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The Business of 'The Future'

1:34 PM, Apr 16, 2014 • By JONATHAN V. LAST
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Nobody loved Shai Agassi and his company, Better Place, more than Tom Friedman. Friedman dedicated two slobbering, wide-eyed, wet-kiss columns to Agassi's Better Place in 2008. You can read them here and here. 

Have a gander at Friedman in full tout mode:

What would happen if you cross-bred J. R. Ewing of "Dallas" and Carl Pope, the head of the Sierra Club? You'd get T. Boone Pickens. What would happen if you cross-bred Henry Ford and Yitzhak Rabin? You'd get Shai Agassi. And what would happen if you put together T. Boone Pickens, the green billionaire Texas oilman now obsessed with wind power, and Shai Agassi, the Jewish Henry Ford now obsessed with making Israel the world's leader in electric cars?

You'd have the start of an energy revolution.

And:

What I find exciting about Better Place is that it is building a car company off the new industrial platform of the 21st century, not the one from the 20th — the exact same way that Steve Jobs did to overturn the music business.

What was this Jobsian revolution Agassi was leading? Better Place was going to upend the entire auto sector by having people purchase cars and fuel the way they do cell phones and mobile data contracts: You pay a subsidized price for an electric car, which you buy from Better Place—and then lease the battery from them, paying a set monthly fee for fill-ups, depending on how many miles you intend to drive. Whenever you need more juice, you stop by one of the Better Place stations for either a charge or a whole battery swap, performed by robots. Agassi came from the tech world and was, like Friedman, a fixture on the Davos/TED/gilded-lecture circuit. As such, he found it remarkably easy to raise nearly $1 billion dollars to kick-start this "energy revolution."

The only problem is that the entire concept was ludicrous. In order to succeed, Better Place would have had to build a giant, national network of expensive brick-and-mortar stations. It would have had to move an enormous number of people out of a variety of conventional vehicles—small compacts, station wagons, mini-vans, pick-up trucks, SUVs—and into a one-size-fits-all electric car in order to handle standardized battery transactions. It would have had to engineer this epochal shift in very short order, because the carrying costs of the infrastructure become fatal if the customer base doesn't go immediately to scale. And if their customer base did scale, then the network of stations would almost certainly be overwhelmed by users. 

And even if Better Place somehow overcame all of these problems, the company would have been limited in geographic scope to countries with warm and temperate climates. Because cold weather is severely limiting to battery performance, which makes electric cars basically a non-starter in any place colder than, say, Ohio.

It takes a very special kind of naïveté to look at the Better Place model and, instead of being struck by its foundational flaws, see it as a "revolution" already in progress. The same kind of naïveté, actually, that believes there are any meaningful similarities between the iPod and the music business, and the complicated intersection of geopolitics, energy, transportation infrastructure, and the automobile.

You will, perhaps, be unsurprised to learn that Better Place put roughly 1,400 electric cars on the road before going bankrupt.

The story of the company's implosion recounted in Fast Company is spectacularly entertaining. For instance, there's the scene where Agassi and his team go to meet with General Motors at their headquarters in Detroit. Unlike Tom Friedman, the GM executives are nonplussed by Agassi's sales pitch. One of them tries to explain to the Better Place team, "It took the Toyota Prius 15 years to get to 1.5% market share in the U.S., and the Prius is a hit." As the Better Place executives left, Agassi declared, "The next meeting we have, it'll be at our headquarters and we'll have a bigger market cap." As Michael Bay would say, that is awesome.

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