Legacy industry rot is an ill of our time

Much work is needed if we hope for the world of atoms to improve once again, and along with it our optimism and vitality

The following is a brief post from engineering physicist Andrew Côté based on his thread on Twitter/X, shared with permission (he’s a super nice guy and worth a follow). You can also check out his Substack. I am publishing a version here as I want more people to consider where such rot in their own industries may exist, and what they can do to overcome it. It’s obviously an issue that’s important to discuss and is pernicious in modernity. There are also many ambitious startup ideas sitting in front of us, and they’re needed.

It would be mistaken to say companies like Pratt and Whitney have not innovated on jet engine design in the last 70+ years of making them. For example, 13 years ago they added this single gear between the compressor stage and turbofan at a program cost of only $10 billion.

This lets the fan operate at a different speed than the compressor stage, though the ratio is still fixed. Still, having this small amount of adaptability improved fuel efficiency by 16%. Today, their best-selling engine is the JT8D. It first ran in 1960.

Commercial PW designs are built for reliability and cost management in large, disaggregated aircraft procurement supply chains. Jet engine and aircraft companies have preferred to 'cost-optimize' in small areas of a large process rather than innovate on the whole process

This is a common pattern in both the space launch as well as the automotive industry. In the past, companies became horizontally integrated to drive cost-efficiencies. But, this made it harder to create altogether new things. The scope of optimization narrows.

This made sense when you're seeking cheaper labor from different countries and US workers are expensive. But, you miss the high-level overview of the entire process, and miss what steps can be condensed or skipped altogether. Automation makes vertical integration the better way.

Thanks to automation, optimizing across the entire production stack lets you drive far past the cost savings you used to get by outsourcing labor. Meanwhile legacy makers in both aerospace and automotive act more like 'parts integrators’.

What makes it harder for legacy companies to re-vertically integrate is they've now spread operations over a large number of different voting districts for political capture. Their cost-inefficient structure is now propped up by tax breaks they can't afford to lose.

The irony is the strategy of outsourcing didn't work at all for the Aerospace industry. Boeing outsourced 70% of design, engineering, fab, and testing of the 787 Dreamliner:

• Projected cost: $5 billion

• Actual cost: $22 billion

This experienced has cowed both Boeing and Airbus into taking even less risks with engineering development while leaving them trapped in cantankerous supply chain logistics. Boeing's most popular airframe, the 737, first flew in 1964.

This overall pattern of outsourcing for labor cost-management and political district capture, which creates a rigid cost-structure and life-line dependency on government assistance, which stifles high-level innovation and fundamental breakthroughs is common in a few areas.

Defense, aerospace, automotive, pharmaceuticals, energy, construction, are all industries ripe for a disruption as people realize they can beat current cost-floor with vertical integration, and more innovation, and legacy companies can't keep up.

I think as a culture we've grown pessimistic because we no longer see the rapid pace of change in our material built environments that led to such optimism in the 1950s and 60s. Instead we see $10 billion dollar gears in 60 year old planes and are told its a 'breakthrough'.

This gradual creeping-in of 'shittiness' in so many organizations, services, industries, and realms of politics has a common root - the politicization of what should be a competitive process, that stifles new ideas to protect incumbent interests. I call it "The Blight".

The Blight is what gives you things like billion-dollar a mile railroad tracks in San Francisco, never completed high speed rail in California, the NRC killing nuclear energy, ArianeSpace, a bunch of go-nowhere climate tech bubbles…

The Blight is a disease of wealth. Any society faced with genuine survival pressure can't afford the Blight, or else they perish The Blight exists solely as a parasite suckling off the insane wealth generated by industrial capitalism.

The Blight is endless bureaucracies, outsourcing, McKinsey consultants, feel good diversity panels, committees, ESG, biofuels, carbon credit marketplaces, NIMBY anti housing socialism, "math is racist", denies biology, natural variance, etc.

The Blight is simply a manifestation of petty tribalism and grift in the modern age Most usually it leverages a feel good narrative of inclusion or else just sells fear to justify centralization of control. The net effect of Blight is inflation and declining birth rates.

The Blight is fundamentally antithetical to what is good in the Human Spirit Perseverance, competition, innovation, decisiveness, execution, imagination, risk-taking, adventurousness, and integrity.

The Blight has produced endless millions of do-nothing paper pushing jobs with titles like Analyst, Coordinator, Engagement Officer, Committee Chair. It is the reason education, healthcare, and government services have all declined in real value per dollar spent.

The Blight cannot exist wherever there is free and fair competition. It can only grow and take root where people let it, when they give in to peer pressure and crowd conformity to do what they know is not truly fair or just.

As we learn to identify and burn out the Blight wherever we find it, the future material abundance and prosperity of human civilization is far beyond the small doled-out percentage improvements and hidden inflation we've learned to cope with through myopic doomerism.

It's not that PW jets or Boeing planes or Ford cars didn't do a good job in their time. They were industrial and engineering triumphs that built Western prosperity, fought two World Wars, and industrialized the world. But it's time for a new age of industry and manufacturing.

Nowhere is there a better glimpse of this entirely-achievable future than what SpaceX is doing building Starship and creating the entire New Space industry with Falcon 9. It turns out, when you burn out the Blight you shatter even the most seasoned industry veterans expectations.

Going to space is exotic, transcendental, and beyond the life paths of most humanity. Cars are far more domesticated as vehicles we drive, and Tesla is bringing blightless cars to the masses. But there is still an important one missing: planes. This is why I think a jet company that builds the successor to Boeing can't use the same business model of Boeing of getting their parts from other people. They need to design new engines from the ground up, not just add a gear here and there.

I'm optimistic that in hindsight we'll look back on past decades as a time when industrial progress temporarily stalled, while software and compute grew to maturity. But eventually we turned our focus back to the world we live in - of atoms, steel, ships, and importantly, cities.

The Golden Age of Flight, Space, and Atomic Energy are all ahead of us, in fact, if we learn to open our eyes a little bit wider and see past our local horizon. If we let ourselves escape the past there is no telling where we can end up.