Robo-Economics:Getting from Here to There

Darryl JenkinsJune 12, 2013

Flight Plan

1. I do believe that commercial UAV’s will change everything,

2. What I missed in the study,3. The really important parts of my study

A. Insurance: The 800 pound gorilla,B. Financing a growing industry

4. Phasing in the regulations5. How the Privacy Issue may play out.

Why I did this report

• I have spent my career in an industry that has destroyed billions of dollars of vale and the opportunity to be in one that creates value is exciting.

I am a True Believer

• This will be a very big industry.– Over the next ten years people will become

millionaires from this, and– Some who are currently in this business will fall

by the waysides.• The most important part of my study was the

necessary conditions. These are things which must happen and if they do not, then everything stalls.

What I Missed

• I was never sure of which business models will prevail: Small owners vs. larger owner of many vehicles.

What I Missed

• In the airline business, the largest owner of airplanes is a leasing company.– Will these exist UAV leasing companies?– Will there be capital vs. operating leases?– Over what time period will these leases be?

What I Missed

• A lot of the answers to these questions will be a function of the rate of technical obsolesce and how important new break-thru is to users.

The Really Important Parts of my Study

• The Necessary Conditions• For this industry to take off in the manner I

envision it, a number of things must happen:– Well thought out regulations,

Trivia Question

• In the movie Jurassic Park, why were the outside academic consultants called in?

Trivia Question

• In the movie Jurassic Park, why were the outside academic consultants called in?– An insurance company threatened to pull

coverage because the T-Rex ate one of the workers.

Trivia Question

• What almost killed General aviation in the late 1980’s and early 1990’s?

Trivia Question

• What almost killed General aviation in the late 1980’s and early 1990’s?– High Cost of Insurance Coverage

Insurance the 800 Pound Guerilla

• The UAV industry will die in its infancy if the following forms of insurance are not available:– Manufacturers liability,– Hull Insurance,– Users and operators liability.

Insurance the 800 Pound Guerilla

• If a company has uncovered liabilities:– You cannot get financing to grow!

Insurance the 800 Pound Guerilla

• Currently, you can get manufacturers liability insurance in the United States. What we do not have is:– Hull insurance, and– Operators and users liability insurance

Insurance the 800 Pound Guerilla

• We could probably without much effort get the following:– Liability for operators and users for rural areas.

Insurance the 800 Pound Guerilla

• The likelihood for getting liability insurance for users and operators for UAV’s in non-rural areas out of the gate, is very limited.

• We have little or no data and the potential liabilities are very high.

Insurance the 800 Pound Guerilla

• Insurance will pick the initial winners and losers.

• Those who have insurance will have a better chance of finding financing.

• No insurance, no financing.

Insurance the 800 Pound Guerilla

• This tells us right out of the gate that using UAV’s for home deliveries of pizzas and tacos is a total non-starter.

Insurance the 800 Pound Guerilla

• Insurance may be the solution to some of the privacy issues.

• If manufacturers, users, operators, financiers, insurers were to agree to an ethical standard of conduct then the fruitcakes can be marginalized.

Insurance the 800 Pound Guerilla

• There is a law universally decreed before the foundation of this world, that fruitcakes (those who will misuse UAV’s) always appear at Holy times and when you do not want them.

• This can be the biggest issue facing the long term regulation of UAV’s.

Insurance the 800 Pound Guerilla

• The idea behind using insurance to marginalize the privacy issue is to get rid of the bulk of the fruitcakes as they can never be totally eliminated.

• If we can do this we go way down the road on this issue.

Insurance the 800 Pound Guerilla

• The issuance of hull insurance will be tricky and initially somewhat costly. However, bulk commercial purchases of UAV’s are impossible without hull insurance.

Insurance the 800 Pound Guerilla

• An necessary condition for bringing down hull insurance costs is an industry wide database.

• Manufacturers, operators, and users will have to share data.

• This has its own privacy issues, but these are minor compared to the need and easily handled thru proper contracts.

Financing the New Frontier

• Growing industries desperately need cash:– There is no growth without cash to finance

inventory and capital needs, growing payrolls, etc.–

Financing the New Frontier

• For some this will not be a problem.• For others, the need for cash will be at the

center of every decision.

Questions

• Darryl Jenkins• airjenkins@aol.com• 540-364-6913