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Drew

From the source documents it looks like the Chinese construction industry is benefiting from scale and standardization, but it doesn't show that it is more productive in a different environment, such as in the US, where there are cultural, regulatory and financial reasons that standardization has not become the norm. As developers main concerns are local politics/regulation and finance, this appears be in the area of what I will call "snap-backs" where at some time the benefits of technology will overwhelm the existing institutional structure, but not there yet. Health and education are similar areas - even medical tourism, which seems like a straight forward improvement hasn't taken off. I worked in the educational testing industry for a few years and the players are definitely looking over their shoulder for when someone re-invents the education industry, as well as trying to be that someone, but it still hasn't happened.

Kartik Gada

Drew,

Standardization, while not seen as a technology itself, certainly enables other technologies to emerge, since the addressable market for entrepreneurs becomes larger.

Recall the May 2017 ATOM AotM that discussed the effect of standardized shipping containers :

https://www.singularity2050.com/2017/05/atom-award-of-the-month-may-2017.html

China is seeking to build things in neighboring countries, under the Silk Road project. Those countries are usually poorer than China, and can standardize around China's methods easily.

Geoman

The one thing that concerns me here....

It is not just about how many square feet of indoor space you built per $, it is also about the quality of that space. Productivity may be falling off in the U.S., as it seems to have done in much of the western world, but the space is better lighted, better air conditioned, more fire and earthquake safe, and longer lasting.

I can tell you, the construction quality in China is very poor.

https://www.smartcitiesdive.com/ex/sustainablecitiescollective/poor-quality-corruption-and-construction-china/32889/

https://www.youtube.com/watch?v=XopSDJq6w8E


If I made cars out of stapled together recycled cardboard I could make millions of cars very cheaply and easily. They wouldn't be very good....

Kartik Gada

Geoman,

I thought about that, but then again, in the US we have Millennium Tower, in the wealthiest and most high-tech part of the US.

I don't know of a major Chinese highrise collapsing.

See the Spire Research report :
https://www.spireresearch.com/spire-journal/yr2011/q1/2011-q1-china-construction-industry/

fatcat

Hi Geoman,
the artcile itslef says that the buildings are secure and even a bit overengineered in that regard. It is the finishing and fixtures that are of the lowest quality. I would say that this is exactly what I see in north America in the new residential buildings. The cheapest possible materials form a given class. A 300K house will use the same materials as 1.3M one . The latter will just have a better location and/or more rooms.
It is probably a side effect of the market maturity or price sensitivity. After all, using better finishing will yield only a marginal increase in the resale value but will cost 15-30 % more. And unfortunately that is what the buyers respond to. They might declare that they want better materials but will flock to the cheapest option...

On another note, there are some improvements in the construction/renovation. Drones can make inspection cheaper and easier. The battery power tools make the work faster and easier. One of the major hurdles is that gyps work is very manually intensive white the materials are dirt cheap.
Probably a tool that can lay the compound to 1/32 “ precision will reduce the need for re-sanding and reapplying.
Another big issue is the homes are not prefabricated , even though the new buildings look like cookie-cutter clone of each other. To do that we will need standardized modules like what happened with the shipping container industry. That would require a big producer to design blocks that are drop-in replacement, produce them cheaply and start assembling homes. Like if the bathrooms could be only 5 basic variants, you could order the whole bathroom at the factory and just assemble it on place. Now it is not the case...

Fatcat

somehow an of topic,

I have stumbled on this discussion that rimes well

with ATOM

https://marginalrevolution.com/marginalrevolution/2019/02/if-the-gdp-deflator-is-off-which-financial-investments-should-you-make.html#comments


Kartik Gada

FatCat,

Even if simple structures like parking garages could be pre-fabricated and assembled on-site in short order, the speed of urban improvement in the US would rise greatly.

For example, in ultra-expensive Palo Alto, there are still open parking lots, where a multi-level garage would be better.

Of course, my vision is that by 2032 we may not need nearly as many parking spaces at all, but that is a separate point.

Geoman

I've done work on home plumbing and electrical projects, and I'd say the biggest problem is standardization. It really is just miserable, ancient designs for things. new and better stuff is out there, but the industry as a whole is so conservative. Unions are the worst - why embrace any tool or technique that might cause your members to get fewer hours on the job?

And there is something to be said for cost - I once had a contractor tell me the first thing he does when he gets a new home is replace all the switches, valves, and plugs. The standard stuff they use is such poor quality.

Drew

Also somewhat off topic, but related to ATOM dues and a possible entry point for you to get your views more widely spread, is the current discussion of Modern Monetary Theory. This article is a contemporary view against it, but does have a wikipedia link about MMT in the article.
https://www.americanthinker.com/articles/2019/02/why_the_radical_left_and_no_one_else_touts_modern_monetary_theory.html
The article itself displays the usual fallacy of treating a money creating government as the same as a family household, but also displays the worry that once if the government starts freely printing money, people will lose confidence in it. The more you can explain how the modern USA is more like modern Japan instead of modern Venezuela or Weimar Germany, the more successful you would likely be.

Drew

I expect that we will continue to muddle through a version of this by running large deficits. If you are correct, interest rates will continue to be low and manageable, those who say that there will be a tipping point once increased debts cause a raise in interest rates, will be vindicated if there is a tipping point. I think you are more correct because of the technology deflation sponge that you have described, but don't think you will be able to convince people until they see widespread deflation that impacts them through lowered costs of protected sectors such as education/health/construction/government.

Kartik Gada

Drew,

but don't think you will be able to convince people until they see widespread deflation that impacts them through lowered costs of protected sectors such as education/health/construction/government.

Education is already seeing massive cost-deflation, but since most people cannot separate that from the physical location of a school or university, they have trouble seeing it.

Google and other employers have already said they don't need Bachelor's Degrees for highly qualified, proven candidates. Combine that with the glaringly conspicuous trend of highly-credentialed (and heavily indebted) graduates who truly know nothing, and the rubicon has already been crossed.

Another problem is that too few people see that all technological disruptions are interconnected. That is why even the seemingly astute still believe government is untouchable, and that a C-Corp will cost $800/yr for registration for ever and ever.

HB

The main reason for housing price inflation, or perhaps the uncharacteristic lack of deflation, is mostly regulatory, not technological.

Looking at some of the ever more rare less regulated (less land supply regulated) areas of the US, the average Silicon Valley worker can buy a house in e.g. Indianapolis, Atlanta, most of Texas and other unregulated fly-by country for a little more than a year's salary. In that respect there has been deflation.

However that is not the case in "progressive" locales where the free market has broken down and individuals are forcibly conscripted to serve misguided communal goals, most often by average majoritarian rule which is, well, almost by definition, mediocre in its thinking.

So in locales like Silicon Valley the main unaffordability issue is not that much the modest amount of space occupied by parking lots but the vast amount of space that is almost completely off limits to development as well as a mentality of essentially cordoning all development inside unexpandable city limits. Large areas of Santa Clara county have been regulated to one hundred and sixty acre (!) minimum lot subdivision sizes. Looking at Silicon Valley on Google Earth one sees that less than a third of available land is developed. In Silicon Valley you have suicidal phenomena whereby home owners are forced to pay additional levies on their taxes to finance the purchasing of undeveloped land so that it can be permanently placed out of circulation -- because that is what Silicon Valley residents voted for!

In typical voter suicide fashion residents are financing their own housing unaffordability, their own working for an additional couple of decades just to finance their old crummy houses, even for those like myself who disagree. Renters? Well they don't own anything so they bury their head in the sand and think they are insulated from all this.

Very few people benefit from this, primarily the smaller fraction of Silicon Valley residents who have no children and are one day soon going to sell their overpriced homes and move out of the area. For those who want to stay, their next house, the house they would really like to upgrade to, is becoming expensive at an even faster rate than their current residence. For those who have children, Silicon Valley residents are essentially pricing their offspring out of the area. Needless to say that all this also increases the risk that the distortionary bubble will burst leaving behind a once hip place, like Detroit.

These phenomena are all much more pronounced and advanced in Europe where average housing prices for even smaller houses are even larger multiples of annual incomes compared to virtually all US cities. As in Europe, once this vicious cycle gets going it is impossible to reverse. People will react by attempting to drive away demand rather than vomit all the progressive policies they have believed in for decades and free supply, as they did in Long Island city.

Politics is the reason that reversion to the mean exponential growth trendline happens unevenly. And in places that exhibit high levels of coercive collectivism most aspects of life are asphyxiatingly regulated and dictated by the majority. A majority which, almost by definition, represents the mediocre mind. Subordination of the competent to the mediocre largely determines whether a society falls behind, matches, or exceeds the mean world growth exponential trajectory. And, as I'm sure most people in these pages understand, small differences in exponent quickly compound to huge differences -- and this compounding will become ever faster as the exponential further accelerates. Hindsight will quickly become twenty-twenty but for those societies that make the wrong choices it will be too late -- way too late, and quite fast.

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