Why Central Banks Are The Opioid Of Our Economy
The Fed has got the good stuff, and it might take an intervention to set our economy back on track.
The Fed has got the good stuff, and it might take an intervention to set our economy back on track.
Consequences of monetary policy will go beyond the stock market or the economy. It will shape everyone’s life throughout the 21st century, up to the very meaning of freedom and democracy.
Central bank policy is a fascinating subject and probably one of the most controversial discussions you can have on a trading floor. If you are a newcomer to this industry and you are looking for an icebreaker at the coffee machine on a Monday morning: Central banks are always a good pick. Everyone will have an opinion about it. Good or bad, very few people stay indifferent to central bank policies. It always amazes me how such topics can provide such radically opposite views. Even the most prominent actors on the stock market and the most brilliant minds of the planet can’t find a consensus on the impact of central bank actions. So, where lies the truth about central bank consequences?
Before we start, I don’t want to disappoint anyone: You will not find the holy truth here. You will only find the humble opinion of someone who has spent 10 hours of his day in front of his Bloomberg screen trying to assess the future impact of monetary policy on our daily life. This article will be a strong espresso shot of my personal opinion, research and conclusions I have gathered over the past five years when I was working as a portfolio manager for private clients. I will try to make the complex as simple as possible, and whether you have been in the industry for years or you have no prior background in finance and economy, I hope this article will challenge your perception and raise your interest on a subject that will shape everyone’s life in the 21st century.
“Quantitative Easing At Vitam Eternam”
When we talk about the modern time of central banks, we need to talk about quantitative easing, also called QE. You probably heard that term during the aftermath of the 2008 Global Financial Crisis, as it was the main tool used by central banks to relaunch our economy. It would be normal to still hear about it nowadays, as it is still active. And I know what you are thinking right now: “What? 12 years later? But the financial crisis is over now….” Yes. And that is part of the problem I am hoping to explain in this article. In simple terms: Quantitative easing is a transaction in which a central bank will purchase a given quantity of an asset, usually bonds, from governments or companies. The direct effect is to offer liquidity to the government or company, which in turn, might use this money to launch a program (for example for governments: Social welfare during the COVID-19 pandemic).You might be asking, “But Dustin…what does it have to do with me?” I’ll get there, I promise.
The mechanism behind QE is that it can reduce interest rates via asset purchases: Buying these government bonds will inevitably push the price of the bond higher and, therefore, the rates of the bond lower (you have to trust me on that). It will lower the cost for governments and companies raising funds in these markets and should, at least in theory, lead to higher spending in the economy.
When the European Central Bank (ECB) continually buys government bonds, it pushes interest rates lower, including indirectly affecting the one that you will negotiate with your commercial bank, to buy a house for example. This is also why we say that quantitative easing is supposed to “stimulate” the economy. By lowering interest rates, people will be incentivized to consume (e.g., buying a house). There is ongoing debate among financial experts on whether QE is equivalent to “printing money.”. Some would argue that it is not, that QE is merely an asset swap between central banks and a commercial bank and, in order to create new money in the system, commercial banks would need to create new loans. However, no one can contest the fact that central banks buy assets by creating central bank reserves. We will not go down the rabbit hole of discussing monetary base versus money supply. The central bank buys assets out of thin air. We will refer to that as “printing money” in this article.
Obviously, the central bank has unlimited power for printing money and, hypothetically, they could print as much money as they want. They could even indirectly give money to people. For example: France could issue any number of government bonds and redistribute the proceeds to the people, knowing perfectly that the central bank would buy these bonds. The problem with printing money (in any form) is that it has its own consequences. It is not free. I want you to stop here for a second, as this is probably one of the most important points of this article. Read it as many times as you need to: There is no free lunch in life.
The expression “free lunch” is used in finance to refer to something you get for free that you would usually have to work or pay for. It is not only a financial term, it also applies to your daily life in more ways than you realize. Take the example of Google, you think you use Google for free, but they actually monetize your personal information. You are the product, and your personal information is the implicit currency. You never get anything for free. Think about it. Everything has a hidden cost.
To go back to quantitative easing and liquidity injection, what does it have to do with free lunch? And what will be the hidden cost?
You might be thinking, “What’s the problem of a liquidity injection? If we can afford houses and we can consume more because credit is cheaper. What is wrong about that?” Well, the central bank still has to print money for that. It is like an “implicit” loan, not only for you, but for our entire society. Think of it like a collective loan. So, like any loan you take, we will have to pay back this liquidity at some point, one way or another. And there are many ways: Either we will have higher inflation, or our currency will be worth less, or we will have higher taxes. The more something is available, the less value it has. And it is the same with our money.
The problem is that the consequences I just mentioned have failed to materialize just yet (e.g., higher inflation or weakening of currency). And because the symptoms have not appeared, people think they won’t ever appear, so they think they can keep doing what they are doing without consequences. People advocate that we live in a new world environment, which is true. For example, technological revolution is naturally deflationary (you get more for less, e.g., Netflix) which can counterbalance the inflationary effect created by QE. This might be one of the reasons why inflation stays abnormally low while we keep printing money, but it doesn’t mean that everything is fine. For example, the use of acetaminophen might temper your fever for a moment but if the root of your problem is much deeper, the acetaminophen will only hide the real problem.
Part of the problem is that people only think about the first derivative (no inflation = no problem). However, we live in a very complex and multidimensional world where consequences are not always linear. We never wonder what are the second and third derivatives of our actions, which are mathematically speaking the most dangerous and powerful ones (example for the financial experts: consequences of gamma in options derivatives, butterfly effect, etc.).
Remember: Your actions have consequences and there is no such thing as a free lunch. Even if not obvious at first, consequences (especially second and third derivative ones) might appear later in the future in new and unknown forms. While it may not be immediately apparent, printing money will have consequences, and we should deal with quantitative easing in that manner.
“Like always, we perverted a good concept for Machiavelllic purposes.”
Like I said, the purpose of QE was to stimulate the economy during a downturn. During a recession, it is important to restimulate the economy. When you push interest rates lower, you tunnel fresh capital to firms, projects and investments. It helps to create jobs, and the more people have jobs, the more people consume, the easier they can afford to buy a house, and so on: It is a self-nourishing feedback loop. On that point, it does make a lot of sense to use such tools to stimulate the aggregate demand during difficult times.
QE is one of the strongest tools in the shed, and in times of crisis, you need all the help you can get. That’s why I am not here to blame central bankers in this kind of situation. Where would we be if they hadn’t intervened after the financial crisis? Or during the COVID-19 pandemic? Probably in a worse situation than now. While QE interventions are justified to ramp up the economy during certain times, it is really hard to rationalize the use of liquidity over a long period of time. The financial market is like any natural system. QE is the antibiotic administered to our economic immune system. And just like with real-life antibiotics, its repeated and improper use can lead to the growth of nasty, therapy-resistant bugs and, in the long term, hamper our natural ability to fight off disease. We have been feeding our economic body with antibiotics for the past 13 years, every day, for no particular reason. We have been making our economic immune system weaker and weaker, year after year.
We now use extreme measures on a regular basis. At some point your “extreme” measures are no more “extreme” if you keep using them on a daily basis. They essentially become the new normal. But what will happen the next time we have a rough patch? What firepower will be left if we’ve already used up all of our ammunition?
When you think about it, central bank interventions are completely “unnatural.” Life is cyclical, we are born, we live and we die. This is the cycle of life. The economy, too, is cyclical, there is a phase of recovery, a booming economy, a slowing economy and, from time to time, there is recession. Either caused by human actions (like 2008) or by economic cycles. Nowadays, we do everything in our power to make cycles generally longer. Not only on the financial market with QE but also with life longevity and biogenetic techniques, which, sure, on paper sounds exciting. In the particular case of the economy, the fact that we try at any cost to save and push cycles for extended periods of time has negative consequences for the entire ecosystem. Central bank intervention is prone to moral hazard, and negative interest rates keep zombie companies alive. Crises are painful but they tend to clean the economic environment from human excess (excess leverage, fraud, financial bubbles). In the new environment we live in, where we don’t allow the stock market to go down, we push people to take more risk. We create a very unnatural, fragile system.
We had many windows of opportunity during all this time to decrease our deficit and create a healthy debt environment but as always, when everything is working fine and the sun is shining, nobody really wants to change anything. Paradoxically, this is the exact moment when we need to do something. It is not in the middle of a storm or a crisis that we are going to get back on track with healthy habits.
Quantitative Easing At The Corporate Level
As part of the plan of quantitative easing, money was injected into big companies (remember the process of buying bonds?). The initial goal of this bond buying process was to diffuse this effect in the entire system. But then what happened? Nothing. The money got stuck at the corporate level, and it was not funneled down to the rest of the economy. And when you think about it, it just makes a lot of sense. Imagine you are on the board of a large company, the recession is over, the economy is booming and you have a lot of cash. On top of that money and even without asking, central banks show up to buy bonds on the market, push interest rates down and offer you cheap money on a gilded platter. Indeed companies have credit risk that influence the rate at which they can borrow money, but one component of the interest rate will be pushed lower by central banks. Therefore, your overall cost of financing will go down, ceteris paribus. This loan for large companies will have almost zero interest and even better, some large companies can even borrow at negative interest rates. Would you turn down that offer from central banks? Heck no. So you take this extra money, even if you don’t need it and, what do you do with it? You return it to your shareholders.
One very common method for this that has recently grown in popularity over time is “share buyback.” Imagine, you can now borrow money virtually for free and you can buy back your own shares and push your stock price higher. Isn’t it fantastic?
What is even more beautiful in this mechanism is that it will not only increase the wealth of your investors, but you will, on top of that, artificially make your stock more attractive for future buyers, as you will inflate your earning per share (or EPS, earnings will stay constant but your number of shares will decrease). EPS is very often used to select and buy stocks. In that case, you not only increase your stock price, but you make it even more attractive to future investors.
Another strong argument to push companies to do buybacks is tax incentive, as buyback goes untaxed as long as the shares are not later sold, while for example, dividends are taxed when they are issued. This is why, according to Howard Silverblatt, S&P companies have spent more on buybacks than on dividends every year since 2010.
To avoid misunderstandings, I am not “against” share buybacks, but I do think they should be regulated. If you are a large company like Apple, that makes an enormous amount of profit every year, and you lack R&D projects, then it makes a lot of sense to return some of this profit to investors. But what about if you are a company that generates no cash flow, but you are still able to do share buybacks because you can borrow money for free?
In some cases, we have even witnessed companies borrowing money to buy back their stocks while they had negative cash flow AND they were laying off people (e.g., Royal Caribbean borrowed to boost its liquidity to more than 3.6 billion, laid off workers in mid-March but has not suspended its remaining 600 million buyback program).
Really, don’t get me wrong, I am a capitalist, but what I just described is simply morally wrong. You are indirectly transferring money from the taxpayers to the shareholders. According to JPMorgan Chase, in both 2016 and 2017, the proportion of buybacks funded by corporate bonds reached 30%.
For your information, “share buybacks” were illegal by law in the U.S. before 1982, it was considered market manipulation. (“Are you kidding me? — Nope.”)
The second problem we have with that liquidity injection is that it is not really available to everyone. Larger companies have easier access, and they are the ones that actually need less of these injections, because they already have access to the primary market contrary to mid-size or small-size companies. If you are a small company, you don’t have access to the financial market (or at a very expensive price), therefore, when times are rough, you might get pressure from bigger businesses that have access to cheap money to buy you out. It also creates a dislocation of resources and an implicit bias that leads to consolidation in sectors and monopoly (e.g., Amazon).
Discrepancies Between The Financial Market and Fundamentals
So far, I have modestly talked about the impact of central banks on the financial market, but it has obviously had an enormous impact on market price. Besides the example I gave on stock buybacks, another impact is simply the discounted cash flow effect. The price of a stock is simply the actualization of their future cash flow at a certain interest rate. Like with bonds, the price of a stock goes up when interest rates go down, and the price goes down when interest goes up (all else equal).
When you lower interest rates, you mechanically push the price of stock higher. If you don’t believe in the theory of discrepancy between prices and fundamentals, take a look at a ratio invented by Warren Buffet, formed by dividing the Wilshire 5000 Total Market Index (the 5,000 biggest U.S. companies) over the GDP of the U.S. This ratio gives you an idea of what the price of the market in the U.S is compared to how the economy is actually doing. We have never seen such a discrepancy in human history.
Another example of a discrepancy: This is a photo from April 23, 2021, when, as you can see, ECB officials reported a possible 15% fall in GDP. At the same time, the highest number of jobless claims on record was reported in the U.S. Yet, looking beyond to the indices to the left, markets couldn’t care less.
Why the lack of correction? Was none of this news? It was, but in this new environment, bad news can be good news. If you have bad quarterly macroeconomic figures, it means more stimulus, which means lower interest rates, which means higher stock prices. Stocks go up and the economy goes down.
Another worrying phenomena that we see implied by central banks is what people called the “central bank put”: The fact that the central bank will be here forever, ready and willing to support the market. This moral hazard tends to push stock prices higher regardless of fundamentals. As a former fund manager on volatility, it was amazing to see how stocks could pop up during central bank meetings. A couple of words pronounced by an official would be enough to skyrocket stock prices. Below, you will find the plot to back my theory. It is the performance of the EURO STOXX 50 when you withdraw the three days of central bank meetings every quarter: the day before the meeting, the day of the meeting and the day after the meeting. Withdrawing only 12 days of trading over an entire year can completely erase the upside performance of the index. Astonishing. Why? Because you don’t compound on the best market days and most of the best market days were around central bank meetings. A study by JPMorgan shows that, over the last 20 years, if you miss the 10 best days you can reduce your annualized return by half.
How can we sanely explain that most of the performance on an index solely comes from a few comments made by central bank officials? Business is the same. Companies didn’t sell more or less goods. It has nothing to do with fundamentals. Nothing changed. It is just words. Just the reassuring confidence of central banks interventions. That is why, these days, we see such discrepancies between price and fundamentals. And remember this: Price and fundamentals are mean-reverting. The time window may vary, but at the end, they both converge to each other at some point. Do you believe we might have a 50% GDP increase in the next couple years? Then, you know which one will likely converge to the other one here.
The president of the reserve bank of Dallas, Robert Kaplan, had this to say about bond buying: “I worry that [bond buying has] some distorting impact on price discovery, that they encourage excessive risk-taking, and excessive risk-taking can create excesses and imbalances that can be difficult to deal with in the future.
Hooked On Liquidity
You may ask yourself: “Has anybody thought about pulling the plug?” In December 2018, the Federal Reserve moved in that direction by raising interest rates. There were instant reactions on the market: Markets tanked. This was the first warning to central bankers: “You gave it to us, you fed us that liquidity for so long, and you think you can just walk away like that? No way.” On that day, it was clear that markets are now dictating the rules, not central bankers. The monster got too big, and they were the ones feeding it. Nobody knows how to deal with the spoiled child (that they spoiled themselves). Nobody wants to be remembered as the central banker that created the “mother of the mother of the greatest depression.” The person who will finally recognize what is going on, and actually act on it, will have to bear the burden of bursting the bubble. This person will be accused of crashing the market, putting millions of people on unemployment.
In the long term, and whether we like it or not, we are all on the same boat here. You, me, Jerome Powell, Christine Lagarde. We are all, one way or another, tied to the financial market. The pensions of millions of American people are heavily invested in the stock market, the security of your employment is tied to the financial health of your company, which is also tied to how the economy is doing, which is tied to how the financial market is doing. Even your money, sitting in your bank account, is tied to the financial market. That could be worth nothing if, tomorrow, people lose faith in central banks.
“Not everything done in the name of good intentions will necessarily end up a good thing.” I am not here to put central bankers on trial. I acknowledge how challenging their job might be. Probably one of the highest responsibilities on Earth, and I respect that. Who am I to judge? I am just passionate about the market. I am also not here in any way to encourage conspiracy theories, those advocating that central bankers did so in order to enrich themselves and their friends in the private sector. I don’t think it was a Machiavellian or even orchestrated plan.
I do think that it was created for a good purpose (i.e., relaunching the economy). However, like most things in life and because of human nature, it got hijacked to serve personal interest. A similar example would be the creation of AI algorithms on social media, built to serve a particular purpose (in this case for marketing purposes), that end up serving another one (manipulating elections all over the world).
My purpose behind this article is more about raising awareness among people that are outside of the financial world. It is also, I hope, a wake-up call for everyone involved in our business, that our path, economically speaking, is unsustainable.
Because we act on our own interest, to gain a little bit more everyday in the short term, we will put in jeopardy everything over the long term. We need to change our mentality and for that it is important to know the truth. That it is OK to be wrong. It is OK to make mistakes. It is OK to not have the answer. It is OK to not know. However, what is not OK, is to keep doing the same things, over and over again, and hoping for different results. It was Einstein’s definition of madness.
Today, our monetary policy is still based on target inflation, because it was written into our academic textbooks 20 years ago. Everything has changed since then. Everything. We need to adapt to our times. No adaptation means no future. Even religions were able to adapt and modernize themselves, so why not central bankers?
I understand that they have been elected for a certain mandate and that they have to carry out what they have been elected for. But how can they base their monetary policies and actions that have such tremendous consequences on everyone’s lives on something they are not even able to calculate? See the graph below from the ECB.
As Daniel Kahneman said, “It is wrong to blame anyone for failing to forecast accurately in an unpredictable world. However, it seems fair to blame professionals for believing they can succeed in an impossible task.”
Maybe their mandates were wrong to begin with. I think it is time to rethink everything we’ve learned and think differently. We need to open the discussion. Like Christine Lagarde mentioned in one of her first speeches, we need to conduct a review of our own work — even if it means admitting we were wrong.
But people fail to acknowledge that keeping the systems afloat like we do is only making the bubble bigger and bigger, day after day. When we raise the ceiling of debt, year after year, we are only passing on the “hot potato’’ to the next generation. To our kids, and grandkids. But remember, someone will have to pay the bills at the end. It is in the collective interest to act on it now, sooner rather than later, but to do so you need to think about others first and it almost feels like an impossible task. A study made by Thomas Schelling in 1984 showed that many people fail to save for retirement because of a failure to identify with their future self. Therefore, they will trade immediate rewards for themselves against future benefit for an unknown “self.”
“If we now care little about ourselves in the further future, our future selves are like future generations. We can affect them for the worse, and, because they do not now exist, they cannot defend themselves. Like future generations, future selves have no vote, so their interests need to be specially protected” (Parfit, 1987).
So, if we cannot even identify with our future self to make the right decision, how are we supposed to do it for a perfect stranger?
This is the most challenging part. We need to sacrifice a little bit of comfort now for the sake of the community. If we are not able to change how we behave and how we invest, we are doomed to fail.
“Evolution can only happen if risk of extinction is present.” — Nassim Taleb
Quantitative easing was (is) the golden age of shareholders. By diverse mechanisms (low interest rate, share buyback), market price and shareholders’ wealth were pushed to record highs while the economy grew little in comparison. It created a massive and historical gap between the top percentile of wealthy people and the rest of the world.
Is the central bank responsible for the growing wealth inequality? There is clearly a correlation between these two, but do we have a causality? It is a subject of debate. However, it’s clear that quantitative easing had some impact in at least exacerbating this wealth gap. Wealth concentration is bad for the economy. If the government fails to counter it and monetary policy makes it worse, then who is going to protect the weakest ones? We, as humans, are judged on how we can protect the weakest ones. That is what makes us human.
Wealth inequality can create the type of polarization along the political spectrum that could hurt our democracy. It allows for the festering of resentment and reinforces some people’s ideas that there is a political elite, deep state, and so on. Rising populism is a phenomenon that we observe all over the globe (U.S., Italy, U.K., Brasil, Mexico) and that could potentially lead to social unrest or civil wars. Social unrest is the consequence of people’s distrust of their institutions (third derivatives), wealth inequality (second derivatives) and indirectly from quantitative easing (first derivatives).
We are currently trading the short term for the long term. If we are not able to correct this trajectory, the impact will not only be monetary (financial market crash) but could lead to social crisis, up to the point of losing our entire system.
“Compendiaria res improbitas, virtusque tarda.”
Wickedness takes the shorter road, virtue the longer.
The impact of quantitative easing goes way beyond the simple price of the stock market. It has consequences on everyone’s life, on our political system, up to the very meaning of freedom. Something that we take for granted. Probably because we are a spoiled generation that lived in the safest and most peaceful period in human history. It is probably because we never experienced such painful moments that we act this way. Something that Nassim Taleb refers to as “skin in the game.” When people are not held accountable or don’t suffer from the consequences of the mistakes they make. If we know our behavior will be the reason for our extinction, why do we keep behaving like that?
A study conducted by Edward Miller, CEO of Johns Hopkins Medicine, concluded that 90% of the people who suffered a heart attack and had coronary artery bypass surgery did not change their lifestyle afterward. Even though it would mean they might suffer from a second heart attack at some point in the future. Given the choice of changing behavior or facing potential life-threatening events, people would choose the second one. Most of us want to change but wanting to change and being able to change are two different things.
“Opioids And Economy”
Opioids are chemical substances that relieve pain. Opioids such as morphine are widely used in medicine. Would you say morphine is a bad substance? Not necessarily. It really depends on how we use it. If you use morphine to treat acute pain, it will probably be used for a good cause. On the contrary, if you talk about opioids in the case of drug addiction, it’s not going to be a good thing. But both of them, pain relief and drug addiction come from the same origin: opioids.
You may be wondering why I am talking about opioids in the context of central banks and quantitative easing.
Let’s have a look at the case of the opioid crisis in the U.S. If you are a construction worker or any technical worker, and you break your back while on duty, you might be administered some morphine at the hospital. Now let’s imagine that this construction worker is our economy, it went through a rough patch, the only healthy way to put our economy back on track was to inject him with some liquidity (morphine) so it can keep functioning. It would be a little sadistic to let our man go through this painful experience without offering something that can help alleviate his pain. In that case, we wouldn’t blame the doctor for this intervention.
However, the doctor has also some responsibility with the patient, by administering him the right and adequate dose of morphine. We need to make sure that the pain is under control. Smaller and smaller doses of morphine will be allowed to our fellow worker as time passes and his injuries start healing. Otherwise, if we kept giving him morphine, the likelihood of an addiction to opioids will increase. Once the underlying problem is solved and his backbone (our economy) is back on track, our patient can go back to work. There should be no need for the use of opioids at this point, or at least the bare minimum on an occasional basis. So, it is a very legitimate question to ask, why, in our economy’s case, did our doctor not stop the intervention? Why did our central bankers refuse to withdraw the stimulus to our economy?
We kept it because we were scared that its effects would be too temporary and go away too fast. Even worse, we increased our dose of liquidity: “Just in case it would be needed.” We kept feeding the patient opioids. An addiction can change a man. It can change his behavior: faking some illness to get more opioids. That is what happened in December 2018, we could have weaned the market off, but we were scared of the reaction. Today, our worker (economy) is a functional addict. His systems got used to it. The more we inject, the less effect it has on him, and the more he will ask for a stronger dose.
At some point, the doctor’s prescription will expire or the drug will fail to have an effect, and then what? He will have no other choice but to turn to harder drugs to satisfy his needs. At that point, what will be our economy’s equivalent of “harder drugs”? Is the ECB going to buy all the available sources of ETF on the EURO STOXX 50? And then buy the entire stock market?
The worker’s addiction will make him inevitably lose everything down the road, starting with his job, his family, probably up to his life.
Once our liquidity loses its stimulus effect, our market will experience this trajectory as well. Our economy is not yet down the street looking for its more potent fix, but I think it’s fair to say that, at that point, our economy has already lost its job.
Thank you for taking the time to read this article. You may ask: Why did I publish this article? From time to time, I re-read my stories and I try to rethink what I know or challenge some belief I had in the past that turned out to be dead wrong. Publishing on Medium is, to me, being accountable for my ideas. It is my humble form of having “some” skin in the game.
“If you do not take risks for your opinion, you are nothing.” — Nassim Taleb
This is a guest post by Dustin Lamblin. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.bonds government bonds corporate bonds pandemic covid-19 stocks bitcoin btc etf euro
Infosys Recognized as the Top Service Provider Across Nordics in the Whitelane Research and PA Consulting IT Sourcing Study 2023
Infosys Recognized as the Top Service Provider Across Nordics in the Whitelane Research and PA Consulting IT Sourcing Study 2023
STOCKHOLM, March 31, 2023
Infosys achieves a notable rise in overall ranking in the Nordics with a customer…
Infosys Recognized as the Top Service Provider Across Nordics in the Whitelane Research and PA Consulting IT Sourcing Study 2023
STOCKHOLM, March 31, 2023
Infosys achieves a notable rise in overall ranking in the Nordics with a customer satisfaction score of 81 percent as compared to the industry average of 73 percent
STOCKHOLM, March 31, 2023 /PRNewswire/ -- Infosys (NSE: INFY) (BSE: INFY) (NYSE: INFY), a global leader in next-generation digital services and consulting, today announced that it has been recognized as one of the top service providers in the Nordics, achieving the highest awarded score in Whitelane Research and PA Consulting's 2023 IT Sourcing Study. The report ranked Infosys as the number one service provider and an 'Exceptional Performer' in the categories of Digital Transformation, Application Services, and Cloud & Infrastructure Hosting Services. Infosys also ranked number one in overall General Satisfaction and Service Delivery.
For the report, Whitelane Research and PA Consulting, the innovation and transformation consultancy, surveyed nearly 400 CXOs and key decision-makers from top IT spending organizations in the Nordics and evaluated over 750 unique IT sourcing relationships and more than 1,400 cloud sourcing relationships. These service providers were assessed based on their service delivery, client relationships, commercial leverage, and transformation capabilities.
Some of Infosys' key differentiating factors highlighted in the report are:
- Infosys ranked as a top provider in the Nordics across key performance indicators on service delivery quality, account management quality, price level and transformative innovation.
- Infosys' ranked above the industry average by 8 percent year-on-year, making it one of the top system integrators in the Nordics.
- Infosys is positioned as a "Strong Performer" in Security Services and scored significantly above average on account management.
Arne Erik Berntzen, Group CIO of Posten Norge, said: "Infosys has been integral in helping Posten Norge transform its IT Service Management capabilities. As Posten's partner since 2021, Infosys picked up the IT Service Management function from the incumbent, successfully transforming it through a brand-new implementation of ServiceNow, redesigning IT service management to suit the next-generation development processes and resulting in a significant improvement of the overall customer experience. I congratulate Infosys for achieving the top ranking in the 2023 Nordic IT Sourcing Study."
Antti Koskelin, SVP & CIO at KONE, said: "Infosys has been our trusted partner in our digitalization journey since 2017 and have helped us in establishing best-in-class services blueprint and rolling-in our enterprise IT landscape over the last few years. Digital transformations need partners to constantly learn, give ideas that work and be flexible to share risks and rewards with us, and Infosys has done just that. I am delighted that Infosys has been positioned No. 1 in Whitelane's 2023 Nordic Survey. This is definitely a reflection of their capabilities."
Jef Loos, Head of Research Europe, Whitelane Research, said, "In today's dynamic IT market, client demand is ever evolving, and staying ahead of the curve requires a strategic blend of optimized offerings and trusted client relationships. Infosys' impressive ranking in Whitelane's Nordic IT Sourcing Study is a testament to their unwavering commitment to fulfilling client demands effectively. Through their innovative solutions and exceptional customer service, Infosys has established itself as a leader in the industry, paving the way for a brighter and more successful future for all."
Hemant Lamba, Executive Vice President & Global Head – Strategic Sales, Infosys said, "Our ranking as one of the top service providers across the Nordics in the Whitelane Research and PA Consulting 2023 IT Sourcing Study, endorses our commitment to this important market. This is a significant milestone in our regional strategy, and the recognition revalidates our commitment towards driving customer success and excellence in delivering innovative IT services. Through our geographical presence in the Nordics, we will continue to drive business innovation and IT transformation in the region, backed by a strong partner network. We look forward to continuing investing in this market to foster client confidence and further enhance delivery."
Infosys is a global leader in next-generation digital services and consulting. Over 300,000 of our people work to amplify human potential and create the next opportunity for people, businesses and communities. With over four decades of experience in managing the systems and workings of global enterprises, we expertly steer clients, in more than 50 countries, as they navigate their digital transformation powered by the cloud. We enable them with an AI-powered core, empower the business with agile digital at scale and drive continuous improvement with always-on learning through the transfer of digital skills, expertise, and ideas from our innovation ecosystem. We are deeply committed to being a well-governed, environmentally sustainable organization where diverse talent thrives in an inclusive workplace.
Visit www.infosys.com to see how Infosys (NSE, BSE, NYSE: INFY) can help your enterprise navigate your next.
Certain statements in this release concerning our future growth prospects, financial expectations and plans for navigating the COVID-19 impact on our employees, clients and stakeholders are forward-looking statements intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding COVID-19 and the effects of government and other measures seeking to contain its spread, risks related to an economic downturn or recession in India, the United States and other countries around the world, changes in political, business, and economic conditions, fluctuations in earnings, fluctuations in foreign exchange rates, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India and the US, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal or expiration of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, unauthorized use of our intellectual property and general economic conditions affecting our industry and the outcome of pending litigation and government investigation. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our Annual Report on Form 20-F for the fiscal year ended March 31, 2022. These filings are available at www.sec.gov. Infosys may, from time to time, make additional written and oral forward-looking statements, including statements contained in the Company's filings with the Securities and Exchange Commission and our reports to shareholders. The Company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the Company unless it is required by law.
View original content:https://www.prnewswire.com/news-releases/infosys-recognized-as-the-top-service-provider-across-nordics-in-the-whitelane-research-and-pa-consulting-it-sourcing-study-2023-301786887.html
Spread & Containment
Asking the right dumb questions
You’ll have to forgive the truncated newsletter this week. Turns out I brought more back from Chicago than a couple of robot stress balls (the one piece…
You’ll have to forgive the truncated newsletter this week. Turns out I brought more back from Chicago than a couple of robot stress balls (the one piece of swag I will gladly accept). I was telling someone ahead of the ProMat trip that I’ve returned to 2019 travel levels this year. One bit I’d forgotten was the frequency and severity of convention colds — “con crud,” as my comics friends used to call it.
I’ve been mostly housebound for the last few days, dealing with this special brand of Chicago-style deep-dish viral infection. The past three years have no doubt hobbled my immune system, but after catching COVID-19 three times, it’s frankly refreshing to have a classic, good old-fashioned head cold. Sometimes you want the band you see live to play the hits, you know? I’m rediscovering the transformative properties of honey in a cup of tea.
The good news for me is that (and, hopefully, you) is I’ve got a trio of interviews from ProMat that I’ve been wanting to share in Actuator. As I said last week, the trip was really insightful. At one of the after-show events, someone asked me how one gets into tech journalism. It’s something I’ve been asked from time to time, and I always have the same answer. There are two paths in. One is as a technologist; the other is as a journalist.
It’s obvious on the face of it. But the point is that people tend to enter the field in one of two distinct ways. Either they love writing or they’re really into tech. I was the former. I moved to New York City to write about music. It’s something I still do, but it’s never fully paid the bills. The good news for me is I sincerely believe it’s easier to learn about technology than it is to learn how to be a good writer.
I suspect the world of robotics startups is similarly bifurcated. You enter as either a robotics expert or someone with a deep knowledge of the field that’s being automated. I often think about the time iRobot CEO Colin Angle told me that, in order to become a successful roboticist, he first had to become a vacuum salesman. He and his fellow co-founders got into the world through the robotics side. And then there’s Locus robotics, which began as a logistics company that started building robots out of necessity.
Both approaches are valid, and I’m not entirely sure one is better than the other, assuming you’re willing to surround yourself with assertive people who possess deep knowledge in areas where you fall short. I don’t know if I entirely buy the old adage that there’s no such thing as a dumb question, but I do believe that dumb questions are necessary, and you need to get comfortable asking them. You also need to find a group of people you’re comfortable asking. Smart people know the right dumb questions to ask.
Covering robotics has been a similar journey for me. I learned as much about supply chain/logistics as the robots that serve them at last week’s event. That’s been an extremely edifying aspect of writing about the space. In robotics, no one really gets to be a pure roboticist anymore.
Q&A with Rick Faulk
I’m gonna kick things off this week with highlights from a trio of ProMat interviews. First up is Locus Robotics CEO, Rick Faulk. The full interview is here.
TC: You potentially have the foundation to automate the entire process.
RF: We absolutely do that today. It’s not a dream.
It’s not lights out. Lights out might happen 10 years from now, but the ROI is not there to do it today. It may be there down the road. We’ve got advanced product groups working on some things that are looking at how to get more labor out of the equation. Our strategy is to minimize labor over time. We’re doing integrations with Berkshire Grey and others to minimize labor. To get to a dark building is going to be years away.
Have you explored front-of-house — retail or restaurants?
We have a lot of calls about restaurants. Our strategy is to focus. There are 135,000 warehouses out there that have to be automated. Less than 5% are automated today. I was in Japan recently, and my meal was filled by a robot. I look around and say, “Hey, we could do that.” But it’s a different market.
What is the safety protocol? If a robot and I are walking toward each other on the floor, will it stop first?
It will stop or they’ll navigate around. It’s unbelievably smart. If you saw what happened on the back end — it’s dynamically planning paths in real time. Each robot is talking to other robots. This robot will tell this robot over here, “You can’t get through here, so go around.” If there’s an accident, we’ll go around it.
They’re all creating a large, cloud-based map together in real time.
That’s exactly what it is.
When was the company founded?
[In] 2014. We actually spun out of a company called Quiet Logistics. It was a 3PL. We were fully automated with Kiva. Amazon bought Kiva in 2012, and said, “We’re going to take the product off the market.” We looked for another robot and couldn’t find one, so we decided to build one.
The form factors are similar.
Their form factor is basically the bottom. It goes under a shelf and brings the shelf back to the station to do a pick. The great thing about our solution is we can go into a brownfield building. They’re great and they work, but it will also take four times the number of robots to do the same work our robots do.
Amazon keeps coming up in my conversations in the space as a motivator for warehouses to adopt technologies to remain competitive. But there’s an even deeper connection here.
Amazon is actually our best marketing organization. They’re setting the bar for SLAs (service-level agreements). Every single one of these 3PLs walking around here [has] to do same- or next-day delivery, because that’s what’s being demanded by their clients.
Do the systems’ style require in-person deployment?
The interesting thing during COVID is we actually deployed a site over FaceTime.
Someone walked around the warehouse with a phone?
Yeah. It’s not our preferred method. They probably actually did a better job than we did. It was terrific.
As far as efficiency, that could make a lot of sense, moving forward.
Yeah. It does still require humans to go in, do the installation and training — that sort of thing. I think it will be a while before we get away from that. But it’s not hard to do. We take folks off the street, train them and in a month they know how to deploy.
Where are they manufactured?
We manufacture them in Boston, believe it or not. We have contract manufacturers manufacturing some components, like the base and the mast. And then we integrate them together in Boston. We do the final assembly and then do all the shipments.
As you expand sales globally, are there plans to open additional manufacturing sites?
We will eventually. Right now we’re doing some assemblies in Amsterdam. We’re doing all refurbishments for Europe in Amsterdam. […] There’s a big sustainability story, too. Sustainability is really important to big clients like DHL. Ours is an inherently green model. We have over 12,000 robots in the field. You can count the number of robots we’ve scrapped on two hands. Everything gets recycled to the field. A robot will come back after three or four years and we’ll rewrap it. We may have to swap out a camera, a light or something. And then it goes back into service under a RaaS model.
What happened in the cases where they had to be scrapped?
They got hit by forklifts and they were unrepairable. I mean crushed.
Any additional fundraising on the horizon?
We’ve raised about $430 million, went through our Series F. Next leg in our financing will be an IPO. Probably. We have the numbers to do it now. The market conditions are not right to do it, for all the reasons you know.
Do you have a rough timeline?
It will be next year, but the markets have got to recover. We don’t control that.
Q&A with Jerome Dubois
Next up, fittingly, is Jerome Dubois, the co-founder of Locus’ chief competitor, 6 River Systems (now a part of Shopify). Full interview here.
TC: Why was [the Shopify acquisition] the right move? Had you considered IPO’ing or moving in a different direction?
JD: In 2019, when we were raising money, we were doing well. But Shopify presents itself and says, “Hey, we’re interested in investing in the space. We want to build out a logistics network. We need technology like yours to make it happen. We’ve got the right team; you know about the space. Let’s see if this works out.”
What we’ve been able to do is leverage a tremendous amount of investment from Shopify to grow the company. We were about 120 employees at 30 sites. We’re at 420 employees now and over 110 sites globally.
Amazon buys Kiva and cuts off third-party access to their robots. That must have been a discussion you had with Shopify.
Up front. “If that’s what the plan is, we’re not interested.” We had a strong positive trajectory; we had strong investors. Everyone was really bullish on it. That’s not what it’s been. It’s been the opposite. We’ve been run independently from Shopify. We continue to invest and grow the business.
From a business perspective, I understand Amazon’s decision to cut off access and give itself a leg up. What’s in it for Shopify if anyone can still deploy your robots?
Shopify’s mantra is very different from Amazon. I’m responsible for Shopify’s logistics. Shopify is the brand behind the brand, so they have a relationship with merchants and the customers. They want to own a relationship with the merchant. It’s about building the right tools and making it easier for the merchant to succeed. Supply chain is a huge issue for lots of merchants. To sell the first thing, they have to fulfill the first thing, so Shopify is making it easier for them to print off a shipping label.
Now, if you’ve got to do 100 shipping letters a day, you’re not going to do that by yourself. You want us to fulfill it for you, and Shopify built out a fulfillment network using a lot of third parties, and our technology is the backbone of the warehouse.
Watching you — Locus or Fetch — you’re more or less maintaining a form factor. Obviously, Amazon is diversifying. For many of these customers, I imagine the ideal robot is something that’s not only mobile and autonomous, but also actually does the picking itself. Is this something you’re exploring?
Most of the AMR (autonomous mobile robot) scene has gotten to a point where the hardware is commoditized. The robots are generally pretty reliable. Some are maybe higher quality than others, but what matters the most is the workflows that are being enacted by these robots. The big thing that’s differentiating Locus and us is, we actually come in with predefined workflows that do a specific kind of work. It’s not just a generic robot that comes in and does stuff. So you can integrate it into your workflow very quickly, because it knows you want to do a batch pick and sortation. It knows that you want to do discreet order picking. Those are all workflows that have been predefined and prefilled in the solution.
With respect to the solving of the grabbing and picking, I’ve been on the record for a long time saying it’s a really hard problem. I’m not sure picking in e-comm or out of the bin is the right place for that solution. If you think about the infrastructure that’s required to solve going into an aisle and grabbing a pink shirt versus a blue shirt in a dark aisle using robots, it doesn’t work very well, currently. That’s why goods-to-person makes more sense in that environment. If you try to use arms, a Kiva-like solution or a shuttle-type solution, where the inventory is being brought to a station and the lighting is there, then I think arms are going to be effective there.
Are these the kinds of problems you invest R&D in?
Not the picking side. In the world of total addressable market — the industry as a whole, between Locus, us, Fetch and others — is at maybe 5% penetration. I think there’s plenty of opportunity for us to go and implement a lot of our technology in other places. I also think the logical expansion is around the case and pallet operations.
Interoperability is an interesting conversation. No one makes robots for every use case. If you want to get near full autonomous, you’re going to have a lot of different robots.
We are not going to be a fit for 100% of the picks in the building. For the 20% that we’re not doing, you still leverage all the goodness of our management consoles, our training and that kind of stuff, and you can extend out with [the mobile fulfillment application]. And it’s not just picking. It’s receiving, it’s put away and whatever else. It’s the first step for us, in terms of proving wall-to-wall capabilities.
What does interoperability look like beyond that?
We do system interoperability today. We interface with automation systems all the time out in the field. That’s an important part of interoperability. We’re passing important messages on how big a box we need to build and in what sequence it needs to be built.
When you’re independent, you’re focused on getting to portability. Does that pressure change when you’re acquired by a Shopify?
I think the difference with Shopify is, it allows us to think more long-term in terms of doing the right thing without having the pressure of investors. That was one of the benefits. We are delivering lots of longer-term software bets.
Q&A with Peter Chen
Lastly, since I’ve chatted with co-founder Pieter Abbeel a number of times over the years, it felt right to have a formal conversation with Covariant CEO Peter Chen. Full interview here.
TC: A lot of researchers are taking a lot of different approaches to learning. What’s different about yours?
PC: A lot of the founding team was from OpenAI — like three of the four co-founders. If you look at what OpenAI has done in the last three to four years to the language space, it’s basically taking a foundation model approach to language. Before the recent ChatGPT, there were a lot of natural language processing AIs out there. Search, translate, sentiment detection, spam detection — there were loads of natural language AIs out there. The approach before GPT is, for each use case, you train a specific AI to it, using a smaller subset of data. Look at the results now, and GPT basically abolishes the field of translation, and it’s not even trained to translation. The foundation model approach is basically, instead of using small amounts of data that’s specific to one situation or train a model that’s specific to one circumstance, let’s train a large foundation-generalized model on a lot more data, so the AI is more generalized.
You’re focused on picking and placing, but are you also laying the foundation for future applications?
Definitely. The grasping capability or pick and place capability is definitely the first general capability that we’re giving the robots. But if you look behind the scenes, there’s a lot of 3D understanding or object understanding. There are a lot of cognitive primitives that are generalizable to future robotic applications. That being said, grasping or picking is such a vast space we can work on this for a while.
You go after picking and placing first because there’s a clear need for it.
There’s clear need, and there’s also a clear lack of technology for it. The interesting thing is, if you came by this show 10 years ago, you would have been able to find picking robots. They just wouldn’t work. The industry has struggled with this for a very long time. People said this couldn’t work without AI, so people tried niche AI and off-the-shelf AI, and they didn’t work.
Your systems are feeding into a central database and every pick is informing machines how to pick in the future.
Yeah. The funny thing is that almost every item we touch passes through a warehouse at some point. It’s almost a central clearing place of everything in the physical world. When you start by building AI for warehouses, it’s a great foundation for AI that goes out of warehouses. Say you take an apple out of the field and bring it to an agricultural plant — it’s seen an apple before. It’s seen strawberries before.
That’s a one-to-one. I pick an apple in a fulfillment center, so I can pick an apple in a field. More abstractly, how can these learnings be applied to other facets of life?
If we want to take a step back from Covariant specifically, and think about where the technology trend is going, we’re seeing an interesting convergence of AI, software and mechatronics. Traditionally, these three fields are somewhat separate from each other. Mechatronics is what you’ll find when you come to this show. It’s about repeatable movement. If you talk to the salespeople, they tell you about reliability, how this machine can do the same thing over and over again.
The really amazing evolution we have seen from Silicon Valley in the last 15 to 20 years is in software. People have cracked the code on how to build really complex and highly intelligent looking software. All of these apps we’re using [are] really people harnessing the capabilities of software. Now we are at the front seat of AI, with all of the amazing advances. When you ask me what’s beyond warehouses, where I see this really going is the convergence of these three trends to build highly autonomous physical machines in the world. You need the convergence of all of the technologies.
You mentioned ChatGPT coming in and blindsiding people making translation software. That’s something that happens in technology. Are you afraid of a GPT coming in and effectively blindsiding the work that Covariant is doing?
That’s a good question for a lot of people, but I think we had an unfair advantage in that we started with pretty much the same belief that OpenAI had with building foundational models. General AI is a better approach than building niche AI. That’s what we have been doing for the last five years. I would say that we are in a very good position, and we are very glad OpenAI demonstrated that this philosophy works really well. We’re very excited to do that in the world of robotics.
News of the week
The big news of the week quietly slipped out the day after ProMat drew to a close. Berkshire Grey, which had a strong presence at the event, announced on Friday a merger agreement that finds SoftBank Group acquiring all outstanding capital stock it didn’t already own. The all-cash deal is valued at around $375 million.
The post-SPAC life hasn’t been easy for the company, in spite of a generally booming market for logistics automation. Locus CEO Rick Faulk told me above that the company plans to IPO next year, after the market settles down. The category is still a young one, and there remains an open question around how many big players will be able to support themselves. For example, 6 River Systems and Fetch have both been acquired, by Shopify and Zebra, respectively.
“After a thoughtful review of value creation opportunities available to Berkshire Grey, we are pleased to have reached this agreement with SoftBank, which we believe offers significant value to our stockholders,” CEO Tom Wagner said in a release. “SoftBank is a great partner and this merger will strengthen our ability to serve customers with our disruptive AI robotics technology as they seek to become more efficient in their operations and maintain a competitive edge.”
Unlike the Kiva deal that set much of this category in motion a decade ago, SoftBank maintains that it’s bullish about offering BG’s product to existing and new customers. Says managing partner, Vikas J. Parekh:
As a long-time partner and investor in Berkshire Grey, we have a shared vision for robotics and automation. Berkshire Grey is a pioneer in transformative, AI-enabled robotic technologies that address use cases in retail, eCommerce, grocery, 3PL, and package handling companies. We look forward to partnering with Berkshire Grey to accelerate their growth and deliver ongoing excellence for customers.
A healthy Series A this week from Venti Technologies. The Singapore/U.S. firm, whose name translates to “large Starbucks cup,” raised $28.8 million, led by LG Technology Ventures. The startup is building autonomous systems for warehouses, ports and the like.
“If you have a big logistics facility where you run vehicles, the largest cost is human capital: drivers,” co-founder and CEO Heidi Wyle tells TechCrunch. “Our customers are telling us that they expect to save over 50% of their operations costs with self-driving vehicles. Think they will have huge savings.”
This week in fun pivots, Neubility is making the shift from adorable last-mile delivery robots to security bots. This isn’t the company’s first pivot, either. Kate notes that it’s now done so five times since its founding. Fifth time’s the charm, right?
Neubility currently has 50 robots out in the world, a number it plans to raise significantly, with as many as 400 by year’s end. That will be helped along by the $2.6 million recently tacked onto its existing $26 million Series A.
Model-Prime emerged out of stealth this week with a $2.3 million seed round, bringing its total raise to $3.3 million. The funding was led by Eniac Ventures and featured Endeavors and Quiet Capital. The small Pittsburgh-based firm was founded by veterans of the self-driving world, Arun Venkatadri and Jeanine Gritzer, who were seeking a way to create reusable data logs for robotics companies.
The startup says its tech, “handles important tasks like pulling the metadata, automated tagging, and making logs searchable. The vision is to make the robotics industry more like web apps, or mobile apps, where it now seems silly to build your own data solution when you could just use Datadog or Snowflake instead.”
Saildrone, meanwhile, is showcasing Voyager, a 33-foot uncrewed water vehicle. The system sports cameras, radar and an acoustic system designed to map a body of water down to 900 feet. The company has been testing the boat out in the world since last February and is set to begin full-scale production at a rate of a boat a week.
Finally, some research out of MIT. Robust MADER is a new version of MADER, which the team introduced in 2020 to help drones avoid in-air collisions.
“MADER worked great in simulations, but it hadn’t been tested in hardware. So, we built a bunch of drones and started flying them,” says grad student Kota Kondo. “The drones need to talk to each other to share trajectories, but once you start flying, you realize pretty quickly that there are always communication delays that introduce some failures.”
The new version adds in a delay before setting out on a new trajectory. That added time will allow it to receive and process information from fellow drones and adjust as needed. Kondo adds, “If you want to fly safer, you have to be careful, so it is reasonable that if you don’t want to collide with an obstacle, it will take you more time to get to your destination. If you collide with something, no matter how fast you go, it doesn’t really matter because you won’t reach your destination.”
Here you go, way too fast. Don’t slow down, you’re gonna crash. Na-na-na-na-na-na-na-na-na. (Subscribe to Actuator!)
Asking the right dumb questions by Brian Heater originally published on TechCrunchtesting covid-19 singapore japan europe
Waymo retires its self-driving Chrysler Pacifica minivan
More than five years ago, a newly minted Waymo took the wraps off of what would become its first commercialized autonomous vehicle: a Chrysler Pacifica…
More than five years ago, a newly minted Waymo took the wraps off of what would become its first commercialized autonomous vehicle: a Chrysler Pacifica Hybrid minivan loaded with sensors and software.
Now, the minivan, a symbol of the early and hypey AV days, is headed for retirement as Waymo transitions its fleet to the all-electric Jaguar I-Pace vehicles equipped with its fifth-generation self-driving system.
When the Chrysler Pacifica Hybrid AV was first revealed, it might not have been what people expected from the former Google self-driving project turned Alphabet-owned business. The design wasn’t ripped from the pages of a graphic sci-fi novel and it was hardly flashy. But the white minivan — highlighted with the same blue and green accent colors found on the Waymo logo — embodied the company’s aim. Waymo wanted a friendly looking vehicle people would feel comfortable using.
The partnership with established manufacturer Fiat Chrysler — now Stellantis — also derisked an already risky frontier tech pursuit. Under the deal, Fiat Chrysler would handle the manufacturing and provide Waymo with minivans that built in redundancies designed for autonomous driving.
Waymo never got close to the 62,000-minivan order it agreed to in 2018 as part of an expanded partnership with Fiat Chrysler. But the minivan did become a critical part of its commercialization plan and over its lifespan the fleet provided tens of thousands of rides to the public, according to the company. (Waymo has never revealed detailed figures of its minivan fleet beyond that its total global fleet is somewhere around 700 vehicles.)
“It’s bittersweet to see it go,” Chris Ludwick, product management director at Waymo who has been at the company since 2012, told TechCrunch. “But I’m also happy for this next chapter.”
A bit of history
Waymo revealed the Chrysler Pacifica Hybrid in December 2016 and then provided more technical and business model details a month later at the 2017 North American International Auto Show. The first look at the minivan in December came just five days after Google’s self-driving project officially announced that it was a business with a new name and slightly tweaked mission.
At the time, little was known about what the Google self-driving project — also known as Chauffeur — intended to do beyond a stated goal to commercialize self-driving cars. The Google self-driving project had developed a custom low-speed vehicle without a steering wheel called the Firefly, but that cute gumdrop-shaped car never made it to commercial robotaxi status.
The lowly minivan seemed to represent a more grounded realistic vision toward the goal. By spring 2017, the company had launched an early rider program that let real people in the Phoenix area (who had been vetted and signed an NDA) use an app to hail a self-driving Chrysler Pacifica minivan with a human safety operator behind the wheel.
Waymo eventually opened up the service to the public — no NDA required — and grew its service area to Phoenix suburbs Chandler, Tempe, Ahwatukee and Mesa. Waymo repeated that process as it took the important step of removing the human safety operator from behind the wheel, launching driverless rides in 2019 and eventually a driverless robotaxi service in 2020 that was open to the public.
Minivan proving ground
The minivan’s initial reveal represented the moment when “Chauffeur” became Waymo and less of a science project, he noted. But there was still considerable work to be done.
The Chrysler Pacifica was the ultimate commercial proving ground, according to anecdotes from Ludwick, who recounted the progress of moving from autonomous driving 10 miles in one day, then 100 miles, and then a 100 miles everyday.
For instance, the company discovered that families were far more enthusiastic to use the minivan than it assumed. The minivan also helped develop the company’s AV operations playbook, including how to park vehicles in between rides and where to locate depots for maintenance and charging.
The minivan also became a testbed for how to operate a driverless fleet during the COVID-19 pandemic. Prior to COVID, the fleet in Phoenix was a mix of driverless vehicles and those with human safety operators behind the wheel.
“In three months we turned it fully driverless and figured out how to disinfect the vehicles between each ride,” he said.
The next chapter for Waymo is focused on its all-electric Jaguar I-Pace vehicles, which will be pulled into the service area in the Phoenix suburbs of Chandler and Tempe that the minivan covered. The Jaguar I-Pace is currently the go-to driverless vehicle for robotaxi rides in downtown Phoenix and to the Phoenix International Sky Harbor Airport. The 24/7 service runs on a five-mile stretch between downtown Phoenix and an airport shuttle stop, specifically, the 44th Street Sky Train station.
On Thursday, the White House gave a shout-out to Waymo (along with other companies) for its commitment to an all-electric fleet as part of the White House EV Acceleration Challenge.
Waymo intends to deploy the all-electric Jaguar I-Pace across all of its ride-hailing service territories this spring now that the minivan has been retired. The nod to Waymo was part of a larger announcement from the Biden administration around public and private sector investments into EVs as part of its goal of having 50% of all new vehicle sales be electric by 2030.
The next task for Waymo may be its most challenging: The company has to figure out how to grow the service, charge its all-electric fleet efficiently and eventually turn a profit.
But Ludwick believes the company is well positioned thanks, in part, to the Chrysler Pacifica.
“When I look at what the Pacifica got us, it’s a lot,” he said, noting that the vehicle had to travel at higher speeds and make unprotected left turns.
Waymo retires its self-driving Chrysler Pacifica minivan by Kirsten Korosec originally published on TechCrunchwhite house pandemic covid-19
New ways to protect food crops from climate change and other disruptions
Financial Stress Continues to Recede
Candida auris: what you need to know about the deadly fungus spreading through US hospitals
A Federal Reserve Pivot is not Bullish
The ONS has published its final COVID infection survey – here’s why it’s been such a valuable resource
How to Stop Bumping from Crisis to Crisis
Next PLC share price dives after weak guidance: buy the dip?
New IRS Report Provides Fascinating Glimpse Into Your “Fair Share”
Waymo retires its self-driving Chrysler Pacifica minivan
Indian Low-voltage Switchgear Market Witnesses Surge Due to Pent-up Demand and an Increase in the Average Price
Government5 hours ago
Waymo retires its self-driving Chrysler Pacifica minivan
Uncategorized6 hours ago
Indian Low-voltage Switchgear Market Witnesses Surge Due to Pent-up Demand and an Increase in the Average Price
Uncategorized5 hours ago
What Has Driven the Labor Force Participation Gap since February 2020?
Uncategorized6 hours ago
Where’s the Money Going? Watch Volume and Price Action
Uncategorized6 hours ago
The Trouble with Bank Tribbles
Spread & Containment5 hours ago
Asking the right dumb questions
International6 hours ago
GO Ahead: Make My Day!
International6 hours ago
Why the Polen Capital Global Growth Fund portfolio is going to help investors win in the long run