Venture Capital Firms Shift to Green Infrastructure
Several Bay Area major venture capital firms announce that they will shift their portfolios toward funding physical green infrastructure, including solar and wind power generation, utility lines, hydroelectric dams, environmental remediation projects for dams, and passenger and freight rail.
One founder of a firm in the public transit industry, speaking on condition of anonymity because the deal is still in process, points out that other VC investments have not been successful in the last 10-15 years. Cryptocurrencies, NFTs, and other blockchain technologies have not succeeded in transforming the finance sector; the Metaverse flopped; AI investments in driverless cars are still a long way from deployment, while LLMs are disappointing compared with expectations of artificial general intelligence. In contrast, the founder explains, there are great opportunities for new passenger rail lines and renewable and at places nuclear power.
Another founder points out the example of Brightline West and says that with upcoming reforms in permitting, pushed by many of the same VCs, it will be profitable to complete new domestic and international intercity rail lines between cities; a $15 billion investment in connecting Chicago, Detroit, and Cleveland is underway.
On Sand Hill Roads, VC attitudes to the new investment are jubilant. One VC admits to never having heard much about public transit, but, after a three-day factfinding mission can tell you everything you could possibly want to know about the Singapore MRT. Other VCs say that Peter Thiel and Mark Zuckerberg are both especially interested in funding public transit initiatives after Elon Musk retweeted the X account TruthSeeker1488 saying that public transit is a conspiracy by international finance communists.
Pedestrian Observations 
We just need Bloomberg to fund Utica/Nostrand/College Point/Gateway Center extensions out of his pocket!
Let the privatization of what should be public goods continue….
Ha Ha, that was a good laugh.
I was going to write something like “what have you done with Alon?” and then I remembered…
A lot of truth in this post for an April fool 😀
April fools? Except PE firms are very much shifting to green infrastructure, and Brightline is lapping CaHSR under the ownership of Fortress Investment Group.
If you look at Japanese private railway companies, its pretty much all investment/retail banks and insurance companies expecting safe/reliable returns and only getting small shares of the equity the Big 3 JR’s have JP Morgan Chase and Boston State Street Corporation among their top 10 shareholders. What you’d expect from a mature industry with a degree of implicit state backing. JR companies are more open to foriegn investors than the legacy privates because the latter have strong Keiretsu ties
Not that there haven’t been the occasional attempts, when Osaka privatised the Semboku commuter line, Lone Star private equity tried to snap it up because Nankai was having trouble getting the cash to buy it. Osaka had weedle around quite quickly to make sure Nankai got it (right move since Semboku line is a branch of the Koya line).
Simple rule on railway privatisation, have you privatised parking? If the answer is no, then you probably shouldn’t.
I know this is an April Fools post, but what are your thoughts on Brightline West? Brightline Florida looks like it will do well, particularly if they extend to Tampa and Jacksonville, and they seem to have kept construction costs reasonable there.
But I have serious qualms about terminating Vegas trains in Rancho Cucamonga. For one, it would probably kill Vegas-LA traffic, which could have a lot of potential (there are a couple of million people living in Vegas who would probably appreciate an easy trip to LA, it shouldn’t all be about tourist trips to from LA to Vegas).
Why can’t they cut a deal with Metrolink to run trains through to Union station on the commuter tracks? There must be spare capacity there for 1-2tph.
I think they’re making the same error as Texas Central, except with way more distance from city center. They don’t want to interface with anyone else, so they’re building an outlying terminal. There’s plenty of spare capacity but they don’t want to have to coordinate anything with Metrolink, even though they’re using technology where such coordination is normal, unlike Texas Central.
Separately, they have $3 billion of federal funding but they say they need $12 billion to build the line; I haven’t seen any news of their getting $9 billion in private funding, and somehow I feel like the VCs who go on a three-day factfinding trip to Singapore are not going to come out recommending either state-funded rail or state-funded HDB blocks.
They raised an additional $2.5B in private activity bonds, so the gap is smaller now. https://www.8newsnow.com/news/local-news/brightline-west-halfway-to-12-billion-funding-for-las-vegas-high-speed-train/
Regarding the private funding – I don’t think it would be out of the question for one of the major infra funds to contribute some capital, though they typically make majority equity investments. See article here (might need to clear your cookies to read FT) https://www.ft.com/content/fb0f710c-c1c1-47fd-a4be-0faf1cf9050e
Brightline is already owned by PE firm Fortress Investment Group, that has sufficient equity capital available via its PE funds.
Fortress is able to make equity investments on its own without other funds, although presumably they will try to mutualize risk with public/debt investors and privatize profits as much as possible.
No, Fortress’ private equity fund is only $2.9B, and those groups typically like to write an equity check that’s 10% of their fund size. So they don’t have sufficient equity dry powder, most of their funds are credit. Also they have taken on minority equity funding from Virgin in 2018 and attempted an IPO in 2019 – so additional equity fundraising is not out of the question for them.
Since Texas Central is on ice, and Amtrak looks like it’s taking a bit more interest in the project, maybe there will be a rethink on the Dallas/Houston station locations. Houston absolutely needs a downtown station, and while Dallas’s station is in an OK location, it’s ridiculous that it will be separate from Dallas Union. They’re recreating the mistakes of the 19th century (multiple, competing city centre stations). But in this case, even if the stations are co-located with Amtrak, there’s no reason the physical tracks can’t be kept separate from other railroads, enabling physical segregation from other services. They can just have dedicated platforms in a combined station.
Brightline West is different since it’s a question of either sharing tracks with Metrolink or building expensive dedicated infrastructure into downtown LA (or terminating in Rancho Cucamonga and hamstringing the service).
Worse, they are recreating mistakes that had been figured out and solved in the 19th century. Dallas’ station (like those in many, many other cities) is called “Union Station” because it was the single station that multiple railroad companies used jointly.
The head of Brightline recently said a round trip ticket LA-LV would possibly be $400. At that price, I think the ridership will be very low. The demand for transportation is there, but if flying or driving are cheaper, then the train will lose the battle.
Presumably they would use high-yield pricing like airlines, so talking about what a ticket costs is kind of abstract. $400 round trips would, I imagine, be for a peak trip going to Vegas on Friday evening, coming back Sunday evening. Those with more flexible dates/times would be able to travel much more cheaply.
AI investments in driverless cars are still a long way from deployment
Except that Waymo One is offering rides in SF, Phoenix and LA, and about to start doing so in Austin. The company has tens of millions of autonomous miles driven at this point (much of it in testing, not commercial service). People who discount driverless cars are in for a rude awakening when this mature technology takes off soon.
“I think there is a world market for maybe five computers.”
Thomas Watson, president of IBM, 1943
“Energy will be too cheap to meter.”
I know this is April Fools, but most of the existing value provided by driverless currently is level 2 driverless autonomy, which makes vehicles safer and less stressful to drive and has rapidly improved over a short period of time. This in fact is “too cheap to meter,” the marginal cost of compute for these tasks is close to 0. Fully driverless vehicles aren’t much different, the cost of compute for level 4 on demand driverless like with deployed commercial Waymo is also close to 0. And the cost of installing lidar for a taxi that operates 24 hours a day also rounds to 0 dollars an hour. It’s not really comparable to nuclear which at that time cost billions of present-day dollars per plant, and people thought energy would become too cheap to meter on pure speculation. A lot of people I know, including myself, shift their behavior towards more driving because of “autopilot” features on their vehicle. Minimal technological progress or a post-scarcity world is unlikely to exist compared to the usual 2% improvement in productivity in the most innovative developed countries. If someone strongly believes that tech companies are wrong about BTC, LLMs, EVs, driverless, AI, etc. they should consider shorting or buying put options on these companies and becoming extremely rich when the bubble crashes.
I don’t have spare cash to play the stock market and I don’t think in terms of stocks but in terms of effect on the transportation system. From the point of view of someone who bought Uber stock, if Uber shifts to a completely different business model (say, charging the same fares as metered taxis but with apps), they cash; from the point of view of a transportation planner, if this happens, it means there’s no affordable on-demand transportation at scale and therefore there’s no need to set government policy based on such a product existing.
Driverless technology optimists believe the cost of taxi services will be affordable at scale in the long run, since most of the cost of taxi services is driver labor in high-income countries. The lidar sensors and on-board computer shouldn’t add much to the capital cost of the car. With competing driverless services, the cost might be driven down to be cheaper than transit fares and the cost of owning a car. Therefore, you will have a huge increase in the number of users who are using taxi services, many who will be using it as a substitute for owning a car or a daily transit commute. From what people in Phoenix say, it seems that Waymo is already somewhat cheaper there. The fares are slightly lower, but people save substantially by not having to tip a human. At the margin, the cheaper fares must be reducing transit use by some amount already.
Does Waymo actually make an operating profit in Phoenix?
Actually, at the time the “two cheap to meter” statement was made (Sep 1954) the first connection of a reactor to the power grid was only a few months old, and was of a prototype in the Soviet Union. The first commercial power plant wouldn’t open for a few years. Nuclear plants as extremely expensive due to extensive fail-safeing didn’t really exist yet, so to someone thinking reactors would have been built quick and cheap (like they were during early atomic research) might have legitimately though energy would be de facto free since the operating costs were so low that a small enough capital cost spread widely would also be effectively zero.
It’s also worth noticing the phrase was in a paragraph of a speech that talked about children growing up to live in a world without famine, travelling at great speeds through the air (jet power), and eliminating disease; in other words it was an aspirational phrase about a bright future ahead, not a formal prediction of specific nuclear energy costs (although the person who made it was the Chair of the Atomic Energy Commission so it became famous). Official AEC estimates at the time though nuclear power plants would cost the same as a coal plant of equal size, although there were dissenting voices.
Half of my electricity bill is for electricity and the other half is the cost to deliver it to me. There was going to be an electricity bill.
Interesting, I did not know the full history behind that statement
t’s also worth noticing the phrase was in a paragraph of a speech that talked about children growing up to live in a world without famine, travelling at great speeds through the air (jet power), and eliminating disease; in other words it was an aspirational phrase about a bright future ahead, not a formal prediction of specific nuclear energy costs
And today we are looking at the those eradicated diseases making a comeback and famine/food poverty everywhere you look even in the (sic) richest country in the world…..
Actually, the only eradicated human disease, smallpox, has not come back. What’s more, we are on the brink of eradicating polio and Guinea worm. There has also been vast improvement recently in many infectious diseases: malaria deaths dropped 60% between just 2000 and 2015, measles deaths 80% from 2000 to 2013, rubella cases dropped 98% from 2000 to 2018 (along with no cases reported in 82 countries and 2 continents), and leprosy cases dropped 95% since 1981.
As to famine, estimated deaths from famine dropped 99.5% from the 1950s to the 2000s, and the rate in the 2000s was 1/20th the rate in the 1990s. The US has virtually no deaths from starvation, the few cases of death by malnourishment each year are almost all due to abuse.
Why do you think things are getting worse when by all measures they have been getting dramatically better just in the past few decades?
So driverless cars in those cities don’t need to handle rain or snow and probably don’t need to handle cars parked on the highway or single track roads or sharp bends or any other difficulties.
There probably aren’t many cyclists or pedestrians either.
There is a long long way before they can handle Northern European roads let alone Asian or Italian ones where people don’t follow the road rules.
Plus all the research at vast cost is dependent on low taxes and essentially unlimited profits from web search. I wouldn’t expect that to continue – whether because AI search will be more expensive to provide or because governments need the tax revenue.
Except that Waymo One is offering rides in SF
Yes, there are definitely no narrow one way streets or sharp curvy roads in San Francisco . . . no cyclists or pedestrians either. /sarcasm
I’m sure that California/Arizona were picked as test areas for Waymo because of the mild climate (it’s the same reason Hollywood is where it is and why LA was once the center of the US aerospace industry – you could shoot movies outdoors or fly almost all year round back in the 1920’s when planes had open cockpits). I’m also sure rain and snow will be an absolutely impossible problem for driverless cars to solve, sort of how computers mastered tic-tac-toe very early but have yet to ever beat a grandmaster at chess /sarcasm (the second sentence, the first is accurate).
Don’t they just do the San Francisco suburbs at night. Because that was the deal last year…
I mean to be clear if the driverless cars do Lombard street in the day maybe they can also do the English or French countryside. But if they can why don’t they do Oxfordshire?