Moore’s law is well known, understood, and has stood the test of time since published by Gordon Moore in 1965. Wright’s Law is less well known, and has also stood the test of time since the mid 1930’s.
Formulated by Theodore Wright, a pioneer aeronautical engineer, Wright’s Law describes quantitatively the relationship between volume and cost. It provides a reliable framework for forecasting cost declines as a function of cumulative production.
It states: For every cumulative doubling of units produced, costs will fall by a constant percentage’.
In various manufacturing operations I have been associated with, and many I have observed, I have seen this in action, but until recently I was unaware of Theodore Wright.
In effect, Wrights Law reflects the outcome of ‘learning by doing’.
Wright observed that for every doubling of output from the Curtiss-Wright Aeroplane factories, the production labour costs dropped by 10-15%. Other sources of cost reduction that together give a consistent cost reduction relationship are process standardisation and optimisation, labour specialisation, network effects, machine availability and efficiency, all things in the modern engineering toolbox.
Look around now at what is happening to the cost of Solar panels, Lithium-ion batteries, industrial robots, and what has happened to cars over a very long period.
Intuitively, Wrights Law stands up, and there is plenty of empirical evidence that supports Wrights 1936 thesis.
As Australia embarks on a path to some level of sovereign manufacturing capability, it will pay us to observe the realities of Wright’s Law.
This means we should find a way to judiciously apply patient funding to manufacturing operations that offer the opportunity to reach the volume inflection points that lead to a sustainable manufacturing base of key manufactured products.
We have thrown away many such opportunities, let’s not repeat the mistakes of the past.
As an aside, we now have another federal industry minister after the (necessary) resignation of Christian Porter yesterday. The now incumbent temporary minister Angus Taylor, is unlikely to do anything useful, but someone has to warm the seat. Being the eighth ‘seat-warmer’ in a government formed in 2013, 7 of whom would not know an ‘industry’ if it whacked them on the head is hardly an ad for consistent policy and investment confidence. Sadly this is in a time where both are desperately needed.
Header photo courtesy Wikipedia.
