Musk speaking at The Boring Company community meeting in Los Angeles, where he got pushback from residents about his plans to burrow through land the company does not own. Reuters
Musk speaking at The Boring Company community meeting in Los Angeles, where he got pushback from residents about his plans to burrow through land the company does not own. Reuters
Musk speaking at The Boring Company community meeting in Los Angeles, where he got pushback from residents about his plans to burrow through land the company does not own. Reuters
Musk speaking at The Boring Company community meeting in Los Angeles, where he got pushback from residents about his plans to burrow through land the company does not own. Reuters

Is Musk's The Boring Company outrageous or just what LA and Dubai need? Maybe both


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As so often with Elon Musk’s triumphs and tragedies, breakthroughs and lawsuits, the announcement came in an apparently off-hand tweet sent in a fit of frustration during the Los Angeles rush hour.

“Traffic is driving me nuts,” the serial start-up king wrote late in 2016. “Am going to build a tunnel boring machine and just start digging...”

Within a few weeks, staff at SpaceX HQ in Los Angeles were ordered to move their vehicles from the car park. The digging began three hours later.

The world will get its first look at the results on December 10, when Mr Musk’s Boring Company unveils the first section of its two-mile test tunnel. The public will be able to have a ride in it for free a day later.

It is certain to attract fans of all things Musk, a controversial and at times polarising figure who made his fortune with PayPal before branching into space exploration with SpaceX and electric cars with Tesla. But it will also offer engineers and urban planners some insight into whether he is really on the brink of radically reimagining mass transit or whether it is all a pipe dream.

“Cities of the world are littered with failed mobility projects that started with a great deal of promise,” said Jeff Tumlin, a transit expert at Nelson\Nygaard Consulting Associates. “But sometimes those new technologies succeed.”

At its heart is the simple idea and a common-sense solution: If American transport networks are clogged then the fix involves building overhead or underground to free up space.

To do this, the Boring Company is trying to reduce what it says are prohibitive tunnelling costs – as much as $1 billion (Dh3.67bn) per mile – by a factor of more than 10, to make new tunnel systems that are economically viable.

Its solution involves narrower tunnels and better boring machines, offering three times as much power as conventional borers and drilling continuously, reinforcing the route as it goes instead of the current stop-start process.

There is even an innovative idea for making money from excavated dirt. Rather than paying to transport waste to dumps, it will be compacted into Lego-style bricks for construction.

“Only 10 cents a brick! Rated for California seismic loads,” is how Mr Musk advertised his wares recently.

In theory, the tunnels would be small enough to maintain a vacuum. His Hyperloop plan would exploit reduced friction and magnetic levitation technology to speed passenger pods at more than 1125kph over long distances. In cities, Mr Musk sees “electric skates” carrying pedestrians, cyclists or cars at more modest speeds to ease commutes and reduce congestion.

Los Angeles is its guinea pig. The test tunnel in Hawthorne, where SpaceX and now the Boring Company are headquartered, is designed to show that tiny, garage-sized “stations” could house lifts transferring cars underground. Imagine a future with such lifts in the basement of every office building.

The idea received a huge vote of confidence in June when The Boring Company was selected to build a link from downtown Chicago to the city’s O’Hare International Airport. The Chicago Express Loop will be three to four times faster than existing options, according to its pitch. Skates, based on a modified electric Tesla Model X chassis, will leave stations as frequently as every 30 seconds.

“Entirely dismissed as a sideshow hobby of Elon Musk, The Boring Company is proving itself capable of evolving into a viable and potentially exceptionally profitable infrastructure business,” runs the bullish conclusion of Alexander Haissl, an analyst at Berenberg. He pointed to the potential synergies with Tesla and said its $100 million per mile tunnel target was realistic as he concluded the company could be worth as much as $16bn.

But cutting the costs of tunnelling will not be the end of the story, according to Robert Paaswell, director emeritus of the University Transportation Research Centre at City College of New York.

“There are other dimensions, the competitiveness with other modes, acceptability to travellers, the location of the tube stations … can you just drill under land that other people own? That might make the boring costs look small,” he said.

Last month brought an example of those real world complications. The Boring Company abandoned part of its Los Angeles plan which would have seen it tunnel beneath a freeway in the west of the city. In so doing it hoped to avoid the problems of digging beneath private land in what Mr Musk claimed was another proof of concept test.

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Residents saw a billionaire avoiding environmental reviews by claiming the project as a small-scale demonstration while in reality the test tunnel would eventually hook into a city-wide network.

The tunnel was ultimately shelved. Residents claimed victory and The Boring Company said it did not need the test, and would focus instead on another loop serving the city’s baseball stadium.

Sceptics suggest the problem reflects the biggest challenge to the idea: just how do you connect up a new system to a city’s existing infrastructure?

Mr Tumlin, the consultant, said it was a common failure of new technologies offered as radical solutions.

“In subway design it is never tunnelling that is the challenging or costly part of the project. It is stations,” he said. “He doesn’t seem to have solved the station problem yet, including how you access the tunnel and are you simply transferring the congestion problem from the journey to the queue for getting into the tunnel.”

More fundamentally, Mr Musk’s rush-hour brainwave runs the risk of making the same error as 1950s planners who simply misunderstood the nature of congestion. They soon found that building more lanes did not help – they simply attracted more traffic.

But that does not mean it may not find its niche elsewhere. The tunnels may be better suited to cities that do not already have high-capacity mobility networks.

“For example in Abu Dhabi or Dubai – which has the Dubai Metro but there’s no national rail network yet - maybe it is a good technology,” said Mr Tumlin.

Or maybe Mr Musk’s ultimate contribution will be to improve tunnel boring technology.

Robert Paaswell, who headed the Chicago Transit Authority in the 1980s, said the idea of a cheaper, smaller tunnel built using a better borer was feasible. But he was reserving judgement on transforming the excavated material into bricks.

“It’s a great idea but you don’t know what you’re boring through,” he said. “You could be boring through garbage; you could be boring through rock.”

Similarly, digging through various types of soil and rock - shale, clay, ground water – would all make it difficult to run a borer continuously, as Mr Musk wants to do.

“Even if nobody ever rides in a tube, he can show that there are better technologies to use to build better transportation,” said Mr Paaswell. “And I suspect that if he can build a tube people will find ways of developing next generation tubes, that aren’t like travelling in a cigar tin, that are comfortable, with fresh air and light brought in.”

Mr Musk has already indicated he is looking at alternative uses for his technology, beyond mass transit systems.

“The Boring Company is also going to do tunnelling for, like, water transport, sewage, electrical. We’re not going to turn our noses up at sewage tunnels,” he told a conference of city leaders in Los Angeles last month.

The tools could even be used for construction one day on Mars as part of his SpaceX plan. There he envisages mining for raw materials and building underground accommodation to avoid radiation exposure.

This may be where the future lies. Or, just like his Hyperloop technology or the pioneering work of Tesla which ignited interest in previously sluggish sectors, Mr Musk’s contribution may be to launch a range of competitors into the race.

His vision of a new transport system for Los Angeles may be more difficult to realise.

“If you think about it as just a personal tunnel for you it works,” said Mr Tumlin. “If you think of it as an express lane for the highway that happens to be underground it accomplishes nothing.”

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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