Tunnel Economics Lesson from Elon Musk

I was watching an interview of Elon Musk on TED’s YouTube channel and was hit with a concept in the economics of boring tunnels.  Musk was saying that in order for tunneling to become more mainstream that the cost per mile would have to decrease by a factor of 4.  He described a number of ways he planned on decreasing the cost using his scheme, but the one I found most interesting is when he talked about the savings by simply reducing the diameter of the tunnel.

Elon’s purported goal is to put cars on automatic electric sleds to move them from point A to B.  To do this he feels that his tunnels only need a radius of 12 feet. Currently the smallest tunnels that are bored using machines are twice that size.  One of the things he brought up is that when you reduce the diameter of a tunnel by half, you decrease the total cross section by three quarters. So by having a tunnel half the diameter you reduce the total material that has to be moved by three quarters. (The featured image gives you an idea of what the cross sections look like.)  This of course means you need a much smaller tunneling machine, which costs less to build, costs less to run, and you have a quarter of the martial to remove and relocate.

I would have you ask yourself if in your business you can essentially do the same thing.  Many times small value add services dramatically increase resource cost for a venture.  Such as if you have a web development company and rent an office space.  You need to pay the rent on that space, utilities for the space, possibly require at least one staff member on site during business hours to answer the phone, etc.  The value add of the office space ends up increasing your costs possibly dramatically.  On the other hand if you had everyone work from home and use Slack or such to communicate you could save a significant cost, and yet still provide the services that the client wants to pay for.  Why dig a 26 foot tunnel, when you only need 12 to transport a car?  Why outlay for offices when your employees have fine desks at home?  This would free up resources so that you could lower cost to clients to be competitive, increase wages to employee to be competitive, or my favorite use it to spend a couple of extra weeks in South Beach.

If you’re a Managed Service Provider a huge amount of resources are taken up by doing service calls.  It may take 2 hours of driving for a tech to do 5 minutes of work.  Can you setup a system where there never needs to be a service call?  With tiny yet powerful PC’s from companies like Azulle  you could simply have clients ship you broken PC’s when they have an issue.  Setup remote access so you can support your clients remotely.  Design a robust network that you know you can rely on.  Have the clients use cloud based services so nothing important is on the PC itself.  Then if a CPU does die simply cross ship a replacement to them.  If you build out your setup right the clients can end up getting an amazing level of service, and at the same time you massively decrease your expenses for having technicians running to sites.

If you still do computer repair is it worth your time to do data recovery and migration?  You can repair a PC easily and quickly.  When you get to the data is when everything goes to hell.  Is it worth your time to provide the extra level of service?  Having a fast service for a low cost and no concerns about data may give most of your clients what they want without having to expend the time to deal with the clients who for some reason have 10 .pst files with some of them in the System directory.

When listening to people like Elon Musk it’s important to try to think how what they say relates to you.  It’s easy to get caught up in the dream of flying to Mars, or driving in autonomous cars, but unless your company sells rocket boosters or LIDAR those topics only have tangential value.  Looking past the specifics of what the person is talking about down to the core business concepts is where you can find the ideas that can revolutionize whatever it is that you are doing.

Be the first to comment

Leave a Reply