01 July 2018

Quant's Hubris

Regular reader, by now, knows one of the mantras: "the bane of the capitalist is capital". Meaning, of course, that using capital to get rich by substituting machines (hardware and/or software) for people reaches a tipping point. Not just the wall of diminishing returns, but the abyss of unremitting sunk cost. That's just a fancy way of saying that automation methods become more expensive, as unit cost. And it's not just cheap Chinese hands beat robots; it's that robots aren't necessarily adept. We all do remember the smartest guys in the room? Will Musk end up a latter day Lay? We'll see what happens.

Well, Tesla is an exploding data point (oddly, the NYT version???).
Ron Harbour, a partner at the consulting firm Oliver Wyman, noted that in his annual survey rating auto plants worldwide, the most efficient ones use a lot of manual labour. "The most automated ones are at the bottom of the list," he said.

The money quote:
Two assembly lines inside the plant already exist to handle at least some of those tasks, but they have proved troublesome and perform the work more slowly than Musk had hoped, in part because Tesla used robots for tasks that are better left to humans.

Tesla engineering executives acknowledge that the company overestimated the rate at which it could produce cars and designed a production system that proved to be too complicated — a problem that Musk lamented at the company's June shareholder meeting.

"One of the biggest mistakes we made was trying to automate things that are super easy for a person to do but super hard for a robot to do," he said. "And when you see it, it looks super dumb. And you are like, wow! Why did we do that?"

As the title says, the quant's hubris.

Here's the other thing to consider. We've built a global economy on petroleum just because we've found gobs and gobs of it. In order to replace the internal combustion engine with some sort of electric (battery?) vehicle, we must needs have an equivalent supply of some other substance. Lithium? World reserves of it are speculative, but
And if that happens, the 365-year supply would be less than a 17-year supply (13.5 million tons of reserves divided by 800,000 = 16.9 years).

And, of course, that assumes we could economically mine, refine, and produce such batteries. Good luck with that.

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