There are investment opportunities in changing our economic lifeblood from oil to ingenuity, preempting the need for oil in urban transport.
Unexpected innovations (positive Black Swans) such as personal computers, the Internet, lasers, penicillin, often require preparation to allow investment. The objective of this paper is to alert investors so those interested can exploit current opportunities and organize their charter to for direct investments in the Personal Rapid Transit [PRT] industry - the Physical-Internet.
Government management of infrastructure created our oil addiction. Bureaucracies developed plans to maximize consistency (know-how), minimizing the messy process of innovation (know-what). For a century the technologies of Ford, Bell, Edison and the Wright Bothers have been frozen in time (Bell until 1984). Alternative technologies based on computer networks, such as PRT, have not been allowed because they were not in the plan. The consequence of a century of better know-how but the same know-what has resulted in Peak Oil and Global Warming.
Peak Oil, with rising gas prices, is forcing a change and an investment opportunity that will cause the cost to travel a mile to drop from 56 cents to 4 cents. This savings applies to about 4 billion of the 8 billion miles Americans drive daily. The Physical-Internet will grow in the next 15 years to about 1.4 million miles of packet-switched, ultra-light rail networks. The world market is about 5 times larger.
Following is a summary of the paradigm shift, PRT compared to existing transport modes, how to invest today, status of the industry and companies that are leading in the PRT effort.
Paradigm Shift: PRT is a double paradigm shift from individual devices to networks that system integrate transportation and power generation:
- PRT is a shift from moving a ton to move a person in congested, repetitive travel, towards moving just the person in ultra-light podcars at 100 to 200 watt-hours per mile (400 to 200 miles per gallon electrical equivalent). Early networks have a 1-5 year payback.
- PRT energy efficiency enables a synergy with distributed natural power sources. Example; solar collectors, 6-foot wide mounted over the top of the rails can gather 12,000 vehicle-miles of power per day per mile of rail. Power collection in transportation has 1-5 year paybacks for solar PV.
Here is a list of how PRT is similar to existing modes of transportation; how PRT is the "personalization of mass transit,” a physical-Internet:
- CSX television ad notes that railroads can “move a ton of freight 423 miles using a gallon of fuel.” PRT is ultra-light rail networks that provide similar efficiencies.
- Based on riders per day, elevators are the most successful form of public transportation; PRT is a network of horizontal-elevators. Integrating computer networks with roller coaster mechanics permits on-demand mobility of people and cargo stream from origin to destination non-stop.
- Automated warehouses use computer networks to move pallets between addresses. PRT expands the concept to an economic community.
- The automobile has a 97% market share of trips in the US and an 80% market share in Europe. This is proof the personal car is the right size mobility packet, just the wrong mass, power consumption and randomness of behavior for congested transport in modern cities. PRT provides the personal mobility of a chauffeured car at the cost to operate an elevator.
US Transportation is currently 97% dependent on oil and consumes 26.6 Quadrillion BTU’s annually. Re-tooling transportation to sustainability in the next 15 years will provide better service while cutting oil demand by 60-80%. Those savings can be taken as profit.
How to invest:
- Invest in natural resource companies. Vast quantities of materials will be required to build 1.4 million miles of ultra-light rail. JPods has made a strategic alliance with Novis because of their ability to recycle aluminum. Investing in supporting companies is similar to investing in oil services companies.
- Invest in solar and wind collection manufacturing companies. The need for natural power collection technologies 6-foot wide by 1.4 million miles long will change the economies of scale in those companies. The short paybacks on these technologies will allow rapid churning of innovation. Instead of building large arrays in deserts and losing a significant amount of power in transmission, use the power where it is collected and make that use very efficient. If you have used a solar powered calculator, you have experienced the principle of tailoring efficiency to the capabilities of distributed power sources.
- If you are a publicly traded company that can supply the needs of this industry, forming strategic alliances with PRT companies may boost your stock price. POSCO/Vectus and British Airport Authority (NYSEMKT:BAA)/Advanced Transport Systems Ltd lead in this category.
- If you are an investor arrange your investment charter so you can take advantage of this industry within 8 months.
- If you can make private investments, there are a number of opportunities. Some listed below:
- It will take 4 to 8 months for the first modern PRT networks to deploy and demonstrate 1 to 3 year paybacks. After the first modern networks come on line there will be public investment opportunities directly in PRT companies.
- Author's note. The task of re-tooling transportation is gigantic. Facing an overwhelming task, take the ant approach to eating an elephant, small bites, lots of friends. Nearly every company in this market will make money or get acquired. The big winners will be those that mimic Internet success with a distributed collaborative model, small bites, lots of friends (Google (NASDAQ:GOOG), YouTube, Ebay (NASDAQ:EBAY), Apple (NASDAQ:AAPL), Dell (DELL), etc...).
Current status of the Industry: Like the computer industry of the early 1980's there is an odd mix of participants. Investors range from sovereign wealth funds (Abu Dhabi at Masdar), industrials (POSCO at Uppsala Sweden and British Airport Authority at Heathrow Airport) to an eclectic batch of inventors/geeks/garage companies (links below). The military-industrial companies that built the first systems in response to the 1973 Oil Embargo dropped out of the market when government contracts ended after the Embargo (Boeing at Morgantown and Messerschmitt with Cabinetaxi).
Infrastructure has been constrained for nearly 100 years by government central planning and regulated monopolies over the power generation and transportation. Full development of the PRT industry requires government policy change from central planning to performance governing (defining standards which will allow access to public rights of way):
- Communications infrastructure was de-monopolizing in 1984. When the central planning changed to performance standards, century old analog networks were re-tooled to digital, fiber and wireless. Messy innovation was allowed to create vast number of jobs and demand for high tech products and services. PRT networks will mirror the explosive development of the Internet.
- The German government de-monopolization of power generation infrastructure with Feed-in Tariffs created dramatic investment opportunities in the solar and wind industries. PRT shortens the payback time from 10-20 years to 1-7 years for large solar arrays integrated into transport networks. PRT will create more demand for solar and wind systems.
- Early investments will have to focus on locations where governments grant rights of way for achieving performance standards. It is relatively trivial to achieve standards such as 100 miles per gallon and 10 times safer than automobiles. The cities, states and countries that allow innovation will invest directly in PRT. Those places are also the locations that will create many jobs.
The elegant simplicity of PRT is a great advantage as we struggle with depleting resources. Rising oil prices will help break down bureaucratic barriers to innovation but will also complicate getting the resources needed to re-tool. The current crisis is not from a conspiracy. Far worse, well-meaning bureaucracies are protecting us from the messy innovation. Well meaning bureaucracies created the monoculture of oil addiction, the infrastructure equivalent to the great Potato Famines.
Oil Prices, Upwardly Unstable will Drive PRT Adoption
Oil prices are unstable, but only upward (negative Black Swan). Small changes can go either way, but the whoppers will jump oil prices only higher. There is nearly an unlimited number of low probability whoppers. Combined risk of one or more whoppers occurring looks like a guarantee.
Demand destruction is meaningless in this forest of whoppers. Demand destruction is even more meaningless when an addict is facing a depleting supply. Oil is depleting. May 2005 was Peak Oil. The rules of supply and demand may influence but they no longer control oil prices. And, there are two sides to oil addiction. Consumers are addicted to oil use and will pay (or borrow) the costs. Oil exporters are addicted to their current revenues and will cut production to maintain current revenues. Pricing power is in the hands of exporters. Mid-June 2008 the Saudis announced a production increase, Libya announced a reduction; oil prices climbed.
Prices will further increase when shortages occur. EIA reported Inventories are at the bottom of the range that prevents most outages. When we fall below that range betting on higher prices seems a zero risk. Outages may create panic buying, adding to price.
Oil's supply chain is long, fragile and requires inventories of the correct type at the correct location to ballast small bumps. JPods version of PRT has a distributed power collection system.
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Imports into the US Gulf (purple line) are below the worst of Katrina (red line). If there is a significant hurricane anywhere between Venezuela and Louisiana, inventories will likely plunge and panic seems not far behind.
The world faces an oil deficit 3 times worse than in the 1973 Oil Embargo. World exports, (Production minus Producing Country Domestic Consumption) is the correct measure of Peak Oil. Peak Oil was in 2005 at 46.342 mbpd. Deficits accumulated since 2005 are 3 times larger than the deficit from the 1973 Oil Embargo (Ref WSJ)
The Export Land Model for oil depletion indicates available world exports will plunge by 2011. This is the $500 a barrel referenced by Dr. Hirsch and Matt Simmons. Prices will climb because of depletion and because fixed costs will have to be spread over a much smaller product delivery.
There may be small downward price adjustments but all the big moves will be up. The problem with investing in oil is at some price point economic fatigue or outright collapse seems likely. On June 25th Deutsche Bank's Chief Energy Economist warned of world economic collapse at $200 a barrel. The exact price is hard to fix because the economy has momentum; stop growing energy and the effects take time to display. Momentum decay can be seen by combining Peak Growth of oil and foreclosures actions to EIA's graph of Real Disposable Personal Income and oil prices.
For long term sustainability plant a garden and invest in ways to change the our economic lifeblood from oil to ingenuity.
Invest in Ingenuity
In response to the 1973 Oil Embargo, the US Senate directed efforts to find solutions. Congressional Office of Technology Assessment Study B-244854 identified Personal Rapid Transit [PRT] and Automated Guideways as the solution to sustainable urban transport. Morgantown's PRT system opened in 1975 and has delivered 110 million injury-free, electrically-powered passenger miles. The technology is essentially a physical-internet, packet-switched computer networks that move physical packets.
In the case of JPods version of PRT (the company this author works for), solar collectors 6-foot wide mounted over the rails gather 12,000 vehicle-miles of power per mile of rail per typical day (2.5 mega watt-hours per day). The distributed nature of the transportation network can be used to gather distributed nature power sources. Payback on these integrated ribbons of mobility and power is 1 to 5 years.
Masdar, the zero-carbon city being built in Abu Dhabi will use this technology for its internal transportation. That network will be solar powered. More networks are being built at Heathrow Airport and Uppsala Sweden. JPods has an agreement to network a large mall in Minnesota.
Investing in this industry is risky due to its early stage and the complexity of getting rights of way; bureaucracies do not have a check list for innovation. Most PRT companies are looking for capital but few are public. To aid investors interested in looking at this early stage industry, here are links to a couple of industry sites, the known companies and several background. In the interest of disclosure the author is the founder and primary shareholder of JPods. It is my personal opinion that this industry will expand dramatically driven by 5 factors: simplicity, lower costs, oil prices, zero-emissions and the service of a chauffeured car at the cost to operate an elevator.
PRT Times Better Background
Venture investors often sight the need for a 10X or 10 times improvement of a breakthrough technology over current practices. Following is a "X" better table for a number of categories.
|Costs, Operating||56||4||14X||Cents per vehicle mile traveled (cars verses JPods)|
|Costs, Capital||100||10||10X||$million per mile to build (light rail verses JPods)|
|Safety||14||0.005||2,800X||Fewer deaths (cars kill 14 per 100,000)|
|Access||24||4||6X||% that cannot drive/operate, children under 5 years old must be accompanied|
|Congestion||48||5||10X||Hours lost to congestion each year|
|Capacity, Cars||4800||4800||1X||*Same capacity as cars, 4 seats every 3 seconds|
|Capacity, Bus||600||4800||8X||*Bus 5 min apart with 50 seats verses JPods|
|Capacity, Trains||1200||4800||4X||*Trains 10 min apart with 200 seats verses JPods|
|*JPods can have multiple rails is same right of way and time between vehicles will drop to milli-seconds.|
|Emissions||1.7||0.0008||2125X||Pounds of CO2 per passenger mile|
|Conservation||250||4||63X||Parasitic Energy Consumption, 2000 lbs. time 25 start-stops per commute|
|Land Use||50||2||25X||Width of right of way, feet|
|Defense||492 billion||1||5 billion X||1% the estimated cost of Iraq War|
|Trade Deficit||584 billion||1||584 billion X||2006 Trade Deficit for cars and oil|
|Currency Value||Cause||Hope||stability||Oil addiction weakens the dollar|
|Peak Oil||Cause||Hope||life||Life if the Return for Solving Peak Oil|
|Climate Change||Cause||Hope||life||Life if the Return for Solving Climate Change|
There are many uncertainties. The primary risk is the question if government policies will allow the messy process of innovating. When allowed, the simplicity of PRT will likely create powerful examples of success. Efficiency gains, changing 60-70% of current costs into profit or competitive advantage, may drive wider adoption.
There is a profit in saving people time and money.