Polynerd

Credit to Joey Oberhoffner (@oberhoffner) who fostered quite a discussion about high speed rail in Alberta last night on the #abrapidrail and #ableg hashtags on Twitter. There are some threads and thoughts that were teased out of me by his questions that I felt deserved to be explored in more than 140 character form.

The first major point I want to make and something that needs to be hammered home in every single high speed rail discussion you ever have is the complete inappropriateness of payback as a metric for success of a high speed link between Calgary and Edmonton. High speed rail is infrastructure, it's a mobility and transportation platform, it is not a power plant or a condo complex. No one asks what the payback is for highways or bridges or ring roads. In fact it would be ludicrous to ask the question.

I'll repeat this point again because it is extremely important. THE SIMPLE PAYBACK FROM FARES ON A HIGH SPEED RAIL SYSTEM ARE TOTALLY IRRELEVANT.

Fares would be, at best, a microscopic portion of the economic value provided by a high speed rail link between Calgary and Edmonton.

All levels of government heavily subsidize all methods of transportation. Why? Because they realize intuitively that effective transportation networks are the backbone of a functioning economy. If you're unable to move people or freight the economy will quickly grind to a halt.

I think it's far more effective to talk about high speed rail as fundamental economic infrastructure and as a platform for economic development. Let's use the example of the highway. When Dwight Eisenhower started the process of creating the Interstate Highway System it was a visionary act. The distribution of virtually every single good and service in the US now uses the Interstate Highway System. It is the single largest public work in the world. Initially it was supposed to cost $25 billion over 12 years, it ended up costing $114 billion and took 35 years. Behold its tentacles.

Now let's look at one, small, tiny economic after effect of building this incredible system. Walmart. Walmart became the uber-successful company it is today for many reasons. One of them being its tremendous just-in-time supply chain system. With publicly paid for Interstate Highways Walmart is able to ensure that their stores receive their product in a timely and efficient manner.

Yoshie Furuhashi lays it out pretty clearly in this article on Counter-Punch

Efficient supply chain management is the key to the profitability of Wal-Mart, which pioneered "just-in-time" inventory in the retail industry: "The 'Wal-Mart model' is the leading retail strategy (perhaps the leading business strategy in any sector) to emerge since the 1970s. This model features a super-efficient production process in which each operation -- buying products from manufacturers, distributing them to the retail stores, and selling them to customers -- is linked to the next in a continuous 'just-in-time' chain." Wal-Mart's zeal to "hold the lowest feasible [inventory] level while avoiding the risks of 'stock outs,'" is its competitive advantage."

Walmart made upwards of $400 billion in revenue in 2009, has upwards of two million empoyees and has more than $170 billion in assets. When the US government started the process of building the highway system in the '50s they had no idea that something like Walmart would spring up. They didn't have to. They realized that highways were needed for the economies of the future so they built them.

Smooth, level, straight, above grade and well maintained highways were next-generation technology back in the 50s. High-speed rail is next-generation technology today. This is the joy of creating this high speed rail system. We know it is needed but we have no idea what very smart entrepreneurs will end up doing with it. 

To quote Stephen Carter

We heavily subsidize all transportation. Why not high speed rail. I want it. I want it now.