🏎️ Self-driving Teslas and adverse selection

Why only the worst drivers will sign up

Hi everyone,

Welcome back to Parth, Adi, and Neel’s product strategy insights newsletter. We’re glad to have you on board.

You might have heard that Tesla is rolling out “Full Self-Driving” mode. Elon Musk himself admits that the feature isn’t ready, but he’s rolling it out to beta testers regardless.

Adverse selection

A concept that’ll help you understand why this is a bad idea comes from economics: adverse selection. Insurers have learned that the people most likely to sign up for insurance (home, auto, life, etc.) are precisely the same people who are most likely to get into accidents or otherwise lead risky lives. What’s worse, these people probably aren’t going to disclose their risk-taking nature on their application forms, so insurers can’t figure out which clients are going to drive them out of business.

A similar concept applies here. When Musk announced Full Self-Driving, the people who rushed to sign up were probably risk-loving drivers who wanted to push their car to its limits (read: get into dangerous situations and see if the car can bail them out). The people you’d want to test out the feature—safe, boring drivers—aren’t going to sign up. You often need to hand-pick your beta population for this reason.

Plus, even when Tesla was still at partial self-driving, some people still zoned out, put on a movie, and promptly crashed. Users are always going to abuse your half-baked features—it’s up to you to ensure they don’t put themselves or others in danger when they do so. The makers of multi-ton cars need to be especially careful.

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Image credit: harry_nl on Flickr