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Comment by vkou | Hacker News Reader

If the cost of electricity halves, will you start using twice as much electricity?

Halving the cost of transporting goods will not double the demand for transporting goods. Consumer budgets are fixed, and transportation is a very small fraction of the price of goods that consumers buy.

Dropping the cost of transport by 30%, because you only need to employ half the truckers, will not double demand. Unlike the before-after world of trucking, air travel, container shipping, etc, there isn't a mountain of businesses that suddenly become viable when long-haul costs get slashed by a third.

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It won't double it but it will be close in some locales. It would also slightly decrease the cost of a heck of a lot of things.

Exactly which categories of businesses are sitting on their hands, going 'Golly - we'd make and sell so much more of our product, if only shipping & handling were 30% cheaper'?

What fraction of the economy do they make up?

What if efficiency gains are not 2x, but 10x? What if you'll only need to employ one trucker to do the job of 10? Do you think demand for trucking will go up 10x? This isn't a web framework.

Everything that you buy online, in a Walmart, or is otherwise manufactured a city away from where it's sold?

Trucking costs are built into most products. My grocery store sells apples from California. If the cost of trucking them to me goes down, those apples will decrease in cost and they will potentially sell more apples.

Shipping probably cost less than the plastic container.

Automation of driving is all about making people with lots of capital richer. Efficiency is just the dream -- this stuff will dramatically increase costs of shipping as capacity is constrained.

The demand will not rise 1:1, that's a given. It will rise the same way that when gas is cheap people are more likely to take road trips.

For example, I just requested quotes for waterjetting some stuff today. If LTL shipping were cheap enough to I'd look outside the high CoL sphincter of the country where I happen to reside but instead I'm stuck paying a premium because the local cost of everything is high. There's also a cylinder head in my garage for a 60s Ford I'd like to give to someone who needs it but nobody needs it bad enough to pay for me to ship it across the country.

At the higher volume levels similar stuff happens. A construction company may source steel from farther away to undercut it's competition. You can bet the logistics people at Walmart (and anyone else with a big fleet) are drooling over all the optimizations they could implement if trucks could run like call centers.

> The demand will not rise 1:1, that's a given.

This is the only point I seek to make.

If salaries are 60% of the cost of shipping, and self-driving trucks make drivers twice as productive, costs will drop 30%.

This will bring a demand increase of less then 30%. Let's say 15%.

... Doing the math, it looks like 42% of truckers just lost their jobs. But at least they can buy more apples with the money they no longer have.

The bigger the productivity gain, the worse it will look for them.

Why would you think this?

Lots of products have price elasticity of greater than 1.

Shipping seems like a very elastic industry. If anything, demand would increase by more than 1% for every 1% decrease in cost.

This is because shipping costs if shipping costs are low enough, then you can build something for cheap somewhere else and then ship stuff across the country to high cost of living locations.

YOU wouldn't ship stuff more, but industry would.

IE imagine if something costs 1/3 if it is made in China.

If shipping costs are more then you save, then nobody would ship it. But if shipping costs go down, now you can easy get those cost benefits of across world or across country manufacturing.

Amdahl's law. Shipping is only useful when you have goods to ship. Unless you're selling bricks, shipping is a small portion of the price of most products. Reducing the cost of shipping, which is already a small portion of the price of the product will not result in price elasticity of greater then 1.

> If the cost of electricity halves, will you start using twice as much electricity?

Possibly since not all my cars are electric yet.

You can also see this happening for other resources

https://www.gatesnotes.com/Books/Making-the-Modern-World

There's an obvious difference between various resources. If a cross-country airplane ticket cost $4000, instead of $400, air travel would be much less then 1/10th what it is now. A lot of people will fly somewhere for $400. Almost nobody will fly somewhere for $4000.

On the other hand, if the price of that ticket dropped from $400 to $360, we wouldn't see a 10% increase in passenger volume. The set of people who will fly somewhere for $360, but won't for $400 is tiny.

I posit that trucking is in the latter, rather then the former category. It's already cheap.

> It's already cheap.

I disagree. Given companies like Amazon, it is currently not cheap enough. I would argue that it will take longer before it's 'cheap'. The appetite for 'free shipping' is still growing and it's very different from the demand for airplane tickets. Kind of like with your electricity example, you're missing parts of the big picture.

What's not cheap is the last mile. We're talking about long-haul trucking, here.

For companies like Amazon and Walmart, there's no such thing as cheap enough especially when it's tied to shipping.

Of course you want to cut costs.

But what percentage do trucking expenses make, of their overall sales receipts?

Will their sales double if the cost of trucking drops by a third?

in Walmart's case it would allow them to offer free shipping for even more items. For other companies it would allow them to offer free shipping or better terms for free shipping (i.e. you have to buy less to get it).

Yes I could be wrong but I feel further lowering the costs of long distance trucking would help increase eccomerce sales for retailers which in turn would further increase demand for it

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