Disruption in Infrastructure

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Disruption in Infrastructure

DataTrek spent most of the day at an infrastructure industry conference hosted by our friends at Thompson Research Group. We had the chance to meet 1:1 with senior executives of some of the nation’s largest and most progressive port systems, state departments of transportation, DC lobbyists in the space, and US construction companies.

Out of deference to their remarkable openness with information and insight, we will not cite them by name but here is what they had to say when we asked, “What’s the single most disruptive technology you see in your space?”

The port operator: “really big container ships”. Because trade with China is a volume business, ship builders have come out with mammoth container vessels. The widening of the Panama Canal lets these get to east coast ports, but accommodating them means dredging deeper waterways/harbors and upgrading facilities. Automation would help, but most US ports are unionized and that limits efficiency gains. That leaves the US at a deficit to other countries, but the size of the domestic market offsets that.

His other notable disruptor: China Ocean Shipping Company (COSCO), a state-owned enterprise that is a driving force in global industry consolidation.

The construction company executive: “modular construction”. There is a perennial shortage of construction workers in US urban areas but tremendous demand for new buildings. One answer is to assemble pieces of a building in other parts of the country/world and them assemble them, Lego-style, at the job site. Total cost savings for this approach can be 10-15%, mostly due to reduced cycle time from design through finished construction. Our interviewee gave an example of a US hotel that was built from modules constructed in Poland.

We asked him about Katerra, a SoftBank Vision Fund portfolio company that does this kind of work. We expected a positive review, given the business’ high profile VC sponsor (Vision Fund has an $854 million investment here). He had not seen the company’s operations, but reports from his co-workers who had toured Katerra’s facilities were less than complimentary. Surprising, that…

The state DOT executive: “How will my state get much-needed tax revenues when the US shifts to electric vehicles/ride sharing?” Gas taxes fund Federal and state-level highway maintenance and construction. EV owners don’t pay those, so this particular state charges a higher annual vehicle registration fee on such vehicles to compensate. But what happens when individuals give up car ownership all together? And what about when drone deliveries supplant trucks?

His central message: whatever tax regime individual states and the Federal government adopt in response to these shifts in modes of transportation will require buy-in from citizens. And that is rarely an easy political calculus.