§1. Course logistics and module choices [00:01]
You need to start thinking about which module you want to take. There is some sort of order. This one we're doing right now live with me is the material selection module, the one from about four years ago, the last time I did it. I'm going to skip fracture because Dr. Belmar has done it up here in a more modern form, 2012. I will do NDE. I probably won't do welding metallurgy — in fact if you look you'll find I didn't do it in 2009, but I probably did it back in 2007, which isn't on there. Next semester I might do welding metallurgy, a new version. I'm doing more on material selection. I'm actually going to get into different metals and different materials. So we're going to do eight or nine lectures on material selection.
There's one on casting. That one is where I prove that you'll never make structural materials internally by nanotechnology, and then I get into a description of casting. I really need to get more into the science of casting, so I'll modify that as time goes on. Then you go to deformation processing if you want to follow through. From casting you start out with molten metal, you cast it into some shape, you then deform it, forge it, extrude it, draw it into some shape, you then might weld it, do NDT or other things. So there's a series of these.
Over the years I told Professor Shu that I've got eight or nine choices for students. The students could take this structural materials course three times and get different material. I don't know why we need 12 or 15 lectures. I was going to do one on powder metallurgy, I decided not to do that. I was going to do one on coatings and vapor deposition, but Professor Thompson does something on that from the electronic materials point of view. So I think it's better to try to improve what I've been doing than create new modules. You need to think about which of these modules might be of interest to you for your third module. It looks like most of you are taking both of the live modules from Dr. Belmar and myself, but you need to think about that. I'm going to talk more in the future about your presentation — that'll probably be coming up in October, the beginning of November.
The other thing is, I talked to Adam Powell this morning, a former faculty member in this department, who's running a startup company, and he might come in and give a guest lecture. He's trying to develop new ways to refine rare earths. We talked about that for electromagnets. He was telling me about the need for dysprosium. We talked about neodymium iron boron magnets. I didn't know about this until this morning. Apparently if you replace twenty-five percent of the neodymium with dysprosium, you can get higher temperatures for your magnets. Right now neodymium iron boron magnets hit the Curie temperature at about 80 or 90 degrees centigrade, so you put that inside the engine compartment of a car in Arizona and your magnet doesn't work because it gets too hot. They'd like to have higher temperature magnets, okay.
So the Department of Defense has put out a request for someone to sell them a thousand pounds of dysprosium metal because they want to use it for magnets. A thousand pounds is only about a half million dollars. That's not a big enough market for most people. The Chinese apparently have put out something saying they're going to start producing 1200 tons of dysprosium oxide, which is a fairly simple thing to go from the oxide to the metal. That's a whole different order of magnitude. The other thing, he's working on a process to make magnesium. The automotive people always want to use magnesium because it's so light, and they would use more of it but they don't have a reliable source for the volumes that they need. That's what Dr. Powell's company is trying to do — come up with a reliable source of magnesium for the automotive companies, and a way to get dysprosium. He also has an economics degree from MIT, so I've asked him and he agreed that he will come in and give you a guest lecture about some of these externalities. I don't know which day it's going to be, but I told him it's got to be in the next three or four weeks because we're going to be done lecturing. Anybody have any questions from before? John, I got you your fracture toughness, okay. Yes?
Student: [Question inaudible — about module requirements.]
Yeah, you're supposed to take 36 hours of lectures. I'm giving 12 live, approximately. Dr. Belmar is giving 12. The other 12, you've got to pick one of these modules. I don't care which module you pick. You can't pick this one because that's what I'm doing right now, so that's off for this semester. Dr. Belmar's module is a different one than he's ever done before, so you could take either one of his before. If you were interested in structural life assessment, that gets into fracture mechanics. If you're interested in extrusion, you'll take my deformation processing one. If you're interested in casting, take your choice. If anybody wants to take this course again, you could pick three modules and take everything by video. In fact I have a student who's a senior who apparently did a summer internship in London, and they wanted him to stay until October 15th, so he emailed me — he's taking this course from London right now, and he'll show up to make a presentation to you.
By the way, I think the class has gotten so large that I'm the only one who has to listen to all the presentations. So I may divide it up and only ask you to attend about half of them. I do want the students with an audience — you don't want to talk to an empty room of just me. So we'll come up with a schedule. I'm not going to make all of you sit through 20-some presentations. I have to do that. Actually I enjoy the student presentations. I usually learn something, because I think the students sort of get the hint that I like to go through a little bit of history of things. You ought to get that hint, because I do. They go through a history of things. The student who did the history of doorknobs — I had never studied the history of doorknobs before, and it's not something I probably would have done, but I enjoyed listening to it. Any questions?
§2. Strength-to-density and the ages of humankind [07:11]
Today what I'd like to do is talk about steel, and maybe then aluminum. But I want to talk about productivity through the ages. I handed out a couple of days ago this thing on materials manufacturing — it's sort of a history of nails. I want to go through that, but before I do, this is the strength-to-density ratio of structural materials. You start with wood and stone, bronze and cast iron and steel and aluminum and composites and these fibers. And you see tremendous growth over time. These are all different materials, but as structural materials, the strength to density — this particular metric, if it's an important one to you — has increased dramatically. I showed you the one for rare earth magnets; it's increased. I'm going to show you some other materials properties that have increased. Nails as an example, or the making of iron.
We might talk about the ages of humankind. I handed out this Ashby plot. You could talk about the ages of humankind in terms of the materials people used. Initially they called it the Stone Age — so stones in here. Then they had the Bronze Age a little bit later, 5000 years later. They have iron right in here, but the Iron Age in general, you might start it in the 1400s. I'll read you something later that might say 1453 was the first iron foundry in Italy. So we got into the Iron Age. We certainly got into the Iron Age after Henry Bessemer, and sometimes people call it the Steel Age rather than iron, cast iron. What's the age we're in today?
Student: Electronic materials, silicon.
Okay, so today — we actually named the ages of society after the materials. Historically it was structural materials, but now we have electronic materials.
§3. The world's first energy crisis: England, 1530–1690 [09:36]
I wanted to talk to you about nails. Simple nails. And I want to talk about the history of making steel in the world's first energy crisis. This comes out of a book from Penn State University Press called Out of the Fiery Furnace. This was a PBS series 25 years ago on the history of metallurgy. In the middle of this book they talk about the world's first energy crisis. I don't know if it's the world's first energy crisis, but they call it the revolution of necessity. The revolution they're talking about is the Industrial Revolution.
They talk about the population growth in England and Wales between 1530 and 1690. The population nearly doubled, from 3 million to 6 million people. We've got that many people, more than that, in New York City right now. But when you have to transport fuel and water with 16th-century technology, it's hard. It's not even that easy today. Over the same period the city of London grew from 60,000 to more than half a million — an eightfold increase in 160 years. That put a lot of strain on England. It may have been the largest city in the world, but they don't know for sure because no one was keeping data in China of what was the largest city over there in the 16th century.
One of the problems was, how do you get energy to all these people in all these homes when they start densifying in the cities? This is actually a problem for today. Has anyone ever looked at the growth of mega-cities or the predicted growth of mega-cities in the world? A mega-city is a city of more than 30 million people. Right now I think there might be — in the whole metropolitan area, maybe New York and maybe Tokyo or New Delhi, or Beijing — approaching that. But they're predicting there could be 50 to 100 of these cities by 2050, as people keep migrating towards the cities, because that's where the better jobs are. And how do we know they're the better jobs?
Anybody listen to the Oak Ridge Boys? Listen to country music? Too old for you, or too country. They sing a song about the Depression, about the family that lost their farm during the Depression, and they moved to the city, and they bought a washroom, and then dad got a job with the TVA, and they bought a washing machine and then a Chevrolet — TVA and Chevrolet rhyming in that song. They got better jobs in the cities. That's what's happening in China right now. People are moving from the rural areas to the cities. It's what happened in the United States in the 1790s. In the 1790s, ninety-seven percent of all the workforce was in agriculture in this country and most of the world. It was just an effort to grow food, and you didn't have time to play video games. Yeah?
Student: [Asks about the song — possibly Alabama, not Oak Ridge Boys.]
I'll check next time it comes up on my iPad. Alabama, was it? Nobody else knows the Alabama folks anyway. Anyway, it's a country music song. Maybe I'll bring it in, we can play it.
In any case, the growth of cities is a concern, not necessarily a problem. Better jobs — when you don't need everybody out there growing wheat or rice, they tend to move to the cities, because that's where the higher paying jobs are. As they move to the cities, the cities get overcrowded, and there are certain things that have allowed the growth of cities. Sometimes people will say it was the development of the ability to roll I-beams by Bethlehem Steel in the 1890s that allowed the growth of New York City. Before that you could never build a building over about 10 stories. Now if you go to Otis Elevator, they will tell you that the growth of New York City was because Otis developed an elevator. Who wants to walk 20 stories to get to work? There's no glory in having the top floor office if you've got to walk up. Nowadays the glory is to be on the top of a hundred-story building — the highest rents are up there.
§4. Wood, iron, glass, and the law of 1558 [14:49]
What was happening in the 1500s was they had an energy crisis. The energy they were using before was wood. The wood shortage was due to the growing demands of the iron-making industry, according to these folks. The earliest water-powered blast furnace in Europe began operating in Italy in 1463. They found that cannons could be cast from iron instead of bronze. Bronze was expensive — cost comes in again. Their military-industrial complex could make cannons out of cast iron. But to make iron you needed charcoal, and to get charcoal you needed wood. They called it the Weald of Kent — the Weald was where all the mature oaks, beech, and chestnut were, beautiful forest — and they were cutting them down to make charcoal.
At the time there was a competing industry — warships, again the defense business. It took 2100 tons of wood to build the HMS Victory, which was Nelson's flagship at Trafalgar. These ships that were allowing the countries to wield their power around the globe — now they knew the globe was round — took a whole forest to build one ship. In fact we still have that problem. The best wood — if you looked on those Ashby-type plots that have wood on there — anybody know what Old Ironsides is made out of, what type of wood? Red oak?
It's actually white oak from North Carolina. White oak — live, actually, I think it's live white oak. There's a shortage of it in the world today. It tends to be the strongest wood in the world. The reason it's called Old Ironsides is it was made out of this oak from North Carolina, whether it's red or white or live. Yes?
Student: [Question about royal decrees on forests in England.]
More about that from England — but yes, they would put royal decrees on the forest. In that case they wanted these nice straight pines, but that wasn't the strongest wood to defeat cannonballs on the sides of the ship. So the ship is made with — you selected different woods back in those days for different applications. It turns out they just did a repair on Old Ironsides, and they were having a problem getting the oak from North Carolina. They just did a repair down here in Plymouth on the Mayflower II, and it was like two years delayed because they couldn't get the oak from North Carolina. One Navy officer was in my office a week ago, and he was telling me that the minesweepers are made with this same oak from North Carolina, because it's the strongest wood, best for certain types of shipbuilding. Yeah?
They're made out of wood because you don't want anything that's metal. The fuses on the mines in the ocean work off sensing that there's something metallic around. So they have to make them out of wood.
So the two other uses of oak — building ships and making iron — were in conflict. And now a third industry added to the demands, and it's called glassmaking. In 1558 a law was passed forbidding the felling of trees to make holes for the burning of iron. But as good politicians, the Weald of Kent and Sussex was exempted, so you couldn't cut trees for making iron by royal decree — except where they were making iron. So even the lobbyists worked back in 1558, okay.
One writer complained in London that the price of wood had gone from a penny to two shillings. I was going to look that up this morning — I can't remember how many pence in a shilling, but someone can look that up. That's a big increase in price. By 1581 the lobbyists had lost, and the shortage of wood for shipbuilding was so serious — so this is your white pines from Maine — that a further act was passed forbidding the felling of trees within 22 miles of the Thames River, within four miles of the Great Forest of the Weald, and within three miles of the coastline anywhere. You had to move these big tall trees to wherever you're going to build them on the coast.
By 1615, England was facing an energy crisis. A royal proclamation of that year lamented the disappearance of "the kind of wood which is not only great and large in height and bulk, but hath also that toughness of heart as it is not subject to rive, cleave, and therefore of excellent use for shipping." So we get into fracture mechanics here too, except they didn't know about fracture mechanics.
§5. Charcoal, coal, and the revolution of necessity [20:17]
What I wanted to talk to you about is making of nails and how that all fits together. I've estimated that the productivity of making steel — and it's in this little materials manufacturing thing that I handed out to you — this is a Tom Eagar estimate — that it took in the early 1600s about one person-year per ton of cast iron that was produced. You had to go out there and cut down a few tons of cord wood, you had to then turn that into charcoal. Do you know how to make charcoal? How do you make charcoal?
Student: [Answer about burning wood with restricted oxygen.]
Yeah, exactly. I don't know how well this is going to show up — it's out of Out of the Fiery Furnace — but basically you lay a bunch of cord wood — here's a guy shoveling, can't really see him very well — you lay down the cord wood, you then might even cover it with dirt, just pile dirt on it, then you put some straw or something above that and you light it on fire. But it's refined — there's not enough oxygen, so all you're doing is a slow burn. The whole thing heats up, and it vaporizes off the lignin in the wood, and that burns off and leaves charcoal behind, which is mostly coal. Why do you want charcoal? Because charcoal burns cleanly.
There are some types of coal that burn very cleanly. [Tom holds up a piece of anthracite coal taken from the blacksmith forge downstairs.] This is a piece of anthracite coal. There's not that much anthracite coal in the world compared to all the other coal — but the anthracite coal has been cooked in the earth under pressure and heat for millennia, and then we go dig it out of the ground, and it's got most of those volatiles burned off. Most of the coal that we burn in a power plant is what we call bituminous coal, which has not been cooked as long and has a lot more volatiles in it. Or even sub-bituminous coal, which is sometimes called lignite, and it's old plant fibers that have not been cooked very long. You can buy that stuff out of Colorado or Wyoming at five dollars a ton today. It costs you more to ship it out of Wyoming than it does to dig it out of Wyoming. So coal is pretty cheap. Out there in West Virginia the better quality coal might cost 40 or 50 dollars a ton. [Tom shows a piece of shale.] I also have a piece of shale here — if you look on the edge of the shale you can actually see some of the layers, which I believe are oil. So if you want to know about fracking, that's basically shale in the ground — it's porous and it's got hydrocarbons in it, whether it's gas or oil.
What happened is they were having a shortage of wood, and the revolution of necessity that this book talks about is basically the fact they had to start using coal because they couldn't use wood. They would first go along the ocean, and you could pick up what they called sea coal. Wherever the waves had come up against some coal seam, you'd have sea coal on the beaches. Once they'd removed all the sea coal from the beaches, they had to start digging for it. When they had to start digging for it, they had water in the mines, and they had to develop steam engines to pump the water out of the mines. Then they had to worry about whether they were spending more money running the steam engine pumps than they were getting coal out of the mine. This is a question of economics. It turns out that ended up leading to, believe it or not, the science of thermodynamics, and James Watt and steam engines. So the science came out of the revolution of necessity.
If you wanted to have iron to build hinges or nails or build cannons for warships, if you wanted to have wood for other applications, or if you wanted to have something so you could make glass — you need a clean fuel to make glass. You have to have something that burns cleanly. Why does anybody — why do you need a clean burning fuel to make glass?
Student: [Answer about contamination in the glass.]
Yeah, if you have a fuel it'll get in the glass, and your glass is no longer going to be clear. It'll be full of carbon dust and it's not clear, and you're making glass as a clear material.
So they decided to build in the new world some of those things, because over here we had forests still — the Indians had not cut them all down — and so the British came over to cut them all down. They built in New England in the 1630s something called the Saugus Iron Works. Anyone ever been to Saugus to see the ironworks? Go up to Saugus, right up here — you don't want to walk it, but it's only about 20 minutes away — and they have the Saugus Iron Works. They built a blast furnace. Why? Because we had wood. We were solving the energy crisis for Britain. They could make iron and ship it over there, and the foundries over there could make cannons. We had the energy source here, namely wood. Anyone ever been to Jamestown, Virginia? They had an industrial plant there. I haven't been there for 35 years, you've been there more recently than me. But in any case, they built a glass furnace in Jamestown, which 35 years ago you could go and watch them make glass. So again, there were trees in Virginia — they were running out of trees by royal decree in England.
§6. Nails: from one person-year per ton to twenty minutes [26:40]
How did they make nails thousands of years ago? It turns out I have a little history here of cut nails in America. This is cut nails, but it says that nails date back to 300 BC, and they have excavations of sunken ships from 500 AD showing nails. Back then people used to forge the nails, and in the winter when they didn't have crops to grow and harvest — I told you that ninety-seven percent of the workforce in 1790 was in agriculture, and now it's less than three percent, and that's why they can move to the cities. Back in the old days, if you didn't have anything to do in the winter, you might just sit there and forge nails. A ten-penny-weight nail was a size nail that you could get ten pennies for 100 nails. An eight-penny nail was a smaller nail that only cost eight pennies for a hundred. But they were hand-forged from before the Christian era to the 1600s. They were forging individual nails.
They would burn down barns or houses and sift through the ashes to recover the nails, because it was about one person-year per ton to produce this. What's the productivity today? Well, the productivity today to make nails or steel is about 20 minutes per person ton. That's a pretty high increase in productivity, and as a result you can buy a ton of steel today, if you just want to buy garden-variety steel, for four or five hundred dollars a ton. The equivalent price back in the 1600s — nails were a valuable commodity, as were hinges or anything else.
If you want to learn more about nails, you can go to the Tremont Nail Company — it's right down here in Weymouth, Massachusetts — they've been making nails for almost 200 years. They've misspelled it on their name on the top of their thing — at the top it says Tremont Nail Company, but the title in blue is misspelled. From 1819, who knows how to spell? But it tells you a little bit if you want to read about nail making.
[Tom produces several nails.] I have some nails from today. Here's my spiral nail — this one's got a spiral to it, it's got a head on. I passed around the cut nails. Cut nails replaced forged nails around 1800. Here's a regular old nail, but this one's coated — it's got some rosin on it so it grabs the wood. And here's a little nail, just a galvanized nail. So you can look at nails.
§7. Glass: bullseye, plate, and Pilkington's float process [29:55]
The other industry was to make glass, and they still have glassblowing. If you go look up Sugar Hollow Glass — some of these references are on the handout I gave you — or if you go to Jamestown, they will show you how they made glass for windowpanes. They start out just like they do — you can go to the basement of Building Four here and watch them do glassblowing. They get a blob of hot glass on a steel tube, they blow through it to make a bubble of glass, they then start spinning it and taking steel tools and forming it, and they spin it into a big flat. That big flat they can cut out little panes of glass. Those little panes of glass came in two forms.
Sugar Hollow Glass — they're in New Fairfield, Connecticut — will sell you bullseye glass. Anybody ever seen bullseye glass? This is the center of that little tube, and it's got a blob of glass on it, because when they cut it off you have this sort of sharp blob in the center. This was the junk in the 1600s, was bullseye glass. That was not taxed — remember "taxation without representation" and all that stuff. People would put it over their door to let some light in so they wouldn't have to burn as many candles. It wasn't taxed, so this was the junk. All the good flat stuff went into the churches or the rich folks' homes, and didn't have this big blob and didn't distort the view, just let the light in at the top of the door.
So back in the old days, the bullseye glass, which was the center of this spun piece of glass, was the junk, and you would pay extra for the somewhat flat glass that went into windows like this. By the way, some of these at MIT from 1917 are original — I don't know how many are still original — you actually can see, by looking carefully, they're not completely flat. The way we made glass in 1900, companies like Pittsburgh Plate Glass — they would take the glass as a big sheet off a big mill, and they would have a mill that ran for half a mile to a mile just straight down, and they would polish the glass to make it flat. It was sort of wavy as the glass cooled, and you had to anneal it so it wouldn't shatter. Then someone — Pilkington in England, 1920s or so — came up with something called the float glass process, where you'd pull the glass off when it was hot, and you'd float it on molten tin, which is perfectly flat because of the earth's gravity. The top surface is also flat just because of surface tension, and you could eliminate all that half mile of polishing. Now you only have like a hundred yards of annealing on this float glass product. So newer glass is all float glass, and got rid of all the polishing.
In the old days the cheap glass was the bullseye glass. Now you can pay a premium to get bullseye glass from Sugar Hollow Glass, and pay a big premium, because it shows that your house looks old even if it was built three years ago. Don't ask me the economics and the emotions of different people. In the old days they wanted bullseye glass because it was cheap. Nowadays they want bullseye glass because it looks old, even if it isn't. But then they buy cosmetics so they don't look old and never run.
§8. Continuous casting and the US steel industry's near-death [34:02]
So there's a revolution of necessity. We've talked about the history of nails. If I look at steel making more recently, then going back 400 years ago, starting in 1925 it was about 50 or 60 pounds per person hour. So it'd take 40 or 50 hours worth of labor to make one ton of steel in 1925. Going up to about 1980, it was getting to the point of six hours a ton. What happened in 1980? In 1980 we had our second energy crisis of the modern era. '72 was the first oil embargo, and then they had an energy crisis around '78 or '79.
This is the production of steel in the 1980s in the United States, millions of metric tons. If you just sort of ignore these little variations in here — from 80 down to 56, this is the '82 recession — but the production of steel in the United States was constant along this blue line, more or less, at about 75 million tons, except for depressions and externalities. The actual use was about 100 million tons.
There were also some big changes in the industry. They used to make steel — and you'll find this when I talk about casting — by pouring it into an ingot mold. Then in the 1960s some people, Voest-Alpine I think it was, in Austria, decided to see if they could continuously cast steel. People had been continuously casting gold and silver and copper for several decades, but steel melts at a higher temperature, and Voest-Alpine decided in the '50s and '60s to try to develop a continuous caster for steel — much bigger market. In the '60s they actually would sell you a unit. But the "rocket scientists" as I used to call them, who were hired into the steel industry after World War II — remember I told you, after World War II the United States had bombed out all the competition, that's one of those externalities — and we had seventy-five percent of the world's steel market in the mid '60s. When these guys were the middle-level managers, they and the upper managers decided not to put in continuous casting in most US steel mills when they were building a new casting shop.
The guy who later became the dean of Harvard Business School was telling me in the 1970s how this was the right decision. I'm sitting there: Kim, you're explaining to me as a metallurgist this stupid idea was the right decision, because the business managers can rationalize stupidity. The difference between an ingot mold of making steel and continuous casting is something called yield. With an ingot mold, I'm going to pour the steel into this mold — it's a piece of cast iron, great big piece, maybe 30 tons of cast iron. It's got sloping walls so when it cools and contracts I can turn it over or pull it out without sticking to the walls. I pour it in at that level, but as it shrinks, as it solidifies, I get what we call a pipe. When I'm all done and it's solidified, I've got to cut off one-third of the top and send it back to remelt it. As a result, my yield when I was at Bethlehem Steel in the mid '80s was about sixty-seven percent — of tons poured versus tons shipped, we call that the yield.
There was a guy, graduate of MIT, metallurgist, Mike Harashemcheck was his name, and he was responsible for Bethlehem Steel's yield. If he could get the yield up by one percent, our profits would double. So it was his job to figure out how to improve the productivity of casting. A continuous caster is a machine that's about 10 stories tall and cost 100 or 200 million dollars back then. You basically have a vibrating copper mold up here, water-cooled copper — you pour the steel in, your shrinkage happens right at the mold, but the steel shrinks down along the sides, and then you bend the steel on the lower eight stories — a hot beam of steel — and it comes out. I'll show you a picture of it in a second. As a continuous caster, you don't have to cut off the top because you can keep going — Nippon Steel's continuous cast for like a year without shutting down, 24 hours a day, just keep pouring more steel in. Now your yield goes to ninety-five percent. What happens to your profitability?
So what happened to the US steel industry? In 1968 when Armco Steel put in new casting facilities, and they could have put in a continuous caster, what did they put in? Ingot casting, because there was no risk. The Japanese were putting in continuous casters and they were beating your socks off with productivity. They went from six hours a ton to one and a half hours a ton because of the productivity increase of using continuous casting. When Bethlehem Steel built the world's last steel mill built by a company, in the 1960s — from '65 through '70, took them about five years to build it, probably about a five or six billion dollar investment, just about bankrupt the second largest steel company in the world, Bethlehem Steel — they put in ingot casters. Both these companies in the mid '70s took out their ingot casters and put in continuous casters at the cost of a few hundred million dollars, because all of a sudden they realized what they should have known ten years before — that continuous casting was the way to go.
Today ninety-eight percent of all the steel in the world is continuously cast. You can buy continuous casters that are only four or five stories tall for what we call mini-mills. They don't put out 10 million tons of steel a year in one mill, they put out 2 million tons of steel a year, much lower capital cost. But there's a problem in the industry in 1980. By 1980 you have this continuous casting coming online, and it's changing the entire economics of the steel industry. It's also cutting jobs by a factor of two. If you have usage or tons poured staying constant for 10 years, but you have productivity going up by a factor of two, from pounds per man-hour back here at 150 up to nearly 300 — productivity goes up by a factor of two, but consumption stays constant — what happens to employment? It drops from 500,000 down to 250,000.
All the pundits on Wall Street and in Washington say "oh, the American steel industry is defunct, they're just dying." They were, economically they were dying, but not because they couldn't compete. They had doubled their productivity in 10 years. There's only one industry that had improved their productivity better than the metals industry in the 1980s. Anybody know what it is? Close — mining. The manufacturing industry in the United States in the 1980s had a four percent annual productivity gain. The mining industry had a six percent productivity gain. The lesson from all of this: the threat of extinction sharpens the mind, and allows you to take bigger risk. When you're going to go out of business anyway, you will take bigger risk. In the 1960s the steel industry managers were not willing to take any risk. They're going to put in the same old thing they've been using for 80 years. When they were faced with "if we don't put in something that increases our yield from sixty-seven percent to ninety-five percent, we're going to be out of business," they'll take the risk, and they'll make it work.
§9. Zero rework: Motorola, Ford, and self-fulfilling productivity [43:25]
There are some great stories about taking the risk and making it work. In the electronics manufacturing sector, in 1990 it was well known that you had to have four percent rework on all your printed circuit boards. If you built a printed circuit board plant anywhere in the world, you would have a repair area that could handle four percent repairs. It's a valuable board when you finished it, and if it doesn't work when you burn it in, you go in there and figure out what it is and have someone resolder and repair it.
This Motorola manager in Boynton Beach, Florida, had decided — nope, we're bringing back the production from Singapore to Boynton Beach, and we're going to use minimum-wage American unskilled labor, and we will design our plant for zero rework. We're going to allow nothing to be reworked. If it doesn't work, we're going to throw it in the scrap bin. And guess what the process engineers achieved at Boynton Beach? Near zero rework, because they went and fixed the process so they didn't make defective product in the beginning. All of a sudden this rule of thumb of "you need four percent rework" — that was a self-fulfilling prophecy. If you put in four percent rework, the engineers would improve the process until you got to where the rework area could handle the amount of rework, and you wouldn't keep on improving the process.
You think that's an isolated story? Ford Mustang plant. Billion-dollar facility, turning out one vehicle a minute off the end of the assembly line. This was around — by 1994, 1995 — actually this might have been the 1980s. I was doing some work for Ford, and the guy said let me take you over to the Mustang plant. He took me to the end of the line and said, it used to be that when you got to the end of the line they'd fill it with gasoline, you turn the key, and the guy was supposed to drive it into the parking lot to be loaded onto the trains to be shipped around the country. If it didn't start, you had one of the forklift trucks come and pull it out to the repair area so some mechanic could go out there and figure out how to get it started. Then you'd buy this semi-defective car because it finally got working.
New manager. The new manager says: no more tow motors. If it doesn't start, you push it 100 to 150 yards to the parking lot. Guess what? Within a couple of months they were all starting at the end of the assembly line. Why? Because those guys who had to push it went to those engineers and said "fix it." And they did. So this is a lesson in management of manufacturing and improving productivity.
§10. Mini-mills, national investment, and the modern productivity scale [46:43]
I've taken you from one person-year per ton in the making of steel to the modern age — by 1990 we were at sort of three or four person-hours per ton, or six. Then the mini-mills came along in 1975, and some of these guys learned that you could buy scrap steel on the world market for a hundred dollars a ton. You could make cast iron from virgin ore for 180 a ton. They said, "I like that idea of 80 a ton excess profit by just melting old steel rather than taking virgin ore. I'm going to build an electric furnace plant." One of the guys who did this, a guy named Gordon Forward, a graduate of this department — Nucor Steel — is the one who made it the biggest. They made what they called mini-mills.
Instead of a five-billion-dollar investment by Bethlehem Steel in the late 1960s — since Bethlehem Steel, no other country, no other company has ever built an integrated steel plant. Current cost of an integrated steel plant would be 15 to 20 billion dollars to build a plant that could turn out 10 million tons of steel. Remember, we're producing a billion tons of steel a year, so 10 million tons — you need a hundred of those plants around the world. They built a lot of new plants. The thing is, they're no longer built by companies. Bethlehem Steel almost went bankrupt. They're built by countries today.
Korea decided in 1972, just after Bethlehem — President Park took Colonel Park, his chief of staff, and said "you're in charge of POSCO Steel, our new steel company." And the government of Korea teamed up with U.S. Steel and built POSCO Steel. 30 years later they surpassed Nippon Steel as the world's largest steel company in the 1990s. What happened after that? The Chinese started making lots of steel, and Bao Steel is the world's largest steel company today. Countries build steel plants.
It's the same in other industries. It's the same in aerospace. There's only two competitors, Airbus and Boeing. Neither one of them can afford the 10 or 20 billion dollar investment to build a new jetliner like the Dreamliner. They get all kinds of government subsidies, and the politicians on both sides of the Atlantic argue that you're giving unfair competition advantage to your aircraft industry. They are, they're doing it, but there's only two companies there. Same thing in semiconductors. You want to build a new super sub-micron-size semiconductor fab? 10 or 20 billion dollars. Intel probably built the last one, but now they're parsing and breaking up the industry in different ways so no company today has the profitability in semiconductors to build a 10 billion dollar fab. We are getting to economies of productivity and scale that really require national investments — like POSCO Steel, or 20 other steel companies that have been built in the last 40 years, built by countries. Or in the case of aircraft, just pure government collusion and fighting among the politicians on both sides of the Atlantic. Or in the semiconductor business they sort of restructured things in partnering because of these huge investments.
To get levels of productivity and increases in productivity today, steel takes about 20 minutes a ton compared to one person-year, 3000 hours, 400 years ago. In the 1980s when your older siblings were born, steel was six hours a ton. In 25 years we've gone from six hours a ton to a third of an hour a ton. That's an 18-fold increase in productivity.