(Bloomberg Opinion) — “Short horses” was Warren Buffett’s very ex-post advice for investors of yore playing the rise of the automobile. Thousands of automakers rose but then fell while a handful emerged as winners. Horses, meanwhile, just fell and then fell some more.
Notice Buffett didn’t say “short mules.” Oversight? Maybe. Or possibly he noticed that while mules also went the way of the horse, they didn’t go in quite the same way. Half of America’s horses had disappeared before Pearl Harbor, but the mule’s crash is a postwar phenomenon. Had you shorted them in 1910, you would have lost out for several decades.
Therein lies both a warning and encouragement for our own century’s transportation revolution: electrification.
The mule’s stubbornness, so to speak, owed much to its peculiar relationship with the South. In 1924, the states that had comprised the Confederacy hosted only a fifth of U.S. horses but roughly three-quarters of its mules. “Mule use expanded with the slave and cotton empire,” wrote historian George Ellenberg in his book “Mule South to Tractor South.”The experience of the Civil War, which familiarized many veterans with the animal, and subsequent rise of sharecropping embedded it even more deeply in the region’s agrarian economy. Indeed, farm size was often expressed in terms of whether it was a one-mule or two-mule affair.
The mule’s biggest ally was cotton. More agile than horses and easier to train for voice commands, the mule was better suited to cotton’s narrower rows compared with, say, corn. A county-level study published in 1990 found a very high correlation between the prevalence of cotton farming and the ratio of mules compared with horses in the South.
It was cotton that helped the mule cling on even as tractors ran over the draft horse. Early tractors were large and unwieldy. Fine for bigger farms on flat terrain, these machines made their earliest inroads to the South in parts of Texas and the Mississippi Delta. The average southern farmworker in 1940, however, tilled only about 25 acres of crops (usually not the best acres, either).
Deere & Co. began producing models targeted at small farms from the mid-1930s. Even then, cotton still had to be picked by hand, limiting the tractor’s usefulness. Although development of cotton-picking machines advanced before World War II, the war’s intervention stymied manufacturing at scale. By 1948, while almost half the U.S. cotton crop was planted using tractors, only 1% was harvested by machine.
On the other hand, the war helped familiarize many veterans with mechanization, similar to the Civil War’s role with mules. Most importantly, the war also sucked laborers away from Southern farms, driving up wages. All this teed up the widespread adoption of machine harvesting from the 1950s. As Ellenberg wrote: “The cotton picker proved to be the truly revolutionary advance that spelled the end of the mule in the South.”
The mule’s meandering path to (relative) oblivion shows even the most no-brainer technology isn’t guaranteed to just take off. And electrification isn’t even as obvious a no-brainer for consumers as the internal combustion engine turned out to be, at least not yet. The EV’s raison d’etre, lower emissions, matters a great deal to some but less so to most. Other advantages such as easier maintenance, one-pedal driving and faster acceleration take time to permeate, especially when few models are on the road.
A combination of falling prices, wider product range and, if legislated, bigger tax credits should certainly help. But the mule’s stubborn hold on Southern farming in the face of demonstrably more productive technology suggests this only goes so far; it took a multiplicity of factors aligning to tip the balance.
Similarly, mass vehicle electrification involves so much more than merely developing a viable EV. Consider just one prominent issue: range anxiety. Never mind the vast majority of journeys involve short distances; you don’t win over many customers by explaining how misguided they are. The obvious solution: bigger batteries. But they also cost more and take longer to charge. However, we could reduce the size of the battery required, saving money and resources, if there were enough chargers around.
So now what you need is ubiquitous home charging equipment and a network of high-power public chargers (that work seamlessly because no one wants to actually think about charging their car). Except home chargers don’t work for everyone and in any case require dealing with electricians and maybe the permitting demigods down at the town hall.
As for those high-power public chargers, they require grid upgrades — as well as renewable generation and transmission to make it all worthwhile — plus new electricity tariffs because utility demand charges eat all the profits. While we’re at it, how about also rethinking the whole model of service stations to suit a stop that takes maybe 25 minutes instead of five?
This isn’t to cry “impossible!” Far from it. Rather, that the route to EV dominance likely involves some winding backroads and seeming dead ends. This is what systemic change means: electrifying and greening an entire ecosystem of manufacturing, energy supply, urban planning, pricing, finance and, ultimately, consumer tastes. When farmers bought tractors, they also had to install fuel tanks and get comfortable with relying on gasoline suppliers rather than the “fuel” they produced on the land for their own livestock.
Alex Roy, a director at Argo AI, a self-driving technology company, wrote a fantastic piece earlier this year on the parallels between elevators and autonomous vehicles. Making that earlier form of unmanned, (vertical) mobility ubiquitous required more than a century of technological advances, not just in the elevator mechanism itself but in related industries such as electricity and construction. Even muzak was conscripted into the effort of getting folks comfortable with stepping into a windowless moving room on their own and trusting it to deposit them safely at the 50th floor.
Subsidies and bans on gasoline-fueled cars have a crucial role to play — especially in the absence of transparent emissions pricing. But a true transportation transition means persuading the likes of you and me to literally buy into it.
Rather than the productivity gains we focus on in hindsight, pre-war tractor manufacturers exercised their inner Don Drapers and dangled what every farmer really wanted: a rest. “From the gray, drab existence of mule farming, you can emerge into the sunshine of Better Living with Allis Chalmers power,” as one stirring ad put it.
Today’s autos industry is still figuring out how to sell EVs, touting everything from green bragging rights to, in the case of Ford Motor Co.’s forthcoming F-150 Lightning, powering your home in a blackout (that one likely resonates more right now).
Those on the opposite side, such as the incumbents of the fossil-fuels business, had their counterparts a century ago, too. Besides livestock breeders, dependent trades such as veterinarians, grain suppliers, tanners and blacksmiths all cast a scornful eye on tractors. Bodies like the Horse and Mule Association of America were as creative as the American Petroleum Institute, if not more so, in their rhetorical fusillades against the upstarts. Farmers were warned about becoming dependent on “the city” for machinery and the risk of injury; although the latter could rebound given the mule’s occasional physical harm to the farmer and, unlike the tractor, a reputed capacity for premeditation.
It says a lot that when the tractor’s inarguable efficiency gains could no longer be ignored, the pugnacious secretary of the Horse and Mule Association recast this as the “inclination of the human race to be lazy,” adding, in words tailor-made for a Deere campaign, that farmers “want to get their work done in less time.”
Herein lies the hopeful undercurrent for EVs. Yes, it takes a combination of sometimes unforeseen and seemingly unrelated developments to tip the balance toward change. But when it happens, it quickly acquires the mantle of inevitability, and rival technologies tend not to coexist for very long.
Grim as it is, anyone pointing to the obstacle presented by all the investment made already in the internal combustion engine complex should consider the wholesale slaughter of horses and mules that happened well before their time, despite all the sunk costs.There will be a new era’s version of the mule to displace. Still, the torrent of dollars flowing toward EVs from investor portfolios and auto capex budgets suggests the shorting is well underway already.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal’s Heard on the Street column and wrote for the Financial Times’ Lex column. He was also an investment banker.