Silicon States

by Lucie Greene

  The rental-car market being one. In 2017, shares in Hertz Global Holdings hit their lowest in seven years. They dropped by 39 percent in one year. Shares in Avis Budget Group Inc. declined 26 percent in the same year. In the last quarter of 2017, Uber accounted for 55 percent of ground transportation transactions expensed through Certify, America’s second-biggest expense software platform. And Uber’s recent reputational controversies about its ethics, internal sexism, and aggressive culture seem to be doing little to erode its revenues.

  Gurley also pointed to a wider cultural shift. “Millennials don’t give a shit about cars,” he said. “There are kids who will turn sixteen and won’t get a driver’s license . . . millennials view cars as a utility, not as a social statement, which is a huge shift for North America.”

  Which puts Silicon Valley at a further advantage over rivals such as Detroit. Both hubs may be creating cars, but Silicon Valley’s are largely designed for ride-sharing systems, not ownership.

  Uber has already supplanted not just taxis but hire cars and car ownership. It’s also positioning itself as the architect of the future of transportation, with automated cars (being tested in Pittsburgh) and UberPool (replacing the daily public transport commute). In addition, Uber has published a white paper about on-demand flying cars in cities. (White papers are a common form of reports on a specific issue. They are created by governments, academics, or other experts exploring or making a proposal on an issue.)

  The white paper trend is worth noting. From Elon Musk’s white papers to Uber’s recent ninety-seven-page vision for the future, these documents—often illustrated with renderings reminiscent of 1920s urban futurism—are public challenges to the way traditional transportation operates today. Such white papers usually receive a huge amount of attention.

  “Imagine traveling from San Francisco’s Marina to work in downtown San Jose—a drive that would normally occupy the better part of two hours—in only fifteen minutes,” says Uber’s “Fast-Forwarding to a Future of On-Demand Urban Air Transportation” paper published in 2016. “Every day, millions of hours are wasted on the road worldwide,” it continues. “For all of us, that’s less time with family, less time at work growing our economies, more money spent on fuel—and a marked increase in our stress levels: a study in the American Journal of Preventative Medicine, for example, found that those who commute more than ten miles were at increased risk of elevated blood pressure.”

  The solution? “On-demand aviation has the potential to radically improve urban mobility, giving people back time lost in their daily commutes . . . Just as skyscrapers allowed cities to use limited land more efficiently, urban air transportation will use three-dimensional airspace to alleviate transportation congestion on the ground.”

  The next area ripe for disruption is postal services, as evidenced by Amazon’s recent acquisition of cargo jets and ocean freight services—not to mention testing drone delivery. Many people, including Virgin Hyperloop One chief executive Rob Lloyd, are excited: “It’s amazing, but the postal services are relevant again . . . I actually think you’ll see private industries funding new infrastructure. An early sign of that is Amazon buying two fleets of 767s to control their own infrastructure, just as DHL and FedEx brought their own airplanes. They brought their own infrastructure because it became a part of the dynamic of their cost model. Transportation infrastructure, increasingly, could become part of the cost model that big enterprises will look for in an on-demand world.” Amazon has introduced cloud computing services for businesses, enabling small companies to sidestep building their own IT infastructure systems. Its shipping infrastructure is transforming consumer expectations toward deliveries en masse. Today it’s not uncommon to expect packages to arrive on the same day in major cities, or next day, and free of charge. That’s largely thanks to Amazon. Will plug-and-play deliveries for new businesses be its next business-to-business service?

  Silicon Valley isn’t stopping there. It’s seeking to reinvent energy, from cars to homes. With storage batteries, affordable solar panels, and electric cars, Elon Musk is in effect becoming an energy magnate. Amazon is investing heavily in renewable energy. It signed an agreement to buy 90 percent of the output from a new 235-megawatt wind farm in Scurry County, Texas. It has also announced an agreement with Iberdrola Renewables for a 208-megawatt wind farm in North Carolina. In 2016 Bill Gates announced the start of Breakthrough Energy Ventures, a $1 billion clean-energy fund, which he plans to chair. Other backers include Jack Ma and Jeff Bezos. The fund aims to invest in next-generation energy technologies.

  Moving Mountains

  While Virgin Hyperloop One originated in California, its most vociferous support is, interestingly, far from home. The most vocal backing has come from markets such as Northern Europe, where there’s a well-established legacy of investing in new transport infrastructure, and the Middle East, where there’s the autocratic vision to achieve a project of the magnitude of Virgin Hyperloop One, as well as a largely blank canvas in terms of relevant infrastructure. (Not to mention a general enthusiasm in the Middle East for fantastical futuristic developments—in Dubai there’s a 22,500-square-foot indoor ski slope, after all.)

  Pishevar’s ambitions, pre-allegations, had recently extended to rethinking government and campaigning, in the wake of the 2016 presidential election result, for California to leave the U.S. Speaking to CNBC after the election, he said the state could “reenter the union after California becomes a nation. As the sixth largest economy in the world, the economic engine of the nation, and provider of a large percentage of the federal budget, California carries a lot of weight.” He added that he wanted California to become the catalyst for a national dialogue, as the country needs to “confront the systemic problems that this election has exposed.”

  In person, Pishevar compares the lack of enthusiasm in the U.S. for his pneumatic train with the struggle of the Wright brothers to launch aviation. “They had that similar situation where the first interest in the airplane was from the French, German, and British governments. The American government didn’t take it seriously. They funded their own project, which was a complete failure, whereas these two brothers with $2,000 of earnings from their bicycle shop figured it out. It’s incredibly inspiring. It’s also very analogous to what’s happening now, where international governments are much more ahead of the game in terms of interest in deploying Hyperloop.”

  One of his ideas to solve this is to hold a California referendum, throwing the choice to the people. “I’d have someone run a campaign that basically says that the California high-speed rail is a complete waste of taxpayers’ money at $80-plus billion, and we should vote in a referendum to replace it with Hyperloop; to take over the right of ways and then return that money to taxpayers and put it into infrastructure projects and schools.”

  Like Jain, Pishevar believes the future will be built by entrepreneurs. “One of the lessons I’ve learned as an entrepreneur is that it really does take a very small group of people to push something forward. If the Wright brothers hadn’t worked so hard with a small group of people and a small budget, the history of flight might have been delayed by decades. The economic impact that has had on humanity has been massive. We feel the same way with Hyperloop. We’re trying to speed up the process of the kind of important technology innovation that can become part of a whole new transportation grid. Moving people and things faster will make the global economy work faster and create growth, jobs, and opportunity.” He has also been looking at companies such as Boom Technologies, trying to bring supersonic flight back with passenger airplanes (supersonic flights fly faster than the speed of sound and were initially developed for the military). In December 2017, Japan Airlines (JAL) and Boom announced a $10 million strategic partnership to bring commercial supersonic travel to passengers.

  “Supersonic flight has existed for seventy years, but until now it hasn’t been efficient enough for routine travel. Boom’s airliner enables fares 75 percen
t lower than Concorde, about the same price as today’s business class tickets,” says Boom. “This advance in efficiency is made possible by a breakthrough aerodynamic design, state-of-the-art engines, and advanced composites.”

  Pishevar’s original vision for Virgin Hyperloop One extended beyond the transport network itself. It has the potential to overhaul dock systems and unlock new geographies. “A lot of people don’t understand that there’s a real estate arbitrage play here, too. Ports around the world are sitting on really expensive real estate property. Trucks are also creating a lot of infrastructure strain and pollution. Long Beach Port alone is $200 billion of real estate value and there’s 800,000 trucks a day that go there that the mayors want off the highway. We could build an offshore port that could take the cargo straight to the desert and meet the trucks there. Then you could basically have $200 billion of prime waterfront property developed for new housing and commercial properties. Multiply that by all the ports around the world and you’re talking about trillions of dollars of value creation and massive pollution and environmental benefits.”

  As for our current cities, Pishevar is not a fan (meeting Pishevar is like meeting a live petri dish specimen of Silicon Valley stereotypes, both for his magnetic ambition and uninhibited self-belief). “Cities need to be redesigned. I look at cities now and they’re based on nineteenth- or twentieth-century infrastructure. So you have depreciating assets that are seventy-five or one hundred years old, falling apart, and need to be replaced. Whole swaths of cities will have to rise up anew. You have what I call regenerative development of existing cities and completely new development of new cities. I joke that Elon has to go to Mars and terraform Mars—we have to terraform the planet.” He adds that many new cities and even nations have been created in the last one hundred years, so this is not even very innovative. “It’s just studying history . . . The world before had a much more straightforward process of someone saying, ‘Let’s go build a city.’”

  Old buildings, urban settings, and a mixed layered fabric of cities are something great, and rich. Wouldn’t we be losing something if we just tore everything down and started from scratch? The future and history can coexist. In Japan and in France, futuristic architecture and transport sit alongside history. But, for now, Virgin Hyperloop One is not arriving in the U.S., where there’s inconvenient things like existing infrastructure that cannot be terraformed. And democracy.

  But there’s no doubt that Silicon Valley has its eye on transforming how we move around the planet.

  Hyper Travel

  “In Europe, transportation infrastructure is as expected as health care,” observes Lloyd. “It’s not a nasty thing to imagine that someone would spend $10 billion to make a more efficient, high-speed connection between two cities where there’s frequent travel. It’s actually expected. So you get that in Northern Europe, also in Dubai, where we expect that we’re going to be bringing the first ideas forward.”

  America has a mixed history with regard to public transport, from railroad monopolies controlled by captains of industry (or “robber barons,” depending on your view), to early privately run cable cars and subways in the late nineteenth century. Public transport was a profitable pursuit. Cornelius Vanderbilt built the New York Central Railroad and the Grand Central Depot, and many of the other major railroads can be attributed to industrial tycoons from Leland Stanford to Collis Potter Huntington.

  After World War II, cars and gasoline became widely available. Cars also became status symbols, associated with freedom, independence, and the American dream. Highway-building programs ensued, as did suburban sprawl and urban development dependent on access to cars. Meanwhile, with the creation of efficient jet aircraft for long-distance travel, a major airport-building initiative took place. And all this public transport needed government funding to sustain it. So, from planning to execution, public transport became the realm of the state. But over the years there has been a decline in public transport overall. According to a 2016 study by the American Society of Civil Engineers, America is $1.44 trillion short of the investment it needs to repair infrastructure in the next decade.

  Today, mobility in the U.S., or ease of mobility, is a tiered system based on personal income and location (unless you’re in a major city, but even then, that’s partly the case). Long-haul buses are a slow, uncomfortable option compared to planes and trains. For those who can afford it, the more comfortable but still painfully slow Amtrak will take you from Boston to New York or down to Washington, DC—Amtrak’s Acela Express is a little faster but expensive. Amtrak is another fatality of the Trump administration, though. Trump’s 2017 transportation budget slashed federal aid to America’s rail systems. It cut funding for long-distance Amtrak service and drastically cut money to help expand transit lines and build new ones. The new $16.2 billion budget sees a nearly 13 percent reduction in spending during the fiscal year of 2017, about half what Congress originally allocated, including a $630 million reduction in subsidies for long-distance Amtrak routes. It’s more disappointing after 2016, when Amtrak announced it would be introducing high-speed trains along its northeast corridor by 2021 as part of $2.45 billion in federal loans. Meanwhile, a series of high-profile train derailments in Washington have highlighted the urgency of updating the underfunded network.

  Was Peter Thiel right? Did we lose our ambition and stop building exciting things?

  Of Silicon Valley’s bolder endeavors—at least those on Earth—Virgin Hyperloop One is one of the bigger bets. A mission to reinvent the horror of long-distance travel with a time-bending, planet-flattening, on-demand bullet train on stilts.

  Arrive at the corner of Bay Street and South Santa Fe Avenue, a down-at-the-heels, warehouse-like area of downtown Los Angeles, and it can get confusing. This is supposed to be the location of the shiny new headquarters of Virgin Hyperloop One, the company reinventing how we, and goods, move around the planet. The street is desolate, lined with boarded-up stores save for a dusty strip club called the PlayPen, a dive bar, and a gas station.

  The first glimpse there might be change afoot is the American Tea Room. It’s a groovy, hipsterish island in what is currently an industrial wasteland, but it has all the trappings of a Brooklyn café—aprons, moustaches, a tea zone, polished concrete seating, and a vertical garden. Further meandering and there’s Our/Los Angeles, a Pernod Ricard experiment in producing vodka in a locally run, locally adapted distillery. There’s a local art gallery, and there are two more artisan cafés. There’s also the Springs, a wellness center housed in a warehouse, offering a natural wine bar, yoga, juice bar, and workshops. If Los Angeles’s downtown theater district is becoming a hub for hipster reinvention, then this industrial part of downtown L.A. is the new answer to London’s Shoreditch and a growing hotspot for startups. And they don’t get much hotter than Hyperloop.

  It’s difficult not to get excited stepping into the Hyperloop One offices. A regular headliner at tech conferences where drones and jargon about “social media influencers” and “being authentic” are an incessant hum, Hyperloop One has stood out as bold in its ambition and refreshing in its futurist outlook.

  It’s also emblematic of one of the more widely ambitious Silicon Valley private ventures.

  Thiel talks about our reluctance to seize the future, and of our tendency to view that future in dystopic terms, but Hyperloop seems to have captured people’s imagination. There are naysayers of course, particularly engineers and journalists, as well as doubts about how much this thing—the ultra–high speed floating tubular train system—will actually cost to build, but it nevertheless seems to be striding ahead. There are countless headlines about India or the United Arab Emirates potentially being the first location for Hyperloop, or how we’ll soon be able to go from “Helsinki in Finland to Stockholm in Sweden in just twenty-eight minutes.”

  If it’s successful, it could also be extremely lucrative. The company estimates that the market for moving things and people around
could be $154 trillion over the next twenty years. That is, of course, if it ever successfully starts taking passengers and freight.

  The ambition is also for it to be affordable, using what Pishevar describes as Uber’s “adjacent subsidization” model. “Where black car service, which is more expensive, subsidizes UberX, and then UberX subsidizes UberPOOL, and then UberPOOL made it the price of a bus ride. Cargo is our adjacent subsidization for a Hyperloop passenger.” (Will it therefore experience the same financial losses as Uber? In November 2017, Uber’s quarterly losses had jumped 40 percent to $1.46 billion.)

  Like Uber, Google driverless cars, and seemingly every new Silicon Valley service, Hyperloop will be on-demand. (When it comes to civic and social life imagined by Silicon Valley, everything is turned inward, personalized, and ultra-convenient. There are no timetables. No one will have to encounter anyone, or anything, at any time that they don’t want to. And when they do want something, it will arrive quickly. Considering how on-demand culture has already turned urban millennials into a tribe of impatient selfish babies, unable to handle any social realities, let alone wait for taxis, thanks to Uber, dates, thanks to Tinder, deliveries, thanks to Seamless, and—er—anything, thanks to TaskRabbit, it’s wild to imagine what this could do to our sense of collective social consciousness. Is it so bad to wait for a train? And pity the poor, for whom this is still largely unaffordable.)

  The finished system will transport people or goods at a speed of up to 745 mph, which is just below the speed of sound and faster than an airplane. In Hyperloop’s vision, passengers and freight will be propelled in pod-like vehicles through a near-vacuum tube, gliding through magnetic levitation. In July 2017, the company carried out a test in Las Vegas with a transporter that could achieve 250 mph, its self-described Kitty Hawk moment. It’s now completed test runs in a fully fledged test center, with white tubing mounted in the Nevada desert. Though there have been no human tests yet, the Wright brothers would have been open-mouthed.