> Few places need the theoretical density that buses provide and even less need the level that rail provides.

Almost every major urban city and metropolitan area needs buses and rail service to function effectively, the population density requires it, and it is the proven, mature, and scalable solution to providing high capacity transport. Massive roads used by primarily single occupant vehicles, is the non-scalable, inefficient solution.

> Most of the time they're running at 10-20% capacity. Or at least that's what happens in my city.

Just because you see <i>a bus</i>, at <i>some</i> time of the day being underutilized, is not indicative of much. That same bus on the same day/shift could be at or near capacity, earlier or later in day carrying commuters, or students that got out of class, etc. making it worthwhile.

Capacity planning for a transportation network/system means it has to be sized for its maximum or peak demand (typically during commute hours), so it also makes sense to use its excess capacity during off-peak hours given it is largely paid for to meet peak demand (buses and trains sitting around midday depreciating, and operators being paid a full shift to do nothing, is a poor use of high value assets and resources). This is similar to other systems like energy, telecom, etc.

> I'm not talking about taxis. Something shuttle bus or van sized. We don't need to put 200 cars worth of people in trains to solve traffic issues. Putting 200 cars of people into 30 shuttle buses is good enough.

Same point above about sizing for peak. Additionally this does not match modern fleet management best practices, which would strive to minimize the number of vehicle types in the fleet. Typically this is a standard ~40 foot single level bus. Possibly with additional types (longer articulated or double decker) for lines with higher demand/passenger loads, if needed. A common fleet type minimizes driver and mechanic training, makes buses and personnel more interchangeable and operable across the entire route network, creating efficiencies and economies of scale. These are the same reasons why Southwest Airlines and Ryanair exclusively fly B737s.

Upwards of 80% of the cost structure of providing bus or train service (the marginal cost of running an additional bus/train) is dominated by labor costs in the USA and other developed countries, where labor is expensive and capital, broadly defined, is cheap; so capital replaces labor where possible (developing countries tend to be the opposite). Or to put it another way, 20-40% of the cost structure is the cost of the vehicle. Using smaller, cheaper, low capacity vehicles does not significantly reduce the underlying cost structure, and in fact will increase inefficiencies and costs elsewhere in the system.

An excessive number of small vehicles instead of a reasonable number of large vehicles, where each vehicle requires a driver, will maximize inefficiencies and create diseconomies of scale, resulting in higher overall system costs, lower transport capacity, and higher congestion and pollution in space constrained urban areas. Efficient use of space in constrained urban areas is key attribute of transportation systems [0][1][2].

[0]: https://drive.google.com/file/d/1gl3bVsV3Kcl_RfIFsJ8iZ7dEEEg...
[1]: https://en.wikipedia.org/wiki/Passenger_load_factor#/media/F...
[2]: https://en.wikipedia.org/wiki/Passenger_load_factor#/media/F...