but why to ask California State for subsidy? Why not to build it using private funds? I'd imagine that if this is economically sound idea there must be potential investors lining up to have their share in the Project? The estimated cost is $7B. Now, Musk just needs to make a few calls to his friends at Google, Amazon, etc. Can't these guys just form a company together just to build it?
Maybe I'm naive... or maybe Musk for all his genius is focused on the Government grants too much instead of being focused on the investors in the business world.
If this brings profit, everybody want to own piece of the pie, no?
(1) CA is much better positioned to straighten out the land use issues. It needs to use the existing I-5 right of way, it needs to tunnel through some mountains, and it probably needs to eminent domain some additional bits of land for pylon bases where I-5 curves too sharply. No matter what, this is a project that has to pass the legislature in order to get built.
(2) A CA-sponsored bond issue must be by far the lowest cost way to finance a $7B infrastructure project that's amortized over 30 years.
Can't (1) and (2) be solved by additional $1b to cover "cost" the Government might have? Just make it easier for them to move it through legislature, mountains, and such ;-)
You can already get the same effect by having a private investor agree to "pay back" the Government if there are really private investors who want to do that.
It's called a "public-private partnership" and it's not completely impossible but it does require some person or persons to cough up the cash.
> but why to ask California State for subsidy? Why not to build it using private funds?
Because you can't, in practice, acquire the rights of way necessary to build a substantial railroad/hyperloop/freeway or other major infrastructure project of that type without government (specifically, without use of eminent domain).
But as I recall, the gov't can use eminent domain to give land to a private entity if they're in favor of the idea for the "public good." Or am I way off base here...?
few investors would touch this. It doesn't fit into any investment category that's approved.
There are infrastructure funds but they're looking for sleepy assets. Stuff like toll roads and ports that have an established operating history and are supposed to be low risk.
This is a whole different animal. It's almost infrastructure VC. I don't see how this fits in any part of the institutional world. That leaves wealthy individuals and I don't think there'd be a lot of interest there. They're looking at Berkshire and steady growth vs. an investment in speculative infrastructure. I could see $10M investments but I think it'd be hard to get people to put a big chuck of their net worth into it, which is what you need (i.e. you need a couple people putting in $1-2B). Furthermore, historically public transportation hasn't been very profitable. Realistically you probably need the state to build it.
Not to be nitpicky but if you haven't driven the I-5 theres substantial room between each direction of the freeway so I don't think it will actually be above traffic if that's your concern.
I have driven the I-5, but good point. And the diagrams that you'll find on p28-29 of the presentation suggest that the supports would definitely fit on the median.
You still need government permission to use the median like that.
There are overpasses all along I-5. I seriously doubt you can put a 20 ft elevated tube under them and you certainly don't want them in a place where a truck can easily slam into the support pillars.
Depends on how strong the tunnel is. Assuming your taking 3/4 atmospheric difference your starting at ~11 pounds per square inch add in a 3-5x safety factor and that tunnel would be one tough son of a bitch.
Not to mention it's got to be really close to a strait track so your more dealing with scraping forces than a direct strike.
The government loan was hardly free. Not only did it incur interest, there was an equity component that nearly kicked in had Tesla not had sufficient funds to pay off the loan early.
Musk put $40m into Tesla and his stake is worth billions. The people put $465m into Tesla and their stake is worth nothing, after making a paltry $12m in interest. In addition, while Tesla was paying the government 3% on that loan, they were paying Musk 10% on his loans, in effect shoveling government money directly into Musk's account.
This is a classic example of socializing the risk while privatizing the profits. Yes, Musk is a smart guy with plenty of great ideas and good execution. But he's also plenty good at funneling government money to himself.
No, it's a very visible example of socializing the risk while privatizing the profits. It's pretty small potatoes compared to the normal contract guarantees to even, say, companies doing highway maintenance, and let's not get into the "socialization" of science funding. Where are our guaranteed ROIs on NSF grants?
The government makes these investments all the time. In fact, usually the (barely implicit) goal of government funding is to also encourage job and wealth growth. $12 million isn't much of a return, but even revenue neutral is a win for the average government investment. And, like the tax breaks to encourage people to buy the very cars the government was helping pay to produce, the idea is to help kickstart an industry that might not have the differential to self-start, but has the potential to eventually be self sustaining and bring outsize benefits compared to the investment. Basically the same reason we fund basic science research as well.
And again, this is highly selective outrage. You can disagree with the whole category of government-sponsored industry, but you have a bit of an uphill battle there. Meanwhile, there are far more "classic" examples all around, not to mention the two other major car companies that together received nearly 16x what Tesla received and have so far not exactly put in a great showing for the industry-creating change that money was supposed to help fund.
He put his money in at the beginning, the govt. put it in after they had a production car and the Model S R&D well underway. They're not at all equivalent in terms of level of risk.
That said, the interest was low, but it was meant as a public good. Without Tesla, I very much doubt the big car companies would be pushing out their own EVs on nearly as aggressive a timescale.
They had a loan program to kick-start electric vehicles. One of their loans was largely responsible for the existence of Tesla and its ensuing success. The loan was paid back.
Should the government have been more profit-maximizing? Do we want civil servants taking large equity stakes in private companies? We fund research (both directly and through the university system) all the time with the understanding that the net benefits to society outweigh the direct costs of the programs.
Well I guess judging by the poster's rage, they should have got a better return and folded that into another project. I'm just trying to empathise with the anger of taking risks with relatively low returns using public money.
AFAIC Tesla upheld their end of the bargain and society is up by quite a bit. This is in stark contrast to other bullshit that the US government has funded which is wasteful at best. War, war on drugs, war on privacy, bankers, ...
Or maybe - just maybe - without the Government he would have to spend more time and effort to persuade private investors and companies to help him. I think by choosing the Government he choose the path of the least resistance. I don't blame him, just saying, that for the rich getting the money from the Government might be much easier than getting it from the markets. Which would be just another example of why the Government should stay away from the economy.
Ah, that's boring. Look, we're talking about progress here, no Government burocrat should be able to stop us. Just $1B extra in "fees" would get us all the Government backing in the world we want. Unless we're not really serious about the whole thing and not really confident about the end result.
Or just have Jobs resurrected. This way we save $1B on the "fees" and he'll talk the Government officials into this for free. They'll think they get the best deal in the world once Steve is done talking to them and the Distortion Field is permanently present in the Government heads.
Well the issue, apart from getting the land to build, is probably that the public benefits a great deal more than a company can profit off. There are always going to be intangible benefits from huge infrastructure projects like this that a company can't monetize. Hence what is economically a good idea for the nation or state as a whole, is not necessarily a good idea for a private investor.
I live in los angeles and the proposed price is cheaper than taking a cab from the LAX to my place (4 miles). So no, this is not to help rich americans.
I think anyone who pays money to be transported from one place to another at high speed is too rich to be cared for by Bill Gates, from his perspective :)
There is a private bus service the runs between LA and SF for $40, which is probably less than the cab fare to the airport, or what a high speed rail ticket will end up costing.
Actually Bill Gates is on record saying that if he had 'one wish' it would be for an awesome low emissions energy source.
When you consider the growth in air travel, and the fuel options for air travel, the Hyperloop IS effectively a low emission energy source. I suspect he's more than interested.
Maybe I'm naive... or maybe Musk for all his genius is focused on the Government grants too much instead of being focused on the investors in the business world.
If this brings profit, everybody want to own piece of the pie, no?