Reaching For The Sky - A New Vertical Era Of Efficient Innovation
Embracing the Future in The Immediate Reaches Above Us
Thank you to everyone for reading and sharing my newsletter. Thank you to those who have been in contact this week offering your support, both from a research side and investment to help us build SkyTrades. Please get in touch with me at jonathan@skytrades.io to learn more.
With new technology can come creative destruction. Eventually, the right idea becomes the wrong one, and the old ways of doing things fade into the background. It rarely happens by agreement, and bringing new efficient infrastructure unsettles the incumbents, but it has incredible upside.
Unmanned Air Mobility (UAM) operations will be enabled by airspace constructs and airspace management techniques which minimize or eliminate additional workload for Air Traffic Control (ATC)…. Example solutions for such enabling airspace constructs include Vertiports (distinct from existing heliports, or existing areas on an airport surface)……. and UAM Corridors. - Federal Aviation Administration (FAA)
The FAA want private solutions for low-altitude airspace management and building highways in the sky is the next step in transportation infrastructure. Enabling Unmanned Aerial Vehicles (UAVs) to transit legally in low-altitude airspace will have an immensely positive impact on society.
They will not only remove the need for many of the dangerous and polluting vehicles on our roads, but they will move people and products faster to where they need to be. Blood and organs can be transported further and more safely. Medical items, clothes and food can be moved sustainably through our skies. Cargo that is clogging up highways in ten-tonne trucks can be delivered last minute in a more size-appropriate drone or electric Verticle Take off and Landing vehicle (eVTOL).
Anyone who has ever taken a cursory interest in the expansion of the railroads West knows how powerful transportation can be. It was the vector for what we now know as the United States and the philosophical journey to Silicon Valley.
Utilising existing infrastructure to develop our towns and cities both physically and through software will push much of the inefficiency that has been built into the system out.
Transportation
Infrastructure is an area which has enormous potential for improving lives but also the prospect for overspending and overrun, as we look to build out new infrastructure it’s important we see where the pitfalls are.
According to a recent report Procurement and Infrastructure Costs State and government spent $187 Billion on highways in 2018 and there is concern that the quality of the work is deteriorating. Spending per mile increased 3X from the 1960s to the 1980s and public procurement is 25% of overall government expenditure. Much of the highways have already been built, so this appears to be maintaining the status quo.
State Departments of Transport (DOTs) face staffing shortages and rely on consultants, leading to poor project planning and increased project risks. This is a similar finding across international research which shows the White Collar Premium is a very high one. Incentives are not aligned. Some reasons for this include a lack of skills or experience in the DOTs, which sets everyone up for an expensive and long process.
Insufficient competition in procurement, particularly subcontractors, contributes to rising industry concentration and too few ‘approved’ construction firms in most States. There can be many factors at play here, one of the most concerning is the regulatory capture which promotes inefficiency up and down the value chain. We must ask ourselves how many consultants and government appointees are interchangeable.
The Key Findings from the NBER working paper correlate with the findings from international research.
High Construction Costs: Infrastructure construction costs in the United States are significantly above international standards, and they are on an upward trajectory.
State-Level Cost Variability: Construction costs vary considerably across different states within the U.S., indicating regional disparities.
Procurement Practices Impact Costs: The application of these is driving cost differences.
Weak State Capacity: The research reveals that inadequate staffing and lower quality in State Departments of Transportation (DOTs) significantly contribute to increased construction costs.
Understaffed DOTs resort to outsourcing work to costly consultants.
More frequent post-bid project modifications lead to higher costs.
Limited Competition:
Fewer bidders for projects are linked to higher construction costs.
Specific practices that restrict competition, such as limiting subcontractors and bidder outreach, coincide with increased costs.
International Overspend
Of the 41 countries in the International Transport Forum (ITF), as of 2018, when solid figures are available over $1 Trillion was spent on road and rail infrastructure. Again this does not mean exclusively new roads and rail networks, it means upkeep and ‘improvements’ too.
The European Union and Great Britain devoted 42% of the total rail and road infrastructure investment to rail. In the OECD Pacific and the transition countries, the share of rail out of total road and rail infrastructure spending for both was 31%. China, as best we can tell, put only 15% of the entire rail and road infrastructure investment into rail. Similarly, in North America, rail represented a small share, 11% of the total rail and road investment. This is not entirely surprising as anyone who has travelled by rail in Europe and North America can attest.
Recurring Costs of Land-Based Highways
Once our tax dollars have paid for the roads there are multiple other ‘charges’ we then need to pay. These range from jurisdiction to jurisdiction but can include items like motor tax, which is a ‘tax’ for owning and using a motor. Registration charges that need to be paid to register a vehicle, even though you own it. Licence plate fees, stamp duties and road tolls can also start to add up. Various bits of paper that have stamps and numbers on them show that you send your money to the right departments at the right time.
Tolls
Road tolls vary depending on where you are driving and what you are driving, what is important is whether are you getting value from the toll you are paying. For example, in France, you can be charged up to $71 to transit on a road if you are in a family car. On the same highway if you are in a truck it is $412. It’s not just in Europe where these charges are levied, in the US the average toll for a single short journey is $6 but can go up to over $200 if you are in a truck. These fees for commercial vehicles get passed down the line, ultimately making products more expensive for no real benefit.
Next Steps
Roads are costly to build, and expensive to maintain and use. It is as if we have no choice in the matter and must accept what is presented to us. It does not need to be this way.
Skyways, or highways in the sky are a more efficient way to transit, reducing the costs dramatically and by paying only when we use them, the benefits accrue to society. As the Federal Aviation Administration (FAA) has stated, private market solutions offer the best way to bring this new form of infrastructure into our communities. The need for higher costs associated with roads will be reduced dramatically. After all, competition in transportation leads to improvements for all.