How capitalism works; let’s hail a ride with Jaguar and Waymo

How capitalism works; let’s hail a ride with Jaguar and Waymo

by Eben Wilson
article from Tuesday 3, April, 2018

WHEN I FIRST READ that Jaguar has an order for twenty thousand of its new i-Pace cars from Waymo, part of the Google empire, to become self-driving “ride-hailing vehicles”, I was puzzled. But then I began to laugh. Here’s why.

This contract offers a wonderful lesson in economics, highlights the farce of leftist thinking and emphasises what Brexit is actually about. 

Think about it. Here’s a premium vehicle costing £63,000 destined to become – er – a taxi. It’s a rich person’s status toy, but it’s all-electric and, wait for it, it is built in Austria by a British company owned by an Indian conglomerate.

Who would have thought it?

Leftist prejudices about the rich versus the poor, public versus private, fossil fuels versus electric power, home and overseas ownership and global profits are all forced into reassessment in the face of such enterprising genius. (Although my bet is that Waymo engineers just thought it would be cool to have a Jag as a taxi. )

Let’s do a bit of that re-assessment.

To use a rich person’s car as a taxi reminds us that rich people are important to innovation and that the notion that the poor are only poor because the rich are rich is dead wrong.  It’s the opposite.  By using an i-Pace, Waymo are being commercial. They are sinking huge sums into development; they want it back and a premium ride-hailing vehicle, a better name than taxi, will command higher prices; meaning more money redistributed from the rich to blue collar workers.

Through these efforts, we will also get to a world where elderly, infirm, poorer and more vulnerable people will have new freedoms to move around more quickly because richer people have found out how to do it.  In the process, the younger, cash-hungry, family overhead-building next generation will be working in industries that self-sustain, provide higher and growing wages, and advance human knowledge for tomorrow’s innovations. That’s capitalism, folks!

Imagine if the state tried to innovate like Waymo, using a set of publicly funded engineers designing within the eco-system of the self-interests of the public sector.  We’d end up with a wee wobbly bubble car, just like Waymo did with its prototype self-driving Google car, but the bus companies and taxi companies would do everything in their power to trash it and take over operationally.  Innovation would then stall.

My expectation is that we would repeat the farce of those post-war vehicles for the disabled that used to encircle football grounds; creating a specialist market for social reasons; the infirm and vulnerable would be discriminated against through controlled use of self-drive vehicles for them only. They would be costly, rationed, badly maintained and get in the way on the roads because their electric power trains were un-improvable due to the rationing of state cash.  That’s socialism.

Let’s dip further into this innovation and its combination of technical and international commerce.  The new venture taps into a particular industrial history in that Jaguar is a lucky company. What do I mean by that, and why is it important?

The Jaguar brand gained its personality early, securing it with Le Mans victories through the 1950’s, where daring drivers had the luck to survive. The lucky combination of the fast cat name and the fast driving vehicles sustained through the development of the XJ6 engine. The company survived the socialist agglomeration of BMC into BL – just – and was taken over by Ford when it only had one vehicle in its catalogue.  Ford was unlucky with Jaguar, but Jaguar had the luck to be completely re-invested using Ford money with a new alloy engine plant and flexible robot equipped manufacturing line that could generate volume output. Ford also drove quality into the brand.

Then bought by Tata, Jaguar had the luck to have Dumfries born designer Ian Callum on board.  He managed to evolve Jaguar design from a slightly fusty image to a totally new look. Through time, in a carefully managed merging of bodyshape aesthetics, the Jaguar’s road presence adopted some of Land Rover’s design cues, especially in its SUVs but with the Jaguar “look” still retaining its cool.

Throughout this process, a loyal export customer base grew. The XJ series, unexpectedly, became the cool car of choice of wealthy California wives (yes, wives) and the newly named Jaguar Land Rover got more luck through good cross-market marketing echo between Range Rover sales and Jaguar sales.  Tata opened plants and component suppliers worldwide.

Now, you can put this all down to luck, but I tease. It’s not luck in the sense of random happenstance, it’s luck in the sense of engineered chance; hundreds of small decisions by professional industrialists, marketers and financiers juggling together like amoeba coalescing into an emerging successful whole. This is modern international industrial capitalism.  The “luck” to be chosen as a cool SUV, driven electrically, to pioneer self-driving ride-hailing vehicles – is the reward for years of developing small insights and improvements.  The right place, right time, right brand, right potential needed to come together. 

And the key insight here? It was not centrally planned but instead driven by market incentives. Waymo could have chosen a Ford, an Audi, a Dodge or a Cadillac; all could have been suitable but JLR ducked and weaved and offered the coolest choice.

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