• Uber’s drivers are expensive
  • The rise of 5G-enabled internet routers
  • Why lithium-ion batteries still beat solid-state options

Dear Reader,

Welcome to our weekly mailbag edition of The Bleeding Edge. All week, you submitted your questions about the biggest trends in technology. Today, I’ll do my best to answer them.

If you have a question you’d like answered next week, be sure you submit it right here.

Uber’s self-driving future…

First up is a question about the self-driving taxis of the future…

Hello, Jeff. You wrote that Uber’s single largest expense in its business is the drivers and that the company could get to profitability quickly if the cars could drive themselves.

But aren’t most Uber cars owned or leased by the drivers, who not only drive the cars but also maintain them and thus incur additional costs that do not affect Uber’s bottom line?

If Uber “fired” all its drivers, wouldn’t it have to acquire cars and pay for their maintenance, including some staff (or contractors) to take care of that?

– Joe A.

Thanks for writing in, Joe.

For readers who missed it, on Tuesday, I outlined Uber’s recent decision to shore up some of its losses by – among other things – cutting investments to its self-driving division. If Uber hopes to achieve profitability, I wrote, the fastest way would be to eliminate the drivers entirely and let the cars drive themselves.

What I didn’t clarify was precisely how much Uber is spending on its drivers.

In 2018, Uber spent $5.6 billion – or 50% of its revenue – on “cost of revenue.” This category covers money paid to drivers, driver incentives, and insurance costs.

In other words, half of Uber’s money is going toward drivers and driver-related expenses.

But if the company operated a suite of self-driving cars, that cost would come down considerably. After all, you don’t have to pay self-driving cars for every ride. Autonomous vehicles don’t need incentives. And because self-driving cars will be much safer than human drivers, even insurance costs would come down exponentially.

And Uber does not need to incur the capital expense of buying cars. Uber isn’t a capital expense-heavy company. It doesn’t buy cars today, so why would it do so in the future? Uber will simply lease or rent self-driving cars that can be used throughout its transportation network.

Uber won’t even need to maintain or clean the cars either. Completely new businesses will spring up to clean and maintain autonomous vehicles used for public transportation. The cars will drive to the location, fuel up, get cleaned up, and get back to work driving. This is a great business opportunity and one that car rental companies should be looking at if they don’t want to go out of business.

In short, the operational expenses of leasing and maintaining a fleet of self-driving cars will be far less than Uber’s current “labor” expenses, which is why there is a faster path to profitability.

On a related note, one of the smarter moves that Uber made in its reorganization was to share the R&D expense of bringing autonomous tech to market. As I told readers all the way back in April, Uber struck a $1 billion deal with Softbank, Toyota, and DENSO. In exchange for the funding, Uber sold 14% of its self-driving unit.

In addition to continuing research and development, the funding will also be used for the development of commercial self-driving taxis for Uber. Toyota even agreed to pay an additional $300 million over the next three years to forward this goal.

5G: Coming to a home near you…

Next up is a question about 5G in the home…

Hi, Jeff. I’m looking at upgrading my phone when 5G comes around. But will I also need to upgrade the wireless network in my home if my phone connects using it?

– Judy B.

Thanks for writing in, Judy.

This is a common question I get a lot. Will 5G-enabled phones still connect to Wi-Fi? Will they still function on the current 4G networks?

Wireless networks like 4G or 5G networks are completely different than the wireless networks in our homes, which are Wi-Fi networks. Most consumers have a high-speed internet connection either through their local cable TV (CATV) provider or through a telecommunications company that provides DSL or fiber to the home.

The beauty of 5G-enabled phones is that they can make use of 5G speeds – which we’ve shown are exponentially faster than today’s 4G speeds. These phones will still function over older networks like 4G. And yes, they will still connect to your in-home Wi-Fi network. Each phone has different semiconductors that allow the connection to different kinds of wireless networks. Most smartphones even have a Bluetooth chip that creates yet another wireless connection to wireless headsets or earbuds.

Ironically, 5G speeds are dramatically faster than the average internet speed delivered to homes over CATV or telecommunications networks, which is just 60 Mbps.

One of the exciting new broadband internet services that I am really excited about is 5G-enabled home internet routers. And I’m not just excited about the speeds. Wireless operators will provide legitimate competition to CATV operators for high-speed internet to the home. In most markets, consumers only have one choice for high-speed internet. In the U.S., that choice tends to be CATV operators, which historically have some of the worst customer service and business policies in just about any industry.

But now Verizon already offers 5G home internet in areas where the networks have gone live. You can get an idea of the service it provides with the image below.

How Verizon’s 5G Home Works

Source: Verizon

The batteries of the future are…

Hi, Jeff. I follow all of your publications. Your work is truly amazing. So I’ll start with a big thank you!

In The Bleeding Edge, you reported about lithium batteries and the future of Tesla’s batteries. My question is: What about solid-state batteries? Are they not bound to replace lithium batteries in the short term? What is your take on that?

– Adrien F.

Adrien, thanks for being such a dedicated reader. As you likely know, I spend a lot of time and energy publishing as much research as I do. So I’m always happy to hear from subscribers who are benefiting.

Battery technology is one of my hot topics… more specifically, one of the things that I am frustrated about. Very few technologies have shown less improvement over the last three decades than batteries. Considering the incredible developments over the last 30 years, we still seem stuck with the same basic lithium-ion (Li-ion) battery design.

Yes, solid-state batteries are amazing. They use a solid electrolyte between the anode and cathode (the negative and positive sides of a battery). The resulting battery is capable of higher energy density. It is safe, can’t catch fire, has a longer life cycle, deals with heat better, charges faster, and can even be smaller compared to an equivalent Li-ion battery.

So why hasn’t the industry switched over to solid-state batteries? Why isn’t it replacing Li-ion batteries? Simple. Solid-state batteries are ridiculously difficult and expensive to manufacture. They are nowhere near being competitive on an adjusted price point to what Li-ion provides today. We are going to need some major breakthroughs in design and manufacturing before this shift happens.


Jeff Brown
Editor, The Bleeding Edge

P.S. In my research, I focus on finding investment opportunities in the world of high tech. But some of my longtime readers know that I also have a background in active trading. I even published an options trading service several years ago.

I’ve stepped back from that type of trading in recent years. But if that sort of thing is of interest, then I encourage you to read the work of my colleague Jeff Clark. Jeff has a great knack for short-term market moves. And he has a great track record of consistently profitable trades.

Next Wednesday, October 23, at 8 p.m. ET, Jeff is hosting a free trading summit. He’ll reveal a trading method that he’s never shared publicly. I encourage you to tune in and hear from Jeff himself. Go right here.