We’ve all heard the debate. Silicon Valley versus Detroit. The future of the auto industry is on the line. The old champion takes on the upstart. Or is it the other way around? As Detroit grapples with a massive shift in how the world gets around, Silicon Valley is fighting to not just claim a seat at the table, but to take the crown. Google has been developing the self-driving car. Tesla Motors’ HQ sits like gem in Palo Alto. Apple is doing a poor job of keeping its vehicle of the future a secret.
Looks like Silicon Valley is preparing to deliver a knockout blow.
An alliance is forming, not an either/or proposition.
-Ted Serbinski, Managing Director of Techstars Mobility
Clik here to view.
Ted Serbinski, Managing Director of Techstars Mobility based in Detroit, Mich.
Detroit-based Techstars Mobility is one of two accelerators in the world focused solely on next-generation mobility companies. They’ve recently graduated 10 companies from their first acceleratorclass.
Ted used to be a Silicon Valley guy until he moved to Detroit a few years ago, so he’s seen both sides of these converging worlds.
“The Valley has its strengths in software,” says Ted. “But the experts with deep automotive experience are in Detroit. And you know what? Those folks settled down here. I don’t see them uprooting to the Valley. Rather, I see the Valley interfacing much more with Detroit.”
Detroit’s heritage of automotive dominance is accepted wisdom, while Silicon Valley is the undisputed champion of software. These two massively influential industries have a lot to absorb from each other as they both vie for space in an industry that’s undergoing rapid, revolutionary changes. But framing the debate as Detroit versus The Valley is to miss the forest for the trees.
Teaching Each Other
Clik here to view.
Noah Berger/Reuters – An assembly line for Tesla’s Model S electric sedan
“Silicon Valley can learn to benefit from the lower cost of manufacturing, precision engineering and durability that goes into the cars that already on the road,” Ted says. “These cars are meant to last for 10 years or more. Meanwhile, the phone in your pocket lasts only a year.”
The auto industry takes years, and years to develop technology for vehicles. That tech has to be sufficient for a long time. Research shows that the average age of a vehicle on the road is 10.8 years. More people can afford to replace their mobile phone regularly than can afford to replace their car every year. Unlike their phones, people don’t need to replace their cars every year.
“Detroit, on the other hand, can learn to constantly be shipping code, fix bugs, and improve,” Ted continues. “Otherwise, you have these super durable cars on the road forever that remain static, for the most part, in their technological capabilities. ”
The power that software can bring to hardware cannot be understated. Code can be shipped instantly, tested across millions of users, and that feedback can be immediately reviewed and acted upon. There’s already an example of this in the wild. In 2013, Tesla was able to automatically raise ride height in their cars to reduce underbody damage with a wireless software update. The possibilities range from features to fixes and could make vehicle recalls a thing of the past.
With the strengths of these two industries combined you’ll have a product that’s meant to last, but can also be consistently improved upon.
Can Detroit Keep Up With Silicon Valley?
Clik here to view.
TecDay Autonomous Mobility Sunnyvale 2014/ Mercedez-Bens autonomous car interior concept
It might be hard to imagine entrepreneurs and tech companies leaving the land of silicon and honey, but it’s happening. A recent study by the real estate brokerage company, Redfin, shows that one in four Bay Area residents are looking for homes in other up-and-coming tech hubs like Seattle, Portland, Austin, Chicago, and Boston.
Residential properties aren’t the only bank-busting concerns for Valley-folk. Commercial rents are almost double what they would be in Denver or Portland.
This doesn’t surprise Ted. “Starting up a company [in Detroit] is much, much cheaper than it is in the Valley. In the Valley, people are all fighting for the same resources, that can be very difficult. The Midwest has much to offer in untapped potential,” he notes.
Detroit, in particular, is a fertile ground for companies operating at the intersection of automotive and tech. “Michigan has more engineers per capita than anywhere in the country! We’re not just talking about software engineers, but also electrical, hardware, etc,” says Ted.
Clik here to view.
Graph from Brookings showing Detroit-Warren-Dearborn, MI Advanced Jobs Jobs and Output
Ted’s claims are backed by compelling evidence. According to The Brooking Institution’s study on relative strength of industries that employ STEM (science, technology, engineering, and math) workers, Detroit’s job growth in these areas was third overall from 2010 to 2013. With a young, and talented workforce being homegrown, there’s plenty of opportunities available in the Motor City. And Ted says that he hasn’t needed to convince developers to come to Detroit.
“Developers are excited because they can build something that Ford can actually use. They feel like there’s a place for them, here. They want to impact people around the world, and that’s very easy to do when you work in transportation,” Ted explains. “Think about how people get around. They can make that easier for them.”
Silicon Valley isn’t exactly slacking when it comes to manufacturing oomph. According to Bruce Katz at Brookings, in the Valley, manufacturing actually employs nearly half (46.1 percent ) of workers. These 134,000 workers produce everything from semiconductors to computer equipment to aerospace parts and pharmaceuticals. It’s an amazing statistic when you consider that the region is dominated by software giants.
Each area has the opportunity to grow their respective hardware and software needs.
“Fun fact: 50 percent of the companies in our Techstars Mobility first graduating class are establishing a presence in Detroit,” says Ted. “They either have their HQs located here or have offices opening here.”
Clik here to view.
Two visitors relax in the foyer of the Ford Motor Company Research and Innovation Center in Palo Alto, Calif. (AP Photo/Eric Risberg)
Having a presence in both places might be a worthwhile solution rather than trying to reinvent the wheel in either place. This is not a novel idea, every major automaker has a presence in Silicon Valley. The world’s nine largest automakers, by revenue, and three largest auto suppliers have offices and research labs along what is being called Silicon Valley’s “auto corridor.“Automakers being able to scoop up some of the talent coming out of the Bay Area has been important as they strive to innovate. Ewald Goessmann, who runs VW’s Belmont, CA. office, said in a Wall Street Journal interview, “The real frontier of the automobile is here.”
In a world in which we champion connectedness, does the frontier have to begin and end in one region?
No Need To Start From Scratch
Some people are already working to change the nature of this conversation.
Michigan Governor, Rick Snyder, recently traveled with other business leaders to San Francisco to connect with Bay Area entrepreneurs with Michigan roots. In an interview with Detroit Free Press, Snyder said that the group met to discuss “great talent and how much R&D we have in autos.” Snyder continued, “We’re not trying to be Silicon Valley, but we’re trying to find ways to work together.”
Clik here to view.
Gov. Rick Snyder checks out a new Ford Mustang (Detroit News file photo)
Last year, Detroit and Silicon Valley connected car experts met at an event called The Promise of the Connected Car: What It Can Be and Who Can Win. The conversations included topics like connected cars, security, and insurance. David Bailey, president of Airfoil Group, the host of the event, said, “There was an overwhelming sense that Silicon Valley ingenuity mixed in with Detroit’s sheer automotive know-how will together pave the way for the cars of tomorrow.”
“Last week’s event was a reminder of the possibilities, as well as the synergies between the technological and automotive hubs of the world – Silicon Valley and Detroit,” Bailey said.
Hearing Ted discuss the lessons that the industries can learn from each other, and seeing the influential groups actively trying to instigate cooperation is a promising shift in the narrative.
That’s the conversation everyone should be having.
The post It’s not Silicon Valley vs. Detroit, It’s Silicon Valley AND Detroit appeared first on Automatic Blog.