Wed 24 Aug 2016 - Impact
Geography used to be destiny. Communities and trade flourished in proximity to food, resources and transportation options. In ancient times that meant rivers and coastal areas. In the industrial revolution, that meant along rail lines and at rail terminals. In the automobile era, that meant along highways and interstates. The cost of distance has been baked into goods and services for so long that it’s almost taken for granted, seen as an absolute or a constant. In recent years, globalization has been driven by a shrinking cost of distance. An American firm moving its manufacturing across the Pacific doesn’t think twice about the cost of shipping back over the ocean because its labor costs are so much lower and containerization of trade drops the cost even further.
But what if the cost of distance fell dramatically again? Strategy and consulting firm Bain & Company produced a fascinating report earlier this year that explored the technology-driven decline in the cost of distance. It struck a nerve with us because at Hyperloop we often talk about eliminating distance (and time) through high-speed on-demand travel, and reshaping regions by enabling people to live in more affordable communities well outside a metro area, or to live in one city but work in another 300 miles away separated by a now 20-minute commute.
Bain points to a set of emerging technologies such as 3-D printing, robotics, autonomous vehicles, low Earth orbit satellites, drone delivery and the Hyperloop, that will allow people to live and work in a wider variety of places with better quality of life, for manufacturers to shift production to more distributed locations, and for retailers to serve more distributed customers profitably. Drones have the potential to lower delivery costs by 75% to 80%, according to the Bain report, allowing deliveries of smaller packages. Smart kiosks and dexterous robot assistants in casual dining restaurants and apparel retailers can lead to a 25% to 30% increase in the number of locations that chains such as Outback Steakhouse, Old Navy and Apple can profitably serve, according to the report
A structural decline in the cost of distance could lead to widespread shifts in business models, supply chains, and real estate values. The winners would be advanced economies that can deploy these technologies quickly and harness their benefits. The losers would be emerging economies that depended largely on labor arbitrage, commercial real estate developers that made long-term bets on suddenly irrelevant locations and service-economy workers ripe for displacement by automation.
One of the mega shifts, the migration out of cities, is well under way. Bain’s Macro Trends Group analyzed census data for 360 metropolitan statistical areas, defining the urban center as being 10 miles or less from the city center, about the average one-way commute. In 2000, just under half the US population (49.7%) lived within 10 miles of a city center. Ten years later that number had fallen to 47.5%. That’s almost 6 million fewer people living in urban centers, and the migration was split evenly between the suburbs and the exurbs. Bain’s finding may seem to contradict reports about renewed growth of urban centers, but it doesn’t. The total population living within the city-center radius did increase over the decade by 7 million people, but the population of the US also grew. Had these urban centers retained their proportional share of the population, they would have added 13 million people. Instead, the suburbs and exurbs increased their share by 6 million people. That shift away from central cities is even stronger in Western and Southern Europe than it is in the U.S.
We had a chance to sit down and talk with the authors of the Bain report: Karen Harris, managing director of Bain’s macro trends group and Austin Kimson, Bain senior economist:
Harris: We’re always looking for big drivers in the economy where the assumptions of the market are fundamentally misguided for a reason we can identify. In this case, we were confounded by the general wisdom that by 2050 everyone would live in a megacity. I live in Manhattan so I understand the attraction. But why is it that well-off people who can make other choices would be inexorably crammed into 100-story buildings? We looked at the construct of cities and what they were built to do and realized that the constraint is changing. Some people will continue to choose to live in cities, but that doesn’t mean that people will inevitably cram themselves into cities and our clients who are making these long term bets based on that conventional wisdom should know the counter trend.
Harris: One of our big clients, a buyout fund that makes real estate investments, called and asked us to come in and talk to their team right away. For people in technology circles on the West Coast it made a lot of sense, but in some traditional industries like retail they are wondering what it will mean for footfall traffic. Transportation companies tell us they are already seeing this kind of dispersion.
Kimson: People in big cities like New York and Sydney have been scratching their heads at this idea but as you go through the logic, people agree more than they disagree. The richer people have a hard time understanding this. It’s really middle class that has to balance cost, space and affordability. We’re seeing a lot of people moving from California to Texas, Nevada, Arizona in search of more affordable housing.
Harris: The far-flung 5,000-km supply chain to China is shortening. A lot of companies we talk to are putting their marginal production closer to market (like Mexico). There is a lot more 3-D printing of complex parts closer to home markets, but massive printing of commodity things like utensils, not so much. But in a decade or a decade and a half, the bigger trend could take hold. Having the ability to reach a wider customer base no matter what means you can specialize more now, too. If you have smaller group of customers to delight you can have localized and lower production. Companies like Amazon that deliver in smaller quantities can offer mass customization in demand. You saw a similar trend play out when the less-than-truckload category emerged separately from the trucking industry.
Kimson: It’s about reducing the scale point, or the ability to be producing at lower volumes with products that are five to ten times better than what they already have. It’s no longer that relevant to look around the world to lower your labor costs by 10% versus asking if you can innovate more quickly than anyone else or do a level of customization that’s just not possible at batches of a million. As with commuting, in the business-to-business market it’s the variability in time that will kill you. Companies are pulling in their supply chains because of the risk of variability. Missing a deadline is just not worth it to them. The opposing trend is that we’re seeing businesses that are able to operate at much smaller scale because they can leverage these global supply chains that much easier. But they’re wanting to extend the supply chain without making it complicated and adding a new source of risk. The history of economic innovation is having your cake and eating it, too. If you could have all your suppliers next door to you that would be great. If you can use something like a Hyperloop to create the equivalent experience in every way (speed, dependability, availability) and your suppliers are now hundreds or thousands of miles away, this is having your cake and eating it too. You’re collapsing the trade-off so it’s not a trade-off.
Harris: The people who feel the real pressure of cost and space are families. More of what we’re seeing in cities are that they become provinces of rich families, young people who don’t mind piling up, and empty nesters. The rest get squeezed out and move someplace where they can get a four-bedroom house they can afford. I hesitate to say it’s only about millennials because that sounds like it’s attached to a value system but it’s more of a lifecycle thing. The related phenomenon is family size, which is not as much about educational attainment as people think it is. Family size is more of a U curve. Lower income families are larger than middle income families and then size goes up again along with wealth. The reason most families have two kids is because it’s what they can afford and they want to give their children a better life than they had.
Kimson: I live well outside of Dallas, almost an exurb, and my neighbors are a school teacher and a firefighter and are doing the basic math to find out if she can stay at home vs paying for child care. If there is one particular class of cost that is really driving constraints around having children it’s cost of childcare. For many generations the natural arrangement was having a multigenerational household or people nearby. Spatial economics makes it possible to undo the structure that ripped it apart through urbanization. In China younger folks went to cities and older folks stayed in country, but now both groups are facing financial constraints and finding outer places to co-locate.
Harris: Those tier B malls in the inner rings of suburbs are the flashing red light danger zones because they’re neither fish nor fowl. You will still need to move your commodity goods around like coal and wood, but the question is what kinds of customers will you hit based on where you locate.
Kimson: The spatial logistics of Hyperloop reminds me of a conversation I had with an airline executive who said that higher spatial dispersion makes feeder patterns even more important. For large-network airlines, their mega hubs and big trunk lines become even more important sources of competitive advantage, but you’re having to feed them from increasingly dispersed population areas. Similarly, a very high-speed point to point route is interesting but how do you feed it? A bullet train between Dallas and Houston can reduce a four-hour trek to 90 minutes but if it takes an hour to get to each station from downtown then I’m back to my four hours. It’s not just the trunk line or mega hub-to-mega hub but the true spatial problem of reducing the time for that point to point travel.
Kimson: The real crux of the last mile is the neighborhood to front door. I’ve seen rolling robots for groceries, and drones overhead for other goods. They all reduce the cost of distance. But to get a real step change in delivery cost, you either need to relax time-sensitivity (which is the opposite of what everyone wants) or a real breakthrough in last-mile productivity. A UPS driver is only marginally more productive than he or she was in the 1950s but a driver with a fleet of 4 drones would be hugely more productive. The cost of that model is based on a driver going to a central area with a drone pad on top of the truck where takeoffs and landings happen. No matter how I pencil it out I still get drastic reductions.
Harris: No, it will mean more outlets. Will it mean more employees? I’m not so sure. ATMs didn’t replace banks but you have fewer tellers. Branches actually grew until recently as ATMs grew.
Kimson: I live in Keller, Texas, an exurb of Dallas-Fort Worth, and I can get 90% of the things Karen can get in NYC but she can get access to a far wider variety of services that are made available to higher-density areas. The new math that retailers are going to do is to lower their population per trade radius from 100,000 to 30,000. Suddenly they can push into lower-density areas and that in turn increases the desirability of those areas and reduces the services gap in areas such as restaurant varieties and quick-delivery. New business models like DoorDash has really exploded in my area by taking a piece of the value chain that restaurants used to do and spreads it across 30 or 40 restaurants and now all of a sudden I have a lot wider variety. Pasadena is great example of community of the future: a walkable high street and cluster of world class universities. If you live in Pasadena and can work in Pasadena you’ve really got it made.
Harris: In some countries there is a big city that has tremendous gravitational pull. With Sydney, you see a lot of pull. Tokyo, too. But what we’ve seen in London is that while population has grown, some 600,000 British citizens have left and it’s the non-domestic residents that have kept the population rising. And while Tokyo is an example of death star pulling in energy, cities like Osaka are not.
Kimson: Of the top three metros in U.S., New York is still continuing to create a white-hot center in terms of population density but Los Angeles and Dallas-Fort Worth continue to exemplify population dispersion. Dallas-Fort Worth is one of most rapidly spatial expanding. This mirrors people’s image of 1950s suburbanization, when people lived in a 10-mile radius of the city center, but now at least where I live the outer burbs are becoming self-sustaining. They’re giving people walkability and human-scale development but replicating that in smaller bite-size pieces that enable you to have lower density. My town of Keller is a great example. Ten or 15 years ago there was nothing there. Now a very wealthy demographic is being drawn out here from closer to the city by amenities such as Southlake Town Square (a faux downtown with cool restaurants and shops) and proximity to DFW airport. You have a lot more professionals, sales people and consultants here and mobility is critical for them. I see it in Chicago and somewhat in Denver, where I was poking around and asking the locals where is the development heading. My Uber driver said it’s all happening around the outer most rings and his rides are periphery to periphery instead of clustered in the downtown. The most fundamental insight in this work is that cost of distance is going down and when that happens people will use more of it.
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We're a privately-held company on a mission to create fast, effortless journeys that expand possibilities and eliminate the barriers of distance and time.
There are too many people caught bumper-to-bumper in traffic, who have to make a hard choice with their family on where to live and work, and who are limited in their access to experiences and opportunities. We're building a system that will give back time and deliver the travel experience of the future.
The number of cars is set to double worldwide by 2040, same with air and trucking. We are already dealing with the effects of pollution, lack of access, and congestion. If we only invest in the same technologies we’ve had for more than a century, tomorrow will look like today, only much worse. It’s been over a century since the Wright Brothers first showed us human flight was possible. It’s time for a new era in transportation capable of carrying us forward for the next 100 years.
To date, we have received over $400 million.
A major investor of ours is DP World, a leading enabler of global trade who sees the potential of sustainable hyperloop-enabled cargo systems. Additionally, we are backed by the Virgin Group, an industry leader across rail, aviation, ships, and even spacecrafts. For more on our investors, visit the company page.
Virgin Hyperloop One is the only hyperloop company that has a strategic partnership with a mass transportation company, the Virgin Group, an industry leader across rail, aviation, ships, and even spacecrafts. Another key partner of ours is DP World, a leading enabler of global trade who sees the potential of sustainable hyperloop-enabled cargo systems. Other industry-leading partners include KPMG, Foster + Partners, Systra, BIG, SNCF, GE, Deutsche Bahn, Black & Veatch, McKinsey, Deloitte, Jacobs, Turner & Townsend, ARUP, and Steer, among others.
No, there’s no connection with Elon Musk.
We aren't just building a hyperloop; we're building a network of public and private partners to scale an integrated supply chain ecosystem. Our business model is based on partnerships that create local jobs and opportunities for those who choose to invest in this technology. We are working at the highest level of governments around the globe to put in place commercial agreements to make hyperloop a reality.
Hyperloop is a new mode of transportation designed to eliminate the barriers of distance and time for both people and freight. It can travel at speeds approaching 700mph, connecting cities like metro stops - and it has zero direct emissions. The journeys can be booked on demand so there’s no wait time or delays.
With hyperloop, vehicles, called pods, accelerate gradually via electric propulsion through a low-pressure tube. The pod floats along the track using magnetic levitation and glides at airline speeds for long distances due to ultra-low aerodynamic drag.
On May 12th, 2017, we made history two minutes after midnight when we successfully launched our vehicle using electromagnetic propulsion and levitation under near-vacuum conditions at our full-scale test site in the Nevada Desert. We've since run hundreds of tests, acquiring validated knowledge that only comes from real-world testing. For more info on DevLoop, our 500 m test track, visit our progress page.
We estimate that the top speed for a passenger vehicle or light cargo will be 670 miles per hour or 1080 kilometers per hour. That is about 3 times faster than high-speed rail and 10-15 times faster than traditional rail. The average speed vehicles travel will vary based on the route and customer requirements.
A perfect vacuum would decrease the drag on the vehicle even more, but not significantly. We have already gotten rid of 99.9% of the air in the tube. Lower levels of vacuum than this are important if you are performing scientific experiments, but the cost would not be worthwhile.
Hyperloop is an entirely new mode - think the best of trains, planes, and the metro. Hyperloop is on-demand, offering flexible travel schedules with no stops, no transfers, and no weather delays – all at speeds about 3 times faster than high-speed-rail and less cost. Hyperloop is highly efficient, with a smaller environmental impact than high-speed rail because the closed system can be tunneled below or elevated above ground, avoiding dangerous at-grade crossings. The VHO system is 100% electric and can reach higher speeds than high-speed rail for less energy due to our proprietary electric motor and low-drag environment.
Fast, effortless journeys go hand-in-hand with journeys where everything works reliably without interference, and where all passengers feel comfortable and safe. The Virgin Hyperloop is designed to be inherently safer than other modes, with multiple redundancies in place. Our system operates autonomously in an enclosed tube and is not susceptible to weather delays, accidents from at-grade crossings, human error, or power outages. Our proprietary high-speed switching architecture eliminates unsafe track configurations and moving trackside parts, a failure point of traditional rail with mechanical switches.
As new mode, we have to prove our safety case to regulators and work with them to develop a regulatory framework, so passengers can ride the hyperloop in years not decades. We are encouraged by the support we are seeing at the local and federal level around the world to support hyperloop certification based on the fundamentals of safe operating that are already standard practice. In March 2019, the U.S. Secretary of Transportation, Elaine Chao, created the Non-Traditional and Emerging Transportation Technology (NETT) Council to explore the regulation and permitting of hyperloop technology to bring this new form of mass transportation to the United States. This Council is an important step forward in recognizing hyperloop is a new transportation mode and that we need to shift our mindset and acknowledge that this technology does not fit into a regulatory structure that is over 100 years old. The European Commission’s Directorate-General for Mobility and Transport (DGMOVE) has also been leading discussions with hyperloop companies to advance regulatory standards and, in India, the Principal Scientific Advisor (PSA), Prof. Vijayraghavan, has set up an independent committee called the Consultative Group on Future of Transportation (CGFT) to explore the regulatory path for hyperloop. For more, visit our regulatory progress pages.
While flying through a tube at more than 1000km/h might seem like a thrill ride, the truth is we are able to mitigate any uncomfortable acceleration forces within our controlled environment. The journey will be so smooth, you could sip a coffee the whole time without spilling a single drop. Normal acceleration and deceleration of 0.20 Gs will feel similar to a train. As a comparison, flooring a typical sedan gives between 0.4-0.5 Gs and commercial airplanes see 0.3-0.5Gs depending on the plane and load.
Pods will continue to travel safely to the next portal even with a large breach. Our response to a breach would be to intentionally repressurize the tube with small valves places along the route length while engaging pod brakes to safely bringing all pods to rest before it is deemed safe to continue to the next portal. A sustained leak could impact performance (speed) but would not pose a safety issue due to vehicle and system architectural design choices. This assessment is based in solid understanding and analysis of the complex vehicle load behaviors during such an event.
Without a massive leap forward, pollution from the transportation industry is expected to almost double by 2050 - well above the carbon budget. By combining an ultra-efficient electric motor, magnetic levitation, and a low-drag environment, the VHO system can reach airline speeds for 5-10x less energy (depends on route length) and can go faster than high-speed rail using less energy. In regions like the Middle East, we could power the system completely by solar panels which cover the tube. As fighting against climate change becomes an existential issue for cities across the globe, hyperloop will create a new, shared, electric mobility model for helping to permanently reform an industry with some of the world’s highest carbon emissions.
We are designing Virgin Hyperloop to be more efficient than other modes of transportation. Modern jetliners use up to 10 times the energy we use per passenger-mile over the entire journey. We can cruise at 500 miles per hour for less energy (per passenger) than an electric car doing 60 miles per hour. At peak speed, the VHO system consumes approximately 75 watt hours per passenger kilometer (Wh/pax-km). To put this in perspective, the fastest conventional maglev train travels at about half our speed and consumes 33% more energy.
Our system is 100% electric with zero direct emissions. We're energy-agnostic. Our system can draw power from whichever energy sources are available along the route and support a transition to a renewable energy-powered future. In regions like the Middle East, we can completely power the system with solar panels which cover the tube.
It’s similar those new electric vehicles that are so quiet they need to create noise to indicate movement. With hyperloop, we eliminate sources of mechanical noise, like wheels on track, and we actually have a sound barrier inherent in our tube design
DP World Cargospeed is a global brand for hyperloop-enabled cargo systems operated by DP World and enabled by Virgin Hyperloop technology. These systems will deliver freight at the speed of flight and closer to the cost of trucking for fast, sustainable, and efficient delivery of palletized cargo.
The focus would be on high-priority, on-demand goods – fresh food, medical supplies, electronics, and more.
With DP World Cargospeed, deliveries can be completed in hours versus days with greater reliability and fewer delays. It will expand freight transportation capacity by connecting with existing modes of road, rail, ports, and air transport, and will provide greater connectivity with manufacturing parks, economic zones, distribution centers, and regional urban centers. This can shrink inventory lead times, help reduce finished goods inventory, and cut required warehouse space and cost by 25%. DP World Cargospeed networks can also enable just-in-time, agile manufacturing practices.
The Virgin Hyperloop is unique in that it doesn’t need to be passenger-only or cargo-only. We are designing a mixed-use system that fully utilizes system capacity while maximizing economic and social benefits. However, it is possible to run cargo commercial operations while certification and regulation are still ongoing for passenger use.
We are working with the most visionary governments around the world to make sure you can ride the hyperloop in years, not decades. Our goal is to have operational systems in the late 2020s. Our ability to meet that goal will depend on how fast the regulatory and statutory processes move.
We are working with visionary governments and partners around the world to make hyperloop a reality today. To learn more about our projects around the world, visit our progress page.
Capital and operating costs will range widely based on the route. We recently released a study that showed our linear costs are 60-70% that of high-speed rail projects. In addition, we expect the operational costs to be significantly lower than existing forms of transportation.
It’s simple – if it’s not affordable, people won't use it. We are looking to build something that will expand opportunities for the masses, so they can live in one city with their family and work in another. Currently, that kind of high-speed transport is not feasible for most people. The exact ticket price will vary for each route, but a recent study showed that riding a hyperloop in Missouri could cost less than the gas needed to drive.
We are in the business of serving local needs, not the other way around. Public and private support is key. In some cases, we will respond to solicited bids with partners when we feel the technology matches the project’s objectives. In other cases, we will make an unsolicited bid for a project when we see that hyperloop could offer a unique solution to market needs.
While the technology is different, the process for building a hyperloop is similar to that of building a highway, railway, or any other type of linear infrastructure. The first stage is project development. This phase includes feasibility studies, and then more detailed engineering reports and environmental impact studies. Once a project is approved to move forward, a consortium is formed to finance and deliver on the project.
Many infrastructure projects succeed or fail based on right-of-way issues. We are designing a system that requires only about half the right-of-way as high-speed rail and can more easily adapt to existing right-of-ways. At high speeds, the VHO system has a 4.5 times tighter turn radius compared to high-speed rail and can climb grades that are 6 times steeper, reducing the disturbance at crossings. Portals will be purposely integrated into and support existing communities and landscapes. Low noise levels will expand opportunities to build hyperloops closer to the city center.
Hyperloop also holds enormous promise for rural communities. Virgin Hyperloop systems can be built below or above ground, which means no one’s farm needs to be cut in half. Our system enables rural areas to retain residents, who can now have more access to urban job centers, educational opportunities, and health care facilities. Additionally, hyperloop could enable freight distribution centers to be placed in rural areas, leading to job growth and industrial clusters. After a system is built, there is the opportunity to add additional on and off-ramps, supporting a greater number of people along the route.
Transportation infrastructure has traditionally relied on extensive government funding. This is because the benefits of clean, safe, and efficient transportation are enjoyed by the entire community, not just the user buying a ticket. However, most existing mass transportation modes are unprofitable and hindered by existing infrastructure built in the past century or by legacy systems. We want to change that and are focused on public-private partnerships. By developing a new mode of transportation from scratch, we're able to leverage technological developments that have occurred in the last century, especially the IT revolution. We're able to keep maintenance costs low, energy efficiency high, and transport tens of thousands of passengers per hour. This keeps margins and accessibility high, contributing to more financially attractive returns than if the corridor was served by existing modes. These benefits aren’t just hypothetical. While this is an exceptional case due to high demand, a third-party evaluation found that our Mumbai-Pune Hyperloop Project could be funded 100% by private capital. In the U.S. we see enormous potential to attract investment from the private sector, leveraging public investments. Involving government stakeholders as well as potential private investors early in the project development process is critical.
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