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🦉 10x curiosity - Learning Curves and Wright’s Law


🦉 10x curiosity

March 6 · Issue #246 · View online

🦉 A weekly sample of links that made me think 🤔

Also published in 10x curiosity
This story is part of my short course on Carbon Literacy for Industrial leaders

“[T]he future will be far more surprising than most people realize, because few observers have truly internalized the implications of the fact that the rate of change itself is accelerating.” Ray Kurzweil, The Singularity Is Near
Wright’s law observes that as the production volume of an item increases, its cost fall and quality improves more quickly as the industry learns to improve the process. The rate of this reduction in cost and improvement is know as learning curve.
The learning curve model posits that for each doubling of the total quantity of items produced, costs decrease by a fixed proportion. Generally, the production of any good or service shows the learning curve or experience curve effect. Each time cumulative volume doubles, value-added costs (including administration, marketing, distribution, and manufacturing) fall by a constant percentage. Experience curve effects — Wikipedia
The learning curve ties in with the concept of exponential improvement (Life Implications of Exponential Growth ) which results in compounding improvements with every doubling (or halving!) and a rapid transformation of whatever industry is seeing this impact.
The following gives an example of exponential growth and how surprising the change is at the very end. (How to Think Exponentially and Better Predict the Future (
Azeem Azhah introduces the concept of Wrights law and learning curves in Chapter 1 of his wonderful book “Exponential
… Wright’s Law was developed by Theodore Wright, an aeronautical engineer who set out to understand how much aircraft cost to manufacture and why. He looked at the production costs of planes in the 1920s and 1930s and noticed that the build cost seemed to decline following a pattern. The more aircraft built meant engineers, mechanics, and designers had to assemble more airframes, and the cheaper each individual specimen became. 56 His theory was that, for every doubling in units produced, costs would fall by a constant percentage. The exact nature of the decline would depend on the engineering in question. In the case of the aircraft Wright studied, it was a 15 percent improvement for every doubling of production. This 15 percent improvement is known as the “learning rate.” In Wright’s rendering, the reason was simple. As engineers build a product, they come to understand what it takes to build it better.
For this reason, the key to the continuation of Wright’s Law is increasing volume. Greater demand drives improvements in the process, which in turn drive down costs, which in turn drives further demand, and so on. This is a distinct concept from the notion of economies of scale — the idea that efficiencies come from having bigger operations, or getting better prices from suppliers. Rather, Wright’s emphasis is on the relationship between demand and skill. As demand for a product grows, the people producing it have to make more of it. And that means more opportunities to learn by doing. As they put what they have learned into practice, costs get driven down further and further.
This process holds true for many exponential technologies. Even mighty wind turbines are not immune to such effects. The generating capacity of a wind turbine is proportional to the area that the blades sweep through. That area grows by the square of the length of the blades, so if you are able to manufacture a blade twice as long, you get quadruple the impact.
But the greater cause of the newfound power of Wright’s Law lies in economics. Previously, the S-curve of demand tapered off when a market reached saturation. Today, that point of market saturation is much more distant — because global markets are so much larger. And this means that the process explained by Wright’s Law can continue for much longer, and the exponential gains can continue to mount up.
The cycle has an inherently exponential logic. And so Wright’s Law describes how technological progress takes on its own momentum: the more we make of something, the more demand there is, and so the more we make. This, at heart, is why Wright’s Law is driving us into an exponential future. We learn by doing. And in recent years, we have been doing more. Eventually, that resulting process tipped us over into the Exponential Age.
Implications for the shift to renewables and climate change.
The basic building blocks driving the renewable revolution, silicon PV cells, lithium ion batteries and computer transistors are being made in their billions and as such are seeing significant learning curve improvements. This pace of change will accelerate further, reducing their cost many time further than even todays low prices. This will never be the case for large bespoke technologies like coal or nuclear power stations. They are so massive (seeking economies of scale for their fixed capital) that the learning curve is virtually no existent. Prices of building new coal and nuclear have in fact increased.
renewables follow steep learning curves and fossil fuels do not. A key reason is that renewables do not have fuel costs and comparatively small operating and maintenance costs, which means that the LCOE of renewable energy scales with the cost of their technologies. And the key technologies of renewable energy systems — solar, wind, and batteries — themselves follow a learning curve: each doubling of their installed capacity leads to the same decline of costs.
If we are serious about making the transition to a low-carbon global energy system we have a fantastic opportunity in front of us. Scaling up renewable energy systems doesn’t only have the direct benefit of more low-carbon energy, but has an indirect side effect that is even more important: cheaper energy.
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