The Robots are Coming!

Dear Reader,

The robots are coming.

Morgan Stanley has been putting out a series of research reports on this.

One of them caught my attention, and I’ve been processing it for the past couple of weeks.

So I figured I’d share it with you.

One line really struck me.

“Talking about the world before robots is like talking about the world before electricity.”

Think about how much electricity changed our world.

Lights. Televisions. Batteries.

There’s a before and an after.

Morgan Stanley is imagining the robotic revolution changing our environment that much.

Why This Time Is Different

Robots have been around for a while, so it’s easy to dismiss them.

General Motors put the first one in its New Jersey plant in 1961.

They were building cars with robots back then.

It’s like lasers.

You hear another laser story and you think, give me a break.

But there are two reasons I know robots are going to be big this time.

Number one, AI has changed the game.

Number two, the funding is going there now.

You can see the tidal wave of money going in.

There’s going to be a BC and AD way of looking at this.

Before AI, robots could only do simple, predictable, repeatable tasks.

Pick up a box here, move it over there.

A factory of robots moving something down an assembly line.

Now, with AI, they can process their environment.

Two Ways to Train a Robot

Right now there seem to be two models for training them.

The first is a foundation model.

You take AI that’s already trained on a massive amount of data and plug it into the robot.

Think of taking ChatGPT and putting it in a body.

The second is a world model.

It starts with data and information, but then it interacts with the world and learns.

Cause and effect.

It reminds me of my daughter when she was a baby.

The good old days.

She was in her high chair, and I’d feed her a little spoon at a time.

One day she picked up a little cup of orange juice and looked at it.

Then she turned it over, and it all went on the floor.

At first I got upset.

How dare you?

Then I realized she was learning physics.

She didn’t know that’s how gravity works.

You come onto this earth, and God gives you the gift of life.

Then you have to learn how to interact with things.

You learn what’s dangerous, what could hurt you, what’s good, what gives you pleasure.

That’s what a world model does.

It learns by interacting.

How Big Is This?

Morgan Stanley also asked how big the total addressable market is.

They start with a global labor market of 4 billion people.

They estimate a robot costs about $10,000 per worker, not counting recurring revenue.

That makes a $40 trillion labor market.

I don’t know that all of those workers get replaced.

So their more realistic forecast is an AI robotics market reaching $25 trillion of annual product revenue by 2050.

And the robots themselves aren’t the only thing that explodes.

Think about what goes into one.

Cameras. Lidar. Radar. E-motors. Bearings.

Reducers. Analog and AI semiconductors. Rare earth magnets. Batteries.

We talked about some of these the other day.

By 2050, Morgan Stanley forecasts the robot bearing market multiplying 200 times.

Rare earth magnets, 480 times.

Batteries, 1,500 times.

AI compute capacity, 40,000 times.

And you wonder why the Mag Seven is spending so much money.

Why are they doing all this compute?

They see the future, they know the money is going into it, and they’re building for it.

Nvidia is.

Tesla is.

They’re talking openly about how they’re going to train their robots.

Nvidia talks about its process.

Tesla famously talks about cloud compute and inference.

They’re all tooling up for a world very different from the one we’re used to.

How I Knew About Streaming

I’ve seen this movie before.

In the early 2000s, a good friend of mine named Todd collected DVDs and Blu-ray discs.

We bet on it, and we both wrote articles.

His bet was that there would never be online video on demand.

He’d bought all his special editions.

I wrote a counterargument that Netflix would make streaming possible everywhere.

I was right.

How did I know five, six, seven years before it happened?

I was watching what the companies were investing in.

In their annual reports and their capital spending, they were talking about exactly what was coming.

They were saying, this is the future we’re building right now.

It’s the same situation with robotics.

They’re building that future right now.

And it’s hard for young people to imagine.

We old-timers had to go to Blockbuster.

My daughter asks, you used to have to go rent VHS videos?

Yes.

She can’t imagine a world before the internet.

In the same way, it’s hard for us to imagine the world they’re building and investing trillions of dollars in right now.

History books are going to be written about this time.

Mark my words.

The robots are coming.

And these are the three companies leading the future of it>>>

Have a wonderful weekend.

“The Buck Stops Here,”