Welcome to Bastrop

The next trillion-dollar company?

In today’s Diary:

-       Notes from the field on our 6-city tour

-       Thiel’s question

-       The next trillion-dollar company

-       SpaceX’s playbook goes underground

-       Can this solve traffic?

Dear Rational Optimist,

“What’s missing?” asks Peter Thiel. 

We’re on his deck in Bel Air. He gestures to the LA skyline.

I respond:

Skyscrapers?

Flying cars?

“No… cranes!”

In most modern cities, steel cranes rise above the skyline. Back home in Abu Dhabi, crews break ground on a new project every month.

But in California, the home of Silicon Valley and America’s supposed bastion of innovation?

Nothing.

Regulators have made it all but impossible to build at a reasonable cost in LA. And much of the country for that matter. Rational Optimists know this as The Blight.

The Blight is why the paperwork alone to build an apartment in San Francisco costs around $400,000. And why it took longer to build a slip road to the Golden Gate Bridge in 2018 than it took to build the actual bridge in 1937.

And it’s why I’m visiting six cities in two weeks with the original Rational Optimist, Matt Ridley, and ROS co-founder Dan Steinhart.

Next up: Austin, Texas.

Here the Blight is in retreat. Austin is booming.

Its population has exploded 10X in 40 years. Meanwhile rents have declined 22% since August 2023 because they actually built new housing. Funny how that works.

While LA's skyline is frozen in time, Austin's is alive with cranes sculpting a new city.

Tesla built its gigafactory in Austin in the same amount of time it takes to get a single permit in California.

A half-hour outside of Austin is a tiny dusty town called Bastrop.

Imagine two superfactories across the highway from each other…

Linked by this underground tunnel:

That’s Bastrop.

On one side of the street is Starlink’s massive manufacturing facility. Starlink, part of SpaceX, can deliver high-speed internet almost anywhere on Earth from a network of satellites.

On the other side:

Elon’s Quietest Project

The Boring Company, which aims to solve traffic with tunnels.

Digging tunnels is stupidly expensive and inefficient today. For example, when the giant drill-like machine is finished digging a tunnel, they’ll often steer it off to the side and bury it, never to be used again. Lifting it out of the ground is too expensive and disruptive. 

A half-billion-dollar machine used once and abandoned!

The Boring Company’s digger Prufrock, on the other hand, is reusable. It can climb out of the ground itself. And as it moves forward, grinding up the earth in front of it, Prufrock lays 5-foot concrete rings behind it, building the tunnel as it goes. Glance up at that photo again—you can see the rings.

Prufrock can dig tunnels for $12-$15 million per mile. That’s more than a 90% cost reduction from the $1 billion-plus per mile tunnels typically cost. It can also build tunnels in months that used to take years.

Do you see the parallels with SpaceX? Before SpaceX, rockets were “one-and-done.” We would spend billions building a rocket to fly it once, which made launches prohibitively expensive.

SpaceX figured out how to “catch” rockets to reuse them and made countless other innovations that combined to slash the cost of a rocket launch by over 95%. Now we have a flourishing space industry, and SpaceX is the world’s second most valuable company after OpenAI.

After two hours touring The Boring Company and talking with an executive there, I walked away thinking…

This might be the next trillion-dollar company.

The Boring Company’s first big project is already operational under Las Vegas.

Teslas glide through Boring’s underground Vegas Loop, letting passengers circumvent surface traffic. Humans operate these Teslas for now. Soon, the cars will drive themselves.

Once the build-out is complete, 70 miles of tunnels beneath Vegas will take you anywhere in the city in under eight minutes. Unlike mass transit, the Vegas Loop can get you directly from point A to point B without having to make stops for other passengers.

The Boring Company isn’t just digging the tunnels. It will operate them with a business model similar to Uber. It expects the project will pay for itself within two to three years through fares and advertising revenue.

If tunnels can solve traffic, why have we only built about 10 miles of tunnels in the US in the past decade?

The Blight.

Exhibit A: the debacle that is New York City’s 2^nd Avenue subway. It took NYC a decade and $4.45 billion to lay down 1.8 miles of track.

We drilled Boring Company's head of operations with questions. What about underground fires? Floods? Structural failures?

For every "what if," they had a smart answer. These guys have engineered solutions for disasters most people haven't even considered.

Notice the integration with Musk’s other companies. Only Teslas can drive in the tunnels. And Prufrock’s diameter exactly matches that of a SpaceX Falcon 9 rocket, making the parts somewhat interchangeable.

For its second US project, The Boring Company is about to start digging the Music City Loop, which will link downtown Nashville with the airport.

After that, a third southeastern US city we were asked to keep confidential for now.

The Dubai Loop is coming too… can’t wait!

For many cities, the only thing standing in the way of traffic relief is The Blight.

Traffic is a solvable problem. But many governments, especially in blue cities and states, are hesitant to welcome an Elon Musk company. The unions that dominate government construction jobs aren’t exactly rolling out the red carpet either.

Luckily, America has a huge advantage:

50 experiments going at all times

50 states…50 rulebooks for innovators.

If the Boring Company proves itself in Nevada and Tennessee… will residents of Chicago, LA, and NYC look around and say, “Please free up our gridlocked streets too?”

We’ll see.

I have so much more to share with you from our trip. I can’t wait to tell you about the small nuclear reactor factory in Austin, the asteroid mining company in Seal Beach, the private chipmaker in San Jose that’s challenging Nvidia, the company that’s rapidly scaling up America’s drone production… and much more.

For now, I’m off to Denver to meet with Blake Scholl, CEO of Boom Supersonic.

—Stephen McBride