The Continuance of Growth

Timothy B Lee, a technology reporter I'm generally fond of, seems to think we are near the end of technologically-lead productivity growth (outside of IT, medicine, and transport), and that the future is just (i) the rest of the world catching up to where America is now, and (ii) a lot of status competitions and endlessly bidding up the price of positional goods. There's no room in his view for continued improvements in consumer welfare.

This confession is rather shocking, as it shows an incredible myopia about the prospect of near-future technology, and also a lack of imagination about future consumption goods that aren't positional. It really reminds me of the apocryphal quote of Charles Holland Duell, who allegedly said that "Everything that can be invented has been invented" (only Tim is actually saying it!). I know my own position is much closer to what Duell actually said in 1902:

In my opinion, all previous advances in the various lines of invention will appear totally insignificant when compared with those which the present century will witness. I almost wish that I might live my life over again to see the wonders which are at the threshold.

And of course he was right. The century that followed was amazing and saw technological improvement and economic growth that would seem to be science fiction or fantasy to anyone from previous centuries. "Common workers having second homes or vacationing on other continents?? Please!"

In this essay I will argue that Tim is wrong on all counts. There are prospects for dramatic economic growth, both in and outside the sectors he identifies as ripe for improvement; these prospects will be objective improvements over the quality of life of even rich Westerners today; and these improvements will be non-positional, so their price will track marginal costs of production rather than auction pricing.

I. Further Automating the Production of Consumer Goods

Consumer goods are not positional, so their prices track with marginal cost. If you can lower the marginal costs, the prices fall. We have seen this marginal cost improvement most dramatically these last few decades in the production of transistors. A new phone today can replace a multi-million dollar super computer and a whole store's worth of consumer electronics from 1990. But other consumer goods have also gotten cheaper, and will get cheaper yet.

Tim dismisses food as already "too cheap to matter", but most calories consumed today are in the form of a few crops (wheat, corn, rice, soybeans) and their manufactured oil byproducts. This isn't because they're really that good for us or tasty, but because they are amendable to automated farming and thus cheap. One farmer can tend thousands of acres of corn. The same cannot be said of fruits and vegetables, and if you asked Tim I bet he'd agree that Americans don't consume enough of them. And of course they're expensive because they're labor intensive. Fruit and vegetable farming require large numbers of low-skill migrant laborers to work long hours in the sun doing repetitive work. Machine vision and handling is now reaching the level of quality needed to automate the planting, tending, picking, sorting, and packing of these crops, and the price declines that follow will be substantial. Also, lots of labor will be freed up for more productive activity.

Drone aircraft are also playing a role in the further automating of agriculture. Drones can patrol over fields on a near-constant basis, observing them for water issues, blight, ripening status, soil health, etc. This technology is already being deployed.

Healthy proteins are also expensive, and getting more so all the time, as cattle and fish farming push the limits of Earth's biosphere. But we are on the verge of using biotechnologies such as CRISPR to produce as much edible proteins as we need from plant sources, even algae. One study I saw suggested that algae ponds about the size of Rhode Island would produce enough protein to meet the needs of every human currently alive on Earth. If being able to feed everyone on Earth with such a small input of resources isn't growth, I don't know what is.

Tim admits that personal electronics are a growth area, but doesn't seem to think about what it means that factories in China are automating the production of phones and other tiny devices with dexterous robots. Lights-out factories will eventually be able to produce any number of phones, VR headsets, etc. for the cost of materials and electrical power. And that's how you get the equivalent of $50 Android smartphones in every product category. Instead of rich people having one VR headset the family shares, there will be devices of equal complexity in every room.

Transport is also a huge consumer good, both consumed directly (our cars) and indirectly (shipping of products). All forms of transport from the largest cargo planes and ships to personal mobility pods are about to become drones, and we will stop owning our cars directly but rather call them up as needed and share the cost burdens with the other passengers. Automated fleets of long-haul trucks and planes will transform supply chains, and self-driving cars will change our daily life in ways we probably can't imagine now. Of course Tim admitted transport was sector was ripe for disruption, but it also sort of contradicts his point about only catch-up growth existing going forward. Self-driving cars are analogous to having a personal driver take you everywhere, which is not something the top 20% of America have access to. That's a Top 0.1% thing. But soon we will all have it.

The most significant consumer good of all though, by dollars spent, is construction (both residential and commercial). A large part of why housing is expensive in many parts of America today has nothing to do with technology, and is all about the limits on developing new housing supply imposed by local law. But even without those limits, building houses, offices, factories, etc. consumes a great deal or labor and is time-consuming as well. This limits the size of the interior space that any one human can reasonable afford to consume. But if technologies like Broad Group's factory construction or contour crafting takes off, you'll see huge efficiencies in this sector which will translate into growth. Maybe London and New York apartments won't have to be the size of shoeboxes in the near future.

II. Automation of Services

Tim mentioned private jets as one the few things that "the rich" have that everyone else doesn't, but I think this is overly focused on physical goods over services. Most economic activity is services these days, after all, and the rich consume a lot of them. Those are going to become democratized with the near-term explosion of machine learning and automated services.

Tim mentioned medicine as being ripe for improvement, and he's right. But this is more than catch-up growth by making medicine cheaper; healthcare is about to go places that rich Westerners today can only dream of. Look to the convergence of AI (such as IBM Watson), Sensors (such as FitBit and Open Water), and Robotics (such as this robot surgeon) to imagine the possibilities. The ability to have ubiquitous sensors feeding information into a personal AI physician is unprecedented in terms of healthcare management, and it will be available at the cost of software (nearly zero) with necessary machine-precision surgical interventions available for the cost of mass-produced machines (pretty cheap, and consistently higher quality than hand-made stuff).

Another example is private banking and financial advice. They've been unaffordable to the poor for a long time partly because they require a lot of human labor and partly because the banks that sit at the center of the global financial sectors collect monopoly rents and brokerage fees, keeping things expensive (and making financiers very wealthy). Both of those factors are going away. Finance is being decentralized thanks to open financial networks like Bitcoin, and banks sitting at the center of all the webs are about to starve to death as financial transactions make an end run around them. Also, the rise of "robo advisors" is the first step in AI offering tailored, personal investing and cash management advice to everyone for the marginal cost of software (aka, zero).

Similarly, education is being democratized. Artificially intelligent tutors are bringing personalized education to every corner of the world for the cost of an Android laptop and data connection. Although Tim calls this "catch up growth", because aristocracy have always had private tutors, it is non-linear growth nonetheless because there will be much less "cognitive waste" in the world. Instead of brilliant minds being wasted tilling fields in rural India or Africa, they will have the tools to meaningfully contribute to humanity. Doing more with the (biological) capital you have is growth.

Do automated tutors solve the issue of Harvard having limited admission slots? No, but you can solve that problem by other means. Getting into Harvard, after all, isn't so much about getting the education as sending the signal that you have abundance intelligence and drive, and it's that signal (not the English criticism classes) that opens up career and marriage opportunities. But there are other ways of generating those signals that don't need to cost $200,000 or more. One simple example is an IQ test, and I'm sure you can think of others. Start a company, for instance.

III. New Frontiers of Growth (more speculative)

Robot vision and AI systems exist today and its easy to see how they can be developed just a bit more to deliver value in many sectors if you just take 10 minutes to think about those sectors (and not rely solely on trending news topics). But there are also technologies that are more speculative, and offer the prospect of amazing growth in the future.

Biotech is one of them. CRISPR technology is only a couple years old, so it's hard to judge just how transformative this is going to be, but initial prospects suggest "very" transformative. Gene transplants won't just fix people with bad mutations, but will give ordinary humans super-powers, such as the ability break down and excrete coronary or amyloid plaques. Lengthening telomeres and rejuvenating our immune systems and supply of stem cells will extend healthy life by decades. Algae will be given the genetic machinery to produce drugs, useful industrial materials, and even edible proteins that could replace all cattle farming with a few bioreactors. If living decades longer in great health and being able to easily feed 10 billion humans isn't economic growth, I don't know what is.

3D Printing is a big deal. I'm surprise Tim didn't think about this. It won't replace mass-produced injection-molded plastic, but it will allow entirely new abilities by taking advantage of micro-geometries and reducing the complexity of aerospace parts. SpaceX and Blue Origin are already using 3D printing to make engines that traditional technology simply cannot make, which is how SpaceX is able to advertise the Dragon spacecraft's ability to land mass on any solid planet or moon in the solar system. Boeing, Lockheed Martin, and Airbus have also started using 3D-printing to replace complicated parts in terrestrial aviation with simple but previously-impossible-to-make parts, so this matters for stuff here on Earth too. Microlattices, for instance, cannot be made by any other means and offer amazing physical properties.

Speaking of space access though, having access to all the energy and physical resources of the solar system is sort of a big deal. Like how "discovering the New World" was a big deal for Spain. A single and not terribly large platinum-group metal asteroid would have more valuable metals and rare earth elements than have been mined from Earth in all of human history to date, and all you need to refine them out is a big magnifying glass. The asteroid Ceres has more water than Earth does. A single Bishop-ring habitat spun out from a carbonaceous asteroid would have a internal surface area about the size as India. Solar power is rather abundant, to say the least. And so forth. You might think these are fantasies, but that's because you haven't thought about how cheap reusable rockets are going to be, or what efficiencies using the energy and materials already in space will bring.

There are also a lot of companies out there trying to develop next-generation nuclear energy, both fission and fusion. We only need one of them to succeed to allow for nearly limitless energy growth. And once one of them succeeds, we will find a way to use that energy, just as software has found ways to use all those transistors that Intel, NVidia, and ARM keep making.

IV. Time and Labor Saving Consumer Devices

As for saving the time of average consumers, currently the biggest time wasters at home (not just for me, but in general population surveys I have seen) are cooking, commuting, yard work, and laundry. At least the first three of these are about to go away. Cooking will be replaced with robotic kitchens and drone delivery. High quality foods (including cheap fruits and vegetables!) will be deliverable from a smart phone app, so average folks will have the equivalent of a personal chef. (And on the restaurant side, much of the kitchen staff costs will go away) Commuting of course is about to be zeroed out with self-driving cars. You can spend that time working on productive tasks or relaxing instead. Yard work will be replaced with robotic lawn mowers, tree trimmers, and weed removers.

Also it's worth pointing out that these things aren't going to be cheaper just because they replace human labor with machine labor. They'll also allow new business models that make do with a lot less hardware than we have today. You don't need your lawn mowed every day, for instance, so an entire street should share of single robot lawn mower or subscribe to a law mower service that sends out unattended mowers just as near-future Uber will send out unattended taxis. Self-driving cars will be shared cars. Tree trimmers will certainly be shared. That's a once-a-year thing after all.

As for laundry ... I don't know. Maybe one day. We're probably more likely to invent disposable clothes made out of paper before we make a robot that folds clothes. Or not. Hard to say. It's a hard problem.

V. Conclusion

At this point you probably think I'm a hopeless technological optimist, but to me this is just common sense. The timelines are fuzzy, and everything turns out to be a little (or a lot) harder than first imagined, but this sort of stuff does come true eventually. Predictions about cheap solar power have finally come true. Predictions about calling services from your smartphone have come true. Predictions about the increasing power efficiency of smartphones and graphics cards have come true. Machine learning is already exploding and delivering real results, most visibly with self-driving cars.

To come back to the topic of Tim's post, I again suggest that it's shocking that someone who allegedly reports on technology can underestimate the consumer surpluses and new 'super powers' that are about to descend on us. I'd suggest for anyone who thinks along the same lines to do the following exercise: 1) Make a list of all the sectors our economy spends money on, and 2) imagine how robots can replace that. It's going to happen.

Blue Origin enters the fray

There are a number of interesting companies innovating with rockets these days (such as Virgin Galactic and XCOR), but only one that goes to orbit: SpaceX. For the last decade the story of innovation in space access has been the story of SpaceX first and "everyone else" a distant second. Who knows, maybe the XCOR Lynx or Virgin's SpaceShip Three will reach orbit one day, but then again, maybe not.

And that's an unfortunate situation for space enthusiasts, because it's competition which really drives companies to lower prices. SpaceX can lower its costs all day long, but without competition it would have less incentive to open up the space market to everyone. SpaceX needs competitors.

Luckily, as I have mentioned before, United Launch Alliance seems to have finally gotten the memo that the old way of doing things under NASA isn't going to cut it anymore, and real innovation is needed. Their work towards reusability and creating platforms for exploring cis-lunar space is great stuff.

Now a third company has really come into the top ranks: Blue Origin.

Of course Blue Origin is not a new company. They've been around for over ten years now, but they've been so secretive that it was impossible to know what they were really working on or how much progress they were making. Would they get to orbit like SpaceX has been doing, or were they stuck in a sub-orbital development cycle like XCOR or Virgin? Until very recently, we had no idea.

BO's first flight test was April 2015, one year ago this month. It then flew and landed its New Shepard vehicle in November 2015 (reaching space but not orbit), January 2016, and April 2016. That means it has flown the same rocket (not just the same model, but the same actual vehicle) to space three times now and landed it safely. That's higher and with a better flight record than the SpaceX Grasshopper achieved in 2014.

Of course the SpaceX rockets are going to orbit, so they're much bigger, flying higher, and going much faster than the Blue Origin rocket. Successfully landing the SpaceX Falcon 9 first stage last year was a much harder problem in many ways. SpaceX is in the lead in this race, but let's give Blue Origin credit where it's due: They're in the race. No one else (except maybe ULA) can say that.

What Bezos is doing is critical to actually realizing the promise of low-cost access to space. Fly, land, refuel, fly again, cheap. This is mandatory for low-cost space. We don't need another Space Shuttle that cost $1-1.5 billion per launch. So far, SpaceX has shown it can make rockets fairly cheaply and get them to orbit. Blue Origin is showing it can fly rockets and then fly them again. (SpaceX has yet to do this) The company that puts those two features together will be able to change the world. And of course we hope they'll both succeed, so we can all reap the rewards of competition, lower prices, and continued innovation far into the future.

BEAM: 97% cheaper than NASA is just the start

In a few days the SpaceX mission CRS-8 will launch from NASA's Cape Canaveral to the International Space Station. CRS-8 is a cargo resupply mission to ISS; its primary payload is the Bigelow Expandable Activity Module (BEAM), an inflatable expansion for ISS.

I've written before about how SpaceX (and recently, Blue Origin, but that's another post) represents a potential revolution in the cost of space launch compared to systems developed and operated by NASA. That's great, but it's also a truism that it's not enough to get to space - humans need a place stay (where they won't instantly die) once they're there. And that's where BEAM comes in.

The ISS cost $100 billion to construct, using NASA's technology. The total bill is estimated to be around $150 billion (including all costs from international partners), but about $50 billion of that was just the cost of launching the pieces on the Space Shuttle. So $100 billion was just for the strcuture, and that's a lot of money! According to Wikipedia, that's the most expensive structure ever made. It's a plausible claim anyway.

BEAM by comparison cost "only" $17.8 million. That's still expensive by most people's standards, but there are homes in London and New York that cost more. This is within the realm of something that normal humans can afford, and is certainly affordable to larger commercial entities.

Another useful comparison between Bigelow's structures and ISS is the internal volume, since that's where any potential people would live and work. ISS has an internal volume of 916 cubic meters. The Bigelow modules are numbered according to their volume, so the BA 330 has 330 cubic meters of internal volume and the (proposed) BA 2100 has (wait for it ...) 2100 cubic meters of internal volume.

In other words. just three BA 330 modules would have the same internal volume as ISS, and a single BA 2100 module would be more than twice the volume.

We don't have a purchase price to compare the BA modules with ISS because Bigelow is not offering them for sale. The business model to start is to lease the space to national space agencies and corporate interests for 60-days at a time or more. The pricing released in 2014 was $25 million for 2 people for 60 days, which works out to $208,333 per person per day. ISS by comparison works out to about $7.5 million per person per day, so we're talking about a 97% discount from the NASA price. And that's based on SpaceX's non-reusable rocket prices! Getting the stations in orbit is a big part of their final cost, so reducing that price by 90% will eventually lead to even lower prices for Bigelow's leasees.

The BA modules present the opportunity for any developed nation of reasonable size to have a space station as larger or larger than ISS for less than 3% of the cost. It also opens up the ability to go to places besides Low Earth Orbit. A BA 300 station could be landed on the Moon and essentially be a pop-up Moon base for six people. Or it could be placed in orbit around Mars. Or attached to an asteroid mining rig, much as deep-sea living quarters are a part of the modern oil & gas industry.

The big lesson is that when you reduce the cost of something by two orders of magnitude, a lot of previously quiet demand can make itself known. Bigelow has already signed agreements with seven national space agencies and an unlisted number of corporate interests. They're just waiting on a manned space vehicle to prove out so before launching them, and the Dragon v2 is expected to fly in 2017. Before this decade is out you should expect to see a lot more people in space.

From Deng Xiaoping to Donald Trump

Like many Americans of the "professional class", I have been at turns shocked and dismayed by the success of Donald Trump during the current Presidential campaign season. But this isn't a rant against Trump. I have come to understand, I think, why he's succeeding (and why Sanders is succeeding), and to sympathize with their supporters. In that vein, I'm here to ask: Is the near-total control of American politics by corporations at an end?

(In this post, when will speak of the Republican and Democratic parties, I mean as they were, not as they are becoming. Donald Trump may be running as a Republican, but he is not representative of the Grand Old Party. And in many ways, the same is true of Bernie Sanders. I am speaking of the Bush Republicans and Clinton Democrats. For now I will just say Trump and Sanders as stand-ins for what is coming after, but hasn't been named yet)

It's no secret that the Democratic party is most strongly supported by industries that rely heavily on human capital - media, law, and (most faithfully) academia. From a funding perspective, they're essentially a coalition of the creative class and public sector unions. Republicans by contrast have seen most of their support come from industrial and financial capital-intensive firms - oil & gas, home construction, pharmaceuticals, casinos. A few sectors, notably finance, telecom, and defense firms, support both about equally.

And during my lifetime, the laws passed (or pushed) by the Dems and GOP reflected this funding. But overall, they have pushed a pro-corporate agenda. Free trade, low tariffs, and (on the Republican side at least) lower corporate taxes. At an aggregate level this has been good for the US economy, and our economy has grown at a steady clip. If you look at the aggregate or median numbers (such as median GDP/capita) we're doing much better than Europe or Japan.

However what the aggregate and median numbers hide is the distribution of results within the American economy. Over the last 20 years all of the gains have accrued to the upper classes in America, especially at the very top of the economy. Wage income is up or at least steady among the professional classes, and capital income among the management class has become stratospheric. In the public sector, wages have grown at the steady rates that were "negotiated" between the union representatives and the Democratic politicians whose campaigns they funded. But there was no equivalent benefit or protection for the less educated service workers and vocational laborers in America's private sector, where steady job losses and stagnating wages have been ongoing.

The reason for the poor job prospects of American labor class is a fairly straight-forward story of supply and demand. Post-War American corporations faced competition from Japan and Germany, but this competition was paired with demand from Japanese and German consumers. Starting with Deng Xiaoping's reforms in the late 1970s however, the global economy started to experience a massive increase in the supply of labor, but without an equivalent amount of demand for American goods.

The former Soviet Union and, more importantly, India similarly reformed their economies to be more open in the early 1990s, increasing the supply of labor even further. At the same time, America (under both Republican and Democratic governments) continued to sign more and more free trade deals with other countries, including NAFTA in the 1990s, but that was hardly the only one. The combined effect of these reforms is that it was cheap to move manufacturing and some services overseas, and there were no political barriers to doing so.

Again, to emphasize again, this was great for America as a whole. On the aggregate level the economy grew well all during this period, and while recessions happened, they ended. In the 2008 "Great Recession" had one bad year of job losses and then steady gains ever since. And all Americans, in theory, had the ability to buy the cheaper goods and services that flowed from Mexico, China, India, and elsewhere. But in practice what happened to individual Americans was a lopsided lottery. You either did a little bit better or much, much worse. The increase in the supply of labor had two effects: 1) Any time supply goes up further than demand, price falls. Econ 101. The global price of labor was being set by China rather than Detroit, even after accounting for productivity differences. 2) Labor lost a lot of bargaining power. Whether a shop was unionized or not, management always had the option of moving the whole operation to another country, Carrier just decided to do. Combine these effects, and wages go nowhere while jobs go elsewhere.

So what was great for America's professional class, and great for the world as a whole, was bad news for America's working class. In chart form it looks like this:



Wages are down, and also, jobs were lost. Here's the labor force participation rate. You can see it picked up during the 70s and 80s when women entered workforce in increasing numbers, but then it stagnated even as the economy grew during the 90s, and has been falling ever since the turn of the century.



Falling or stagnant wages, increased uncertainty that a job will stick around, and a real risk of becoming permanently unemployed and dependent on others has a terrible effect on people. While life continues to improve in the rest of the developed world, America's death rate climbed thanks to increased suicide and drug overdoses.


I mean, drug abuse has become so bad that pharmaceuticals that relieve opiate-induced constipation are advertising during the Super Bowl.

These are the people that America's political system has ignored for the last forty years. They're the non-elite, less-educated, working stiffs who don't contribute to campaigns or fund lobbying groups in Washington D.C. I know people who insist that political money has limited control over how elections turn out (look at all the money that Jeb spent), but it seems to have a lot of influence over who runs in the first place. Before "the people" vote in the primaries, the donors who fund the campaigns vote (with their checkbooks) in the pre-primary, limiting the pool of potential candidates to people who the donors agree with. And once in Washington, when politicians cast around for ideas on how to solve this or that problem, they turn to think tanks and lobbyists that are funded by the same corporate lobbing groups or politically active rich guys who benefit from free trade. Rich guys like the Koch brothers and George Soros have very different views on many things, but one thing they have in common is zero direct experience with the concerns of the working poor. It may not even be malice.

This despair and anger is what both Trump and Sanders are tapping into, which is why there is a lot of overlap between their supporters. These are the first two candidates that have bypassed entirely the donor primary and decided to represent the working classes directly, although they take different approaches in doing so. Ross Douthat thinks that Trump is a flash in the pan, that he's a personality rather than the representative of an institutional movement, but this is wrong. Trump and Sanders represent a class of American workers in revolt against the American system. And thanks to social media, they don't need an institution like the DNC to organize.

American corporations aren't about to roll over and cede the field to labor, but for the first time in a very long time, they'll have to share it.

What I hope, as someone who wants both free trade to continue for the benefits it brings, and who doesn't want to see anyone suffer from the economic gyrations that free trade inflicts, is that the Corporate Party and the Labor Party of the future realize that there is a mutually beneficial arrangement where the economy is open and competitive but the government acts as a giant risk pool providing generous safety nets to workers who experience factory closings or redundancies. That way the aggregate and median numbers continue to improve even while the variance individual families experience is reduced. This is the place that many European countries have already come to, but I'm concerned that we may end up instead in a self-defeating cycle of political back-and-forth between labor-populism and corporate-cronyism, like Latin and South American economies experience.

The new shape of space

Two quick items that reveal that the major players in the space sector have not only realized that the paradigm is changing, but they're finding the confidence to say so publicly.


Here's a video from United Launch Alliance (the Boeing/Lockheed joint venture) describing the near-term development of Cis-Lunar space, leading to an in-space population of 1,000 people (plus tourists) and $2.7 trillion in space-driven economic activity within 30 years. Personally I think that's conservative, because they don't want to sound crazy. But note that they are predicting that the in-space population will grow from 6 today (the astronauts on ISS), to 20 people (on a mix of commercial space stations built by Bigelow Aerospace) just within 5 years. Robotic prospecting of resources will also begin with the same period.

The key part of this video is focusing on economics. The current amount of activity in space is driven by the cost of lifting propellant from Earth to orbit. Propellant sourced from the Moon and Near-Earth Asteroids would be 1000x cheaper. Processing aluminum and other bulk materials in space would further reduce the amount of material that needs to be lifted from Earth. These sort of cost reductions are what will allow a greater number of private businesses with venture capital to engage in space-based activities.

The second item is an admission from NASA that the Senate Launch System (SLS) has no purpose. Basically, NASA is now scrambling because it's no longer able to ignore what the Augustine Commission told them years ago: the SLS is so expensive, that even if they build it they can't afford to maintain it and fly it. And now they are approaching the steps where they start building the rocket, but they still don't have any missions for it (because no mission with SLS's price tag can survive budget review).

It's not clear how much longer this farce will continue. SLS was never a rocket program - it was from the beginning a jobs program for the NASA centers to produce endless paper studies, and the third-party contractors who would allegedly eventually build the rocket to do likewise. This make-work attracts tons of government funding, some of which is recycled back into the campaigns of the Senators who pass the funding bills in the first place. As a funding tool for political campaigns, the SLS mission continues to perform nominally. But SLS development money is crowding out high-profile missions that the public actually likes, like the Mars rovers, and eventually this funding competition will come to a head. Once SLS is actually here, and the per-flight price tag is sitting on the Budget Committee's table, someone in DC (who isn't a Senator from Florida, Alabama, or Texas) will eventually ask why SLS exists when launch services from SpaceX and ULA (and maybe Blue Origin by that point) are available for 1/100th the price.

And when that day comes, hopefully, NASA will finally get out of the launch business and focus on the exploration and science missions for which they are uniquely suited.

A Primer on Bitcoin "Mining"

A friend asked me to explain, in a simplified manner, how important the "mining" process is to Bitcoin (and its alt-coin forks), and whether that process is integral. This post an attempt to answer that question only, without going into all the details of how Bitcoin works.

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The first thing to understand is that Bitcoin is an amalgam of cryptographic tools, each with their own purpose. Each tool solves a particular problem that decentralized ledgers have. The mining process is integral to solving Sybil attacks.

A Sybil attack is something that can happen to any system where enrollment is open to all parties and there is no trusted moderator to authorize identities. Since anyone can sign up, individuals who want to attack the system can create thousands of accounts and flood the system with false information, or spam. This is exactly what happens to email systems, which are federated and have no central authority, and thus spam filtering is an essential part of any useful email service.

The most common type of spam filter (such as Gmail uses) is based on pattern recognition. Machine learning algorithms rely on users to flag emails as spam and then as enough data is gathered, begins to automatically filter emails that are similar into your spam folder. This is considered "good enough" for most email systems, as the cost a user pays for receiving a spam email in their main Inbox is usually just the few seconds of their time it takes to recognize it as spam and mark it as such.

Back in 1997, a cryptographer named Adam Back came up with a different type of spam filter, which he called Hashcash. The central idea of Hashcash is that email senders would be required to attach a cryptographic hash to each sent email that represented an amount of useless work; a deliberate waste of computing resources. Back called this attachment "Proof of Work". Email servers receiving email would be able to quickly and easily check whether the Proof of Work was legitimate, and would automatically delete any email that didn't check out. The idea was that if the wasted resources exceeded the ROI of sending spam, spam would stop. And spam has a very, very low ROI per email. It would only require wasting a few cents (or maybe fractions thereof) worth of computing resources to kill spam for good. Receiving email servers could also set the level of Proof of Work they required to pass email on, so maybe users who got spam when the filter was set to 0.1 cents would increase the barrier to 1 cent.

Unfortunately, internet users really like "free" email supported by ads, and really don't like paying postage to send emails (even a few tenths of a cent), so Hashcash never caught on as a spam-fighting tool.

Satoshi Nakamoto (Bitcoin's pseudonymous developer) saw the usefulness of Hashcash though, and incorporated it into Bitcoin. Generating the "Proof of Work" was assigned to the parties to the Bitcoin protocol called "Miners". They waste tremendous computing resources (and electricity) to generate insane amounts of Proof of Work, only instead of attaching the Proof of Work to an email they attach it to a block of Bitcoin transactions. The other Miners (and the Bitcoin nodes, which do not mine) check the Proof of Work for validity, and assuming it checks out everyone adds the block to their copy of Bitcoin's blockchain.

The point of Miners producing Proof of Work is for the same reason Back attached Proof of Work to emails - to prevent spam. Only in Bitcoin's case, spam isn't a bad email, it's a bad financial transaction. Specifically, without mining someone could spend the same Bitcoin twice, which is called a double-spending attack. A Bitcoin spammer could send their Bitcoins to you, but they could also simultaneously send them to any number of other parties (including themselves!). This sort of attack would increase the number of bitcoins in circulation with each fraudulent transaction, setting the Bitcoin ecosystem into a death-spiral of hyperinflation.

The way that Proof of Work prevents double-spending is a bit more involved. The bare essentials of what you need to know is that when you "hash" a digital file, you're essentially creating a unique string of characters that "represents" that file. Change even one bit of the file and the hash string also changes. Therefore you can easily and verifiably pair digital files and hash strings. The Bitcoin miners attach hashes of the previous block of transactions into each new block, which creates a verifiable "chain" of transaction blocks, each provably leading from one to the next. You can't download the Blockchain, change a few transactions in a block from the day before, and present it to another node as proof you own those bitcoins, because if you altered block 25,115 to give yourself money, the hash of your altered 25,115 would not match the hash of block 25,115 that's in block 25,116. Your transaction would be automatically rejected as invalid.

Of course if the most recent block in existence is 25,116, you could send the same bitcoins to both Bob and Chris. They, after all, have no block 25,117 to compare it to, so assuming that Bob and Chris are not in contact with each other, they would both think that the transfer to them was legitimate. However, when you broadcast both of the transaction to Bob and Chris, the miners competing to produce block 25,117 would recognize that the two transactions contradict each other, and would discard one of them (usually the one with the lower fee, or if the fees were identical, they'd just discard one at random). That's why people who receive bitcoins are advised to not treat a payment as "final" until it is several blocks "deep" into the established blockchain. Assuming Bob and Chris are prudent and risk-averse merchants, they would wait until at least block 25,120 before sending to you whatever you were trying to buy with the bitcoins. (And the one whose transaction was not included in the blockchain might be pretty mad)

Simply put, without the Mining process, Bitcoin would not be both a (1) secure and (2) open, system for transferring value. Some protocols, such as Ripple, have dispensed with mining, but they necessarily also had to dispense with "open". The Ripple protocol is a closed protocol that is entirely controlled by a trusted central party. The "blockchain" initiatives many banks are working on are the same. That's fine for some applications, but not if you're worried about that central party getting hacked by gangs or subject to a legal injunction impounding all your assets. If you want money with censorship resistances, you need it to be decentralized and secure. Some new cryptocurrencies, in an attempt to remain decentralized, secure, and open without the wastefulness of Proof of Work, are trying to replace Proof of Work with a different protocol called Proof of Stake. The security provided by Proof of Stake has not been proven yet however.

A Farewell to Aprons

There’s a saying among futurists that once the Model-T proved that mass manufacturing of low-cost cars was possible, and that demand for them was high, it was easy to predict the eventual mass adoption of cars. And there were a few second-order effects you could then predict too, like the need for a fuel distribution system and professional car repairmen. But few people predicted that everyone having a car would cause downtown shopping districts to be replaced by big-box stores on the edge of town. This essay attempts to draw together a few trends now emerging, and predict once of those harder-to-see second order effects.

I think cooking at home is set to nearly disappear within fifteen years (other than hobbyists). Within twenty years some new construction will cease to include much of a kitchen. It will become an afterthought, like the half-bath on the first floor of your average single-family home, not a central piece of family life. The days of $50,000 kitchen remodels are soon to be over.

What’s this based on? The convergence of two trends.

Trend 1: Robotics, Sensors, and Automated Cooking

Cooking is becoming subject to full automation. Momentum Machine’s automated kitchen can produce a gourmet burger from scratch ingredients. The Innit kitchen knows the recipe and cooking instructions for thousands of meals. The Moley Robotic Chef has two arms and hands that mimic the motions of Michelin-rated chefs to reproduce any meal. Eatsa is a fully automated fast-food restaurant in San Francisco. And so on.

The technologies driving this are the advances in robotics, machine learning, and sensors. These trends are covered in depth elsewhere, but the basic idea is that all the little sensors that going into smartphones and other mobile technology is combining with robotics-driven advances to produce robotic chefs that can sense the food they are working with and cook it properly.

This technology isn’t necessarily cheap on a per-unit basis. And I don’t expect it to come to the personal home, not any time soon. A robotic kitchen in a personal home would be dead capital 22 hours out of the day, just sitting there, since our need to eat just three meals a day isn’t going to change. In stage one of the great change coming to cooking, this technology will be deployed at restaurants, destroying millions of serve-sector jobs. Fast-food restaurants will become automats. Fancy restaurants will have a wait staff in the dining room but limited personnel in the kitchen.
But that’s an easy prediction. It’s already fairly obvious.

Trend 2: Supply-chain by drone

When most people hear “drone”, many think of the little quad-copters that have consumer and professional versions. I mean those too of course, but I also mean something much broader than that. When I say drone, I mean any self-propelled, unmanned system for transport. The Predator drone delivers bombs. Self-piloted cargo ships with 10,000 containers are drones. Little dog-sized boxes on wheels for home-delivery of groceries are drones. And so forth. Form-factors will vary by local geography and cargo, but the basic idea is that delivery-robots are going to quickly become our society’s distribution system. They’re going to replace air freight, cargo ships, and long-haul trucking, and solve the last mile too. This is going to revolutionize many industries of course, put millions of drivers and pilots out of work, and allow Amazon to bring you a tube of toothpaste on a moment’s notice. Wonderful! (Well, maybe not for the drivers and pilots…)

Similarly, Amazon is leading the way in automating warehousing and packaging for delivery. They still have humans involved in picking and packing, but you better believe they’re working on automating that too. Amazon’s ultimate goal has to be “dark” warehouses that minimal human supervision.

Taken together, supply chains are going to get automated in the same way that manufacturing has already been automated. At the beginning, and perhaps for a while, humans will be involved at the loading and unloading stages of delivery, but that is a minimal amount of labor compared to the current level of human labor involved in things like running FedEx and the Postal Service. Eventually I expect products to be travel half-way around the world, from producer to consumer, without any human touching them or operating any of the vehicles it travels in.

The Combination of the Two:

I want you to consider a “freshly prepared supply chain”, on the level of a city-sized area. Consider this how will reduce food waste, save time and effort for consumers, and offer a great variety of food items for (relatively) immediate consumption.

Stage 1 is that restaurants begin to automate their kitchens, lead by national chains but eventually including locally-owned restaurants. Eatsa is already fully automated, but this will spread quickly to established chains. The Momentum Machines burger-maker is an obvious good fit for burger joints like Five Guys. If not Five Guys specifically, a competitor. Similar machines will be developed for pizza, pasta, and so forth. When a high-throughput machine for commonly consumed items is not available, a highly-automated kitchen combining Moley’s chef-arms and Innit’s technology will allow a few low-skill employees to produce large numbers of carefully prepared food items.

Happening at the same time is the rollout of general delivery companies for prepared food, like Uber Eats. Currently Uber Eats uses human drivers in traditional cars, but Uber CEO Travis Kalanick has been completely transparent about his intention to buy and own self-driving cars as soon as they’re available. And that’s by road. By air we are seeing Google Wing and Amazon Prime Air as leading the way in local delivery by drone.

Within five years, when delivery by drone and self-driving car is common, initially we will see a mass adoption of meal delivery via App. I expect that websites like Seamless will see some very good years in the near future if they adapt to this, and there’s no reason to think they won’t. But the less obvious play is in managing the supply chain behind the restaurants. The key insight here is that there’s no reason the restaurant a meal is ordered from has to prepare all the food it sells. Preparation specialization can happen at a metro-regional level, as long as it is within the range of common air drones—or even further, if the item refrigerates well. Imagine one kitchen in a city-region that produces the best puddings, or cream sauces. They might just produce a few ingredients, or common side items like salads or fresh-baked bread.

This might sound expensive, and something only the rich will participate in, but I imagine it will be the opposite of that. Momentum Machine’s burger-maker makes “gourmet quality” burgers with fresh ingredients for the same price as a McDonalds burger. The Eatsa automated restaurant provides fresh bowls of food for the same price of a McDonalds combo meal. And McDonalds itself can lower prices from its current price-level by replacing staff with automated versions of its kitchens.

There are other cost-savings too, besides automating human labor. An automated kitchen can be set up in the warehouse part of town, and pay warehouse rent. It doesn’t need to be downtown to serve a region, because the drones take care of bringing food to where the people are. Further, food items that are currently rejected by buyers for grocery stores for cosmetic reasons, and then trashed, can be used by the meal prep supply chain (and purchased from farmers at a discount to the "pretty" food). Supply-chain management software will use items before they wilt or expire much more efficiently than the average American consumer, who throws away nearly half their food every year.

A second source of cost-savings will be the value customer. Right now the profit margin on the sale of a bowl of rice and beans is too low for traditional eateries if it’s sold near cost. Restaurants want to sell high-value items like cocktails, wine, and steaks. An automated supply chain without wait staff will eventually realize that a family-sized portion of rice and beans, plus some vegetables, can be acquired and prepared for less than $1, and sold at a “mere” 100% mark-up. Meatballs or other proteins can be added as a value-add item, but aren’t necessary for human nutrition, and thus freshly prepared but simple meals will be available to nearly any American.

The greatest cost-savings of all however is time. Nearly a hundred years ago much of the work that went into maintaining a home was automated with the invention of the electric dishwasher, vacuum, washing machine, and dryer. The home-manufacture of clothes, once common, was replaced by the Sears catalog, and later the department store. The last two chores remaining that Americans spend the majority of their time on are folding laundry and preparing meals. Automating those away will produce tremendous improvements in quality of life, especially for families who do not have an adult at home full-time or part-time to prepare meals. The harried working-parents who currently take their kids to McDonalds will appreciate the convenience of a meal being brought to the home, ordered through an app as they commute home. I suspect it will be irresistible.

So, to recap, I will draw your attention again to a few key points. The drone supply chain will be able to distribute freshly prepared foods quickly and conveniently anywhere in a metro region within 10 minutes or so (both to consumers and middle-man kitchens). Automated kitchens will be able to consistently produce well prepared meals in a high-volume manner. These meals will be tastier than most meals prepared at home, and probably for about the same cost as groceries at the store (just like how Costco rotisserie chickens are cheaper than whole raw chickens) – and that's before accounting for convenience and time saved. Eventually this will lead to consumers losing the skill to prepare meals (just as most of us cannot sew clothes), and the family kitchen will probably be relegated to milk and breakfast cereal, plus a microwave for reheating leftovers. Kitchens will become smaller, people will spend less money on them, and the “social center” of the home will move from the kitchen to the dining areas – much like the aristocracy of previous centuries.