Category Archives: Producer Class Economics

Nerdgasm—Thoughts on Tesla’s Battery Day

Like many, I was looking forward to what Elon Musk would say about what is easily the most critical and expensive part of building an electric vehicle—the batteries. The presentation was literally breath-taking. Several times I found myself holding my breath as I tried not to miss any important details. Musk and company had gone to great lengths to simplify their descriptions of what they were attempting. Unfortunately for me, I hadn't taken a Chemistry course since 1966 so I found myself fishing in some forgotten waters. Fortunately, it was easy to watch repeats on YouTube so eventually the requisite understanding returned. (I needed four tries ;-)

There is really no sustainable energy future without effective storage. Anyone who has ever lost their electricity knows that life gets extremely difficult VERY fast. Yes, I know humans survived without electricity in hazardous places such a North Dakota in winter. But those people were unusually hardy, strong, and clever. Even so, preparations for winter began the first days of spring. If you had trees, you chopped wood. Trees are stored energy. Unfortunately, there aren't many trees in North Dakota. Fortunately, there are energy sources that will sustain human life up there—lignite coal and then after the 1950s, oil and natural gas. Now that burning fossil fuels has become a big no-no, North Dakota also has abundant wind power but harnessing it as a practical matter requires storage.

Energy storage has been the big scary boogieman since the invention of fire. We like to treat the problem socially the same way we treat hauling out the trash and for many of the same reasons—it is UGHLEE. Clear-cut forests, oil refineries and tank farms, and the like smell funny and in myriad ways are offensive if not serious health hazards. Storage is especially tricky when the energy is electricity. Electricity moves at roughly the speed of light. With tiny exceptions, therefore, electricity must be used the instant it's produced. While this nearly instantaneous speed is easily electricity's most useful characteristic, it seriously hampers more widespread adoption of renewable energy.

The best and most useful way of storing electrical energy is by using batteries. This option has earned its important status because the alternatives don't work very well, if at all. Some proposed building huge flywheels. This scheme never got off the drawing boards because of the problems building a wheel precise enough to store massive amounts of energy. Bearings large enough to support a large flywheel at even slow rotational speeds were probably physically impossible. One scheme—pumping water into an elevated reservoir only to be released when the grid needs more electricity has several working examples operating in Norway. But these are only possible due to Norway's unique geography. There are also supporters of compressed air. Big money has been spent trying to make hydrogen the default storage medium. But in end, the most useful and reliable method of electrical storage is still the humble battery.

But just because batteries work, after a fashion, that doesn't mean they don't have serious problems. They are heavy, and expensive, and don't store all that much power. They are an environmental headache from mining to disposal. Lots of money and brainpower is being directed at solving those problems. There has been a lot of chirping about the potential for a solid-state battery while Samsung has made them a company goal.

But Tesla has a different sort of problem. They must use a technology that already exists at scale which means lithium-ion. So their solution is to throw resources and effort into production innovation—they intend to make terawatts of these things, after all.

In the early days of industrialization, folks who could create factories and make them run smoothly were called "millwrights"—a prestigious occupational category. Now the term has fallen into serious disuse as more and more companies that make complex products tend to outsource difficult tasks. Tesla and Musk has made a public declaration that they do NOT intend to follow that path. Instead they intend to employ the method used by most early industries—vertical integration. If someone is building a product that has not been built before, this is the only choice. If the tools of production cannot be purchased, the only alternative is to make them yourself (or find someone who can make them for you).

Musk most certainly did NOT invent vertical integration. In fact he has a ways to go before any of his manufacturing facilities equal the sophistication of Ford's River Rouge (Model A-1927) or Willow Run (B-24 bomber—1942). But while Musk did not invent vertical integration he is most certainly a true believer in its principles. This is his presentation for battery day.

Elon Musk

Reaction to the Elon Musk / Drew Baglino presentation fell into two main categories—the disappointed and the breathless. The investor classes were the most reliably disappointed. It wasn't flashy enough. It didn't introduce a new model of something. The promised new product timelines were often in the range of 2-3 years, NOT next quarter. The unearned-income crowd considers descriptions of the nuts and bolts of technological innovations to be a snoozefest—especially at the level of battery day.

On the other hand, the folks who stayed awake in science classes had what one wag called a nerdgasm. That's what it felt like to me. A friend called two days after battery day and less than one minute into the conversation he asked, "What's up with you? I haven't heard you so happy in 35 years." Guilty as charged.

There are several main reasons Tesla's battery day was so appealing.

It was strategically solid. The Tesla scheme requires the least amount of social change. I am a HUGE fan of high-speed rail and live on what would be an important link if USA built up its passenger-rail system. However, I am reasonably certain USA will never build such a system for the simple reason that the cities we have in USA were built during the age of petroleum and individual transportation devices. Cars and filling stations can serve such cities—light rail, buses, etc. cannot. The roads are built—assembling the land for dedicated high-speed rail alone is an unimaginable nightmare. The zero-carbon transportation future will be a function of electrifying the existing infrastructure. The success of this venture will be a function of how efficiently we can convert the internal combustion transportation system into an electric one.

The devil's in the details. Instead of chasing a breakthrough such as a solid-state battery, Tesla chose to chase smaller production upgrades. The reason this works is that it addresses a host of problems that needed attention anyway and if there are enough "small" improvements, they are likely to add up to breakthrough numbers.

Borrow, steal, copy. The example that made me giggle was the admission that Tesla had learned a LOT from the food-packaging industry—specifically bottling. This technology has been around for awhile. The all-aluminum beer can has been around since the late 1960s and it is still used as an example of metal-forming sophistication. The amount of pure genius expended on food packaging is usually beyond belief. So it not surprising that kind of genius could accelerate battery assembly speed by 7x.

And on it went—one technological triumph following another. Elon and Drew just rapping like they were sharing a barbecue. No notes or teleprompters—just a sound industrial pragmatism on an intense search for what will actually work in the real world. The biggest advantage the Producer Classes have is that they can subject their theories to real-world testing pretty easily. Objects that cannot perform are culled pretty quickly. Industrial pragmatism turned up past 11.

Elon Musk often claims that manufacturing doesn't get nearly the appropriate amount of respect AND has vowed to make Tesla manufacturing world-class. Apparently he learned some important lessons trying to make the Model 3 assembly line work. In a few 120 hour weeks, Musk discovered why "millwright" has been the most difficult job humans do.

Running on empty

DW looks at the institutional impediments to change in the all-powerful automobile industry. And OMG are the car folks all powerful—for some very good reasons. Germans invented the internal combustion engine—both gasoline and diesel. The nation's driver associations have even managed to keep parts of the autobahn speed-limit free. And should a driver do something seriously stupid and crash, the authorities have access to rescue crews on hair-trigger alert. This is not to say the rest of the country always approves of these James-Dean wannabees setting transportation policies. Environmental activists recently managed to ban automobile traffic in central Stuttgart—the home of Porsche and Mercedes Benz.

But the serious power is still held by the manufacturers and their conventional wisdom which says—the automakers are the most important element of the German economy and you tamper with them at great risk. In that nearly rules-free environment, they twiddled their thumbs and made fat profits from ICE cars. Now their biggest market, China, is demanding that they get serious about selling electric cars. This is proving much harder than it looks—and WAY more expensive. Here DW has captured a fascinating look at smug auto executives spouting the conventional wisdom / Institutional Inertia.

Greta Thunberg comes to New York

The Fridays for Futures movement inspired by the frankly incredible Greta Thunberg has been fun to follow since it started only a year ago. She was a disgusted child who decided to skip school to camp out in front of the Swedish Parliament. The goal was to remind the politicians that they were not doing enough to arrest the climate crises. Her logic was absolutely impeccable:

The scientific consensus is that unless there are significant changes in how societies operate, we only have twelve years before the CO2 tipping points have been breached and all hell is going to break loose.
The most commonly reported tipping point was 1.5°C (2.7°F) We are almost there.
2018 broke records for high temperatures and widespread forest fires in Sweden. Anyone who wasn't frightened to death by these developments was probably clinically unconscious. It was an amazing demonstration of what environmental collapse could look like.
Greta did the math. She was 15. 12 years and she would be only 27. This is a very grim future.
"Why educate yourself to be a useful and productive citizen when the future is so hopeless?" reasoned Greta. Besides, she was extremely studious so missing a little school to make a political point seemed a logical path. Her grades weren't going to suffer.

A typical angry teenager, she distilled her beef with the world in the perfect summation, "You adults are shitting on my future." It is almost impossible to imagine a more powerful battle cry if the goal is to unite the world's young into a vast protest movement. But I am almost certain that not even Greta had any idea of the firestorm she was igniting.

She has spoken to the European, British, and French Parliaments. She went to Davos to scold the filthy rich for their role in the crimes against the climate. She has been nominated for the Nobel Peace Prize. And her latest was her decision to address the UN General Assembly which meant a transatlantic trip. Since she doesn't fly, this left her with few options. The one she chose was to sail on an environmentally-friendly racing yacht.

She arrived Wednesday (28 AUG 19) in New York and immediately answered questions at an arranged press conference. She wobbled a bit as her sea legs adjusted to solid ground but mostly gave good answers to questions she probably expected. She was obviously weary, dying to take a shower, and eat food that hadn't been freeze dried.

Sailing the Atlantic is, by its very nature, an adventure. When this one sinks in, she will have probably changed. The boat was crazy fast. They hit over 30 knots in spots. (I have sailed since 1971 and never seen 10 knots.) Even so, it required 15 pretty stressful days to travel the distance you can fly in eight hours. Yes, Greta, aviation deposits large amounts of CO2 at high altitudes. Yes it is probably a good idea to get people to eliminate frivolous air travel—and if guilt trips work, keep preaching. But at the current state of technological development, there is simply NO commercial aviation without burning petroleum.

It is quite possible that an invitation to address the UN was simply something a polite Swede could not turn down (Sweden is a country where they still take the UN very seriously). Even so, Greta is already one of the most famous people on earth. Anyone remotely interested can watch multiple speeches of hers on YouTube. So it is possible that her trip to New York and Chile could be considered frivolous. It is also possible that the political statement she would have made by addressing the UN over the Internet would have done wonders for cutting back on the hundreds of utterly frivolous do-nothing climate change conferences that cause thousands of scientists to fly hundreds of thousands of air miles to exchange papers.

Greta has noticeably matured in only one year. Sooner or later she is going to come to the realization that marches with signs are not going to reduce CO2 emissions. She was caught on camera today looking quite bored at a rally. The sail probably had something to do with that too. In 15 days at sea, she probably noticed that moving around on a rich man's toy was not a solution for trans-continental travel. That yacht is a technological marvel built with scientific rigor and may in fact have a zero-carbon footprint under way—but it will not solve the problems of climate change—not even in a symbolic way.

Greta's most serious problem is encapsulated in a slogan plastered all over her super sailboat and even on her foul-weather gear. It says, "unite behind the science." The flaw in her understanding is quite understandable. The climate scientists are absolutely magnificent in describing the problems—CO2 buildup in the atmosphere and oceans, the speed at which glaciers melt, etc. However, when it comes to actually proposing real solutions to these problems, they are quite unhelpful. For example, James Hansen, the former head of NASA, the man who gave such compelling testimony in 1988 before the Senate warning of the catastrophe which would befall humanity if nothing was done about climate change, has been reduced to lobbying for carbon taxes, lawsuits against the government for inaction, getting arrested for chaining himself to the White House fence, and of course, marches.

Because basic science, while helpful in understanding the problem, is not helpful in the drive for useful solutions because Climate Change is a problem of technology, engineering, industrial design, and the sociology and economic theories that drives these great art forms. Humanity has spent at least 10,000 years organizing societies that run on fire. It's not the production of petroleum or coal that causes Climate Change—it's burning them. We are a species that literally worships fire. Many cultures actually have fire gods—the Greeks have Prometheus, the Romans had Vulcan, those from the Judaeo-Christian traditions tell stories of their God appearing as fire.

Greta, you have done a spectacular job of proving, one more time, the ultimate power of articulating the facts. You leave people breathless because that is the default reaction to the unvarnished truth. Your clear, short, and deeply profound sentences compel people to understand hideously complex ideas.

Because you are so good at what you do, it is highly likely that folks will soon expect a whole lot more by way of how to fix things. Just remember, you have trained a whole host of followers who sincerely believe that the key to progress is better complaining. And you are certainly correct that the adults have been sitting on their thumbs for the past thirty years and must show at least a LITTLE more urgency. But when that host begins to demand that YOU should have the working plans, your life could get a LOT more complex.

The following is a list of issues you might want to brush up on. The day is coming soon when folks will expect you to be the adult in the room.

Actually lowering the output of CO2 will be very difficult. Worse, the higher the rate of installed infrastructure, the more social impediments (investments in houses, cars, power grids, etc.) there will be to change. This means building a solar infrastructure will be easier in a city like Nairobi than Washington DC because there will be so much less to replace.
When the "adults" start accusing you of fear-mongering and alarmism, they will end up asking, "How can we pay for this? What you are claiming will cost TOO MUCH MONEY to fix. Virtually every country and person on this planet is hopelessly in debt. Etc. And in some minor way they are right. Converting human society from fire-based to solar-based will be extremely expensive. But that is the good news! If we get serious about solving climate change, we must spend SO much money that we should have at least 50 years of prosperity.
Actually, pro-growth development monetary policies have been around for a long time- Some argue that the Sumerians invented them. Benjamin Franklin argued for the American Revolution based on them—he argued that playing by the rules of the Bank of England would impoverish Americans. My favorite historian on the money question is a British lawyer who moved to California where she discovered the longest-running debate in North American politics. Her name is Ellen Brown. Bottom line—of all the impediments to solving the climate crises, The supply of money is, by FAR, the easiest to fix.
As you no doubt discovered on your 15 day sail, such a transportation option will never substitute for air travel. Some solutions for the climate crises ARE effectively impossible. If anyone tells you that all the hardware to build the sustainable society has been invented and just needs funding to accomplish, they are grossly exaggerating. We are thousands of inventions away from building a battery-powered airplane that could fly the Atlantic with a load of passengers.
There are parts of the solution which have been invented. The Swedes figured out the super-insulated house in the 1980s. The high-quality battery-powered car was on the roads by 2013. Yet only a tiny fraction of the houses worldwide could meet Swedish building codes even today. And electric cars are but a tiny sliver of the worldwide small vehicle fleet. The reasons for this are very interesting. Not doing what we CAN do is where the sociology of change comes in.

The following are two fascinating discussions on the sociology of electric car adoption. The first is about an old Missouri codger named Jack Rickard who has devoted a significant fraction of his life to figuring out how to convert fossil cars into an electric cars. He has done it successfully so knows the hundreds of difficult steps it requires to pull it off. He is quite unhappy about all the impediments that the petroleum industry and internal combustion automakers create to make the conversion FAR more difficult than it needs to be.

This video features a guy named Sandy Munro whose business it is to tear down cars in order to discover how they were made, what was done well, and what could be improved. He explains the sociology of why the legacy automakers not only did not invent the good electric car, they still cannot compete with a novice company that treats the electric car as a computer on wheels. This video is extremely informative and discusses the human foibles that shape our built world.

Good luck Greta! You are quite literally a global treasure.

Sandy Munro does a teardown analysis of Tesla

This YouTube interview of Sandy Monro is interesting to the point of being profound. Some background.

Monroe lives in Michigan and has a bunch of commercial ties to the car business. His specialty is tearing down cars to see how they were built and whether better production practices could make a better car. His company has about 100 employees, because cars are incredibly complex with dozens of systems so he needs a wide assortment of specialists.

The reason Monro has become a sensation is because he tore down an early Tesla Model 3. At first he was pretty critical but as time has gone on he has become convinced that most legacy automakers are now almost hopelessly behind. He has some wonderful stories about how institutional inertia works at a place like Ford Motor. His inside look at Teslas will probably sell well for at least a decade

And then he says some really enlightening things about China and their rapid industrialization plans. His observations may be skewed because he is probably meeting their best and brightest, but even taking a hefty discount for that, the story is still about as compelling a look at China as anything I have seen in a long time—maybe ever.

Sandy Munro does a teardown analysis of Tesla