Monday, November 11, 2024

Standardization and Specialization

I am a couple dozen episodes in on Dave Broker's Industrial Revolutions Podcast and cam across this tidbit from chapter 14.

But what Whitworth was most famous for was something called British Standard Whitworth – BSW.

Up until this point, different machine tool makers used different designs for their tools. For the end users – really, anyone involved in industry by this point – it was maddening. If you had a steam engine made by Company X, for example, and one of the screws was damaged, it could only be replaced with a screw provided by Company X or the vendor for Company X. Otherwise the screw wouldn’t fit.

Along with Clement, Roberts, and other Maudslay alumni, Whitworth was a strong proponent for standardization such parts – nuts, bolts, and screws. So, in 1841, he sat down and wrote up what he thought should be the standards. Screw threads should be set at a 55 degree angle with very specific depths and radii. By the 1870s, as the railroads became increasingly frustrated with the different systems being used, they said, “yeah, Whitworth was right.” By the 1890s, everyone was using BSW.

With BSW standardization, a steam engine maker need not produce all of the screws, rivets, fasteners, and other minor parts. Outsourcing these components allowed him to focus on improving the steam engine and the component makers to improve production. Economies of scale in, say, screw manufacturing unleashed by dis-integration would drive costs down dramatically.

I recommend the podcast to fellow history buffs and I am sure I will mine it for future blog posts.

Friday, November 8, 2024

The NFL sends Mediocre Teams to Play in Europe

The NFL schedules a handful of games each season to be played in Europe, London and Munich this year. With plans to expand the program to Africa, Asia, and Australia, The Times of India asks why they disappoint their European fans by not sending "contender teams."

Since the league’s initial foray into Europe in 2007, 42 games have been held on the continent. Yet, only two of these contests featured both teams with winning records - the New York Giants and Green Bay Packers in 2022 and the Kansas City Chiefs and the Miami Dolphins in the 2023 season.

One possibility is that they don't need to - the stadiums sell out anyways. I am reminded of when I lamented to a friend that I have a fondness for the Chicago Cubs but they, at that time, had not won a World Series since before the Depression. His reply was that the fans are so loyal that they do not have to. Why pay for a better team roster when you already sellout the stadium? If you cannot adjust capacity to meet greater demand, adjust demand to meet capacity.


Friday, November 1, 2024

When will RoboTaxis become Profitable?

An interesting article in the WSJ reports on the growing acceptance of autonomous vehicles being used for ride hailing. The dominant platform, Waymo, is currently operating 300 retrofitted Jaguars in San Francisco and 400 in a few other other west coast cities.

It is doubtful that they are profitable yet but there are reasons to believe that the service will achieve economies of scale. Consumer acceptance is growing with Waymo customers being more loyal than Uber or Lyft. As it scales, the trips without paying passengers, now 40% of all trips, should fall. And, while luxurious Jaguars are a nice way to introduce the service, Waymo, plans to introduce less expensive vehicles.

Tuesday, October 29, 2024

Correlation is not causation: birth weight determines mortality, not the animus of white physicians

Economist

CORRELATION: “when Black newborns are cared for by Black physicians, the mortality penalty they suffer, as compared with White infants, is halved.” 

MISTAKENLY INFERRING CAUSALITY FROM CORRELATION:
This striking finding quickly captured national and international headlines, and generated nearly 700 Google Scholar citations. The study was widely interpreted—incorrectly, say the authors—as evidence that newborns should be matched to doctors of the same race, or that white doctors harboured racial animus against black babies. It even made it into the Supreme Court’s records as an argument in favour of affirmative action, with Justice Ketanji Brown Jackson (mis)citing the findings. A supporting brief by the Association of American Medical Colleges and 45 other organisations mentioned the study as evidence that “For high-risk black newborns, having a black physician is tantamount to a miracle drug.”

CAUSALITY:  birth weight determines mortality, not the animus of white physicians

...a disproportionately high share of underweight black babies were treated by white doctors, while a disproportionately high share of healthy-weight black babies were treated by black doctors.
IRONY:
That a flawed social-science finding which fitted neatly within the zeitgeist was widely accepted is understandable. Less understandable is that few people now seem eager to correct the record. The new study has had just one Google Scholar citation and no mainstream news coverage. 

Wednesday, October 23, 2024

Who regulates the regulators?

From REASON:
For decades, the California Coastal Commission has had near-unchecked authority to regulate development along the state's 860-mile coastline, and it's been unafraid of using it. 
It's now trying to expand its terrestrial authority to outer space. 
This past week, the commission voted to oppose plans by private space company SpaceX to launch more rockets from Vandenberg Space Force Base in Santa Barbara County, California. 
The commission is asserting for the first time that SpaceX must get coastal development permits to shoot more rockets into space. SpaceX and the Department of the Air Force have conversely argued that SpaceX launches are federal activity that's exempt from the commission's regulatory powers.

WORSE:  it appears that the regulators opposed the launch due to Elon Musk's political beliefs.  The case now goes to trial.  

Monday, October 21, 2024

The hidden cost of regulatory uncertainty

Innovation drives growth and at our current growth rate of 2%, US income doubles in 36 years. In contrast, EU income doubles in 108 years. There are many reasons for the US/EU difference regulation, income taxes, subsidies and "regulatory uncertainty." President Biden’s appointees have createdted huge regulatory uncertainty in antitrust (see earlier post) which deters acquisitions which are the proverbial “exits” that drive startups.

Thursday, October 17, 2024

Failures ==> Learning ==> Success

Economist:
...SpaceX’s existing Falcon 9 rockets had a similar string of spectacular failures (it even released a blooper reel). But there was a method behind all the explosions. The idea is that flying lots of hardware, and failing rapidly, lets you learn from reality, which is the best teacher of all. That sort of mindset, best-known in Silicon Valley, is not how the rocket business has traditionally worked. But it is hard to argue with the results: SpaceX’s Falcon rockets have now made more than 350 successful landings. That has helped the firm cut the cost of getting a tonne of payload into space by perhaps a factor of ten. It now dominates the launch industry.

Wednesday, October 16, 2024

Why has US left other rich economies in the dust?

Economist:
On a per-person basis, American economic output is now about 40% higher than in western Europe and Canada, and 60% higher than in Japan—roughly twice as large as the gaps between them in 1990. Average wages in America’s poorest state, Mississippi, are higher than the averages in Britain, Canada and Germany.

WHY?

  • Economies of Scale: a good idea hatched in California or product built in Michigan can, in short order, spread to 49 other states. 
  • Flexible Labor Market : ...allowing people to move to better-paying jobs and drawing workers to more productive sectors. 
  • Immigration: A long, porous southern border [allows] the labour force to steadily grow ... to fill the hard, dirty jobs that many native-born Americans have no interest in doing. 
  • Oil & Gas:...the improvements in techniques for extracting hydrocarbons from once-unpliant shale rocks have turned America into the world’s biggest producer of oil and gas.
  • Light touch Regulation:  ...has given high-tech companies room to play and grow. It also enabled the experimentation which led to the shale revolution. 
  • Better regulation: After the global financial crisis of 2007-09, [regulators] clean up bank balance-sheets, and making aggressive use of monetary policy to support growth. 
  • Good Macro policy: government’s willingness to step on the accelerator pedal when [the economy] has sputtered, ...[response to the] covid slowdown ... with...fiscal stimulus packages that left other countries in the dust.

Wednesday, October 9, 2024

What happens when you cut the supply of Northwestern football by 75%?

WSJ: Price goes up by 900%!
Ryan Field, where Northwestern played until this season, sat over 47,000 fans—nearly four times as many as the [temporary] cv lakeside stadium.
Tickets for last Saturday’s home game against Indiana started at $129 on the school’s official site, an increase of more than 900% on the $17 average secondary-market price for last season’s home opener.
The shift in capacity creates a natural experiment, a movement along the demand curve, that allows us to calculate the Price Elasticity of Demand for Northwestern football. 

(Price Elasticity of Demand) = (% change in quantity)/(% change in price) = (-75)/900 = -1/12, 
a very inelastic demand, i.e., one whose quantity does not respond much to price changes.  

But this natural experiment may make demand look less elastic than it really is because of the quality increase: its intimate feel and views of Lake Michigan, make the new stadium more attractive.  This increase (shift) in demand due to higher quality increases the price change, making demand appear less elastic than if the new stadium were the same quality as the old one.  

HT: Lamar