Why I Traded my Tesla for an Ebike
Ebikes, Spatial Structure, and The Doorman Fallacy
I did a Twitter thread about my plan to do this a few months ago, but now that I’ve actually gone through with it I thought it would be fun to share some more details here.
This experiment combines my two favorite things: finance and transportation. First, the finance:
My wife and I have made a very conscious choice to live in a place that is proximate to enough daily activities that we can bike to almost all of them. Since we moved from a location that was completely car-dependent, we each had a car. After a few months, we noticed that for the most part they both sat in the driveway. Even though we had them available, we both mostly preferred to ride our bikes.
I started to wonder: what is it really costing us to own both of these?
At first it didn’t seem so expensive. After all, we were driving less and therefore putting less wear and tear on the car. But assets like cars can be sneaky. There’s the obvious costs like gas, insurance and maintenance that are somewhat variable with how much your drive.
But most of the cost of the car is fixed: it’s there whether you drive it or not. This includes the mostly invisible depreciation and the completely invisible opportunity cost of the capital that is “invested” in the car while you own it. That capital can be doing something else such as funding the operations of a productive business which will earn you a return on the capital.
Every day it’s invested in the car rather than something else means you’re losing money. That’s on top of the value the car loses as a natural function of its slow and steady entropic decay.
So here’s the calculation I ran. It is a 2015 Tesla Model S: an expensive car to choose if it’s just going to sit there. Plus, 2021/ early 2022 has been an abnormally good period to sell a used car if you find yourself with a spare. The proceeds from the sale (Carvana is great for selling a car, by the way) were about $51,000.
The finance enthusiast in me kept asking: what would happen if we reinvested that money in something more productive?
Further, what if we invested our average monthly operating costs (taxes, insurance, maintenance) into that same investment account? This is a neat way to save money - you keep your expenses the same but shift the way they’re allocated away from “expenses” and into saving. It doesn’t feel like anything’s changed (your net outflows are the same) but you end up saving much more money.
The results are astounding. In 40 years at “retirement” the decision to only own one car will net us an additional $2.6 million.
Framing Problems
The way problems are framed has a profound impact on the way we think about them and go about solving them. Some might formulate the situation Sophie and I were in as:
“Would we rather have two cars or one car?”
And of course, it becomes easy to imagine the times you might need two cars at the same time. What if we both have meetings that we can’t attend virtually in two distant ends of town?
Framing it this way immediately turns your focus to imagining the negative outcomes. Once we thought it through, we realized that we had never been in that situation before and it would be pretty easy to avoid that going forward.
Further, even if we were, one of us could just user Uber or Lyft to get to the meeting. $10 for a ride-share once every few months is much more manageable than several hundreds dollars a month for a depreciating asset.
But a more productive and realistic formulation would be:
“Would I rather have two cars now, or an extra $2,600,000 when I retire?“
It’s the marshmallow test all over again. Turns out that experiment does have some useful implications! And of course, this is a very reversible decision - if we do find it necessary to own two cars there is a simple solution - buy another car.
This is only looking at the decision through the lens of personal finance, which is itself a narrow framing. There are plenty of environmental, social, and health benefits that come from commuting by some means other than car. If you include those, I believe the decision becomes even easier. Here’s personal finance blogger and big time bike advocate Mr. Money Mustache on some of the benefits:
The fundamental reason for the bike’s status as the Greatest Invention of All Time is its unique combination of simplicity, efficiency, and incredibly powerful health benefits- interestingly enough, exactly the opposite attributes of a car which is complex, inefficient, and horrible for your health due to the stress, inactivity and the cramped seated position.
From Get Rich With Bikes
Of course, doing this requires you to live in a fairly walkable and bikable place, which simply isn’t an option for many people - yet.
Electric Cars are a Painkiller, not a Treatment
What follows is only tangentially related to what the first part of this post is about, but I’ll never miss an opportunity to gratuitously redirect a post to something more philosophical!
The U.S. doesn’t have a gas car problem, it has a car problem. If every car on the road today became electric, it might improve one type of emissions, but it will not fix the fundamental issue with the way most cities in the country are laid out. For that we need new ways of thinking about building and development.
The U.S. doesn’t have a gas car problem, it has a spatial distribution problem.
The Doorman Fallacy
Often, companies or politicians will take a problem and define it very, very narrowly, then develop a technology or policy that deals with that single, narrow definition. Rory Sutherland calls this the Doorman Fallacy:
The ‘doorman fallacy’ is what happens when your strategy becomes synonymous with cost-saving and efficiency; first you define a hotel doorman’s role as ‘opening the door’, then you replace his role with an automatic door-opening mechanism.
The problem arises because opening the door is only the notional role of a doorman; his other, less definable sources of value lie in a multiplicity of other functions, in addition to door-opening: taxi-hailing, security, vagrant discouragement, customer recognition, as well as in signaling the status of the hotel. The doorman may actually increase what you can charge for a night’s stay in your hotel.
When every function of a business is looked at from the same narrow economic standpoint, the same game is applied endlessly. Define something narrowly, automate or streamline it — or remove it entirely — then regard the savings as profit.
In complex systems, most problems are multifaceted. Usually one element is more obvious than others. But that doesn’t mean if you “solve” the one narrowly defined problem that all other elements somehow become miraculously solved. In fact, this usually just makes the less obvious parts of the problem more extreme.
Replacing gas cars with electric ones, particularly autonomous electric ones, may solve the narrowly defined problem with cars of emissions. But it doesn’t address the more fundamental issue of poor spatial distribution of land uses and the associated poor infrastructure investments and high energy consumption. These problems are less salient, but that is exactly what makes them so destructive.
Looking at the United States and thinking “we need to replace all the cars with electric cars” is an overly simple framing of the wicked problem that exists.
If the spatial layout of our cities doesn’t change, we will still be dealing with the deleterious effects of single use zoning like social isolation and poor health for those with long commutes. People will still be wasting tremendous energy making trips that shouldn’t require a car in the first place. But again, they won’t realize that an alternative exists because the spatial distribution is so fundamental to people’s daily lives.
Rory Sutherland’s point above is reminiscent of Peter Drucker’s famous quote:
There is nothing so useless as doing efficiently that which should not be done at all.
What’s needed is to imagine a different future altogether. Not one where all the gas engines are switched with electric motors and batteries, but one where Americans have the freedom to live in different environments - to not be totally dependent on cars for every single thing they do.
Health and energy waste aside, the 20th century pattern of development just doesn’t make for a good society. It separates people and land uses in a way that they shouldn’t be separated. This question doesn’t get addressed by most political and technological solutions because it isn’t a political or technical question - it is philosophical and moral in nature.
These are the least asked but most important questions: What do people want their daily lives to look like? What sort of society do we want to build? What do we want our cities to look like? They don’t a right or wrong answer, only outcomes that tend in one direction or another.
They are questions outside the scope of any single institution that exists today to ask and therefore outside the scope of any existing institution to address. So the narrow definition of problems and solutions will continue (Houses are expensive - Cash subsidies for first time homebuyers! Gas is expensive - Gas subsidies for people who drive a lot!), and the solutions to those narrowly defined problems will continue to make other, more fundamental or less salient problems worse.
What’s needed aren’t new solutions from existing institutions, but new institutions altogether. We’ll explore those in the future of this newsletter, but until then: move to walkable neighborhood and sell a car!
Until next week,
Joel
P.S.
For those curious, here’s what replaced the Tesla:
I originally used a Rad Power Bikes RadMission for commuting and frankly would recommend it over the VanMoof. The VanMoof looks better, but in every other way the RadMission is better as a commuting device, and is about half the price.