The Driverless Revolution Is Upon Us

Driverless is coming and it’s coming sooner than most people think. Cities and companies are spending tens of billions on making driverless happen. 

Q. Driverless will kill auto insurance, and it seems auto insurance is in denial. Look at PGR’s earnings call from August. They’re dubious of autonomous tech? They think they’ll be around in 40 years? It’s almost sad. Now that Google has officially started the transportation revolution in Arizona, can’t we have some fun and short $PGR? Is Progressive any different than Blockbuster? Other than $GOOG and FNVDA, are there other companies to own to maximize gains from the forthcoming transportation revolution? I’m gonna watch one more live Q&A, and then I’m signing up with you. Thanks for reading.

A. I love your thinking on this…yes, over the next 5-10 years, the retail auto insurance industry will be secular decline….do you know if PGR is the most dependent upon auto insurance of all the publicly-traded insurance players? Maybe Berskshire Hathaway with their Geico is in trouble too…hmmm

Subscriber follow-up: I had checked the major insurers, and PGR is the most exclusively auto. (Berkshire (Geico), AllState, etc, all sell home, life, etc.) I do like PGR’s ads, though it’s not a good sign when the best thing you got going for you is your marketing company.

Cody’s follow-up: That’s funny: “I do like PGR’s ads, though it’s not a good sign when the best thing you got going for you is your marketing company. ”

Q. I have some concern with the auto insurance secular decline scenario. They are so wired into state legislatures that I feel like they will figure out a way to legislate mandatory insurance for driverless cars. I think ride sharing as an alternative to owning a car could perhaps lead to fewer cars on the road and be the bigger threat to the auto industry as a whole.

A. There will definitely be mandatory insurance for driverless cars, but the rate of accidents will drop precipitously. The revenues, earnings and margins of suppliers will contract as they have to start selling into a market that will measure it’s customers by the hundreds of government institutions and giant corporations instead of billions of people. I think we can expect to see the car insurance industry undergo a massive competitive price war in to sell into that secularly changing market.

Q. Autonomous/electric/ ride hailing etc. Any hidden gems in the Cody mind space? Or is FANG the safest way? Anything that main street and Wall Street are not seeing in any sector that you are seeing or getting glimpses/flash forwards. Thanks Cody!

A.Oh great question. As noted above, I do think $PRG and any other car insurance company is going to be CRUSHED in ten years from now. Most of the best plays on autonomous cars are well known — we invested in $NVDA almost two years ago BEFORE it was well-known as a play on the auto cars. There will be more opportunities to find great gems in this industry in coming years, of course. Stay tuned, I plan to find them.

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