Carried Away

Peter Thiel on the Space Shuttle Program and Lack of Innovation

Peter Thiel has an interesting discussion with Francis Fukuyama.  There are lots of nuggets, but the following encapsulated my thinking on the lack of innovation...

"[The Space Shuttle Program] was an extraordinary program. It cost more and did less and was probably less safe than the original Apollo program. In 2011, when it finally ended, there was a sense of the space age being over. Not quite, but it’s very far off from what we had decades ago. You could argue that we had more or better-targeted funding in the 1950s and 1960s, but the other place where the regulatory situation is radically different is that technology is much more heavily regulated than it used to be. It’s much harder to get a new drug through the FDA process. It takes a billion dollars. I don’t even know if you could get the polio vaccine approved today. 

"One regulatory perspective is that environmentalism has played a much greater role than people think. It induced a deep skepticism about anything involving the manipulation of nature or material objects in the real world. The response to environmentalism was to prohibit scientists from experimenting with stuff and only allow them to do so with bits. So computer science and finance were legal, and what they have in common is that they involve the manipulation of bits rather than stuff. They both did well in those forty years, but all the other engineering disciplines were stymied. Electric engineering, civil engineering, aeronautical, nuclear, petroleum—these were all held back, and attracted fewer talented students at university as the years went on. When people wonder why all the rocket scientists went to work on Wall Street, well, they were no longer able to build rockets. It’s some combination of an ossified, Weberian bureaucracy and the increasingly hostile regulation of technology. That’s very different from the 1950s and 1960s. There’s a powerful libertarian argument that government used to be far less intrusive, but found targeted ways to advance science and technology."

I Was Wrong About Oil, At Least In Small Part

Never did I expect that the price of oil would increase to $100+/bbl, but here we are right now at $106.40/bbl for April '08 light crude.  However, I was correct in thinking that the world would soldier on despite the oil price.  The U.S. economy is in or near recession not because of the price of oil, but because of the bursting of the housing bubble.  There are no oil shortages.  There is no crisis.  The market is working just fine.  It would be fine at $150/bbl.  It would be fine at $200/bbl.

The price is forcing work on substitutes for oil.  Within a decade, we could end up using electricity for most of our individual transportation needs.  The technology is mature enough to make the switch and it wouldn't inconvenience anybody except in the rare situation.  Maybe the price of oil would need to be higher in order to force the substitution, given that gasoline and diesel are strong products.  Of course, oil is used for very many other things -- its use permeates our economy -- but I am sure that there are substitutes in most of those markets as well.

The Value of a Human Life -- DARPA Urban Grand Challenge

Congratulations to Carnegie Mellon for winning the 2007 DARPA Urban Grand Challenge, held last month at an abandoned military base in California.  Carnegie Mellon 's vehicle "Boss" was able to traverse a 60-mile urban course at 14 miles per hour without a single traffic violation and without human intervention.  The grand prize was $2 million.  The second-place finisher was Stanford's "Junior."  Motor Trend has a good blog post about the event.

Carnegie Mellon's "Boss" SUV, the winner of the 2007 DARPA Urban Grand Challenge (Motor Trend)

Here's the reason why this is cool and important stuff.  According to the National Highway Traffic Safety Administration, in 2006, there were 42,642 people killed and 2,575,000 injured (1.5 MB PDF) in traffic accidents in the United States, incurring an economic cost of about $230 billion, or about 7.6 cents each mile traveled (2000 estimate).  Over the past couple of years, it has become clear that these traffic accidents are almost entirely avoidable by cars driving themselves.

Solar Panels Resume Price Decline

In April, for the first time since June 2004, the retail price of solar panels has declined in nominal terms -- to $4.87 per watt of capacity.  The resumption of the long-term trend of retail price declines is good news for a couple of reasons.  It may indicate that the economy as a whole is working out of its recent inflationary spell.  Also, it may indicate that solar panel manufacturers specifically are continuing to innovate and utilize their capacity more effectively in the face of rapidly growing demand and shortages of crystalline silicon.

Prices as tracked by Solarbuzz.  Read Solarbuzz's web site for an interesting discussion of these prices.

The April price is the same in nominal terms as the January 2003 price. In real terms -- using the GDP Personal Consumption Expenditures Implicit Price Deflator as the measure of inflation -- since January 2003, the price has declined 9.4%, or about 2.25% per annum.  This compares to double-digit annual declines before the inflationary spell.  Obviously, it makes all the difference in the world whether the prices are declining 2.25% per annum or in double-digits per annum.  2.25% annual declines would mean that solar power will not be competitive with conventional power generation for several decades.  Double-digit annual declines would mean that solar power is within a decade or so of competitiveness with conventional power generation.

In order to maintain a trajectory of large price declines and eventually to compete with conventional power generation in a meaningful way, the solar panel manufacturers need to ramp up production very quickly.  Given the recent shortages of crystalline silicon, I wonder whether the panel manufacturers that use crystalline silicon (most of the big manufacturers) will see their production increases limited substantially.

I have been following some start-up companies that make thin-film solar panels using crystalline CIGS (copper, indium, gallium, and selenide) rather than crystalline silicon.  Perhaps these manufacturers will be able to set the pace of capacity increases.  The most ambitious of the group appears to be Nanosolar, which this year is attempting to bring on-line up to 430 megawatts in manufacturing capacity.  To put this increase in perspective, 430 megawatts would represent roughly a 25% increase in the global solar panel market.  Because the increase is so large, and Nanosolar is a startup, my first instinct is to wait and see regarding these claims.  But the company has been hiring executives from the IBM/Hitachi hard disk drive division and has taken in an enormous amount of Silicon Valley venture capital.  Other CIGS start-ups include Miasolé.

Via X Prize, Albuquerque Snags Tesla Motors

Believe it or not, the space business does pay in some circumstances.  Today, Tesla Motors announced that it will build an assembly plant for its White Star electric sedan in Albuquerque, New Mexico.  KRQE, the local CBS affiliate, has some video of Tesla Chairman Elon Musk giving remarks and an interview with Gary Tonjes from the Albuquerque Economic Development Department (double click on the video to get a full-screen version).  The details of the incentives were not provided.  The car plant will be next to the new Tempur-Pedic mattress plant on the West side of Albuquerque.  Here's a map of the area.

So what does a car company have to do with space?  Apparently, the connection was made through Musk being known to the New Mexicans as a member of the X Prize Foundation Board of Trustees. 2008 presidential candidate Governor Richardson has been handing out incentives from New Mexico's budget surplus at a brisk pace.  He has landed Eclipse Aviation, the X Prize Cup, Spaceport America, Advent Solar and now Tesla Motors, among others.  The interesting aspect of these incentives is that many of the recipients are start-up endeavors. Eclipse just delivered its first jet, the first X Prize Cup was held in October 2006, Spaceport America is in the process of construction, Advent Solar is in the process of building its first plant, and Tesla will deliver its first car later this year.

As expressed before, I'm looking on with fascination as Richardson makes all of these high-risk plays with the taxpayers' money.  Probably, I would vote him out of office, but I can't say for certain that this is bad spending.  I note that at the end of 1998, New Mexico had the worst state unemployment rate in the nation.  Right now, it has the 15th best (3.8%), so at a minimum it can't be said that Richardson has done a particularly poor job, even though he has been governor for only 4 years.

Tough Living In Midwest, Especially Ohio

According to the National Association of Realtors, the recent large run-up in median house prices in the United States bypassed much of the Midwest, especially Ohio.  Of the 158 U.S. metro areas tracked, 20 have the dubious distinction of having a negative change in median single-family house prices since 2004.  I have listed those 20 metro areas below.  Of those 20, 15 are in the Midwest.  All of Ohio's population centers are represented in the list, even those cities not particularly reliant on industry, such as Columbus.

Metropolitan Area	Q4 2006 Single- Family Median Price	Change From Year Ago Quarter	% Change From Year Ago Quarter	Change From 2004
	($1,000)	($1,000)		($1,000)
Springfield, IL	94.9	-11.0	-10.4%	-8.4
Barnstable Town, MA	373.5	-31.7	-7.8%	-3.7
Youngstown-Warren- Boardman, OH-PA	80.0	-6.7	-7.7%	-6.0
Toledo, OH	104.8	-7.9	-7.0%	-8.7
Akron, OH	110.2	-7.6	-6.5%	-6.7
Columbus, OH	138.7	-9.2	-6.2%	-8.0
Worcester, MA	274.7	-14.8	-5.1%	-1.2
Grand Rapids, MI	129.5	-5.6	-4.1%	-3.4
Indianapolis, IN	117.1	-4.9	-4.0%	-4.6
Topeka, KS	101.1	-4.1	-3.9%	-1.0
Cincinnati-Middletown, OH-KY-IN	138.7	-5.0	-3.5%	-3.8
Cleveland-Elyria-Mentor, OH	130.9	-4.8	-3.5%	-5.5
Cedar Rapids, IA	129.2	-4.6	-3.4%	-0.3
Lansing-E.Lansing, MI	135.0	-4.1	-2.9%	-2.9
Boston-Cambridge-Quincy, MA-NH	388.0	-9.5	-2.4%	-1.7
Pittsburgh, PA	112.2	-2.1	-1.8%	-1.2
Detroit-Warren-Livonia, MI	154.6	-1.6	-1.0%	-6.4
Elmira, NY	78.4	-0.4	-0.5%	-0.4
South Bend-Mishawaka, IN	89.8	-0.1	-0.1%	-3.8
Canton-Massillon, OH	106.2	0.1	0.1%	-9.0

One of the important aspects of home ownership that is not always discussed in detail is that the effective cost of living in a house is impacted by the rise or fall of the price of the house.  To arrive at the effective cost, take the carrying cost of the house -- mortgage plus insurance and maintenace -- and add the net change in house prices.  For a person owning a median-priced house in Columbus ($147,000 in 2004), the monthly carrying cost may have been modest, but since 2004, he also absorbed a non-cash cost of $8,000 due to house prices falling, or about $270 per month.  That's a lot of money.

Meanwhile, a person owning a median-priced house in Washington, D.C. ($340,000 in 2004) paid hefty carrying costs, but received a non-cash benefit of $82,000 due to price appreciation, or about $2,700 per month.  On a net basis, he was paid to live in the Washington area.  It hardly seems fair that a place like Columbus is kicked while it's down at the same time that a place like Washington is doubly-rewarded for good times, but that's essentially what happens.

The trend over the past couple of decades has been a slow migration away from the Midwest to the South and West.  This leaves the Midwest in a precarious position.  It must work hard to increase its attractiveness.  The margin to err is small.  In particular, the state leadership in Ohio has been poor over the last decade, which put Ohio at the mercy of the kicking boot.  As a Republican, it pains me to admit that the GOP was mostly in charge during this period.

Another trend in the Midwest is a slow migration away from rural areas to suburban/urban areas.  Because of this trend, living in a rural area that is not within commuting distance of a major city is more expensive than it seems at first blush.

Note:  It's odd that immigration tends to be unpopular in rural areas, since these areas probably would benefit the most from it.  In these areas, it would be easy for an immigrant to buy a median-priced home because the carrying costs are so low.  There are some exceptions to the rule of immigration to rural areas.  The meat packing and labor-intensive agriculture industries have attracted immigrants to rural areas, for instance.

Maryland Politicians Pushing Green Line Extension

It is interesting to note that since the Metrorail silver line extension to Dulles Airport has moved forward, Maryland officials have started talking about an above-ground green line extension to Baltimore-Washington International Airport (BWI).  The convenient excuse for the extension is the military moving more than 5,000 jobs to Fort Meade, a base equidistant to Greenbelt and BWI.  There's nothing like a little inter-suburban rivalry to loosen the purse strings.

Metrorail has proven to be a good proposition for the District as it seeks to anchor the metro area and increase property values.  I would like to see city officials cement this advantage by building one or more additional lines in the city.  Some areas in need of additional service include Georgetown & Wisconsin Avenue, 16th Street/Georgia Avenue from Columbia Heights through Walter Reed Medical Center (which eventually is to be closed and turned over for development to the city), New York Avenue/Rhode Island Avenue through the National Arboretum to Mt. Rainier, and H Street from Union Station through Southeast D.C.  There are also opportunities to decouple some lines to make the system more convenient and to increase system capacity.

At about $225 million per mile underground, Metrorail seems to have scared off city officials from further investment, however.    In my opinion, the city is not valuing highly enough the billions of dollars in development investment that Metrorail stations are attracting in the areas in most need of it.  Further, city officials do not appear to take competition from the suburbs seriously enough.

More Discussion About Ethanol

For those of you who have broadband, Google Video has a presentation by Vinod Khosla, a successful venture capitalist, about ethanol.  He suggests (Powerpoint, 7.3 MB) that ethanol is competitive with oil at $35 - $40/bbl and that cellulosic ethanol made from switchgrass has many desirable features.  He goes on to say that switchgrass adds nutrients to the soil.  In order to catalyze the uptake in use of ethanol, Khosla proposes a set of government initiatives, such as mandating that E85 (85% ethanol, 15% gasoline) pumps be offered at certain gas stations.

One of the dispiriting aspects of Khosla's talk is that he relies on the government to do the spadework on ethanol rather than entrepreneurs and the market.  For instance, in addition to the E85 pump mandates mentioned above, he wants to collect $35 million to promote a California ballot initiative that would tax gasoline to the tune of $380 million a year.  For another, he proposes taxing oil when it falls below $40/bbl, such that OPEC can't lower its prices to run ethanol out of business.  I think Khosla's instincts are poor in this regard.  Politics is fickle.  The money would be better spent on more durable gains, such as researching new technologies that make ethanol a more favorable economic proposition.  As people become invested in ethanol, the politics will follow.  Besides, for my tastes, we already have too much economic coercion going on in our society.

A couple of months ago, I had a discussion with my mom and dad, where they argued that using ethanol would mean essentially burning our topsoil, no matter that the ethanol feedstock was switchgrass rather than corn.  However, Khosla says that switchgrass enriches the soil, even though he doesn't present any backup.  I always have been sympathetic to my mom and dad's view with regard to ethanol from corn, but I would like to see some facts on how the soil is impacted by growth of switchgrass on a mass scale.

In any event, Khosla also mentions an aspect of ethanol that surprised me:  It takes only $40 per vehicle to convert a gasoline-only vehicle to a Flex-Fuel Vehicle (FFV) that can burn E85 or regular gasoline.  The car companies probably can justify this expense on positive PR grounds alone.

Metrorail Extension to Dulles Airport

It's all over but the politics and newspaper articles.  The 23-mile, 11-station extension of Metrorail to Dulles is going to become a reality within 10 years for a cost of about $4 billion.  This extension is the first major addition to the system since the 1960s metrorail plan construction was completed in 2001.  The extension represents a more than 20% increase in track miles for the system.

I strongly support this extension, especially since I will not be paying for it and my boss will be paying for it.  Much of the construction costs will be defrayed by the Metropolitan Washington Airports Authority through increased tolls on the Dulles Toll Road.  The Airports Authority was given responsibility for the project by the Virginia governor in an expedient political deal that swept away several intermediate steps between planning and construction.  The Washington Post has a good article regarding the move.

One interesting aspect of this extension is that it is being built all the way out to Loudon County, an outer suburb of Washington.  Without the existence of Dulles Airport, Loudon County would not have the population density required to support the extension.

Currently, it is a hassle to travel to the airport such that flying out of Reagan National Airport is much more convenient.  A traveler flying out of Dulles must transfer from metrorail to metrobus at the Rosslyn metro station.  However, even though Reagan National is beautiful and convenient, it cannot grow to accomodate budget airlines and international flights.  Normally, tickets cost much more for flights out of Reagan National than Dulles.

Overall, the extension is not the most highly favorable to the city of Washington (as opposed to the Washington metropolitan area), because it tends to move the center of gravity for the system to the Virginia suburbs.  The current center of gravity of the metrorail system is downtown D.C.  I continue to favor an aggressive build-out of Metrorail within the city limits, even if it is gaudily expensive, in order that we fully share in the benefits of these metrorail extensions to the outer suburbs.  As it stands now, ridership into the city is bumping up against constraints in the 1960s plan.

John Doerr is Being a Dork

Last evening, John Doerr, the famous Silicon Valley venture capitalist, was talking down the American economy on the Charlie Rose Show with a comparison between Singapore and the U.S.  He stated the Singapore had a per capita GDP of $37,000, while the U.S. has a per capita GDP of $30,000 and that therefore Singapore is a good model (authoritarian) of what can be done with technology.

But of course, his figures are rubbish.  The per capita GDP of the U.S. is $40,000, rather than the $30,000 he quoted.  The per capita GDP of Singapore is $27,000, rather than the $37,000 he quoted.  Furthermore, the U.S. has 300 million capitas, while Singapore has 4 million.  The conclusions we draw from these figures are directly opposite of what Doerr proposed.

What interest do technologists have to talk down the American economy and how we do things with regard to technology (education, R&D, etc.)?