Friday, June 22, 2012

The Coming Revolution in Information Technology

From my article in the Detroit News this week:

We are on the cusp of a revolution in information technology that will be even larger than the one that's taken place over the past 40 years. Evidence of this transformation is emerging in what's known as direct-digital manufacturing, an innovation that could lead to the "desktop" printing of entire products from automobiles to washing machines.

Some products developed from three-dimensional computerized manufacturing — such as patient-specific implants for hip joints or teeth, and lighter and stronger aircraft parts — are being made from computer-engineered materials that did not exist a few years ago.

Smart manufacturing, in which the science of emerging materials revolutionizes the very fabrication of physical products, has extraordinary economic implications for the United States, which is at the epicenter of digital innovation.

To grasp the magnitude of the changes taking place, consider that, in the last three decades, computing speeds have risen 200,000-fold, while costs have dropped 10,000-fold. In 1980, it cost $10,000 for the hardware to store a single book. Today it costs one penny. That's why a Kindle can store thousands of books. And the cost of storing books and digital information is still collapsing.

We're entering a new age of super-computing, providing cheap information and processing power to nearly everyone. But that assumes that our electricity production keeps pace with the rising energy demands of the new information-intensive technologies. Those states that fail to increase electrical generating capacity will pay a huge price for such shortsightedness in terms of lost economic opportunities and jobs. It's time to start modernizing the electrical infrastructure now to prepare for an exciting digital future.

34 Comments:

At 6/22/2012 3:50 PM, Blogger The Drill SGT said...

One of the most simple and earliest applications of this manufacturing is in the Dentist's office, where instead of making a cast of a crown and putting in a temporary cap, while waiting a week for a dental tech to carve/cast a permanent crown, a box the size of a large desktop CAD/CAM machine fitted with a dental appliance measures the crown in 3 dimensions and creates it while you wait.

 
At 6/22/2012 4:24 PM, Blogger OBloodyHell said...

I've been predicting this for decades. It'll go even further when a generic device capable of making things on the fly becomes readily available in the household. Sure, there will still be specialty object that require unusual materials and/or special action to make them functional (such as most medical devices), but just the revolution in the home when you can have something either machined (using a computer-controlled lathe with a publicly disseminated parts description -- think about guns, for example), or built up using a 3D "Printer" from plastics, or even both and assemble-at-home...

We now have the first generation Star Trek "tricorders" in our pockets (i.e., Smart Phones) only 200 years early... and here you can see the first generation "replicators"...

 
At 6/22/2012 6:38 PM, Blogger VangelV said...

We're entering a new age of super-computing, providing cheap information and processing power to nearly everyone. But that assumes that our electricity production keeps pace with the rising energy demands of the new information-intensive technologies. Those states that fail to increase electrical generating capacity will pay a huge price for such shortsightedness in terms of lost economic opportunities and jobs. It's time to start modernizing the electrical infrastructure now to prepare for an exciting digital future.

Why not jut deregulate the system and let the private sector provide the electricity that is required?

 
At 6/22/2012 11:58 PM, OpenID Sprewell said...

Not sure how the article ended up on electricity, but I don't think that'll be that big a deal. A 2011 report estimated that total data center power consumption was only about 2% of all electricity use in the US, down from predictions of 3.0-3.5% made by the EPA four years earlier. The linked article says that the predictions were off because they were expecting a lot more servers to get installed in those four years, which I'm guessing the recession might have slowed. In any case, the server market is well aware of power costs, which is why they're considering moving to the same low-power ARM chips that are used in most mobile devices these days, with new servers like this one from a startup in Austin, TX. Even if a lot more servers get installed in the coming years, these chips could keep power usage flat or dropping, so I'm not sure electricity will be a bottleneck.

 
At 6/23/2012 4:35 AM, Blogger Benjamin said...

VangeIV--

Enron?

The fact that there is one set of wires? Called a monopoly?

Oddly enough, in SoCal, the City of Los Angeles DWP provides cheaper power than SoCal Edison, privately owned.

 
At 6/23/2012 7:04 AM, Blogger Ed R said...

"Why not jut deregulate the system and let the private sector provide the electricity that is required?"

In much of the USA electrical generation IS subject to price competition. The local distribition networks can buy their power from the lowest cost source -- private or public.

 
At 6/23/2012 10:30 AM, Blogger VangelV said...

Allow private competition in distribution and you will get exactly the investment that is needed. If you look at the record you can see that government certainly has not been very good at investing wisely.

 
At 6/23/2012 10:49 AM, Blogger Scott Drum said...

I checked with the current Department of Energy. They said they would not allow this to happen because they can't put up enough solar panels to generate the power.

 
At 6/23/2012 1:31 PM, Blogger SteveH said...

Jesse Ausubel wrote in a paper found here: http://​phe.rockefeller.edu/​Daedalus/Elektron/ in which he discussed distinct pulses of technologies and their diffusion. He identified two distinct pulses in US electricity production and consumption. The first beginning in 1929 and ending in 1973 and the second likely ending in 1993. If the next pulse increases demand by an order of magnitude as did the transition from pulse 1 to pulse 2 then getting the prediction right on future generating capacity required is essential.

Ausubel states "Projecting electricity demand matters because it influences investments in capacity. Accurate projections might have lessened the pain for the utilities, which ordered and then canceled plants; the equipment suppliers, who lost the orders; and consumers, who ultimately pay for all the mistakes."

I recommend the 'old' paper as it contains some framework for thinking about this important issue.

 
At 6/23/2012 4:14 PM, Blogger Ron H. said...

SteveH: "He identified two distinct pulses in US electricity production and consumption."

How can you talk about "pulses" and electricity production in the same sentence, without at least smirking a little bit?

 
At 6/24/2012 8:03 PM, Blogger Hydra said...

Vange: heard an interview with J BoonePickens, today. He admitted a huge mistake on wind power, based on collapsing natural gas prices. Then he proposed a national plan to convert heavy trucks to natural gas. The market, he said, will do this anyway, in eight to twelve years. But with proper legislation, he claimed, it could be done in cost years, at no additional taxpayer cost.

He went on to say That his proposed legislation was defeated by the Koch brothers, whose businesses would be harmed by higher natural gas prices.

 
At 6/24/2012 8:19 PM, Blogger Hydra said...

Allow private competition in distribution and you will get exactly the investment that is needed.

=====================================

AHH, but when? Private enterprise will wait until it can pretty much ensure a profit in the next quarter, or so. The farther ahead you project your gains, the higher the risk. Government has many failures because of this, just as venture capitalists have. But the long term gains often exceed the short term costs.

What private enterprise, for example, would have invested in WWII, with the expectation of capitalizing on what Germany and and Japan have since become?

 
At 6/24/2012 8:39 PM, Blogger VangelV said...

Vange: heard an interview with J BoonePickens, today. He admitted a huge mistake on wind power, based on collapsing natural gas prices. Then he proposed a national plan to convert heavy trucks to natural gas. The market, he said, will do this anyway, in eight to twelve years. But with proper legislation, he claimed, it could be done in cost years, at no additional taxpayer cost.

He went on to say That his proposed legislation was defeated by the Koch brothers, whose businesses would be harmed by higher natural gas prices.


Pickens is trying to look after Pickens. He tried to play a political game hoping that an uneconomic venture could attract large subsidies. When the subsidies were not enough he lost big. And while I have a hard time with the Koch brothers at times I think that there is no way to blame them for anything. I think that Pickens is pissed off that the can & trade legislation did not make it but there were more voices than those of the Koch brothers warning about how terrible that would be for consumers. When voters paid attention the legislation died.

 
At 6/24/2012 8:47 PM, Blogger VangelV said...

Private enterprise will wait until it can pretty much ensure a profit in the next quarter, or so.

You have no clue what you are talking about. Many projects in the energy sector take more than a decade from drawing board to actual production. I have investments in companies that will not generate any cash flow from operations for several years. They have shown a loss for more than a decade as they worked in defining their resources, planning their mines and began construction of infrastructure and the purchase of equipment.

The farther ahead you project your gains, the higher the risk. Government has many failures because of this, just as venture capitalists have. But the long term gains often exceed the short term costs.

As I said, this is not true. You need to actually look at what companies in the materials and energy sectors do and their track records. And compare their performance to government programs.

 
At 6/24/2012 8:50 PM, Blogger VangelV said...

What private enterprise, for example, would have invested in WWII, with the expectation of capitalizing on what Germany and and Japan have since become?

What kind of confused statement is this? Companies don't 'invest' in war because it is peace, not war that brings wealth and prosperity. It is governments that love war and conflict as they try to grab for power and divert attention from other issues.

 
At 6/25/2012 1:57 AM, Blogger OBloodyHell said...

>>> Oddly enough, in SoCal, the City of Los Angeles DWP provides cheaper power than SoCal Edison, privately owned.

Benny, when your LA DWP is subject to full GAAP accounting practices, then, and only then will such claims be worth a piece of used toilet paper.

Until that time, it's a fair bet that there are hidden subsidies and money-transfers going on that change the actual numbers from what they ought to be in a true accounting fashion to the government-friendly numbers you're citing.

And this is so DUH as to be laughably silly for me to have to point it out.

 
At 6/25/2012 2:02 AM, Blogger OBloodyHell said...

>>> What private enterprise, for example, would have invested in WWII, with the expectation of capitalizing on what Germany and and Japan have since become?

Oh, geez, why is the world filled with idiots trying to argue that ridiculous extremes of economic arguments not being valid has anything to do with the day to day application of the economic arguments.

The fact that there are special circumstances which free enterprise arguably is not set up to handle does not have anything to do with the functionality of free enterprise in the usual run of day to day human economic situations -- any more than the equations of Einstein, at the fringe edges of math and physics, invalidate the equations of Newton for day-to-day activities.

Newton's laws still work for 99.999% of all applications.

So does Free Enterprise.

 
At 6/25/2012 6:23 AM, Blogger geoih said...

You've missed one important obstacle to this revolution: intellectual property laws.

 
At 6/25/2012 9:03 AM, Blogger Hydra said...

Companies don't 'invest' in war because it is peace, not war that brings wealth and prosperity.

===============================

Given that a war is handed to you, it is government that takes it on, not private industry. Government, of course can't succeed without private industry. The point is that the organizations are different and have diferent incentives, not tha one is better than the other.

 
At 6/25/2012 9:05 AM, Blogger Hydra said...

As I said, this is not true. You need to actually look at what companies in the materials and energy sectors do and their track records.

=================================

Precisely. Companies in the material and energy sectors have had some spectacular failures, because of the long term nature of their investments. Over time, many of them do pan out, but there are also a lot of corporate corpses out there.

 
At 6/25/2012 9:11 AM, Blogger Hydra said...

You have no clue what you are talking about. Many projects in the energy sector take more than a decade from drawing board to actual production.

=================================

That is true, but it is an exception rather than the rule, and they have a narrow focus. The point is precisely as you have stated. An energy or mining company make a long term investment based on an asumed price far into the future. This is a more risky business than one which can start up quicker with less investment, and some of these long term investments have turned into big failures. Government is not alone in having big screw ups.

 
At 6/25/2012 9:19 AM, Blogger Hydra said...

Pickens is trying to look after Pickens. He tried to play a political game hoping that an uneconomic venture could attract large subsidies. When the subsidies were not enough he lost big.

=================================

That was his wind venture, and he admits exactly what you said, it is uneconomic at todays gas prices. He concedes that was a huge mistake that cost him big time.

He is what, 85? the argument that he is looking after his own interest doesn't hold much water at this point. Will his new idea make him money, sure, but that isn't the basis of his argument.

He merely states that big trucks will convert to natural gas eventually, and converting just the heavy trucks to natural gas would eliminate much of our foreign oil imports - a much dirtier fuel than owur own natural gas.

He claims that can be achieved sooner with government intervention. All I am pointing out is that here is at least one person who thinks government can do some things faster than private industry, and with beneficial results.

The Mantra that government can never, ever do anything right, and is constitutionally dispositiond to be a failrue, is probably myopic.

 
At 6/25/2012 9:29 AM, Blogger VangelV said...

Given that a war is handed to you, it is government that takes it on, not private industry. Government, of course can't succeed without private industry. The point is that the organizations are different and have diferent incentives, not tha one is better than the other.

Yes they do have incentives. But as I pointed out, it is governments that start wars and governments that destroy capital through those wars. The fact that some industries can make a lot of profit by giving government what it is asking for does not change the argument.

 
At 6/25/2012 9:36 AM, Blogger VangelV said...

Precisely. Companies in the material and energy sectors have had some spectacular failures, because of the long term nature of their investments. Over time, many of them do pan out, but there are also a lot of corporate corpses out there.

That is the beauty of the market. Companies that are not capable get punished and go under. The capital goes into the hands of other companies that can deploy it better. If some idiot went bankrupt because he did not plan a mine properly and ran out of cash before he could make things work the capital is still in place to produce the resources that were identified and society still benefits over the long run when the new owners begin production. The managers from the failed company lose their jobs and the investors are wiped out. They pay for their sins and incompetence as they should.

But when a government decides to build a light rail system that is far too expensive, is unnecessary, and demands continued subsidies society does not benefit. Even if the system can be given away to an independent operator it often fails to make a profit because the operational costs are too high and the use not enough to turn a profit. But unlike the private sector managers, the people who made the bad decisions are not fired. Instead they are given more power and more money to keep the system going even though it requires permanent subsidies from the taxpayers.

 
At 6/25/2012 9:44 AM, Blogger VangelV said...

That is true, but it is an exception rather than the rule, and they have a narrow focus. The point is precisely as you have stated. An energy or mining company make a long term investment based on an asumed price far into the future. This is a more risky business than one which can start up quicker with less investment, and some of these long term investments have turned into big failures. Government is not alone in having big screw ups.

You still don't have a clue. It is not the exception. It is the rule. From the time a company begins to explore to the time of production startup you are often looking at one or two decades. Often the biggest risk comes from government bureaucrats who lengthen the approval process and put up red tape. I own shares in a company that has oil and gas royalties in the Mackenzie Delta. They were acquired in the 1980s. I do not expect any production to start flowing until 2025. Note that the exploration costs have already taken place. The next step is having approval for a pipeline. Once that happens you need a few years of construction and only when you are nearly complete do you start to drill the wells that will feed the system.

 
At 6/25/2012 9:46 AM, Blogger VangelV said...

He is what, 85? the argument that he is looking after his own interest doesn't hold much water at this point. Will his new idea make him money, sure, but that isn't the basis of his argument.

Sure it makes sense. He wants to die as rich as possible so that he can leave as much money to his heirs, charities, etc., as he can. And if an idea has merit the 'greedy' guys in the private sector will do what they can to take advantage of it. The fact that Pickens is going to the government shows that the market is not convinced.

 
At 6/25/2012 2:45 PM, Blogger Ron H. said...

"He is what, 85? the argument that he is looking after his own interest doesn't hold much water at this point. Will his new idea make him money, sure, but that isn't the basis of his argument."

You must be the most naive person on the planet if you believe that. Pickens does what benefits Pickens - period.

People like Pickens do not retire and spend their remaining days in the porch swing, they do what they have always done until their last breath.

Do you really believe Pickens might be concerned about improving YOUR standard of living? Get a clue.

You should learn more about Pickens's entire plan before claiming he has suddenly grown some altruism.

He is smart enough to know that the wind portion of his grand Pickens enriching scheme is no longer beleivable, so he has abandoned it.

Why do you suppose he keeps admitting his plans require taxpayer money to succeed?

 
At 6/27/2012 8:15 PM, Blogger Hydra said...

Cheap information may not be worth what it costs.

 
At 6/27/2012 8:20 PM, Blogger Hydra said...

The point about Pickens was only that he admitted his previous major mistake.

He points out a way for the natural gas boom to be put to good use with the minimum of infrastrucure. he is merely suggesting that the nation capitalize on low hanging fruit.

What is wrong with that?

The only real problem is that he points out this can hapen sooner with (gasp) government involvement, even if government arranges the policy to be self funding.

What is the argument that says this will take longer or cost more because of government involvement?

Incentives matter, right?

 
At 6/27/2012 8:27 PM, Blogger Hydra said...

Pickens is old. Even if he makes money on this, he won't be around long enough to make most of it. that will fall to other people.

If I am 85, what is my incentive to try to initiate a project that wil take many years, even if I succeed?

I don't have any doubt he expects to make money on it, nor do I beleive he is doing it for MY benefit. That is normally your schtick (that consumers benefit from big business).

I merely point out that here is someone who has been a successful businessman at times, and he says that here is a situation in which private enterprise couldbenefit from government interfernce -- even without the use of the general taxpayers money.

 
At 6/27/2012 8:31 PM, Blogger Hydra said...

You still don't have a clue. It is not the exception. It is the rule. From the time a company begins to explore to the time of production startup you are often looking at one or two decades.

===============================

WTF are you talking about? the lsast sentence does not follow from the first.

Yes it often takes decades to get a big mine going and profitable. That is what makes it more risky than other ventures.

These things often fail (or play out), and the reason has nothing to do with government interference.
What it has to do with is that one cannot predict the prices decades in advance. You cannot predict theprice of the commodity, and often you cannot accurately predict the price of getting it out of the ground, as BP discovered.

 
At 6/27/2012 8:48 PM, Blogger VangelV said...

The point about Pickens was only that he admitted his previous major mistake.

Given the fact that everyone could see the error he had little choice but to admit it.

He points out a way for the natural gas boom to be put to good use with the minimum of infrastrucure. he is merely suggesting that the nation capitalize on low hanging fruit.

If something makes economic sense the market will make sure that it happens.

What is wrong with that?

The problem is that Pickens is looking after Pickens and expect the taxpayer to backstop his projects and limit his risks.

The only real problem is that he points out this can hapen sooner with (gasp) government involvement, even if government arranges the policy to be self funding.

Nonsense. Government has never been good at allocating capital. All Pickens is asking for is a handout.

What is the argument that says this will take longer or cost more because of government involvement?

It is a bad argument that serves a purpose for his benefit, not yours.

Incentives matter, right?

Yes they do. But when they come from government they usually lead to a bad end. Take a look at ethanol, solar power, battery makers, etc.

 
At 6/27/2012 8:53 PM, Blogger VangelV said...

I merely point out that here is someone who has been a successful businessman at times, and he says that here is a situation in which private enterprise couldbenefit from government interfernce -- even without the use of the general taxpayers money.

We call that rent seeking. It benefits the companies looking for handouts, not the taxpayers. Ideas that make economic sense do not need anything but the government to get out of the way. If that is what Pickens asks for it would be fine. But he goes well beyond asking for a less regulated environment; he asks for subsidies, mandates, and guarantees.

 
At 6/27/2012 8:57 PM, Blogger VangelV said...

Yes it often takes decades to get a big mine going and profitable. That is what makes it more risky than other ventures.

These things often fail (or play out), and the reason has nothing to do with government interference.
What it has to do with is that one cannot predict the prices decades in advance. You cannot predict theprice of the commodity, and often you cannot accurately predict the price of getting it out of the ground, as BP discovered.


First, if bad companies fail it is not a problem because the assets go to better ones who will bring the projects to production unless government gets in the way. Second, as long as the market sets interest rates the economic planners who evaluate the projects are pretty good at getting things right. Most of the failures you can point to were created by artificially low rates that sent wrong signals. The planners expected plenty of savings and resources to be able to bring their projects to completion only to find huge shortages that drove prices much higher than expected.

The Austrians have described this as the Master Builder problem. A few of us have referenced it a number of times. I suggest that you look it up and learn. Just put in 'mises master builder' into your Google search window and read the referenced commentaries.

 

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