Scale-up Investment vs. Scale
Why do scale up rules of thumb work and why is the historic six tenths power six tenths?
The cause and effect relationship is shown in this link (publication)
The Full Experience Curve
Experience curves show the scale factor or number of dimensions “m” of the production facility, the growth rate constant constant, and contain cycles with time. The full equation for the experience curves depends upon the scale of the production facility at a given time, the number of men currently working on it and the expansion effort currently underway. Using men(t) as a variable, which is proportional to money via wages, and an exponential demand from the population gives the following differential equation and its’ solution. The periodicity is shown to be a fundamental part of the solution.
Research as Investment
I was talking to Gregory S. Patince recently about Research being an Investment, or not. My view of course is that it can be if managed to be an investment. Just how that is so is included in the following documents. The criteria of what is required is defined.
research-as-investment-power-point1
research-as-investment-manuscript
These documents are part of the continuing dialog about what Experience Curves are and how they can be extended beyond historic data.
Why firms should be cautious in using experience curves as a strategic guide in their operations?
The equation for the slope of an experience curve is (1/m-1)*(1-exp(-kg*t)) or
(SF-1)*(1-exp(-kg*t)), where: t is time typically years, kg is the exponential growth rate
constant, SF is scale factor from the slope of an xy plot of scale of the facility vs investment
in constant dollars, m is the number of dimensions of the production facility eg. 1 for linear
like a pipe line, 2 for an area facility like a plate and frame filter press, and 3 for a volumetric
facility like a tank. For a mature product slope becomes (1/m-1) or (SF-1).
Inflation and Real Growth
The post titled “Money” shows the GNP or money=k*(employed)^4 and volume=k*(employed)^2.16 and
price=k*(employed)^1.84. In the context of these posts the number of dimensions of the production
facilities, m=2.16 and the price exponent is (4-m). Differenting by parts results is the fraction of the change
in GNP that is real growth is m/4 and the part that is inflation is (4-m)/4. The value of m therefore determines
the fraction that is inflation and real growth. The value of m determine the fraction that is real growth, namely;
m=1 results in 25% real growth,
m=2 results in 50% real growth
m=3 results in 75% real growth.
Obama’s and others “put people to work” with bail-out government money will not help the economy much if
the number of dimensions of those activities is low (e.g. a shovel in hand ditch digger) vs. high
(like building a petrochemical plant).
Money
Article for Chemtech on the dimensions of economic systems and their business applications (money=k*People^4):
Part One: money22
Part Two: money23
Note Figure 5, a GNP as deflater forecast from 1984 forward that is amazingly accurate.
The Geometry of Experience Curves
the-geometry-of-experience-curves-aiche5-cut
Defines what an experience curve really is and why.