tech entrepreneurship

Tesla once again doesn’t understand manufacturing

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Once again, Tesla demonstrates no understanding of volume manufacturing!  Newspaper: “Tesla reworks 40% of its parts.” Tesla response: “But we inspect every car carefully before shipping it!”

Tesla fires back against a CNBC report that cited unnamed employees’ complaints about the electric carmaker cranking out a high number of parts that need to be repaired or replaced. Tesla say…

Source: Tesla: flawed parts report is flawed regarding cars’ quality

But as Deming and others pointed out decades ago, you cannot achieve good final quality by doing lots of inspection. There are many reasons for this, including that inspection/testing is not 100% accurate. The whole field of statistical process control, which eventually morphed into today’s “Six Sigma,” was invented as an alternative to massive inspection.

So if Tesla claims that it can make parts so poorly that 40% need rework, but still have defect-free cars, it is an admission of ignorance. This continues Tesla/Musk’s consistent pattern of not understanding that high volume manufacturing is not just “low volume manufacturing repeated many times.” (See my October post  about Tesla’s attempts to ramp up Model 3 production.)

My suggestion for people with a Model 3 on order: don’t expect it to be on time, or have good build quality. Sorry.

Style by subscription: Why clothing-to-your door is so popular – Silicon Valley

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I’m going to list some oddball potential case study opportunities for my students here. (I’m teaching 3 courses in April, all requiring papers!).

Having a computer and a person you’ve never met pick clothes out for you, based on a style questionnaire and your social media photos, seems an odd concept. But San Francisco’s Stitch Fix and Le To…

Source: Style by subscription: Why clothing-to-your door is so popular – Silicon Valley

Each new generation needs to learn the lesson of Theranos: appearance ≠ reality

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Every 10 years or so, a conspicuous bubble bursts, and in doing so it resets the expectations of the next generation of young adults.

  • Enron
  • 2008 financial collapse
  • Now Theranos

Reading this article, I’m astonished at how little substance the adulation of Elizabeth Holmes was based on. And how much secrecy her investors allowed her. Given that she was claiming that her system would be ~100x better than established technologies, why didn’t they demand evidence? Why was it left to a reporter to figure out that the emperor had no clothes? And, was she nothing more than a successful con-artist with no genuine scientific expertise?

“In a searing investigation into the once lauded biotech start-up Theranos, Nick Bilton discovers that its precocious founder defied medical experts—even her own chief scientist—about the veracity of its now discredited blood-testing technology.”

Source: Exclusive: How Elizabeth Holmes’s House of Cards Came Tumbling Down | Vanity Fair

The Hardware Startup Valley of Death — Bolt Blog — Medium

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An interesting short article by Chris Quintero, about what goes wrong when hardware startups are ready to start selling actual production units.  The company faces simultaneous “manufacturing hell” and “fundraising hell.”

My response: It’s a good analysis, but it’s symptomatic of the problem that the author does not include a single recommendation about manufacturing.

Manufacturing 1000 units is a whole different world than making 10, and I’ve seen many idealistic startups founder because the team thinks they can outsource all the manufacturing issues (and, to the least expensive contract manufacturer). Not understanding tolerances and not designing for manufacturability, for example, cause months of delay, that eat cash needlessly and often fatally. But some startup teams don’t have this expertise. If you are in that situation, work with an appropriate US-based partner such as Leardon.com. (No affiliation except that one founder is a former student of mine.)

Source: The Hardware Startup Valley of Death — Bolt Blog — Medium

You can guess that this author knows mainly about finance and marketing. Classic MBA profile!  (I don’t know CQ and don’t know his background.)

Immigration and high-tech startups: not correlated, after all?

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Some colleagues have just published a new analysis of high-tech entrepreneurs, and the results are  surprising. There has been a lot of talk  lately that high tech firms are disproportionally founded by immigrants.  But according to my interpretation of this new, and more carefully done, study, that’s  not true.  Here’s my summary of their results:

Only about 3 percent  of the founders of high-impact, high-tech companies are foreigners (about 60 out of 2034).   97 percent are US citizens, and specifically 87 percent are US-born, while 10 percent are naturalized US citizens.    Furthermore, most foreign-born founders lived in the US for decades.  These founders are statistically very similar to the average US population in terms of birth and immigration status.

What’s the evidence? The study is by David M. Hart, Zoltan J. Acs, and Spencer L. Tracy, Jr.High-tech Immigrant Entrepreneurship in the United States A summary of their report is at http://www.sba.gov/advo/research/rs349.pdf

Here’s the odd part: the authors draw a rather different conclusion from their data than I do. Specifically their lead is “The central finding of the study is that about 16% of the nationally representative sample of high-impact, high-tech businesses that we surveyed count at least one foreign-born person among their founding team.” And indeed, their data does say this. But they failed to make a comparison to the US population in general. And classifying as “immigrant founded” a firm with any foreign-born founders is inherently biasing the results toward a higher number. They report that “of the 205 Immigrant Founded Companies in the sample, more than half [ie. at least 8% of the firms in the sample] were founded only by foreign-born entrepreneurs,” which seems to me more informative than the 16% number.

For what it’s worth, I’m very sympathetic to the view that immigrants have a positive effect on technology and entrepreneurship. My nationalistic perspective is that we (the US) should educate in our universities the smartest kids we can get our hands on worldwide , and then keep them in the US.  We’ve always been a nation of immigrants, and there is no reason to change. Of course, there are many nuances and ramifications of this debate.

Here’s my comparison data on the general US population, based on latest-available information from US Census.  In 2003  about  11.7 percent of the population was foreign-born.    (http://www.census.gov/prod/2004pubs/p20-551.pdf)  Of these, only about 40 percent are naturalized US citizens (http://www.census.gov/prod/2003pubs/c2kbr-34.pdf). But corrected for the same average age (or residence time in the US), it looks like very roughly 70 percent of immigrants are  naturalized.  And, if we adjusted for region of residence, since startups and immigrants both disproportionally reside in some regions, the fraction of immigrants in their sample would probably be even lower than the general population in the same region.

On the other hand, it might be more relevant to look at the status of company founders in the year of founding, rather than today. Presumably fewer of them were US citizens at the time (although the percentage foreign born would be the same). But a similar correction would apply to the immigrant population of the US as a whole, so it’s still not clear that the two would differ meaningfully.

Finally, this research looks well-done to me. It’s only their spin on the executive summary  that I disagree with. They seem to have done a much more careful job than previous analysis on this topic, and if you read their report carefully they don’t overstate their results.

[A good comment on this research is at http://www.usnews.com/blogs/capital-commerce/2009/07/16/immigrants-a-driving-force-behind-innovative-firms.html#3323010 . The commenter has delved into the report and extracted some numbers I didn’t notice, that support the view that this research is NOT pro-immigration, at least not directly.]