers, schedulers, and the guys who handle getting the equipment fixed”….might also include the guys who *actually fix* the equipment, in some companies, and in other companies, the money paid to outside firms to do the fixing.

    Also, there will be the costs for salespeople who develop new customer relationships and maintain existing ones.

  10. Jim says:

    VXXC: “If we could only perhaps CRISPR sheep docility into Homo sapiens we’d have a winning and high-margin design. I’m sure someone’s working on it now…”

    Where have you been since March 2020?

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