Good morning. It’s Cliff Leaf here, stepping in for Alan.
The moonshot is over. That was a key takeaway from Fortune’s fascinating conversation last night with Waymo CEO John Krafcik. Sitting down with Executive Editor Adam Lashinsky, at our annual Fortune Brainstorm Tech in Las Vegas dinner, Krafcik said that the real man-on-the-moon moment in driverless cars occurred in 2015, when a truly autonomous vehicle—one with no driver controls or emergency stop buttons—transported a human passenger through the streets of Austin, Texas. That feat took Waymo—now an independently run company within Alphabet—six years to accomplish.
Four years later, roughly 100 Waymo-converted Chrysler Pacifica minivans now driverlessly drive passengers through the streets of Phoenix, Arizona, each day. Some 1,500 active monthly users hail the vehicles via their Waymo apps and take them wherever they’d like within a service area as large as San Francisco. (The prices for the rides are comparable to those for Uber and Lyft.)
The sheer everydayness of this Jetsons–like experience—even if it’s limited for now to parts of Phoenix—was striking to hear. But as Krafcik told the Fortune audience, it took miles to get to this point; more than 20 million miles, in fact, of real-world road testing, with half of that coming in just the last year or so.
Backing up those 20 million miles of rubber-on-road have been tens of billions of computer-simulated miles, which have helped Waymo improve its algorithms, Krafcik said. As for the investment thus far—which the Waymo CEO pegged in the billions of dollars—“it would be hard for any company other than a company like Google to deliver,” he said.
So how, Adam posed, will the company make back those billions? Four ways, Krafcik said. There’s ride-hailing, then urban delivery. (“Using those same vehicles that we’re employing in Phoenix to move goods from point A to point B.”)
Then long-distance autonomous trucking. Waymo is generating revenue now through autonomous ride-hailing, but Krafcik expects commercial trucking to follow. Trucking “is a bigger market opportunity,” he said. And finally, Waymo can sell tech to automakers that want to develop their own applications.
The problem with thinking of such ambitious quests as “moonshots,” said Krafcik, is that it encourages us to frame the challenges in the wrong way. Missions like the original Apollo effort, he said, had a high probability of “some catastrophic failure”—which isn’t exactly an appropriate risk profile when you hope to deliver millions of something every day (as in driverless rides). “So we had to move beyond moonshot thinking, which got us to 2015, to this new sort of thinking—where we’re scaling, where we’re able to do this over and over again with very high confidence of perfect outcomes every time.”
Sure, it will require billions of dollars of additional investment. But then, what else are you going to spend all that Alphabet cash on?
More news below.
Iran Says Retaliation Will Be a "Historic Nightmare"
Iranian officials reportedly issued menacing threats following the killing of Maj. Gen. Qassem Soleimani, with Iranian media reporting on Tuesday morning that Iran is assessing 13 "scenarios" for retaliation. Meanwhile on Tuesday, the body of Soleimani had reached his hometown. At the funeral procession in Kerman, a stampede had reportedly broken out, killing 35 people and injuring 48 more. Bloomberg / Reuters
U.S. Denies It Is Withdrawing Troops
The U.S. top military official denied that the government is pulling troops out of Iraq amid the escalating conflict with Iran, claiming that the release of a letter by the Commander of U.S. forces there was a "mistake" and that the letter was a "draft." The U.S. Defense Secretary also said there had been no decision to leave Iraq. FT
Japan Asks Lebanon for Help
Japanese authorities are asking their counterparts in Lebanon for help with Carlos Ghosn, a day after officials in Japan said they may push for the former executive's extradition back to the country where he was charged. The Middle Eastern country does not normally extradite its nationals, and does not have an extradition agreement with Japan. Meanwhile, Japanese media were reporting that Ghosn escaped Japan in part on a public bullet train, despite constant surveillance, and authorities there had put out an arrest warrant for his wife, Carole. Reuters / FT
Facebook Will Remove Some Manipulated Videos—But Not All Altered Content
Facebook is attempting to crack down on "deepfakes"—images or videos that have been altered using sophisticated machine learning algorithms—but said it would stop short of removing video content that has been altered as part of a parody or satire, or has been edited to omit or alter the order of words. WSJ
AROUND THE WATER COOLER
Why Are There So Many Scooters in L.A.?
Electronic scooters have taken over cities worldwide, from Tel Aviv to Paris—and the backlash has usually quickly followed, including swift regulation by local transport authorities. But in Los Angeles, the city is hoping that the e-scooters will offer one more way to relieve traffic congestion. “People need choices, and that’s really what it comes down to,” said Seleta Reynolds, general manager of the Los Angeles Department of Transportation. “And Lord have mercy, people need choices in Los Angeles.” Fortune
Hong Kong Landlords Face a Tough Year
Anti-government protests in 2019 are contributing to a tough 2020 for Hong Kong, which has the highest commercial rents in the world. The protests have taken a toll on shopping districts and tourism in particular. Retailers have been hit hard. Retail-leasing transactions dropped 26% in the second half of 2019 compared to the first half of the year, and several high-fashion brands have said they will close their central Hong Kong stores. Bloomberg
A Mystery Illness in China
China is battling an undefined respiratory illness, after 59 people contracted the mysterious sickness. The illness, which bears similarities to pneumonia, was first reported in Wuhan at the end of December, with seven patients now in critical condition. But in other regions, including Hong Kong, reports of the illness had prompted temperature screening and face mask stockpiling, bringing back memories of the SARS epidemic. The Guardian
What Happens When You Take New Year's Day Off?
After Mitoshi Matsumoto, who owns a 7-Eleven franchised store in Japan, decided to close for New Year's Day, the chain's parent company terminated his franchise—and stopped supplying him. The latest battle between Matsumoto and the company points to the ongoing debate in Japan over extreme working conditions, particularly overwork. New York Times
A note from CEO Daily: The future of Fortune is coming. This month, we will be launching (deep breath) a new site and app, a new video hub, a new magazine, plus a subscription package that offers the best of business, all in one place: strategic insights, deep-dive stories, and exclusive access to what the C-suite is thinking. We'll keep you updated on the launch, and you can also tell your friends to keep tabs on developments by leaving their email addresses here.
But that's not all! Fortune is also getting ready to launch a raft of new newsletters, two of which you can sign up for in advance. Fans of the Sino Saturday edition of CEO Daily will be excited to learn that Clay Chandler and the Hong Kong team are preparing a daily newsletter on business in China, called Eastworld. And our Rome-based ace, Bernhard Warner, will write a daily newsletter on finance news, awesomely named Bull Sheet.
This edition of CEO Daily was edited by Katherine Dunn.