Should investors be wary of Hyperloop?
The idea of a Hyperloop system is quite captivating: super-fast transport which is based on vacuum tubes and little capsules which can theoretically contain people or cargo. Unlike most new transport innovations, Hyperloop is a completely new idea rather than an improvement on an existing system, and perception of it being clean and out of the way has got people very excited.
The idea originally came from Elon Musk, but the Tesla and SpaceX boss didn’t have the time to pursue it himself so opened it up for teams of engineers and inventors to push the concept on. Many have been involved in different Hyperloop systems since, and whispers of the imminence of a completed line have been constantly cropping up for years. Indeed, it seems that the main virtue of Hyperloop so far has been its ability to generate press.
The latest to get involved in the scheme is Richard Branson, who announced last week that the Virgin investment group has taken a large stake in Hyperloop One, perhaps the most advanced of the many Hyperloop hopefuls out there. The goal for Hyperloop One is for its magnetic levitation electric propulsion system to propel the pods up to speeds of 650mph, though the technology is still a very long way from being viable.
The investment from Virgin is interesting because the company has a history of getting involved with high speed transport, and also into brand new technology such as its glorified space taxi service Virgin Galactic which aims to take rich people into the lower earth atmosphere in exchange for a lot of money. The Virgin brand brings lots of money and experience to the table and it can be hoped that this will help Hyperloop become something a bit more real. In addition, Branson can potentially bring the sort of leadership which has been sadly lacking so far.
However, there are many issues which are likely to crop up in the future which look from a distance to be almost insurmountable barriers to Hyperloop ever becoming widespread. The major problem so far is that the system will need vast tracts of flat land, and there is still no real consensus over where it would potentially go. Would it be suspended by pylons or put in tunnels underground? Both methods are unproven and extremely expensive.
That is on top of all the human problems such as safety, design, regulations and demand. None of these have so far been even approached in a meaningful way, but they will need to be dealt with way ahead of time.
Fundamentally, investing in Hyperloop at this early stage is almost certainly folly. Richard Branson himself is in a good position to see how these brand new transport systems can end up costly and overrun – Virgin Galactic is a good decade behind schedule and there is little light at the end of the tunnel there. The smart bet is that Hyperloop will go through the same painful process, and the idea that the world will be criss-crossed by Hyperloops in the future is something which remains firmly in the realm of science fiction.
Caution is advised. This is certainly one of those cases where you should not believe the hype created by superstar billionaires.