Tesla doesn't solve the problem

EVs are notably cleaner than the ICE vehicles they replace, and they are on track to get even cleaner. Between green electricity production and greener supply chains for the inputs to EVs, the next generations of electric vehicles are on a gradual march towards being truly net-zero transport machines.

Gradual being the key term.

We're nowhere close to deep decarbonization with this plan

Contrary to celebratory headlines, the electric car revolution is not here, and it won't be here for decades.

In the near future, EVs in the US are about 60% less carbon intensive than their ICE counterparts. In countries with dirtier grids, that number is a lot less attractive - in China, for example, EVs are only roughly 37-45% cleaner over a lifetime of use.

Source: Bloomberg New Energy Finance (BNEF)

But the most critical challenge is just how long it will take to get these moderately better options into drivers' hands. First, EVs need to grow from the low single digit percentage of new vehicle sales they represent today - forecasts suggest it will take until after 2030 for them to reach 50% of new vehicle sales. Then, we need to wait for the overall pool of cars to turn over since people only buy a new car every few years - sometimes only once a decade! This slow replacement cycle is why projections suggest that the majority of cars will still be polluting ICE models well beyond 2040.

Source: WSJ

What's worse, trying to accelerate this glacial process is astronomically expensive. Biden's infrastructure bill plans to channel $174 billion dollars into electric vehicles. This is more than the GDP of Hungary or Qatar and another 162 countries. And what is this money really doing? The simple answer: making oversized electric vehicles cheaper so rich people will buy them. We're literally writing $7,500 checks to wealthy, largely white families buying Teslas and Hummer EVs as their second or third car. And lacking any real ideas, the latest proposal is simply to up that to $12,000 in the name of environmentalism with the hope that a larger swath of the upper-middle class will cash in.

The trip economy is the solution

Like Batman, Uber seems to most people to be a force of evil, but in fact it embodies the real solution to our transport climate problem.

The purchasing of individual trips - be they a bus or train trip, a ridehailing ride, a short term car share, a shared micromobility ride, or a food or package delivery - is what we call the trip economy. The way these services work is completely different from our current, vehicle ownership-centric transportation systems:

• Transportation purchase decisions are more frequent and granular in the trip economy than in the ownership economy
  
• The trip economy is highly digitized, allowing visibility that invites precise externality pricing‍
  
• Trip economy rides are delivered by shared, high-utilization fleets, while ownership-based transport requires vehicles to sit unused for almost all of the time‍
  
• Trip economy services get faster and cheaper with density, while transport based on car-ownership gets slower and more expensive with density
  

Put together, these characteristics drive fleets serving the trip economy to adopt green technologies at an intrinsically faster rate than consumers will electrify their cars. It is no wonder that the Prius is one of the most sought-after vehicles for Uber or DoorDash drivers, or that so many municipal bus fleets are already transitioning electric. And can you think of a shared micromobility solution that is not electric? For all these trips, the capabilities and format of battery electric mobility makes sense now - not only after generous demand side subsidies.

What's more, one of these vehicles serves a large number of trips, making the trip economy a much more effective way to transform net emissions since each vehicle electrified takes a bigger bite out of the overall carbon emissions pie. Our north star should not be electric vehicles, but rather electric miles.

For all these reasons, trips delivered by trip economy services - from Uber to the metro - are already cleaner or will become so at a much faster rate than consumers' own cars will decarbonize. So what’s holding back a bigger transition away from the personally-owned car?

Cars embody white privilege

The history of how cars took over America is therefore intimately tied to its dark history of injustices against the poor and especially against racial minorities. Car culture embodies white and elite privilege in not only its historical establishment, but its current self-reinforcement mechanisms.

Considering how the last seventy years were spent building a world to accommodate cars, it’s clear why most of us have a strong psychological tendency to default to using them, and even to react defensively to protect the social infrastructure that privileges cars over alternatives. Bike lanes, bus stops and multi-family homes are surprisingly difficult to build in neighborhoods whose beautiful mansions have Tesla Solar Roofs and "BLM" and "believe science" flags out front. Individually, each of us elites may be acting in short term self-interest and out of no particular racial or class-based animus - it's inconvenient to remove on-street parking, "unsightly" to have apartment buildings come up, and noisy to have a transit stop added outside our homes. But collectively, it is reinforcing a system that hurts those unable to afford the minimum buy-in. Ultimately, it's a system that hurts everyone.

Black households lack cars at three times greater incidence than white households, even in rural areas like Wyoming and Idaho. It's not surprising that these biases are being translated into the electric vehicle transition, where once again the costs are born by all, but the subsidies go only to the rich.

Disrupting car culture: Uber über Tesla

Transit - the original trip economy service - has been in decline across America as cars, supported by massive subsidies both financial and legal, have pushed rich people away from using these services and towards car ownership. Eventually car ownership became a cornerstone of elite cultural identity in the US, which cemented a vicious downward spiral for shared transport services that were unable to attract the parts of society that are profitable to serve and whose political voices are heard.

Source: Urban Institute

Uber brought the trip economy back by being everything transit was not - personalized and available on demand - attracting wealthy consumers to a service that could survive even in a world with high car ownership. The strategy of capturing elite tastes is one that mirrors Tesla's, which convinced the wealthy to see electric cars as desirable as gas ones. Uber got elites to realize that perhaps cars weren't so desirable to begin with. Also like Tesla, Uber had a much bigger vision than to be a luxury service, but to be a broadly transformative part of the transportation system.

But in contrast to Tesla, Uber's model has a much faster pathway to expanding beyond luxury services: the most important advantage that trip economy services have over ownership models is that as ridership scales up, service quality and economics actually improve.

But our climate crisis demands we do better faster

If consensus among the scientific community and global political leadership is to be believed, we have but a few years to make drastic changes to our emissions outputs.

Though the trip economy has laid a path towards a cleaner and greener future, we risk directing subsidies towards unnecessarily perpetuating car culture and away from the solutions that can transform our carbon emissions in a viable timeframe. We should not be paying rich people to buy Teslas and EV Hummers. We should be organizing our politics towards accelerating the trip economy. How?

Concrete policy proposals

Space for trips to start and stop: Trips (passenger and parcel alike) need a space to start and stop that does not interrupt the flow of traffic. Cities should no just be "thinking" about how to accommodate this need as the mix of vehicles increasingly pivots towards the trip economy - they should be actively facilitating such uses. Specifically, the vast amounts of the urban environment inefficiently set aside for on-street parking offers a large pool of curbside space to support package deliveries, micromobility parking or ridehailing pickup and dropoff points.

Space for trips to happen: The trip economy is able to use infrastructure more efficiently than single occupancy owned vehicles, whether for moving people in shared trips like Via or moving packages in delivery vehicles. This is especially true with micromobility lanes, which turns out to have significantly higher throughput than roads and to be cheaper to build. We should be aggressively building a viable network of micromobility infrastructure in cities since they have a much higher return on investment than widening existing roadways which are already heavily congested.

Tie green dollars to green miles, not green vehicles: Governments should consider outright subsidies for pooled rides and micromobility services, especially those that are delivered through EVs. Subsidizing trip purchases instead of vehicle purchases allows incentives to be precisely dosed out and outcomes carefully measured. The trip economy therefore allows governments to provide context-specific support. It also forms a natural bridge to transit networks, making them more rather than less viable - especially important as we bounce back from the covid pandemic. In less dense communities, we could subsidize pooled ride services like electric Via vans in a highly targeted way. By comparison, having a blanket subsidy for EV purchases is like sending a love letter across the Atlantic in a glass bottle in the hope of finding true love: the government doesn't really know if the EV will replace all that much ICE activity, and it can't really check later on.

Fight systemic bias and special interest agitation against the trip economy: Just as the horse lobby fought against the automobile, leveraging fear of the new to support its cause, the trip economy has had to overcome absurd double standards. Uber has to pay a congestion fee in some cities even as single occupancy vehicles escape such charges. Portland levied a roughly 10% tax on all scooter trips and capped the total number of scooters that could be deployed. Why should these pro-social, fledgling solutions have to make accommodations that the car ownership lobby can avoid? We need to fight this prejudice against the trip economy while recognizing the bias in favor of car ownership and working to correct it. When trip economy solutions have gaps or face challenges, governments should be responding with support, not punitive action or petty meddling.

How RedBlue is doing Green

Our framework for investing revolves around the trip economy and we've been focused on this space for close to a decade with a strong track record for identifying emerging trends before they become mainstream.

Investing in a broken system and creating efficiencies has the potential to lead to significant economic returns. In other words, aligning investment targets with technologies that solve problems is a good way to effect significant change while also capturing meaningful returns for our investors. Indeed, aligned interests and incentives is the best way to effectuate large scale, sustainable change.

Specifically our goal is to invest in enablers of the trip economy in four distinct categories:

1. Government tools: We believe policymakers need to commit to supporting the trip economy and in some cases political will and vision is the obstacle, but in other cases new tools are required to realize this vision. Examples of investments we have made in this category are Blissway, which uses low cost machine vision systems to allow congestion pricing on roads and highways as well as Otonomo, Upstream and Nexar which bridge the information gap for regulators by giving visibility into trip data, cybersecurity risk and infrastructure degradation. Curb pricing solutions and transit payment technologies are also promising opportunities in this category.‍
2. Technological enablement: As we move towards a new model for transportation, incumbents operating at massive scale need new technologies to accelerate the transformation of their business in order to remain competitive in the more efficient landscape of the trip economy. We have invested in software that powers trip economy solutions such as Autofleet's MaaS software stack, digitization of existing business processes such as Pact's SaaS insurance offerings and new manufacturing technologies such as Seurat, which has created breakthroughs in 3D metal printing.
3. Full stack trip services: The trip economy rewards innovators who offer new solutions to existing problems. Such services include new vehicle-makers that create vehicles right-sized and optimized for a particular use case or new services (such as micromobility) leveraging products that are already available. Investments we have made in the first category include Zoomo, an e-bike OEM and leasing company supplying into the inbound trip value chain and Revel, the New York based electric moped, ridehailing and energy infrastructure company is an example of an investment in the second category.
4. New trip categories: The trip economy is constantly evolving as the types of trips available to consumers expand. New trip categories include autonomous vehicles, hydrogen powered vehicles, new rail and maritime solutions, hyperloop technologies and VTOL aviation. We've invested in autonomous vehicle building blocks such as simulation (Cognata), teleoperation (Phantom Auto), silicon (Hailo) and sensors (Arbe Robotics) and have done extensive work on identifying new opportunity spaces.

Creating a movement

To meet the challenges of our climate crisis, we need a coordinated effort. We need policymakers to act in a smart and structured way to support the trip economy and allow its ability to generate energy efficiencies to flourish. But we also need to be focusing on the kinds of investments that can support and power trip marketplaces and then grow them to rapidly replace dirty car miles with clean trip miles at scale. The diversity of the trip economy, built on the foundation of the diversity of humanity's mobility needs, means there are many good solutions and many ways for us to generate new economic value along the way. This is not a zero sum game: clean innovation is synergistic, not antithetical to economic growth. But we must avoid repeating the mistakes of the past - including those embedded in the Biden Infrastructure plan and many similar policies being adopted globally and act now to support the trip economy. Let us unite behind this movement. Before it's too late.