#16 - Amazon acquires Zoox

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Amazon acquires Zoox

Last week, Amazon announced that it will be acquiring the autonomous robotaxi startup Zoox.

Why is Zoox special, and why did Amazon in particular make this acquisition?

Zoox and the iPhone

Zoox is trying to be the iPhone of autonomous vehicles. To illustrate, here’s Steve Jobs in 2007 when he first announced the iPhone:

Every once in a while, a revolutionary product comes along that changes everything . . . Today, today Apple is going to reinvent the phone, and here it is. Before we get into it, let me talk about a category of things. The most advanced phones are called smart phones. So they say. And they typically combine a phone plus some e-mail capability, plus they say it’s the Internet. It’s sort of the baby Internet, into one device, and they all have these plastic little keyboards on them.

And the problem is that they’re not so smart and they’re not so easy to use . . . What we wanna do is make a leapfrog product that is way smarter than any mobile device has ever been, and super-easy to use. This is what iPhone is, okay? So, we’re gonna reinvent the phone.

Steve Jobs is absolutely right: Every now and then, there's a generational infrastructural technology that comes along, changing the way we live our lives and facilitating a Cambrian explosion of new technology. The iPhone is a recent example. Uber, Spotify, and indeed Facebook, likely wouldn't be around if we didn't have a powerful computer in our pockets 24/7. However, as Steve Jobs noted, the way these new generational technologies are built requires a level ingenuity and courage in casting off old paradigms of design. The iPhone wasn't built around the constraints of a PDA or a PC. While “smartphones” prior to the iPhone were basically mish-mashes of various technologies (i.e., keyboards, styluses, etc.,), the iPhone re-imagined the smartphone from the ground up. It reinvented the phone.

Self-driving cars, like the iPhone, will be a generational technology. Once they are deployed, we’re going to re-imagine how we construct our cities and suburbs, how companies develop plans for logistics, how we experience time, and certainly many other things I’m unable to imagine right now. I don’t think, however, that the self-driving car will be built around the existing paradigms and constraints of what a car currently is.

Zoox is similar to the iPhone in this way because it's re-envisioning the car from the ground up as opposed to outfitting existing cars, as many other self-driving companies are trying to do. Granted, the iPhone is a consumer device that people have on them 24/7, and so form factor is especially important in shaping the customer’s everyday experience. Although a self-driving car isn’t necessarily a consumer product in the sense that people aren’t going to own self-driving cars, a revolutionary form factor may still be important in achieving better safety and utility for passenger experience. Indeed, today’s cars are designed around the driver, and almost everything in the car serves the comfort and convenience of the driver. But once you remove the driver, you now have all this room for creativity in developing new designs for passengers.

Here are a some examples of Zoox’s innovative design. First, Zoox is focusing heavily on building front-rear symmetry into its vehicles. In other words, the front of its cars are the exact same as the back of its cars such that there is actually no front or back. This symmetrical design means that Zoox (1) offers redundancy and thus lower failure rates; (2) may have an easier time manufacturing new cars and servicing existing cars; and (3) eliminates the need for cars to turn around. Second, instead of the current sedan or minivan paradigm, Zoox is re-imagining how cars’ interiors are structured. Imagine a "social" car where seats are arranged in a circle with a table in the middle. Or, imagine a "business" car that takes one passenger and is designed for ergonomic comfort and ability to work on a laptop. While these are only a couple of examples, Zoox cars still have other design elements that make them an entirely different species than the cars of today.

I guess time will tell whether Zoox’s design is ultimately the right one, but I do believe that Zoox’s general intuition is correct: Autonomous vehicles will require reinventing the car, just as smartphones required reinventing the phone nearly 15 years ago.

Zoox + Amazon

As innovative as Zoox is, though, I’m not sure it makes sense as an acquisition target for Amazon. The immediate, most obvious possible synergy to point out is that Amazon can integrate Zoox into its shipping business for last-mile delivery. After all, a delivery vehicle actually has benefits from being custom-built, removed from the shackles of the current form-factor for cars. For instance, you can take out the space for the driver and passengers and leave it exclusively for cargo. You don’t need windows since, well, packages don’t need to see their surroundings. You want a variety of sizes, from small to large. That said, I wonder whether using Zoox’s proprietary technology and design to ship packages for last-mile delivery is akin to going in for surgery for a paper cut? A smaller but more ordinary delivery mechanism certainly seems more appropriate for delivering and dropping off packages right at customers’ doorsteps. Indeed, Amazon is building out its own autonomous sidewalk robot delivery vehicle, Scout, and Amazon is also working on drone delivery. As it pertains to last-mile delivery, these solutions make more sense than self-driving vehicles, which inevitably are more difficult to build and are inferior from a customer experience perspective.

Or, perhaps Amazon wants to use Zoox for long-haul trucking to transport packages from warehouse to warehouse? This might make more sense, but Zoox has not attempted to apply its tools to trucking, and I’m not sure how much Zoox would need to adapt its technology to fit this use case. Moreover, Amazon has apparently already partnered with autonomous trucking company Embark to ship some of its packages on Embark’s trucks. Why would Amazon want to bring this capability in-house rather than building out its existing partnerships?

Finally, maybe Amazon is truly committed to pursuing robotaxis, thus launching itself into competition with Alphabet’s Waymo, GM’s Cruise, and others. Indeed, the Amazon press release itself did affirm that under Amazon’s umbrella, Zoox would still “drive towards [its] mission [to bring] . . . the future of ride-hailing by designing autonomous technology from the ground up with passengers front-of-mind.” But this doesn’t seem to fit into Amazon’s core mission, right? The cynical interpretation is that Amazon just wants a piece of this trillion-dollar market, core mission be damned. I think the more charitable (and correct) interpretation is that, well, Amazon has been relentlessly expanding its market far beyond its initial market in books. It now has competitive positions in smart speakers, video streaming, ebook readers, groceries, and other areas. Amazon, perhaps the most customer-centric company in the world, wants to serve every consumer in every transaction they can possibly make. To fulfill this mission, though, Amazon’s ambitions need to continually expand so that it offers anything and everything that can be purchased, and rides are no exception.

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