Education and the Economy
In 2014 I was at Alberta Education’s Rural Symposium listening to the Deputy Minister of Education, Mr. Greg Bass, talk about the history of public education. He explained that education has been closely linked to the economy of the day. He said that the early part of the 20th century we had a “behaviourist paradigm” of education, which was designed to help people be ready for the world of the factory. This was about learning how to behave in order to function in a factory, by obeying the clock, asking for permissions, and completing tasks on time as per the instructions - all skills needed on the factory floor. This still plays out in schools today with the ringing of the school bell commanding the learning activities of the day as students go from class to class learning math, science, language arts, social studies, etc. - almost as if they are the product going through the factory of school. Mr. Bass, then said the “cognitive paradigm” began during the 1950’s as the space race between the USSR and the USA created a major push for increasing academic studies, especially in the areas of science and math. This academic stream was developed to prepare more students for university programs in engineering, sciences, and technology. This helped advance the economy with new technologies as companies did their best to get ahead of the competition.
Today, we are in the first half of the “Digital Economy” (this term was first coined by Don Tapscott in 1995. In this economy, the push for educational change has been to create schools where students learn a variety of literacy skills (reading and writing, as well as digital literacy, emotional literacy, physical literacy, etc) as well as skills in computer programming, researching, collaborating, communicating, problem solving, creatively and ethically thinking, and understand global issues in a digitally connected world. Although there has been much that has changed in schools over the past 20 years, we still have a long way to go to help prepare students for their future. Currently in Alberta, coding (computer programming) is not a mandatory course for students, and in some ways technology education has dropped off over the years. Educators in an Alberta have been patient waiting for new curriculum, that we believe will promote these educational goals that have come out of the “digital economy”. Even though we are in times of fiscal uncertainly, we cannot be certain to know what the economy will be like over the next 10 years. But since it is the start of a new decade it is may be fun to extrapolate on current trends and make some predictions of where we may be going, and then with that vision, think about what our students need to know to give them the tools they require to be successful in the economy of tomorrow.
Change Can be Fast and Unmerciful
Way back in 2009 I was chatting with my friend Dave about buying a Blue Ray DVD player and he told me that I missed the boat and I should just save my money. Confused, I asked him why and he told me that DVDs are old news and streaming movies will become the norm. I was sceptical but looking back now, of course this change in entertainment was inevitable. If advancements in technology can offer me the same movies at the same price without me having to leave my house, why would I rent a movie from Blockbuster and risk a late fee? And like that, poof, the DVD rental stores were gone and like that I was dropping 8.99 on Netflix per month and the Blue Ray player I bought sits in my basement collecting dust… Dave was right! The change was fast and unmerciful to the businesses involved in renting and selling DVDs, but truthfully, we could see this change coming if we looked hard enough. Dave, you are wise man!
Looking Ahead
I am always leery of making too may outlandish predictions about changes because at the end of the day people are people. We crave connection - to feel belonging and to feel we are valued. No matter what comes along, if it doesn’t connect people, it probably won’t make the change it was designed to. That being said, I think that there has been a shift in how the global population views climate change science - and that issue is bringing people together. I would predict that a combination of changes in technology and changes in the sentiments of the human population will push our society to get more serious about reducing carbon emissions (because globally carbon emissions still haven’t stopped growing regardless of Climate Change Accords, rallies, and promises from politicians). And, I think there is a company, currently poised to possibly become the next great company as it works towards its vision of doing just that over the next 10 years… allow me to explain.
The Disruption of Entertainment
In the 2000’s, Netflix was an upstart company that was doing mail out DVDs, and they wanted to partner with Blockbuster. Blockbuster said “no thanks” because it was making a fortune on late fees. Netflix eventually changed course and became a streaming service in 2007 and by the end of this decade has over 151 million subscribers world wide, including my family, and are poised to bring home some Oscars with the hit movie The Irishman!! In 2007 almost no one would believe that this could have happened unless you could see how smartphones, smartTVs, big data aggregators, Apple TVs, tablets, and cable TV would collectively all impact the streaming businesses. This change isn’t just the work of one upstart company, it is an upstart company who had the right vision just at the right time, as the economy of entertainment was changing.
The Streaming Services of Transportation
Vehicle production and sales across the globe has followed a very similar formula for many decades and there really hasn’t been much change. Annually, the industry offers consumers small improvements to their vehicle line up to entice a would be shopper to buy new instead of used, and the dealerships help seal the deals. Dealerships and banks work together to keep us paying at reasonable interests rates and we come back every 60 months, or 72 months or 84 months to get another loan and the newest version of the car we like with a different front grill, and maybe a heated steering wheel or larger touchscreen. Dealerships make most of their money on the service side, so they also keep us coming in for oil changes, new tires, and regular maintenance, and as our cars start to age, we have to decide whether we should pay for the big repairs or do a trade in. It is a fun merry-go-round where the consumer keeps paying, and the dealerships keep making money and car manufactures increase their bottom line - which is generally their mission: to make more profits, sell more cars, and keep shareholders happy. It has been this way for a century.
But let me tell you about a small upstart company that made its name in the 2010s. This car company offered a small 2 seater in the late 2000’s but only sold a few thousand. Then it developed a luxury sedan which it started selling in 2012 and that same car won Best Car Ever Tested by Consumer Reports in 2013. In 2015 this same car was named Car of the Century by Car and Driver magazine because it is “the new ultimate in four-door sedan engineering and technology.” See the full report here.
After taking home numerous awards, this upstart company then released an even more expensive luxury SUV in 2016 - referred to as the “Faberge Egg” of SUVs by the CEO of the company. It won Autoguide’s Luxury Utility Vehicle of the Year that same year and Forbes called it the best Vehicle of the Year in 2017. Although many people were impressed with these two vehicles, the concern was that they were just too expensive and due to low volume vehicle sales, wouldn’t impact the auto industry very much. These vehicles were impressive but they weren’t for everyone.
But then this company released a cheaper (base price of $35,000 USD), mid-size sedan in mid 2017 and that vehicle has sold in much greater numbers. Although this car is cheaper, it is still pretty expensive with the average sale price being around $50,000 USD. This vehicle won Popular Mechanics Car of the Year in 2018, won the Design of the Year as well by Automobile Magazine also in 2018. This particular vehicle outsold its smaller luxury vehicle competitors from BMW, Mercedes, Lexus, Acura, Infinity, Lincoln by a large margin in the first half of 2019.
Are you impressed yet? This car company has really only made one change to the appearance of their cars by redesigning the front grill of the first sedan in 2016. There has been some changes to the vehicle prices, configuration and performances, and there have been many software upgrades to the cars and some hardware improvements to the technology as well. This upstart company is doing all of this without having any dealerships and without spending one dollar on advertising!!
How have they accomplished this you may be wondering? Well, they make three different but amazing vehicles that people love, and I mean really LOVE! These people make website about their cars, and Youtube channels and Podcasts and really love their cars and the company so much they cannot stop talking about it! The other way they have done this is that this company has said time and time again that their mission isn’t to make cool cars, or to make lots of money, it is to help accelerate the world to sustainable transportation. That is right, this company is just making awesome cars to help save the planet from climate change, and as a result the people that buy them don’t care that they are spending more money than they intended when they went out car shopping because they are buying not just a car, but a piece of that mission - they are helping save the planet by buying these vehicles! Who needs advertising when you make a great product (arguably the best) and your mission and your vision as a company is a shared value among your customers? To compare, General Motors spent over 3 billion in advertising in 2018 in the USA alone (of course General Motors is one of the biggest automakers in the world with around 10 million new vehicles sales per year). Year over year this upstart company has seen exponential growth in sales, yet it is still just in its early stages of being a major player in the car industry. They have two car factories in the USA, and just opened up one more in China. A forth factory will be coming in Germany in 2021. Later this year this company will release its 4th vehicle, a smaller SUV, which they believe will be their best selling vehicle yet. The truth is, this company is just getting warmed up!!!
If you haven click the links yet, you may have guessed that this company I am referring to is Tesla, and the vehicles I mentioned in order are the Roadster, Model S, Model X, Model 3 and Model Y. If you put the sedans and SUVs together you can spell the word S3XY, and it is little things like that which fan the flames of adoration from Tesla enthusiasts. These vehicles are “all electric” vehicles or EVs which means you have to plug them in to charge them; they have big lithium-ion batteries much like a cellphone or laptop. These EVs are the top selling EVs in the world right now, but EV sales are a very small part of the global market, not quite 2%. So will Tesla really shake up industries they way Netflix has changed the entertainment industry? Yes, I believe they will and not only do I think that Tesla may well become the largest auto producer in the world by the end of this decade, I think Tesla may be the most valued private company in the world by 2030.
Joe’s Top 10 list of what makes Tesla’s Overwhelmingly Awesome:
10 ) Junk in the Frunk - you have storage in the front hood (frunk) as well as the trunk - how handy is that?!!
9) Autonomy - being able to use a Tesla as a robotaxi is cool and should make their own money! This should also make the car safer and smarter than the other cars on the road.
8) Electric - no gas needed, charge it up at home at night, no tailpipe or carbon emissions. Gas stations are a thing of the past, except on longer road trips where you can charge up in 20-30 minutes while getting a snack and stretching your legs.
7) Entertainment - Teslas come with a Netflix player, video games, car-eoke, and much more - all kinds of fun while charging or waiting for your family at the mall.
6) Modes - camping mode, dog mode, sentry mode, fart mode (all kinds of modes to keep you and your friends entertained and your pets and car safe)
5) Supercharger Network - Tesla is the only car company to invest in over 14000 individual charging stations world wide to date with many more on the way. Tesla is committed to building out charging infrastructure for its customers.
4) Safety - with the batter pack in the floor these cars, they have a low centre of gravity so they are hard to flip over and without a combustion engine in the front collisions are much safer for the people in the car. These are consistently rated as top safety picks.
3) Performance - the batters and motors are the industry standard - who doesn’t love whiplash level acceleration when needed and who doesn’t love Youtube videos of a Tesla SUV beating high performance sports cars on a race track?
2) Updates - having a car that gets better over time by software updates is amazing. We generally think of our cars all depreciating when we drive off the dealership lot, but Teslas are changing that game too. It’s more about the car’s features not about the year it was built or mileage with a Tesla. These cars hold their value and the owner gets to enjoy the latest features without having to go in a buy a new one!
1) Shared Values - Tesla wants to help save the planet and as a result the owners of these cars are part of a community, in fact they are more than a community, they are a fraternity - a brotherhood of sorts. It is inspiring to see so many people who love what Tesla represents - sustainable transportation and an alternative to corporations who have reluctantly improved their cars year over year and have produced electric cars only as compliance vehicles due to government pressure. Tesla is all in on electric because they believe it is the only way to lower carbon emissions from vehicles. They also build their Supercharging stations with solar panels and battery storage to help make their energy as green as possible.
A Change in the Rules
Teslas are actually more like smartphones on wheels than they are cars. They are now built with a “neural net” computer, which is a Tesla designed and manufactured computer capable of handling full autonomous driving at some point in the future when the software is ready, using the cars current 8 cameras, radar and sensors. Over the past number of years, Tesla has been uploading all of the data their cars see on the roads to help the neural net learn about real life driving scenarios, and they believe they will have the software ready sometime this year to offer people something very close to full autonomy, where the driver has to supervise the car, but the car does most of the driving (Level 4 Autonomy).
Social media, podcasts, youtube, blogs, Tweets, and Facebook posts have amplified the age-old strategy to be used to sell to customers - build a community around a shared value, and sell them an amazing product. This is a change in the game for the auto industry and it isn’t going unnoticed. Because Tesla sells their EVs direct to customers, many US states have tried to block them, telling Tesla they have broken the dealership rules. There are currently 11 states that have banned Tesla sales because they do not use the dealership model. This ban has been solicited by the dealership and auto manufactures themselves trying to block Tesla from impacting their business. But the Tesla customers are just working around this and they go out fo state to pick up their new EV anyway. Their products are so good people will travel to get them, and turn it all into an adventure as they enjoy their first road trip in a EV when they purchase.
Legacy Automakers will Catch Up
Over the past number of years, Tesla doubters point out that legacy automakers (like GM, Ford, Toyota, Honda) will catch up to Tesla when they decide it is time to get serious about building their own electric cars. Many of these companies promised that by 2020 they would have “Tesla killers” out for sale. But this has not happened yet, and from what I have read, it probably won’t for a few reasons. First off, the technology Tesla has in battery manufacturing and their electric drivetrain is the industry standard. In fact, no other automaker has built a vehicle that has more performance and range than the original Tesla Model S that came out in 2012. They are getting close, but it feels like Tesla has an 8 year head start on the competition. In addition, according to the experts, Tesla is the only EV maker that actually makes a decent profit from their vehicles. That means that the other automakers traditional way of building cars has not been able to find ways to make an EV version of their cars that are profitable.
But even if they made EVs that could compete from a specs perspective that were actually profitable, would dealerships sell them? Right now, one of the jokes in the EV community is that even though there are some nice EVs that are made by some of the legacy automakers being sold a a good price, they are hard to purchase. They are often not available and when they are, the dealership staff dont seem to know much about them.
Dealerships make most of their money on service, and EVs require way less service because they have less moving parts and less to maintain - there are no oil changes, no transmission fluid, etc. Even brakes on an EV will last way longer due to regenerative braking. Dealerships may not be motivated to move EVs, unless they absolutely have too. As 2019 came to a close, these challenges were articulated by an executive of Toyota as he talked about economic armageddon due to the EV revolution.
Manufacturing will require less jobs, they won’t make as much money when they sell EVs, they won’t need as much maintenance and dealerships will suffer; essentially he stated that mass EVs adoption will crush the automobile industry as it is today. In order for any legacy automaker to go all in on EVs, it will mean that they will be dramatically impacting their current profitability, have to lay off a huge portion of their employees and potentially make it hard for their dealership network to keeping their doors open. This is why they haven’t all jumped on board the EV revolution, and in many cases have tried to prevent it from happening at all.
Tesla Becomes a Major Player This Decade
With the China “Gigafactory” ramping up over the course of 2020, it won’t take long before Tesla is able to build and deliver close to half a million cars per year globally. That number will get bigger once Tesla’s 4th “Gigafactory” is opened in Berlin, Germany sometime in 2021. If the demand continues to grow and people choose to buy these cars because they are considered to be of very high quality, boasting the best technology, and people believe in the Tesla mission, Tesla will be massively impacting the profitability of traditional automakers. When the iPhone came out in 2007, it was state of the art and had some amazing features, but most people were still buying Motorola Razors, or Blackberrys. As the technology got better and the subsequent editions of the iPhone improved, they started to capture more and more of the market share, eventually squeezing out their competition to become marginal players in the cellphone market, leaving Apple and Samsung as the two main rivals. Even huge tech companies like Microsoft who came late to the smartphone party were unable to compete with Apple because they lacked the knowledge and understanding of that platform, and it was too late to try learning on the fly. I think that as Tesla’s technology gets better and as the demand grows for their EVs, people will be willing to wait to buy what they really want and won’t settle for alternative brands that cant deliver on features and value. With Tesla’s other endeavours in industrial battery technology and solar panels, Tesla’s growth will likely dominate the next decade. This change will be slower with cars than it was with smartphones, but the change will come.
What does the World Look Like if Tesla’s Mission Becomes Reality?
If Tesla and as an extension, EV’s in general, become the new standard in vehicles, the transportation industry will undergo dramatic change, and global carbon emission should go down as a result. That would be a positive change for the environment. But if I am wrong about Tesla, the future of transportation is still predicted to be electric and autonomous regardless, it is just a matter of when. If Tesla continues on its current path, the EV/Autonomous future will be here sooner, but it is coming either way.
If everyone is riding in an EV, the world will need to triple the total electricity output to charge all of the cars. That means more renewable energy, and probably more non-renewable but clean as possible energy too. It will certainly change the importance of an oil industry, who has been king of the hill for well over 100 years, and it is that change that may be even more dramatic than the change in cars. Imagine the future of 2030, where EVs are the main vehicles on the roads and sold directly to consumers. This could be a world where dealerships and gas stations have been replaced by EV stores, and charging stations with coffee shops and other services. Just like the change from blackberries to iPhones also helped usher in social media and ride sharing on mobile devices, EVs will bring in new opportunities for business while other ones shutter their doors. Think of the possibilities of “in car” entertainment for drivers and passengers who are waiting for their car to charge, or who are riding while the car does the driving for you (level 5 autonomy). Think about how vehicle pollution as well as traffic jams could be a thing of the past, allowing drivers to catch up on work or have a nap as they breath in fresh air while on their way home after a long day at the office. Energy companies will have many opportunities to jump in on the lithium battery and electricity generation boom that will come along with the cars, not to mention the recycling industry as the stockpile of old batteries start to build up. This is why people are looking into extracting lithium out of the tailing ponds in Alberta’s Oilsands industry. If we dont need the oil, we need to look at another way to participate in this electric future.
This is partly why I am advocate for a great education system - to give students the tools to compete in their economic reality. Think of the opportunities presented when people ride in self driving cars - they need connection and in car entertainment - games, videos, and social media platforms. Thanks to technology, the world is changing at increasing speed, yet it feels like our educations system in many ways is trapped in the past. For young people to participate fully they will need a variety of skills in particular they need to have an understanding of computer programming, and coding so they know how the driverless Tesla they are riding in operates. They need to understand how Artificial IntelligenceI is impacting businesses wand what opportunities this creates. They need to know how to see the potential before them and work collaboratively to take advantage of a fast paced and evolving economy. They need an education that will allow them to deepen their understanding of global issues and economic realities to best help make a difference in positive ways. They need to be creative problem solvers and ethical decision makers. They may have opportunities in energy management, battery and charging infrastructure, lithium-ion battery recycling, 3D printing, building subscription based services, plus working in areas like health care with AI health-bots, or in personal brand coaching, or working with climate refugees, or developing technology for carbon sequestration. Companies like Tesla will bring about change in planned and unplanned ways and our students need to be ready. Think of the opportunities presented to the young people coming of age in 2030, who have the skills that align with the economy of the day as apposed to the economy of the past.
Full Disclosure
I do not own a Tesla (yet), nor do I own any Tesla stock, but I have followed Tesla’s story closely over the past 10 years (I drive a Ford Ecoboost Expedition that pulls our trailer when we go camping, and our other car is a hybrid). I admire Tesla’s goals and the many accomplishments the company has had so far. I believe in the science of climate change, and I believe that for my children, who are 7 and 9, to have a fulfilling life, we need to get serious about reducing carbon emissions as a shared human goal - and I think Canada could be a leader in this area. I love the energy industry in Alberta, and I know that the energy industry has helped Alberta become a prosperous and desirable place for many people to call home. And I believe that our energy industry can be a leader in the electric future if we invest in new technologies, support renewables and most importantly invest in our children by investing in our education system.