9 ms·

Global Infrastructure Partners Gets Big Returns In Sleepy Sector

171 points by sajid 10y ago

deleted 10y ago
[deleted]
siscia 10y ago
Great story, but how do you get into this kind of "deal"? I believe that most engineer would be able to come up with a reasonable way to manage an airport, maybe with more dumps that our heroes, but still I believe that most of us will be able to dig themselves out of the problem. But then, how do you get into it? You need tons of money and wealthy/powerful people that trust you, how do you get that trust?
- jtmarmon 10y ago
  ...become "the former head of General Electric’s infrastructure business and Jack Welch protégé" probably
- gizmo 10y ago
  If you're not born into it your best bet is to go to an ivy league, preferably Harvard or Yale, study business or law, and make the right friends. Being born into it is easier, though.
  - elastic_church 10y ago
    > Being born into it is easier, though. because then you get to keep your youth while you have the respect as well.
- retube 10y ago
  These are engineers who have reached very senior levels in large industrials, have prob 20-30 years experience, are responsible for large operations or assets, and are known for significant achievements in their domains.
  - gukov 10y ago
    Success breeds success Wanting the skip all of that and just get a cool billion dollars because you have a big idea is naive, to say the least.
- whorleater 10y ago
  > You need tons of money and wealthy/powerful people that trust you, how do you get that trust? How does anyone do anything big? Get lucky with parents/work hard and network with the right people/start ambitious projects/some or all of the above.
- hibikir 10y ago
  When we fix software, we know that full rewrites are bad ideas, and that the way to success is to make easy changes until finally you end up with a better product. This is true because failing, for any amount of time, is a terrible outcome. However, when it comes to moving upward for bigger opportunities, the opposite is true: Little is gained by very slow grinding. Wondering how to get all wealthy people to trust you is the wrong question: What you want is ONE wealthy person to trust you. 300 failed pitches don't matter. You just want to succeed once. Therefore, my strategy is to aim as high as you can, be ok with a bunch of failures, and once you have success, consider whether you can use it to aim even higher, now that you have established a higher baseline. It's better to have one resounding success an 50 failures at convincing people that never failing, but aiming way too low.
  - siscia 10y ago
    That is a great point! I do agree that shooting for the stars is the way to go, but I still find it difficult.
huac 10y ago
> Most of his recruits speak a language familiar to engineers but foreign to anybody else: Six Sigma, Kaizen, Lean. Woodburn is prone to fall into such jargon. “Anyone who’s been to an airport can say that it’s operating at maybe Two Sigma,” he marvels. “That’s making a mistake 30 percent of the time.” Two sigma corresponds with a 95% confidence interval, while one sigma is a 68% confidence interval which he is presumably referring to. I don't want to detract too much from the work that these people did, which I think is actually very cool, but it worries me that their head of engineering can't discuss really simple statistics correctly... Edit: words mean nothing, see replies
- deleted 10y ago
  [deleted]
- fiter 10y ago
  For whatever reason, the "Six Sigma" techniques/ideas aren't using "Two Sigma" to refer to ±2σ, instead they're referring to the width of the band around the mean. https://en.wikipedia.org/wiki/Six_Sigma#Sigma_levels https://en.wikipedia.org/wiki/Six_Sigma#Sigma_levels
  - OJFord 10y ago
    > For whatever reason, ... they're referring to the width of the band around the mean. That's exactly how I learnt it in secondary school, the standard deviation, what's the problem?
  - huac 10y ago
    Yeah, and it's apparently also shifted down by 1.5 sigma.
    - leereeves 10y ago
      That's apparently based on Motorola's data regarding process drift. > Motorola has determined, through years of process and data collection, that processes vary and drift over time – what they call the Long-Term Dynamic Mean Variation. This variation typically falls between 1.4 and 1.6. https://www.isixsigma.com/new-to-six-sigma/dmaic/15-sigma-process-shift/ https://www.isixsigma.com/new-to-six-sigma/dmaic/15-sigma-pr...
danielvf 10y ago
Quote: Anyone who’s been to an airport can say that it’s operating at maybe Two Sigma,” he marvels. “That’s making a mistake 30 percent of the time.” Is that really what two sigma performance means? That sounds more like one sigma worth of failures.
- vkou 10y ago
  Having been to a few airports, I can say with a fair degree of certainty that they are not making a mistake 30% of the time. Airplanes don't run out of fuel mid-flight, or crash 30% of the time, my luggage doesn't fail to arrive to its destination 30% of the time, and I've yet to show up to a flight, only to discover that my seat in just a hole in the floor. Now, the flight attendants misunderstand my choice of mid-flight snack ~30% of the time, but that doesn't really matter, because it's always ~12 grams of peanut-related animal feed, anyways.
  - giarc 10y ago
    A plane not pulling away from the gate on time is likely considered a mistake. Bags not arriving to the carousel in 15 minutes is likely considered a mistake. It's not always binary like "Did the bag get lost or not?"
- kinkrtyavimoodh 10y ago
  The sigma level in industry traditionally refers to the 'bandwidth', not the distance from the mean, so what you are thinking as 1 sigma is actually 2 sigma. https://en.wikipedia.org/wiki/Six_Sigma https://en.wikipedia.org/wiki/Six_Sigma
  - danielvf 10y ago
    Thanks!
dharma1 10y ago
Surprisingly enjoyable article. Would love to have a crack at designing ways to have a better airport experience - can't say Gatwick feels like a great product yet
cableshaft 10y ago
> What Happens When Two Bankers and an Engineer Get a Billion Dollars? To quote Willy Wonka, "They lived happily ever after."
- DonHopkins 10y ago
  Pfff. I'm working on my second billion! I gave up on my first...
spitfire 10y ago
Now I want to know what that 1930's airfield optimization book is.... I bet graycat knows, care to chime in? Anyone else have a guess?
L_Rahman 10y ago
If you're interested in infrastructure or business backend improvements like the ones described in the article but: - are at a smaller and more local scale that don't attract attention from the likes of GIP - the process improvements are around information flow between applications instead of physical flow I am really interested in talking to you whatever the domain may be. An example I've learned of recently: Garbage truck routing in NYC is grossly inefficient. The routing used to be centralized under a single contractor with rumored tentacles into organized crime. Due to changes in contracting regulations, NYC garbage collection is now includes a mix of independent contractors. This results in multiple trucks visiting the same street on the same night. This is inefficient in the following ways: - cost of garbage transportation - noise pollution - localized pollution from truck emissions - CO2 emissions from inefficient route planning I'm fairly certain efficient routing for this is a solved computational / information systems problem and the source of the issue is a lack of coordination. I'm trying to dig in with the Department of Sanitation to see who the different players are.
- nunez 10y ago
  Sure. I'm currently interested in discovering inefficiencies in airline revenue management. My hypothesis is that a non-trivial amount of the spend that airlines make is inefficient and based on factors that aren't as relevant today as they were 30 years ago during the proliferation of global distribution and revenue management systems. i want to see an airline that is run by software engineers with aviation experience that rolls its own GDS and revenue management system; one that can scale well beyond its years and can operate on clusters of cheap compute. my hypothesis is that current airline operations are band-aids on top of protocols and runbooks that were developed around the initiation of the jet age, and fear and fearfully low margins has held back massive amounts of innovation that keep prices higher than they should be. (and yes, i understand that aircraft are expensive to buy and maintain)
  - emmanuel_1234 10y ago
    Ha, I used to work for a large, Asian airline. They had that cool system used to calculate the pricing of ticket in real-time. No one really knew how it worked, it was built 20 years ago, and no one was allowed near it for fear of breaking it. Therefore, instead of tuning the algorithm, the analyst added their own (mostly arbitrary) rules on top of the system's calculation. It reminded me of that conversation in Asimov's Foundation, where some guy goes to some planet and is afraid to see everyone using technology, having lost all the knowledge of how it actually works and how to maintain it, therefore seeing it as some kind of magic. This was in 2015.
adanto6840 10y ago
For those of you thinking, "I'd like to take a crack at running an airport" or think you'd be able to do better, there's a game that just got through Steam Greenlight and that will be releasing soon which will allow you to do exactly that. Obviously it's "dumbed down", but it still tries to stay realistic & uses a 'systems-based' logical approach for gameplay; the total operation is basically just the sum of all the different inter-dependent systems and how they relate to eachother, how failures cascade, etc... http://www.simairport.com/ http://www.simairport.com/ Disclaimer: I'm involved in the project.
- jdpedrie 10y ago
  Looks pretty cool! The art and UI seem quite similar in style to Prison Architect. Is Sim Airport related in any way to PI, or is it just an inspiration?
  - adanto6840 10y ago
    We're not affiliated with the makers of PA, but it's definitely been a huge inspiration for us -- IMO it's largely responsible for modernizing & reviving the 'tycoon genre' in many ways.
- avar 10y ago
  Is it possible to go outside the bounds of what a typical international airport looks like today? E.g. no security screenings so people can pretty much just walk on the plane like it's a train station? That would mean you don't need space for restaurants, or lots of space for people to pool as they're waiting past security. It would be very interesting to experiment with changes like that and see how it would look. Edit: There's now an entire discussion downthread about how airports did and didn't look like before 9/11. That misses the point of what I'm asking, which I'll rephrase. I'm asking as a simulation game, how customizable is this? E.g. in in SimCity 2000 it initially looks like you can do anything, but really you can't design something that doesn't look & function either like an American suburb or car-centric Los Angeles. There's no way to construct something that looks & functions remotely like the city of Venice in SimCity. Similarly in this game, can you really design your own airport that works anyway you want from scratch? Or are you just placing all the pieces in your typical international airport in different places on the board, while the NPCs walk in some pre-determined route from parking, to checkin, to security etc. There's nothing that appears in the very brief trailer that suggests that it isn't highly constrained in the same way SimCity is. But I'd love to know if that's really the case.
digler999 10y ago
> Outgoing baggage jumped out as a major trouble spot; Stanley went to investigate, Does it really take an "engineer" to find a trouble-spot and fix it ? Why do you need a billion-dollar fund to grab engineering talent to do what the highly-paid leaders of, say, airports, are already supposed to be doing ? If they can't figure it out, isn't there a whole industry of consultancy firms that send "analysts" through your organization to do the same thing? If this sector is so profitable, will it cause the same crisis that privatization of hospitals did to healthcare ? Say "Global Infrastructure Partners" expands and "buys" JFK, ATL, LAX, just like private healthcare bought all the hospitals. Now they can start jacking up their landing fees (each year) until air travel becomes unaffordable. What's to stop them from turning this into the ultimate regulatory capture ?
- FabHK 10y ago
  Yes, that. Actually, I find it obscene that governments that can borrow at basically 2% per annum or less are not engaging in these projects, and instead leave 24% returns on the table for the private sector. Call me a Keynesian all you want, but yes - the austerity stance in the last decade (after the GFC) (particularly in Europe, due to Germany, but also in the US) was a huge mistake.
  - fsloth 10y ago
    If macroeconomics was football, then austerity is like focusing the game on keeping the ball on the opponents side of the pitch but ignoring making goals altogether.
  - merpnderp 10y ago
    Because governments aren't set up to do things efficiently and can never capture the 24% return. Going back to the 19th US where government ran and backed enterprises were outperformed over and over sector by sector by private enterprise. Not losing your job for bad investments is a bad incentive.
- notahacker 10y ago
  > If this sector is so profitable, will it cause the same crisis that privatization of hospitals did to healthcare ? Say "Global Infrastructure Partners" expands and "buys" JFK, ATL, LAX, just like private healthcare bought all the hospitals. Now they can start jacking up their landing fees (each year) until air travel becomes unaffordable. What's to stop them from turning this into the ultimate regulatory capture ? Ironically, GIP owes its airport holdings to the UK government coming to that conclusion about the market power of the airport operator formerly known as the BAA, and forcing it to sell some of its airports. Its growth potential has depended on the success of lobbying efforts to allow it to expand LCY (was going through at the time they sold it) and ideally a second runway at Gatwick (still hoping for). The politics might have more effect on its bottom line than buying in better logistics systems but it's probably less sexy an anecdote for an article. I'd definitely think they were better off hiring one really smart process guy as COO than contracting top tier consulting firms to throw dozens of graduates at the airport's operations issues though.
lacampbell 10y ago
My biggest takeaway from this is - people skilled in industrial processes aren't already in very high positions in Airports!?
- snarf21 10y ago
  I think the bigger takeaway is that at a lot of big companies, the processes and management is horrible but it still makes a ton of money. These guys buy things that aren't optimized and squeeze all that money out. I think the most interesting thing would be to look back at one of these investments 5 or 10 years after they exit and watch the improvements slip away and the companies end up in trouble. I think this is why people are dislike big government (me included, but necessary for some critical things) because there is no incentive to optimize. Quite actually, that is punished. Don't spend all your money one year and your budget gets slashed even though you may need that in a few years to upgrade equipment. The more layers of organization you add, the more managers you have who see their job as self-preservation. It looks like these guys run very very flat.
  - croon 10y ago
    Well, less government leads to privatization of crucial infrastructure (airports, hospitals, banks, etc). Which still siphon government money, only now that money doesn't go to public good or government employees, but to private coffers, with no need to compete (regardless of "free market" hurr durr) since it's infrastructure and can not be allowed to fail. That government can be inefficient is an efficiency problem. That private actors basically "steal" taxpayer money is a lobby/regulatory problem. Government does have some blame for the former, but you can't simultaneously regulate wall street (for example) and still blame the government for being in bed with them.
emilioolivares 10y ago
The real story here is capital in the form of private equity. Engineering is a commodity, it can be bought, there are tons of great engineers in the world. Getting access to capital to take these big bets requires some serious clout, influence, and connections that the average joe doesn't have. Check out the background of ANY private equity firm, it's full of very wealthy people from Ivy League schools (Skull & Bones anyone?). These guys create a firm, pitch their friends to get a seed fund off the ground and then start fundraising from larger institutions. They then hire some real talent and they are off to the races. Not everyone makes it, but the ones who do are featured as geniuses on Bloomberg and the Wall Street Journal. Survivorship bias for sure. Most Hedge Funds and Private Equity firms don't do well, similar to any start-up.
- hkmurakami 10y ago
  What are the returns of the competitors' infrastructure funds compared to GIP? If everyone (including GIP) has modest (much less than the historic 24% of GIP) returns, then we might think the opportunity was simply about untapped inefficiency, and that any team with the massive capital + reasonable human talent would have had the same results as GIP in the past decade. If GIP continues to outperform vs the competition even as the space gets crowded, we could consider their human talent to be a differentiator. If all the infrastructure funds are doing great, even in a world of high competition, then again we can consider the access to capital and access to the counterparty stakeholders to make the deal happen to be the differentiator, not the operational or engineering talent of any firm. Personally I'm willing to believe that operational experience at massive scale is much rarer than simply "great engineering talent" at the individual contributor level, but am open to be proven wrong.
EternalData 10y ago
One of the things I think this story highlights is just how much gain there can be in looking at unsexy things that nobody cares about but everybody needs. I know quite a few startups that are really good at doing that -- no noise, but they're quietly humming away at essential problems that sneak under the surface.
- bluetwo 10y ago
  I think the best startups look to solve a non-it problem, and I think there are still a lot of them out there.
mifeng 10y ago
In 2009 and 2010, I worked for a similar private equity fund that also raised a billion dollars to invest into infrastructure and real assets. A few random things I learned: * While a billion dollars may seem like a lot of money, it's actually fairly small in the infrastructure world where you are building massive projects like airports and power plants. * For that reason, our fund focused on higher-risk, smaller projects in the developing world, which made it a tough sell to the cautious pension and endowment type investors who invest in infra. * The secret to doing well is deal access. We were always envious of GIP because they had an incredible network.
- hkmurakami 10y ago
  Guess it's always about dealflow, be it PE or VC.
rajacombinator 10y ago
Crony capitalism at its finest.
locusm 10y ago
Looks like Theme Park from Bullfrog!

171 points by sajid 10y ago

deleted 10y ago

[deleted]

Great story, but how do you get into this kind of "deal"? I believe that most engineer would be able to come up with a reasonable way to manage an airport, maybe with more dumps that our heroes, but still I believe that most of us will be able to dig themselves out of the problem. But then, how do you get into it? You need tons of money and wealthy/powerful people that trust you, how do you get that trust?

jtmarmon 10y ago
...become "the former head of General Electric’s infrastructure business and Jack Welch protégé" probably
gizmo 10y ago
If you're not born into it your best bet is to go to an ivy league, preferably Harvard or Yale, study business or law, and make the right friends. Being born into it is easier, though.
- elastic_church 10y ago
  > Being born into it is easier, though. because then you get to keep your youth while you have the respect as well.
retube 10y ago
These are engineers who have reached very senior levels in large industrials, have prob 20-30 years experience, are responsible for large operations or assets, and are known for significant achievements in their domains.
- gukov 10y ago
  Success breeds success Wanting the skip all of that and just get a cool billion dollars because you have a big idea is naive, to say the least.
whorleater 10y ago
> You need tons of money and wealthy/powerful people that trust you, how do you get that trust? How does anyone do anything big? Get lucky with parents/work hard and network with the right people/start ambitious projects/some or all of the above.
hibikir 10y ago
When we fix software, we know that full rewrites are bad ideas, and that the way to success is to make easy changes until finally you end up with a better product. This is true because failing, for any amount of time, is a terrible outcome. However, when it comes to moving upward for bigger opportunities, the opposite is true: Little is gained by very slow grinding. Wondering how to get all wealthy people to trust you is the wrong question: What you want is ONE wealthy person to trust you. 300 failed pitches don't matter. You just want to succeed once. Therefore, my strategy is to aim as high as you can, be ok with a bunch of failures, and once you have success, consider whether you can use it to aim even higher, now that you have established a higher baseline. It's better to have one resounding success an 50 failures at convincing people that never failing, but aiming way too low.
- siscia 10y ago
  That is a great point! I do agree that shooting for the stars is the way to go, but I still find it difficult.

huac 10y ago

> Most of his recruits speak a language familiar to engineers but foreign to anybody else: Six Sigma, Kaizen, Lean. Woodburn is prone to fall into such jargon. “Anyone who’s been to an airport can say that it’s operating at maybe Two Sigma,” he marvels. “That’s making a mistake 30 percent of the time.” Two sigma corresponds with a 95% confidence interval, while one sigma is a 68% confidence interval which he is presumably referring to. I don't want to detract too much from the work that these people did, which I think is actually very cool, but it worries me that their head of engineering can't discuss really simple statistics correctly... Edit: words mean nothing, see replies

deleted 10y ago
[deleted]
fiter 10y ago
For whatever reason, the "Six Sigma" techniques/ideas aren't using "Two Sigma" to refer to ±2σ, instead they're referring to the width of the band around the mean. https://en.wikipedia.org/wiki/Six_Sigma#Sigma_levels https://en.wikipedia.org/wiki/Six_Sigma#Sigma_levels
- OJFord 10y ago
  > For whatever reason, ... they're referring to the width of the band around the mean. That's exactly how I learnt it in secondary school, the standard deviation, what's the problem?
- huac 10y ago
  Yeah, and it's apparently also shifted down by 1.5 sigma.
  - leereeves 10y ago
    That's apparently based on Motorola's data regarding process drift. > Motorola has determined, through years of process and data collection, that processes vary and drift over time – what they call the Long-Term Dynamic Mean Variation. This variation typically falls between 1.4 and 1.6. https://www.isixsigma.com/new-to-six-sigma/dmaic/15-sigma-process-shift/ https://www.isixsigma.com/new-to-six-sigma/dmaic/15-sigma-pr...

danielvf 10y ago

Quote: Anyone who’s been to an airport can say that it’s operating at maybe Two Sigma,” he marvels. “That’s making a mistake 30 percent of the time.” Is that really what two sigma performance means? That sounds more like one sigma worth of failures.

vkou 10y ago
Having been to a few airports, I can say with a fair degree of certainty that they are not making a mistake 30% of the time. Airplanes don't run out of fuel mid-flight, or crash 30% of the time, my luggage doesn't fail to arrive to its destination 30% of the time, and I've yet to show up to a flight, only to discover that my seat in just a hole in the floor. Now, the flight attendants misunderstand my choice of mid-flight snack ~30% of the time, but that doesn't really matter, because it's always ~12 grams of peanut-related animal feed, anyways.
- giarc 10y ago
  A plane not pulling away from the gate on time is likely considered a mistake. Bags not arriving to the carousel in 15 minutes is likely considered a mistake. It's not always binary like "Did the bag get lost or not?"
kinkrtyavimoodh 10y ago
The sigma level in industry traditionally refers to the 'bandwidth', not the distance from the mean, so what you are thinking as 1 sigma is actually 2 sigma. https://en.wikipedia.org/wiki/Six_Sigma https://en.wikipedia.org/wiki/Six_Sigma
- danielvf 10y ago
  Thanks!

dharma1 10y ago

Surprisingly enjoyable article. Would love to have a crack at designing ways to have a better airport experience - can't say Gatwick feels like a great product yet

cableshaft 10y ago

> What Happens When Two Bankers and an Engineer Get a Billion Dollars? To quote Willy Wonka, "They lived happily ever after."

DonHopkins 10y ago
Pfff. I'm working on my second billion! I gave up on my first...

spitfire 10y ago

Now I want to know what that 1930's airfield optimization book is.... I bet graycat knows, care to chime in? Anyone else have a guess?

L_Rahman 10y ago

If you're interested in infrastructure or business backend improvements like the ones described in the article but: - are at a smaller and more local scale that don't attract attention from the likes of GIP - the process improvements are around information flow between applications instead of physical flow I am really interested in talking to you whatever the domain may be. An example I've learned of recently: Garbage truck routing in NYC is grossly inefficient. The routing used to be centralized under a single contractor with rumored tentacles into organized crime. Due to changes in contracting regulations, NYC garbage collection is now includes a mix of independent contractors. This results in multiple trucks visiting the same street on the same night. This is inefficient in the following ways: - cost of garbage transportation - noise pollution - localized pollution from truck emissions - CO2 emissions from inefficient route planning I'm fairly certain efficient routing for this is a solved computational / information systems problem and the source of the issue is a lack of coordination. I'm trying to dig in with the Department of Sanitation to see who the different players are.

nunez 10y ago
Sure. I'm currently interested in discovering inefficiencies in airline revenue management. My hypothesis is that a non-trivial amount of the spend that airlines make is inefficient and based on factors that aren't as relevant today as they were 30 years ago during the proliferation of global distribution and revenue management systems. i want to see an airline that is run by software engineers with aviation experience that rolls its own GDS and revenue management system; one that can scale well beyond its years and can operate on clusters of cheap compute. my hypothesis is that current airline operations are band-aids on top of protocols and runbooks that were developed around the initiation of the jet age, and fear and fearfully low margins has held back massive amounts of innovation that keep prices higher than they should be. (and yes, i understand that aircraft are expensive to buy and maintain)
- emmanuel_1234 10y ago
  Ha, I used to work for a large, Asian airline. They had that cool system used to calculate the pricing of ticket in real-time. No one really knew how it worked, it was built 20 years ago, and no one was allowed near it for fear of breaking it. Therefore, instead of tuning the algorithm, the analyst added their own (mostly arbitrary) rules on top of the system's calculation. It reminded me of that conversation in Asimov's Foundation, where some guy goes to some planet and is afraid to see everyone using technology, having lost all the knowledge of how it actually works and how to maintain it, therefore seeing it as some kind of magic. This was in 2015.

adanto6840 10y ago

For those of you thinking, "I'd like to take a crack at running an airport" or think you'd be able to do better, there's a game that just got through Steam Greenlight and that will be releasing soon which will allow you to do exactly that. Obviously it's "dumbed down", but it still tries to stay realistic & uses a 'systems-based' logical approach for gameplay; the total operation is basically just the sum of all the different inter-dependent systems and how they relate to eachother, how failures cascade, etc... http://www.simairport.com/ http://www.simairport.com/ Disclaimer: I'm involved in the project.

jdpedrie 10y ago
Looks pretty cool! The art and UI seem quite similar in style to Prison Architect. Is Sim Airport related in any way to PI, or is it just an inspiration?
- adanto6840 10y ago
  We're not affiliated with the makers of PA, but it's definitely been a huge inspiration for us -- IMO it's largely responsible for modernizing & reviving the 'tycoon genre' in many ways.
avar 10y ago
Is it possible to go outside the bounds of what a typical international airport looks like today? E.g. no security screenings so people can pretty much just walk on the plane like it's a train station? That would mean you don't need space for restaurants, or lots of space for people to pool as they're waiting past security. It would be very interesting to experiment with changes like that and see how it would look. Edit: There's now an entire discussion downthread about how airports did and didn't look like before 9/11. That misses the point of what I'm asking, which I'll rephrase. I'm asking as a simulation game, how customizable is this? E.g. in in SimCity 2000 it initially looks like you can do anything, but really you can't design something that doesn't look & function either like an American suburb or car-centric Los Angeles. There's no way to construct something that looks & functions remotely like the city of Venice in SimCity. Similarly in this game, can you really design your own airport that works anyway you want from scratch? Or are you just placing all the pieces in your typical international airport in different places on the board, while the NPCs walk in some pre-determined route from parking, to checkin, to security etc. There's nothing that appears in the very brief trailer that suggests that it isn't highly constrained in the same way SimCity is. But I'd love to know if that's really the case.

digler999 10y ago

> Outgoing baggage jumped out as a major trouble spot; Stanley went to investigate, Does it really take an "engineer" to find a trouble-spot and fix it ? Why do you need a billion-dollar fund to grab engineering talent to do what the highly-paid leaders of, say, airports, are already supposed to be doing ? If they can't figure it out, isn't there a whole industry of consultancy firms that send "analysts" through your organization to do the same thing? If this sector is so profitable, will it cause the same crisis that privatization of hospitals did to healthcare ? Say "Global Infrastructure Partners" expands and "buys" JFK, ATL, LAX, just like private healthcare bought all the hospitals. Now they can start jacking up their landing fees (each year) until air travel becomes unaffordable. What's to stop them from turning this into the ultimate regulatory capture ?

FabHK 10y ago
Yes, that. Actually, I find it obscene that governments that can borrow at basically 2% per annum or less are not engaging in these projects, and instead leave 24% returns on the table for the private sector. Call me a Keynesian all you want, but yes - the austerity stance in the last decade (after the GFC) (particularly in Europe, due to Germany, but also in the US) was a huge mistake.
- fsloth 10y ago
  If macroeconomics was football, then austerity is like focusing the game on keeping the ball on the opponents side of the pitch but ignoring making goals altogether.
- merpnderp 10y ago
  Because governments aren't set up to do things efficiently and can never capture the 24% return. Going back to the 19th US where government ran and backed enterprises were outperformed over and over sector by sector by private enterprise. Not losing your job for bad investments is a bad incentive.
notahacker 10y ago
> If this sector is so profitable, will it cause the same crisis that privatization of hospitals did to healthcare ? Say "Global Infrastructure Partners" expands and "buys" JFK, ATL, LAX, just like private healthcare bought all the hospitals. Now they can start jacking up their landing fees (each year) until air travel becomes unaffordable. What's to stop them from turning this into the ultimate regulatory capture ? Ironically, GIP owes its airport holdings to the UK government coming to that conclusion about the market power of the airport operator formerly known as the BAA, and forcing it to sell some of its airports. Its growth potential has depended on the success of lobbying efforts to allow it to expand LCY (was going through at the time they sold it) and ideally a second runway at Gatwick (still hoping for). The politics might have more effect on its bottom line than buying in better logistics systems but it's probably less sexy an anecdote for an article. I'd definitely think they were better off hiring one really smart process guy as COO than contracting top tier consulting firms to throw dozens of graduates at the airport's operations issues though.

lacampbell 10y ago

My biggest takeaway from this is - people skilled in industrial processes aren't already in very high positions in Airports!?

snarf21 10y ago
I think the bigger takeaway is that at a lot of big companies, the processes and management is horrible but it still makes a ton of money. These guys buy things that aren't optimized and squeeze all that money out. I think the most interesting thing would be to look back at one of these investments 5 or 10 years after they exit and watch the improvements slip away and the companies end up in trouble. I think this is why people are dislike big government (me included, but necessary for some critical things) because there is no incentive to optimize. Quite actually, that is punished. Don't spend all your money one year and your budget gets slashed even though you may need that in a few years to upgrade equipment. The more layers of organization you add, the more managers you have who see their job as self-preservation. It looks like these guys run very very flat.
- croon 10y ago
  Well, less government leads to privatization of crucial infrastructure (airports, hospitals, banks, etc). Which still siphon government money, only now that money doesn't go to public good or government employees, but to private coffers, with no need to compete (regardless of "free market" hurr durr) since it's infrastructure and can not be allowed to fail. That government can be inefficient is an efficiency problem. That private actors basically "steal" taxpayer money is a lobby/regulatory problem. Government does have some blame for the former, but you can't simultaneously regulate wall street (for example) and still blame the government for being in bed with them.

emilioolivares 10y ago

The real story here is capital in the form of private equity. Engineering is a commodity, it can be bought, there are tons of great engineers in the world. Getting access to capital to take these big bets requires some serious clout, influence, and connections that the average joe doesn't have. Check out the background of ANY private equity firm, it's full of very wealthy people from Ivy League schools (Skull & Bones anyone?). These guys create a firm, pitch their friends to get a seed fund off the ground and then start fundraising from larger institutions. They then hire some real talent and they are off to the races. Not everyone makes it, but the ones who do are featured as geniuses on Bloomberg and the Wall Street Journal. Survivorship bias for sure. Most Hedge Funds and Private Equity firms don't do well, similar to any start-up.

hkmurakami 10y ago
What are the returns of the competitors' infrastructure funds compared to GIP? If everyone (including GIP) has modest (much less than the historic 24% of GIP) returns, then we might think the opportunity was simply about untapped inefficiency, and that any team with the massive capital + reasonable human talent would have had the same results as GIP in the past decade. If GIP continues to outperform vs the competition even as the space gets crowded, we could consider their human talent to be a differentiator. If all the infrastructure funds are doing great, even in a world of high competition, then again we can consider the access to capital and access to the counterparty stakeholders to make the deal happen to be the differentiator, not the operational or engineering talent of any firm. Personally I'm willing to believe that operational experience at massive scale is much rarer than simply "great engineering talent" at the individual contributor level, but am open to be proven wrong.

EternalData 10y ago

One of the things I think this story highlights is just how much gain there can be in looking at unsexy things that nobody cares about but everybody needs. I know quite a few startups that are really good at doing that -- no noise, but they're quietly humming away at essential problems that sneak under the surface.

bluetwo 10y ago
I think the best startups look to solve a non-it problem, and I think there are still a lot of them out there.

mifeng 10y ago

In 2009 and 2010, I worked for a similar private equity fund that also raised a billion dollars to invest into infrastructure and real assets. A few random things I learned: * While a billion dollars may seem like a lot of money, it's actually fairly small in the infrastructure world where you are building massive projects like airports and power plants. * For that reason, our fund focused on higher-risk, smaller projects in the developing world, which made it a tough sell to the cautious pension and endowment type investors who invest in infra. * The secret to doing well is deal access. We were always envious of GIP because they had an incredible network.

hkmurakami 10y ago
Guess it's always about dealflow, be it PE or VC.

rajacombinator 10y ago

Crony capitalism at its finest.

locusm 10y ago

Looks like Theme Park from Bullfrog!