Saturday, July 27, 2013

Not every good idea is a good idea

PayPal, Tesla and SpaceX founder Elon Musk has been generating buzz for a concept he calls “hyperloop” for intercity transport, supposedly faster than subsonic aircraft (approx. one and a half times), and cheaper. Apparently the technology, to be unveiled 12 August, is based on air pressure/vacuum and magnetic acceleration. Musk has twitted that this is not a vacuum tunnel, so it must be a vacuum above-ground enclosed tube—otherwise air resistance would prevent the claimed speed and would require continuous power. Los Angeles to San Francisco is his suggestion of a first application.

Disbelief has to forcibly choked, not merely suspended, to avoid the conclusion that whatever it is, it would be far more expensive than the conventional high-speed line now being planned between these very cities as a result of a matching-funds deadly embrace between the effectively bankrupt state of California and the rescission-bound federal government. No-one claims that that project makes sense by any commercial standard. The likely ticket prices will target mostly airline passengers, of whom there are only 13,000 per day between the multiple airports in each region in both directions, split among more than half a dozen airlines—thus ensuring minimal prices. With traffic so low and priced so close to cost, one is at a loss to justify the existing rail project as sensible even in serving some significant unmet need. Musk is proposing something with far higher capital costs than air service, probably higher operating costs, and only inconsequentially higher speeds.

Yet this as-yet undeclared idea is spam du jour. Musk has transcended his real achievements (first commonly accepted electronic payment service, first and second proper electric car, first private mission to the ISS) and filled the…vacuum formerly occupied by Steve Jobs — that of the unassailable genius pronouncing ex cathedra.

It is not that Musk isn’t that, but rather that his two well-known, business-jeopardising mistakes were both due to false economies—behaviour antithetical to a high-capex project such as a hyperloop. PayPal’s inability to bring itself to pay for any meaningful customer service quickly made it the thief’s friend, before Ebay purchased it and cleaned it up. And years later at Tesla, to save an inconsequential amount, he built charging stations that were A Bridge Too Far—one rather than two on each of Washington–New York and New York–Boston, and a little too far apart between the California coast and Las Vegas. He then gave reporters $100k+ Model S cars with the best batteries and they got stuck. And stuck. And almost stuck twice. Unsurprisingly, that is what they then wrote, for the opposite effect from the desired validation of Tesla’s fitness for the real world.

The moral of this story: don’t buy hopelessly romantic technological dreams that would make Mitterand blanch from an entrepreneur who almost impaled two otherwise successful companies on fits of irrational tightfistedness.

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