Stop me if you’ve heard this one before. “Mark Rober? More like MacRo Ber!”
You probably should have stopped me anyway because now that’s out there on the internet and I’ll never live it down.
I just watched Mark Rober’s video offering for March 2023, and let me tell you, I am floored. In the latest installment of his cool science videos, he showcased an incredible drone company called Zipline. He immediately caught my attention in the first couple seconds when he touched on the sheer inefficiency of delivering a tiny little meal via a heavy vehicle and all the problems that entails, and then astounded me with how Zipline aims to solve this. By using autonomous, silent, aerial drones, Zipline can skip the traffic and a lot of the environmental impact of other delivery methods and get you your orders in a far more time and energy efficient manner. That’s incredible. We love efficiency. Zipline is so cool for that. But before you shake your head and mutter, “there goes another brilliant mind off to solve a meaningless first world problem”, it gets better. Mark’s video spends the majority of its 21 minute runtime showing you how the concept of drone deliveries is already saving lives over in Rwanda.
See, Mark’s newest best friend Abdul came up with an idea of slingshotting packages across the country aboard long range drones. When these drones approach their destinations (in mere fractions of the times it would otherwise take for a delivery to be made), it would deploy its parachuted parcels to pining patients and doctors could save lives without waiting on traffic.When Abdul partnered up with Zipline to create these distribution centers/launch sites, things became a reality and the world changed forever.
Right away the effectiveness and importance of these drones became clear. Mark shares the staggering statistic that, “their drones have reduced in-hospital maternal mortality by 88%”. Kids get to grow up with mothers thanks to this big idea. But that powerful statistic didn’t get my brain churning quite as much as the next one he shares.
Rwanda’s GDP has been growing at 4x the rate of the US’s in the past decade.
Now, you’re a smart economist, so you say, “Why Nate, that makes sense. It’s harder to grow your GDP when you’ve already hit the border of what’s possible than it is to play catch-up.” You’re exactly right. You just summarized the Solow Model of Growth and you (probably) didn’t even know it.
Solow Model of Growth
Let me walk you through it. I had to dig out my intermediate macro econ notes to find the exact formula I was thinking about, because it's really cool. Assume your GDP is a function of your nation’s capital and labor. That is to say, what you produce is dependent on the people who make it and the tools they use. Here’s a formula for my nerds in the audience tonight:
Y = (AK^𝛼)(L^(𝛼-1))
Y is your output, A is the efficiency of your capital, K is your capital, and L is your labor. Don’t worry about the little alpha in the exponents, we’re not actually going to do any math, we’re just thinking about it.
Now, as we’re producing, there comes a point where we can’t really produce any more than what we already are. Once we’re there, we’re kind of stuck. Adding more capital won’t really help, right? Handing someone three extra hammers won’t help them assemble a cabinet any faster than one hammer will. Likewise, increasing your labor won’t help either because then you just have supervisors and managers watching the one guy with his one hammer. Instead, you focus on efficiency.
By increasing the efficiency of your capital/labor, you will have more output at any level of capital. Sure you’ve just got the one hammer, but man, you should see that guy work it! Likewise, you can give the man a hammer, or you give him a nail gun and watch him assemble that cabinet like nobody’s business! It’s all about the efficiency factor.
The main takeaway from the Solow Model of Growth is that an increase of efficiency can boost your short-term growth right up until you’ve hit that maximum limit of what’s possible with what you have. Once you see your next breakthrough, that’ll boost your limit again and you’ll quickly accelerate until you reach that next checkpoint.
Romer Model of Growth
Next up, however, let me tell you about the Romer Model of Growth. This one is a little different as it aims to explain long-term growth. The whole idea behind this one is that (here’s a direct quote from my old notebook) “Economic growth is sustained by discovering better and better ideas of how to use finite objects”. The three main reasons behind this are as follows:
1. Ideas are what’s called non-rival. Multiple people can hold the same idea at the same time without there being any less of that idea to go around.
2. Ideas have increasing returns to scale. Invention may be costly at first, but once it’s happened, costs start going down.
3. Finally, there needs to be some incentive for these ideas to be dreamed up. After all, nobody likes a copycat, so we utilize institutions to protect and foster the idea creating process.
Mark’s video perfectly showcases all three of these points. We got to see that both Zipline and Abdul were thinking up ways to use drones for deliveries, and neither experienced “less idea” because the other had it, too. Ideas are infinite. Next, we see how it was tough for Abdul getting his idea off the ground, but then the more and more he worked at it and with additional resources from Zipline, suddenly they were able to make deliveries in a far more cost efficient way than traditional methods. Then finally, Mark took special care to point out how Rwanda as a nation has really banded together to improve their communities, and to raise the next generation on hope and optimism, encouraging new ideas. There was a heartwarming moment where Abdul is approached by a kid who had built his own little drone in facsimile of the Zipline drones he had seen taking off from and coming into the Zipline station all day.
These economic models hold up. And it was so exciting to see.
So kudos, Mark! Way to show the world that under all that big engineer talk, you’re really a macroeconomist at heart.
And to the rest of you out there, I highly recommend you check this video out for yourselves. It was something else.
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