Bacon's Rebellion

Civic entrepreneur Jim Porter has discovered a new niche in the mass transit realm — free bus rides for students and other weekend revelers. Chalk up another victory for private-sector transit.

by James A. Bacon

When Jim Porter was looking into the practicality of operating a private bus service in Richmond, he was told he would have to get City Council approval for his routes. But if he didn’t charge a fare, he could run his bus where he wanted. He decided that charging passengers wasn’t worth the trouble. His goal was simply to run a loop between Virginia Commonwealth University and Richmond’s nightclub district in Shockoe Bottom so students would have an alternative to drinking and driving.

Little did he imagine in 2009 when he launched To the Bottom and Back (2BNB) on capital of $6,500 that his free service would be transporting thousands of people monthly and generating $220,000 in revenue by 2011. As it turned out, Porter discovered that he could support the non-profit operation with tips, contributions and corporate sponsorships. With an entrepreneur’s nose for business, he has added two circulator routes — one connecting the University of Richmond, another serving Richmond’s museum district — and he has forged relationships with fraternities, sororities, festival organizers, food banks, athletic leagues and others.

“We listen to our passengers, our drivers, our sponsors,” says Porter. Word of mouth has led to numerous opportunities. It turns out that there was a vast market not served by the Greater Richmond Transit Company (GRTC) or commercial bus companies. Established competitors would gladly provide the service but they cannot match Porter’s fares – free – or his cost structure. He has purchased his fleet of four buses from county school systems, never paying more than $3,500 for a bus, and he hires school bus drivers for part-time work. Maintenance costs are minimal. “When I have maintenance on the bus,” he says, “I can go to the nearest junkyard and get what I need.”

Oh, yeah, all that, plus he doesn’t pay himself a salary.

2BNB has a unique business model; there is nothing else like it in the country. It is a classic example of what a civic entrepreneur can accomplish with creativity and a shoe-string budget. And it shows the kind of innovation in transportation services that that could be unleashed by the private sector if only it were given more lattitude in an industry dominated by government-funded monopolies.

The dominant player in the Richmond market, the GRTC, is regarded as one of the better-run transit companies in the country, but it pays 10 times what Porter does for new buses, pays its bus drivers 50% more, plus benefits, and must convince affected municipalities to pass an ordinance every time it wants to add or drop a route. GRTC management has had a plethora of good ideas for expanding the service across the region but local politics and federal regulations make it impossible to respond nimbly to market opportunities.

To Porter, running the bus service is more than a job, it’s a passion. He tells stories about how he grew up in the bus business. His grandmother ran a tour company for senior citizens, and as a youngster he would help out by hauling luggage and handing out BINGO tickets. “I was raised with the idea of customer service,” he says. Later, crossing the picket line during a Greyhound strike, he drove the route between Richmond and New York. The gregarious Porter says he loved that job, which allowed him to interact with riders.

For 15 years Porter, now 45, had nursed the idea of running a bus to serve Richmond restaurant patrons but he couldn’t get any interest. He talked to Mothers Against Drunk Driving but drew a blank. He investigated taking his idea down to Nags Head during the tourist season but couldn’t pull it off. It wasn’t until he was in a West Virginia traffic accident – he was hit by a drunken driver and his car tumbled down a hill – that he raised the money he needed. He drew upon his settlement to finance the start-up of To the Bottom and Back.

Porter bought his first bus, painted it lime-green and black, and started carrying VCU students. The free service was a huge hit and drew hundreds of riders. It wasn’t long before he began attracting restaurant and corporate sponsors like Sticky Rice, the Hat Factory, Loveland Distributing and the Emroch and Kilduff law firm. Riders didn’t pay fares, but they did leave tips. Says Porter: “I would meet parents, and they would write me checks and say, ‘Thank you for looking after my daughter.’”

As revenues rolled in, Porter added new buses. Although the routes are fixed, drivers aren’t required to abide by strict schedules. Porter likes his buses to dally in Shockoe Bottom so they can pick up more riders, and he would rather have a bus run behind schedule than go faster and risk an accident. The lack of minute-by-minute precision doesn’t hurt, he says: Riders can keep track of the buses’ locations on free, smart-phone so they know when their ride will arrive.

Porter may have to stick to tighter schedules to pull off his next big idea. He sees another under-served market – West Broad Street, a commercial corridor flanked by hundreds of restaurants and retailers that supports thousands of entry-level jobs. When people need to get to work on time, keeping schedules is important, he concedes, but it would cost GRTC a lot more to serve the route than it would cost 2BNB. “For a few thousand dollars, I can drive a bus anywhere.”

Porter doesn’t have to conduct expensive marketing studies to determine if demand for the service exists. He’ll just buy a bus, paint it and put it on the street. If the riders materialize, so will the sponsorships. If the demand isn’t there, he’ll move the bus to another route — exactly how mass transit needs to operate in the future if it’s going to gain market share from automobiles.

by James A. Bacon

Daniel Kahneman, an eminent psychologist, won the 2002 Nobel Prize in economics for his work showing how a key underlying assumption of classical economics — that people behave in an economically rational manner — is demonstrably false. The human brain has evolved cognitive short cuts that served homo sapiens well when survival required rapid decision making but now bias thinking in unproductive ways in the vastly more complex environment of contemporary society. Among these traits, which he explores in his book, “Thinking, Fast and Slow,” are an irrational aversion to risk in some circumstances and a proclivity for excessive optimism in others.

Little did I suspect when I embarked upon reading the book during vacation that passages would bear upon my work at Bacon’s Rebellion. But one section entitled, “The Planning Fallacy,” which describes the tendency to base plans and forecasts upon unrealistic, best-case scenarios, applied directly to a wave of transportation mega-projects, from Rail-to-Dulles to the U.S. 460 upgrade, at various stages in the approval process in Virginia. This optimism bias is a fundamental human affliction, affecting consumers, businesses and government alike. No one is immune. But the most egregious examples come from government.

Kahneman cites a fiasco in which the cost of the new Scottish Parliament building escalated from a £40 million estimate in 1997 to £431 million upon completion in 2004. He also notes a tendency for the cost of rail projects around the world to… well, to run off the rails. In a worldwide survey of projects undertaken over 30 years, the average cost overrun was 45% and passenger forecasts exceeded actual performance by 106%.

Writes Kahneman:

Errors in the initial budget are not always innocent. The authors of unrealistic plans are often driven by the desire to get the plan approved — whether by their superiors or by a client — supported by the knowledge that projects are rarely abandoned unfinished merely because of overruns in costs or completion times. In such cases, the greatest responsibility for avoiding the planning fallacy lies with the decision makers who approve the plan. If they do not recognize the need for an outside view, they commit a planning fallacy.

What decision makers should do, Kahneman writes, is to engage in what he calls “reference class forecasting,” a practice that has been implemented for transportation projects in several countries. “The outside view is implemented by using a large database, which provides information on both plans and outcomes for hundreds of projects all over the world, and can be used to provide statistical information about the likely overruns of cost and time, and about the likely underperformance of projects of different types.”

Reference class forecasting protects decision makers from excessive optimism before approving a project and may help them structure projects in ways that will help prevent cost overruns. The problem with most forecasts is that they are based upon known factors and known “unknowns” but, in the immortal words of former Defense Secretary Donald Rumsfeld, do not incorporate “unknown unknowns.” While any particular unknown may be unlikely to occur, there are so many unknowns that the odds are very high that one of them will occur, often with cascading effects. A well-run organization, says Kahneman, will reward planners for precise execution and punish them for ailing to anticipate difficulties.

That’s all very fine but how does it apply to Virginia? Hopefully, decision makers will learn something from recent experiences in administering rail projects like The Tide in Norfolk and Rail-to-Dulles in Northern Virginia. In both projects, costs outran early cost estimates but public authorities continued pursuing them because once a public project picks up momentum and costs have been sunk into it, politically there is no going back.

Now the McDonnell administration is pushing a slew of expensive bridge and highway mega-projects. Aside from the critical question of whether all of these projects are economically justified — the case for the Charlottesville Bypass is particularly weak — we now get to worry whether the projects will run over budget. The Virginia Department of Transportation is shifting from a project-management methodology in which VDOT designed the projects, bid them out to private contractors and ate the cost overruns, to a new methodology that shifts far more of the responsibility and risk  to the private contractors. The theory is impeccable. How the theory will be executed is another matter entirely. It will depend largely upon how tightly the contracts are written.

Unfortunately, Gov. Bob McDonnell will be long gone when the projects he sets into motion are completed and the costs are tallied. By the time we know how well his team did in managing the mega-projects, it will be impossible to hold him accountable — just as his predecessor Tim Kaine has eluded the fallout from the Rail-to-Dulles project that he set into motion. Accountability is the key. Private corporations have evolved mechanisms, however imperfect, for holding their decision makers accountable for successsful management of massive projects. Virginia has yet to do so.