Talent and not money is the truly scarce variable

Tuesday, October 4th, 2022

Rob Henderson finds Tyler Cowen’s latest book, written with Daniel Gross, thorough yet breezy, providing useful tips for how to develop a talent-spotting mindset with insights from psychometrics, management, economics, and sociology:

Cowen and Gross note that in the U.S., from 1980 to 2000, the main cause of income inequality was whether a person graduated from college. But from 2000 to 2017, income inequality primarily existed within educational groupings. In other words, talent appears to be more responsible than education for economic returns.

Cowen and Gross each describe how often they reject proposals, and they conclude that “talent and not money is the truly scarce variable.” But where does it come from? They acknowledge that talent can differ between individuals, but they also stress the importance of practice. Indeed, those with the potential to cultivate serious talent sometimes practice to the point of obsession. Discussing which attributes predict eminence in a field, psychology professor David Lubinski has said that passion for work is key, and that highly creative people tend to be “almost myopically” fixated on work.

Relatedly, Cowen and Gross observe, “If you are hiring a writer, look for signs that the person is writing literally every day. If you are hiring an executive, try to discern what they are doing all the time to improve networking, decision-making, and knowledge of the sectors they work in.” Developing the habit of practice and self-discipline — the authors describe it as “sturdiness” — is critical for talent acquisition. “Sturdiness is the quality of getting work done every day, with extreme regularity and without long streaks of non-achievement,” they write. “If you are a writer, sturdiness is a very powerful virtue, even if you do not always feel you are being extremely productive.”

Accordingly, the book cites research indicating that perseverance is a stronger predictor than passion for success. When it comes to achievement, persistence pays off more than pure passion.

The authors’ favorite interview question about browser tabs is meant to tap into this question about whether a person spends his or her free time practicing. What the book describes as “downtime revealed preferences” are more interesting than “stories about your prior jobs.” For instance, asking what newsletters or subreddits a person reads is often more illuminating than asking what a person did at their previous job.

The book is very much about identifying high performers, as opposed to average workers. This is particularly true of its interview section, which gives guidance on unstructured, as opposed to structured, interviews. Most research indicates that interviews are more effective for higher-level jobs.

Talent provides several fascinating questions designed to yield interesting answers. How did you prepare for this interview? What’s a story one of your references might tell me when I call them? Which of your beliefs are you most likely wrong about? Whether the candidate can draw on intellectual and emotional resources to answer is a sign of broader stores of intellect and energy that he or she will bring to the job. The authors suggest that interviewers should not be afraid to let a question hang in the air after asking it; better to hold the tension to make clear you expect an answer.

The authors suggest using challenging and unusual questions to identify those with more style than substance. As they put it, “Beware of verbally adept storytellers.” Most of us have a bias toward well-spoken and articulate individuals. Bear this in mind, for it can lead you to hire what the authors describe as “glib but unsubstantial people.” They conclude this line of advice with, “Do not overestimate the importance of a person’s articulateness.”

The military can’t afford iPhone-level software

Tuesday, August 30th, 2022

As consumers, we are spoiled by how easy our phones are to use, Austin Vernon notes, and critics expect the military to have software as capable as our phones:

If you examine the numbers, it quickly becomes apparent that the military can’t afford iPhone-level software. Apple, Google, Microsoft, and Facebook had combined operating expenses of over $600 billion in 2021. The military’s total budget is around $750 billion.

The mass of all the physical products these companies sell is probably less than one Ford-class aircraft carrier, and the number of SKUs is relatively limited. And remember, a defining feature of the software business is that marginal cost is near zero. It costs about the same to design high-quality software for 100 F-35s as for 200 million copies of the plane.

Grids have excess capacity 95% of the time

Monday, August 29th, 2022

There are many ways Texas’s grid could have avoided disaster during winter storm Uri:

Being synchronized to one of the other wide-area grids in the US is one way. Another is not to have ~50% of its households rely on electric heat.

Cold weather causes demand to spike while also hampering supply. ERCOT is not the only grid to have suffered significant supply outages during cold weather. But other grids like PJM in 2014 were bailed out by imports and lower shares of customers using electric heating.

Customers using electric heat don’t pay the costs of their impact on the grid when they only pay a fixed price per kilowatt-hour. Electric resistance heaters and air source heat pumps see power usage spike dramatically during the coldest events. The overall kilowatt-hour usage only sees a slight increase on the monthly bill, but the peak power might be two or three times higher than the norm.

Bromberger pegged additive manufacturing at 2-3% of the $12 trillion production market

Sunday, August 7th, 2022

Additive manufacturing — 3-D printing — is on the cusp of being adopted more widely by industry — still:

In May, Goodyear opened a $77 million plant in Luxembourg that centers on 3-D printing and can make tires four times faster in small batches than with conventional production. Goodyear also is testing its new 3-D printed airless tire technology on Tesla electric vehicles and Starship Technologies’ autonomous delivery robots. It has been working for the past several years on improved manufacturing techniques at an R&D center near Columbus, Ohio.

By 2030, Goodyear aims to bring maintenance-free and airless tires to market, and 3-D printing is part of that effort for the Akron-based tire-making leader founded in 1898 and named after innovator Charles Goodyear. Currently, about 2% of its production is through additive manufacturing and more integration into the mix is in sight.

“Like with any innovation, targeting the right use case is key. 3-D printing is not for every job. We’re using additive manufacturing for higher-end, ultra-high performance tires that require much more complexity, and in smaller lot sizes,” said Chris Helsel, senior vice president, global operations and CTO at Goodyear. “There is still a benefit of making large runs of tires efficiently through a normal assembly line.”

Leveraging the new technology takes patience. “You can’t bring it in, turn it on. It is not a short journey. We have been on this route for 10-12 years,” Helsel said. In an initial commercialization of its 3-D printed airless tires in 2017, Goodyear started equipping premium lawnmower models made by Bad Boy Mowers.

[...]

Primarily useful for making specialized high-value parts and smaller production volumes, Bromberger pegged additive manufacturing at 2-3% of the $12 trillion production market.

3-D printing industry consultant Wohlers Associates expects additive manufacturing to grow at a relatively strong pace and predicts the market worldwide will reach $85.3 billion in 2031 from $15.2 billion in 2021. The leading industrial sector using the technology is aerospace, followed by medical/dental and automotive, while the most common applications for 3-D printing are for making end-use parts and functional prototypes, according to the firm’s Wohlers Report 2022.

The main advantages of the technology include design flexibility in various 3-D shapes that can perform better or cost less, and customized production of parts. Other advantages are cutting out time-consuming, pre-production processes and making products on-demand from digital files.

A chief barrier to adoption is investment costs. Prices for industrial 3-D printing machines can vary from $25,000 to $500,000 and up to $1 million for huge systems. Further limitations are a lack of engineering talent to implement the technology, a knowledge gap among businesses about why and how to use it, cultural resistance on the shop floor to change, and too few end-to-end 3-D printing systems.

[...]

But stock market reception of 3-D printing as a pure-play investment theme has not been good in recent years. Desktop Metal has lost almost 80% of its value since going public in 2021, and the performance of other 3-D printing sector plays has been poor even as the technology advances.

[...]

For Boeing’s Millennium Space Systems subsidiary, acquired in 2018 as a maker of small satellites for the national security space, 100% 3-D printed satellites have been made this year with 30% less cost and a five-month reduction in production lead time. A regular user of the technology for several years, Boeing also has 3-D printed parts for helicopters and seats for the Starliner spacecraft, as well as components for the Boeing 787, and tooling for 787 aircraft wings.

Diamonds are forever

Friday, August 5th, 2022

Back in 1982, Edward Jay Epstein asked, Have you ever tried to sell a diamond?

Until the late nineteenth century, diamonds were found only in a few riverbeds in India and in the jungles of Brazil, and the entire world production of gem diamonds amounted to a few pounds a year. In 1870, however, huge diamond mines were discovered near the Orange River, in South Africa, where diamonds were soon being scooped out by the ton. Suddenly, the market was deluged with diamonds. The British financiers who had organized the South African mines quickly realized that their investment was endangered; diamonds had little intrinsic value — and their price depended almost entirely on their scarcity. The financiers feared that when new mines were developed in South Africa, diamonds would become at best only semiprecious gems.

The major investors in the diamond mines realized that they had no alternative but to merge their interests into a single entity that would be powerful enough to control production and perpetuate the illusion of scarcity of diamonds. The instrument they created, in 1888, was called De Beers Consolidated Mines, Ltd., incorporated in South Africa. As De Beers took control of all aspects of the world diamond trade, it assumed many forms. In London, it operated under the innocuous name of the Diamond Trading Company. In Israel, it was known as “The Syndicate.” In Europe, it was called the “C.S.O.” — initials referring to the Central Selling Organization, which was an arm of the Diamond Trading Company. And in black Africa, it disguised its South African origins under subsidiaries with names like Diamond Development Corporation and Mining Services, Inc. At its height — for most of this century — it not only either directly owned or controlled all the diamond mines in southern Africa but also owned diamond trading companies in England, Portugal, Israel, Belgium, Holland, and Switzerland.

De Beers proved to be the most successful cartel arrangement in the annals of modern commerce. While other commodities, such as gold, silver, copper, rubber, and grains, fluctuated wildly in response to economic conditions, diamonds have continued, with few exceptions, to advance upward in price every year since the Depression. Indeed, the cartel seemed so superbly in control of prices — and unassailable — that, in the late 1970s, even speculators began buying diamonds as a guard against the vagaries of inflation and recession.

[…]

To stabilize the market, De Beers had to endow these stones with a sentiment that would inhibit the public from ever reselling them. The illusion had to be created that diamonds were forever — “forever” in the sense that they should never be resold.

[…]

Movie idols, the paragons of romance for the mass audience, would be given diamonds to use as their symbols of indestructible love. In addition, the agency suggested offering stories and society photographs to selected magazines and newspapers which would reinforce the link between diamonds and romance. Stories would stress the size of diamonds that celebrities presented to their loved ones, and photographs would conspicuously show the glittering stone on the hand of a well-known woman. Fashion designers would talk on radio programs about the “trend towards diamonds” that Ayer planned to start. The Ayer plan also envisioned using the British royal family to help foster the romantic allure of diamonds. An Ayer memo said, “Since Great Britain has such an important interest in the diamond industry, the royal couple could be of tremendous assistance to this British industry by wearing diamonds rather than other jewels.” Queen Elizabeth later went on a well-publicized trip to several South African diamond mines, and she accepted a diamond from Oppenheimer.

Immigrant-founded companies are valued at $1.2 trillion

Monday, August 1st, 2022

Immigrants are 80 percent more likely than native-born Americans to found a firm, according to a study by researchers at the Massachusetts Institute of Technology, but this might not be so impressive if the businesses are laundromats, nail salons, and gas stations:

According to the NFAP, a nonprofit that researches trade and immigration, immigrants have started 319 of 582, or 55 percent, of America’s privately-held startups valued at $1 billion or more. Over two-thirds of the 582 companies “were founded or cofounded by immigrants or the children of immigrants,” notes the NFAP. For comparison, approximately 14 percent of America’s population is foreign-born.

Together, the immigrant-founded companies are valued at $1.2 trillion and employ 859 people on average. Elon Musk’s SpaceX has the largest valuation at $125 billion, employing 12,000 workers; Gopuff, a food delivery service valued at $15 billion, has 15,000 employees; Stripe, a payment platform valued at $95 billion, employs 7,000; and Instacart, a grocery delivery service valued at $39 billion, has 3,000 workers.

These findings are notable, the NFAP points out, since “there is generally no reliable way under U.S. immigration law for foreign nationals to start a business and remain in the country after founding a company.” A large share of the immigrant startup founders came to the country as refugees, on family-sponsored green cards, or through employment-based pathways for other companies.

“Our employment-based pathways for immigrant entrepreneurship are so poorly designed, migrant businesses are often associated with non–employment based pathways,” points out Sam Peak, an immigration policy analyst at Americans for Prosperity. Peak notes that refugees “have the highest rates of entrepreneurship of any other immigrant group,” and family-based migration, “especially among siblings, is also strongly tied to new business formation.”

The effects houses bend over backward to keep Marvel happy

Wednesday, July 27th, 2022

An anonymous VFX artist notes that working on Marvel shows is really hard:

When I worked on one movie, it was almost six months of overtime every day. I was working seven days a week, averaging 64 hours a week on a good week. Marvel genuinely works you really hard. I’ve had co-workers sit next to me, break down, and start crying. I’ve had people having anxiety attacks on the phone.

The studio has a lot of power over the effects houses, just because it has so many blockbuster movies coming out one after the other. If you upset Marvel in any way, there’s a very high chance you’re not going to get those projects in the future. So the effects houses are trying to bend over backward to keep Marvel happy.

To get work, the houses bid on a project; they are all trying to come in right under one another’s bids. With Marvel, the bids will typically come in quite a bit under, and Marvel is happy with that relationship, because it saves it money. But what ends up happening is that all Marvel projects tend to be understaffed. Where I would usually have a team of ten VFX artists on a non-Marvel movie, on one Marvel movie, I got two including myself. So every person is doing more work than they need to.

The other thing with Marvel is it’s famous for asking for lots of changes throughout the process. So you’re already overworked, but then Marvel’s asking for regular changes way in excess of what any other client does. And some of those changes are really major. Maybe a month or two before a movie comes out, Marvel will have us change the entire third act. It has really tight turnaround times. So yeah, it’s just not a great situation all around. One visual-effects house could not finish the number of shots and reshoots Marvel was asking for in time, so Marvel had to give my studio the work. Ever since, that house has effectively been blacklisted from getting Marvel work.

Part of the problem comes from the MCU itself — just the sheer number of movies it has. It sets dates, and it’s very inflexible on those dates; yet it’s quite willing to do reshoots and big changes very close to the dates without shifting them up or down.

[…]

The main problem is most of Marvel’s directors aren’t familiar with working with visual effects. A lot of them have just done little indies at the Sundance Film Festival and have never worked with VFX. They don’t know how to visualize something that’s not there yet, that’s not on set with them. So Marvel often starts asking for what we call “final renders.” As we’re working through a movie, we’ll send work-in-progress images that are not pretty but show where we’re at. Marvel often asks for them to be delivered at a much higher quality very early on, and that takes a lot of time. Marvel does that because its directors don’t know how to look at the rough images early on and make judgment calls. But that is the way the industry has to work. You can’t show something super pretty when the basics are still being fleshed out.

Shawn Ryan interviews Erik Prince about the rise and fall of Blackwater

Thursday, July 7th, 2022

Shawn Ryan interviews Erik Prince — who’s close to a real-life Bruce Wayne — about the rise and fall of Blackwater:

Status anxiety keeps earnings flatter across employees than they would otherwise be

Sunday, July 3rd, 2022

Robert Henderson has been reading Choosing the Right Pond: Human Behavior and the Quest for Status, by the Cornell economist Robert Frank, which addresses the question, Why are the least productive workers in an organization typically paid more than what they produce, while the most productive workers are paid less?

In most organizations, productivity varies more across employees doing similar jobs than wages.

In other words, if you take a selection of workers in an office who are all earning $80k/year, what is the likelihood they are all producing the same amount of value for the firm?

Basically zero.

Moreover, the highest-ranked employees are typically paid less than what they contribute. And the bottom-ranked workers are paid more.

[…]

Robert Frank suggests the reason for this is that workers would generally prefer to occupy higher-ranked positions in their work groups than lower-ranked ones. They’re forgoing more earnings to hold a higher-status position in their organization.

[…]

The low-ranked workers are giving up status for money. The high-ranked workers are giving up money for status.

[…]

Status anxiety keeps earnings flatter across employees than they would otherwise be.

An engineer then predicted that it would take 45 years

Tuesday, June 14th, 2022

Fifteen years ago, Con Edison finally ended its 125 years of direct current electricity service that began when Thomas Edison opened his Pearl Street power station on Sept. 4, 1882, the New York Times reported

Con Ed will now only provide alternating current, in a final, vestigial triumph by Nikola Tesla and George Westinghouse, Mr. Edison’s rivals who were the main proponents of alternating current in the AC/DC debates of the turn of the 20th century.

The last snip of Con Ed’s direct current system will take place at 10 East 40th Street, near the Mid-Manhattan Library. That building, like the thousands of other direct current users that have been transitioned over the last several years, now has a converter installed on the premises that can take alternating electricity from the Con Ed power grid and adapt it on premises. Until now, Con Edison had been converting alternating to direct current for the customers who needed it — old buildings on the Upper East Side and Upper West Side that used direct current for their elevators for example. The subway, which has its own converters, also provides direct current through its third rail, in large part because direct current electricity was the dominant system in New York City when the subway first developed out of the early trolley cars.

Despite the clear advantage of alternating current — it can be transmitted long distances far more economically than direct current — direct current has taken decades to phase out of Manhattan because the early backbone of New York’s electricity grid was built by Mr. Edison’s company, which had a running head start in the first decade before Mr. Tesla and Mr. Westinghouse demonstrated the potential of alternating current with the Niagara Falls power project. (Among the customers of Thomas Edison’s Pearl Street power plant on that first day was The New York Times, which observed that to turn on its lights in the building, “no matches were needed.”)

But direct current clearly became uneconomical, as the short distances that it could be transmitted would have required a power station every mile or less, according to Joe Cunningham, an engineering historian. Thus alternating current in New York began in the outskirts — Queens, Bronx, Upper Manhattan and the suburbs.

The direct current conversion in Lower Manhattan started in 1928, and an engineer then predicted that it would take 45 years, according to Mr. Cunningham. “An optimistic prediction since we still have it now,” he said.

Core management practices can’t be taken for granted

Monday, May 16th, 2022

In MBA programs, students are taught that companies can’t expect to compete on the basis of internal managerial competencies because they’re just too easy to copy:

If you look at the data, it becomes clear that core management practices can’t be taken for granted. There are vast differences in how well companies execute basic tasks like setting targets and grooming talent, and those differences matter: Firms with strong managerial processes perform significantly better on high-level metrics such as productivity, profitability, growth, and longevity. In addition, the differences in the quality of those processes—and in performance—persist over time, suggesting that competent management is not easy to replicate.

[…]

To date the team has interviewed managers from more than 12,000 companies about their practices. On the basis of the information gathered, we rate every organization on each management practice, using a 1 to 5 scale in which higher scores indicate greater adoption. Those ratings are then averaged to produce an overall management score for each company.

That data has led us to two main findings: First, achieving operational excellence is still a massive challenge for many organizations. Even well-informed and well-structured companies often struggle with it. This is true across countries and industries—and in spite of the fact that many of the managerial processes we studied are well known.

The dispersion of management scores across firms was wide. Big differences across countries were evident, but a major fraction of the variation (approximately 60%) was actually within countries. The discrepancies were substantial even within rich countries like the United States.

In our entire sample we found that 11% of firms had an average score of 2 or less, which corresponds to very weak monitoring, little effort to identify and fix problems within the organization, almost no targets for employees, and promotions and rewards based on tenure or family connections. At the other end of the spectrum we identified clear management superstars across all the countries surveyed: Six percent of the firms in our sample had an average score of 4 or greater. In other words they had rigorous performance monitoring, systems geared to optimize the flow of information across and within functions, continuous improvement programs that supported short- and long-term targets, and performance systems that rewarded and advanced great employees and helped underperformers turn around or move on.

[…]

As we’ve noted, our data shows that better-managed firms are more profitable, grow faster, and are less likely to die. Indeed, moving a firm from the worst 10% to the best 10% of management practices is associated with a $15 million increase in profits, 25% faster annual growth, and 75% higher productivity. Better-managed firms also spend 10 times as much on R&D and increase their patenting by a factor of 10 as well—which suggests that they’re not sacrificing innovation to efficiency. They also attract more talented employees and foster better worker well-being. These patterns were evident in all countries and industries.

[…]

Furthermore, we found zero correlation between perceived management quality and actual quality (as indicated by both their firms’ management scores and their firms’ performance), suggesting that self-assessments are a long way from reality.

It wasn’t the environment itself that was stressful or distracting

Saturday, April 23rd, 2022

In 2010, the psychologists Alex Haslam and Craig Knight set up an experiment in which participants were asked to perform simple administrative tasks in four different office layouts:

One was stripped down: bare desk, swivel chair, pencil, paper, nothing else. The second layout was softened with pot plants and almost abstract floral images. Workers enjoyed this layout more than the minimalist one and got more and better work done there.

The third and fourth layouts were superficially similar, yet produced dramatically different outcomes. In each, workers were invited to use the same plants and pictures to decorate the space before they started work, if they wished. But in one of them, the experimenter came in after the subject had finished decorating, and then rearranged it all. The physical difference was trivial, but the impact on productivity and job satisfaction was dramatic. When workers were empowered to shape their own space, they did more and better work and felt far more content. When workers were deliberately disempowered, their work suffered and, of course, they hated it. “I wanted to hit you,” one participant later admitted.

It wasn’t the environment itself that was stressful or distracting — it was the lack of control.

Yet there is a long, dismal tradition of disempowering workers. In the 1960s, the designer Robert Propst worked with the Herman Miller company to produce “The Action Office”, a stylish system of open-plan office furniture that allowed workers to sit, stand, move around and configure the space as they wished.

Propst then watched in horror as his ideas were corrupted into cheap modular dividers, and then to cubicle farms or, as Propst described them, “barren, rathole places”. Managers had squeezed the style and the space out of the action office, but above all they had squeezed the ability of workers to make choices about the place where they spent much of their waking lives.

There have been only three unicorns in 35 years in the defense space

Thursday, March 31st, 2022

In 2016, Facebook unceremoniously pushed Palmer Luckey out of the virtual reality startup he founded, Oculus. Then Luckey founded Anduril:

Luckey is now winning billion-dollar Pentagon contracts. One of them is for a counter-drone system based on its “battlefield operating system,” called Lattice. Anduril’s demo video shows one of the company’s sentry surveillance towers detecting a hostile drone and dispatching a small high-speed drone of its own to literally knock the intruder out of the sky. Recently, Anduril acquired a company that makes robot submarines.

[…]

Anduril has a valuation of nearly $5 billion, making Luckey a rare founder of two unicorns. He is unusual for a military contractor. Perpetually garbed in a Hawaiian shirt, and occasionally still in cosplay threads, his vibe is much more cheerful hacker. His conservative politics also make him an awkward figure in Silicon Valley. (One of his sisters is married to the right-wing provocateur and congress member Matt Gaetz.)

[…]

There have been only three unicorns in 35 years in the defense space: Palantir, SpaceX, and Anduril. All three of those companies were founded by people who had just sold their previous company for billions of dollars.

Overall the book is an anti-checklist for Westminster

Saturday, February 26th, 2022

If you want to examine in detail an organisational culture that is much healthier and higher performance than Whitehall, an organisation that actually lives the culture it advocates, then you will find Working Backwards, about the management of Amazon by two people who worked with Bezos in senior roles, interesting, Dominic Cummings suggests:

Discussion in Westminster suffers from false dichotomies. People on ‘the right’ who don’t know about great management talk as if ‘bureaucracy is a public sector problem’ that can be cured by ‘making government more like business’. People on the left including many defenders of the status quo say ‘government is not the same as business … it’s simplistic to say cutting bureaucracy is the answer … lessons from great teams aren’t relevant to most of government … we need more money…’

They’re both a bit right and a lot wrong. Whitehall can and should learn from great businesses and great managers, though generally not in the ways ‘free market’ Tory MPs say. And Whitehall is different in critical ways that limit the application of some lessons from business in some narrow ways. But at a more general level, the lessons from great private sector management and the lessons from great public sector case studies are the same. Great businesses can and do learn from projects like Apollo. Governments can and should learn from great businesses. The breakthroughs of ‘systems management’ came in the public sector between the 1940s and 1960s then spread to business then were largely forgotten by western governments (though are much studied in China).

One of many useful things about this book is the way it shows how many problems of ‘bureaucracy’ we see in government are the same or similar to those experienced in Amazon — and Amazon is, by common consent of the great judges of these things (e.g Charlie Munger), one of the very best managed organisations in the world.

Overall the book is an anti-checklist for Westminster in the sense that if you look at all the things they do really well and really value, and you’ve worked around No10/Cabinet office, you’ll say to yourelf ‘tick, tick, tick, government does the opposite, opposite, opposite’. It’s similar to my paper on the ICBM and Apollo projects which also illustrated a set of ideas about brilliant management that are an anti-checklist for Westminster.

[…]

A more fundamental problem than the failures of the civil service is that politicians do not care and are not incentivised to care about performance and unless this changes we can only expect the same sort of failures over and over.

When I said this years ago nobody wanted to hear it. But in 2021 we saw that even after a global pandemic costing 150k lives and hundreds of billions, Westminster collectively turned away from facing the reasons for the implosion of core institutions in 2020, No10 embarked on an attempt to rewrite history, most MPs tried to ‘move on’ rather than force honesty about what happened, while the media mainly overwhelmed serious debate with noise. Errors of spring 2020 were repeated more than once killing thousands more. Things that worked well but challenged traditional ways of doing things, such as the Vaccine Taskforce, were dismantled rather than learned from and built on. Rather than have a very fast lessons learned process, the PM and other senior figures have repeated the historical pattern — punt an extremely lengthy inquiry led by lawyers far into the future where it will have little practical effect on how critical decisions are made, just as the Iraq inquiry did not fix the problems of the MOD and Cabinet Office.

True autonomy is worth almost nothing

Saturday, January 15th, 2022

True autonomy is worth almost nothing when it comes to trucks, Stefan Seltz-Axmacher of Starsky Robotics explains:

At Starsky we modeled that our robotrucks could achieve 42% margins even if each had a dedicated remote person paying attention 100% of the time. Those margins would jump to 58% if that remote driver only needed to pay attention for the first and last miles.

True autonomy, on the other hand, would have added less than 2% to our bottom line. Which means that the technological achievement $70b has been invested in over the last decade is worth less to the trucking industry than automatic billing.

The US trucking industry is structured around the systemic shortage of long-haul truck drivers. The 3.5 weeks/mo an over-the-road (OTR) driver is expected to spend in a truck is so miserable that few will do it for even $60k/yr. On the other side, trucking is a highly fragmented commoditized industry, which puts no fleet in the position where they can raise prices sufficiently to afford to pay drivers more. The result is that the market typically has at least 50,000 too few drivers to meet demand.

This shortage defines everything in American trucking — it’s why our trucks have nice comfortable cabs (worse fuel efficiency but better driver retention), it’s why our railroads are so profitable (which is why Warren Buffet buys them), and why our supply chain has even been shaped to minimize how much time trucks need to drive in cities (drivers get paid by mile and hate driving in slow-speed cities).

[...]

$60k/yr isn’t enough to entice over-the-road drivers but it is more than enough to recruit drivers who get to sleep at home.

[...]

Trucking is a business with both high fixed and variable costs. For every dollar that comes in, the best run firms typically spend 75% of it evenly divided between fuel, equipment, and labor. They then spend another 17% or so of administrative overhead per truck before eking out an 8% profit margin.

[...]

American truck drivers are paid only for the miles they haul freight — the hours spent waiting to be loaded or unloaded and taking mandatory breaks are all unpaid. As a result, the $200/day drivers typically earn is really only for the 7 hours/day they move freight and not for the 14 total hours they’re on-duty. This delta is big — it means that the trucking company feels like they pay drivers $28/hr while drivers feel like they only get $14/hr (or $8/hr if you consider the 24 hours/day drivers spend in a truck).

Drivers who aren’t physically in a truck don’t need to lose productivity when the truck stops moving. Rather than twiddling their thumbs at a distribution center the driver could simply switch to a different truck in the fleet which has been loaded and is ready to move. The driver actually cares about earning $200/day — if they earned that by driving for 11 hours (vs being on duty for 14) their hourly rate would increase. The fleet would see their $200 buy them 57% more hours of a truck moving which would drop their labor cost by 30%, bringing it to just 17.5% of gross.

As a result a robotruck which is remotely monitored 100% of the time by a teleoperator who is looking only at that truck while it moves would cut labor cost from 25% of gross to 16.5% and have profit margins of 42.5%.

95% of the hours an OTR truck moves is on the highway. If you were able to eliminate remote supervision for the bulk of those hours you would see per-truck labor cost drop to just 1.75% of gross and profit margin would soar to 58%.

The hardest 1% of the technical problem, automating the surface streets and interchanges, would end up being worth only about $600/truck/yr. Level 4 truck autonomy has less value than a daily coffee.