The NYC Subway System

I've been thinking a lot about the NYC subway system. It was built in the latter part of the 19th century and the early part of the 20th century. It's a lesson in the power of private enterprise to do public good.

There were elevated transit lines in NYC dating back to the 1870s, but the first underground line opened in 1904. At that time, the NYC subway system was operated by two privately held companies, the BRT (Brooklyn Rapid Transit) which became the BMT (Brooklyn Manhattan Transit) and the IRT (Interborough Rapid Transit). These privately held companies raised capital to build the subway lines and operated with the city's blessing. Starting in 1913, the city starting building the tunnels and leased them to these privately held companies.

Then in 1932, the city started to compete with these two privately held companies, and in 1940, they were bought and consolidated into the MTA (Metropolitan Transit Authority).

I ride the subways every day and will head to the L train shortly to get to work. Every time I ride on this system, I am amazed at how it got built given the cost and complexity involved.

The fact that it started out as a private enterprise is not surprising. There is something incredibly powerful about entrepreneurs backed by speculative capital. The entrepreneurs laid the first tunnels, operated the first lines, and showed that it was a profitable enterprise.

At some point the city stepped in and turned it into a public utility. Say what you want about government's ability (or inability) to operate effectively, I will tell you that the NYC subway system works pretty damn well.

So all the debates, including the one I waded into yesterday about mobile broadband infrastructure, about private enterprise versus public spending are like most things – fringe debates. There is a third way which is public private partnerships and I think that is the best way.

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#NYC#Politics#VC & Technology

Comments (Archived):

  1. Mo Koyfman

    agreed. the railroads are a good example as well.

    1. fredwilson

      Unfortunately the railroads are an example of the gov’t ownership messing up.There are a host of reasons, largely to do with arcane right of way and ownership issuesBut our railroad system in the US is a fucking messWe could get from boston to nyc, a route you know well moshe, in 90 minutes with the technology that exists and has been deployed in germany and japanThink about what would happen if we had that between Boston and DC?

      1. Mo Koyfman

        agreed.i meant in the early days of the railroads when private enterprise that the government has taken over they are a fucking mess.

        1. fredwilson

          Imagine having lunch at balthazar, catching a 2pm train and being at spark’s offices for a meeting at 4pmSorry for torturing you. Couldn’t help myself

          1. Mo Koyfman

            Hah!If only.You know me — If it doesn’t involve the private sector, I think it’s usually DOA.

        2. jl

          A very good counter example is the french railways system. It was built and is run by the government, and it is one of the best worldwide. You can go from Paris to Lyon in less than 2 hours reliably using the high speed trains. Of course nothing is perfect and you have to be ready for the “occasional” strike. However, all things considered it is a good example where 10 years regional development plans work.

          1. Mo Koyfman

            Agreed.Although the downsides there are the tax regime and the real lack of productivity, innovation and competitiveness in the global economy.Everything is a tradeoff.As for me, I’ll take our approach with a bit more public/private partnerships as you suggest for those projects which are great for the populous and the private sector won’t be able to pull off on their own.And I’ll always take Paris…

        3. Druce

          The US railways were built because the Feds granted them the land. They were massive land speculations. Warren Buffett recently mentioned that the Union Pacific had 10% of the land in Nebraska.Those great humanitarian railroad builders (ha) Gould and Fisk were in bed with Tammany Hall, got government legislation in exchange for bribes, and put up the million dollar bail for Boss Tweed (who was on the board of the Erie).Those were public-private partnerships in every sense LOL.the US railways were optimized for speed of construction. The Brits tried to make track as perfect and gently graded as possible, and the US tried to span vast distance as quickly as possible, and used rugged locomotives to compensate for shoddy track.

          1. Mo Koyfman

            a bit crude yes, but public – private partnership nonetheless.they did things a bit differently back then………or maybe not :)doing this kind of thing the right way is much needed.

      2. kidmercury

        the railroad system was done properly before, but the auto industry lobbied to basically shut down the railroad system. the clearest and most painful example of this is los angeles, which once had a good public rail system — until the auto industry came in and killed it. now look what we have in LA.

        1. Joe Siewert

          Same thing happened in the Twin Cities. Used to have street cars here and they all got ripped out. Now they’re trying to put in light rail lines and are having a really difficult time weaving them back in to existing infrastructure.

      3. Dave Pinsen

        If we were starting from scratch, high speed rail might make sense in a handful of places in the the U.S. (e.g., the Boston-D.C. corridor). But to build it now would, as you know, require the exercise of eminent domain on an unheard of scale, which would lead to massive legal challenges (not to mention environmental impact statements, research into the effect on any endangered critters along the way, etc.) A better approach might be the air taxis James Fallows has written about.As Fallows notes, although our major airports are often jammed, we have a lot of unused capacity at smaller airports, and a lot of empty air space at the altitudes in which these air taxis fly.

        1. fredwilson

          I am not a fan of flying in small planes so that’s not a great solution in my mind

          1. Dave Pinsen

            You’d prefer a Super Train, I imagine, with great coffee and great music.

          2. fredwilson

            that would be ideal

  2. bijan

    it is an amazing took me awhile to figure it out but I’m getting better at it – much thx to the iTrans NYC, i want to use Bump to top up my metrocard.

    1. fredwilson

      I just found out about this metrocard that auto refills. I have it now. Its a game change if you want the details, I’ll send them to you

      1. bijan

        That would be great.

      2. rich caccappolo

        agreed – it is a very beneficial service. I am surprised at how poorly they market it, that is, they hardly market it at all.

  3. Rob K

    Agreed. But if the 1940s events were to happen today, a bunch of people on this blog, and a bunch more on Fox News, would be up in arms over “the government takeover.”

    1. fredwilson

      Fringe debatesI want to join the far center party

      1. Rob K

        So do I. We can make Olympia Snowe our Speaker

        1. fredwilson

          Or mike bloomberg. I have some beefs with him but I love how he approaches governing

      2. kidmercury

        the solution to left or right is not center. it is truth.

        1. raycote

          I tend to think of truth as an adjective not a noun, but point taken. I like to spin truth as an organic community triangulation but I’m split hairs and peddling my favorite dope!

          1. derrinyet

            Why not think of truth as a verb? That seems the best route.

          2. raycote

            Good Point!I don’t know if you’re just funning with my silly pedantic off topic post but the verb thing is sort of like the elephant in the room. How’d I miss that?—————————BE FOREWARNED – this is all pedantic from here on out————————–Truth as an adjective is, how true, how much fidelity does a representational description capture about the original event. The PROCESS by which we incrementally decrease that gap between the original event and our representational description, the PROCESS by which we increase the degree of truthiness that our statements, audio or video representations capture and convey is indeed a collective social PROCESS, a collective social VERB, to stretch the point just a little the process of tracking down public domain truth is an ORGANIC SOCIAL PROCESS.In the bigger, social evolutionary frame, improving our collective SEARCH PROCESS for truthiness is far more relevant, far more important than simply gauging or debating the level of truthiness delivered by FOX, CNN or PBS on any particular topic.____________________________OK – the key point of all my nonsense here is !EPISTEMOCRACY is an important memes to an end.Truth visualized as an ADJECTIVE =my CNN is better than your FOX – yes it is – no it isn’tTruth visualized as a VERB =hey there CNN & FOX – show us your PROCESS for improving truthiness – it pushes public awareness and dialogue towards collective epistemological awareness.

      3. paramendra

        The Far Center Party. You know, that could be a name we could run with. 🙂

    2. andyswan

      The 1940’s events ARE happening today.

  4. LIAD

    The London Underground became a public private partnership in 2003 amid much political wrangling.Save for the never ending fair rises, from a consumers point of view its doing well

    1. fredwilson

      My friend robert gerard was involved in making that happen

  5. Thomas Ott

    Yes, but the private subways also went broke and out of business. That’s the reason why the MTA had to step in buy them, to keep things going. PPP’s make the most sense because you do get the speculative capital and the will of private enterprise to build new infrastructure but you need the support of government to ensure safety standards and deep pockets for lean times.

    1. fredwilson

      They went broke during the great depression but you are so right about the need for a partnership

    2. rich caccappolo

      yea, I was going to make the same point. I don’t believe the investors in the private subways came out ahead. They suffered huge losses.

      1. fredwilson

        As huge as the investors who built out the telecomm infrastructure in the late 90s?

  6. Rob K

    and it’s a much better system than Boston (which often can’t get you where you want and many of the lines are OLD and SLOW) and DC (which cannot seem to figure out the concept of the express train).

    1. fredwilson

      Ah, the express train. I love going from wall street to grand central in three stops

      1. Rob K

        When I used to ride the Red Line in DC, I used to curse the 14 stops it would take to get to Metro center and the lack of connections between the Lines. It’s all hub and spoke.

        1. fredwilson

          Its washington

          1. paramendra

            LMAOYou crack me up when you talk about Washington DC! 🙂

  7. DenisHurley

    Labor laws were also quite different when they were being built. And today we see some abuses of public/private partnerships (see Atlantic Yards)

  8. Kevin Vogelsang

    Mass transit systems in general amaze me. I’ve heard wonders of such systems in other countries.Somewhat tangential, but if you’re interested in reading something interesting, take a glance at this article in Wired about the similarities between the Japanese Rail System and transport in microorganisms: . Relevant to many networked systems.The wonders and lessons of nature.

    1. fredwilson

      Cool. I’ll check it out. Thanks

    2. jeremy

      I agree. Fred’s point is mainly about the financing and management perspective, but I also think there is a truly incredible engineering story behind the NYC subway which should be an inspiration for people who like big ideas and a rebuttal to fans of incrementalism.

    3. paramendra

      Kevin, fascinating article. Thanks for sharing.

  9. Mohamed Attahri

    I think the question is not wether it works or not, but more about how efficient it is.Public companies tend to spend huge amounts of money on things that don’t make sense for different reasons. Sometimes to be the example to follow and others simply because they never ask themselves where the money’s coming from.My opinion might be biased by the fact that I live in a country where people can go on strike to show solidarity with employees of another company in another industry. Money spent to pay their wages – while on strike – could be spent on improving the service, expanding it and innovating.France is on sleep mode for at least 1 month a year because of public transport strikes, mainly subways and trains.

    1. fredwilson

      Those are rare in this country. I’m on the fence about ‘labor’. I appreciate what the labor movement has accomplished but I think the pendulum has swung too far

  10. bfeld

    A phenomenal book on the creation of the New York Subway system is 722 Miles: The Building of the Subways and How They Transformed New York by Clifton Hood.

    1. fredwilson

      This is so going to be my first read on my spring break vacation next week. thanks!!

    2. Chad Dickerson

      I’ll second that recommendation — one of the first books I read when I moved to NYC. Utterly fascinating.

      1. fredwilson

        Can’t wait to read it

      1. bfeld

        Awesome – thanks!

        1. paramendra

          My first “conversation” with Brad Feld, the man himself. This is a “moment!”

          1. paramendra

            You just got an email from me. 🙂

  11. jonsteinberg

    Not to take us too far off topic, and I do think the government does do some things right, but every time I fly, I can’t help but wish that the TSA was private. It’s staffed at the same level despite volumes at time of year (as one officer explained you can’t add and remove federal workers seasonally), and it’s one of the most broken processes that I deal with on a daily basis.

    1. fredwilson

      The problem is the rules they have to live by in how they deploy their labor

      1. andyswan

        Why do they have to live by those rules? Don’t THEY make the rules?

      2. kidmercury

        no, the problem is that the TSA shouldn’t exist in the first place, as it was born out of a lie. of course, the bigger problem is willful ignorance and acceptance of the lie. we get what we deserve.

  12. naterkane

    how the L has been transformed over the past few years from a painful experience to the top rated line on still amazes me.when i first moved to the Morgan stop, just a few years ago, i couldn’t even get my girlfriend at the time to come out to visit me, and now it’s a prime example of what can be done if you get enough demand/growth in a market to warrant spending some money here and there.i was a passionate Acela traveler about 10 years ago, working in NYC during the week and spending my weekends in Baltimore/DC. in this last decade, with the consumer cost almost doubling, i’ve actually traveled less instead of using an alternative (bus, drive my car, etc).the only reason, it seems, that we need privateers to make advances is simply because they don’t have to operate within any sort of democratic process to get things done. that’s why we have the subway, the somewhat functional national rail system, but people who still freeze to death in the winter despite Snuggies being such a “success” in the marketplace.

    1. fredwilson

      I had free and good wifi on the acela back and forth to dc this weekOnly issue is their web filter blocked as “porn’

      1. naterkane

        no way! that’s a first in my book. for three years i had to rely on a sprint mobile broadband account to even think about getting any work done while traveling. i’m still not sold on $180 being a good value though.

        1. fredwilson

          Not sure it is good value. But it just got a bit better

      2. paramendra

        “….their web filter blocked as “porn’….”That is because you were on your back and forth to DC. Will not happen on a Boston trip.

  13. Steve Koss

    The debate of private versus public and what works better has been decided:..both of them. Without the partnerships of collaboration between the public and the private sectors many stadiums, arenas would not exist today that gives rebirth to cities and businesses in the region.

    1. fredwilson


      1. Emil Sotirov

        But if put in an end-to-end archtecture where they don’t mix at the same level. The “public” may create platforms (APIs) – national market, law, regulations, security, etc – on top of which the “private” hooks up specific functions.The public platforms should be agnostic in regards to what private initiative does on them. I agree that this sounds more like a good, but probably unattainable wish.

        1. fredwilson

          I like the idea of spec’ing out a good architecture and then letting people have at it. That’s how we got the internet

  14. andyswan

    1) Private enterprise, when left to its own devices, is always focused on “the public good”. It has no other choice, for the public is its potential customer and it MUST provide value in order to obtain a voluntary mutual transaction that benefits both parties. This is the essence of entrepreneurship.2) The ability for government to destroy a quality product should not be underestimated. How will we know if another private enterprise would have done the NYC subway system better over time, had the opportunity of abandoned bankrupt tunnels sat there for a decade or so? Government can afford to run enterprises at a significant loss by confiscating the wealth of non-customers in order to make the ride affordable for those who “need” it to be cheap. This is an unsustainable luxury, and I wouldn’t doubt that this post comes close to marking the “top” of the NYC subway system, as taxpayers get squeezed and many flee the greatest city on earth.

    1. fredwilson

      That’s one side of the fringe argumentI’m waiting for the other side to show upIt will

    2. raycote

      Slow down there Andy! That sounds a little too black and white for me. That public vs private, left vs right, libertarians vs collectivists, good vs evil lexicon can be an epistemological sinkhole of a-priori conclusions if we are not careful.Check out this great videoGOD BLESS OUR TWO PARTY SYSTEM…Under present electric conditions, lightning fast, complex organic interdependencies are the economic substrate order of the day. The key economic substrate components, fiscal policy, monetary policy, credit/investment system arbitrage, production & consumption arbitrage along with their unsustainable purchasing power fallout and the accelerant effects of social networks at every level, mandate a more robust lexicon for framing the public debate.An alchemist’s lexicon afforded little progress. It failed to map the under lying atomic structures and their rules of copulative interplay in an effectively realistic isomorphic way.Chemists, solved this short coming, developing a lexicon that adequately described the periodic table and it’s valence rules.If communications technology concepts and lexicons had progressed as slowly as their counterparts in political economy, we would still be waiting for the printing press and reusable recombinant moveable type.The old, simple, linear, one variable, business equation, making a profit for me and mine, is a formula for individual, corporate and collective social disaster. As Marshall Mcluhan put it, that process has flipped into it’s opposite, from a tool into an impediment. The all consuming, single minded, sacrosanct, push for ever higher profits has been pushed too far into an emerging new organic economic environment that is no longer hospitable to its original design limitations. Meme me up Scotty, by the looks of things down here, we are going to need a new design approach.Now don’t get me wrong. I am totally committed to some form of capitalism, just like I’m totally committed to some form of democracy. The problem at hand is how to evolve some new organic configurations of both that distills the optimal synergistic homeostasis between the two. Both have their historical failings and abuses. Given a more productively, accessible, public facing lexicon to untangle the organic complexity inherent in our new network driven economy we could possibly push this four wheel drive Fox-CNN spin-monster vehicle out of the Mad Hatter’s swamp, drain the vehicle and still manage to hold onto our democratic-capitalist baby.What does ORGANIC CAPITALISM look like?OPTIMAL PROFITS ??… help… help the sky is following!How does it fit into a network of ORGANIC COMUNITIES?_________________________ORGANIC PROCESS LITERACYis a magic little lexicon:FOR …distilling the reusable heart and soul, the very Mojo, that animates all Living Organic Systems and injecting the dynamism of that Mojo into every day language and cultureFOR …accelerating collaborative visualization of all things organicFOR …making obvious the organic fabric at the very heart of all modern social structures___________________________ORGANIC PROCESS LITERACYoffers an optimal medium for collaborative social progress in a complex, organically interdependent, world!on the road to better communityORGANIC PROCESS LITERACYis simply a memes to and end____________________to all our Godsfrom all our peoplesplease bestow blessingsof optimal inertia dampeningupon our emerging noosphere

  15. David Manaster

    Along with the postal system, the NYC subway system is on my list of “things that the government runs that people complain about even though they work amazingly well for very little cost.”That said, I do think it is telling that there has been very little progress on new subway lines in decades. It’s one thing to protect the status quo and get people to work every morning. It’s another to innovate amidst the city bureacracy and make new things happen.

    1. fredwilson

      I’ve been watching the 7 line extension with fascination. They’ve built this massive boring machine at the corner of 26th and 10th. Its so cool to watch how they are building the new tunnel

      1. paramendra

        Where is this? Which way are they expanding? The 7 line and the 26th street? You mean 46th maybe?

        1. fredwilson

          It goes across to 10th and the down to the javitz center. I wish it would go all the way to 23rd

          1. paramendra

            Wow, that is cool. I guess a western version of the 2nd Ave line.

  16. eCommerceCircle

    Whenever riding the subway in NYC, I always wonder who had this vision. It’s crazy if you think about it…

    1. fredwilson

      Just got off the lex express line. Got from my office to wall street in five minutes. Brilliiant is an understatment

  17. Mark Essel

    I’ve been thinking about the subway too, just had to take one from Atlantic Ave in Brooklyn. I missed my switch at Jamaica.I picked the best day of the year to walk around central park and around Manhattan :). Meeting up for video interviews later with gung ho founders that are going to help us all learn how to change the world.Hey IPOs are another great example of public private ownership. I just never got over the caste system of shares. A couple of months back I wrote up a post about how BIG things can happen with the aid of government & companies (highways, canals, spacecraft, NY pizza).Here’s the post Think Bigger. I did mention railroads without loathing. And yeah we could use REALLY fast/efficient trains. Certainly to escape Long Island, now it’s a 3hour tour of Gilligan Island proportions to drive anywhere past the city.

  18. David Esrati

    Fred-Thank you for your position it’s refreshing. On my blog, I’ve been hearing from Teabaggers and Libertarians that we should privatize roads- and that parks are just tax sucks. I don’t agree.However, can you verify if MTA is self-supporting- or does it require tax payer support?I believe great public transit is the mark of a great (and green) city. The MTA allows NYC to operate without an overflow of cars- something every other city could benefit from. I’ve also wondered if people in NYC are multi-modal- bus and subway- or one kind or another? My guess is you ride the train- but wouldn’t ride a bus if you could avoid it. It’s nice to see a VC believe in public utilities- I believe that electricity, gas, water and broadband all would be better served as publicly owned, non-profit/mutuals.Thanks for the insightful post.

    1. fredwilson

      I’m not sure if it is subsidized or not. Money is so fungible that one can never be sure

    2. Tereza

      The buses actually are pretty civilized. Only thing is they don’t have the speed of the subway and they’re not so easy to decode if you’re not familiar with them.Also buses are easier w a baby carriage than subways, where the stairs are a bear.Cabs in the city w a baby carriage are a total PITA.

      1. David Esrati

        The perception of buses in the hinterlands- is that poor people ride them- and that they are dangerous. Our bus fleet in Dayton is modern and clean. The drivers are courteous- but there is still a stigma.We barely have cabs here…

  19. baba12

    Fair enough public private partnership is good. But I don’t really private enterprise wanting to do a lot of good until it is forced to do so through regulations/standards etc.Also I don’t see private enterprise willing to put huge amounts of capital into fundamental research the way it was done. Today a lot of the fundamental research is funded through the State despite all efforts to cut off those channels.If it was not for the NIH we would not have the human genome project there have been many private enterprises that have taken advantage of this and produced new products and services. These same companies will also hire wonderful lawyers and accountants to find every loophole to avoid paying taxes ( nothing wrong in taking advantage of the system, everyone is doing it is the argument). We forget to realize that without the role of agencies such as NIH or DOE etc we won’t see many benefits for the common good of society.It is very difficult for private enterprises these days to take risks with fundamental research and as long as private enterprises continue to milk the system to their advantage we will slowly fade away in terms of leading edge technologies as private enterprise does not have the desire to fathom such investments with no real rewards always.Sure USV has made investments in may companies but I am doubtful they have any company in their portfolio that has a product or service in the making that is still a research project and there is no well defined market etc for it for another 10 years.I doubt there is any VC fund out there that has that capacity cuz in the end they all have to deliver results for themselves and their shareholders.Public Private partnerships are only good as long as the private entity feels it is getting to profit. The Atlantic yards project was supposed to be a public/private partnership but as it turns out it is a private project but with all subsidies provided for without the promised benefits a the capital markets have soured. In any case I would like to see private enterprise take risks on fundamental research and see how that flies for them and their investors.

  20. Robert

    Interesting perspective, but I question if something like this would be OK by todays standards. Government taking over a private industry would cause a political firestorm today.Had the IRT and BRT started suffering in the 90’s or 2000’s, we would have likely just boarded up the subway and auctioned it off to the highest bidder. No way government would be able to operate it.Shame, imagine what’s disappearing today that would prove to be an incredible asset in 20 years.

    1. andyswan

      IF?? Say hello to GM, Chrysler, AIG, airport security, and….coming soon… insurance.

  21. Ken

    I am an active user of the subways and I agree that it is incredible what humanity is able to create collectively. However, shouldn’t we consider the financial resources that were and are invested to build and maintain the system? How can we judge a system without a judging its cost? My non-expert understanding is that the history of the NYC subway system is marked by a good start leveraging off of privately held companies, followed by the government bankrupting the private companies via subsidies to their “public option”, followed by woeful underinvestment in lieu of union sweetheart deals ever since. It is somewhat questionable that, as New York is having severe financial viability problems and our subways look like something from the mid-20th century, that we can decide that they work pretty well.

    1. fredwilson

      I don’t feel that the subways are in bad shape at all and I ride them every day. I’m on the 4 train right now

      1. Ken

        Fair enough, but does it surprise you that in this day and age, we don’t have simple electronic signs telling us when the next train is coming? (The L, and perhaps a few others, have it.) Access to arrival information from above ground? Cell and WiFi access? And, as I mentioned, one must consider the cost side of the equation. Your original post, as I read it, seems to ignore this.

        1. paramendra

          That would cause havoc on the staircases if people could know there next train will arrive in, well, 30 seconds. But on the platform would be a good idea.

        2. fredwilson

          I think much of that is coming. I’m an unabashed fanboy of the MTA and the subways so I have some blinders on for sure

      2. paramendra

        How many train rides since you finished work on this blog post and were done commenting? 🙂

        1. fredwilson

          A half dozen

  22. Druce

    If the government is doing something, it’s generally because the incentives are wrong for the market to do a proper job, ie military, law enforcement, education, roads. (public goods)Considering the government is only doing things that tend to lack proper incentives, it’s impressive it does as good a job as it does, waste and screwups notwithstanding.(as an aside, it’s amazing how some people who think the government can’t do anything right think the military is a great organization, when it’s got the same bureaucracy and perverse incentives as every other government activity, IMHO proving culture usually trumps economics)

    1. Emil Sotirov

      Yes – culture trumps economics… always! – to the chagrin of both Marxists and market fundamentalists (I find those very similar anyway).But what do you mean by “proper” incentives? You think the incentive to do your job well – as a fireman, policeman, doctor, soldier, teacher – is not proper in itself and by itself?… As opposed to the “proper” monetary incentives that dominate the American imagination since early childhood experiences of selling lemonade or being paid money by your parents for doing something than any good kid should be doing anyway?

      1. Druce

        well, the market doesn’t do a ‘proper’ job of signalling the right quantity of defense goods to buy at a given price, or solve a complicated coordination problem like a big airport or highway (or subway).and people respond to incentives, but within a range of culturally acceptable behavior.the best things in life may not be free, but they are mostly public goods.

        1. Emil Sotirov

          With public-private entanglement – at the scale we have now (through taxes mostly) – there are no markets per se (pure markets) – to give you signals – about so much stuff… healthcare, college education, housing. You don’t need to even look at the defense stuff.But we don’t have a paternalistic government either – so we are stuck with public-private (mutual) corruption.About incentives… and people responding to them – take a look at this book (which I haven’t read yet) –… (hint – culture trumps economics).

          1. raycote

            Society is by nature an array of volitious agents working their self interest at very turn. This is the penny in the currency of all human affairs. I think this precludes any realistic expectation of sustainable pure markets. This is the hull speed of our biological wet ware.So I agree, were are stuck with “public-private (mutual) corruption”.We can only extend these endemic evolutionary limits via social and technological design.Using biology as an analogue to elucidate a cheat sheet lexicon for ORGANIC PROCESS LITERACY, target that organic design template at Political Social Graphs implementing direct democracy mechanisms.We could develop organic checks and balances by constructing Organic Community Social Graphs dashboards. Dashboards that empower the community with an effective visualization of the community’s choices regarding the enforcement of behavioral standards, the prioritizing of social goals, the choosing of implementation methods and the measuring of social outcomes with independent automated metrics might be a resonable starting point?PUBLIC DOMAIN – ORGANIC SOCIAL GRAPH DASHBOARDSSHOULD be easy to shareSHOULD be easy to visualizeSHOULD be easy to collectively updatedSHOULD provide federated methods for the collection of hard social metricsSHOULD provide built in methods for actionable direct democratic politically controlSHOULD be based on open public domain federated API standards

  23. johnblossom

    Fred, I am a huge fan of the NYC subway system also – my son and I have taken a ride on every train line in the city – and I agree that the history of its development offers some very interesting lessons for broadband infrastructure development. Private/public partnerships are certainly a plus when new technologies require rapid development and know-how to be applied to somewhat risky endeavors. After a while, as the technologies mature and profits are harder to come by, it makes sense to transfer some or all of that infrastructure to public ownership or to new private/public partnerships.In regards to broadband, and the Web in general, I think that we have had public/private partnership all along. The Internet came along as the result of public investment in advanced technologies, but its scaling-out into a global network was turned over to private companies to build and to operate most of the infrastructure. The weakness in mobile markets in the U.S. as compared to other nations may be due in part to its having been too much in the hands of private concerns without enough public participation. The government allocated the frequencies, but failed to provide an environment in which carriers would compete to build a broader and more interchangeable mobile environment.Now with broadband, there’s an opportunity to create a mixture of approaches, marrying commercial interests with public interests more effectively than in the mobile phone era. In this sense, to bring it back to your subway analogy, the current development of broadband is in some ways analogous to the IND era of subways, when the city began to introduce wider and longer subway cars. Sometimes you need public investment to spur innovation – or to push the private sector on to new markets when public investment can manage low-profit infrastructure more effectively. I think that the FCC is on the right track and that their proposals will compel carriers to offer more competitive broadband services, while allowing more public access to people locked out from the Web today.

    1. fredwilson

      That’s a hell of a great comment. Its really a blog post in its own right. And its very much in line with what I’ve been thinking and why I wrote today’s post

    2. paramendra

      NYC is a public transport city. Could America be turned into a public transport country?

  24. SGN

    468 stations in operation, 656 miles (1,056 km) of track delivering over 1.623 billion rides, averaging over five million on weekdays (about 98% of these rides are on time and on schedule) – if you ask a private industry to sustain this model, the only way they will do it is to riase fares to more than 6 dollars a ride on top of cutting ‘non-essential’ lines (read: lines that cater to poorer sections and minority neighborhoods…). Say, what you will, I love the NYC subways!!

    1. fredwilson

      Me too

    2. enrolled agent study guide

      “(read: lines that cater to poorer sections and minority neighborhoods…)”These poorer sections and minority neighborhoods make up a large percentage of subway users. Business-wise, they’re not gonna cut that off. :)+1 to your post though. 🙂

  25. Ovi_Jacob

    Great post – I think the area where public-private partnership is best expressed now is the energy sector. Specifically with alternatives, most renewable generation projects would not approach cost-parity without substantial government incentives. This goes beyond project finance (big boys) and is effecting energy and sustainability startups and VCs. ARPA-E grants, for example, will breath enabling life into technologies, that can become real products.All of that said, one hesitation that I have heard (from energy execs as well as investors) is that the stimulus programs tend to “pick winners”. Moreso than other sectors, energy generation and its component industries are as much about capacity and process scalability as they are the underlying technology (see FSLR). Something to consider when discussing public-private partnerships in competitive environments.

    1. fredwilson

      That’s why supply side stimulus is hard. You have to pick winners. I like demand side stimulus better

      1. paramendra

        Please explain.

  26. Emil Sotirov

    I think that public-private partnerships are the perfect way to legalize corruption. To put it in more philosophical way – the “social” corrupts the “market” and vice versa… no matter what. You can’t have a hybrid whose parts are driven by conflicting motives and goals without getting a dysfunctional monster. It may look functional for quite some time… by feeding itself off the larger pool of taxpayers’ money.In fact, you can have such monsters – the US, China, EU are all such monsters right now… and it doesn’t bode well for those of us outside the fantastic world of opportunities made possible by the public-private partnerships.

  27. Dave Pinsen

    The rate of new subway construction seems to have slowed quite a bit once the NYC subway system became a government operation, no? How long have they been working on that Second Avenue line?One problem with it becoming a government operation is that it becomes a de facto entitlement program for public sector workers, and money that could be used to improve infrastructure goes to pay for folks to retire early, get generous defined benefit pension plans, etc. Do MTA workers still get to retire at 55?

    1. paramendra

      Important point.

  28. enrolled agent study guide

    Agreed. NYC subway system = fantastic. And loving the little history lesson. :o) I have to wonder, though, if the example of the government taking over private enterprise is ALWAYS such a good thing (*cough!* health insurance *cough!*).

  29. Parveen Kaler

    The discussion about Public-Private-Partnerships is interesting to me. The Canada Line here in Vancouver was built as a P3.…It will be interesting to see if P3s still work in the modern age.

  30. ShanaC

    I just wish we took better care of the subways. They need better lighting for late at night at some of the stations- everyone looks like a crook, kind of unsafe feeling.Also I sort of wish people would notice how beautiful some of the stations are, some of the mosaics an d public art. They always make me smile. I don’t think you could do that to the same degree without a public-private partnership, because the art would sort of reflect more the corporate sphere. Instead it is often there as a result of public efforts and other donations and institutions, like the NYPL. It is really nice to see so much stuff that reflects the city at large.

    1. fredwilson

      There are some great subway art tumblogs

    2. paramendra

      (1) Beautify all stations. Most are blank. Use art work. (2) Clean up all tunnels and platforms. When were they last painted? In 1904?

  31. Collin Canright

    This is a very apt post with healthcare and other national debates, such as the broadband you commented on yesterday. What it brings to my mind, however, is the parking debate-debacle in my city, Chicago. The city leased street meter parking rights to a private company to much much outcry. It wasn’t handled well, and people have said it will bring Mayor Daley down (along with other things). Yet parking in the city was inefficient: You had to have wads of quarters and now you can use a credit or debit card. I guarantee that even though rates went up a lot, and I don’t like it either, the old rates were too low to support street maintenance and all the other public goods we take for granted and really don’t like paying for. It’s been a rocky partnership, but my guess is it will end up working better for everyone as a partnership than as an inefficient public good or an overly expensive private monopoly. Let’s hope, at least. . .

    1. fredwilson

      I hope so

  32. Nick Giglia

    Public-Private Partnership is a good thing, but unfortunately there are also new realities that didn’t exist in 1904. There were no noise laws and NIMBYism didn’t exist yet, so the construction happened when the companies said so – this made building the lines much quicker than it’s going to take them to (finally) finish the 2nd Avenue Subway. In addition, they should truly be partnerships – the one thing you notice more than anything is how piecemeal the subway was built. Many of the connections came after the fact because, of course, it used to be different companies. The subways are a massive achievement, and I marvel at both the utility and in many cases the sheer beauty of the design, but it’s also a perfect example of how different things were in the “good old days”.I’m one of those who believes the massive public good (ease of transportation, taking cars off the road, etc) makes the taxes we have to pay to the MTA worth it. However, I also hope the city can take the next logical step and implement congestion pricing – which I saw work very well when I lived in London – to finance the next big boost in public transit.Fred, 2 great posts in a row…this ex-SimCity junkie is weeping for joy.

    1. fredwilson


    2. Joe Siewert

      Aww, SimCity, haven’t played that in ages. So fun.

  33. rich caccappolo

    one perspective that i don’t yet see in the comments is the benefits to the customers / riders in terms of usability through unification. Before 1940, riders had to buy different tickets or gain access to the different lines with complex (if any) interconnectivity or transfer privileges. There were few track or station connections between lines. These were big benefits for customers. (interestingly, NYC is one of the few systems – maybe the only system – where you pay one price regardless of how far or how long you are riding. Other systems, like London, have different zones with varying prices for rides between certain stations) The MTA also brought about consistency and standards that didn’t exist across the private lines.

    1. fredwilson

      Great points rich

  34. kenberger

    DUBAI: check out their brand new metro. I did while there last month:…It is of unspeakable beauty and smoothness, both the stations and trains. The whole thing is an MIT student’s dream, driverless and automated. Fares are relatively reasonable (about that of NYC– Dubai is a crazy expensive town), the system is gov’t run and subsidized. Each train also has a 1st Class car (double fare). Like many things in Dubai right now, it is near bankruptcy. But it *just* opened, and many people don’t even think to ride it yet. We’ll see how they do and what public/private interactions unfold down the road.

  35. Tereza

    On my home (suburb) days, I’m constantly sitting on my ass in an SUV and it does not feel good.Taking the subway and then walking in NYC is totally refreshing. Get where you’re going faster, observe people along the way. And it’s cheap and green. I’m in the city 3-4 days/wk and always go public; In the past year I’ve taken, I think, only 3-4 cabs. Even if raining and I was destined for a bad hair day.For those of you who know me, you know those are fightin’ words.

    1. paramendra

      “For those of you who know me, you know those are fightin’ words.”LOL

  36. Morgan Warstler

    I think you’ll enjoy this episode of Drew Carey’s Reason Saves Cleveland: Privatize it.…This is way to do public / private. Government doesn’t have to cease, it just needs to outsource.

  37. Alex

    In USA the initiative of free trade and capitalism has paved way for NY Subway. But in other developing countries where this initiative is lacking, these basic necessities are in the control of government and so these things are lacking. I hope developing nations learn from NY Subway example.

  38. paramendra

    Recently you had a post about mobile broadband, and now you have a post about the subway. You seem to have a knack for figuring out what my favorite things are! To me the subway is where the city happens. That is where the people congregate.The L line? You surprise me. That is my line. We might not be neighbors, but looks like we are subway neighbors. Same line. (Nod).What you call public-private, in the Global South they call it BOOT, Build Own Operate Transfer. That might be the best way to build ambitious infrastructure.Say, what will it take to expand and modernize the NYC Subway system? Take it to Shanghai levels, for example? If people could do this 100 years ago, what can people do today?I don’t mean to mix race talk into this topic – that is a legitimate topic, just like health care and peace in the Middle East, but that is a separate topic. Bu I wanted to share the map at the top of this blog post:http://democracyforum.blogs…The public or private debate is tired. We need both. It is just that the right mix is hard to figure out sometimes, and that right mix changes over time. That is where Obama’s non-ideological pragmatism can come in handy, and Bloomberg’s business approach can help. The emphasis ends up on what works. It is not either or.PS. India has the largest, most complex railway network in the world.

    1. fredwilson

      I guess were on a mind meld this week. See you on the L platform at union square someday!

      1. paramendra

        I am often on the L platfrom at Union Square. …… Wait a minute. Is your firm named after Union Square? Wow. Talk of a fan of the subway.

      2. paramendra

        I have gone to so many tech events in this town. Never met you in person yet. I hope to some day. I guess it might happen on a train platform before it happens at a tech event. That would be really something.

  39. Guest

    I completely agree that private enterprise is better suited for innovation. This conversation becomes even more interesting (and contentious) when you start taking about privatization of public assets (toll roads, the Chicago parking privatization, harbors, airports, etc.). I’m pretty confident that is many of these situations private companies can run them more efficiently than government, but I worry when our politicians start negotiating price with private equity firms – who is going to understand the price of these public assets better – an elected official with no financial training or the PE firm??

  40. Dennis Mykytyn

    Fred, the NYC subway history has more complications. The franchise agreement set the fare at a nickel with no provision for inflation adjustments unless the City agreed, and the politicians never did, for 44 years! When the cost of running the system exceeded a nickel, it drove the private lines into bankruptcy and the City got the assets cheap. They later doubled the fare to a dime after they owned it. Not sure this is a good example of public-private partnerships. It’s more an example of politicians pandering to voters (“Save the Nickel Fare!”) until they drove the efficient private sector operators out of I worked at the MTA in the 80s during the rebuilding of the system after decades of neglect. FYI, the T in MTA is Transportation, not Transit, as they also control the TBTA Bridges and Tunnels.

    1. fredwilson

      i just bought 722 Miles on the suggestion of several commenters to this postso i am going to get schooled on the history of the subway system. it’s suchan interesting story and obviously i need to learn more about it.

  41. Qson

    I am guessing the NYC subway system was dug and built on the backs of cheap, pre-union, likely immigrant labor…if so, the profit equation, or whatever math kept the “private enterprises” building and then running the subways, simply would not come close to working these days

  42. johndodds

    Public private partnerships are fine in theory but they must be partnerships. Here in the UK, a lot of capital expenditure was taken off the government balance sheet by creating such partnerships (not that that was the official reason of course). The rush to achieve that goal created a huge problem insofar as the uncommercially-minded public sector signed up to contracts that will be a financial burden for decades to come.

  43. Andrew

    Great blog. New York City is a one of a kind town and has a pretty decent transit system, especially compared to Toronto’s. Where we have scandal after scandal, operators who sleep on the job and drunk, fares going up annually and constant shutdowns of the system or delays of the buses.It really shows you how the U.S. had such a great manufacturing sector throughout its early years but now it’s full of speculators, iPods and everything that else that doesn’t contribute to the long-term economy.Too bad the U.S. doesn’t have that anymore because it could get out of its massive hole, heck I wish Canada had a real manufacturing base too!

  44. BillSeitz

    Any history of public transportation should include mention of how the auto companies bought trolley car systems and shut them down. NYC has the density to support a subway, but lots of other smaller cities are trying to recreate something close to trollies now….It’s also worth noting that most public-private partnerships are more like sports stadium boondoggles than the NYC subway system.

  45. George A.

    Hi Fred, good post (catching up on my reading). I see your point here and I deeply appreciate the NYC subway systems. It is like an old dog with a bad leg, it is still deeply loyal and dependable, but it ain’t the pretty pup….But the subway is still massively insolvent, deprived of critical upgrades, has rampant labor issues and has grown into another large pool of government entitlements attached to a critical infrastructure service. Is that where we want broadband in 30, 50, 100 years?While I generally disagree with your views on network neutrality, I think we share the same views on the critical role that broadband plays in the economy and consequently how precarious it is to have unregulated monopolies in such a position.I favor regulation (universal service, price caps, pre-determined definitions of speeds and other marketing lingo), but I really don’t favor network neutrality. It eliminates a powerful economic funding source (advertising) from the reservoir used to fund infrastructure.

  46. Emil Sotirov

    Just wanted to add here a statement by Elizabeth Warren (in support of my first comment under this post):”I’m one of those people who never liked public-private partnership to begin with. I think what they did was use public when public was useful and private when private was useful… And I think we’ve got to rethink that whole thing.”http://www.washingtonexamin…

  47. Dave Pinsen

    If memory serves, the reason why the subways were built in the first place was because the workers in the manufacturing and textiles businesses in Manhattan were overcrowding tenements near their factories, leading to unsafe and unsanitary conditions. The subways were pretty much the only way for them to live elsewhere and work there.

  48. andyswan

    Are you really suggesting that the role of public policy should be to subsidize the delivery of labor to concentrated sections of wealth? Is it so outrageous to think that perhaps Wall Street might just need to pay an extra $3/meal because the owner’s cost of labor is higher….much as his cost of delivered goods is higher? Or would there be some shift away from Manhattan, resulting in closets actually costing less than $500,000 (gasp!).I can only assume from this attitude that we are nearing the day of contemplating a taxpayer-subsidized program to attract small-businesses to the Queens area, which will be in NEED of opportunity because “all of the work is in Manhattan”.

  49. paramendra

    “We should approach healthcare like we approach public transportation–it should be part of the dialtone of society.”Wow. That is quite a sentence.

  50. chrisdorr

    A very smart comment, very well stated.

  51. derrinyet

    You’re absolutely right in principle, but I have some concerns in practice. I’ve been in COBRA purgatory the last few weeks: even though I paid in February, it’s taken until yesterday for the third-party processing firm to communicate with my insurance company to re-activate my coverage. Given the technology we have for communication, this is unacceptable.However, I’ve had similar experiences with public services. (I couldn’t apply for government aid as an undergraduate in 2003 because they didn’t have on file that I was a citizen – I had been naturalized years ago!)How do we ensure that the transaction costs are indeed lowered and the complexity eliminated? Even within one agency, there can be a lot of miscommunication and dropped lines.Healthcare for the common good must be informed by best practices in information sharing, data portability, and usability drawn from both the private and public sector. In other words, we need a partnership not just in terms of who the stakeholders are, but in terms of what the practices are.

  52. fredwilson

    Exactly. My friend tom evslin says ‘nothing good gets done without irrational exuberance’. His view is some bubbles are good, like the railroad and telecom bubbles. Maybe even the housing bubble

  53. andyswan

    A private market in which government just happens to dictate:Coverage that MUST be offered….Customers that MUST be accepted…..Geographic areas in which companies can or cannot participate….and in which government inserts itself as a competitor, fully committed to NOT playing by the same market rules as private companies who don’t have the unique advantage of confiscation and printing presses?That kind of “private” market?And yes…of course kids benefit from schools and teachers that have incentives to teach them well. And yes, I will put my money where my mouth is….There is ZERO chance my kids will be attending a government school just as most people of adequate means avoid government schools that aren’t “competing” for our dollar, but are rather confiscating it.I’ll “just say no” to schools who bus kindergarten kids 40 minutes across town in order to “jump-rope with no ropes” in gym class to “boost esteem” (a critical mandate!). I’ll stick with the institutions that know I can “take my business elsewhere” if they aren’t helping me give my children the tools for success in the real world.