Second Order Effects of Autonomous Vehicles
The market does a great job of pricing in first-order effects. But there is often money to be made (or risks to be avoided) in connecting the dots to the second-order effects. Walk with me.

Let's say Tesla is successful in creating autonomous vehicles. What are the first-order effects?

=> People don't have to spend time driving
=> Tesla stock goes up
=> You are inspired to add your own first-order effect in the comments⬇

Ok but what are the _second order effects? Y_ou know, the things that will happen that busy people don't have time to think about.

Housing prices will plummet.

("What? Why?")

Here's the logic:

Your car spends 95% of it's time sitting in a parking spot doing nothing.

If Tesla is successful in developing a self-driving car, vehicle ownership will look very different. Most cars on the road will be autonomous taxis. They will drop off a passenger and immediately drive away to pick someone else up. Vehicle utilization rates will go up.

Cars being used more means parking spots will be used less.

That means there will be less need for land for parking. Currently it is estimated that 14% of all the land in LA is dedicated to parking. When cars no longer need that land, the land can be repurposed for other uses.

What is the highest and best use for land?


More housing supply means lower housing prices.

You heard it here first: autonomous vehicles = more affordable housing.

Or if you want to state it differently: There is a risk that housing prices will collapse late this decade as society reorganizes to accommodate the second-order effects of self-driving vehicles.

If you're new to the Commonstock community- one thing I love about this corner of the internet is the Thoughtful Pushback. So have at it- let me know why I'm wrong in the comments :)
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Seb's avatar
Harvard published a great paper about it a few years ago, predicting a billion dollar shift in housing from town to far suburbs as commute won’t be an issue anymore
Nathan Worden's avatar
Would love to read that! Do you have a link? Figures Harvard beat me to this buy a couple of years 😆

But did they have a cool mech-bot on the front of their paper? 😄
Seb's avatar
@nathanworden I’ll try to find it!
Nathan Worden's avatar
@seb thank you! I love papers like that 🙌
Josh Worden's avatar
Now that’s one big second order effect! Let me throw out a theory- a sizable chunk of the new housing would be apartments or condos, rather than full scale houses. My thinking is that the biggest parking lots are not in residential areas, so the most sensible replacement for the parking lots would be the type of housing you already see downtown- high rise apartment buildings. So if you looking to buy a home, maybe prices won’t drop as much as expected? Not sure, just a question
Pat Connolly's avatar
I’ve tried to consider what would happen to the suburban driveway if we no longer need them to store our cars -- Presumably we would see a wave of repurposing existing garages & reconsidering what the optimal landscape design looks like