A game changing and potentially super disruptive technology that could greatly change our lives and our world is now far closer to reality.
A company called Hyperloop Transportation Technologies Inc. intends to make inventive billionaire Elon Musk’s proposed super-fast transportation system a reality, Wired reported. Last year, Musk proposed a plan to create a next generation transportation system called a Hyperloop. The Hyperloop would be a giant tube through which compressed air would push capsules full of passengers or freight at speeds of up to 800 miles an hour.
Among other things, the Hyperloop would make it possible to go from Los Angeles to Las Vegas in just half an hour, or about the same time it takes to take the subway from Downtown LA to North Hollywood. It would also take a little under an hour to go from Los Angeles to Salt Lake City or an hour to go from Chicago to New York using the Hyperloop.
The Hyperloop is hardly a new idea; the Beach Pneumatic Transit, a subway that operated on a similar principle of compressed air pushing a cylinder, was built in New York City in 1869. Yet it could be a real game changing technology if it were built; among other things, it would put a lot of airlines out of business and form the ultimate commuting machine. A person could live in Buffalo and work in Manhattan and have a shorter commute than many people that live in Brooklyn.
Hyperloop Transportation Technologies has backing from JumpStartFund, a crowd-sourced venture capital effort in El Segundo, California, and support from Musk’s privately held rocket firm, SpaceX. CEO Dick Ahlborn has assembled a team of 100 engineers to work on the project and 25 University of California at Los Angeles (UCLA) students to build mockups of the Hyperloop. They’re also conducting a feasibility study.
If all goes as planned, they could build a working Hyperloop within 10 years and start working on a nationwide network. That could be harder to achieve because it can take a long time to embrace new transportation technologies. Maglev trains, which could achieve similar results, have been technologically viable for nearly 30 years, but only one working system has been built.
Still, JumpStartFund has done an impressive amount of work, including a design for a station and capsule. They’re also looking for a route for the trains.
The current plan is to build a 400-mile demonstration Hyperloop on a route such as Los Angeles to Las Vegas. Prototypes could be built in 2015. It will be expensive however; initial estimates for the first stretch of the system are $6–$10 billion. Given the way transportation costs expand, that could be $12–$30 billion by the time it’s actually built.
One has to wonder if Hyperloop Transportation could get some support from an actual transportation company, say a railroad, which has the routes and actual experience moving people and goods. The Union Pacific (NYSE: UNP) has a route from Los Angeles to Las Vegas.
Railroad Revenues Show Hyperloop Could Be Very Profitable
If it gets built, the Hyperloop could be very profitable, if railroad revenues are anything to go by: Union Pacific’s TTM revenue increased by nearly $2 billion between September 2013 and September 2014. The UP reported a TTM revenue of $21.58 billion in September 2013 that grew to $23.46 billion in September 2014. The Kansas City Southern (NYSE: KSU), which operates track in Texas, the Midwest and Mexico, saw its TTM revenue grow from $2.322 billion in September 2013 to $2.55 billion in September 2014.
Union Pacific reported a quarterly year to year TTM revenue growth rate of 10.93% on Sept. 2014. The Kansas City Southern reported a TTM revenue growth rate of 8.99% on the same day. The Norfolk Southern (NYSE: NSC), which runs trains in the south and on the East Coast, reported a TTM revenue growth rate of 7.05% on the same day.
The interesting thing is that the railroads reported growth on just moving freight. As Warren Buffett knows, there is immense profit to be made in the ground transportation business. They’re making that kind of money with old-fashioned trains pulled by diesel-electric locomotives that move around 50 miles per hour. Just imagine the kind of money you could make moving freight on a Hyperloop.
So it might not be that hard to get some hedge fund types or billionaires interested in the Hyperloop if the technology proves practical. The question will be if government would embrace it or not.
One thing is certain: if something like the Hyperloop ever gets built, airports are going to be a lot smaller and a lot less crowded in the future. Airlines simply will not be able to compete with it.
One more thought here: hopefully somebody will come up with a better name for this technology. Hyperloop sounds silly and rather childish.