I do not agree, making the systems work in all conditions is the hard part of true automated driving.
Also, worst conditions happen 1/50th of the year ( guess). So it's not that rare
This means self driving cars must also operate without LIDAR, though the safety advantage when it is operating can still be a net gain.
It is absolutely acceptable for a self-driving system to refuse to drive in any conditions it can’t handle, but it must also deactivate in a safe way when such conditions arise during operation (e.g. pull over to the side of the road if the driver hasn’t positively acknowledged resuming control).
Commercial viability of any given system is a separate issue, but it’s pretty well accepted moral responsibility to not accept control of a vehicle if you’re unable to operate it safely, regardless of the consequences of that refusal(1). I see no reason to not hold consumer-facing self driving systems to the same standard. Otherwise, they require some specialized training for the operator to be able to recognize the situations in which they are safe to use.
(1) Actual life-and-death situations change this a little, but future availability of rescue personnel and equipment generally weight the conclusion towards operating safely in those situations as well.
However, for rare events it’s very possible for individuals to be fine with something and only collectively do you end up with major problems.
This is simply a constraint that any system needs to work within, and it’s entirely possible that precludes the commercial viability of LIDAR-based systems. It’s also possible that there’s some niche market that fair-weather-only systems can be successful in long before the general problem is solved, and we shouldn’t artificially throw those out as “unacceptable” when there’s a reasonable framework for them to operate under.
You’re making an assumption here that the system is capable of continuing to travel safely. Obviously being safe at home is better than being stopped on the side of the road, but that’s not the choice you’re actually faced with. Similarly, a system that can operate safely in adverse conditions is obviously better than one that can’t.
I don't give automated driving any allowances, if it can't do what I do, it doesn't belong on the road.
In that case, you’re almost certainly grouping a lot of current and safe drivers in the “it doesn’t belong on the road” category. Not having lived in a place where I’ve needed to deal with white-out conditions myself, I doubt I’d feel comfortable continuing to drive. I know this about myself, though, and am likely more conservative than you about canceling or rescheduling a trip when such conditions are a possibility. This is the same bar that I’m proposing automatic driving systems need to meet; if that means they only work on cloudless days with 0% chance of rain, so be it. In practice, this means there’ll need to be some way for a human to take control for quite a while yet.
A scaled request for the driver to take over as conditions get worse can train the driver not to use the self-driving system in adverse conditions, so hopefully it wouldn't have to refuse (unless the driver is negligent).
Getting back to the OP, Musk may have a point: people are terrible at evaluating risk for low-probability/high-consequence events like a car accident, so LIDAR might lose in the market even if it is worth it. But if there were standards for when the car asked the driver to take over and LIDAR is able to pester its drivers less often because it is more capable, then perhaps LIDAR can justify its place in the market.
But in all seriousness, if self driving cars are not ready as fast or as performant as expected a lot of these long term bets may be in a lot of trouble. This potentially includes Uber, Lyft, Tesla by self-declaration, and others.