Can the U.S. Bring Jobs Back from China?

Pricey oil is dulling the mainland's edge in manufacturing. But American industry may not be ready to seize the opportunity

Christina Lampe-Onnerud has a long-lasting, fast-charging battery for notebook computers that she believes will revolutionize the industry. Her company, Boston-Power, would like to make the batteries in the U.S., which she says is feasible despite high American wages.

But Lampe-Onnerud has had trouble finding anyone in the U.S. even to make a prototype, let alone manufacture the battery in bulk. China, by contrast, is home to more than 200 battery manufacturers. On visits to the mainland, Lampe-Onnerud toured dozens of factories with ample staff and laboratories, and none wanted the millions of dollars up front that one contract manufacturer in the U.S. had demanded. She recalls a negotiating session last year that started at 9 a.m. and ended with a midnight dinner. Despite parting with 30 unresolved questions, "at 9:00 the next morning, the entire management team was there with pressed white shirts and a PowerPoint presentation addressing every issue," she says. "That's how badly they wanted the business." In six months, Boston-Power was ramping up production in a 400-worker factory in Shenzhen.

This would seem to be a good time for an American manufacturing renaissance. The economics of global trade are starting to tilt back in favor of the U.S. to a degree unseen in a generation. Since 2002 the dollar has plunged by 30% against major world currencies and is falling against the yuan. Wages in China are rising 10% to 15% a year. And spiking oil prices are driving up shipping rates. The cost of sending a 40-foot container from Shanghai to San Diego has soared by 150%, to $5,500, since 2000. If oil hits $200 a barrel, that could reach $10,000, projects Toronto financial-services firm CIBC World Markets.

But as the experience of Boston-Power and countless companies like it shows, the map of global commerce can't be redrawn overnight. American factories and supplier networks in many industries have withered in the era of globalization, so it will take lots of time and capital before the U.S. can become a big player again. In electronics, for instance, there has been a mass migration of component makers to China in the past decade. Ditto for suppliers to Midwest heavy-equipment makers and North Carolina's furniture industry.

The bulk of goods made in China—clothing, toys, small appliances, and the like—probably won't be coming back, because they require abundant cheap labor. If anything, their manufacture will go to other low-wage nations in Asia or Latin America. And in industries from machinery to motorbikes, China's productivity gains nearly offset rising wages and fuel prices.

In areas where the U.S. is at the forefront of innovation—renewable energy, nano materials, solid-state lighting—the U.S. must compete with Asian and European nations willing to lavish entrepreneurs with start-up capital, cash grants, and cheap loans. Similar help may be needed to persuade U.S. companies to build capacity.

EATING INTO "THE CHINA PRICE"

The global industrial landscape certainly appears to be in the early stages of a realignment. The euro's breathtaking rise against the dollar has spurred European makers of cars, steel, aircraft, and more to shift production to the U.S. Now the soaring cost of fuel is making it pricier to send goods across the Pacific. Consider Japan's steel industry, which depends on imported iron ore and coal to create high-end metal for Japanese automakers in the U.S. In 2003 it cost $15 to ship a ton of iron ore costing $30 from Brazil to Japan. By last fall, while the ore had jumped to $80 per ton, shipping costs had risen to $90. Shipping of raw materials now accounts for 13% of the price of rolled steel used in car bodies, estimates CLSA Asia-Pacific Markets. The finished steel must then be sent to factories in the U.S., pumping up the price even further.

Rising costs are starting to eat into what American managers fearfully call the China Price, the once-formidable 40% to 50% cost advantage enjoyed by Chinese manufacturers—and demanded by customers. "Fuel prices just shot up so fast that everyone was caught flat-footed," says Allen J. Delattre, who heads Accenture's (ACN) global supply chain practice. "Now logistics costs are an overarching priority." Richard Sinkin, a San Diego consultant who scouts manufacturing sites in the U.S., Mexico, and China for multinationals, also senses a major strategic shift. "A lot of clients who were thinking about going to China are now saying, Not at these prices,'" says Sinkin. "The high cost of fuel is going to radically transform the way people look at the geography of their manufacturing."

Examples of production shifts abound. Chinese steel exports to America are down 20% in the past year, notes CIBC, while U.S. steel output has jumped 10% despite the slowdown in construction. Big electronics manufacturers are expanding assembly of high-end telecommunications, computer, and medical equipment in Mexico and some parts of the U.S. for greater proximity to corporate buyers. Tesla Motors, which has just begun production of its $109,000, electric-powered sports car, transferred assembly of battery packs from Thailand to a plant next to its San Carlos (Calif.) headquarters. Thailand's low factory wages were more than offset by the costs of shipping thousand-pound battery packs across the Pacific. "We were seeing tens of millions of dollars of value sitting on the water for months," says Darryl Siry, Tesla's vice-president for marketing. "It was one of those things that became obvious all of a sudden, and you said, Why are we doing this?'"

Look behind these examples, though, and obstacles to a broad manufacturing migration become clear. Iron castings maker Donsco, on the banks of the Susquehanna River in eastern Pennsylvania, illustrates the dilemma. In recent years, Donsco has laid off hundreds of workers as customers shifted production of gear boxes, oil rig parts, and much more to Chinese competitors. Now, Donsco says it's flooded with order inquiries from U.S.-based clients. "All of a sudden our customers are saying, Whoops, it's cheaper to buy in our backyard,'" says Donsco Chairman Art Mann Sr. While Donsco managed to keep its doors open, many of its U.S. rivals shut down, so there's now a shortage of capacity.

STAYING PUT, FOR NOW

Despite growing demand, Mann says Donsco will be "real cautious" about spending the $30 million and two years needed to build a new foundry. The impact of this reluctance is being felt in Belen, N.M., where CEMCO, a maker of rock-crushing and farming equipment, is looking to cut costs and logistical headaches. The company today imports many metal parts from Asia but would prefer to buy domestically because of rising shipping rates and the weak dollar. "American foundries now can compete head-to-head on cost, but there aren't many foundries, welders, machinists, and quality-control engineers," says James B. Turk, CEMCO's chief financial officer. "What we had 10 years ago is gone." Where did all the capacity go? Mainly to China, where modern foundries are proliferating.

The furniture industry has undergone a similar transformation. Hundreds of factories have shut their doors across the U.S. South, while giant plants churning out beds, armoires, and coffee tables have sprung up in industrial estates that sprawl for miles and miles outside Chinese cities such as Dongguan, just north of Hong Kong. It's true that wages are up, the Chinese plants import much of their wood from North America, and bulky bed frames and mattresses consume a lot of space in shipping containers. Yet Stylution Group's 1,600-worker complex in Dongguan isn't going anywhere. Stylution churns out 1 million mattresses and 300,000 bedroom sets every year, exporting about half of them. "It's not easy to pick up and move," says Stylution's marketing manager, Frank Masiello. Besides, he says, most of the supply base has gone to China, down to the paint and tiniest screws, and the mainland market is growing fast. "High Point [N.C.] used to be the center," Masiello says. "But over the last eight years, pretty much everything moved here."

The same goes for lighting fixtures, household appliances, and more. An overwhelming majority of many of these products are made in China. And while some companies are shifting production to Vietnam or Indonesia, those countries don't have enough skilled workers to match Chinese quality and efficiency. If global shipping costs continue to rise, some businesses could eventually move their factories back to the U.S., but that process will take years. "In the short term, China is irreplaceable," says Xu Dongsheng, deputy secretary general of the China Household Electrical Appliances Assn.

How has China been able to keep its edge in the face of soaring costs? One factor that's widely overlooked is rising productivity. For the past decade, U.S. manufacturing productivity growth has averaged 4.8%. That's impressive for an industrialized nation, and bodes well for U.S. industry when the economy recovers. But productivity at medium and large Chinese manufacturers—the backbone of country's export boom—has averaged nearly 19% over the same period, says Bart van Ark, chief economist at the Conference Board, a business research group.

While American manufacturers have been tightening their belts, producers in China have been plowing money into bigger and more advanced facilities that are ahead of their U.S. counterparts. Douglas Bartlett, chairman of Bartlett Manufacturing, a Cary (Ill.) maker of high-end circuit boards used in defense and medical systems, doesn't see a big reversal in store. A decade ago the U.S. accounted for one-third of global circuit-board output. Today that's down to 10%, with China making 80%. Chinese boards are still 40% to 50% cheaper than the ones Bartlett makes in the U.S., in part because producers there have superior technology. "When factories went to China, so did the R&D," says Bartlett, who also heads the U.S. Business & Industry Council, a lobbying group for manufacturers. "I can't envision a scenario in which the price gap will drop significantly anytime soon."

Some analysts contend the China Price edge against the U.S. will remain for at least a decade. While the U.S. has become a "midprice" alternative to Western Europe thanks to the plunge in the dollar, says Boston Consulting Group senior partner Harold L. Sirkin, its cost structure in relation to China has changed only marginally. Sirkin points to industrial compressors, which are used to power equipment such as office air-conditioning systems. Three years ago it cost 38% less to make a 1.5-ton compressor in a factory in China than in an American plant. The big driver was Chinese wages and benefits, which were 65% below those in the U.S. Even accounting for rising labor costs in China, the strengthening yuan, and higher shipping rates, Sirkin estimates Chinese-made compressors are still about 30% cheaper. While that puts Mexico within striking distance as a rival site, "this is not enough of a change to bring this production home to America," Sirkin says, "and there is likely no factory and equipment left to come back to."

Expecting the U.S. to recapture industries that have already gone to China may not be realistic. But the new cost equation likely will influence many decisions about where to locate production in the future. America remains the world's biggest manufacturer, after all, because it's still the largest market for everything from drugs and packaged foods to high-end medical equipment. The U.S. may have as good a chance as anyone of being a strong player in nascent industries, whether next-generation wind turbines, medical devices with nano-scale sensors, or electric cars. The challenge will be to persuade reluctant venture capitalists and corporations to invest again in modern U.S. production facilities.

What would be required, for instance, for the U.S. to re-emerge as a player in batteries? It is an industry, after all, on the cusp of radical technological change that could spur development of future eco-friendly vehicles, cell phones, and home appliances. Boston-Power's Lampe-Onnerud has suggestions, but America may not be ready for them. Washington could lend up to $50 million in seed capital to promising startups, for example, and state governments could build industrial parks with low-cost facilities and services that rival those found in China. "If we got state and federal support," she says, "we would team up with others in a heartbeat and grow an industry."

Links

Clearer Sailing

Cargo ships may soon have an incentive to burn lower-sulfur fuel when sailing off the California coast. Port operators will reimburse shippers the price difference between so-called bunker fuel, a viscous distillate used by big vessels, and a more expensive but cleaner-burning alternative, the Los Angeles Times wrote on Mar. 19. The measure, expected to go into effect by July 1, would cut sulfur-oxide air pollution in the L.A. basin by 11%.

With Dexter Roberts in Dongguan, Geri Smith and Adrienne Bard in Mexico City, Peter Coy and Jacob Stokes in New York, and Ian Rowley in Tokyo

Surviving Matrix Management

Surviving Matrix Management

Posted by Gill Corkindale on June 19, 2008 11:33 AM

Matrix management has been around for 40 years, but there have been few challenges to its efficacy and viability. Most writers and management theorists remain convinced that a matrix approach is superior to a hierarchy, but is it really the only alternative? Are there different ways to manage – for example, a truly integrated hierarchical/matrix system or do we need to think about a different system altogether?

Let’s take a look at a few fundamental questions to see if matrix systems are shaping up to the challenges of 21st century business. Here are some thoughts – drawn from my own experience and from Life in a Matrix, a great resource. Let me have your thoughts too.

Key challenges

• Multiple reporting lines can reflect the interests of functions, geographical regions and product lines, but they can also cause conflict, stress and confusion among staff if managers’ interests are not aligned


• Poorly defined management roles can result in turf wars or lack of accountability, which can erode organizational cultures


• Self-managing teams and individuals can free up management time and allow creative and flexible approaches to work – but not everyone can make the transition to self-management


• Organisations can set parallel priorities, but this does not always result in effective or efficient working


• Matrix systems are vulnerable to constant reorganization, which can disrupt the relationships that make them work: knowledge, experience and organizational know-how can be lost easily


• Responsive managers in a matrix can offer unparalleled opportunities for professional development, but inattentive managers can cause immense stress and over-work


• It can be difficult to keep track of who is overseeing performance if project completion is the key focus for businesses

How do you lead in the matrix?

• Make sure the culture is robust, supportive and you have the right values and behaviours in place


• Ensure that you are a skilled communicator: networking, influencing, coaching and facilitating skills are paramount


• Draw up clear goals, objectives, and performance metrics for managers and staff and see to it that they are aligned vertically and horizontally


• Empower teams to make decisions and to resolve conflicts at an appropriate level


• Don’t tinker with the structure, but let the networks and matrix evolve over time


• Use your expertise and personal network to influence those over whom you have no formal authority

How do you work in the matrix?

• Bolster your communication, networking and coaching skills


• Think about who is making demands on your time and attention


• Decide how much effort and attention each part of your workload requires


• Work out how to manage priorities and where you can do trade-offs


• Understand your managers’ situations and identify potential pressure points


• Ensure that each manager is aware of your entire workload and push back against unreasonable or conflicting demands


• Keep your manager informed about what you are doing and your progress

What are the possible effects of the matrix – on people and organizations?

• Greater focus on short-term projects rather than long-term issues


• Shorter attention spans as multiple projects are carried out simultaneously


• Transactional relationships as managers and employees trade off priorities


• More flexible – or more conflictual - management relationships


• More open/supportive – or more political/destructive – organizational cultures


• Greater uncertainty – more ability to deal with ambiguity or less accountability


• More productivity, challenge and growth – or more stress, pressure and fear

What is the future for the matrix?

Tuesday, June 17, 2008

Creating Creatures

Spore's Lucy Bradshaw talks about why the game's developers embraced an old programming technique.

By Erica Naone

The Creature Creator, the first piece of Electronic Arts' highly anticipated evolution game Spore, launched Tuesday. Created by Will Wright, who's known for the video games SimCity and The Sims, Spore begins with a player controlling a single-celled organism and progresses through various evolutionary stages until the player controls an entire space-faring race. The Creature Creator part of the game consists of a modeling interface that lets players build their own organisms from a set of highly customizable and flexible parts.

When Wright first began talking about Spore in 2005, he expressed a vision of extreme player control. Rather than having game designers build thousands of 3-D models of creatures in advance and program their behavior, he had the staff develop algorithms to animate the creatures that players built, using a technique called procedural generation. While using the Creature Creator, each choice that a player makes to design the look of her organism affects how it moves or interacts with others. The game is entirely populated with creatures created by players, but it's not a multiplayer game. Secondary creatures are controlled by artificially intelligent software, not by other players.

The Creature Creator's free trial edition is available today. A full version is available for $9.99 on the PC, with a Mac version to follow. The full version of Spore will launch in North America on September 7.

On the eve of the Creature Creator's launch, Technology Review's assistant editor, Erica Naone, talked with Spore's executive producer, Lucy Bradshaw, about the effects of procedural generation on Spore's game play.

Technology Review: Procedural generation was commonly used in games in the earlier days of computers, when they didn't have the memory to store lots of details about creatures and terrain. Designers relied on processing power to build up game worlds from a small set of instructions when they had no other choice, but that technique fell out of favor when computers began to store large quantities of data easily. What made you take another look at procedural generation?

Spore creation: Lucy Bradshaw, executive producer of the highly anticipated evolution game Spore, says that the game’s approach to programming affects game play and player control, making characters more customizable. Below is a screenshot showing examples of creatures that could be built using the game’s Creature Creator. The game’s algorithms generate behavior for the creatures based on the features of physical characteristics selected by players.
Credit: Electronic Arts

Lucy Bradshaw: Will [Wright] wanted to use procedural generation because he wanted to put as much creativity into the hands of the player as we possibly could. In most games, [developers] create a set of predetermined skeletons and predetermined textures. What we wanted was for players to be able to construct anything they could imagine. Doing the content procedurally allowed us to do that, and to create a game dynamic that gives meaning to each of the players' creations by giving them game purpose.

TR: Can you offer an example of how procedural generation gives meaning to the design choices that a player makes when building a creature?

LB: The creatures' abilities come from the parts that players choose to put on them. Socializing parts, for example, give you the ability to charm other creatures, to dance, to sing, or to pose. With the Creature Creator, you can put these things on. For instance, a charm part might be a little flower, or some sort of antenna might give you the charm ability. There's AI in the game, and creatures will behave based on the parts that you've added to them. So, if I'm going to decide I want to socialize with a number of other species, I'm probably going to opt to put on more socializing parts and create my possibilities there. If I want to attack and win by brute force, then I'm probably going to invest more in the combat parts. There are also movement parts that give creatures the ability to sneak and jump and glide. All of these things together create the kind of strategies that you get to play out once you get the game.

Spore’s Creature Creator, a part of the Spore game that launches today as a stand-alone product, has an interface balanced to give players a great deal of latitude with relatively easy controls. Players select parts by dragging them onto a creature’s body. After attaching the parts wherever they choose, players can stretch, resize, and paint them. The game’s algorithms interpret the form that those parts take to create behaviors for the creature, and to determine how the creature moves, interacts with other creatures, or fights its enemies.
Credit: Electronic Arts

TR: Does how you build the creature affect anything in the game beyond how the creature behaves?

LB: One of our original visions . . . was to do procedural music, [which we achieved with help from electronic musician Brian Eno]. So, as you create your creature in the editor, if you're putting on a more aggressive part, the music starts to turn a little more ominous. If you're putting on a more socializing part, it turns a little more perky and happy. And that happens throughout the game, in fact.

TR: One goal of the Creature Creator was to make it relatively easy to use, while also giving people a lot of range in what they could create. How did you pull that off?

LB: The Creature Creator's interface is probably the single item that we spent the most time on. To make it something that feels as simple as shaping clay, allowing players to easily add parts, stretch them, or rescale them, we taught the computer to respond to what the player was doing. If the creature is facing the player, it will manipulate the limbs differently than if the creature is to the side. We created methodology like symmetry, so that if you're dragging on a leg and you put it to the side of the creature, it's going to have two of them.

TR: Because so much of the behavior of these creatures is procedurally generated once the game is running, my understanding is that the files for the creatures themselves turn out to be much smaller than for a 3-D model, for example.

LB: What you're doing with your Creature Creator is creating a recipe for a creature. Because the computer builds the creatures up procedurally, the file that stores [the creatures] gets reduced down to about 8 K. We're talking about kilobytes, not megabytes or gigabytes [as you might expect for most 3-D models].

TR: Since the file sizes are so small, are you making mobile versions of Spore as well?

LB: We have a version of Spore called The Beginning that will be available on the mobile phone, but, in the full game, the underlying technology to do procedural animation and some of the AI that we're doing definitively takes advantage of the PC platform's computing capability. While procedural generation gives you a tremendous amount of creativity, and it gives you this ability to reduce files down to a very small size, the way that we're putting procedural generation into action for the full game is using quite a bit of computing power.

TR: What kind of computing capability will a player need to be able to run Spore?

LB: We are actually running on a system spec for computers that shipped about three years ago, and we'll also launch [the full version] simultaneously on the Mac and the PC.

Sharper Satellite Imagesl

Friday, June 20, 2008

Sharper Satellite Images

A new satellite could produce color images of objects half the size of those visible to its predecessors.

By Lissa Harris

Next month, a commercial satellite company is scheduled to launch an Earth-orbiting satellite that will be able to produce color images so detailed that the U.S. government doesn't permit their public release. The new satellite, dubbed GeoEye-1, will provide images at its highest resolution for classified military and intelligence uses. Slightly lower-resolution versions will be available for commercial and research purposes, as well as through online services like Google Earth.

On August 22, Virginia-based GeoEye will launch the satellite, from Vandenburg Air Force Base in California. The satellite will be able to distinguish objects that measure 0.17 square meters. The best color satellite images now commercially available, from GeoEye competitor DigitalGlobe, can resolve objects that measure 0.36 square meters.

"We can see a beach ball 16 inches across," says GeoEye CEO Matt O'Connell. According to O'Connell, the satellite data will be accurate to within three meters of "ground truth"--a measure of how well the satellite imagery matches up to GPS data taken from the ground. DigitalGlobe's QuickBird satellite is accurate to 27 meters.

GeoEye-1 owes its improved accuracy to its star trackers--sensing devices that allow it to calculate its exact position based on the stars. Its star trackers were initially developed by Ball Aerospace for military applications and only recently cleared for commercial use.

Preparing for takeoff: A photo of GeoEye’s new imaging satellite in May 2008 at General Dynamics’ facility in Gilbert, AZ, where the satellite underwent environmental testing.
Credit: GeoEye

Although federal regulations prohibit satellite companies from selling images with resolutions of less than 0.25 square meters, O'Connell says the images taken by GeoEye-1 will still be the highest-resolution color images available on the market--able to spot a person on the ground or distinguish between a tank and a truck.

GeoEye-1 will record color in four wavelengths: blue, green, red, and near-infrared. It is capable of imaging up to about 700,000 square kilometers a day--an area roughly the size of Texas. The company expects the satellite to last for at least seven years.

The fledgling industry of commercial satellite imagery has grown rapidly since its inception in the 1990s. Fifteen years ago, almost all satellite imagery worldwide was produced by governments and was highly classified. But since 1994, when President Bill Clinton signed a directive broadly declassifying commercially produced satellite data, military and intelligence agencies have increasingly relied on commercially acquired data, and U.S. government restrictions on that data have been steadily loosening.

The increasing quality of commercial satellite data is a tremendous boon to researchers, says James Garvin, chief scientist at NASA's sciences and exploration directorate at the Goddard Space Flight Center in Greenbelt, MD. Since 2006, NASA researchers have been using high-resolution color images of Mars from the HiRISE satellite to research the planet's climate, geology, and history. It's only recently, Garvin says, that earth scientists have begun to turn this kind of attention to our own planet.

"It's ironic that we implemented it on Mars before Earth," he says. "I'm particularly excited about its capabilities for helping train us to understand some of the unknown unknowns about climate change."

This image of the Colorado capitol building in Denver has a resolution of 0.50 meters, demonstrating the level of detail that the new satellite will be able to provide to the general public. The satellite will be capable of collecting data at a resolution of 0.41 meters, but due to federal restrictions, it will be able to release only 0.50-meter data for commercial use.
Credit: GeoEye

One reason satellite imagery is becoming important to scientists studying climate change, says Garvin, is that the quality is beginning to rival that of aerial photography. With high-resolution satellite imagery, scientists will be able to look back in time, comparing current images to a wealth of historical images taken from airplanes--a trove that dates back to the advent of large-scale aerial reconnaissance in World War II.

"One of the things that's really hard to do is detect very subtle landscape changes at the boundaries between landscape systems--the edge of the ocean, the coastline, the beach zone," Garvin says. "The resolving power of this soon-to-be-launched satellite will dramatically extend what we can measure from space in several different environmental disciplines."

About half of GeoEye's roughly $200 million in yearly revenue comes from the federal government. The rest, O'Connell says, is made up of private-industry and international sales.

Although the company has been reluctant to discuss the details of its business relationships with major online providers, GeoEye currently sells satellite images to Google, Yahoo, and Microsoft. As the online providers update their imagery, the new satellite will make much higher-quality data available for free to the general public. Though that may seem like giving away the store, O'Connell says, it doesn't hurt GeoEye's business, since most of its customers in research and industry want custom imagery and more data than sites like GoogleEarth make available.

"It's been a great additional source of revenue and a great marketing technique," he says. "People see our images online and say, 'Oh, man--what I could do with this stuff.'"

GeoEye-1 was originally scheduled to take flight in April, but the launch provider, Boeing Launch Services, delayed the launch to make way for a U.S. government mission.

Plans are already in the works for GeoEye-2, a satellite that will be able to image objects that measure a mere 0.06 square meters. GeoEye-2 is scheduled to launch sometime in 2011 or 2012.

Friday, June 20, 2008

A Display That Tracks Your Movements

Samsung and Reactrix move beyond touch screens and try to make hand waving the next big computer interface.

By Kate Greene

There could be a revolution brewing in billboard advertising. Instead of simply presenting a static image, why not let people interact with the advertisement? This is the vision of electronics giant Samsung and interactive advertising company Reactrix Systems. The two companies have partnered to bring 57-inch interactive displays to Hilton hotel lobbies by the end of the year. These displays can "see" people standing up to 15 feet away from the screen as they wave their hands to play games, navigate menus, and use maps.

With the buzz surrounding the Wii, the iPhone, and Microsoft's Surface, "people are more open and ready to interact using their hands and gestures," says Matt Bell, chief scientist and founder of Reactrix. It's easy to see how a gesture-based interface might work well for video games and virtual worlds, and certainly companies such as Belgian startup Softkinetic make systems for those very needs. But Reactrix is aiming for the out-of-home advertising market, traditionally dominated by large static displays like billboards. Founded in 2001, Reactrix has some experience already: today, its interactive floor displays attract crowds in shopping centers across the country.

Knockout: Multiple people can use this gesture-based interactive screen, called WAVEscape, developed by Samsung and Reactrix. Here, two people punch the air while playing a boxing game.
Credit: John Fox

The basic idea behind Reactrix's system, and even low-end gesture-based technologies such as the Sony PlayStation Eye, is to use a camera to detect a person's body, and then use computer vision algorithms to make sense of the images. Reactrix and Softkinetic systems differ from the PlayStation Eye, however, in that they record 3-D information as opposed to just two-dimensional information. There are many types of cameras that can capture 3-D scenes, says Bell, but in its current models made with Samsung, the company is using a stereoscopic camera with two lenses. Next to the camera is an infrared light that projects an invisible pattern onto the people in front of the screen. Each lens captures a slightly different view of what's going on, and, based on the disparity in the images, the system can distinguish distance down to a fraction of an inch. Bell adds that the projected light pattern helps the system's accuracy in uneven lighting.

When the camera collects the information, it automatically dumps it into a specialized processor to analyze the depth data, bypassing software that wouldn't be able to compute fast enough. "Once that's done, we have a full-depth image showing the distance to every object," Bell says. At this point, Reactrix's unique algorithms take over. One of the differentiating factors between Softkinetic and Reactrix is that the former focuses on the detailed motion of parts of a single body, whereas the latter strives to disambiguate people and objects. Bell doesn't provide details, but he says that the code is designed to figure out scenarios such as when people are holding hands, or if people are standing shoulder to shoulder.

On top of the hardware and algorithms, Bell says, Reactrix is also thinking about the best design for the user interface. As with touch-screen technology, gesture-based interactions have been toyed around with before, but it's still unclear what sort of interface would work best for most people. There are a few interactions that lend themselves well to a gesture interface, such as a boxing game or sliding pictures across a screen. However, engineers still haven't figured out the best way for people to interact with a virtual button, for instance. It may seem trivial, but it's unclear how to press a button when there's nothing to touch. "There's an exciting opportunity here to create the standard gestural interaction with displays," says Bell. "We want to be at the forefront of creating that."

Regarding the forthcoming Hilton displays, Bell says he expects that travelers will be able to play games that relate to local attractions and navigate menus for more information. In this way, he says, people have fun interacting with advertisements, instead of just passively flipping through a brochure.

With its floor displays already available in U.S. shopping centers, "Reactrix has proven the value of interactive marketing solutions for use in public spaces and, specifically, in use with crowds, for which it is difficult to track individual people's body movements," says Michel Tombroff, CEO of Softkinetic. He suspects that the market for gesture-based technology will grow in the coming years, thanks in part to the falling price of 3-D cameras.

The engineers who build these cameras and computer vision systems have made great strides in recent years, says Scott Klemmer, a computer-science professor at Stanford University. "Cheap cameras and sensing [systems] are going to usher in a new genre of user interfaces," he says.

Bell says that the falling price and shrinking size of these cameras is one of the main reasons that his company partnered with Samsung. The display company, he says, should be able to find a compact and cost-effective way to integrate the camera technologies, Reactrix processors, and algorithms into commercial displays that can have a home outside a Hilton hotel lobby.

The endowment effect---It’s mine, I tell you

The endowment effect

It’s mine, I tell you

Jun 19th 2008
From The Economist print edition

Mankind’s inner chimpanzee refuses to let go. This matters to everything from economics to law

Illustration by Claudio Munoz

“I AM the most offensively possessive man on earth. I do something to things. Let me pick up an ashtray from a dime-store counter, pay for it and put it in my pocket—and it becomes a special kind of ashtray, unlike any on earth, because it’s mine.” What was true of Wynand, one of the main characters in Ayn Rand’s novel “The Fountainhead”, may be true of everyone. From basketball tickets to waterfowl-hunting rights to classic albums, once someone owns something, he places a higher value on it than he did when he acquired it—an observation first called “the endowment effect” about 28 years ago by Richard Thaler, who these days works at the University of Chicago.

The endowment effect was controversial for years. The idea that a squishy, irrational bit of human behaviour could affect the cold, clean and rational world of markets was a challenge to neoclassical economists. Their assumption had always been that individuals act to maximise their welfare (the defining characteristic of economic man, or Homo economicus). The value someone puts on something should not, therefore, depend on whether he actually owns it. But the endowment effect has been seen in hundreds of experiments, the most famous of which found that students were surprisingly reluctant to trade a coffee mug they had been given for a bar of chocolate, even though they did not prefer coffee mugs to chocolate when given a straight choice between the two.

Moreover, it is now possible to see the effect in the brain. In the June 12th edition of Neurone, Brian Knutson of Stanford University describes a brain-scanning study he carried out recently. The pattern and location of the activity he observed suggests the endowment effect works by enhancing the salience of possible loss. But that still does not explain why this sense of loss should be felt. The question is whether such behaviour is truly irrational, or just “differently” rational. That might be the case if, for instance, it was a hangover from the evolutionary past that worked then, but is no longer appropriate now.

Mug’s game

The endowment effect has nothing to do with wealth (it is not as if chocolate bars and coffee mugs matter) or transaction costs (in most experiments these are zero). Not even emotional attachment, whatever that means, can really be called in as an explanation, since the effect is both instantaneous and sometimes felt even by those who buy and sell for a living. According to Pete Lunn, an economist at the Economic and Social Research Institute in Dublin, professional market traders are often reluctant to sell investments they already hold, even though they could trade them for assets they would prefer to invest in if starting from scratch.

Supposedly rational economists are affected, too. Dr Thaler, who recently had some expensive bottles of wine stolen, observes that he is “now confronted with precisely one of my own experiments: these are bottles I wasn’t planning to sell and now I’m going to get a cheque from an insurance company and most of these bottles I will not buy. I’m a good enough economist to know there’s a bit of an inconsistency there.”

The effect is not, however, universally observed. Whereas coffee mugs generate an endowment effect, tokens that can be exchanged for coffee mugs do not. And despite Dr Lunn’s observations, other work suggests professional traders can, and do, overcome the effect. So what is going on?

Owen Jones, a professor of law and biology at Vanderbilt University, and Sarah Brosnan, a primatologist at Georgia State University, suspect the answer is that, in the evolutionary past, giving things up, even when an apparently fair exchange seemed to be on offer, was just too risky. These days, as they discuss in a paper just published in the William and Mary Law Review, there are contracts, rights and other ways of enforcing bargains. Animal societies have none of these mechanisms. As Adam Smith observed in the “Wealth of Nations”, “nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog.”

To put flesh on their idea, Dr Jones and Dr Brosnan have been trying to overcome Smith’s observation by training chimpanzees to trade. In 2006 Keith Chen of Yale University showed that capuchin monkeys could learn to do so, and also seemed to exhibit the endowment effect. Chimps, it turns out, can manage to truck too. In the chimp study, tubes of peanut butter and frozen juice bars were used. Both treats were designed to be difficult to eat quickly. This makes it possible for animals that would otherwise consume any food they were given at the first opportunity at least to consider the idea of an exchange.

When presented with a choice, 60% of the chimps preferred peanut butter to juice. However, when they were endowed with peanut butter, 80% of them chose to keep it instead of exchanging it for juice. It was as if the peanut butter became more valuable as soon as it was possessed. And an opposite endowment effect was observed when the chimps were given juice.

Observing the endowment effect in three primate species suggests it does, indeed, have deep evolutionary roots. Better still, before they started work Dr Jones and Dr Brosnan predicted that the strength of the effect would vary with the evolutionary salience of the item in question. Lo and behold, when they tried the same experiments using bone and rope toys, no endowment effect was seen. Food is vital. Toys are not.

If the endowment effect does indeed vary according to evolutionary salience, this may make sense of the disparate results of hundreds of studies on people. But it does raise the question of what is and is not evolutionarily salient. Food and mates clearly are. Tangible goods such as mugs, as opposed to abstract goods such as vouchers for mugs, probably are too. But intangible possessions, such as shareholdings, do generate some effect, so physical presence cannot be all there is to it.

Steffen Huck, an economist at University College, London, has an alternative hypothesis that is directly to do with trade. In societies with markets, customers can go elsewhere. But in a small, tribal society there may be no alternative seller. In that case, those who were reluctant to trade might get better prices. It may thus make sense for an owner to be psychologically predisposed to hold out for a high price as soon as someone else expresses interest in one of his possessions—something Dr Huck’s models predict would, indeed, be evolutionarily beneficial.

Keep on trucking

Because the endowment effect touches on so many areas, Dr Jones thinks it may be helpful for legislators to understand its evolutionary origins. That goods and rights such as pollution permits, radio spectrum and mobile-telephone licences do not inexorably flow towards the most efficient distribution worries the legal scholars charged with designing fair allocations. The effect also complicates the negotiation of contracts, as people demand more to give up standard provisions than they would have been willing to pay had they bargained anew.

Nor is the endowment effect alone in suggesting that Homo economicus is a rarer species than neoclassical taxonomists would like to believe. Other “irrational” phenomena include confirmation bias (searching for or interpreting information in a way that confirms one’s preconceptions), the bandwagon effect (doing things because others do them) and framing problems (when the conclusion reached depends on the way the data are presented). All in all, the rational conclusion is that humans are irrational animals.

Endowment effect

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The endowment effect (also known as divestiture aversion) is a hypothesis that people value a good or service more once their property right to it has been established. In other words, people place a higher value on objects they own than objects that they do not. In one experiment, people demanded a higher price for a coffee mug that had been given to them but put a lower price on one they did not yet own. The endowment effect was described as inconsistent with standard economic theory which asserts that a person's willingness to pay (WTP) for a good should be equal to their willingness to accept (WTA) compensation to be deprived of the good. This hypothesis underlies consumer theory and indifference curves.

Energy

The future of energy

Jun 19th 2008
From The Economist print edition

A fundamental change is coming sooner than you might think

SINCE the industrial revolution 200 years ago, mankind has depended on fossil fuel. The notion that this might change is hard to contemplate. Greens may hector. Consciences may nag. The central heating's thermostat may turn down a notch or two. A less thirsty car may sit in the drive. But actually stop using the stuff? Impossible to imagine: surely there isn't a serious alternative?

Such a failure of imagination has been at the heart of the debate about climate change. The green message—use less energy—is not going to solve the problem unless economic growth stops at the same time. If it does not (and it won't), any efficiency saving will soon be eaten up by higher consumption per head. Even the hair-shirt option, then, will bring only short-term relief. And when a dire prophecy from environmentalism's jeremiad looks as if it is coming true, as the price of petroleum rises through the roof and the idea that oil might run out is no longer whispered in corners but openly discussed, there is a temptation to believe that the end of the world is, indeed, nigh.

Not everyone, however, is so pessimistic. For, in the imaginations of a coterie of physicists, biologists and engineers, an alternative world is taking shape. As the special report in this issue describes, plans for the end of the fossil-fuel economy are now being laid and they do not involve much self-flagellation. Instead of bullying and scaring people, the prophets of energy technology are attempting to seduce them. They promise a world where, at one level, things will have changed beyond recognition, but at another will have stayed comfortably the same, and may even have got better.

This time it's serious

Alternative energy sounds like a cop-out. Windmills and solar cells hardly seem like ways of producing enough electricity to power a busy, self-interested world, as furnaces and steam-turbines now do. Battery-powered cars, meanwhile, are slightly comic: more like milk-floats than Maseratis. But the proponents of the new alternatives are serious. Though many are interested in environmental benefits, their main motive is money. They are investing their cash in ideas that they think will make them large amounts more. And for the alternatives to do that, they need to be both as cheap as (or cheaper than) and as easy to use as (or easier than) what they are replacing.

For oil replacements, cheap suddenly looks less of a problem. The biofuels or batteries that will power cars in the alternative future should beat petrol at today's prices. Of course, today's prices are not tomorrow's. The price of oil may fall; but so will the price of biofuels, as innovation improves crops, manufacturing processes and fuels.

Electrical energy, meanwhile, will remain cheaper than petrol energy in almost any foreseeable future, and tomorrow's electric cars will be as easy to fill with juice from a socket as today's are with petrol from a pump. Unlike cars powered by hydrogen fuel cells, of the sort launched by Honda this week, battery cars do not need new pipes to deliver their energy. The existing grid, tweaked and smartened to make better use of its power stations, should be infrastructure enough. What matters is the nature of those power stations.

The price is right

They, too, are more and more likely to be alternative. Wind power is taking on natural gas, which has risen in price in sympathy with oil. Wind is closing in on the price of coal, as well. Solar energy is a few years behind, but the most modern systems already promise wind-like prices. Indeed, both industries are so successful that manufacturers cannot keep up, and supply bottlenecks are forcing prices higher than they otherwise would be. It would help if coal—the cheapest fuel for making electricity—were taxed to pay for the climate-changing effects of the carbon dioxide produced when it burns, but even without such a tax, some ambitious entrepreneurs are already talking of alternatives that are cheaper than coal.

Older, more cynical hands may find this disturbingly familiar. The last time such alternatives were widely discussed was during the early 1970s. Then, too, a spike in the price of oil coincided with a fear that natural limits to supply were close. The newspapers were full of articles on solar power, fusion and converting the economy to run on fuel cells and hydrogen.

Of course, there was no geological shortage of oil, just a politically manipulated one. Nor is there a geological shortage this time round. But that does not matter, for there are two differences between then and now. The first is that this price rise is driven by demand. More energy is needed all round. That gives alternatives a real opening. The second is that 35 years have winnowed the technological wheat from the chaff. Few believe in fusion now, though uranium-powered fission reactors may be coming back into fashion. And, despite Honda's launch, the idea of a hydrogen economy is also fading fast. Thirty-five years of improvements have, however, made wind, solar power and high-tech batteries attractive.

As these alternatives start to roll out in earnest, their rise, optimists hope, will become inexorable. Economies of scale will develop and armies of engineers will tweak them to make them better and cheaper still. Some, indeed, think alternative energy will be the basis of a boom bigger than information technology.

Whether that boom will happen quickly enough to stop the concentration of carbon dioxide in the atmosphere reaching dangerous levels is moot. But without alternative energy sources such a rise is certain. The best thing that rich-world governments can do is to encourage the alternatives by taxing carbon (even knowing that places like China and India will not) and removing subsidies that favour fossil fuels. Competition should do the rest—for the fledgling firms of the alternative-energy industry are in competition with each other as much as they are with the incumbent fossil-fuel companies. Let a hundred flowers bloom. When they have, China, too, may find some it likes the look of. Therein lies the best hope for the energy business, and the planet.

THE FUTURE OF ENERGY

The power and the glory

Jun 19th 2008
From The Economist print edition

The next technology boom may well be based on alternative energy, says Geoffrey Carr (interviewed here). But which sort to back?

Illustration by Ian Whadcock

EVERYONE loves a booming market, and most booms happen on the back of technological change. The world’s venture capitalists, having fed on the computing boom of the 1980s, the internet boom of the 1990s and the biotech and nanotech boomlets of the early 2000s, are now looking around for the next one. They think they have found it: energy.

Many past booms have been energy-fed: coal-fired steam power, oil-fired internal-combustion engines, the rise of electricity, even the mass tourism of the jet era. But the past few decades have been quiet on that front. Coal has been cheap. Natural gas has been cheap. The 1970s aside, oil has been cheap. The one real novelty, nuclear power, went spectacularly off the rails. The pressure to innovate has been minimal.

In the space of a couple of years, all that has changed. Oil is no longer cheap; indeed, it has never been more expensive. Moreover, there is growing concern that the supply of oil may soon peak as consumption continues to grow, known supplies run out and new reserves become harder to find.

The idea of growing what you put in the tank of your car, rather than sucking it out of a hole in the ground, no longer looks like economic madness. Nor does the idea of throwing away the tank and plugging your car into an electric socket instead. Much of the world’s oil is in the hands of governments who have little sympathy with the rich West. When a former head of America’s Central Intelligence Agency allies himself with tree-hugging greens that his outfit would once have suspected of subversion, you know something is up. Yet that is one tack James Woolsey is trying in order to reduce his country’s dependence on imported oil.

The price of natural gas, too, has risen in sympathy with oil. That is putting up the cost of electricity. Wind- and solar-powered alternatives no longer look so costly by comparison. It is true that coal remains cheap, and is the favoured fuel for power stations in industrialising Asia. But the rich world sees things differently.

In theory, there is a long queue of coal-fired power stations waiting to be built in America. But few have been completed in the past 15 years and many in that queue have been put on hold or withdrawn, for two reasons. First, Americans have become intolerant of large, polluting industrial plants on their doorsteps. Second, American power companies are fearful that they will soon have to pay for one particular pollutant, carbon dioxide, as is starting to happen in other parts of the rich world. Having invested heavily in gas-fired stations, only to find themselves locked into an increasingly expensive fuel, they do not want to make another mistake.

That has opened up a capacity gap and an opportunity for wind and sunlight. The future price of these resources—zero—is known. That certainty has economic value as a hedge, even if the capital cost of wind and solar power stations is, at the moment, higher than that of coal-fired ones.

The reasons for the boom, then, are tangled, and the way they are perceived may change. Global warming, a long-range phenomenon, may not be uppermost in people’s minds during an economic downturn. High fuel prices may fall as new sources of supply are exploited to fill rising demand from Asia. Security of supply may improve if hostile governments are replaced by friendly ones and sources become more diversified. But none of the reasons is likely to go away entirely.

Global warming certainly will not. “Peak oil”, if oil means the traditional sort that comes cheaply out of holes in the ground, probably will arrive soon. There is oil aplenty of other sorts (tar sands, liquefied coal and so on), so the stuff is unlikely to run out for a long time yet. But it will get more expensive to produce, putting a floor on the price that is way above today’s. And political risk will always be there—particularly for oil, which is so often associated with bad government for the simple reason that its very presence causes bad government in states that do not have strong institutions to curb their politicians.

A prize beyond the dreams of avarice

The market for energy is huge. At present, the world’s population consumes about 15 terawatts of power. (A terawatt is 1,000 gigawatts, and a gigawatt is the capacity of the largest sort of coal-fired power station.) That translates into a business worth $6 trillion a year—about a tenth of the world’s economic output—according to John Doerr, a venture capitalist who is heavily involved in the industry. And by 2050, power consumption is likely to have risen to 30 terawatts.

Scale is one of the important differences between the coming energy boom, if it materialises, and its recent predecessors—particularly those that relied on information technology, a market measured in mere hundreds of billions. Another difference is that new information technologies tend to be disruptive, forcing the replacement of existing equipment, whereas, say, building wind farms does not force the closure of coal-fired power stations.

For both of these reasons, any transition from an economy based on fossil fuels to one based on renewable, alternative, green energy—call it what you will—is likely to be slow, as similar changes have been in the past (see chart 1). On the other hand, the scale of the market provides opportunities for alternatives to prove themselves at the margin and then move into the mainstream, as is happening with wind power at the moment. And some energy technologies do have the potential to be disruptive. Plug-in cars, for example, could be fuelled with electricity at a price equivalent to 25 cents a litre of petrol. That could shake up the oil, carmaking and electricity industries all in one go.

The innovation lull of the past few decades also provides opportunities for technological leapfrogging. Indeed, it may be that the field of energy gives the not-quite-booms in biotechnology and nanotechnology the industrial applications they need to grow really big, and that the three aspiring booms will thus merge into one.

The possibility of thus recapturing the good times of their youth has brought many well-known members of the “technorati” out of their homes in places like Woodside, California. Energy has become supercool. Elon Musk, who co-founded PayPal, has developed a battery-powered sports car. Larry Page and Sergey Brin, the founders of Google, have started an outfit called Google.org that is searching for a way to make renewable energy truly cheaper than coal (or RE

Vinod Khosla, one of the founders of Sun Microsystems, is turning his considerable skills as a venture capitalist towards renewable energy, as are Robert Metcalfe, who invented the ethernet system used to connect computers together in local networks, and Mr Doerr, who works at Kleiner Perkins Caufield & Byers, one of Silicon Valley’s best-known venture-capital firms. Sir Richard Branson, too, is getting in on the act with his Virgin Green Fund.

This renewed interest in energy is bringing forth a raft of ideas, some bright, some batty, that is indeed reminiscent of the dotcom boom. As happened in that boom, most of these ideas will come to naught. But there could just be a PayPal or a Google or a Sun among them.

More traditional companies are also taking an interest. General Electric (GE), a large American engineering firm, already has a thriving wind-turbine business and is gearing up its solar-energy business. The energy researchers at its laboratories in Schenectady, New York, enjoy much of the intellectual freedom associated with start-up firms, combined with a secure supply of money.

Meanwhile, BP and Shell, two of the world’s biggest oil companies, are sponsoring both academic researchers and new, small firms with bright ideas, as is DuPont, one of the biggest chemical companies. Not everyone has joined in. Exxon Mobil, the world’s largest oil company not in government hands, is conspicuously absent. But in many boardrooms renewables are no longer seen as just a way of keeping environmentalists off companies’ backs.

Some people complain that many existing forms of renewable energy rely on subsidies or other forms of special treatment for their viability. On the surface, that is true. Look beneath, though, and the whole energy sector is riddled with subsidies, both explicit and hidden, and costs that are not properly accounted for. Drawing on the work of people like Boyden Gray, a former White House counsel, Mr Woolsey estimates that American oil companies receive preferential treatment from their government worth more than $250 billion a year. And the Intergovernmental Panel on Climate Change (IPCC), a United Nations-appointed group of scientific experts, reckons that fossil fuels should carry a tax of $20-50 for every tonne of carbon dioxide they generate in order to pay for the environmental effects of burning them (hence the fears of the power-generators).

So the subsidies and mandates offered to renewable sources of power such as wind turbines often just level the playing field. It is true that some subsidies amount to unwarranted market-rigging: examples include those handed by cloudy Germany to its solar-power industry and by America to its maize-based ethanol farmers when Brazilian sugar-based ethanol is far cheaper. Others, though, such as a requirement that a certain proportion of electricity be derived from non-fossil-fuel sources, make no attempt to pick particular technological winners. They merely act to stimulate innovation by guaranteeing a market to things that actually work.

If the world were rational, all of these measures would be swept away and replaced by a proper tax on carbon—as is starting to happen in Europe, where the price arrived at by the cap-and-trade system being introduced is close to the IPCC’s recommendation. If that occurred, wind-based electricity would already be competitive with fossil fuels and others would be coming close. Failing that, special treatment for alternatives is probably the least bad option—though such measures need to be crafted in ways that favour neither incumbents nor particular ways of doing things, and need to be withdrawn when they are no longer necessary.

The poor world turns greener too

That, at least, is the view from the rich world. But poorer, rapidly developing countries are also taking more of an interest in renewable energy sources, despite assertions to the contrary by some Western politicians and businessmen. It is true that China is building coal-fired power stations at a blazing rate. But it also has a large wind-generation capacity, which is expected to grow by two-thirds this year, and is the world’s second-largest manufacturer of solar panels—not to mention having the largest number of solar-heated rooftop hot-water systems in its buildings.

Brazil, meanwhile, has the world’s second-largest (just behind America) and most economically honest biofuel industry, which already provides 40% of the fuel consumed by its cars and should soon supply 15% of its electricity, too (through the burning of sugarcane waste). South Africa is leading the effort to develop a new class of safe and simple nuclear reactor—not renewable energy in the strict sense, but carbon-free and thus increasingly welcome. These countries, and others like them, are prepared to look beyond fossil fuels. They will get their energy where they can. So if renewables and other alternatives can compete on cost, the poor and the rich world alike will adopt them.

That, however, requires innovation. Such innovation is most likely to come out of the laboratories of rich countries. At a recent debate at Columbia University, which The Economist helped to organise, Mr Khosla defended the proposition, “The United States will solve the climate-change problem”. The Californian venture capitalist argued that if cheaper alternatives to fossil fuels are developed, simple economics will ensure their adoption throughout the world. He also insisted that the innovation which will create those alternatives will come almost entirely out of America.

As it happens, he lost. But that does not mean he is wrong. There are lots of terawatts to play for and lots of money to be made. And if the planet happens to be saved on the way, that is all to the good.

Robots

Nothing to lose but their chains

Jun 19th 2008 | MUNICH
From The Economist print edition

Robots are getting cleverer and more dexterous. Their time has almost come

AFP

TITAN is a bit of a hulk. It can lift a BMW into the air with just one arm, swing it around and then set it down again in exactly the same spot with barely a quiver. Moving cars is a piece of cake for the world's strongest robot. Built by KUKA, a large German robot-maker, Titan lifts 1,000kg and with its arm extended is as tall as a giraffe. It works out by moving huge concrete structures, steel-castings and pallets loaded with glass.

At just 1.4 metres in height, Partner Robot is a wimp—but its talent is versatility, not strength. Made by Toyota, Partner Robot is humanoid. Rather than being bolted to the floor like Titan, it can walk on two articulated legs. One version can even run a little. Instead of a single giant limb, it has two arms each with four delicate fingers and a thumb. With a violin tucked under its chin, Partner Robot can make a decent fist of the tune to “Land of Hope and Glory”. If you give Partner Robot a shove, its sense of balance is good enough to stop it from falling flat on its expressionless face.

As different as these two machines are, they share a common ancestor: the industrial robot. The first factory robots appeared in the 1960s. They could do only simple, monotonous and mundane things, like moving objects from one production line to another—they were drudges, like the slaves Karel Capek described in 1920 in the play that coined the term from the Czech word robota, or “forced labour”. By the 1990s factory robots had become adept at cutting, milling, welding, assembling and operating warehouses. The cost of industrial robots has also fallen sharply against the cost of people (see chart), which has helped to boost their numbers to more than 1m worldwide. Most of them are built in Europe and Japan, with about half at work in Asia.

Today, thanks to the relentless increase in the power of computing, the latest robots are being fitted with sophisticated systems that enable them to see, feel, move and work together. Robot engineers call this “mechatronics”: the union of mechanics, optics, electronics, computers and software. Some factory robots are now smart enough to be released from their safety cages to work among humans. And as they become cleverer and more dexterous, they are starting to move from factories to offices and homes.

A robot is defined not by its appearance, but by how it is controlled. The more automated it is and the more it can determine its behaviour, the more likely it is to count as a robot. Many single-function service robots are already familiar. They could be vacuuming the floor, cutting the grass or guarding your property while you are away. In some clinics transport robots ferry around paperwork and medicine; or they may be cleaning the office windows. Thousands of robots are also enrolled in the armed forces where they defuse bombs, fly reconnaissance and attack missions in Iraq and Afghanistan, and meander under the sea. They do not look at all human: most are blobs on wheels or, if they are airborne, they may look like insects. But they are robots nonetheless.

Partner Robot is a guess at what a multi-skilled service robot may one day look like, but for the time being it lives in a laboratory. There is a lot of work to do before it and other humanoid machines, like Honda's ASIMO, can be sent to earn their living in the outside world. Even now, humanoid robots greet people or guide them through exhibitions, but they are curiosities rather than something for people to buy and use at home. Eventually, advanced humanoid robots will escape from the laboratory. Indeed, Toyota and Honda expect domestic robots to become a huge market in the future, with machines working as a family helper.

Until humanoid robots are mass produced, robotic blobs, arms and devices that resemble spiders will pave the way. A lot more of these are coming to work in offices and homes, and some will do more than one thing. That, at least, was the message broadcast loud and clear last week at Automatica, a two-yearly robotics trade fair held in Munich. Among a bewildering array of robots that can now do most jobs in a factory there were also machines that could fly, fetch, carry, talk and even perform surgery (see article)—a far cry from the factory drones of 50 years ago. Four trends were on show: robots are rapidly becoming more responsive, cheaper, simpler to program and safer. Take each in turn.

See me, feel me

Aptly for Munich, home of the Oktoberfest, the fair introduced Roboshaker, an automated bartender, created by PAAL, a German company that specialises in packaging systems. Roboshaker, based on a small robot made by Japan's FANUC, can mix a fair cocktail and clear up afterwards. Whenever it picks up a can of drink to add to the ingredients, it examines the lid with a camera so that it can work out where to find the ring-pull. PAAL knows very well that Roboshaker is not about to replace the mädchen serving armfuls of frothing beer. Its job is to demonstrate just how much more capable robots become when they have machine vision.

Vision gives robots the power not only to do more in factories, but also to spread into other industries, such as the food and drinks business, which struggles to find people to do lots of boring, repetitive and unpleasant jobs. Robots with machine vision check to see that bottles and jars are filled to the right level, that the tops and caps fit, that the right labels are stuck on (and neatly, mind). They can recognise and sort pretty much anything extremely accurately and rapidly. Robots put chocolates into a box, sort apples, make salads and wield knives in chilly abattoirs, butchering carcasses without having to take a rest or visit the toilet. Robots even work in bakeries, slicing cakes—because they are more accurate than people and if you make thousands of cakes a day, all those wasted crumbs add up.

Robots are also gaining a sense of touch. Sensors can analyse the surface of materials and, using the amount of resistance they show, work out the force to apply to an object. Giving robots touch allows them to be gentle and to handle things that come in many shapes and materials. Different grippers may be needed for different jobs, and instead of using several robots, some machines now automatically swap hands; for instance choosing flat paddles to lift a box onto a production line and then hands with fingers to pick up small things to put into the box.

Robots need this flexibility now that production managers are having to cope with increasingly varied product lines in their factories. Even the car industry, which pioneered factory robots and which still accounts for some 60% of their use, now makes different models on the same assembly line. The carmakers want to tailor each vehicle to a customer's order, so they are buying robots that can recognise different models and adapt accordingly.

Then there are more ingenious ways of helping robots navigate their surroundings. Even though the arms of industrial robots can twist and turn like a contortionist, they have limitations. When spot-welding, for instance, a robot has to touch the metal with an electrode. This can be awkward inside complicated structures such as the shell of a car. Lasers, however, can be aimed to weld a join from a distance. Comau, an Italian robot specialist, now produces a 3D remote-laser welding system that helps make the new Fiat 500. It transmits a laser beam through an optical cable to a robot, which angles lenses and mirrors in the end of its arm to aim the laser towards the parts that need welding. Using a laser, the robot can make highly accurate welds and position itself for each one a lot faster than it could if it were spot-welding in the normal way.

Big, sophisticated robot systems used on car-production lines can cost millions of dollars. One reason for the high costs of automation in the past is that the price of a robot could sometimes count for only a quarter of the total cost of installing and maintaining it, according to Martin Hägele, who heads SMErobot, a European Union-backed initiative to develop robots for small and medium-sized companies. But now costs are coming down. Robots are continuing to get cheaper—a medium-sized robot able to stack goods onto pallets now goes for about $50,000. And the cost of installing and maintaining them is falling as they become better adapted.

“Some companies think robots are too big, too costly and can only be justified with high-volume manufacturing,” Mr Hägele says. “But robots can now be made that are flexible and much quicker and easier to program.”

The falling cost of computing power makes it practical to give robots features like vision, touch and awareness, says Charlotte Brogren of Sweden's ABB Robotics. The producers that are part of the SMErobot initiative are starting to make light robots small enough to sit on a workbench. When the job is done, they can be picked up and moved somewhere else. That may appeal to carpenters and small engineering firms.

Different sorts of low-cost robots are also emerging that do not look at all like the bulky beams of factory robots. This type of robot contains rigid frames and tubes that use linear motors to slide and swing tools into position for welding, cutting, gluing and assembly. The robot can easily be taken to bits and moved to the next job in another part of a factory.

Such robots are useful in foundries that cut and grind components. These processes often have to be done by hand, because production volumes in small firms are too low for automation. They are expensive, because the law protects workers from the long-term injury caused by vibrations, restricting the hours they can work. The new frame-type robots are flexible and cheap enough for smaller foundries to buy, reckons Peter Haigh, in charge of R&D for Castings Technology International, a British consultancy. “When you have installed robots, you also tend to design things to use them more effectively, which increases their return on investment.”

A lot of effort is going into making robots easier to program. “If we want to sell more robots, we need to make robots easier to use,” says Jürgen Schulze-Ferebee, of KUKA. His company was one of the first to introduce PC-based programming, instead of the specialised code that only the engineering departments of big firms could understand. Some robots are also set up from hand-held devices called “pendants”, which can often program more than one robot at the same time. Robots are getting better at co-operating with each other: in some car plants a big robot now lifts a small one inside the vehicle to assemble components.

Robots are also learning how to understand direct instructions. Some can be “led by the nose”—when an operator moves the arm of a robot around to show it what to do. The software is intuitive, so the robot can describe a perfect circle, say, if the operator shows it just a few points. Some robots also respond to speech.

Obey the law

If robots are to be widely used in offices and homes, they must be safe. They need to learn Isaac Asimov's first law of robotics: a robot may not injure a human being or, through inaction, allow a human being to come to harm. Many robots today are treated like wild animals, caged behind security fences. The working area is often called a robot “cell”, and nobody can enter it until the machine is switched off. This is for a good reason: a heavy, blind robot arm swinging heedlessly from one position to another could kill anyone in its path.

AFPHighly strung

Making robots safer means giving them more sense of their environment. If the doors to their cells open and someone wanders in they must slow down or stop. Vision and touch are improving fast enough for the cage soon to be removed.

At that point, robots could help a carpenter, or an assembly worker on a production line. Toyota already uses a partly automated robot to lift a 50kg dashboard into a car, which enables a single human worker to position and install it. “One of our goals is to move robots from the factory to the home without any safety fence,” says Toru Miyagawa of Toyota.

The next task will be to write programs that meet Asimov's second law—that a robot must obey orders given to it by human beings, except where such orders would conflict with the first law. The third law asks a robot to protect its own existence so long as that does not conflict with the first or second law. When robots are safe and aware of their surroundings, they will start to encroach on complicated, unstructured places such as offices and houses. Eventually, sophisticated multi-task service robots should be able to comply with all three of Asimov's laws and fulfil many of science fiction's promises.

These service robots may be humanoid—after all, they will be working in an environment designed for humans. But then again, many may continue to assume entirely different forms. As with industrial robots, the first service robots to enter production will be shaped by their job.

For instance, it makes sense for a robot that carries someone to look like a wheelchair. A robot chair could be told where to go. It would know how to steer itself without banging into anyone. Later this year Toyota aims to put two-wheeled robotic chairs, able to stabilise themselves, into a Japanese shopping centre and some of its company hospitals. They look a bit like large Segways.

A few other service robots are already making their way into the wider world, and they do not look human either. Care-O-Bot is a single-armed robot that rolls along on spherical wheels. It is a butler, fetching and carrying, working appliances and making telephone calls. It is built by Germany's Fraunhofer Institute with parts from SCHUNK, a robotics specialist, and is the type of service robot that is closest to production. Care-O-Bot can sidle up to Roboshaker, fetch a drink and serve it on a silver salver. But, if you value your ears, don't ask it to play the violin.

http://isgwww.cs.uni-magdeburg.de/sim/alumni.html

http://www.acp-it.com/http://www.acp-it.com/

Name	Degree	Date of Graduation	Thesis		Where did they go from here?	What is he/she doing there?
Heike Schliefke	Dipl.-Ing. CV	October 2002	Visualisierung von Simulationskonzepten in einer Game Engine	pdf	Institut für Sportwissenschaft (ISPW), OvGU-MD	Research and teaching assistent
Arno Krüger	Dipl.-Ing. CV	October 2002	Integration einer Simulationsumgebung in eine Game Engine	pdf	Institut für Simulation und Graphik (ISG), OvGU-MD	Research and teaching assistent
Daniel Sommer	Dipl.-Inform.	April 2003	Entwurf und Implementierung eines modularen und erweiterbaren Analysewerkzeugs für erweiterte Fehlerbäume		pure systems	Software Engineer
Claudia Isensee	Dipl.-Inform.	August 2003	Aggregationsstrategien für ein Multilevel-Verfahren zur Lösung von Markov-Ketten	pdf	Institut für Simulation und Graphik (ISG), OvGU-MD	Research and teaching assistent
Peter Celler	M.Sc. CV	May 2004	Development of a De-Bottlenecking Optimization Algorithm for an Automobile Manufacturing Process		Start-up Firma in Vancouver, Canada	Mechanical Engineer
Stephan Finn	Dipl.-Ing. CV	May 2004	Quantitative Analyse erweiterter Fehlerbäume mit nichttrivialen Basic Events		DaimlerChrysler Research Center, Stuttgart	Simulation and Development Specialist
Prasanna Balaprakash	M.Sc. CS	May 2004	Pre-processing of Stochastic Petri Nets and an improved Storage Strategy for Proxel Based Simulation	pdf	IRIDIA, Université Libre de Bruxelles	PhD Student
Iris Zollfrank	Dipl.-Inform.	September 2004	Kontinuierliche Optimierung für Simulation: Verfahren und Implementierung in eM-Plant	pdf	SimPlan AG (Office Regensburg)	Project Manager (Simulation)
Fabian Wickborn	Dipl.-Inform.	November 2004	Entwicklung eines erweiterten Proxel-basierten Petri-Netz-Simulators	pdf	Institut für Simulation und Graphik (ISG), OvGU-MD	Research and teaching assistent
Andrea Mayer	Dipl.-Ing. CV	December 2004	Automatische Steady-State-Erkennung und Genauigkeitsbasierte Terminierung für das Simulationswerkzeug Expect		Stryker Navigation, R&D, Freiburg	Software Engineer (navigierte Operationssysteme)
Christin Leiffert	Dipl.-Ing. CV	January 2005	Optimierung der internen Logistik einer Fertigungshalle für Aggregatmontage in der Automobilindustrie mittels Simulation.		iSILOG GmbH, Bühl (Baden-Baden)	Projektingenieurin für Materialflusssimulation und Logistikplanung
Ingo Bischof	M.Sc. CS	January 2005	Entwicklung einer Simulationsumgebung zur Betriebsanalyse und Demonstration des Betriebsleitsystems VICOS OC 100®		Siemens AG in Braunschweig, Bereich Tranportation Systems	Projektingenieur
Hauke Hansen	Dipl.-Ing. CV	February 2005	Entwicklung eines diskreten Optimierungsbausteins für das Simulationswerkzeug eM-Plant		SimPlan AG (Maintal)	Project Manager (Simulation)
René Chelvier	Dipl.-Ing. CV	April 2005	Modellierung und Visualisierung von Kenngrößen komplexer Projekte		Zephram Ideenfabrik	Vorstand / Idea-Engineering
Benjamin Rauch-Gebbensleben	Dipl.-Ing. CV	June 2005	Optimierung eines Produktionssystems bei der Volkswagen AG mit Hilfe der Anlagen- und Logistiksimulation	pdf	Institut für Simulation und Graphik (ISG), OvGU-MD	Research and teaching assistent
Sangeetha Sivaprakasam	MSc. CS	August 2005	Experimental Comparison of some Discrete and Continuous Phase Approximation Methods		VIRAJ LLC, Kentucky, USA	ORACLE and JAVA developer
Lakshmi Dhevi Baskar	MSc. CS	August 2005	Simulation of Fluid Stochastic Petri Nets Using the Proxel-Based Approach		TU-Delft, Niederlande	Research area: Multiagant control / Intelligent vehicles for traffic and transportation management
Thomas Simon	Dipl.-Inform.	September 2005	Anwendung des Hidden Markov Modell-Ansatzes auf die Proxel-basierte Simulation	pdf	Dr. Schniz GmbH / SimPlan AG, München	Projekt-Ingenieur für Simulation
Jana Görs	Dipl.-Ing. CV	September 2005	Entwicklung eines Werkzeugs zur computergestützten und kollaborativen Ideengenerierung	pdf	Zephram Ideenfabrik	Vorstand / Idea-Engineering
Anika Horlemann	Dipl.-Ing. CV	September 2005	Entwicklung einer standardisierten und automatisierten Erfassung und Auswertung von Taktzeitschwankungen zur Verfügbarkeitsberechnung von Anlagenkomponenten im Karosseriebau bei der BMW Group		BMW Werk Leipzig, Abteilung SImulation	Prozessberater / Simulationsexperte im Bereich Ablaufsimulation - Abteilung Logistik
Marcus Müller-Dornieden	Dipl.-Wirt.-Inform.	November 2005	Design und Implementation einer Optimierungsschnittstelle für stochastische Modelle	pdf	Vattenfall Europe Information Services	Trainee
Anne Goldammer	Dipl.-Ing. CV	Februar 2006	Ein Software-Werkzeug zur Lösung wiederkehrender Ideenfindungsaufgaben unter Berücksichtigung von Aspekten der kognitiven Psychologie.		icubic AG	Software Entwickler
Stefan Knoll	Dipl.-Ing. CV	Februar 2006	Die visuelle Unterstützung von Teilen des allgemeinen Ideenentwicklungsprozesses durch ein Softwaretool zur strukturierten Erstellung von Ideen	pdf	Institut für Simulation und Graphik (ISG), OvGU-MD	Research and teaching assistent
Anja Hanitsch	Dipl.-Ing. CV	Februar 2006	Optimierung des Produktionssystems für Lenkungen bei der Volkswagen AG mittels Anlagen- und Logistiksimulation	pdf	iSILOG GmbH, Hannover	Projektingenieurin für Materialflusssimulation und Logistikplanung
Rebekka Brandt	Dipl.-Ing. CV	Februar 2006	Proxel-basierte Simulation von Stochastischen Reward-Netzen durch Betrachtung Reward-relevanter Zustände	pdf	Syskoplan AG, cm4 GmbH Gütersloh	System-/­ Organisations­beratung und Softwareentwicklung
Kristina Dammasch	Dipl.-Ing. CV	Juni 2006	Umsetzung des PECS-Referenzmodells zur Abbildung psychosomatischer Prozesse in der Simulation von Personenströmen und Vorbereitung der Integration in das Simulationstool SimWalk		BMW AG, München	IT-Prozessberater
Wolf Brüning	Dipl.-Ing. CV	Oktober 2006	Creativity Support Tools: Steigerung der Effizienz durch Reduzierung von Produktionsverlusten am Beispiel von Netstorming 2.0	pdf	Travelping GmbH in Magdeburg	Product Marketing Manager
Karsten Dietrich	Dipl.-Ing. CV	November 2006	Entwicklung einer Modellstruktur mit integrierter algorithmischer Optimierung der Parameter am Beispiel einer Lagersimulation		Start-Up-­Unternehmen	Existenzgründer als Software Engineer
Hannes Köberle	Dipl.-Ing. CV	Dezember 2006	Analyse und Implementierung von Strategien zur Bestimmung geeigneter Schrittweiten für die proxelbasierte Simulation von stochastischen Modellen		icubic AG	Software Entwickler
Lars Kägebein	Dipl.-Inform.	April 2007	Design und Implementierung einer Applikation zur verteilten Berechnung aufwendiger Aufgaben unter Nutzung von Peer2Peer Technik
Ariane Weber	Dipl.-Ing. CV	September 2007	Mehrkriterielle Verfahren zur Selektion und Bewertung von Ideen in Group Support Systemen	pdf
Patty Gadegast	Dipl.-Ing. CV	September 2007	Kalliope, Ontology-based Restructering of Knowledge to Support Idea Generation	pdf
Marcel Strzeletz	Dipl.-Ing. CV	Oktober 2007	Erzeugung interaktiver 3D-Visualisierungen von Ablaufsimulationen		Audi AG	Planer für Produkt- und Prozesstechnik
André Brahmann	Dipl.-Inform.	Oktober 2007	Untersuchung der Auswirkungen realitätsnaher Störprofile von Fügeprozessen auf den Gesamtnutzungsgrad von Simulationsmodellen im Karosseriebau Dingolfing		Institut für Automatisierungstechnik, Helmut-Schmidt-Universität Hamburg	Research and teaching assistent
Britta Becker	Dipl.-Inform.	Oktober 2007	Analyse, Bewertung und Optimierung von Reparaturlinien zur Instandsetzung von Turbinenschaufeln ziviler Flugzeugtriebwerke mit Hilfe der Materialflusssimulation		iSILOG GmbH, Hannover	Projektingenieurin für Materialflusssimulation und Logistikplanung
Martin Hörning	Dipl.-Ing. CV	November 2007	Konzipierung, Implementierung und Evaluierung eines ThinXel-basierten Group Support Systems	pdf	Igosys IT-Service GmbH in Magdeburg	Senior Developer / Teilhaber
Anika Gerdes	Dipl.-Wirt.-Inform.	November 2007	ThinXel und ThinkLets für Group Support Systems: Definition, Spezifikation und Beispiele	pdf
Wenjing Xu	M.Sc. CV	April 2008	Application of Proxels to Queuing Simulation with Attributed Jobs	pdf
Sebastian Gralher	Dipl.-Ing. CV	April 2008	Entwicklung eines Bausteinkastens für die Durchführung von Simulationsstudien im Gesundheitswesen am Beispiel des Klinikums Esslingen		SimPlan AG, München	Projekt-Ingenieur für Simulation
Susan Spitzner	Dipl.-Ing. CV	Mai 2008	Untersuchung des Einsatzes von agentenbasierter Simulation zur Darstellung von Werkern in Produktionsszenarien	pdf	acp-IT, Stuttgart	IT-Ingenieur