It was with great interest I read about Jeff Bezo’s bold plan for Amazon and using Unmanned Air Vehicles (UAV’s) to ship products directly from an Amazon warehouse. As Bezos pointed out 84% of shipments weigh less than 5 lbs. Why do I need to use FedEx to send packages that get routed through Memphis, TN, even when I may be shipping something just three miles away? I could have a fleet of UAV’s that could simply launch from an Amazon warehouse and deliver directly to the end customer. if we take a step further based on what Bezos claims, it could literally be within 30 minutes of the order being placed online. First this is a bold and audacious vision of the future, which I like. It also will create new industries and new scenarios across every industry we know. Not to mention we area society in the US that likes instant gratification, 30 minutes will still be long for some but it beats 3-5 days.
We first started to hear about UAV’s during the hunt for Osama Bin Laden after the 9/11 attacks. If you know any history of Afghanistan then you know that the mountains in Afghanistan throughout history have proven rugged and impenetrable. Time and time again invaders have fallen as Afghan rebels retreated high into the remote caves of this rugged mountainous landscape. Most recently the Soviet Union learned this lesson when it made an ill-advised invasion of Afghanistan. However in the post 9-11 world the United States was able to send troops into the mountains with far better information than had ever existed before as US drones patrolled the skies. Since that times we continue to hear about the military’s use of drones to carry out attacks in the Middle East, In fact they are used so much that they have made it into Hollywood films (A high compliment in American society). They are now a standard and core component of the US military complex. Increasing our military capacity while removing military personal from harms way.
As is so often the case the US military may have the technology first but eventually it makes its way into the private sector. As the technology matures it moves beyond its roots for battle and entrepreneurs’, the great savior of American capitalism, figure out how to build a business case for the technology, secure venture capital and build either a small business or business empire. Amazon may not fit nicely into that description, as it already is a well established business, but they still have a very entrepreneurial spirit. More importantly the idea of a fleet of drones either owned and run by Amazon or outsourced to a UPS or FedEx has broad appeal to Amazons business model. One of the big, not so hidden costs, for Amazon is fuel. Maybe Amazon does not spend a lot relatively speaking but its carriers do. Those fuel costs then get passed on, to you, I and Amazon. A lightweight device that can carry small packages can be a potential bonanza in savings for us all.
As Bezos pointed out the first hurdles will be the regulatory barriers faced by launching something that is not really regulated by the FAA. There are a lot of questions about airspace that need to be answered. What altitudes can these UAV’s fly at? How many UAV’s can occupy a specified airspace? Remember these are small devices, not 787’s. Potentially ten or a hundred can occupy the same space as a jetliner. What will our skies look like? Do you want your mountain views blotted out by thousands of UAV’s? What about environmental impact? Because it is fairly new technology if we race full steam ahead, we may discover down the road irreparable damage has been done to the environment. These type of mistakes end up costing both the government and the tax payer more down the road. Granted predicting ramifications of future ill’s created by technology is more an art, than a science.
The reality is beyond basic transportation of goods UAV’s are going to play a bigger role in the United States. From crop dusting to Homeland Security. Industries that traditionally required a labor force will see the need for skilled labor decrease. As in everything where humans get replaced on one line of work there ends up being a demand in other lines of work. It can be a difficult transition as the people being replaced are not necessarily suited for the jobs that are being created. One thing the United States is well positioned is the ability to create the entrepreneurial spirit that fosters risk taking and creates new industry. Companies like Amazon and Google push that needle.
At the end of the day what Amazon is attempting could be and should be viewed as disruptive , if successful, it could lead the competition scrambling to catch up. How would any e-commerce site react to having to compete with a company trying to deliver within 30 minutes from the time it was ordered online? Luckily for the competition today they can thank the US government for giving them time to catch up as governments move slowly and trying to get FAA regulations liberated and updated, takes time. What Amazon is suggesting will prove to be a bold new en-devour moving forward into the great unknown. But the industry is built on big bets. The bets that most people comfortably say will not happen. However if they do happen it disrupts the existing business models. Most companies who manufactured typewriters did not predict or foresee the impact of the personal computer. Where are they now?
The Amazon vision will happen. It is already happening. In nearly a dozen countries there are already case studies of various scenarios ranging from mapping to terrorism where UAV’s have been used. The number of countries will continue to grow as will the number of scenarios by country. We are entering a new race as these type of robotic creations expand into every walk of life. The age-old arms race will take a significant turn towards the future. Within the next five to ten years, however, expect your delivery service to be less personal, but much quicker from the time of online purchase to delivery. Amazon is thinking big and believing big in this future and may be the company to make it happen.
Good Night and Good Luck
Hans Henrik Hoffmann December 17, 2013