§1. Magnetic field effects on electron beams [00:04]
The eighth point: the electron beam is distorted by magnetic fields. That can be a good thing. We use magnetic fields to traverse the beam across things. I had a student who was looking at electron beam welding of stainless steels — actually he was looking at cooling rates of stainless steels, and he chose to use electron beam because he could get seven orders of magnitude of cooling rate. For the fastest cooling rate, he put a high-power beam and swept it across magnetically just across the plate, and he got a weld that was about 1,000 microns deep but it was cooling at about 10^6 degrees Centigrade per second because of all the metal around it and the small size of it. Then he had bigger welds. The challenge with the smallest one was just to be able to measure the samples that were that small.
Magnetic fields are used to advantage when you're doing electron beam heat treating — not necessarily welding but heat treating, like electron beam heating of camshafts. Typically people might use a raster pattern where you just scan back and forth, like the old cathode ray tubes on TVs. The problem is you always end up with extra heat at the beginning and the end as you're changing direction — you have to decelerate and accelerate. So what people have developed is Lissajous patterns. Anyone know what a Lissajous pattern is? No electrical engineers in here. If you take a sine wave and use it as an input to the y-axis, and you take a different frequency sine wave and use it for the x-axis, you can get a pattern of swirls — that's a Lissajous pattern. If I wanted to do a rectangle and I scanned back and forth, I would get too much heat on the ends. But with the Lissajous pattern you get a bunch of swirls and the thing is never stopping and changing direction. You end up covering the whole surface time-average, and you don't get those sharp ends of heating.
So magnetic fields can be used to your advantage but they can also be used to your disadvantage. When the Japanese were doing very heavy section, 6 to 8 inch thick electron beam welds for coal gasification pressure vessels, they found that when they were welding dissimilar steels you would actually set up a thermocouple effect between the two different metals. If you have two different metals in a temperature gradient you have a voltage between them — it's called the Seebeck effect. Because of the different thermochemical equilibrium for the compositions, you set up a small voltage, maybe millivolts. But when you're doing these thick-section steels you actually would get a current flowing from one steel to the other during welding. That current has a magnetic field, and it would cause a straight beam to curve, and you would end up missing part of your joint if you were more than 4 inches thick. The thing would just bend right out of the way. No one ever found a solution to that. So you couldn't weld dissimilar heavy-section steels with electron beams because the beam is distorted by magnetic fields.
The advantage of lasers: nothing other than astrophysical gravitational fields of galaxies distorts the light. So we don't usually have to worry about that. Electron beam — anything above 60 kV is going to produce fairly hard x-rays. We either go up to 60 kV or we go all the way up to 100 or 200 kV. We don't find very many machines in the 60 to 100 kV range.
§2. Electron beam weapons and additive deposition [05:07]
As soon as someone gets a new heat source, they tend to try to use it for welding or something. I told you about this situation where the Navy had spent a quarter billion dollars up to 1992 trying to develop relativistic electron beam weapons to replace the Phalanx system. You'd have this relativistic pulsed electron beam, and if someone was firing a missile at you, you'd shoot it through the air 30 miles away, hit the target, and blow it out of the air before it hits your ship. Well, peace broke out with the former Soviet Union. They were trying to figure out what to do with the technology. They had a little workshop and they asked me, could you weld submarines? I said, well, you could melt a submarine with 5 megawatts of power but you can't weld — you only need at most typically 100 kilowatts of power.
[Tom passes a small sample around the class and holds up a larger one.] Since they were trying to find a use for their technology, we had a research contract and we tried electron beam deposition. This is a piece of nickel manganese aluminum bronze. Anybody know what this alloy is used for in the Navy? Propellers. Propellers are circular and you could potentially build up structure. So this is a piece cut from that, and we built up this ridge with an electron beam. This is a piece of stainless steel where we were building up a ridge just going around and around. But sometimes you end up getting solidification defects, surface tension defects, and they tend to propagate and it's hard to get rid of them. The other problem is you develop residual stresses. As you build up bigger and bigger things, you have these small little weld zones and you put one on top of another, and the residual stresses get worse and worse. Typically you get to about more than a half an inch and you find that you end up cracking.
So 20 years ago we were trying to do solid free-form fabrication. Because of the heat flow equation — distance goes as the square root of time — if you go slow, you're wasting a lot of heat, you're not getting efficiency. If you go fast, the faster you go the less depth you get of penetration, so you end up putting down less and less metal because you're just doing surface heating. So whether it's laser or electron beam deposition for solid free-form fabrication, just feeding wire in and trying to build up — today this is also the big news in the Wall Street Journal, this is additive manufacturing. But people have been doing it for 40 years or longer, laying metal down. Weld on top of weld. You've probably seen it on rebuilding of shafts in the shipyard. You come in and the tail shaft is worn where the bearings are, so someone machines it away and then they put some weld metal in there over and over.
What did you also see at the same time? A bunch of torches, flames on there, as they're heating it to preheat and post-heat and relieve the residual stresses. Because you put on more than about a quarter of an inch and you're going to have tremendous residual stresses, which will cause the bearing to fail in service unless you relieve them. So you can repair things and build them up, but you have to worry about the residual stresses.
One of the problems with these multi-megavolt pulsed energy weapons is that when you start getting to a million electron volts, you're now talking about radiation shielding that might be 2 feet thick of high-density concrete, with lots of barium oxide and so on. That's what we use for doing x-rays of 3- or 4-inch thick steel. So it'll go through 3- or 4-inch thick steel. You need feet of protection. The other problem: above 5 megavolts you get to what they call the activation limit. That's when the electrons coming in are sufficient to transmutate the atom into another type — iron can go to cobalt and become radioactive in the process. So you can produce radioactive elements above 5 megavolts. The Navy in their particle beam weapon program built 45 MeV machines out at Lawrence Livermore, and they were buried like 20 feet in the ground just for shielding. All you're going to do out there in the ocean is radiate a bunch of fish — hopefully the sailors are far enough away. So there are problems with going to really high voltages because of the x-rays you produce.
People have looked at building things up — back around 1976 or '77, when they first had some high-power lasers, they tried to build up things. There was a research contract at Pratt and Whitney from the Office of Naval Research to use this very proprietary high-power laser to build things up like we were doing with electron beams, to try to make turbine discs. A turbine disc could be worth $100,000 a piece. The problem was you're laying down such thin layers and you have residual stresses. They were laying down 15 pounds a day, which is not very much when you start talking about a thousand-pound turbine disc that you're going to machine to a smaller weight. People are still trying. After 35 years, there's a whole new generation of people who refuse to believe that the people before them were not completely stupid. They believe they were stupid and they can make it work. So today additive manufacturing is one of the buzzwords. People are trying to do what we were trying to do 20 years ago with electron beams.
We thought with electron beams we had an edge over lasers, because with a million-volt electron beam you can deposit the heat a millimeter beneath the surface. With lasers, with surface heating, all you can do is lay down at very high speeds these very thin 50 to 100 micron layers, and building that up is really slow. If you could lay down millimeter layers, we showed you could get 500 pounds a day. So we thought we could build valve bodies and other things.
§3. Spare parts, lead times, and the case for rapid fabrication [12:57]
Anybody know why you need to build great big valve bodies in a rapid way? On a new ship design you might spend a hundred or a couple hundred million dollars on spare parts. Great big castings, or tail shafts, or bearing housings — 20- to 30-ton objects. Anybody know what a typical lead time is for a 20-ton casting? At least a year. So if you happen to have one crack, you've got a big problem. You can't just go down to Home Depot and buy another. If you go try to purchase one, they'll say, yeah, we'll make you one and we can deliver it in 70 weeks. That's not a very good thing if your ship is incapacitated.
So they buy spare parts — great big castings — they'll buy a couple hundred million dollars of spare parts for the ship class. They'll leave them maybe partially machined or unmachined, and then when a particular ship has a problem, they've got this casting sitting out in some field somewhere and they can machine it and turn it around within a few weeks or a month. But if you had some way that you could produce a new casting in a few weeks, then you could avoid all those procurement costs for spare parts.
In fact, I have a failure right now in a gas plant in Wyoming. They had an explosion and they lost a critical heat exchanger. The lead time is 70 weeks to buy a new one. So you've got a quarter-billion-dollar project that's down for at least 70 weeks unless they can find a spare somewhere. There's not a lot of spares of these sitting around doing nothing. $20 million aluminum heat exchangers for cryogenics — they just don't exist. Well, they exist, but someone else is using them.
§4. Laser characteristics: reflections, beam shape, fiber optics [15:09]
With lasers the problem is you have invisible infrared reflections, which create problems. People have to wear glasses, you can't see where the beam is. You go into a shop that's doing laser cutting of plastic or steel with some robot, the whole thing is surrounded by a fence with interlocks, so no one walks in to where the robot is, because it's not a good day if they put their hand through the beam. So you've got to worry about the infrared reflections. You also have to worry about visible light reflections, but most of the high-power lasers are infrared.
Current is limited to about a half an amp on electron beams. In practice we use about a tenth of an amp, because the electrons are close enough together above a half an amp that they just start defocusing the beam. The laser, on the other hand, you'd like to have what we call a nice Gaussian beam, but in fact you don't. If I had a laser spot, and in one direction I have a half sine wave, in another direction I have a half sine wave, I would have positive in the middle of the whole thing — that would be a nice Gaussian beam. But if I have a full sine wave in one direction and a half sine wave in the other, I'll have positive and negative. And if I get multiple reflections of sine waves, I'll get fancy spots.
[Tom shows a pulsed laser plexiglass sample to the class.] This is one of the things they do in the laser business. They take a piece of plexiglass and pulse it with the beam and vaporize some of the plexiglass, so you can see what your spot size looks like. This came from a laser which had a cavity that produced about a 7/8 inch diameter beam, and you can see all the little diffraction spots of positive and negative reflection. They can also tilt that beam — if you look through it this way you can see they got a higher heat intensity for laser surface heat treatment with a linear beam. You get that by taking a circle and turning it sideways, and the projection becomes an ellipse heat source. So you can get a linear heat source and do surface heating.
So lasers have diffraction spots. If you want a nice Gaussian beam you lose a lot of your efficiency — over half your efficiency is gone. The laser mode cavity prefers to have all these multiple modes that degrade the beam, at least in terms of welding where you'd like a nice uniform peak Gaussian heat source.
The electron beam is affected by magnetic fields, and you can manipulate it with magnetic fields; with lasers you use mirrors or fiber optics. One of the advantages in recent years for laser heat sources is the fiber optics have gotten better and better. Professor Yoel Fink of this department did his doctoral thesis developing basically a perfect mirror. You put different layers of different index-of-refraction materials and you can get a quantum effect such that the light cannot go through, so it has to reflect back. The first big application of this, when he was a young professor about 15 years ago, was to make fiber optics for laser surgery — high-value-added medical business. But now people are using some of these things for higher-power lasers such as laser welding. So you can use fiber optics to get the beam there. In the old days you had to use mirrors. And I already told you the problem with mirrors — you get any dust on the mirror, when the laser beam hits it, it couples very well to the dust because the dust is an insulator, not reflective, and you burn a pit right in the surface of your mirror. You can destroy some very expensive optics very quickly.
§5. Heating uniformity and the NRL HY-80 laser welding result [20:18]
The last point is that electron beams heat the sample uniformly. Everything gets heated the same, partly because the electrons have a certain depth of penetration. From 100 kV it might be a tenth of a millimeter; at a megavolt it might be a millimeter. So it averages the heat out over inclusions and other things. Whereas it turns out the inclusions in steels are oxides, and they couple with the laser energy better than the base material. So 30 years ago the Naval Research Lab had a 25 kilowatt laser to study laser welding, and they found they were welding HY-80, and they got better properties in the weld metal of the HY-80 than they did in the base material. The mechanical properties were better. They asked, well why is that? It turns out they were refining the steel. The laser was selectively vaporizing the oxide inclusions in the steel — oxides and sulfides — and just blasting them away as vapor, leaving behind a more refined weld metal. So there are certain advantages you can get in changing the chemistry of the weld bead.
Student: Is that a practical way to apply that to producing steel stock in the first place?
The only problem is your melting rate. With lasers, there are megawatt lasers but they're really pulse lasers and they're chemical weapons — they have spot sizes like this, because you're going to try to shoot down a missile. If you've got a laser that you want to focus, we're limited to 25 kilowatts. 25 kilowatts is probably 50 pounds an hour, so forget it. If you start working out the economics of the production rate, it's just not practical. And if you start looking at trying to build these things up in layers like we did those electron beam layers, you've got to have something that actually deposits the heat beneath the surface. The laser just heats on the surface. The faster you go, the thinner the layer. It's a decreasing returns problem because of the fundamentals of transient heat flow, where x is the square root of alpha t. The faster you go, the thinner x becomes, and x becomes thinner faster than time of melting increases. So you just get thinner and thinner layers and the net melting gets to be less and less as you go faster.
We actually showed with these megavolt electron beams you could deposit a millimeter deep. We did a model showing the traveling Gaussian heat source with heat on the surface and heat beneath the surface, and showed you could get 500 pounds an hour. I estimated it would cost $10 million to build a facility, but you'd have to bury it in the ground about 20 feet and it'd have to be completely automated, no people around, because you could give them a lifetime radiation dose in 30 seconds. We couldn't convince anybody to build it. But you hit the right person at the right time who has just experienced the most expensive problem he can imagine, and he'll say, okay, I'll spend $10 million to build that. Even if you develop something, the development problems get to be horrendous.
If you're entrepreneurs, you know that of every 20 good ideas, only 5% work. One out of 20 actually works and becomes commercialized. That's across the board. So what looks like a good idea at the research stage has a 5% chance of being a good idea in application. That's sort of what entrepreneurs are about — it's not what venture capitalists are about. Venture capitalists basically sort through a hundred different possibilities and pick one to invest in. Usually it's already a proven success. And they pat themselves on the chest and say, weren't we smart to pick this technology when it was obvious — when it was actually already obvious.
§6. American management and the productivity comparison [25:13]
Most of the people who think they're great businessmen — it's just what they have to compete with. I've been watching for over 30 years, and American businessmen like to say they're the best managers in the world. But you walk into an American factory and you say, this is the best in the world? You look at some of the management practices, and you realize that 25 years ago we were competing with Japan, and Japan actually looked like they were beating us. But we actually had higher productivity than the Japanese. The Japanese have built into their economy a 30 or 40% lack of efficiency.
Anybody live in Japan for a while? You know what the lack of efficiencies are in Japan? It's coming back to bite them now. But when I went over in the mid 80s, everybody thought, oh, Japan rules the world, because they were producing the best cars and shipping them to the United States. It turns out the Japanese have this culture that they want to be an agricultural society. So 30% of their people are in agriculture. Anybody have any idea how many people in the United States are in agriculture? About two percent now. Back in the 1790s when the country first started, 95% of the population was in agriculture. Over the years, as agriculture got mechanized and with fertilizers and all these other things, we can now feed the world with about 2% of the workforce.
Japan still has people out there planting rice by hand and they have 30% of their workforce in agriculture. How do they support that? When I was in Japan I figured a great gift — the Japanese like to give gifts — would be a pound of wild rice. The Japanese, one of the symbols they use for America in Chinese characters is Beikoku, which means rice country, because we are an agricultural nation and they respect that. But I was told Customs would have a fit if I brought a single grain of rice in, because the Japanese have all kinds of things to protect their farmers. They only need 3% of their workforce in farming but they have 30%, so they have an inherent inefficiency in their economy. They complain about their poor economy. But if they had a free-market economy and got rid of all these rice farmers and found something for them to do, they would have a much better economy.
So that's an advantage American businessmen have competing with Japan. What's the advantage in Europe, particularly France? In France, if a company hires someone, you own them for life. You can never downsize. It's sort of like GM used to be. The unions in France are extremely strong, and if you follow the papers you know the French want to keep their 20 days a year of vacation and their 20-hour work weeks. So what we're competing with in Europe is an economy where the businessmen are strangled by their own regulations. American businessmen say, why aren't we great businessmen, we're the most productive in the world — and you walk into their plants and they're doing stupid things, but it's only because they're competing with people who have inherent millstones around their necks.
§7. Heavy-section electron beam: the problem list [29:21]
Heavy-section electron beam. I spent a year in Japan in the mid 80s because the Japanese had spent a couple hundred million dollars on a national project to try to build these coal gasifiers and weld heavy-section steels. Someone's going to come along when you're a captain in the Navy and say, oh, we're going to build an electron beam machine for you, it can weld 2-inch thick steel very rapidly. Well, what they found was long-term beam stability. If you're going to weld one of these 30-foot diameter pressure vessels 6 or 8 inches thick, it takes about an hour to go around, and typically you'll have some hiccup in the beam every 10 or 15 minutes, which means you're going to produce a defect every 10 or 15 minutes. When you produce a defect as you're welding continuously, you now have to worry about how you repair those defects in this narrow little weld.
The advantage of laser welding is we have something that has a depth-to-width ratio of about 10. This was your original seam, and you've got to try to first find it. Non-destructive testing is not very sensitive. But if you find a defect, you've got to come in and cut it out and reweld it. There's not a good technique for repair of deep-seated defects inside something that's very thick like this. Non-uniform penetration — I talked about, in the vertical position, how the metal would slump down. In a big deep cavity, it's like you're almost drilling a hole and the metal's back-filling it. Every now and then it back-fills and you'll get a spike in your penetration. So the penetration depth is oscillating at the bottom. They never found a solution to that other than welding in the horizontal position, which worked for certain things.
High equipment cost — you might be talking a 10 or 12 million dollar machine. Low utilization factor, it might weld for 2% of the time during a week or less. It required extremely clean steel. The same situation I talked about, where the laser would preferentially couple to the inclusions — it turns out the electron beam is vaporizing all the metal there, getting it to a very high temperature, and any oxides or nitrogen would come back into the steel and create porosity or poor fracture toughness. They had to get steel from the steel mills which was exceedingly clean. We could make it, but it was doubling the cost of the steel in order to get sound welds that weren't full of porosity.
Seam tracking is critical. The Welding Institute has made electron beam welds in aluminum with a depth-to-width ratio of 50 to 100. But if you're talking about a 2-inch thick weld with a depth-to-width ratio of 50, you're talking about a width that's only 4,000ths of an inch wide. That means if you're off by one human hair side-to-side, you've missed your joint. Or if you're off angularly by less than a fraction of one degree, you've missed your joint, because you're skewed at some angle to your actual intersection. In practice, people like to talk about huge depth-to-width ratios in welding with lasers and electron beam, but in practice you always have to be less than about 10 because of seam tracking.
Fit-up is another problem — you've got to machine these things if you're going to be that precise. Poor fracture toughness was found in many of the steels. Non-destructive testing — one of the modules you have to take has some non-destructive testing, and somewhere in there I'll talk about the fact that most of your non-destructive test techniques can see something about 2% of the thickness. So if you have 2% sensitivity on something that's 8 inches thick, the smallest defect you're going to find is about 3/16 of an inch. Sometimes that's good enough, but it's not always sensitive enough.
Stop-start locations in craters — if you're going in a circular pattern to make a pressure vessel, you're going to have to start and stop at some point. Your end crater, as you power the beam down and let it solidify, you've got to do this in a controlled way. They never completely solved those problems. It essentially became a defect that had to be repaired at the end. You've got to have a very large vacuum chamber, or local vacuum with all the problems of local vacuums and sliding seals.
As you get thicker and thicker, the range of process variables gets less and less. For example, with a 20 mm thick steel, the power that you can use varies by about 30 or 40% and you'll still get good welds. But if you go to 80 mm thick — four times as thick, a little over 3 inches — you have like a 5% process range, not a 40% process range on your power. So your process variables narrow down to next to nothing.
Welding with lasers and electron beam — the theme is they're actually very different processes. You can get very thick sections in theory, but you have all kinds of big problems that people haven't really solved. So most laser and electron beam welding is not done over about a half an inch thick. People have been saying this is the solution to heavy-section welding, but no one's ever — well, the one application I know of, I think it was Mitsubishi Heavy Industries, had to make a bunch of spherical stainless steel vessels that were 2 inches thick. They built a vacuum chamber that was about two or three times the size of this room, and they could fit the whole vessel in. It's 2 inches thick stainless steel and they could go around it in about 10 minutes. They had to make hundreds of these for some nuclear reactor or nuclear physics experiment, so they could justify this very expensive vacuum chamber the size of a two-story building to weld these things. But that's sort of a specialized thing. And stainless steels are easier to weld than carbon steels in many ways due to their metallurgy.
§8. Laser welding aluminum: the double-pane window case [37:02]
High-power lasers and electron beams are very useful in the automotive industry, but their greatest application is not for welding. Lasers in fact are just for cutting, replacing sheet stamping operations. Lasers are becoming the norm in a sheet metal shop for cutting the steel. But we do a fair amount of laser welding too.
One of the problems I didn't mention when we were talking about reflectivity on aluminum: the reflectivity problem on aluminum is worse than it is on steel because aluminum reflects about 95% of the light coming in. It's a very good electrical conductor, which means it's got lots of free electrons, which means it's a very good mirror. People generally would say it's not practical to laser weld aluminum, except — the exception that proves the rule — at one time about 30 years ago, the largest application in the world for laser welding was laser welding of aluminum, in a plant in Illinois. They were turning out 300 million feet a year of a piece of sheet metal that had a cross section like 10 or 15 thousandths sheet, and it had a shape formed like this to make a box. The thickness is 10 or 15 thousandths, and they put a weld along here to seal up that seam. This was about 2 to 3 mm on this land.
Anybody have an idea what these little channels of aluminum are used for? Double-pane windows. This was the frame. You put a piece of glass on one side and a piece of glass on the other. You seal it. This is the separation. They were taking little pieces of aluminum sheet metal and welding the seam. They were making 300 million feet — they had 10 lasers lined up in this factory just pushing the stuff through like mad.
The interesting thing was, because aluminum has such high reflectivity, if you want to get a million watts per square cm in and you've got 90% reflectivity, you've got to put 10^7 watts into your beam in order to get 10% in, because you're reflecting 90, 95%. The problem is when you do that, this will drill a hole — this will weld. So initially you have some melted aluminum on the surface, but then when that changes to melting through the surface, you're now depositing the beam down inside a cavity. The light's re-radiated to the sidewalls and that little cavity absorbs the light much better than the flat surface. So you start oscillating between 10^6 and 10^7, between blowing a hole in the aluminum and actually melting the aluminum.
So this weld was a very nice — if you look at a building from around 1980 — they use mechanical stitching now on most double-pane windows, but back in those days they were using laser for the double-pane window aluminum frames. You look between the two frames on the windows and you would actually see a little weld, very uniform, looked like they made a series of spot welds. It was a continuous weld; it was just inherently unstable, and they were going so fast that it looked like a uniform weld. They wanted a weld that was slightly porous. You wanted this thing to breathe with the changes in atmospheric pressure. So they made a series of defective welds, inherently defective because of the properties of aluminum and the reflectivity and the physics of the beam interaction.
So the rule of thumb in the welding business is you can't laser weld aluminum reliably. But in fact the largest application in the world was laser welding of aluminum, and they were using it because it was so reliably unreliable. It was just a natural oscillating process. You ran it continuous and it gave you a natural oscillation that was exactly what you wanted. They stopped because people developed the mechanical stitching technique, which is even faster and cheaper — you don't have to maintain lasers. So another technology came in and supplanted it.
§9. Technology substitution and the beverage container case [42:27]
That's an interesting thing — people will predict that a new technology is going to take over an existing technology because they predict that the new technology will improve at a much faster rate than the old technology. But that assumes that the people with the old technology are just going to give up and say, okay, we'll close down our business for you, rather than improving their technology to make it better. When an old technology has no competition, there's not a lot of incentive to improve it. But when a threat comes along, all of a sudden there is a threat. When there is a threat, people actually start getting creative rather than going out of work.
The example I like to use is beverage containers. What did we use in the old days? Well, we used clay pots. We don't use clay pots anymore — it's kind of slow to make those. Then we started using glass bottles several hundred years ago. You can still buy glass bottle beverage containers — lots of beer bottles made out of glass. Then someone came along and started making steel beverage containers. And aluminum supplanted that, such that 40% of all the aluminum made in the world goes into beer cans and soda cans, containers. What was the next technology? Plastic. Beverage containers right back there are made out of plastic. Which one dominates today? None of them. We've got glass, we've got steel, we've got aluminum, we've got plastic. As one of them gets better and better, the other one gets a thinner wall, less material, whatever.
If you could find a beer can from 30 years ago, it would have a lot thicker wall than that aluminum can today. They use supercomputers to design the shape of those cans, because they have a fairly high internal pressure. Both the plastic bottles and the aluminum cans use the internal pressurization to give stability. You uncork a 2-liter bottle of soda and you lose the pressure, and all of a sudden you have a hard time holding it nowadays, it's so flimsy. You have that problem with the water bottles now — you've got to be environmentally sound, they've got to make it thinner and thinner, such that you can hardly hold it, it wants to fall out of your hands because the sidewalls are so weak.
So it's continual competition. I like to use the beverage container business as an example of each one doing more and more. The glass people are starting to run into some problems being competitive. The aluminum and plastic have gotten thinner and thinner. But if you go to Japan — at least 15 years ago they were still using steel beverage cans. They still use them in Japan for their hot drink machines. The reason is the steel lobby in Japan. Aluminum is clearly cheaper than steel for a beverage container. But the Japanese have a big steel industry and they have no aluminum industry to speak of, so it's basically tariffs and restraint of trade. You just can't get in to do business there.
§10. Kodak, Bethlehem Steel, and the monopolist's habits [46:21]
It doesn't really matter now because we're in digital photography, but around 1980 — the late 70s — Kodak wanted to build a plant in Japan to make photographic film. In order to build a plant in Japan you had to get permission from the Japanese government. And the Japanese government has never said yes or no to Kodak. Of course Kodak's about bankrupt now, if they're not bankrupt already. But at the time it was estimated that if Kodak could have come in and started producing film in Japan, they could have kept Fujifilm from ever becoming a dominant world player. But the Japanese government just never answered Kodak's request. They're still waiting for an answer. Of course Kodak doesn't want to build a film plant anywhere now — no one wants to build a film plant anywhere — but from 40 years ago we're still waiting for a response.
That delay allowed Fuji to take a world position that was able to compete with Kodak. Eventually Kodak lost its near-monopoly on making film in the world. They didn't have a monopoly — Ilford and others in Europe — but they had a near monopoly. If you went to Kodak in the mid 1990s, the people at Kodak had grown up in this semi-monopolistic environment, and they didn't know how not to spend money.
I had some students do theses at Kodak, and I remember going to Kodak Park and taking a tour. Kodak Park was built by George Eastman, founder of Kodak — Building Six is the Eastman Building. He got MIT out of bankruptcy in 1917. George Eastman built Kodak Park as a manufacturing facility back in the 1910s and 1920s. It wasn't laid out the way we would lay it out today, so they had a loading dock and stuff would come in, and they had to move boxes about a half floor up. Instead of going out and buying some conveyor tables to move the boxes and a little elevator to move them up to the next level, Kodak designed and built — out of stainless steel, not carbon steel — their own conveyors and elevators, because they were used to keeping full employment. They were basically printing money. They called it film, but it was printing money. They had no real competition. The people at Kodak just burned through money, because if they showed they were too profitable, the government would get upset and come in and break up the monopoly. So they just burned through money like water. And then when they did get competition, these great American businessmen didn't know what to do, so they kept burning through money.
I worked for Bethlehem Steel in an era like that. Bethlehem Steel in 1973, the year before I went to work for them, had its most profitable year ever. The American steel industry after World War II owned 75% of the world steelmaking capacity in 1945, because we had bombed out most of the rest. It's great — you just bomb out your competition. There's a good businessman: when you can bomb out your competition you can take a world leadership role. Well, I went to work for them in '74, which is 30 years later approximately, and all the managers who had been hired as young employees in 1945 were now running the company. They still had the attitude that they controlled 75% of the world steel business and that they could dictate prices and everything else. When I went to work for them, we controlled 25% of the world steel industry. But they still thought they controlled 75%, because that's what they grew up on. And it was continuing to decrease.
I went to a training for the 500 new college employees of Bethlehem Steel in the summer of '75. We went to this two-week training in an auditorium, and we had countless vice presidents come in and give us talks. This one financial vice president comes in — they had just had their most profitable year ever a year and a half before — and he says, we are one of the most efficient steel companies in the world, because our blast furnaces were built in 1912 and our coke ovens were built in 1911. Out of 500 idiot newbies, I raised my hand and said, I don't understand why having old equipment makes you more efficient. He said, because it's fully depreciated. I said, oh. And he made some comment about how I didn't understand finance. So a year later I took a finance course and I learned I didn't understand finance — but neither did he.
Anyway, now you've heard my tirade on American manufacturers and businessmen. They're not as great as they think they are. Let's take a 5-minute break and we'll come back.