So Apple Inc. is looking into the car business, not necessarily as a supplier but perhaps as a larger player, perhaps even an auto maker of some sort.
Holy Google.
The tech giant is playing around the fringes of the auto industry, too – with the driverless car that will never in my lifetime become a commonplace reality for a list of reasons so long, it would fill a book as fat as the latest Oxford dictionary. More on that later, but for now, let's focus on Apple, Google and Silicon Valley.
Apple, as the Financial Times and Reuters breathlessly announced, is setting up a "secret lab" near its Cupertino, Calif., office.
Of course Apple and Google and other Silicon Valley heavyweights are looking very closely at the car business. Apple may be worth around $740 billion (U.S.), making it the world's most valuable public company, but the auto industry is massive by comparison. Apple and Google would be nuts not to dig into any opportunities they might find involving cars.
What you may not know is that every single major car company has a presence right there in Apple and Google's own backyard. Of course they've set up shop at the heart of digital technology.
The modern automobile today is a rolling digital platform. Car design and development is also fully digital. Auto manufacturing is a digitized business. Marketing in the auto industry is becoming largely digital. Sales? If you haven't already, get used to working with a sales person who does the entire deal in the showroom on a tablet.
But even though the auto industry is a digital business, it remains the antithesis of Silicon Valley's more freewheeling culture of start-ups and corporate failures. Car companies require stability, loads of capital and must adhere to firm processes for good reasons. A couple of smart and inventive code writers can and did create PayPal out of virtually nothing.
Louay Eldada, CEO of Quanergy, an academic, inventor and three-time entrepreneur, described his experiences working with traditional auto companies to Automotive News: "Some of them have very complex processes. They cannot make decisions. They cannot move forward easily."
Yes, exactly. As noted, there are reasons for this and those reasons are why Apple, Google and every other Silicon Valley company will struggle with any serious venture into the car business, at least beyond the role of first-tier supplier.
First, a global patchwork of regulations on safety, emissions and so many other elements of the auto industry creates a nightmarish bureaucratic maze that mobile phone makers and search engine developers simply cannot comprehend. These require a bureaucracy within car companies that makes sense of the government/regulatory bureaucracy.
To put it simply, if your cell phone just stops working, if it gives up the ghost in mid-call, no one dies. If your car or any key part of it fails, someone can die. And if it does not meet a long list of crash test standards, a new vehicle never even goes on sale. Silicon Valley companies do not need to worry about anyone dying while using their products.
Second, quality. From the moment a car company begins work on a new vehicle to the day it's scrapped, the potential lifecycle of that vehicle can stretch to 22 years. Heck my son just scrapped his 27-year-old Ford Ranger pickup for $150 after getting four years of life out of a little truck bought used for $800. He's gone through two smart phones in the time he had his old Ranger.
The tech industry makes almost immediately disposable products. Not the car business. Apple introduces and phases out entire product lines in a time frame equal to, say, half the life of a typical new vehicle. Silicon Valley's companies will have a hard time wrapping their collective heads around an industry that no longer builds in obsolescence.
It will be interesting to see how Silicon Valley's heavyweights find their way in the auto industry. They're going to find it's much easier launching an iPod than even the cheapest, simplest vehicle.
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