In a world of constant, rapid digital transformation, one industry has struggled to evolve: construction. With all the gains made in efficiency and productivity, what’s holding the construction industry back?

Brian Potter is a senior fellow at the Institute for Progress and author of the book, The Origins of Efficiency which charts the history of production efficiency, examining the great leaps forward with inventions like penicillin, the light bulb, and automobiles.

Brian joins Greg to share his experience in the construction industry that prompted his research into productivity and why construction productivity appears flat compared with manufacturing and agriculture. They also discuss distinctions between labor productivity and overall efficiency, the central role of scale and fixed costs, why tacit knowledge makes process transfer hard across plants and countries, and political obstacles such as guilds and unions resisting automation, including AI.

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Episode Quotes:

A factory is like a big sociotechnical machine

16:55: A factory is like a big sociotechnical machine where some of the capability lives in the machine, and a lot of it lives in, like, the processes that have been implemented and the heads of the people that are working on the line and know exactly what they have to do to make this work effectively. And it all kind of works together as one uniform thing. A lot of that is, like, not necessarily written down any place. It's either in this knowledge of these guys' heads, it's not written down, or it's, like, an emergent property of how all these things kind of work together, and it's very hard to decompose that and transfer it to a new place. It's often quite difficult to do that.

Has scale been the primary driver of efficiency since the Industrial Revolution?

08:42: Scale is a really big part of it for a lot of reasons. One is that just scaling effects are very powerful on their own. And then two is that scaling actually ends up being like a gating mechanism for a lot of other efficiency improvements in the sense that a lot of other efficiency improvements that you might implement need some sort of level, need some sort of scale, to be able to deploy them because they operate like large fixed costs.

What is the genesis of “The Origins of Efficiency”

05:59: To understand why construction is so hard to make more efficient, I need to understand what other industries are doing to get more efficient. What strategies are they employing? And then I could understand why those strategies don't work in construction or whatever.

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