This piece makes the argument that self-driving taxis will be a winner-takes-most market, but color me skeptical.

Winner-take-most markets, like Uber, tend to be two-sided marketplaces with major network effects: folks use Uber because they’re pretty ubiquitously available and relatively inexpensive; they’ve available because the many users request many trips which makes working for Uber as a driver appealing. (Ditto AirBnB, etc.)

But Waymo’s competitive advantage is pretty much only technology here. There is an argument to be made that this technology has a “network effect”-style moat: you need massive amounts of data from cars to build the tech; you get that data by being first to market. But this post doesn’t make this argument, it simply points to Uber/Lyft/the-taxi-app-graveyard and says “see?”

It’s also not clear that this set of data will forever be as critical as it is now, nor that in 10 years it won’t be comparatively easy to collect.

If the only edge that Waymo has here is technology, that’s not a natural monopoly position on its own. Autonomous driving is surely hard, but it’s an absolute-performance-baseline task, not a zero-sum market like ads. The existence of one set of 0.0001%-accident-rate-drivers doesn’t prevent anyone else from producing a 0.0001%-accident-rate self-driving car. There’s a small market stickiness effect from being first, sure, but this is not the same kind of natural monopoly as a two-sided marketplace. It’s clear why users use Uber and AirBnB over alternatives: it’s where the drivers and properties are, and that takes time to build up and it hard to take away. It’s not clear why someone would be a tied to Waymo if another equally-available self-driving taxi were available that were substantially less expensive, even if it were marginally less safe. (Of course, everyone has their trade-off point here—consider airlines: while people are more likely to pick an airline based on convenience and price, rather than safety record, these days—United perhaps excepted—that’s only true because the overall accident rate is so low.)

Assuming the baseline for “safe operation” doesn’t escalate, improvement in technology (e.g., more capable GPUs, better sensors, more public datasets) will only make this baseline easier to reach for newcomers. If the tech gets easy enough, all it will take for a new entrant is CapEx, and it’s not clear how Google would differentiate, and could end up as a single commodity provider among many, rather than a two-way marketplace owner benefitting from network effects on both sides.

That said, to construct a monopoly here, Waymo does have a couple of options:

1. Argue for regulation around self-driving cars that protects incumbents, by (e.g.) setting safety standards that are impossible for new entrants to meet. The NRC has a “good” model for this: by analogy to nuclear plants, any new vehicles on the market would need to prove that they are better than existing vehicles in the market.

2. Cut deals with major auto manufacturers so that incumbents just can’t get the data through partnerships with camera-equipped vehicle manufacturers.

Number 2 seems like it could be clearly anticompetitive, but number 1’s playbook is being written by the big AI companies as we speak.