Seed Factories/Economics



&emsp;We continue the discussion of design elements and features with those that relate to people rather than equipment, in particular motivations and economics.

1.0 - People as Part of a System
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&emsp;Technology is not yet at the point yet where complex systems can operate without people. They are needed for a wide variety of physical and mental tasks. Meeting the needs and desires of people is also the point of having such systems. However, people are complex beings, and groups of people form complex systems.

&emsp;People often don't fully understand themselves and why they do things, and understand even less about how they function as groups. People can be educated, but they can't be designed the way hardware can. So we have to understand people well enough to account for their abilities and needs in our designs.

&emsp;The study of how people interact in groups is known as Social Science. It is a large field of study, for which a list of topics can be found in an Outline of Social Science on Wikipedia. In this book, we will limit ourselves to topics that relate to self-improving systems and seed factories.

&emsp;As agents with free will, people need enough motivation to build such systems, or to build them in preference to conventional ones. Otherwise they won't put in the effort to do so. So we first look at personal and social reasons that would motivate people to work on them. Building such systems requires other inputs besides direct human effort. An incomplete list of these inputs includes land, tools, materials, energy, funding, and information. Economics studies how such inputs get applied to supply goods and services. Economic reasons are also an important motivator for people and society as a whole. So we look at that subject next.

2.0 - Motivations
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&emsp;We can group motivations into personal reasons that can cause individuals to take action, and social reasons that can cause larger groups to do things, even if some members don't have enough cause on their own. People and groups differ individually from other people and groups, and people as a class differ from groups as a class. The motivations we present here will not all apply to everyone or all groups. For some people and groups they will not apply at all. They will be entirely uninterested in the projects we discuss. Universal interest isn't needed to build them. You only need enough interested and motivated people for a given project to happen.

 2.1 - Personal Motivations
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&emsp;People have basic biological needs which motivate them. For example, when you are hungry, you are motivated to prepare a meal or go to a restaurant. Most people have the foresight to take action before these needs become urgent. So we do things like work at a job, earn money, and use the money to stock the pantry or go out to eat. If biological needs can be met with less work using self-improving systems like seed factories, it would be a reason to take action and build them.

&emsp;Necessity is also a strong driver. Jobs may be eliminated by smart tools which need few people to run them. So people may be driven to meet their needs directly rather than through jobs. This includes using some smart tools for themselves. To take such action, they need to know the possibility exists. So informing people would be an element of future projects.

&emsp;People also have psychological drives that are not biological necessities, but nonetheless motivate them. These include desires for autonomy, fairness, inclusion, improvement, purpose, and respect. To the extent self-improving systems can help meet these desires, people would also be motivated to participate in them.

&emsp;Finally, there are external reasons why such systems would be better than current ones. External here means not directly affecting the needs and desires of individuals. For example, self-improving designs may use more renewable energy and recycled materials and are therefore better for the environment.

 2.2 - Social Motivations
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&emsp;Humans are Social Animals, and so they form groups and interact regularly with each other. They do so beyond the basic biological functions of mating and parenting necessary to continue the species. We create a vast array of social groups, from extended families, to neighbors who exchange favors, and to complex formal and legal organizations like governments and large corporations. Nearly everyone belongs to multiple groups, either willingly or by necessity. Groups can have rationales and motivations different from their members. For example, most people don't want to die, but an army by its nature exposes it's members to a higher risk of death.

&emsp;Individuals can produce certain things for themselves, such as furniture by woodworking. A self-expanding production system is likely complicated enough to need a wide variety of skills and equipment, beyond what one person can typically supply. To accomplish such projects they can form informal or formal groups of various kinds. This lets them gather the resources and skills for all the needed tasks. Some examples in order of increasing formality are:


 * A trading network where people exchange products and skilled work on an as-needed basis,
 * A cooperative association that more regularly pools funds and efforts towards larger equipment and workshops, and
 * Formal business organizations like corporations, operated for profit on a continuous basis.

&emsp;Holding a group together and dealing with personal interactions requires extra work. So groups like those just listed need reasons at the group level, beyond those of individuals, to sustain their efforts. Motivations at a group level can include anything from fellowship, to economic advantage or the public good.

3.0 - Economics
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&emsp;Economics is the social science concerned with the factors that determine the production, distribution, and consumption of goods and services. People need physical goods like food, shelter, and water. They also have desires for things beyond these basics, like education, health care, and entertainment.

&emsp;These goods and services are generally supplied by other people. Modern civilization is complex enough that it is not efficient to try and do everything for yourself. So people specialize in a particular task, or work for an organization which is specialized. They then trade for the things they need and want, but do not supply for themselves. The trade value of these things is high enough that most people need to spend much of their time during their "working years" to obtain them.

&emsp;Direct trade of one good for another, or Barter, imposes the added work of finding matching wants, where each trader wants what the other has. It is more efficient to trade for an intermediate good that most people accept - Money. Since most people accept it, you only have to match one want to complete a trade. Money in turn is traded for the other goods and services. Since money is used so often, the value of other goods and services are commonly measured by how much of it is needed to make a trade.

&emsp;Economics is a complicated enough subject to have entire university departments devoted to it, so we will not provide a full discussion of it here. Instead we highlight a few concepts relevant to self-improvement, and refer you to a Detailed Outline of the subject for more information.

 3.1 - Exponential Growth
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&emsp;Exponential Growth in mathematics is when the change in a function with respect to time is proportional to the current value. It can be expressed as the formula


 * $$x_t = x_0(1+r)^t$$

where x0 is the value at time zero, r is the growth rate per time interval, such as 5% or 0.05, t is a variable time, and xt is the value of x at time t. In economics this is usually known as Compound Interest, where the interest rate is the percentage growth per time, usually in years. Compound refers to each year's absolute increase depending on the sum of the original amount plus the prior years of accumulated interest, which increases each year. So the growth rate in absolute terms increases constantly, while the rate as a percentage per time stays the same. Exponential growth occurs in other fields like biology and physics. The relevance to our discussion is production systems that make new equipment at a rate proportional to their size also grow exponentially.

&emsp;The cost of many goods is high because the output quantity is linear with the input effort. For example, in construction, it takes about the same amount of work to build the next house as it did the last one. If you plant some acorns, however, you can eventually end up with an entire forest of oak trees - an exponentially larger result from a given amount of work. This is because the amount of sunlight and materials a tree can convert is proportional to its leaf area. The leaf area, in turn, is a part of the tree which grows each year. Individual trees have size and age limits, so the growth is continued by each tree making many acorns to start more trees. If we apply this kind of growth, self-expansion, and reproduction to non-biological systems, it fundamentally alters the return from a given amount of work from linear to exponential. This is a strong motivation to develop artificial systems which can grow and replicate.

&emsp;In finance and investment it is well understood that a constant interest rate leads to exponential growth in money terms if reinvested. But that growth depends on the work of other people. The output from their work is still mostly linear, and therefore limited. For society as a whole to grow exponentially it either uses biology - increased population and exploiting agriculture, or uses systems that mimic biology in copying themselves. Since population and our effects on the Earth's environment are reaching unsustainable levels, that only leaves improving artificial systems as a route to sustainability and growth.

 3.2 - Categories of Production
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&emsp;Unless you happen to enjoy watching a complicated factory run as entertainment, a self-expanding factory would be built to fill some economic purpose, typically finished products and services that people want. When it uses some of its capacity for self-maintenance and growth, then fewer finished products are available to use.

&emsp;In their design and analysis, we can then divide the output into Internal Production, for use by the factory itself, and External Production, destined for other users. Internal production can further be divided into Operation, items needed to sustain the factory like power and repair parts, and Improvement, items which are used for upgrades or expansion.

&emsp;Whatever part of production not used for maintenance and improvement is available for other users. The portion assigned to external production can be divided into Private Outputs, which are supplied to the factory owners, and Market Outputs, which are sold or traded to others.

&emsp;How to divide up the outputs is mostly a matter of choice for the owners. The exception is maintenance of operations, which is required if they don't want the factory to break down or wear out. The owners can choose a growth strategy which uses most of the outputs for expansion, and defers private and market outputs until later. They can also choose a more balanced approach of some growth and some external output. A no-growth strategy which sends out all available outputs is not very different from conventional factories, and removes most of the reasons to use the self-improvement approach.

 3.3 - Production Margins
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&emsp;In business finance, Operating Margin is operating income divided by operating revenues, usually expressed as a percentage. It is a measure of how much surplus or profit a business generates by its operations, before considering finance and capital. Operating margins greater than zero are needed for a conventional business to continue operating. For a self-improving system, much of the output can be used internally for upgrades and growth, or used directly by the owners. In that case net income and revenue may not be meaningful measures, because much of the output isn't sold.

&emsp;For this type of system we can instead define Production Margins in units other than money. These kinds of measures would give a better perspective on how well it is operating. The External Margin is the ratio of external outputs (as defined above) to total outputs. It is a measure of how much can leave the system. It can be measured in terms of energy, mass, parts count, or other units.

&emsp;A conventional example is a nuclear power plant. Some of the electricity it produces is used by the plant itself for lighting and equipment. The external margin in energy terms is the percentage of total electricity that can be sent outside the plant to customers. The Total Margin adds the portion used for improvement to the external margin. This leaves out operation, which are items needed to keep the factory running. Total margin is then the surplus above what it needs to keep running. Like conventional operating margin, total margin needs to be above zero to keep operating. Otherwise the factory is being consumed faster than it is being replaced, and eventually will stop working.

 3.4 - Operating Costs
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&emsp;An ideal self-improving system would not only make all its own parts, but also expand its range of outputs without added labor, and without supplies from outside its owned assets. So improvements would be "free" in terms of input costs. Continuing operations would only need to pay for energy and raw materials used up internally. The operating margin in conventional terms would be very high.

&emsp;This ideal most likely cannot be reached, for a number of reasons. They include the level of self-operating technology, rare materials not found locally, and the difficulty and cost of trying to make every kind of part internally. Some labor and outside supplies would need to be used, and therefore there are some costs for growth above the costs for production operations.

&emsp;The fraction of parts and materials a real system can supply internally reduces the initial start-up cost, expansion costs, and later production costs of the mature system it later becomes. For example, assume a seed factory starts at 10% the size of the final factory and initially can produce 60% of the parts for expansion. It then grows to producing 90% of its parts at full size. The total capital cost will then be about 75% lower than building the mature factory directly. The higher ratio of outputs to capital cost is a strong economic reason to develop such systems.

 3.5 - Productivity
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&emsp;In economics, Workforce Productivity is defined as the value of the outputs divided by the hours of labor required to make them. An ideal automated system would only need a human to press "Start" on a computer screen, and then wait for the product to be finished. Therefore workforce productivity would be extremely high. Smart tools (automation, robotics, software and AI) are not at that level yet. Even so, self-improving systems can be designed to add existing smart tools, and upgraded to use better ones as they become available. Self-driving technology, for example can be applied to robotic vehicles in a factory. The early stages of a factory may use people to manually move parts and materials, then upgrade to powered machines like forklifts. Eventually these can be upgraded to robotic vehicles without drivers.

&emsp;If the various steps in the production are physically close to each other, and under coordinated control, then more smart tools can be used than with traditional geographically separated special purpose factories. For example, an industrial park may have buildings with different owners doing different production tasks. But their proximity allows easy communication and automated transfer of physical items. The overall increased output relative to human labor is an incentive to co-locate.

&emsp;Besides the standard measure of productivity in terms of monetary value, we can also apply other measures of output, such as mass, relative to labor required. The Productivity Ratio, is how much more a self-improved and smart factory can output compared to a conventional factory that does not have those features. For a factory which makes much of its own capital equipment, we can define a System Productivity measure which includes the embodied labor in the equipment. Thus system productivity is


 * (total output)/(direct production labor + capital equipment labor).