Year: 2018

FBI Seizes Backpage.com

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It appears that the founder’s home has been raided as well:

On Friday, federal law enforcement authorities seized Backpage domain names, including Backpage.com and Backpage.ca.

In addition, the Arizona Republic reported that on Friday morning, law enforcement raided the Sedona-area home of Michael Lacey, a co-founder of the site.

For years, Backpage has acted with impunity as a place that offered thinly veiled online prostitution ads. In December 2016, Backpage CEO Carl Ferrer and his co-defendants beat back a state prosecution in California.

………

However, with the recent passage of FOSTA and SESTA by both houses of Congress, that shield is about to be removed for sites that allow sex work ads once President Donald Trump signs the bill into law. That new bill is aimed squarely at Backpage.

Not fond of bills of attainder, which FOSTA and SESTA come close to, and not fond of the ancillary effects, with sights likes Craigslist terminating their far more benign personals sections.

I rather expect to see these laws, and the seizures and raids, extended into other areas of speech in the not too distant future.

The ACLU agrees with my position.

Yeah, This Is Horrifying

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It turns out that in addition to promiscuously sharing user data with anyone who would pay, Facebook was planning to use health data from hospitals for further refine their profiles of their users:

Facebook has asked several major U.S. hospitals to share anonymized data about their patients, such as illnesses and prescription info, for a proposed research project. Facebook was intending to match it up with user data it had collected, and help the hospitals figure out which patients might need special care or treatment.

The proposal never went past the planning phases and has been put on pause after the Cambridge Analytica data leak scandal raised public concerns over how Facebook and others collect and use detailed information about Facebook users.

“This work has not progressed past the planning phase, and we have not received, shared, or analyzed anyone’s data,” a Facebook spokesperson told CNBC.

But as recently as last month, the company was talking to several health organizations, including Stanford Medical School and American College of Cardiology, about signing the data-sharing agreement.

Let’s be clear about this:  The data would not have been meaningfully anonymized, because you COULD NOT meaningfully anonymize the data.

The data itself would indicate who the individuals in question were, and in fact HAD TO, because otherwise it would serve no use, because it had to be target at SPECIFIC PATIENTS who might, “Need special care or treatment.”

The business plan here was to take the data, merge it with other data to get personalized medical information, and then sell it back to doctors and hospitals.

If that does not chill you, figure that the next step would have been making it available to businesses to allow them to pre-screen applicants to exclude those who would likely have expensive health problems.

Think of it as a FICO score for your life.

Are you horrified yet?

Quote of the Day

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It is not the story of men and women who have a better and deeper understanding of the world than we do. In fact in many cases it is the story of weirdos who have created a completely mad version of the world that they then impose on the rest of us.

—Adam Curtis on the fact that journalism on intelligence has been getting it wrong for decades.

This is undoubtedly true.

Whether Allen Dulles or Lavrentiy Beria, what has characterized the the minds of spies is their perverse view of the world.

Live in Obedient Fear Citizen

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It looks like the Orwellian named Department of Homeland Security is compiling a database of media and “Media Influencers”, which has civil libertarians concerned.

This seems to be rather more extensive that a typical clipping service, which would make copies fof articles about an organization and file them, in the days or yore:

The U.S. Department of Homeland Security wants to monitor hundreds of thousands of news sources around the world and compile a database of journalists, editors, foreign correspondents, and bloggers to identify top “media influencers.”

 It’s seeking a contractor that can help it monitor traditional news sources as well as social media and identify “any and all” coverage related to the agency or a particular event, according to a request for information released April 3.

 The data to be collected includes a publication’s “sentiment” as well as geographical spread, top posters, languages, momentum, and circulation. No value for the contract was disclosed.

 ………

 The DHS wants to track more than 290,000 global news sources, including online, print, broadcast, cable, and radio, as well as trade and industry publications, local, national and international outlets, and social media, according to the documents. It also wants the ability to track media coverage in more than 100 languages including Arabic, Chinese, and Russian, with instant translation of articles into English.

 ………

 The DHS request says the selected vendor will set up an online “media influence database” giving users the ability to browse based on location, beat, and type of influence. For each influencer found, “present contact details and any other information that could be relevant, including publications this influencer writes for, and an overview of the previous coverage published by the media influencer.”

Why does the Department of Homeland Security always make me feel less secure?

Fun With Data Mining

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Some people looked at taxi dispatches around meetings of the FOMC comittee meetings at the Federal Reserves, and found strong evidence that Fed officials are leaking information to large banks during, and immediately after, the blackout period:

Everyone in the financial markets would like to know what U.S. Federal Reserve policymakers are thinking. Will they raise interest rates? Where do they believe that the economy is going? What is their next move, and how will it affect my pocketbook?

In a perfect world, everyone would get an answer to those questions at the same time. But new research from the University of Chicago Booth School of Business finds evidence that suggests Federal Reserve insiders systematically engaged in informal or discreet communication with the financial sector around the time of important policymaking meetings, increasing the probability of at least accidental leaks.

In the working paper, “What Insights Do Taxi Rides Offer into Federal Reserve Leakage?” Chicago Booth PhD candidate David Andrew Finer analyzed more than 500 million New York City taxi rides and finds “highly statistically significant evidence of increases in opportunities for information flow” between the Federal Reserve Bank of New York and major commercial banks around Federal Open Market Committee meetings.

“These inferred meetings might pertain to monetary policy or could be social in nature,” said Finer. “The data don’t tell us. What we do know is that every interaction entails the risk that an outside party might gain valuable insights into the Fed.”

………

Since this study captures only New York City yellow taxi rides, Finer said he believes that the results of this study represent the lower end of possibilities for changes in interactions around FOMC meetings and that the actual number of additional occurrences might be significantly greater.

I am shocked I tell you, shocked, that gambling is going on in this establishment.

H/t Naked Capitalism.

Tweet of the Day

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You know I try not to keep up with the latest happenings of ‘the resistance’ but am I to understand now they are protecting the powerless mom & pop business called *checks notes* Amazon from Trump? 💀

— DarkSkintDostoyevsky (@daniecal) April 4, 2018

Yeah, pretty much.

Amazon got where it was from a huge number of subsidies, like not having to collect sales taxes, and has shown itself to be a toxic workplace. (And that’s not considering the tax subsidies that it gets for locating its warehouses, and the spectacle of them shaking down locan and state governments for a satellite headquarters)

If Amazon faces off against Donald Trump, I hope that there is a way that both of them can lose, but if not, I’d have a hard time selecting who I would want to be the victor.

BTW, also read Dave Dayen’s take on this.  He does a good job of explaining all of this.

F-35 Sustainment Challenges Mount As Global Fleet Grows | Defense content from Aviation Week

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What a surprise.

Lockheed-Martin promised that the F-35 would have support costs near that of the far smaller F-16, because of it’s advanced logistics software.

Right now, it looks like it will cost more to operate than the twin engine F-15:


………

This specific problem was resolved quickly, but that is not often the case. Across the F-35 enterprise, operators are struggling with severe maintenance challenges of which the most critical are a spare parts shortage, insufficient repair capacity and excessive glitches in the ALIS logistics system that tracks the health of the fleet. Meanwhile at the production level, suppliers and skilled workers are making mistakes that slow down the manufacturing process before a complete aircraft even comes off the line.

The sustainment challenges are emerging at a pivotal time for the program, with F-35 pilot training ramping up, international deliveries accelerating, and the Navy on track to achieve initial operational capability of its F-35Cs in 2019. As the global F-35 fleet is poised to triple by 2021, government and industry officials are facing mounting pressure to solve these challenges—and fast.

Reports emerged recently that the U.S. Air Force—the F-35’s single largest customer—would be forced to cut as many as 590 F-35s from the overall buy, or one-third of the force, if sustainment costs do not come down. The government-industry team must find a way to reduce operations and sustainment (O&S) costs or F-35 customers will have to make “tough decisions,” Air Force Secretary Heather Wilson said ominously during a recent event in Washington.

The Air Force is working with the JPO to reduce overall O&S costs by 38% over the next 10 years, or about $3.8 billion a year, Wilson says. And in the field, the Air Force aims to get the cost to sustain the F-35 down to that of sustaining a legacy F-16, according to Chief of Staff Gen. David Goldfein.

………

The main F-35A training hubs, Luke and Eglin AFB, Florida, arguably are facing the most immediate challenge as the Air Force grapples with a critical pilot shortfall.

………

But it is not just the training bases that are impacted by the spare parts problem. Overall from January through Aug. 7, 2017, F-35s were unable to fly because they were awaiting parts on average about 22% of the time—more than double the Pentagon’s goal of 10%, according to the Government Accountability Office (GAO).

………

ALIS, the maintenance hub of the F-35 enterprise, was designed to ease the burden on maintainers by increasing automation. But today the system, which is based on a 1995 architecture, actually is adding to their workload.

ALIS has an excessive rate of “false positives,” where the system mistakenly tells the maintainers a certain part is broken. Even more troubling, each service continues to rely heavily on contractor-provided information technology experts, rather than service personnel, to manipulate ALIS’s intricate software and complex databases, according to the subcommittee chairman, U.S. Rep. Mike Turner (R-Ohio).

In the field, maintainers must rely on inefficient workarounds and manual tracking processes when ALIS is not performing as it should, officials say. In some of the Air Force’s maintenance units, for example, airmen are assigned to tackle ALIS glitches as their primary job, says Harris, which was certainly not in the original plan.

(emphasis mine)

Lockheed-Martin developed a tightly integrated system as a way of maximizing their ability to lock in customers to their support services,

So you have a gargantuan mass of interdependent code, and fixing problems is like untying the Gordian knot.

The F-35 is never going to be as cheap to operate as an F-16, the JSF’s MTOW is 65% more than the that of the F-16, but right now, it’s simply too expensive to operate in significant numbers.

A Feature, Not a Bug

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I’m calling bullsh%$. Every time something like this happens, it ALWAYS results in more data collection.

It was policy:

Facebook has been caught archiving videos users thought they had deleted. The New York Magazine flagged the problem to the company last week, after a user downloaded their Facebook archive and was surprised to discover multiple takes of a video they had thought had been discarded at the time the recording was made, years earlier.

Facebook has now apologized for failing to delete the videos, saying “a bug” prevented draft videos from being deleted. It adds that it’s in the process of deleting the content now.

A company spokesperson told us: “We investigated a report that some people were seeing their old draft videos when they accessed their information from our Download Your Information tool. We discovered a bug that prevented draft videos from being deleted. We are deleting them and apologize for the inconvenience.”

They had previously been caught storing unposted status updates, so I am fairly sure that only regret that they got caught.

The Mainstream Wing of the Democratic Party in a Nutshell

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You remember Donna Shalala?

She was in the Clinton cabinet, and then, as president of the University of Miami, she attempted to sabotage a unionization effort by janitors, and now, it appears that she was pulling heavy salaries from the boards of a health insurance company and a real estate developer.

No laws were broken, but this is fundamentally corrupt, and now she is the front runner for a House of Representatives seat in Florida because she is raising big bucks, much of it, I am sure, UnitedHealth and Lennar homes:

Here’s a sentence that perfectly explains the state of Democratic politics in 2018: Former Clinton Foundation chief Donna Shalala, who helped lead a major homebuilder during the 2008 housing crash and also made $5 million after sitting on the board of a massive, for-profit health insurance company, is poised to steamroll a crowded field of Democratic competitors in a race for the U.S. House.

Earlier this week, Shalala announced her candidacy for retiring Rep. Ileana Ros-Lehtinen’s seat representing downtown Miami, Little Havana, and Miami Beach despite the fact that seven Democrats are already battling in the primary, including more than a few solid candidates without huge red flags in their pasts.

Shalala, who declined an interview through campaign operative Fernand Amandi, paints herself as a progressive with deep understanding of how Washington works. But there are big unanswered questions about her time on two corporate boards tied to major crises in American policy.

As Americans debate how to fix a for-profit health insurance system that is both cruel and the most expensive in the developed world, Shalala will have to explain how she profited handsomely from her time on the board of a health-care giant.

After she served as the U.S. Health and Human Services secretary under Clinton, she used that experience to secure herself a gig on UnitedHealth’s board. She wound up accumulating more than 61,000 shares of company stock, which she then sold in 2005 for more than $5.3 million. Shalala has not yet taken a public stance on the issue of Medicare for all, but signs suggest she might ultimately endorse the idea. Regardless, she’ll have to sell voters on trusting a former health-insurance board member to work against for-profit insurance companies.

Even more troubling, Shalala sat on the board of Lennar Corporation, one of America’s largest homebuilders, from 2001 to 2012. Securities and Exchange Commission filings show Shalala earned $113,000 in combined compensation (mostly stock awards) in 2011. To avoid a conflict of interest, the then-University of Miami president left the board in 2012 when Lennar CEO Stuart Miller Was angling to become vice-chair of UM’s board. (He became a UM trustee in 2002.) She left UM in 2015 and rejoined the Lennar board two years later.

During the decade Shalala helped lead the company, Lennar played a major role in fueling the global recession. Most obvious, Lennar overbuilt: The mid-2000s housing boom came, in part, because D.R. Horton and Lennar were buying up every tract of land they could and slapping together houses as fast as they could. Miami-Dade County, in particular, got hammered during the Great Recession. A 2009 county report laid bare the obviousness of the overbuilding problem. County economist Robert Cruz wrote that from 2002 to 2007, the county’s “vacant and for sale” rate spiked by 52 percent, and a particular construction boom from 2005 to 2007 led to an extremely acute vacancy hike just before the economy crashed.

It’s the hypocrisy that rankles.

Between the board engagements, and the speaking gigs to captains of industry as back end payoffs to their political career, is it any wonder that the typical voter does not believe when people like her claim that they will fight for the ordinary person.

When You Put Back Doors in, Crooks Use Them Too

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Law enforcement has insisted on setting up our phone systems so they can use cell tower spoofing devices undetectably to track suspicious actions.

We now have learned that crooks and spies are using the same technologies, and the same back doors, to spy on people:

The federal government has formally acknowledged for the first time that it has located suspected and unauthorized cell-site simulators in various parts of Washington, DC.

The revelation, which was reported for the first time on Tuesday by the Associated Press, was described in a letter recently released from the Department of Homeland Security to the offices of Sen. Ron Wyden (D-Oregon).

“Overall, [DHS’ National Protection and Programs Directorate] believes the malicious use of IMSI catchers is a real and growing risk,” wrote Christopher Krebs, DHS’ acting undersecretary, in a March 26, 2018 letter to Wyden.

The letter and attached questionnaire say that DHS had not determined who is operating the simulators, how many it found, or where they were located. DHS also said that its NPPD is “not aware of any current DHS technical capability to detect IMSI catchers.” The agency did not explain precisely how it was able to observe “anomalous activity” that “appears to be consistent” with cell-site simulators.

The devices, which are also known as stingrays or IMSI catchers, are commonly used by domestic law enforcement nationwide to locate a particular phone. Sometimes, they can also be used to intercept text messages and phone calls. Stingrays act as a fake cell tower and effectively trick a cell phone into transmitting to it, which gives up the phone’s location.

There is no, “Technical capability to detect IMSI catchers,” because DHS, the FBI, the CIA, the NSA, and the rest of the TLAs want to be able to spy and track with impunity, so the difficulty of detection and countermeasures has been designed into these systems.

This is what happens when you put back doors in systems, the bad guys figure out how to use them too.

To quote Leonard McCoy on this one, “”It’s NOT enough! You didn’t care what happened as long as you could hang your trophy on the wall. Well, it’s not on it, Captain, it’s in it!”

This is why we cannot trust, nor should we consider the absolutist demands of our state security apparatus.

So Not a Surprise

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Are you surprised? I’m not:

In the lead-up to this year’s legislative session in Mississippi, supporters of a tougher gang law in the state talked a lot about the need to arrest white people. But in an ironic twist, the Jackson Free Press has learned that everyone arrested under the existing gang law from 2010 through 2017 were African American.

Over the last year, members of the Mississippi Association of Gang Investigators worked to spread the message that not all gang members in Mississippi are African American, Hispanic or another ethnicity. In fact, they warned, many of the state’s toughest gang members are now white, between the growing Simon City Royals, white supremacist groups like the Aryan Brotherhood, and biker “clubs” such as the violent Bandidos, started by a white Marine in Texas in 1966 who would later be convicted of murder.

In August 2017, MAGI told The Clarion-Ledger that 53 percent of verified gang members, a number presumably pulled from the dozens of identified criminal groups in the state, are white. It is a potentially surprising statistic in the state with the highest proportion of African Americans in the nation and that experiences a large amount of media coverage of its black and Hispanic gangs.

………

It is not talked about a lot in the push for an expanded gang law, but Mississippi already has a gang law on the books. The Mississippi Streetgang Act, passed in 2001, targets “three (3) or more persons with an established hierarchy that, through its membership or through the agency of any member, engages in felonious criminal activity.” That is, much like the FBI does with the federal Racketeering Influenced and Corrupt Organizations Act, called RICO, the State can go after a group that conspires together to commit a criminal act. That is different from making it illegal to be part of a gang and thus being held responsible for crimes other members might commit separately, as the failed gang law this session could have done.

But despite MAGI frequently warning that white gang members pose a strong threat in today’s Mississippi, the arrests and prosecutions under the existing street-gang law have only targeted African Americans, State Public Defender Andre de Gruy pointed out to the Jackson Free Press after the expanded gang law failed this session.

The Administrative Office of the Courts confirmed that from fiscal-year 2010 through 2017, court disposition data show that 97 people were processed under current gang law. All of them were black.

(emphasis mine)

The existing law is being used to racially profile, and notwithstanding the protestations of politicians and law enforcement, so would the new one.

What’s more they cannot help but to know this, it is their job, and their constituents cannot help but have a general idea about this, but locking up black people wins votes (NOT just in Mississippi), so more laws target black people.

Rinse, lather, repeat.

And Macedonia Achieves Moral Superiority over the United States

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It is admittedly a VERY low bar, but the Balkan nation has apologized for its role in aiding the torture of Khaled El-Masri over a decade ago.

From the US, who tortured him unmercifully for months, crickets:

The Former Yugoslav Republic of Macedonia (FYROM) has formally apologized to a man it unlawfully seized, held incommunicado, and handed over to the U.S. Central Intelligence Agency 14 years ago, during the secret CIA rendition and torture program which followed the September 11, 2001, attacks on the United States.

Macedonian security personnel detained Khaled El-Masri, a German citizen, at Macedonia’s border on December 31, 2003, and interrogated him in secret for over three weeks. They then delivered him to CIA agents who flew him to Afghanistan, where he was imprisoned for almost four months in inhuman conditions, and then further mistreated him in a notorious CIA facility. In late May, the CIA reverse rendered El-Masri to Europe, and then left him on a roadside in Albania, long after American authorities had concluded that they had mistakenly captured the wrong man.

On December 13, 2012, in a case brought on El-Masri’s behalf by the Open Society Justice Initiative, the Grand Chamber of the European Court of Human Rights found the FYROM in breach of several provisions of the European Convention of Human Rights and awarded compensation of €60,000, which the government subsequently paid.

Now, six years later, in a letter to El-Masri dated March 28, 2018, Macedonia’s minister of foreign affairs, Nikola Dimitrov, has expressed his “sincere apologies and unreserved regrets” for what he described as the “improper conduct of our authorities” in 2004. He also noted the “immeasurable and painful experiences and grave physical and psychological wounds you suffered” as a result.

And the only response of the US, in response to a spectacular bit of incompetence has been to invoke the state secrets privilege in order to prevent his day in court.

Welcome to American exceptionalism.

That sound you hear is Alexis de Tocqueville spinning in his grave at about 10,000 RPM.

Aluminum Tubes Anyone?

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Theresa May stated that the UK chemical weapons establishment at Porton Downs had definitively identified that the “Novichok” poison used against xxxxx was of Russian origin.

Not so much:

British scientists at the Porton Down defence research laboratory have not established that the nerve agent used to poison Sergei and Yulia Skripal was made in Russia, it has emerged.

Gary Aitkenhead, the chief executive of the government’s Defence Science and Technology Laboratory (DSTL), said the poison had been identified as a military-grade novichok nerve agent, which could probably be deployed only by a nation state.

Aitkenhead said the government had reached its conclusion that Russia was responsible for the Salisbury attack by combining the laboratory’s scientific findings with information from other sources.

The UK government moved quickly to make it clear that the prime minister, Theresa May, had always been clear the assessment from Porton Down was “only one part of the intelligence picture”. The comments came hours before an extraordinary meeting in The Hague of the executive council of the Organisation for the Prohibition of Chemical Weapons (OPCW), called by Russia.

Speaking to Sky News, Aitkenhead said it was not possible for scientists alone to say precisely where the novichok had been created.

He said: “It’s a military-grade nerve agent, which requires extremely sophisticated methods in order to create – something that’s probably only within the capabilities of a state actor.”

He denied Russian claims that the substance could have come from Porton Down, which is eight miles from Salisbury, saying: “There’s no way that anything like that would ever have come from us or leave the four walls of our facilities.”

Aitkenhead said: “We were able to identify it as novichok, to identify it was a military-grade nerve agent. We have not verified the precise source, but we have provided the scientific information to the government, who have then used a number of other sources to piece together the conclusions that they have come to.”

So, a downgrade from a certainty to a likelihood.

I’m still trying to wrap my mind around the fact that this was done just before Russia hosts the World Cup, and the fact that neither of the two alleged targets are dead from something that is supposed to be many times more toxic than VX.

I do not know what is going on, but it appears that whatever it is is weird.

Note that weird does not rule out the Russians, but it means that the path to this attack had to take a very strange route.

I Want My Pieces of Paper with Numbers on Them, and a Honda with a Trunk Full of Silver.*

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Sweden is probably further along than any other nation on earth on moving toward a cashless society, and people are starting to get nervous about it:

It is hard to argue that you cannot trust the government when the government isn’t really all that bad. This is the problem facing the small but growing number of Swedes anxious about their country’s rush to embrace a cash-free society.

Most consumers already say they manage without cash altogether, while shops and cafes increasingly refuse to accept notes and coins because of the costs and risk involved. Until recently, however, it has been hard for critics to find a hearing.

“The Swedish government is a rather nice one, we have been lucky enough to have mostly nice ones for the past 100 years,” says Christian Engström, a former MEP for the Pirate Party and an early opponent of the cashless economy.

………

There are signs this might be changing. In February, the head of Sweden’s central bank warned that Sweden could soon face a situation where all payments were controlled by private sector banks.

The Riksbank governor, Stefan Ingves, called for new legislation to secure public control over the payments system, arguing that being able to make and receive payments is a “collective good” like defence, the courts, or public statistics.

“Most citizens would feel uncomfortable to surrender these social functions to private companies,” he said.

“It should be obvious that Sweden’s preparedness would be weakened if, in a serious crisis or war, we had not decided in advance how households and companies would pay for fuel, supplies and other necessities.”

The central bank governor’s remarks are helping to bring other concerns about a cash-free society into the mainstream, says Björn Eriksson, 72, a former national police commissioner and the leader of a group called the Cash Rebellion, or Kontantupproret.

Until now, Kontantupproret has been dismissed as the voice of the elderly and the technologically backward, Eriksson says.

“When you have a fully digital system you have no weapon to defend yourself if someone turns it off,” he says.

………

But an opinion poll this month revealed unease among Swedes, with almost seven out of 10 saying they wanted to keep the option to use cash, while just 25% wanted a completely cashless society. MPs from left and right expressed concerns at a recent parliamentary hearing. Parliament is conducting a cross-party review of central bank legislation that will also investigate the issues surrounding cash. 

I would also add that with a fully digital system controlled by private banks, they could effectively hold a country hostage for a bailout when they need one, and all banking sectors eventually need a bailout.

In fact, when you account for various bailouts, the banking industry has not made a profit throughout its entire existence.

*It’s a very old internet meme, nothing to see here, move along.

Is Tesla Having Its Uber Moment?

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The Bernstein report on $TSLA ‘s manufacturing strategy was the best sell side thing I have read in a long time.

— Donut Shorts (@DonutShorts) March 29, 2018

This Twitter stream is a good primer

People are beginning to notice that Tesla has problems, and that many of them are symptomatic of the dot-com ethos of its founder, Elon Musk.

The most classic example is that of their manufacturing problems, where they are seeing both quality and productions problems, and now an analysis of Tesla’s production plans show that both are a function of its single minded insistence on eliminating the human component:

The robots are killing Tesla.

In a rare win for humans over robots in the battle for labor efficiency, Wall Street analysts have laid down a compelling argument that over-automation is to blame for problems at the billionaire Elon Musk’s electric-car company.

That is to say, the very innovation and competitive advantage that Musk says he’s bringing to the car industry — his nearly fully automated plant in Fremont, California — is the reason Tesla is unable to scale quickly.

According to the Bernstein analysts Max Warburton and Toni Sacconaghi, it’s the robots that can’t pump out Tesla’s highly anticipated Model 3s fast enough. The whole process is too ambitious, risky, and complicated.

From Bernstein (emphasis ours):

“Tesla has tried to hyper-automate final assembly. We believe Tesla has been too ambitious with automation on the Model 3 line. Few have seen it (the plant is off-limits at present), but we know this: Tesla has spent c.2x what a traditional OEM spends per unit on capacity.

“It has ordered huge numbers of Kuka robots. It has not only automated stamping, paint and welding (as most other OEMs do) — it has also tried to automate final assembly (putting parts into the car). It talks of two-level final lines with robots automating parts sequencing. This is where Tesla seems to be facing problems (as well as in welding & battery pack assembly).”

………

 Bernstein adds that the world’s best carmakers, the Japanese, try to limit automation because it “is expensive and is statistically inversely correlated to quality.” Their approach is to get the process right first, then bring in the robots — the opposite of Musk’s.

 It’s not a problem that Tesla, a highly indebted company, can afford forever.

 ………

 So in Musk’s attempt to bring on the robot uprising that will revolutionize how we make cars, he’s burned cash and baked in his own mistakes. If you think about it that way, we are just beginning to understand how much this will cost him.

The dotcom ethos is ship it then fix it, and that if you have a problem, you can always throw a few more servers and few more programmers at this.

So, Tesla has been trying to do something that the auto industry has been trying, and failing, to do for years, and its solution is to throw more hardware at it without addressing the underlying problem.

Very dotcom, and it’s why they continue down their dysfunctional path, because this is how it is done in IT.  (Also why every few months you hear of a data breach)

Here is a money quote from the report, courtesy of Naked Capitalism:

[A]utomation is expensive — and usually proves far less effective, highly inflexible, and creates quality problems further down the line.

  • In welding, mistakes and inconsistences go unrecognized — but the machine powers on and builds cars with the wrong geometry or bad spot welds in key locations. These are only found later — when for instance the windscreen is inserted, or a door re-attached. Have you wondered why Tesla doors don’t align, or hoods don’t fit, or windscreens are prone to cracking? Now you have your answer.
  • In final assembly, robots can apply torque consistently — but they don’t detect and account for threads that aren’t straight, bolts that don’t quite fit, fasteners that don’t align, or seals that have a defect. Humans are really good at this. Have you wondered why Teslas have wind noise problems, squeaks and rattles, and bits of trim that fall off? Now you have your answer.

This is a state of affairs that has the New York Times wondering about its continued viability, and Bloomberg has noted that Tesla bonds are tanking.

Software can facilitate some aspects of operating in the real world, but when the primary activity is operating in the real world, it cannot change reality.

Overselling and under-delivering is a feature, not a bug.