Why California Can't Be Home to the Hyperloop

Forget Los Angeles to San Francisco. Given California's brutal regulatory climate, Elon Musk has a much better chance linking Austin to Dallas, writes Ray Hennessey.

learn more about Ray Hennessey

By Ray Hennessey

Opinions expressed by Entrepreneur contributors are their own.

In theory, Elon Musk's Hyperloop may be able to get people from Los Angeles to San Francisco in 30 minutes.

In reality, the layover the project will take in Sacramento could delay that trip for decades.

The Hyperloop, the so-called "fifth way" of transportation unveiled by famed entrepreneur Musk on Monday, is an exciting idea, one that is filled with possibilities. Using air-cushioned aluminum tubes, he hopes to create a pod system for just $10 billion. The pods, powered by solar energy, would travel at upwards of 700 mph and make the trip in 30 minutes. On paper, Musk at least says it is workable from a scientific perspective.

But physics may be the least of Musk's problems. His home state is a bigger issue.

California is widely considered to be a brutal regulatory environment. A survey of business leaders polled by Chief Executive magazine ranked California the worst place to do business. Why? For all the reasons that bode poorly for the Hyperloop. The state received half a star out of five for regulatory environment.

Related: Elon Musk's Hyperloop Vision: High-Speed Pods in Steel Tubes

To get a system like the Hyperloop built, Musk and his partners (he made the plan open source because he says he doesn't have the time to concentrate on it, given his duties at automaker Tesla Motors and SpaceX) would face issues of getting the raised system off the ground. For one thing, you need to get the land, either by buying it or getting the state to seize it through eminent domain. Both are expensive and uncertain propositions.

Ideally, this would be a completely private project, but, when it comes to transportation, there really is no such thing. In theory, the whole system would be regulated by the state's California Public Utilities Commission, which regulates the rails now. Just because this isn't a railroad doesn't mean the state wouldn't assert its authority.

California has a skilled and creative workforce, and it is known for its innovation and free thinking. But, when it comes to large projects, there is a tendency for unions to get involved, which raises the cost. In fact, there are federal labor laws that cover railroad workers. Again, this may technically be a rail project, but the unions will no doubt claim it as one.

Oh, and speaking of the feds, there is the issue of the federal permits that would need to be issued. Even under a fast-tracked, shovel-ready project like California's bullet train, a plan hatched in 1996 won't see its first shovel hit dirt until at least 2014. It will be decades before that is completed.

Truth is, assuming the science works, Musk should try Hyperloop somewhere else. An Austin to Dallas trip is shorter, at just under 200 miles vs. the 380 miles between L.A. And San Francisco. And Texas is widely considered by business leaders to have the easiest regulatory environment. In the Chief Executive survey, it received four out of five stars for both regulatory environment and quality of workforce. Austin is a hotbed of startup activity (and its well-known weirdness, which would put creative energy behind the project).

Oh, and it has abundant sunshine, a key factor for a solar project.

None of this is to knock California. It is, after all, where this idea was born, along with PayPal, Tesla and SpaceX. But none of those companies faced the brick wall that intrastate transportation construction and management faces in that state. Folks might have to put their spurs on to get this particular idea off the ground.

Related: Inside the 'Insane' Life of Elon Musk

Ray Hennessey

Former Editorial Director at Entrepreneur Media

Ray Hennessey is the former editorial director of Entrepreneur.

Related Topics

Editor's Pick

The Dark Side of Pay Transparency — And What to Do If You Find Out You're Being Underpaid
Thinking of a Career Change? Here Are 4 Steps You Can Take to Get There.
A Founder Who Bootstrapped Her Jewelry Business With Just $1,000 Now Sees 7-Figure Revenue Because She Knew Something About Her Customers Nobody Else Did
Everything You Need to Know About Franchise Law
Growing a Business

Scaling Made Easy: How to Scale Your Business like a Fortune 500 Company

Once you have the night-vision skills of Fortune 500 restaurants, scaling becomes effortless. Here are 3 ways to scale, hidden in plain sight.


Streaming TV Is the Future of Advertising — Without Breaking the Bank

Today's consumers expect personal, impactful ads. There's an advertising method that can get you there for half the price, making it the next frontier in digital advertising.

Business Ideas

55 Small Business Ideas To Start Right Now

To start one of these home-based businesses, you don't need a lot of funding -- just energy, passion and the drive to succeed.