Wednesday Wisdom

WHO?

Theodore Paul Wright, also known as T. P. Wright, was a U.S. aeronautical engineer and educator. He was born in Galesburg IL, on May 25, 1895. He graduated from Lombard College and Massachusetts Institute of Technology and later served in WW1. He served as administrator of the Civil Aeronautics Division after the war in 1944–1948. His career spanned numerous positions, including Naval Aircraft Inspector and chief engineer of the Curtiss-Wright Corporation. He was a member of the National Defense Advisory Committee under President Franklin D. Roosevelt and Chairman of the Joint Aircraft Committee and served as director of the Aircraft Resources Control Office and a member of the War Production Board. He finished his career as vice president of Cornell University in charge of research from 1948 to 1960 and served as acting president in 1951.

While studying airplane manufacturing, Wright determined that for every doubling of airplane production the labor requirement was reduced by 10-15%. In 1936, he detailed his full findings in the paper “Factors Affecting the Costs of Airplanes.” Now known as “Wright’s Law”, or experience curve effects, the paper described that “we learn by doing” and that the cost of each unit produced decreases as a function of the cumulative number of units produced.

Gordon Moore, a pioneering figure in the world of technology, is best known for co-founding Intel Corporation and formulating what became widely known as "Moore's Law" in 1965. Born on January 3, 1929, Moore's impact on the semiconductor industry and computing technology has been profound. Moore's Law predicted that the number of transistors on a microchip would double approximately every two years, leading to a remarkable increase in computational power and the miniaturization of electronic components. Serving as Intel's CEO from 1975 to 1987, Moore played a pivotal role in transforming the company into a major player in the semiconductor industry. His visionary leadership and contributions have not only shaped the trajectory of Intel but have also had a lasting impact on the entire field of technology. Beyond his corporate endeavors, Moore and his wife, Betty, have been actively involved in philanthropy, establishing the Gordon and Betty Moore Foundation in 2000. Through his groundbreaking work and enduring legacy, Gordon Moore has left an indelible mark on the evolution of modern computing and semiconductor technology.

What he produced

In 1936, he published an important paper entitled "Factors affecting the costs of airplanes" which describes what is known as Wrights Law or Experience Curve Effects. The paper describes that "we learn by doing" and that the cost of each unit produced decreases as a function of the cumulative number of units produced.

Flying with Wright

In 1936 Theodore Wright wrote about a linear and measurable production of airplane wings and the costs associated with the expansion of production. Essentially Wright discovered while studying airplane manufacturing that the cost of an airplane wing is decreased by a measurable and sustainable levels as production doubles. What Wright produced was a statistical tool for analyzing production and efficiency. This production of goods tool can be applied to many products, but technology has really highlighted this principle in recent years. The importance of this principle is that having a predictable measurement of cost, as production ramps up, indicates the potential for both revenues and margin growth.

Most people who have lived through the age of the internet are familiar with Moore's law (ML). Gordon Moore, one of the founders of Intel, noticed that the number of transistors per square inch on integrated circuit boards doubled every 18 months. In other words, the speed and capacity of computers would double every 18 months, which in turn led to the growth of the internet and new technologies. This law, not to be confused with the laws of physics, which is a definable calculation, is an observed hypothesis or a "First Principle" which has shown to be predictive in nature. Moore's Law (ML) ended up being an oracle over the last 30 years by successfully predicting the explosion of computing power and technology. As an investor, if you applied this first principle law, perhaps you would have invested in Intel, Apple, and Nvidia with tremendous success as computation power has exploded. But Moore's law really only explains part of the premise of successful adoption of technology as an investment thesis.

Death of Moore's Law?

As computing power has continued to grow, proving Moore's law to be prophetic, the last decade has led many people to speculate that this exponential growth couldn't continue, and the ML would finally lose its relevance. This prediction has turned out to be premature and the law remains prescient today. However, when it comes to investing tools, a similar and lesser-known law has also shown tremendous predictive value. This law may become considerably more important in the future for judging future technology advancements as they become increasingly embedded across all industries. This law or hypothesis, which shares similarities with ML, has also been predictive of technological growth and this is known as Wright's law.

"Moore" likely the death of combustion engines?

One of the most exciting applications of Wright's law is to the electric vehicle (EV) sector.

We have seen an increase in both EV companies as well as technologies like batteries and charging stations supporting the rise of these cleaner vehicles. We could reasonably argue that Wright's Law is demonstrably excellent at explaining the momentum of EVs as the price of production continues to decline. We are at an inflection point between EVs and the traditional combustion engine, especially when we factor in all the costs of maintenance and gas. According to the International Energy Association, the cost for lithium batteries has gone from 1,110 KW/H in 2010 to 126 Kw/h in 2020 while a typical battery has 37 kw/h to 60 kw/h meaning cars can travel a longer distance before recharging. Typically, these trends that are supported by Wright's or Moore's laws tend to be robust and have long-lasting cycles. With further improvement to batteries, EV infrastructure, and the support of software to provide data, this trend toward EVs seems inevitable.

Other Applications?

One of the more striking examples of Wrights Law has appeared in the healthcare industry. Both data-driven intelligence and artificial intelligence could be huge drivers of cost reduction when it comes to DNA sequencing and personalized healthcare alternatives. The principal of Wrights Law is also applicable to the energy industry. We have seen this play out through the technological advances of locating and then the fracking of natural gas as well as in the production of solar panels. Additionally, capital markets may also make huge advances in cost reduction through new technologies like blockchain software, which will bring about greater efficiency through automation by smart contracts and reduce cost over time.

2024 (yes, it is) why do we care?

Marc Andreessen famously said, "software is eating the world". In other words, computing power has taken a foothold across every industry and is becoming more ingrained in every aspect of a business from decision making to supply chains. This is why when evaluating a business and its technology, Wrights Law may be the essential tool to predicting mass adoption and future success. As far as the auto industry, where increasingly cars have become more reliant on computer technology, EVs will continue to be competitive in both overall performance and price.

Epistemology is the branch of philosophy that deals with the nature, scope, and limits of human knowledge. It explores questions about what knowledge is, how it is acquired, and what justifies certain beliefs. First-principle thinking fits into this framework because it involves understanding and identifying the foundational truths or principles on which knowledge can be built. Essentially, first principle thinking is a logical way to re-engineer a problem by breaking it down big issues into smaller segments and then re assembling them. Both Moore's Law and Wright's Law provide a way of understanding the rapid pace of technological advancement and innovation through efficiency while reducing the overall cost.

Are we at an inflection point where the future of the combustion engine is relegated to our memories and museums? Time will certainly tell, but I wouldn't bet against Moore or Wright.

And now you know...

Thanks, Dad, for the gift of curiosity!

Philosophy is the art of thinking, the building block of progress that shapes critical thinking across economics, ethics, religion, and science. 

METAPHYSICS: Literally, the term metaphysics means ‘beyond the physical.’ Typically, this is the branch that most people think of when they picture philosophy. In metaphysics, the goal is to answer the what and how questions in life. Who are we, and what are time and space?

LOGIC: The study of reasoning. Much like metaphysics, understanding logic helps to understand and appreciate how we perceive the rest of our world. More than that, it provides a foundation for which to build and interpret arguments and analyses. 

ETHICS: The study of morality, right and wrong, good and evil. Ethics tackles difficult conversations by adding weight to actions and decisions. Politics takes ethics to a larger scale, applying it to a group (or groups) of people. Political philosophers study political governments, laws, justice, authority, rights, liberty, ethics, and much more.

AESTHETICS: What is beautiful? Philosophers try to understand, qualify, and quantify what makes art what it is. Aesthetics also takes a deeper look at the artwork itself, trying to understand the meaning behind it, both art as a whole and art on an individual level. A question an aesthetics philosopher would seek to address is whether or not beauty truly is in the eye of the beholder.

EPISTEMOLOGY: This is the study and understanding of knowledge. The main question is how do we know? We can question the limitations of logic, how comprehension works, and the ability (or perception) to be certain.2