Sometimes it’s just too easy.
This morning I saw a CNBC video clip of Richard Anderson, co-CEO of Amtrak, opining on the Hyperloop, saying it wasn’t realistic, and that he tends to look at things like cash flow, return on invested capital and operating margin and doesn’t understand how “those companies” can have real huge losses.
Well, I’m sure Anderson knows plenty about cash flow, return on invested capital, and operating margins, as all those things probably stare back at him on spread sheets that might as well have been dipped in red ink.
While I certainly use Amtrak and prefer using Amtrak for trips along the Northeast corridor, Amtrak is absolutely the poster child for how NOT to run a business.
Realism and a 45-year Debt Burden
Amtrak’s quality of service is extremely poor.
- Trains are rarely on time.
- It has a very expensive and inflexible workforce.
- It has a monopoly on rail travel, yet hasn’t made money in decades.
Of course, profits aren’t all that important as the government continues to spend billions of dollars a year to keep this dinosaur alive. In fact, taxpayers have spent nearly $50 billion over the last 45 years to ensure Amtrak is never taken off life support.
Meanwhile, you now have the co-CEO of Amtrak saying that the Hyperloop “isn’t realistic.”
Rest assured, dear reader, not only is the Hyperloop very realistic, but it’s more realistic than Amtrak ever operating profitably without stealing billions of dollars from taxpayers. And the reason is simple: The Hyperloop is being developed by tech pioneers and investors that want a return on their investments. Both are catalysts for success.
Amtrak’s a Money Pit
When it comes to Amtrak, there’s little incentive to generate profits. It doesn’t have to answer to investors. It only has to answer to bureaucrats who, for most part, will continue to write fat checks every single year for the aging rail service.
Of course, I shouldn’t criticize Anderson too much. After all, he has a job that I can’t imagine anyone would want. Running a company that has little chance of ever being anything more than a money pit. But it doesn’t have to be like that.
Given that Amtrak still holds a monopoly and controls pretty much every rail asset in the country, it could use that as leverage to attract private industry and begin to transition the whole operation to one that would ultimately become privatized.
In exchange for allowing private industry to re-build Amtrak in a way that would make it a profitable company, a portion of those profits could be used to pay back the nearly $50 billion debt that Amtrak owes to the good people of the United States.
And once that debt is paid off, the government could finally rid itself of this liability.
That being said, I don’t know if such a thing would ever happen. There are just too many hands in that cookie jar at this point. So in absence of a well-run, profitable, national passenger rail service called Amtrak, I will continue to cheer on the development of the Hyperloop, which mark my words, will ultimately force Amtrak to embrace modern technology or fall victim to it.
