I read this article, and I must say I lean more towards your earlier piece on Scenius as a vision of the future. The idea of collective creativity, collaboration, and forming around projects and then dissolving again sounds more appealing to me. Looking forward to your next one!
I like this article a lot, and I hope you are right. One thing I don’t see, though, is how any of these companies can keep such high margins. Right now they can by lowering costs and competing with companies that produce the same thing at a much higher cost. But when competitors come around who use the same or similar low cost processes, then surely 60% margins are a total pipe dream.
That will be better for the rest of society, when building or chemicals are dirt cheap, but they will prevent these companies from being worth as much as you imply. Unless I’m missing something...
This article was amazing and informative. I can see that you added a link to one of the presentations by DOE on Techno economic analysis. Can you please suggest some great resources on learning more on this?
Been seeing this trend of techno industrialism a lot, anecdotally.
Besides the obvious American Dynamism trends, I was at an event last week where a VC on one of the panels had raised a fund almost exclusively based on optimizing the construction industry, which he claimed was an untapped market. It’s good to see
helps a lot. We launching our fund in summer its similar but more Biotech based. Focused on growing everything locally via biomanufacturing. miracle.blue
Had to think of Stratechery’s “The End of the Beginning”... Tech-Industrialists “seek to transform society in ways that were previously impossible when computing was a destination, not a given”..?
Great stuff, Packy - I'd offer Farmers Business Network as an agricultural integrator - tech enabled approach supplemented with customization that's based on the collected data and advanced analysis... Octopus Energy is another in the energy space...Would love to see/consider/collaborate on a targets list: Incumbent dominated industries that are burdened with overheads and culture ripe for Techno-Industrials... Defense, Energy, Materials, Agriculture, Pharma... very quickly build into Smalley's List and we can argue about the order of importance and market competitiveness. Ryan@ryanlegg.com
Cost advantage that competition cannot copy is easy to understand when there is a clear technical innovation in play. But how does that happen with aggregators? Tesla is an aggregator and they can’t compete anymore with Chinese brands. I’d love to hear you elaborate a bit more on this.
I see it as more of an innovator and integrator (Elon used to talk less about the EV design itself, but the machine which makes the machine as being more important.
They've integrated software and hardware. Everything from design, to battery supply and production (to an extent)
I so want to agree with this thesis because I'm a big fan of the innovations happening in 'Hard tech', but I personally don't think that gaining new cost advantages from tech enablement will lead to long term sustainably higher margins. (Please push back against what I say here if you disagree, as I'd love to hear your other side.)
When I look at the incumbents in these 'industrial' spaces, they may have originally held higher margins due to better production processes but today those margins have been competed away. These are mature industries, and I think there's a difference in gaining a cost advantage in:
i) a new industry where you can snowball your lead against competitors and capitalise on scale economies.
ii) vs an existing market with large giants that easily have the power and resources to implement the same process optimizations once the path has been proven.
Ultimately cost advantages will get competed away in mature industries faster than new ones and the win-con for startups in these spaces will be that their cost advantage is *SO* large that incumbents can't stop them gaining significant market share before they're able to replicate the same process optimization.
Is the techno-industrial revolution the application - at a deep level - of general purpose technologies such as AI, Internet, electricity, genomics etc. to industrial processes which have not yet been done?
If the final output commodity (lets call it what it is) is cheaper or of a higher quality, then the company has a chance. The proposition you're suggesting is that the new TIs will see structural cost advantages as their processes eliminate additional man-driven processes?
For example industrial production of materials via biological processes
Trying to keep simple what is going on without simplifying it
Packy! Call for a piece on timing -> Tech with high potential impact that is either on time or too early: examples of dead startups whose econ just didn't make the cut but advanced the science for the next generation, examples of startups doing A as a means to B while the costs work out (could be going for higher end markets or completely different applications of the tech).
...great article Packy...feeling similarly bullish on this, not to mention techno industrialism matched with space exploration and cultivation opportunity...if we ever want to get out of this galaxy, expanding production capabilities in an infinite setting is likely possible through robotics and A.I. not to mention what might come if we can build self propellant exploration devices developed to adapt to foreign/unknowable situations/objects/materials...should be an interesting next ~years...
I read this article, and I must say I lean more towards your earlier piece on Scenius as a vision of the future. The idea of collective creativity, collaboration, and forming around projects and then dissolving again sounds more appealing to me. Looking forward to your next one!
I think there will be both!
I like this article a lot, and I hope you are right. One thing I don’t see, though, is how any of these companies can keep such high margins. Right now they can by lowering costs and competing with companies that produce the same thing at a much higher cost. But when competitors come around who use the same or similar low cost processes, then surely 60% margins are a total pipe dream.
That will be better for the rest of society, when building or chemicals are dirt cheap, but they will prevent these companies from being worth as much as you imply. Unless I’m missing something...
As the cost goes down, total addressable market will get bigger which will/might yield to higher revenues
Hi Packy,
This article was amazing and informative. I can see that you added a link to one of the presentations by DOE on Techno economic analysis. Can you please suggest some great resources on learning more on this?
This would be much appreciated!
Been seeing this trend of techno industrialism a lot, anecdotally.
Besides the obvious American Dynamism trends, I was at an event last week where a VC on one of the panels had raised a fund almost exclusively based on optimizing the construction industry, which he claimed was an untapped market. It’s good to see
Love to see it!
Would love to talk to this guy
Wan Li Zhu, Co-Founder and Managing Director of Suffolk Technologies
Thanks a lot
Happy to help
helps a lot. We launching our fund in summer its similar but more Biotech based. Focused on growing everything locally via biomanufacturing. miracle.blue
Interesting, he's Boston based (so am I) so he might also have a view into the biotech / life science community. Lots of it here. Glad I could help
I think in Walter Issacsons book on Elon, Elon used the term “Idiot Index” in similar fashion to how you use “cost physics”. 🤘🏼
Yes! Had a longer section on cost physics and idiot index in here, might turn it into an essay.
Had to think of Stratechery’s “The End of the Beginning”... Tech-Industrialists “seek to transform society in ways that were previously impossible when computing was a destination, not a given”..?
ahh very well put!
Great stuff, Packy - I'd offer Farmers Business Network as an agricultural integrator - tech enabled approach supplemented with customization that's based on the collected data and advanced analysis... Octopus Energy is another in the energy space...Would love to see/consider/collaborate on a targets list: Incumbent dominated industries that are burdened with overheads and culture ripe for Techno-Industrials... Defense, Energy, Materials, Agriculture, Pharma... very quickly build into Smalley's List and we can argue about the order of importance and market competitiveness. Ryan@ryanlegg.com
Rocket lab?
Cropin, eeki foods in agriculture also attempting to do this.
Cost advantage that competition cannot copy is easy to understand when there is a clear technical innovation in play. But how does that happen with aggregators? Tesla is an aggregator and they can’t compete anymore with Chinese brands. I’d love to hear you elaborate a bit more on this.
Is Tesla an aggregrator? Why do you think that?
I see it as more of an innovator and integrator (Elon used to talk less about the EV design itself, but the machine which makes the machine as being more important.
They've integrated software and hardware. Everything from design, to battery supply and production (to an extent)
Great article.
I so want to agree with this thesis because I'm a big fan of the innovations happening in 'Hard tech', but I personally don't think that gaining new cost advantages from tech enablement will lead to long term sustainably higher margins. (Please push back against what I say here if you disagree, as I'd love to hear your other side.)
When I look at the incumbents in these 'industrial' spaces, they may have originally held higher margins due to better production processes but today those margins have been competed away. These are mature industries, and I think there's a difference in gaining a cost advantage in:
i) a new industry where you can snowball your lead against competitors and capitalise on scale economies.
ii) vs an existing market with large giants that easily have the power and resources to implement the same process optimizations once the path has been proven.
Ultimately cost advantages will get competed away in mature industries faster than new ones and the win-con for startups in these spaces will be that their cost advantage is *SO* large that incumbents can't stop them gaining significant market share before they're able to replicate the same process optimization.
Is the techno-industrial revolution the application - at a deep level - of general purpose technologies such as AI, Internet, electricity, genomics etc. to industrial processes which have not yet been done?
If the final output commodity (lets call it what it is) is cheaper or of a higher quality, then the company has a chance. The proposition you're suggesting is that the new TIs will see structural cost advantages as their processes eliminate additional man-driven processes?
For example industrial production of materials via biological processes
Trying to keep simple what is going on without simplifying it
Shein isn’t one?
this!
https://x.com/jasonjoyride/status/1751367588423323778?s=20
Packy! Call for a piece on timing -> Tech with high potential impact that is either on time or too early: examples of dead startups whose econ just didn't make the cut but advanced the science for the next generation, examples of startups doing A as a means to B while the costs work out (could be going for higher end markets or completely different applications of the tech).
...great article Packy...feeling similarly bullish on this, not to mention techno industrialism matched with space exploration and cultivation opportunity...if we ever want to get out of this galaxy, expanding production capabilities in an infinite setting is likely possible through robotics and A.I. not to mention what might come if we can build self propellant exploration devices developed to adapt to foreign/unknowable situations/objects/materials...should be an interesting next ~years...
Food for thought, and not so boring. Still I’m not sure how I see how any of this as not dystopian in some form.
The Machine Economy will have a price and consequences on consumer capitalism we aren’t even really talking about rationally.