The Nostalgic Nerds Podcast
The Nostalgic Nerds Podcast, where we take a deep dive into geek culture, tech evolution, and the impact of the past on today’s digital world.
The Nostalgic Nerds Podcast
S2E14 - When Your Car Says Subscribe
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In 1882, Edison opened Pearl Street Station in lower Manhattan and started selling electricity by the meter. He built the grid, built the appliances that plugged into it, and then tried to build an electric car that would charge off the whole system. The car was never the product. The car was a device that generated demand for his platform.
The battery failed. Gasoline won. And for about a century, the car became the most personal object in American life. You chose the colour. You chose the engine. You turned a key and everything under the hood was yours. Plum crazy purple. Grabber blue. Chrome that caught sunlight and threw it back at you. Nobody was charging you a monthly fee to use your own heated seats.
Marc and Renee trace the full arc, from Baker Electric runabouts marketed to women in the 1890s through Spindletop and the Model T, the muscle car era and its death by regulation, the oil crisis that killed horsepower overnight, and the return of electric with Tesla and lithium-ion solving a chemistry problem that had been open for ninety years.
Then the economics. Dealer margins compressing from 4% to 2%. Software subscriptions running at 40% margins. BMW charging $18 a month to turn on a heating element already wired into the seat. Tesla selling acceleration boosts by removing software restrictions on hardware you already paid for. GM projecting $25 billion in annual software revenue by 2030. Edison figured out the model 130 years ago. The rest of the industry is just catching up.
https://en.wikipedia.org/wiki/Who_Killed_the_Electric_Car%3F Documentary about the EV1 for those interested.
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This one was a request.
Renee:From who?
Marc:Well, my mom, but you know.
Renee:That's okay, moms count.
Marc:Moms count too.
Renee:She really wanted to know the history of cars?
Marc:Yeah.
Renee:Wait till she finds out the first electric car was made just for her.
Marc:I know. Isn't that funny?
Renee:It was a girl car all the.
Marc:Way from the beginning. Yeah, from the beginning. Smell of the storm Look, I've never owned a muscle car, but I can tell you the color of the 1970 Challenger RT that lived in my head when I was 15. Like, you said you liked the Chevelle SS 454. I liked Camaros.
Renee:The 1970.
Marc:1970. I liked the 1969 Camaro Z28 or the SS, and black. But the thing that, you know, captured, you know, my brain so many times is all of the different colors and a plum crazy purple. That was the actual name of that Dodge. And Dodge, you know, had a guy whose job was to name paint colors, I'm sure. And that's what he chose, plum crazy purple. And in 1970, somebody above him said yes.
Renee:So I looked it up. I looked up the Challenger RT in, plum crazy plum crazy purple and it is crazy it almost feels like there should be a big hairy monster driving behind in it you know yeah it's crazy so yeah that's it's it was a bold color and a bold organizational decision i'll give them that.
Marc:Yeah well you know the late 60s early 70s it was a bold era grabber blue i don't know if you looked at some of these other colors they're pretty bright. Dodge is famous. Hemi orange. Yeah, hemi orange. Raleigh green. Oh my gosh, that Raleigh. Oh man, the colors were arguments. Even us just right now, you painted your car plum crazy because you wanted everyone on the street to know you were not interested in subtlety.
Renee:And now what? 80% of new cars are either black, white, silver, or gray. That's it.
Marc:That's it.
Renee:You can get it wrapped any way you want, but your base car is either black, white, silver, or gray.
Marc:That's so lame. Yeah, we went from plum crazy to 50 shades of gray in two generations. Something, you know, something happened here, and I wanted to figure out what happened. All right. So as I said, request, this was a request from someone. So we'll talk about cars, but I think it's not going to be exactly the story that everybody thought it was. So hello, welcome again to another episode of the Nostalgic Nerds podcast, where we talk about the history of technology and what it teaches us about the present and the future. Tonight, we're talking about cars, the full arc of cars from the very first electric vehicles in the 1880s to this will this is definitely going to get renee worked up the subscription gated software locked firmware updated machine sitting in your driveway today
Renee:And the twist is i'm gonna hold that i'm gonna hold my anger to get to that because i got a lot of it and the twist is that the first cars were actually you guys electric the story loops back on itself in a way that i don't think anybody actually really expects. And so the business model behind those first electric cars turns out to be the same business models behind what's happening today.
Marc:This is like, when I started looking at it and thinking about it and kind of untying it all, like, I was like, wait a minute. You know what? It's just history repeating itself over and over again.
Renee:One more time. We're going to write a book one day, Marc, that says, listen, history repeats itself. It repeats itself. It repeats itself.
Marc:So subscriptions and locks and controls, that's the thread I want to follow tonight. It just happens that cars are, you know, the medium here.
Renee:All right, so let's set the scene. In the 1880s and 1890s, the automobile was brand new. No one had decided what the standard should be of what would power it, right? You've got steam, you've got electric, and you've got a little bit of gasoline. I bet if you were like super rich, you could drive a gas car, but everybody else is going to have to find some other way to do it. And the market in 1900 breaks down to roughly this. It's 40% steam, 38% electric, and 22% gasoline. So electric is actually a mainstream choice for you in the 1800s.
Marc:And they're totally beautiful machines. Okay, so it's a little side story here. I've been, I'm sure you've been to the Peterson, right?
Renee:I have been to the Peterson.
Marc:The Peterson's great. Anybody that wants to go to the Peterson, they should go to the Peterson. But when we were in Latvia.
Renee:It is in Los Angeles. It's in, it's in, on Museum Row. They had redone the building like 10 years ago. It's beautiful. And it's got all kinds of cars in it. Great. So yeah, definitely go.
Marc:Definitely go see the Peterson. This isn't about the Peterson. When we were traveling in Latvia, Riga of all places has an excellent automobile museum. Like crazy good so they had yeah i know you're giving me like looks like riga a population of like what six or seven hundred thousand the capital of latvia and it has an excellent automobile automobile museum but they have some really yeah cool early stuff
Renee:So before we before we go on i i was doing the bourbon trail and we decided we were going to go to bowling green and there's there's no reason to go to bowling green unless you're going to go to the corvette museum And so we decided we're going to go to the Corvette Museum. And the only reason I wanted to go was because they had a sinkhole. So I wanted to see the sinkhole, right? And so we go there, and the guy in the museum is like, oh, my God, are you here to pick up your Corvette? Because that's what you do. You go to Bowling Green. You get your car. They teach you how to drive it so you don't kill yourself. And then they send you on your way, and you drive it back to wherever you're from. And I looked at him, and I said, no, I came to see the sinkhole. He's like, seriously, really? I'm like, yeah, yeah. Where's the sinkhole? He's like, all right, come on. And so we go and it's covered in plexiglass now. So the sinkhole is literally still there. You can see it. But the greatest part of that is these really priceless and classic Corvettes were in that hole. And they pulled them out and they put them back on display, all mangled and dirty and nasty. Yeah, they're just mangled, right? And next to them is a sign that says, it's still faster than your Mustang. There you go. But go to Bowling Green, too.
Marc:I'll have to check that out. So Bowling Green, Riga in Latvia, and the Peterson in L.A. There you go. So electric cars were really high-end. They were beautiful cars. Baker Electric comes out of Cleveland. Great runabouts. You should check some of these pictures out. They're really cool. No gears, no hand crank. We'll talk about cranks in a little bit. No exhaust, no vibration. They're quiet. They're clean. They're refined. And a Baker runabout cost about$1,600 in that time money. A Stanthorpe went up to $4,000. Now $4,000 in 1900 or 1901 or early 1900s. That's roughly $140,000 in today's dollars. Detroit Electric ran from 1907 to 1939. 80-mile range. That's pretty good for like 100 years ago. Over 38,000 electric vehicles registered in the U.S. by 1912.
Renee:So there's a marketing angle here that shaped the whole trajectory. Electric cars were marketed specifically to women. They were parlors on wheels.
Marc:Oh.
Renee:Oh, they had mirrors in them. Probably someplace to put your lipstick because they thought more about us then. Right? No hand crank, which caused real injuries and death. And listen, I just want to talk about this for one minute because you would crank the car, right? The engine would move. But if it backfired and it did a lot, that crank would go just as fast backwards and people would just get hit in the head and killed. Like killed. You're lucky if all you did was break an arm. Like you got away with your life in that one. Like these things were deadly. Deadly. Deadly. Yeah. So there's no gear shifting because I guess, you know, I can't drive a stick, so I would appreciate that. And then clean operation. And the advertising worked. Women bought them, and in doing so, it coded electric, Likes a Subaru. It's a girl car. It's a domestic choice. Gasoline became the masculine. It's adventurous. It's like, oh, I'm a Jeep. And then, you know, and then this was, you know, a Subaru. And that framing stuck for a century. And EVs are still positioned as the responsible.
Marc:Responsible.
Renee:Yeah. Or liberal car. I mean, the language is different, but the brand positioning is still the same.
Marc:Right?
Renee:So where does Edison fit into this, right? Like Edison shows up, right? Where does he fit in?
Marc:Yeah, okay. So Edison is the key on the electric side of the thing here. So in 1882, he opens Pearl Street Station in lower Manhattan. The first commercial power in the United States. Okay, six dynamos, 400 lamps, 82 customers. Now, that doesn't sound like a lot, right? But 1882, Pearl Street.
Renee:We all start somewhere. We had 82 listeners. Remember how happy we were?
Marc:Yeah, exactly. Yesterday. Now we have 182. Look at that. But he built the entire system. The generator, the underground conductors, the meters to track consumption so he could build by usage. Like that's And I wonder if there were, and I didn't look too much into competing, you know, players at the time, but I wonder if his idea around, you know, meters and usage charge was different than others, right? Like, you know, if they just generated and it was like water and you turned on the tap and, you know, it came out. I don't know. I'd have to look into that later. We should, maybe on our smart meter when we talk about smart meters.
Renee:Oh, there you go. Another thing that makes me blind with rage.
Marc:Anger. But that was a very clear innovation, right? Being able to track consumption and build by usage. All the fixtures, the wiring, he modeled it on the gas lighting infrastructure that already existed in cities. And then he needed people to use more electricity. Light bulbs only ran at night during the day. The generators are idle. So he started building things that consumed electricity during daytime hours. Like we think about like, oh, these, oh, of course we have all of these conveniences through electricity. Right. But no, it's because Edison made these things to use the grid that he built. All these electric motors, fans, you know, appliances, all of that built at his Fort Wayne factory.
Renee:And of course, the marketing followed. Of course. So Boston Edison opened a suburban retail store selling electric equipment. They staged demonstration, the farm of Edison Light and Power, the colonial house of Edison Light. Right. It's like the same thing that Amazon tries to sell you with the smart home. Like it's all the same, right? Built the platform and the market, the devices that run on it, right? He was selling the razors to sell the blades. And in the early 1900s, Edison starts working on batteries for electric cars. He and Henry Ford were close friends. And by 1914, Ford announced plans for a joint electric vehicle, 1,100 pounds, 405 pounds of batteries.
Marc:Oh, my gosh.
Renee:Oh, my gosh. and priced at $600, an electric car for the everyman, or at least everyman's wife.
Marc:Right? There you go. There you go. So what went wrong on this brilliant idea?
Renee:The battery. So, okay, so Edison used nickel-ion chemistry. Nickel, I don't want to get any of this wrong, so let me read it slowly, like a child. I wish it was phonetically spelled, if I could be honest. Hydroxide cathode, iron anodes, potassium hydroxide electrite. These cells were nearly indestructible. Some of them lasted like 40 years, right? But they had high internal impedance, which means resistance inside the cell itself. When you try to draw on the current quickly, which is what the car needs to do to accelerate, the voltage drops. The battery couldn't deliver enough current fast enough. It was a brilliant storage device and a poor power source. And the car never shipped.
Marc:But Clara Ford, Henry's wife, refused to drive his gasoline cars. She drove a Detroit Electric from 1908 into the 1930s, a 1914 Model 47 Bro-Am. 80-mile range, tiller steering, 3,636 pounds with batteries. So it's pretty hefty. Yeah. And that car is in the Henry Ford Museum in Dearborn, Michigan. The man who built the gasoline car that I, like, defined America couldn't convince his own wife to drive one.
Renee:If I had to crank it, I wouldn't do it either.
Marc:No kidding, right?
Renee:I don't want to die. Like, if I can have this other car that's perfectly fine, I'm good. And if that Ford Edison electric car had worked, every one of them would have charged off of Edison's grid, right? So he would have both made the razor blade and the razor. Like, why not? The car was a customer acquisition strategy for the grid.
Marc:Yeah. Like, how many times have we talked about this whole customer acquisition strategy? Like, it repeats over and over and over again. And so every single time, the car was a load on Edison's network, metered by Edison's meters, generating revenue for Edison's utility. So just remember, we're going to come back to this whole, like, you know, generating, you know, recurring revenue.
Renee:Okay, so what killed the electric car?
Marc:All right, three things, you know, kind of one, one, one, you know, one, two, three, over about 12 years. All right, so the first thing, Spindletop, January 10th, 1901, near Beaumont, Texas. What do they do? They strike oil. 100,000 barrels a day for nine straight days. More oil in one day than all of the world's oil fields combined at the time. Gasoline goes from scarce to cheap, and filling stations start appearing. The fuel infrastructure problem for gasoline basically solves itself. Okay, number two. The Ford Model T. In 1908, mass production pricing. By 1912, a gasoline car cost $650. An electric roadster cost $1,750. That's like more than twice. So the price gap put them in different economic classes entirely. All right. And number three, the electric starter.
Renee:Oh, right. You don't have to crank it anymore.
Marc:That's right. That's a good point. That's a good point. Charles Kettering, Dayton Engineering Labs in 1912, first sold on a Cadillac because, of course, on a Cadillac. Before that, you know, you had to hand crank. We talked about that, how dangerous it was, broken arms, broken wrists, broken heads. Yeah. So Byron Carter, a friend of Cadillac founder, Henry Leland, died from injuries related to a hand crank. And his death directly motivated the project.
Renee:Yeah, look, it has to kill one of their own before. I know. Maybe this is dangerous.
Marc:Maybe. That's true. Yeah. Well, you know, I didn't spend much time on the regulatory side, but, like, it's got to be like somebody died. Many people died.
Renee:Yeah, it didn't matter. Look how many people got thrown off horses and killed. Nobody regulated that either.
Marc:Yeah, I know.
Renee:It was the Wild West of whatever.
Marc:Yeah. Right. Yeah. All right. So, but, you know, you can start a car with a key. that that practical advantage of the electric car basically is gone at that point.
Renee:And only 35 percent of American households had electricity by 1920, which is another reason why you wouldn't have an electric car. If you lived outside a city, you couldn't charge it. By 1913, electric cars held one percent of the market share from 38 to one percent. Years. That's a collapse of a market. That's a collapse.
Marc:Yeah, that's Nokia versus iPhone right there. Yep, that's it right there. The same battery chemistry problem that killed Edison's car kept electric vehicles dead for 80 years. The technology didn't come back until lithium-ion solved the impedance problem in the 2000s. 80 years waiting for the right battery tech. And for most of the 20th century, the car was the most important cultural object in American life. Freedom, independence, self-expression. You could leave your town.
Renee:I want us to remember that. Freedom, independence, and self-expression. Because we're going to need that later, too. Go ahead.
Marc:Yeah, I know. I know. You could leave your town in a car. You could go to somebody else's town in a car. You can leave your class. Route 66 ran 2,448 miles from Chicago to Los Angeles. Have you ever done the whole route?
Renee:I haven't, but I want to.
Marc:Yeah. I've done huge portions of it, but not all at once. So definitely want to do that. The road was the physical symbol of the promise.
Renee:After World War II, returning veterans brought mechanical expertise and an appetite for speed. By the 1950s and 60s, the parking lot was a social stage. Your car was your identity card.
Marc:Yeah, I don't think people, I don't know. The post-war, you know, there are a bunch of GIs. They're like World War II, huge mechanization. I can't remember which episode we were talking about this, but huge mechanization. Cars, tanks, planes, you know, all of that stuff. then there are a lot of people that were working on that stuff and they all come back home and what do they do? They go to their garage.
Renee:Why can't I have a Jeep? Exactly. Why can't I have a Jeep, right?
Marc:Exactly.
Renee:And I think if you're a young person listening to this, American Graffiti. What a great movie to watch. Right. Call car culture back in the day. Right. Like that. That's even I as a high schooler, like we would we would go down the main drag of South Park. Everybody would have their nice cars parked out in the parking lot. You'd pull in, run around talking to everybody. And then you get like it's car culture was a real thing. And I know it doesn't seem like it anymore, but I went to a car show not too long ago. But I know it doesn't seem like that anymore, but it really was a huge part of our lives, even in the 80s. We were still doing that stuff.
Marc:Yeah, yeah. So let's talk about kind of the mid-century here, you know, post-war era. So Pontiac does something kind of, you know, reckless in 1964. Imagine that. What? A car company doing something reckless? No. John DeLorean, yes, that DeLorean, and Bill Collins took the 389 cubic inch V8 from the full-size Grand Prix and dropped it into the lighter Tempest, the Tempest Le Mans body.
Renee:That thing's a Landshark. You ever been in a Le Mans, a Pontiac Le Mans? That thing's a Landshark. It's unbelievable. What a great car.
Marc:Great car, but it doesn't turn into the Landshark until, like, 67 or something like that. In 64, it was small. Like, it's not small by today's standards, but by 1964 standards, yeah, it was, like, a foot shorter than, you know, like, the Impala or something like that. Yeah.
Renee:Yeah, from the 1950s cars, like the 57 cars and stuff like that. Oh, yeah. Those were really, they were both.
Marc:Right? Huge. Yeah. And thick steel.
Renee:Yeah, right.
Marc:But that Tempest Le Mans body, 325 horsepower, GM policy limited intermediate cars to, can you imagine, company policy at the time? Like, it's just interesting. Anyways, GM policy limited intermediate cars to 330 cubic inches. They found a loophole and offered it as an option package instead of a separate model. Yeah, of course. So they capped the initial production at 5,000 units. They sold $32,450, and that became the Pontiac GTO.
Renee:Oh, what a great...
Marc:I know. That was kind of the beginning of the muscle car era.
Renee:And the advertising that followed was unlike anything the auto industry had done before. There weren't ads about safety ratings and fuel economies. Pontiac called the 1967 GTO viewing an uncontrollable urge. Urge, right? Chevrolet introduced the Camaro SS as a fiery new creation. Plymouth used the Roadrunner cartoon character as a getaway driver. The brands were selling rebellion. They were selling youth and speed and danger. Every ad was an identity proposition. Buy this car and you become this person.
Marc:What's Snake?
Renee:You guys fell for all of it.
Marc:I know, Snake and the Simpsons, right? He drives us the hot rod. The design language matched the advertising, too. Hood scoops. Chrome that caught sunlight and threw it back at you. Wide, low stances. Racing stripes. Yeah, bisecting the hood. And the paint colors, right? The names of the paint colors. Plum crazy purple, grabber blue, hemi orange. You didn't buy plum crazy purple to blend in.
Renee:You did not.
Marc:No. I mean, it was really popular when I was in high school to have, like, one of three types of cars. One was a Volkswagen Beetle because they were cheap and they were easy to work on. And you could, like, literally, like, lift the motor in and out with, you know, two strong dudes.
Renee:And Pretty in Pink. Like, Pretty in Pink made you want to have one of those, for sure. Yeah, right. Like, John Hughes movies made you want that car.
Marc:Yeah.
Renee:Yeah.
Marc:And then the second group was, because I was, you know, going to high school in the 80s and the 90s, and so it was the Japanese, you know, import scene, lowered Civics and lowered, you know, Acura Integra and, you know, the 240SX, the Nissans and the big... You know, the, the big mufflers that made all the,
Renee:Oh, the glass parts that made them.
Marc:Yeah. They made the, yeah, they made the funny noises. We, we, we, you know, the, all of that. And then the third group was, you know, American, you know, kind of big V8s and, you know, the looping, you know, that's what I had. I had a big old Chevy, a 73 Chevy with a, you know, giant 350 in it, but it was, it was, there was definitely a Landshark car. It wasn't a muscle car or anything like that, but it was, you know, it was like a sedan, like a luxury sedan kind of, and it floated.
Renee:Yeah, well, those did. I remember I dated a guy who drove like a, it must have been a 70-something Cadillac. It was so big. It was so big. And it was, and you just like, and it kind of floated down the road. It was ridiculous. Yeah. I don't know how much he spent on gas. It was a lot. It was a hilariously big car. I think his parents thought if I make him drive this, like, he won't go anywhere. And it didn't work. Yeah.
Marc:I drove mine. I drove mine, like, I think we had just graduated. And I drove my car, you know, from Southern California to Berkeley to go visit some friends at UC Berkeley. And, like, that's like a 500-mile drive on, you know, a car that does eight miles. Yeah, it does eight miles of the gallon, you know.
Renee:It has, like, 20-gallon tank and gas was $1.50. a gallon so yeah definitely you.
Marc:Know yeah it's crazy
Renee:All right. So movies picked it all up and amplified it. Bullet in 1968, Steve McQueen in a Ford Mustang GT fastback. Like that's, you know what, that's whenever I think about like muscle, I think Steve McQueen every time. Of course. Yeah, Steve McQueen, right. American Graffiti, 1973. George Lucas filming Cruising Culture in a small town, California. That film landed during Vietnam and Watergate, and it triggered a wave of nostalgia for something that already by that time, it felt like it was gone, right? And Hollywood and Detroit were running parallel brand campaigns. The car manufacturers were selling a fantasy, and the filmmakers were selling the memory of it all. And we're big nostalgia fans, right? It's a drug. Nostalgia's a drug.
Marc:It's a total drug. Right?
Renee:So I can see why it worked.
Marc:Yeah, you know, I do have a lot of nostalgia for that. And once in a while here in the UK, like we do go to a car show like once a year or so. There's a big one at Leeds Castle. And we'll usually go to that. And one of the kids really likes cars and stuff. And we'll see the big American cars. But there's some other British cars that were not quite so big but still pretty beefy and stuff. There was the jensen interceptor and the shelby cobra right which is you know kind of kind of the same idea was the the amc that that shelby bought those those cars from and then slammed a giant you know giant motor in them but you know here i mean i live on a on a road that's like if you drive faster than 30 miles an hour, it's a death trap, you know, so you can't, like, it's not practical. Like, why would you, why would you have a car like that? You know, it, it's, it, yeah, there's no, there's no point. And then, and then gas now is. I don't even know what it is right now. You know, diesel is, you know, hugely expensive. You know, we pay by the liter here, not by the gallon.
Renee:Right, right. And that's why yours always seems like it's way more expensive, but it's technically probably not. Like right now, like in this moment in California, diesel is, last time I drove past Shelly's, which is on an Indian reservation, which means it's a full probably $2 cheaper than anywhere else. Yeah. It's already almost $8 a gallon. And so, like, yeah, for diesel. And so, yeah, I mean, like, and those trucks, I mean, my God, like, it takes a lot to move those trucks. And when they're full, it takes even more, right? So I can't imagine how mad those folks are at the moment. And actually, Tesla just rolled out their semi truck. And, like, the truckers were like, this is fantastic. I'm like, is it you guys? Is it? Or is it because it's $8 a gallon right now? If it went back down to $4, would you be this excited? I don't know.
Marc:You can't carry anything but the lightest of loads in those things.
Renee:Well, yeah. Budweiser, okay, I got to say this. Budweiser put a one-mile road between the distribution center for the beer and the brewery. And they thought autonomous vehicles should be able to drive that straight line back and forth. Of course. Yeah. And so Tesla's like, we'll take that deal. Like, we'll do it for you. They're like, fantastic. And they realized, nope, it doesn't actually even make it one. And it makes it one way. They have to charge it to send it back, right? So by the time they get it packed up and they come back, they don't have to charge it again. And they've said, you know, maybe, maybe if it had Fritos in it, it would work. But it doesn't. It has heavy beer in it. Eggs. Like, it doesn't work. So, yeah, I mean, there's a lot to be said for figuring that out. You've got to figure that out, right? Because it can't be that heavy. All right. So in October of 1973, OAPEC, the Organization of Arab Petroleum Exporting Countries, which is different than OPEC. The other oil you know exports in the u.s over the yom kippur war so gasoline goes from 30 cents to a dollar 20 a gallon in 1973 dollars in 1973 right this is why everybody talks about the 70s like they were like oh my god it was like the depression yeah when it went from 30 cents to a dollar 20 a gallon so i.
Marc:Wonder what's happening today
Renee:I know yeah could it be could.
Marc:It be a war
Renee:I don't know A muscle car getting 7 to 13 miles a gallon Costs $24 To fill up Adjust for inflation today Today That would cost you $160 Right, Yeah, I don't know if a Chevelle is worth that.
Marc:I don't know. Okay, okay. Your Chevelle SS big block, you know, the 454. Like, if you had...
Renee:650 horsepower. That thing is crazy.
Marc:I mean, yeah, if you put stacks on it or anything like that, I mean, it's going to get crappy gas mileage. And you're going to have...
Renee:Oh, it's like that Simpsons episode where...
Marc:The Candid Arrow.
Renee:No, no, that one too. But no, what's his name? castle no when.
Marc:Oh reinhardt yeah well yeah yeah yeah yeah faint he
Renee:Shows up and martin's dating his daughter and he pulls up in the in the hummer and marge says my god like what's that mileage he's like zero city one highway he goes.
Marc:What's the what's the line what's the line of the canyon arrow song i can't even remember oh gosh i can't i love the candy and arrow song anyway anyway so so the clean air act is signed by nixon nixon of all people in 1970 and it mandated a 90 reduction in vehicle emissions by 1975 catalytic converters smog pumps Yeah. Retarded ignition timing. The Pontiac 455 V8 went from 310 horsepower in 1973 to 200 horsepower in 1976. Same engine strangled by regulation. This is, you know, one of those times that regulation, you know, is really doing the strangling. Then the CAFE standards in 1975 requiring fleet fuel economy averages. So that meant everything had to get better across the fleet.
Renee:Want to hear the death toll by the end of 1974? GTOs canceled. Challengers discontinued. Barracuda dead. AMC Javelin shelved. SS, the Chevelle SS option, that 650 horsepower beauty dropped like a hot potato. That was it. It was the death of the muscle car, really. Yeah, yeah.
Marc:So, yeah. So what happens next? Japanese imports, they fill the vacuum. The Honda Civic, 40 miles to the gallon. The Toyota Corolla, you know, it's reliable and it's cheap. The Datsun 240Z proved Japanese cars could be fun too, right? This much smaller body, you know, much lighter. By 1975, Japanese imports outsold muscle cars three to one. And American car culture lost its argument, basically, right? The case for excess collapsed against $1.20 gasoline per gallon and emissions law.
Renee:And again, the advertising pivoted overnight. The same industry that had been selling rebellion and horsepower started selling responsibility and mileage. Toyota campaigns on reliability. Honda ran campaigns on efficiency. The entire emotional register of automotive advertising, it totally collapsed in like 18 months, right? Do you remember.
Marc:Some of those commercials? Like, I remember the, you know, when I was, you know, young kids, the Toyota and Honda commercials, you know, they're all like, they're very clean. You know, and it's the car. And there's a person. They open the door. There's a family. And it's all responsible. And it's all nice.
Renee:Grown up.
Marc:Yeah, it's grown up.
Renee:Ew.
Marc:Yeah.
Renee:Yeah, yeah, yeah. What followed was 30 years of convergence, right? Through the 80s and 90s, cars became reliable, efficient, and, absolutely forgettable. The SUV era gave Americans the V8 and the commanding position in a family package. Tahoe. I love a good Tahoe. You know what? I love driving a Tahoe. That thing's a tank. It's so big. It's ridiculous. I really like it. The expedition, equally gigantic. But the trend kept going toward sameness. They all started to look the same.
Marc:Man, my wife misses her expedition. We had three expeditions.
Renee:That's right. You guys drove one. Yeah. Yeah.
Marc:Three of them. Aerodynamic testing converges every manufacturer on the same shapes. And if you compare a 2023 compact SUV with the badges removed, a CRV, an Equinox, a Rogue, a Tucson, they all look the same. And the color palette, that tells a story, too. In 1996, about 40% of cars were monochromatic, black, white, silver, gray. By 2016, 80%. Gray recently overtook white as the most popular color globally. The market optimized personality out of the product.
Renee:So we drive Lexus. So the RX was silver because, you know. And then the NX. silver is just fancy gray i know right and then the nx was like candy apple red it was and it was metallic it was a metallic candy apple red so it was really good this one is metallic but it's a really really dark gray almost black so and we live in a desert that was a bad pick i would if i did it again it would be white just a white car because at least it wouldn't get as hot yeah but you're right i mean it kind of all just went by the wayside you can't, I mean, you could get, I guess you could special order something.
Marc:You could special order something.
Renee:You want a crazy color? You have to buy a Bentley. Like, they'll still let you pick it off a color wheel. Like, you'll sit there with somebody and pick, like, I needed a little bit more blue. And then it's registered as your color. And if anybody else wants that color, they have to ask your permission to use it. It's crazy. You want to do that kind of crap? Buy a Bentley.
Marc:Can't afford one?
Renee:I don't know what to tell you. All right. So in 1996, GM launches the EV1 in response to California's zero admission vehicle mandate. 1,117 were built over three years. Lease only. Drivers really loved them. And in 2002, GM recalled them. And by 2004, they retrieved all of them. Most were hauled to Mesa, Arizona and crushed. A group of drivers offered $1.9 million to buy the last 87 cars and GM refused.
Marc:Yeah, that's a, yeah. Yeah. There's a good documentary about it. I don't remember the title. I don't remember if I put it in the script or not, but there's a good documentary about it. So, okay, we got the EV1, then Tesla, July 1st, 2003. They're incorporated by not Elon Musk, people.
Renee:Not Elon Musk. He didn't build that car.
Marc:Yeah. Martin Eberhard and Mark Tarpening. Their insight came from watching Palo Alto, wealthy residents, park Priuses next to sports cars. The question was whether one car could be both.
Renee:And the answer was lithium ion. Everhart and Tarpening had experimented with lithium ion cells from building an e-book reader.
Marc:An e-book reader.
Renee:I know, right?
Marc:An e-book reader, people.
Renee:They're like, hang on a minute. When we turn it on, it turns on. Why wouldn't that work for a car?
Marc:We could put wheels on it.
Renee:Right. How is it any different than have a light bulb? Let's put wheels on it. Like, I don't see how it's any different. Right. They asked AC Propulsions to build a car using lithium ion instead of lead acid. And that was the decision that mattered. Edison's nickel ion battery had high internal impedance. Lithium ion doesn't. It can deliver current fast. It can discharge rapidly without the voltage collapsing. The problem that killed electric cars in 1914 was, in the end, a chemistry problem. that took 90 years to solve.
Marc:Yeah. So go back and listen to the battery episode if you want to learn all about batteries, battery stuff. So 2008, Tesla has the first Roadsters delivered. 245-mile range, pretty impressive considering, you know, 80 was where we were at before. Zero to 60 in under four seconds and just under $100,000, $98,000 sticker price.
Renee:And Tesla, at least in the early years, understood something that most people missed. I didn't miss it. I said the whole time, they're not building a car company. They were building a battery company.
Marc:Right?
Renee:If you built the battery technology, what are you going to do with all of it? Hey, well, we got a car. Let's stick it in there. Like, that doesn't sound crazy to me. Sounds really smart to me, actually. The car was the delivery mechanism for the battery technology, the gigafactory, the power wall, the solar roof, the supercharger network. The car sat at the center of an energy ecosystem. They sort of lost the thread over time. They thought they became a car company. But if you listen to Musk really early on in his career, he would have told you there are three things that haven't been disrupted as an industry in 100 years. Like one was battery technology right one was electric was rocket technology so he wanted to figure out a better way to build rockets because that hadn't been disrupted in a really long time right i forget what the third one was but like those were the two things where i thought well maybe he's on to something right maybe yeah maybe if we all go electric the only battery you will ever buy is a tesla and and then that blew up so i don't they lost the threat over time but That's why they made so many of the early decisions the way they did when they gave away the patent to the car. I don't think he thought, I'm going to be a car company. I'm going to sell every car company that battery. And that's why he gave away the car patent. That's crazy. He gave it away. He was like, I don't care. Anybody can build one. That's not how I make money. Except now that's how he makes money. So I don't understand any of it.
Marc:Well, now it's a shell game, you know, of, you know, Twitter, XAI, SpaceX.
Renee:I can't.
Marc:Some other time. Some other time. Shut up. Edit out. Where's the edit button? But, like, you know, basically building the platform and the stuff that runs on it, right? That was Edison's model. Build the platform and then sell the devices that run on it.
Renee:So same architecture. It's just 120 years apart.
Marc:Yeah.
Renee:Nothing's new.
Marc:We say this all the time. All right. But the car that comes back, you know, during this period of time in our kind of modern era is a fundamentally different object. An internal combustion engine has thousands of moving parts, pistons, valves, camshafts, crankshafts, timing chains, fuel injectors, exhaust manifolds, you know, just thousands of parts. But an EV motor has around 20, 20 parts. When that much mechanical complexity disappears, the thing that differentiates one car from another, that's the thing that changes. It moves from the engine to the software. The car stops being a mechanical object you can open and understand with a wrench. It becomes an electronic device that receives firmware updates while you sleep.
Renee:And that changes the economics completely.
Marc:Yeah. So I've done a ton of research in automotive manufacturing as like a use case because I love looking at manufacturing use cases. And so, you know, the cost of a car is the cost of a car. And, you know, you break it down and there's things that are higher margin and lower margin. New vehicle gross margins at the dealer, they've compressed from about 4% to 2% over the last seven years. Manufactured net profit per vehicle sits around 5% to 7.5% industry-wide. Tesla's automotive gross margin hit 13.6 in Q4 of 2024, down significantly from a few years ago. But you see that it's like double, essentially, what the rest of the industry is. These margins are under constant pressure. This is why Tesla is valued so highly. And, you know, when you say, why is Tesla stock going through the roof, right? Well, it's because of this gross margin thing. has nothing to do with Toyota sells more cars or not. It's because there's more margin.
Renee:By billions of dollars, though.
Marc:Yes, I know. I know.
Renee:Like tens of billions of dollars.
Marc:I know. I'm with you. I'm with you. It's stupid. Why is it stupid? But that's the reason, these margins. The competition, though, on EV, you know, the transition costs, raw materials, there's a ton of pressure there. So everybody is feeling it. And the physical car itself is becoming less profitable. to sell every single year.
Renee:Now compare that to software. Automakers are launching subscription bundles at $10 to $25 a month with incremental margins exceeding 40%. GM's OnStar has 12 million subscribers. OnStar's margins exceed 70%. The margin on software is three to four times the margin on the car itself, which is... I'm nuts. Go ahead.
Marc:I mean... Yeah, I could see why it's attractive, Right. GM projects 20 to 25 billion in annual. A car company is projecting 20 to 25 billion in annual software and services revenue by 2030. The subscription-based automotive feature market is projected to grow from $1.8 billion last year to $12.5 billion by 2035. So nine years from now, it'll basically increase tenfold. And that's where this whole business model pivots.
Renee:I guess I would wonder what took them so long, right? Like it didn't – we in IT figured out like, oh, infrastructure, cloud.
Marc:Outsource. Get rid of it.
Renee:Yeah, like, just get rid of it. We'll buy it on subscription. Like, we'll buy what we use. Like, like, let's not let's not. Why do I need to own it? Right? Like, it took them another 20 years to get to the point where they were like, hang on a minute. Why don't we get in the software business instead of the hardware business? We'll make way more money. Right. And so like, I get it. What bugs me is. I can't believe you're making me do this part. July 2022, BMW announced a heated seat subscription. I can heat this.$18 a month. The hardware is already installed. The heating element is already in the seat. The wiring's connected. They disabled it in firmware and charged you to turn it on. Want your seat to get hot? It's going to cost you $18 a month. Unless you have a big butt and eventually your seat will get hot anyway, because that's what I would do. I would stick my big butt in that seat and just let it get hot by itself before I would give anybody $18 a month to heat my seat. No. They reversed it in September 2023 after global backlash. They didn't even get a letter from me, but they should have. Board member, I don't know, Peter Nota said, perception is reality. From a brand risk perspective, the damage was enormous. I'm glad they figured that out.
Marc:Yeah, duh.
Renee:Me. Ask me. I'd have told you. Right? But the business case was sound. The decision made it through product, legal, and executive sign-off. The customer reaction killed the specific implementation, but the underlying economics haven't... I swear to you, they were like, it's an extra $4 for headlights. I think that'd be it. That'd be it. I would bring a crowbar and blow out every headlight in that lot while everyone was asleep one night. You see how people become vigilantes? Like, this is not...
Marc:Well, if you think about... They did it with heated seats, right? And there's other examples, right, that we'll talk about. But heated seats. Like, you don't need heated seats to be a safe operating car, right? They're not going to charge you, or at least I don't think they're going to charge you to run headlights, right? Because that's a required safety feature on a car. So regulators would, like, there's no way, right, that they would say.
Renee:But my stereo isn't. Like, my stereo isn't.
Marc:Yes, agreed.
Renee:You would buy the upgraded to the package because you wanted the Bose sound system. Well, now the Bose sound system's installed. You just can't use it. You can use the crappy two speakers at the front. Like, what? No.
Marc:Can you imagine? You got like 50 speakers installed and you can only use two unless you're paying 50 bucks a month or whatever. Yes.
Renee:Yeah. Suck it. Like, that's where I'm at with that.
Marc:Talk to me about, okay, because I didn't put this in the script, but talk to me about like brand promise, brand perception. Brand risk right bmw experiences is firsthand right here but like like for me it goes from i own the car the freedom the self-expression right
Renee:That's it and then that's it that's the brand promise you're free it's yours this it it it represents you yeah that's the brand promise And then what happens?
Marc:Yeah. Then the promise is broken.
Renee:There you go.
Marc:Because I got to pay for freedom. I got to pay for self-expression. Like... I don't know.
Renee:You broke that promise. And so now you have you've ended up with, you know, brand risk that you probably didn't need. And you have a customer who's angry at you and is probably won't renew that car when it comes off lease. Right. They're going to be like, you're nickel and diming me to death. I'm not interested in this. It's your car. It's not mine. Clearly, otherwise you would have given me all this. Right. You broke that promise. So what you did, what you said, what you sold me on and what you delivered me did not overlap. When they overlap 100 percent, I bought a Subaru. My Subaru and my dog are happy together. Like, and as long as that's true, you kept that brand promise. Right. But when you say to me, you're buying a performance luxury car and then you tell me it's going to cost me an extra three hundred dollars a month to make it luxury. You broke that promise and you broke it hard. And that's not a risk you actually want to have. And you're right, they did actually, they experienced that firsthand, but apparently they're going to stick their hand on that stove again and again and again. And I don't, I get it, but I don't get it.
Marc:Like, I don't think they've got much choice, right? If your business, your core business is going from 4% margin on your product to 2% margin on your product, like what are you supposed to do?
Renee:Charge more?
Marc:Like, you know, that's just going to lose, right? Consumers are going to reject that. Cars are already like the second most expensive thing that they'll buy.
Renee:Yeah. And it depreciates so quickly that it's not even a good investment. You're just throwing the money away. You're not investing it in anything.
Marc:Yeah. Nobody wants to buy a new car. I even saw an article like this morning. I was like, oh, this is good. A guy had a car, it was like a 2023 or something like that, and I can't remember what feature it was. Oh, it was this garage door opener. His garage door opener had a little button on the visor, the sun visor. Yeah, yeah. And you could program it to do that. His car gets totaled, and the insurance replaces it with a new one because that's what happens with insurance. Guess what? the car door opener feature is now locked behind a subscription.
Renee:Oh, no.
Marc:I know. I know. I know. Poor dude, man. I would lose my mind.
Renee:I would lose my mind.
Marc:I would totally lose my mind. I would totally lose my mind. I don't even know what to think about that.
Renee:But here's the problem. I bought it. I bought it. You shouldn't be allowed to turn things on and off in it. I bought it. If you don't want to sell me the car and you say, I want to lease you the car, or you can borrow the car, And if you want to borrow a luxury one, I'll send that one over and you'll pay more for it. And everything will be open on it. Like if that's where we're going, again, you can suck it. I'll go find a 70 Chevelle and pay a billion dollars in gas for it. I don't care. I'll crank my own windows. I don't care. I'm going to rebel on that one. But like this idea that you can monetize a car by usage is really short-sighted and dumb.
Marc:It's really weird, isn't it? It's like. Yeah. It's like buying content. I thought it should be seriously fired.
Renee:It should be like a couple times fired.
Marc:You're not actually buying a Nissan, you know, a Maxima. You're buying a license for the Nissan Maxima.
Renee:No. I can't.
Marc:It makes you crazy. Yeah. Tesla does this too, right? They sell cars with battery cells physically present, but software locked. Standard range models use the same battery packs as long range models. I can understand the thinking, right? The cells are in the car. You paid for them. You can't access them. A thousand bucks for 30 extra miles. 1,600 bucks for 50 acceleration boost. You want that? 2,000 bucks. The Model 3 goes from 4.2 to 3.7 seconds, you know, 0 to 60. And that's a price. It's not any change in the platform itself. The motor and battery can already do it. You're just paying somebody to remove a software restriction on hardware that think you own.
Renee:Toyota charged $8 a month for remote start. It's a key fob function that uses radio waves. It doesn't require an internet connection or anything like that. They called it unintentional effort. Everybody got mad about it, right?
Marc:Eight bucks for remote start a month? When do you actually remote start your car?
Renee:Oh, so I do it a lot.
Marc:Really?
Renee:It's on an app. I do it a lot. Well, because we live somewhere where it's hot. And if I can remote start it and turn the air conditioning on. Okay. It's actually not a bad idea. And when it's cold, you could do the same thing. Like it's not, it doesn't seem, but I wouldn't pay eight bucks a month for it. I'm going to touch it right now. I would not pay eight bucks a month for it. They called it unintentional after everybody got really mad at them. And then Mercedes charges eight, 489 euros a year for real rear wheel steering. So you can park like you for what? Parallel parking. That's all you would use.
Marc:No it is okay it is a it is a fancy feature right it's where the front tires and the rear tires are turning so you get tighter radius and stuff like that but yeah but but the mechanics are there in the car it's in the car that's
Renee:My problem like so what they're locked until i pay for it like you can suck it again you can suck it and then volkswagen will sell you 20 extra horsepower for For a mere $16.50 a month at $16.50 a month.
Marc:Yeah.
Renee:Like $20. Yeah. So if I wanted $40, is it twice as much? If I wanted $80, is it twice as much as that? I don't know. I hate them all. I hate them all.
Marc:I hate them all. All right. I know. I know. And there's a data layer on top of all of this, right? About 90% of new cars collect driving behavior data. We talked about this the other day, right? Lexus is installing the cameras all over inside the cars, right, to look at you. Speed, acceleration, braking patterns, time of day, location. It's a smart meter. It's a smart meter in your car. This flows to data brokers like LexisNexis and Verisk, who build driver scores that insurers buy to price your coverage. In 2023, the FTC ordered General Motors to stop selling driving data to third parties. A five-year ban. The fact that it took a federal order tells you what the default was.
Renee:Right. But it's OK. So what do we always say? Like, OK, except they're going to weaponize it in 10 minutes. Right. So now it becomes, Renee, your dogs are loose in the backseat. That's bad for your ability to pay attention to your driving. And we're going to tell your insurance company and now your insurance rates are going to go up. Like, that's the crap that makes me mad. Like, if I had it in case there was an accident or I had it in case someone robbed me or stole my car, we can watch the guy drive it away. Like, maybe, right? Maybe if it helps law enforcement. But no, no, I don't trust any of them to do anything good with any of it, period. All right, there's a documented case from 2020. The original owner bought a Tesla Model S with enhanced autopilot and full self-driving, which isn't real. It's not real yeah okay the car was resold via auction three days later tesla ran a remote audit and removed the features the new owner found out at a service center the autopilot was gone tesla called it a miscommunication the features were restored after oh yeah he writes all about craft that goes wrong right published the story and so but this is it right? Like your subscription didn't go with your car. That person who bought your car bought a blank slate. They want it. They can buy it all over again. Kind of like when you sell your house and you turn off your ADT, but they want it when they get there, they can turn it all back on. Like that's, I.
Marc:So here's what I keep coming back to. All right. So Edison in 1890, he builds the grid. He builds the appliances that plug into the grid. He builds the meters that measure consumption. It's like it's like it's like giving it's like giving the you know crack to the junkie you know like yeah like i'm gonna build the chemicals you know facility i'm gonna build you know the production facility i'm gonna build the distribution and i'm gonna give you the you know give you the the mechanism that you're gonna consume yeah He tries to build an electric car that would, you know, charge off of his grid. Can you imagine if he was successful? Like if battery technology had just been a little bit better at the time?
Renee:They may have never drilled for oil.
Marc:I know.
Renee:They may have never done it. Like, why would you need to? Yeah. It would have been a different world for sure.
Marc:Yeah. So the car was never the product for Edison. The car was a device that generated demand for his platform, which was metered electrical usage.
Renee:And 130 years later, Tesla builds cars, builds supercharger stations, sells solar panels and power walls, sells energy. The car plugs into a Tesla ecosystem. GM OnStar is a persistent connection that turns every vehicle into a recurring revenue node. Edison was selling kilowatt hours. These companies are selling software features, data access, and subscriptions. And the architecture is the same.
Marc:Build the platform. Sell the devices that depend on it. Meter the usage. Collect recurring revenue. The car was always the razor. All right, sign us out here.
Renee:You can do it. Too angry.
Marc:Don't drive angry, Renee. Don't drive angry. Like everybody, thanks so much for listening. You know, hopefully this was at least somewhat informative about cars and car culture and all of that. And it wasn't too depressing of, you know, bringing it down and, you know, making it all about, you know, the weaponization of cars.
Renee:Like, subscribe, share, tell everybody about what we're doing. And definitely, if you're listening to this on any platform, will you please give us at least stars? Stars yeah it makes us feel like we're not. Screaming into the ether we would do it anyway right Marc because we like just sitting around talking but but yeah please like and share and everything like that and we'll see you next time and if you're in a car where you pay for a subscription to i don't know do anything fundamental with a car that you thought you already paid for drop us a line we want to hear yeah.
Marc:I definitely want to hear yeah thanks everybody thank you
