Posts from Rapid transit

No Conflict No Interest

The title of this post comes from a saying I've always attributed to John Doerr, one of the top VCs of the past 25 years and the lead partner at Kleiner Perkins.

In this day and age, having a financial interest in something means you've got a conflict and your opinion is somehow "tainted."

But that wasn't always the case. I'm reading a book called 722 Miles, about the history of the NYC Subway System. It was recommended to me in the comments to the blog post I did about the subway system a few weeks ago.

The original plan for the NYC subway system was drawn up by The Steinway Commission in 1891. It featured the main downtown line from south ferry, up Broadway, to Union Square, then forking off in two branches, one headed up the west side and the other headed up the east side. That plan had to be changed later in order to keep the construction costs below the mandated $50mm (a huge sum in those days) but it was in many ways the blueprint for what got built.

The Steinway Commission was the name attached to the Rapid Transit Commission called for in the Rapid Transit Act of 1891. The commission was charged with laying out the basic plan and assigning a franchise for construction and operation of the subway.

It was called The Steinway Commission because it was chaired by William Steinway, founder and CEO of The Steinway Piano Company, a major manufacturer and real estate developer in Astoria Queens. In addition to Steinway, the commission included John Starin, owner of tugboats and other waterway transit businesses, Samuel Spencer, a railroad executive, Frederick Olcott, a banking executive, and Eugene Bush, a railroad lawyer. All of these men had business interests that would be enhanced or possibly damaged by the development of a subway system.

And yet they largely did the right thing, got the plan approved, and eventually funded and built. None of them ended up with the franchise (that went to August Belmont, who also built Belmont Park, one of the three legs of the Triple Crown in horse racing).

At the turn of the last century in NYC, there was an alignment of business and political interests that got things done that seems lacking in today's political environment. We have a taste of that in NYC with our current Mayor Mike Bloomberg who has brought a business mind to job of governing NYC. But on the national level, we see much less of this kind of thing.

It's really too bad because interest implies knowledge and understanding and leads to good decisions if the people involved have integrity and the ability to put the interests of the community first and their financial interests second. The business leaders of NYC were able to do that in the late 19th century and early 20th century and we have them to thank for our wonderful subway system.

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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