Future Trendlines, and the one major investment that won’t make the cut

The Trends

The US is increasingly urban. Automation drives economies of scale in agriculture, meaning agricultural areas need fewer workers for larger swaths of land to produce food.  In the relentless drive to outsell competitors by cutting costs, autonomous UAS will provide crop information to autonomous tractors, and the tractors will water and treat crops. Humans will still be needed to oversee the loading of produce into autonomous tractor-trailers that transport the food to distribution centers, but the roles of humans in agriculture are shrinking to oversight, planning, repairing, and coordinating the automation that does the repetitive work of tending the fields. Lower density in the rural areas means fewer jobs in rural areas driving rural economies. More jobs – especially retail, delivery, service – are found in the cities, and the growth in population is occurring there far faster than in rural areas.

Entirely self–driving cars are due to be introduced as cars for hire in 2020 and 2021. Even if every new car in the US were a self-driving car, it would take 40 years for self driving cars to become the norm.  Adoption will not be uniform. Unmarked roads and fields will have to be driven by hand, as will roads in poor condition with potholes and poor to little marking, and roads obscured by weather.  However, in the dense cities, autonomous for-hire cars may mean a real decline in privately owned automobiles.  People who own cars for the limited trips they cannot do with transit will not need a fallback solution.  Three-car garages may be on the wane.

In air travel, air traffic management (ATM) experts are finding there is little room for additional capacity at the most fully utilized airports.  Twenty years ago ATM experts envisioned continuing growth in air travel and tried to plan for a doubling or tripling of air traffic, by routing aircraft more efficiently, and using technology to increase aircraft position certainty, to reduce separation between aircraft for more aircraft in the same sky. ATM is at or near the limit of what can be done as long as there are humans flying and controlling aircraft.  Which is not to say that we should switch to automated air traffic control and automated pilots, because the technology is not ready. The point is that increasing the airspace density will require tasks so complex that only a computer could perform them. Given the pace of innovation demonstrated by the US air navigation service provider, such automation is at least 70 years away.

If a cap-and-trade aviation carbon tax is implemented in the US as was pledged at the October 2016 ICAO talks, this tax will lead to a reduction in domestic gas-powered flights. The reason is that a carbon tax raises costs. Fewer flights will be taken at higher prices. Given that airlines are a monopolistic business, they are maximizing the difference between marginal revenue and marginal cost. Some of the least profitable flights will earn less margin, leading to withdrawal of flights that are contributing least to profit. Thin-profit flights tend to be short flights with less demand. Oceanic long flights are among the most profitable, so domestic flights are more at risk of being curtailed. Part of the reason oceanic flights are profitable is the lack of alternatives; short distance flights within the US have the highest number of competing modes, such as car, bus, and rail.

As commuting and office space prices climb, and federal budgets shrink under sequestration, federal jobs will increasingly employ telecommuting as a way to cut costs, by way of reducing the amount of rented office space each Department uses.  The General Services Administration led the way by consolidating employees into its headquarters near the White House, providing fewer one seat per person for the employees who are assigned there.  Taking a cue from government, federal contractors interested in having winning low bids have also sought to lower rented office space. Allowing employees to work from home can make employees happier – no commuting in traffic – and reduces the amount of rental office space needed.

Combine a reduction in commuting with at-your-door delivery service of food, groceries, consumables, and you come out with less demand for cars.  Uber and Lyft now offer group commuting options at a reduced price from one-only taxi drive services.  If you can catch an Uber or Lyft to or from work at any time, even people with complex schedules (e.g., picking up or dropping off children at school and daycare; working out after work) can use a carpool option. The competition for lower cost commuting will compel adoption of autonomous Uber (“Otto”) and Lyft.  With the convergence of increasing commuting time, increasing use of telecommuting for work, and for-hire on-demand cars, many more urbanites and even suburbanites may decide to not renew their 3rd or 2nd car.

The one thing you won’t see very soon however are delivery by UAS in the urban and even suburban environment.  The new standards coming out of the Science and Research Panel, presented at UTM2016, indicate that the kinetic energy of a small drone is enough to kill or maim a person.  To achieve an acceptable level of safety, no drone large enough to carry a package will be allowed over highly populated areas any time soon.