Founder/Author Brian Potter

Auren Hoffman (00:01.24) Hello data nerds my guest today is Brian Potter. Brian is a structural engineer and author of Construction Physics, which is a weekly blog about economics, technology, and the productivity of building and infrastructure. He's also a senior fellow at the Institute of Progress where he's exploring why construction productivity has stagnated while the rest of the economy has accelerated. Brian, welcome to World of DaaS.

Brian Potter (00:25.625) Thanks for having me.

Auren Hoffman (00:27.022) super excited. Now I'm a huge fan of construction physics. I read it every week. I send it out to my, you know, all my newsletter, my five links and everything like that. I really love it. But I I've been meaning to ask you this one question, which is, okay, I live in Northern Virginia, drive on, you know, often drive on the the GW Parkway. For the last three and a half years, there's been this two mile stretch, which has just been under construction forever.

Brian Potter (00:50.358) Mm-hmm.

Auren Hoffman (00:56.386) They can't, seems it didn't seem like they make any progress at all. I feel like if I was in China, this would have been done in like two or three weeks. Like, why does it take so long just to like, you know, I don't know, slightly move, some structural things on a highway.

Brian Potter (01:15.712) So my sense is for roadways specifically, I think there's a lot of what you would call like collective action or coordination problems where it's basically there's a very large reluctance to like disrupt existing operations in people's lives. Basically, people don't want to like close down a main road to just rebuild it, even though that would be much faster. And so they have to like structure things in such a way. it's as

minimally as disruptive as possible to sort of the existing users of the road and the way that

Auren Hoffman (01:50.466) what they did is it was like two lines each way so they made it one lane each way and it's been one lane each day for it'll probably be another five years before it's done

Brian Potter (01:56.212) Yeah, you keep the lanes open. You try to maybe minimize the super disruptive stuff. So it's only at nights or only on weekends or only on certain days or whatever. And then all that difficulty just ends up adding quite a bit of time. I think that's a big chunk of it. And you see that in various other guises as well. So for like New York subway construction.

they famously will want to like excavate all their stations instead of just coming in down from the top, which the construction method called cut and cover, which is often much faster than just having to tunnel in from below. just cut open the road, build up your station, build the road back up. It's a little, it's quicker to do things that way often, but yeah, you'd have to disrupt all the existing, yeah, the disruptive existing operations. People already like,

Auren Hoffman (02:41.794) they don't do in New York because you'd have to like close down Second Avenue for a month or something. Yeah.

Brian Potter (02:49.876) hate these big disruptive construction projects, right? So you do this more expensive, less disruptive way. And there's that sort of difficulty of getting the people affected by something to sort of go along with what you're trying to do is often quite difficult. And so you see that show up in other ways, like horizontal infrastructure construction generally, like you're trying to build a transition line and you're trying to get sort of the

right of way from all the existing landowners or whatever, that can be quite difficult. That's a major blow or something that slows down.

Auren Hoffman (03:26.264) But wouldn't you get the right away first before you started anything? wouldn't it, I might take three years and then you do it.

Brian Potter (03:30.13) Well, you do, but like, you know, acquire, acquiring all that. It's just another example of like acquiring all that right away takes like a very long time or whatever. So that's one of the reasons why it takes like, 10 years to build a transmission line or something in the U S. Yeah. The government says we're going through and in the U S the U S used to be more willing to just like do this disruptive shit basically. And it's like, you know, upend certain people's lives. So like build some piece of infrastructure.

Auren Hoffman (03:41.934) Okay, right. And then in a place like China, they could just like force everyone to do it.

Brian Potter (03:59.516) use eminent domain and stuff like that. And people used to be perhaps more tolerant of it, or perhaps they just had less of a say in whether it went through or not. But for better or for worse, we often will sort of bend over backwards to sort of not disrupt existing operations for things, much to the detriment of actually getting stuff built quickly and efficiently.

Auren Hoffman (04:27.742) There is some sort of narrative that like regulation is a massive percentage of cost of construction. Like where do you kind of fall on that?

Brian Potter (04:36.96) So it's a complicated question. think it's definitely true. I think it's definitely true that regulation has made stuff more difficult to do in construction. The question is, is to what extent that differentiates construction from other industries? Because regulation of everything has gotten a lot more stringent over time, For the manufacturing, agriculture, blah, blah. And those industries have seen substantial productivity increases. And so the question is, is construction

more regulated than other industries, is construction differentially affected? Is regulation uniquely burdensome to construction in some way that it isn't in other industries? And I think there's some evidence that that is the case, that regulation is more stringent, affects construction more than other industries. One way that that shows up is that the, this is a little bit morbid, the death rate of

construction workers on the job has fallen a lot more than the death rate of agriculture or manufacturing. So construction has gotten a lot safer over time than other industries have. And part of that is because, and if you look at OSHA fines, fines for workplace safety violations, they're way, way, way higher in construction than in any other industry. By far the most industry that gets fined is construction. And so there's these pieces of evidence that suggest that

Construction is a little bit more affected by regulation than maybe other industries are.

Auren Hoffman (06:13.826) Okay, interesting. That's actually, that's actually, is there a, I mean, you, you, at one point you worked at Katara, right? and I, I love that idea of being able to like, modularize things in some sort of way. Like, why did that not work?

Brian Potter (06:22.112) Mm-hmm.

Brian Potter (06:31.67) So that's a pretty standard playbook for like trying to, know, someone operating like a construction startup or a new construction operation. Someone thinking like, oh, construction is so inefficient. It's, everything is built onsite by hand. It's very, very labor intensive buildings. You know, each building is kind of unique in most ways. I can make building more efficient by doing it in a factory.

I can sort of mass produce buildings just like Ford did for the Model T and I will use that to sort of make the whole industry more efficient. And lots and lots of other people have had this idea over the years and tried to execute on it and they mostly have gone bankrupt trying to do it.

Auren Hoffman (07:14.818) Yeah. Why, why is that the case? it just cause like moving it is really hard and, or like the final assembly on site is still so big or what's the, what's the, what's

Brian Potter (07:24.21) It's yeah, it's sort of a complex bundle of those things that you mentioned and other things, but at a high level of abstraction, it is very hard to sort of cut labor and efficiency, you know, out of the process and kind of make it more efficient. It's hard to like, even if you move it into a factory, it's very hard to like dramatically rework your process in a way that you can make stuff really, you know, with without labor without like

adding costs back in somewhere else in the process. So you move your process, know, your construction process into the factory, you're producing, you know, some sort of module that you're going to, you know, make your building out of. But you still, even if it's done in the factory, there's still not all that many tasks that can be like really, really automated the way that like, you know, a car assembly line is very, very highly automated.

Auren Hoffman (08:18.178) Why, why, like, why, like, feel like bathrooms or bathrooms or walls or walls or, why is this like, you know, this

Brian Potter (08:26.198) Yeah, so it's again, it's a complex bundle of things. But one reason is that buildings are like, each building are like different enough and you can't transport your buildings far away that like the amount of volume that a single factory can produce in terms of like number of buildings is like not all that high. You can produce like even a pretty big.

Auren Hoffman (08:50.094) And even the the insides of buildings are so different, like the countertops and stuff. It's like.

Brian Potter (08:54.186) Well, that's yeah, a lot of that stuff is, you know, factory produced like windows are like factory produced these days, stuff like that. So you do see like a creeping level of like modularization, but it's like pretty like small components. The stuff that like can be like, you know, is like repetitively used in very, very large numbers and doesn't change much from building to building. That stuff is does tend to be like factory produced. So, know, windows, drywall sheets, doors.

Auren Hoffman (08:59.67) Yeah. Yep.

Auren Hoffman (09:19.896) Doors, windows, those types of things. Yeah.

Brian Potter (09:22.742) Yeah, know, fans, stuff like that.

Auren Hoffman (09:25.366) I assume like that even the wood like is like pre-cut to the right, you know, the right two by fours or something like that or.

Brian Potter (09:32.7) It is not to as much as you would think. Typically on site, they will get like a big bundle of lumber and then just like cut it to what they need on site. Basically because the workers can like do that like reasonably quickly and like the benefit.

Auren Hoffman (09:47.81) And you might need like, it might need like a tiny fraction of an inch difference or something or whatever.

Brian Potter (09:52.574) Yeah, and like, well, another sort of big thing, this kind of touches on another big thing as to why it's so difficult to sort of, know, factorize some of construction, is that the amount of equipment and, you know, machinery that you need to like duplicate what like two guys can do with like a hammer and a saw, basically, is a lot. You need like a, you know, all this material and these components are like big and, you know.

you know, bulky and they need a lot of like pretty substantial equipment to like manipulate them. And so it takes like hundreds of thousands of dollars worth of equipment to like even do like relatively simple jobs that like two guys could do like really, really quickly.

Auren Hoffman (10:35.436) And is that, but is it because things like homes are still so different? Like every year, like whenever I go to someone's home, they all, they, they may have like one of four cars and it's the cars are all the same. You know, the, all have the same phone in the home. They all have the, roughly the same TV, but then like each home is like complete snowflake. Like if the homes were more similar, if there's only like seven models or something, would it be a lot easier?

Brian Potter (11:01.814) To some extent, know, homes are different. A lot of that is dictated by you know, site constraints. like, you know, different, yeah, there's a hill where that, you know, you know, there's trees, there's, you know, water, stuff like that, or just the size of the plot is like different, where the like come in is different. So there's only so much that like you can make it uniform just by the very nature of like you're building this thing in like a specific place with like specific requirements.

Auren Hoffman (11:08.14) Yep. Like you're on a hill or.

Brian Potter (11:30.334) That's part of it. And then kind of to go back to what I was talking about earlier, there's only like so far that you can like ship this stuff because it's so big and so bulky. And so your fact, you know, a car factory will produce hundreds of thousands of cars a year, millions of cars a year. But it's pretty hard to get more than like a couple thousand home units out of like a single housing factory. Even stuff that is like really, really repetitive, like a manufactured home, like a mobile home. Those factories tend to be like

pretty small scale. They're not like all built in one factory in Nevada or something. You know, these big manufacturers, they have like 20 facilities scattered across the country, each one making a relatively small number of these homes because there's only so far that you can like ship this stuff economically because it's so big and so bulky. So these things have like a catchment area of like a few hundred miles and that's your market. So you have a few hundred miles that you can ship it. Within that, you have a bunch of different, you know, demands for different kinds of housing.

different customers that can afford different things, different plots, stuff like that. And so like the uniformity really gets like whittled down.

Auren Hoffman (12:35.31) So if we want to drive down the cost of construction, what are the big drivers that we could do as a society to do that?

Brian Potter (12:43.478) I'm pretty optimistic, medium term, about automation and robotics just because if, yeah, on site or like some combination of like, know, really, you know, something like a pop-up factory or something like that, that, you you set up it up near the site and then your shipping distances get greatly reduced. There's a lot of popularity for that idea.

Auren Hoffman (12:53.215) On-site automation.

Brian Potter (13:13.046) too. But just at a high... And the reason is this basically is sort of uncreative. It's like, well, I can't think of any amazing ideas of what would optimize construction. I spent a lot of time racking my brain over it. Lots of other people have lost large amounts of money trying to come up with a really clever idea. Nothing really seems to work. even if nothing else works, if you replace your expensive, relatively expensive labor with a robot that costs like $5,000 or something, it can work.

24 hours a day. That would effectively solve your problem, right? In a sense that it would. Yeah.

Auren Hoffman (13:45.87) But today, mean, we are like, you you used to have, now you have people using forklifts and people, you have all these different tools that these people are using, which do make them, I assume, much more productive than they were before.

Brian Potter (13:56.884) You would think that it's, and that's, think, one of the big sort of mysteries around the construction industry is that why that didn't have a bigger effect, like the mass introduction of like power tools, basically. don't see like.

Auren Hoffman (14:08.68) The number of people that you need to make a house and the number of man hours seems the same as it was many years ago.

Brian Potter (14:15.346) It is, it's very, very similar. And so yeah, the mass introduction of power tools. Yeah, that's very strange. And what's also very strange related to that is like between say 1950 and like today, the technology of like putting up a house hasn't changed that much. There's some stuff that's like different. Drywall was pretty uncommon in 1950. It's ubiquitous today. Stuff like wood trusses became adopted.

Auren Hoffman (14:18.818) Which is crazy, right? That doesn't make any sense to me.

Brian Potter (14:44.406) you know, certain materials became more common. But the basic process wasn't all that different. The basic materials you were working with didn't change too terribly much. But between, say, like 1900 or like 1890 and 1950, it changed like completely. Everything changed about it. But even over that earlier period between like 1890 and 1950, the data we have suggests that it didn't really get that much more efficient building.

We don't have a great data, but we have some cost at time series and stuff like that. And it doesn't seem like it really got that much cheaper over that period, even while the technology of building totally changed. So that's, again, there's still a lot of reasons that this is not amazingly well understood as to what specifically makes it so difficult to improve it.

Auren Hoffman (15:38.959) What countries are doing this well? there countries that we could like look to at all?

Brian Potter (15:44.768) So there's a couple ways of thinking about it. From what I've seen, there's not really any countries, and I've only seen a limited number of data sets, so some other country out there might surprise me, but there's not that many countries that are avoiding the problem of construction costs constantly going up, construction productivity relatively flat, as far as I can tell.

know, cost per square foot or whatever, or productivity indexes. They kind of show the same trends as the US or whatever. What you do see

Auren Hoffman (16:20.827) And some of the countries like their labor costs are going up much faster than US. I presume their costs are going up like with labor or something, right?

Brian Potter (16:28.222) Yeah, or just they're under similar sorts of constraints. What you do see is that other countries operate a lot. Often they will operate closer to the efficient frontier, the most inexpensively can put up a house. So an apartment building in a major European city or something will be much cheaper to build than a major US city, like a coastal city.

Auren Hoffman (16:52.962) Why is that?

Brian Potter (16:54.582) Again, it's like a combination of things, high labor costs. A lot of these coastal US cities have very strict and burdensome regulation. New York has very high construction costs and they have a lot of really, really onerous regulations for building. It's very hard to use a tower crane in New York for some reason. So you have to use these smaller, less efficient cranes that take longer to do.

You have to use like union labor for a lot of stuff and that drives up costs and it's kind of things like that.

Auren Hoffman (17:24.013) Mm-hmm.

Is it also like you have to guard against the wind that may only happen once every 400 years or that type of thing?

Brian Potter (17:35.808) For, that's less of a thing. There's some of that, like US in general has like, I'm not sure about wind, possibly about wind, but like high seismic stuff. There's some places like earthquakes. the earthquake design is more stringent in a lot of places in the US, especially on the West Coast than it is in most places in Europe. That's not like a, I would not say that's like an enormous driver of costs. It's a factor, but it's, I would say it's much more.

you know, these sort of like, you know, regulatory labor costs, know, general like coordination issues, know, stuff that's stuff that's like very highly regulated. European countries tend to be like better and more efficient.

Auren Hoffman (18:21.646) mean, every time you read anything on, this at all, you always say something like France can, can make their subways at one 10th of a cost as New Yorkers. You you always see these like weird stats like that. And it just, it just seems like you're like, well, France really like, why is France like,

Brian Potter (18:31.988) Yeah.

Brian Potter (18:36.532) Yeah, France. Spain, very, very good at building subways very, very cheaply, which again, you don't think of Spain as like, you know, the incredibly efficient country of Spain, right? That's not like the first thing that Italy to another one, I think they're pretty good at building, building subways. And that's just, you know, again, there's like this like sort of complex bundle of issues, the sort of government agencies in charge of like

managing these Metro construction projects. They all the time don't have like the in-house capacity to like do the design and manage them very well. And so they end up outsourcing a lot of that. And so you end up with these like sort of principal agent problems where like they're not necessarily doing a good design and the agencies aren't be able to oversee them very well. And there's sort of conflicts at work. And you see stuff like that kind of across the board for different sort of constructions.

Auren Hoffman (19:29.198) And it's the hard part about building subways, literally boring the tunnel that they go, or is it just like, or is it all the other stuff afterwards, like the tracks and the trains and the getting people there and all that other types of things.

Brian Potter (19:41.974) I'm not an expert at transit construction. There's so many people who are so enthusiastic about transit construction that I've in some ways stayed away from that topic. But my sense is that a lot of these are used pretty similar technology to actually drill them, use a big tunnel boring machine. Basically, it's more like doing it with an efficient amount of labor and doing the coordinations. They're doing the right jobs in the right.

Auren Hoffman (19:49.058) Yeah.

Brian Potter (20:11.766) place at the right time and stuff like that is I get the sense of what the some of the issues are.

Auren Hoffman (20:19.67) Okay, interesting. You also study, you spend a lot of time studying shipbuilding. Why is that so important?

Brian Potter (20:25.366) Well, it's important now because if you think, you know, their major like global competitor is China and you think there's a reasonable chance we're going to, you know, fight a war with China in the, you know, the South China Sea over Taiwan or something like that, then that's going to be like a naval conflict, right? And you're going to be able to build a large number of ships and then just more generally.

Auren Hoffman (20:54.146) Why would ships be important in like a drone world?

Brian Potter (20:58.23) Well, because you need your ships close to deploy the drones, deploy larger aircraft, fire missiles, and stuff like that. It's not like these drones can all just come from a... You have to get your stuff into the field of combat and stuff like that. And not everything...

Auren Hoffman (21:16.312) But for China, I'm saying like, they're already there. They don't need to have ships in. Their ships would just get, it's more like the US would need some ships, right? Because we're not there.

Brian Potter (21:21.812) they're building like, no, they're building like enormous. China is building like enormous numbers of ships. China has a bigger Navy than the U S now.

Auren Hoffman (21:29.944) But I guess why would that be important in a conflict in like, like, like in the Ukraine conflict today, like naval ships are the Russia has a massive Navy and Ukraine doesn't, but doesn't it doesn't help them because like they're there, their Navy can't get anywhere close to Ukraine because of the drones.

Brian Potter (21:46.454) That's a good question. There's a lot of thoughts. I'm not an expert on this. If you want an expert, you should talk to my friend Austin Vernon about drone combat as it relates to modern warfare. But I think in general, it is not clear how drones are going to interact with modern ships. And you're still basically going to need modern ships, transport weapons, transport troops, transport larger aircraft, and stuff like that. Yeah, Conor drone thing, stuff like that. Drone carriers, think is what

Auren Hoffman (22:09.078) Yep. Or there'd be like counter drone things or drones, countering drones or whatever.

Brian Potter (22:16.206) possible area where we might see ships and stuff like that. But anyway, you're going to need a lot of ships for a conflict in the South China Sea or basically anywhere because the US is basically protected by oceans from most countries that could be a potentially major adversary. And so for any major conflict, you basically need ships to move your of material around. in like the Gulf War, basically, for instance,

Auren Hoffman (22:19.308) Yeah.

Brian Potter (22:44.854) We needed a huge number of ships to move the material over to the Middle East before we sort of...

Auren Hoffman (22:51.534) And I assume most of those ships today are Chinese made ships that you're moving in time.

Brian Potter (22:55.734) Yeah, lot of that there's actually I think a big issue with whether we have enough like, you know, a sea lift capacity is what it's called to sort of move large amounts of military material to sort of a foreign country if we needed to. There's a lot of that capacity I think has been reduced quite a bit.

Auren Hoffman (23:12.982) And initially, like in the fifties, like Japan was dominating and then maybe starting in the nineties, like China started dominating. how, what, how do these shifts kind of w was it like a, like a, from a top down country perspective where they say, this is a priority and we're going to make this happen. Or how did these shifts happen?

Brian Potter (23:32.264) It's pretty much that. It started like as a top-down priorities. Like we're going to be a, you know, we need to have a strong shipbuilding industry for, you know, whatever reason, because we're a maritime country and we get all our, you know, all our goods via ocean trade, because it's a key like component is to building up your sort of industrial economy more generally, because it sort of builds manufacturing capability. It's a big user of steel, which we're also trying to build up and stuff like that. It's a way that it's something that we can sell to foreign countries and earn foreign exchange.

So anyway, basically it was like a sort of a top-down thing as to where these countries decided that was important. And they just invested huge amounts of money building up the infrastructure to do it. They all had like relatively low cost labor. They ended up getting like often low cost steel too. Didn't necessarily start out with low cost steel, but they built up their steel industries over time and were able to reduce their steel prices. So they were able to reduce the cost of their inputs so much that...

that they were able to build these ships very, very, very competitively.

Auren Hoffman (24:34.542) So I don't actually work. So like these ships are massive. Are you like, is it some point where you're like literally building it on the water or like, like, or is it like, because I don't even know, you can't like put them in a building that would fit the like, that like, or are you building this modular way and then you like stitch them together on the water? Like, I assume at some point, like the assembly, the final assembly of the ship is on the water, right?

Brian Potter (24:38.837) Mm-hmm.

Brian Potter (25:01.782) So it's usually done in what's called a dry dock, which is basically a big recess with like a concrete bowl, basically, with the flat on the bottom. And they basically build the ship in big chunks, like big modules. they will like, it'll be one small chunk of all over it. Most of them are outdoor, sometimes they will build these things indoor. There's a few facilities that have like, just a big, huge building.

Auren Hoffman (25:17.73) But it's built like it's outdoor, right? Like I assume it has to be outdoor. Like it's not a roof over it or is your roof.

Brian Potter (25:30.644) with like a dry dock in it, they can flood. Like think some cruise ships are built that way. But yeah, there's some facilities that are indoor, but most of them are yet, it's like a big outdoor truck. And so they assemble the whole ship, it's sitting on this like, you bottom of this dry dock basically. And when the ship is done, they open the gates and they flood it, the ship floats and then they sail it off.

Auren Hoffman (25:35.694) Okay.

Auren Hoffman (25:52.322) that's so cool. I imagine just like the infrastructure of that is like massive. Like it's part of the reason like the US just can't do it is just like, it's just like takes a massive amount of like, it manages really like hard just to do just to build that kind of infrastructure.

Brian Potter (26:10.728) It's not so much that it's physically difficult or so complex to do. That's one of these reasons that you keep seeing new countries come along and get a big share of the shipbuilding industry is because it's relatively simple to do compared to something more complex, like semiconductors or aircraft or something like that. It's much simpler to build a ship than things like that. But it does take a lot of space and a lot of these existing shipyards in the US.

Auren Hoffman (26:30.519) Yeah.

Auren Hoffman (26:35.554) Yep.

Brian Potter (26:38.314) They don't have space to expand. And so all these countries that built up their shipbuilding industries over time, they were able to build this big, huge new shipbuilding facilities and willing to invest the money to do that in these spaces where there was huge amounts of room to expand. And they could build all the room to move parts and pieces around and store the big modules and stuff like that. In the US, shipbuilding, shipyards, they don't really have room to expand in the same way.

necessarily the money has not been allocated to find, you know, places to build big, new, huge giant shipyards. Perhaps someday there will be.

Auren Hoffman (27:17.262) I went once to the aircraft facility in Seattle and it was like, yeah, it was amazing. For the most, so big. It's just like, just like, just the scale that it was, it was just, it was so cool just to see, why, why are Airbus and Boeing, why do they persist as this duopoly where it just seems like in, you know, kind of like the, it's like the last place.

Brian Potter (27:22.73) Hmm. Yeah. The Everett factory. Yeah.

Auren Hoffman (27:43.862) and whereas like the US has lost things like shipbuilding and so many other types of things.

Brian Potter (27:49.686) Yeah, mean, my sense is that the aircraft industry is so small in terms of number of airplanes sold a year, like for a large commercial aircraft, like Boeing 737 or whatever, they only sell maybe 1,000, 1,500 of those a year. And there's not that much room to carve up the market between all that many participants. And so you saw,

Auren Hoffman (28:17.526) I assume like safety is really important there and efficiency and stuff.

Brian Potter (28:19.892) Yeah, it's just so expensive to, yeah, it's so expensive to like build and develop a new model of aircraft, partly because of safety, partly because you have to test it so much. It's so expensive. You need to earn that back over like a certain number of sales. And if the market is carved up too much, there's not enough basically market share to go around. And so what you saw in like the seventies and the eighties and nineties or whatever is that you had more competitors and then they just got like slowly whittled.

down because it was just so expensive to like build these aircraft and there just wasn't a market share. Yeah. So like Lockheed was a competitor in like commercial aircraft for a while and they developed this airline, this aircraft called the TriStar and they lost, it cost them like billions of dollars to develop and they only sold like a tiny number and they lost huge. Yeah. They lost like huge amounts of huge amounts of money on it. And then they said, throw it or. Yeah, it would be pretty uncommon because it was built in like the

Auren Hoffman (28:51.15) Right, the McDonnell Douglas of the world.

Auren Hoffman (29:06.479) I've never even I never even knew Lockheed made commercial. I don't think I've ever flew on a Lockheed commercial aircraft.

Brian Potter (29:18.56) you know, the 70s or whatever. So would be pretty incompetent. I think there's maybe like one still flying. It's like you use for like, I feel like it's used for like some special purpose or something like that. But.

Auren Hoffman (29:19.918) Okay.

Auren Hoffman (29:30.092) That's the we're are there examples of like recent infrastructure projects in the US that are going really well. Like, I don't know, maybe in like some place in Texas and something we can learn from them.

Brian Potter (29:42.71) So the US is pretty good at building like a lot of like natural gas power plants, stuff like that. Those, if you look at like the time lapse of like those going up, those get built like really, really quickly. But they avoid a lot of these like problems that we were talking about earlier with so many infrastructure projects. Like you're not, it's not like a transition line or a subway where you're like.

incredibly disruptive to like a huge number of people that you're trying to like appease and getting the permits or whatever. You're having to like get you know, get a bunch of like, you know, land easements or whatever. It's much it's a so it's a little bit you know, they dodge a lot of those like permitting difficulties and stuff like that. But like, know, industrial facilities in general, like big, you know, we're pretty okay at building, you know, like a big car factory or something will go up like reasonably quickly.

Auren Hoffman (30:12.3) Right. It's just like in the middle of nowhere. Yeah.

Brian Potter (30:37.75) so stuff like stuff that avoids a lot of these, coordination challenges with getting a bunch of landowners and stuff on board.

Auren Hoffman (30:43.246) So basically if you like, could build it out of population center, whether, whether it's a power plant or a factory or a warehouse, like we can do a, it's, when we get a close population center.

Brian Potter (30:52.424) Yeah, you don't need like a approval of like a bunch of little individual landowners if you don't need like, you know, federal government approval or whatever. If you can avoid like a lot of like your complex permitting problems. It's quite a bit more straightforward, we're a little bit better.

Auren Hoffman (31:10.892) It's interesting because 20 years ago there was just like, was all this talk in the U S about peak oil, not just the U S but worldwide. And you know, right as the fracking movement was happening, but it's kind of like happening under everyone, everyone's noses. do you have a sense of like why that, that was so successful in some ways it is like a manufacturing success for the U S like why, why was that like so uniquely successful and so uniquely American.

Brian Potter (31:39.316) Yeah, so it was this company in Texas, Mitchell Energy, I think of it, and they just experimented with, they had a sense that there was like, you you could extract large amounts of, I think it was originally used for, anyway, it could extract large amounts of gas in these formations that had traditionally been thought that you couldn't get it out of, and they just kept fiddling around with their like,

drilling and sort of fracturing parameters for long enough and kept experimenting with it until they basically cracked it essentially until they figured out, here's what you need to do to sort of drill these formations in a way that we can extract large amounts of gas and energy from it. And once they sort of started figuring it out, more people sort of into the sector, sort of, development, they kind of kept figuring out better and better ways to do it.

And just in general, the oil and gas industry in the US has been pretty innovative. It's very, very competitive. And there's lots of constant technology changes to find ways to do this truly more efficiently and extract more oil and gas from these formations. So even for the past 100, 150 years or whatever, there's just been constant innovation pushing the technology forward.

Auren Hoffman (32:44.898) very entrepreneurial.

Brian Potter (33:07.306) try to make it better over time. And the fracking, you know, is yeah, incredible and huge amounts of energy, but

Auren Hoffman (33:11.256) Why is that, why has that been so uniquely American? Like why, like it seems like in most other countries they've got, if we can build something quick, they can do it, can sometimes even do it way better than us. This is like an industrial, very industrial thing where it seems like America does it the best.

Brian Potter (33:27.136) This is a good question. I have a vague sense, so I'm going to put something that's a placeholder that you or a listener can go look into lately. I think the way that the US treats mineral rights is a little bit different than other places. I have a sense that in a lot of places, the government basically owns mineral rights.

Auren Hoffman (33:48.118) Yeah, most countries the government owns like whatever is below the ground.

Brian Potter (33:52.15) And in the US, I don't think that's true. think in the US, it's basically you own it and then you can also sell it, basically. And I think that has been a key factor as to why there's so much more incentive to find ways to develop ways of getting minerals out of the ground, basically, oil and gas than maybe in other places. I think that's part of it. But you'd have to ask somebody with a deeper knowledge of the oil and gas industry to...

Auren Hoffman (33:54.23) Yeah, if you own an acre, you own what's underneath the acre. Yep.

Brian Potter (34:21.45) Get a more detailed answer.

Auren Hoffman (34:22.882) And one things I loved was you wrote this like great essay on Bell Labs, which basically invented like so much stuff. it was such an innovative place. Like why, why do think they were so uniquely innovative?

Brian Potter (34:27.498) Yeah.

Brian Potter (34:36.0) Yeah, so it's this like, sort of like perfect Goldilocks combination of arrangement of like parts and pieces basically. So we had this huge monopoly that was, could funnel like, you know, huge amounts of money into this operation. And so they didn't really have to worry about competition, but also the monopoly was like so big that they were always on the verge of like being too big for the federal government to accept. And they were always worried.

Auren Hoffman (35:04.396) Yeah. You have, you have to like waste money for some reason. Yeah.

Brian Potter (35:05.749) They're always worried that the government was going to come in and break them up. And just so kind of appease them, they're like, OK, you need to be constantly improving your services and constantly driving down costs. So they had a very, long time horizon because they were a monopoly. They didn't really have to worry about competition. But they were also very, very strongly incentivized to constantly be improving their technology and developing new capabilities that they could hold onto. The US government says, look, we made this other thing. Please don't break us up.

And then they just hired like extremely, extremely, extremely talented people and kind of managed them in a sort of very good way where they gave them a lot of freedom to sort of pursue whatever they thought would be useful. But they also sort of subtly directed them into sort of solving problems that were like related to the business that they were in, which is, you know, improving communication.

Auren Hoffman (35:58.094) Cause like a Claude Shannon could have gone into like a university or something, but somehow they like were more effective in a Bell Labs, right?

Brian Potter (36:05.078) Yeah, like, you know, Labs, had like huge amounts of funding, like the equipment was like much better. They didn't have to like worry about like teaching or like finding grants or stuff like that. So it was a much, it was very cushy job to like do research at Bell Labs. And of course, for most of, know, 20th century, it was also very, very prestigious. It was like as prestigious, more prestigious than like a major professorship at like a major university or something like that, which is not generally true at like industrial research type places.

Auren Hoffman (36:18.743) Yep.

Auren Hoffman (36:34.958) And there's some, some people make analogy data like Google does for research or what's something like, or some other companies do for research. Google, you know, they, they, they published the transformer paper, which, which really has kind of like led to the AI revolution and things like, like, is there some analogy to today? Or is it just like, or just like, that was a unique moment in time, which will never be kind of replicated.

Brian Potter (36:59.35) Google is probably the closest. There's lot of, yeah, there's stuff like the transformer, a lot of their AI work. They were funding self-driving cars for years and years years years years, which is only now starting to bear fruit or whatever. they have lots of other stuff that escapes me at the moment. But even then, they're a little more focused on like,

Auren Hoffman (37:15.244) Yep. Only, only a company with like a massive time horizon.

Brian Potter (37:28.822) the bottom line, I think they tend to like spin their efforts out as like separate companies. I, you know, a lot sooner than maybe, you know, would be done, would be turned into a commercial operation at something like Bell Labs. So I think even Google, Google is perhaps the closest, but even Google is maybe not quite at the same level of like, you know, truly free from like, you know, immediate concerns about like competition. We only need to worry about making this sort of useful technology in the long run.

Auren Hoffman (37:33.421) Yeah.

Brian Potter (37:57.302) Yeah, just sort of a.

Auren Hoffman (37:58.094) It seems like, like, if you think of like the, you think of Bell Labs, like the forties and fifties, and then at some point you think of like Xerox PARC or in the seventies or something, somehow the innovations start to like move to like that type of place or,

Brian Potter (38:14.322) So Eve, would say that, yeah, after the transistor, which was like a huge deal after Bell Labs sort of invented the transistor, Bell Labs was like incredibly, incredibly prestigious. And everybody was like, well, and then, shit, we can, if these industrial labs, they can produce like these hugely important valuable products. And so there was a lot of companies that were like, I need to get an operation like that in my own big company.

Auren Hoffman (38:41.846) Hahaha

Brian Potter (38:43.55) And so companies like Ford, companies like Xerox, IBM to some extent, Exxon, they all set up these industrial research labs that were basically modeled on the Bell Labs idea, was, hire a bunch of like super smart researchers, give them a bunch of like freedom to like do whatever they think is valuable.

And they did a lot of groundbreaking research or whatever. The IBM research has won a couple of Nobel prizes. Xerox PARC, of course, invented a whole bunch of modern computing technology. Exxon, a lot of the initial research for lithium ion battery was done there. But none of these companies really managed to turn their research into huge money-making.

products or whatever. It was like they did a lot of prestigious research and stuff that ended up being important in general, but not especially valuable to the company itself. Xerox very famously never managed to really capitalize on its park developments. I don't think Exxon really ever did anything with its lithium ion battery developments, stuff like that. they just kind of had a hard time turning this

you know, turning this research into sort of like products that like showed up on the the bottom line. And so they all kind of ended up moving away from this this model where they would like just give these researchers free reign to sort of do whatever they they wanted.

Auren Hoffman (40:21.934) There's been a lot of talk about like rare earth minerals in the U S and how do we develop them or how do get more, whether it's lithium or copper, you whatever it might be that's out there. Like how, how do you, is that something you think that, that the U S is going to have to do more to just be more self reliance? And if so, like, how are we going to get there?

Brian Potter (40:43.168) That's a good question. This is on my list of things to research, know, rare earths. I have a big list of topics and like you should learn about more about rare earth mining. You keep hearing about it in New York Times or whatever. I don't know a huge amount about it. I get the sense that like the US has a very large number of like deposits of these things. It's just a question of like, is it possible to sort of extract them in an economically profitable way, basically?

Auren Hoffman (41:06.894) Cause it kind of rhymes with fracking in a way, right?

Brian Potter (41:09.91) A little bit. I get the sense that the US has not been especially dominant in mining type developments. My vague sense is that that was an early casualty of not wanting these incredibly environmentally destructive and disruptive industries. And so it's gotten very hard to open a new mine in the US or whatever, another consequence of this permanent stuff.

Auren Hoffman (41:37.432) And also the process, the process, the rare earths is very, yep.

Brian Potter (41:40.296) Yeah, a lot of it's like pretty dirty, pretty gnarly. I don't know if like, you know, there's definitely more interest in like, you know, more self sufficiency and stuff like this, you know, for defensive purposes, or for whatever reason. So I could, I suspect we'll like, get back, do a little bit more of it. I don't really know the trajectory. I don't have good sense of what the trajectory of it will be. I don't know. I haven't researched this area all that much. I don't have too, too terribly much to say about it.

Auren Hoffman (42:07.47) So I was an engineer. went to college in the nineties. And if, if, if you went to college, when I went to college, the, and you were an engineer and you studied electrical engineering, computer science, maybe chemical engineering, this would be like a very lucrative field. If you studied things that are a little bit more traditional aerospace engineering, nuclear engineering, mechanical engineering, et cetera. you probably didn't do like.

Brian Potter (42:10.838) Hmm.

Auren Hoffman (42:36.204) nearly as well on a relative basis over the last 30 years. And my guess is that a lot of people decided not to go into those fields because of that. Like, how are we, how is that affecting today's market?

Brian Potter (42:51.158) Yeah, that's a good question. I saw something just the other day. I think if you look at like the top, you know, median earnings by career or something, it's still all like engineering careers that are like right at the top of the list, like electrical, even, aerospace, all that stuff is like industrial engineering. All that stuff is pretty high up. I don't have a sense of like why, you know, we're not, you know, why we're producing fewer engineers than...

and maybe we'd like, other than, you know, it's become, I think for a lot of period, a lot of period in the 20th century, it was very prestigious to be like an engineer. Like that was something that you'd like people aspire to be. I think the prestige attached to it is not nearly the same as it was.

Auren Hoffman (43:41.036) And what do you think the reason is? I have a theory, but I love to.

Brian Potter (43:45.59) That is a good question. I wonder if it's downstream of like, perceive less technological progress in general outside of a few things like semiconductors and stuff like that. So in like first half of the 20th century, whatever, there's all these incredible technology developments, know, cars and airplanes and nuclear bombs and stuff. It's all getting like better and more capable and stuff all the time. And so an engineer is like a, know, that

sort of technology personified, know, progress personified to some extent. And so if you're, you know, an engineer who like sort of works on that stuff and you're sort of in some vague or indirect way responsible for this like technological progress, that's like quite prestigious or whatever. But if the last 50 years have been like, you know, a of this technology seems like it's maybe not advancing quite as fast, things in many ways seem very similar than they did in the, know, 70s and 80s and stuff like that.

maybe it's not quite so prestigious to become an engineer as maybe it was when you have, know, progress looks a lot different. And maybe that's why China is able to produce so many engineers, or at least part of it is because they've really seen like huge amounts of like development, you know, progress overall, and just like development, like living standards and the results of like building like huge amounts of infrastructure and how that's been able to improve people's lives.

Auren Hoffman (45:09.304) It sounds right. mean, it seems like if you're an engineer, you want to actually build something. That is the reason you're an engineer. You want to actually do something. So if like, you could like build the SR 71 in like two years or whatever it took back then, like you're like, great. Like, this is amazing. Like that's, that must be a really fun project to work on. If you'd work on that same project today and it takes like 20 years. Well, like that's like your whole career to do like one thing. And so you just, you might as well just like that same person, just like.

Brian Potter (45:14.175) Yeah.

Brian Potter (45:33.781) Yeah.

Auren Hoffman (45:38.05) goes into finance and makes money now, whereas before they got to build cool stuff.

Brian Potter (45:40.446) Yeah, I've heard stories that like traditional automakers like Ford or GM or whatever that you would have people who's like engineers who like they only work on like door handles or whatever like that's all that they do is like design door handles.

Auren Hoffman (45:52.174) Right, right, it's like terrible. Like imagine like, yeah, like 30 years in, it's like, could like show like the three door handles like you made or something. Like, I don't know, it just doesn't seem like that exciting.

Brian Potter (46:02.707) Yeah.

Anyway, what's your theory of why we're not making it?

Auren Hoffman (46:07.986) I think that's exactly it. Like, I think it's just like, it's just that like, you can't, want to see what you did, like in the, in the wild. and, you want like, like my wife's grandfather was a food engineer. back for, she worked for general mills. and he got to make like super cool stuff, like Tang and cool whip and, know, all these other types of stuff, like every year he got to like, come up with something cool. was like,

Brian Potter (46:14.164) Mm-hmm.

Brian Potter (46:21.611) Hmm.

Brian Potter (46:31.204) that's cool.

Auren Hoffman (46:36.568) You know, he didn't make a lot of money. was, he was, were for general mills. He was just an engineer, but like every, every, every lesson every year, he got to see like a new invention that his lab did come into. then, and then he could see like the neighbors buying that invention. so that was cool.

Brian Potter (46:52.682) Mm-hmm. Mm. Cool.

Auren Hoffman (46:56.738) Now, what is there is, but it is, we do have a shortage of engineers in the U S right.

Brian Potter (47:02.991) I don't know. mean, it's, you know, I don't know.

Auren Hoffman (47:10.092) You don't know. Okay. All right.

Brian Potter (47:10.934) I don't know. I know there's constantly concerns about labor supply. I'm more familiar with the construction industry. There's constantly concerns about having enough construction workers and stuff like that, like the average age of construction worker.

Auren Hoffman (47:22.978) Why aren't more people going into construction? Because it does seem like a fairly lucrative, like if you're an electrician or something like that, it seems like a very, very hard skill to learn. But once you do learn it and once you're relatively competent, you have an extremely good guaranteed income. And it seems like so few people are going into these types of fields in the US.

Brian Potter (47:48.086) Yeah, it's a good question. think part of it is kind of what we talked about earlier, is the status of these things has been lowered relative to other things. There's so much emphasis on going to college and getting a degree and doing some sort of knowledge work basically in the relative status of construction work has fallen. I think it's not quite as lucrative as a lot of people say. You see these threads on Reddit. like, you should go and be a plumber and then earn $150,000 a year.

few hours make that much money. It's often quite, yeah, I'm sure you can, but I don't think it's the modal outcome. I think a lot of these jobs are really quite taxing. Like to work in construction is like very physically demanding. Not necessarily after you're like super strong or whatever, but you're on your feet all day, you're bending back and forth in...

Auren Hoffman (48:20.974) Yeah, like maybe if you live in Manhattan and you have to add like five grand a month when you're one bedroom. Yeah.

Auren Hoffman (48:33.485) Yeah.

Brian Potter (48:45.468) know, awkward positions. It's very taxing on the body to kind of work a lot of these jobs. So it's not like amazingly surprising that people are like less interested in that and more interested in more relatively interested in, you know, jobs where they can work in a nice air conditioned office and boot numbers around an Excel spreadsheet or whatever. Yeah, like I've worked, I've spent time doing construction.

Auren Hoffman (49:08.194) Yeah. Yeah. That's a good point.

Brian Potter (49:15.048) work. Quite badly, I will say, when I did do it. And it sucks. part of that is a personality thing where I'm not particularly well suited to it. But yeah, was quite taxing. You're out in the sun all day doing manual labor. An office job is comparatively much more attractive.

Auren Hoffman (49:21.986) Yeah, pouring concrete or something.

Auren Hoffman (49:38.658) Yeah. Yeah. It is funny. Like these people, they'll do the office job, but then they'll go like every morning in a Barry's bootcamp or something. What are some topics that you're researching beside the rare earth minerals that you haven't yet felt confident writing about yet?

Brian Potter (49:45.362) Yeah, yeah, yeah.

Brian Potter (49:55.158) So there's usually a quick, pretty quick turnaround between like when I'm interested in a topic and when I start researching it and when I write about it. So there's usually not like a, I have a list of things that I like, you know, want to sort of learn more about. But usually once I start learning about it and diving into the research, the essay starts to shoot up pretty quick. Water infrastructure is something I think is gonna, I'm gonna start devoting more time to.

Auren Hoffman (50:22.737) yeah, that's interesting.

Brian Potter (50:25.214) I just don't under, I just, I, know, I'm a civil engineer. So you fit by, by, know, by degree. So you would think I would understand it very, you know, better just by first, you have treatment plans, you know, how water infrastructure, you know, works at a high level and you know, how it gets, you know, gets built and what sort of gets built and what do we need to do different types of water tasks and how much water is used and where it's going. Like I just don't have a good sense of, of any of that really.

Auren Hoffman (50:33.71) So you're talking about things like treatment plants, the movement of water, all that stuff.

Auren Hoffman (50:51.626) I a hundred percent want to read that when you're like that, like that's super interesting. Yeah.

Brian Potter (50:53.482) But that's, I think, know, that's a pretty important part of infrastructure that I haven't really touched on at all. So I think I will.

Auren Hoffman (51:00.398) By the way, that does seem like, don't know that much about it, but like intuitively it seems like something like US does pretty well. Like pretty much anywhere I go in the US, I can drink out of the tap where that's not true in a lot of countries. Um, the tap water or it's like, it's a, love the tap water in the US, um, unfiltered tap water. just tastes good. It's, it's relatively good for you. I think, um, it's clean. It's, it's ubiquitous pretty much anywhere you go. Like that, that is a weird thing to the US does well.

Brian Potter (51:10.07) Mm-hmm.

Brian Potter (51:29.758) Yeah, that's it. Again, this is thing I don't know is like how good is the water in the US compared to other countries. That's actually a pretty interesting angle that I hadn't considered until just now. But like how good is our water actually? You know, you see stories like, you know, Flint or whatever, there's all the lead in the pipes. But yeah, that would be actually interesting to compare. How good is the water in other countries, in the US compared to other countries? How does it vary across the geography of the US? That'd actually be interesting to look at. So I'm going add that to the list of topics to write about.

Auren Hoffman (51:42.35) Right, right. There are some terrible, horrible stories too.

Auren Hoffman (51:58.286) Interesting. All right. We have two more questions. ask all of our guests. One is what is the conspiracy theory that you believe?

Brian Potter (52:05.044) gosh. Yeah, that is a good question. I don't know. For a while, it really seemed like a lot of this UFO stuff. It was like, there really are actually UFOs. everybody in the Pentagon just knows this, and we just didn't really talk about it. So that was becoming quite compelling to me for quite a bit of time. And then it was like, wait, are there actually UFOs going on here? Why isn't anybody talking about this?

Auren Hoffman (52:30.921) Right, right, right.

Brian Potter (52:34.493) And then just recently I saw some article that was like, this was just something, know, disinformation deliberately introduced by the Pentagon to like confuse some other people in the Pentagon, basically. So now I don't know what to believe. It still seems perhaps somewhat plausible to me. And I would love it if it were true.

Auren Hoffman (52:44.142) Yeah, it's like a Psyop. Yeah.

Auren Hoffman (52:57.282) Is there any conspiracy theory in like the construction industry that people have? Like there's some monopoly that's trying to move prices or anything or.

Brian Potter (53:05.83) that's a good question. There's been a there's a there's I haven't seen discussion as to like, there is like, there's like a conspiracy among home builders, like make large home builders to like, restrict the availability of land to basically effectively drive up prices, essentially. And you are I haven't spent a ton of time looking into it. But you are historically in the US home building was like really, really, fragmented and

Auren Hoffman (53:24.648) interesting.

Brian Potter (53:34.504) even the largest home builders only had like a pretty small chunk of the market. That's not nearly as true today. And the largest home builders have like a pretty big chunk of the market actually. yeah, so like, you know,

Auren Hoffman (53:44.056) probably even locally, they have a bigger chunk. there probably is like where I live in Northern Virginia, there may only be a few or something.

Brian Potter (53:50.59) Yeah, companies like, you know, Toll Brothers and stuff like that, Lennar, like these big national companies are lot bigger than they used to be. So it doesn't, I haven't looked into it deeply, but it doesn't strike me as crazy just based on what I know about like the changes in market share over time.

Auren Hoffman (54:08.49) Those have been some conspiracy theories that like the train companies have been against the trucks or, know, against the pipes or, know, it's like these, like these other, like different conspiracies that are like, they're out there.

Brian Potter (54:19.938) yeah, I think a lot of that is just like, you the economics of something is bad and so it doesn't work out and people don't accept that operation or conclusion or whatever.

Auren Hoffman (54:25.569) Yeah.

Auren Hoffman (54:30.284) Our last question we ask all of our guests, what conventional wisdom or advice do you think is generally bad advice?

Brian Potter (54:36.476) So my thinking about advice is that all advice is kind of like directional. So it's like, it takes you in a direction from a certain point, but you should do more of this, you should do less of this, you should spend more time exercising, you spend more time with your family, you should do less time working, blah, blah. But because it's directional, how good it is depends on like,

where you are starting from. There's people that are like, you work too much and spend less time with your fam, you should spend less time working more time with your family. There's people that do not work nearly enough, would be well served by like, buckling down and focusing more on your job and grinding it out or whatever. So I think in general, people place too much emphasis on like broad.

Auren Hoffman (55:13.91) Right, yeah.

Brian Potter (55:30.482) advice that's not tailored to sort of their necessarily specific set of circumstances. And in general, advice is good to the extent that it is like takes into account like where you're starting from and what would move you in a most profitable direction. And I think most advice is not like that kind

Auren Hoffman (55:47.864) Now, highly, I highly encourage everyone to subscribe to construction physics. also follow you at underscore Brian Potter on X, by the way, what is the, why the underscore? Why do you have the Brian Potter taken or something or.

Brian Potter (55:57.75) Because what the yeah, Brian Potter was taken. I could have done Brian Potter 2727 or something like that, but the underscore seems good. I saw a few other people do it and like, oh, this is a seems like a good way to get something that's close to like your actual name or whatever.

Auren Hoffman (56:13.742) Yeah, okay. You got it. You got to like, you have to somehow like buy it from the other guy.

Brian Potter (56:18.26) Yeah, I know. I couldn't get, yeah, yeah. Maybe somebody will sell it to me.

Auren Hoffman (56:23.086) Well, this has been awesome. Thank you, Brian Potter for joining us in World of DaaS. And I definitely encourage our listeners to both subscribe and follow you on X. This has been really great.

Brian Potter (56:31.306) Yeah, thanks for having me.

Auren Hoffman (56:33.379) basic.