Happy birthday Ford Model A...celebrating the learning curve

Did you know, on this day in 1903 Ford Motor sold it's first automobile?  Thank you Garrison Keillor and 'The Writers Almanac' for this little gem of information.  If you don't get The Writers Almanac daily email, I highly recommend it and you can see it/sign up for it here.

The Model A sold for $850 in 1903.  It sold fewer than 2,000 cars but that was enough to make Ford profitable.  And, through continued innovation, engineering, scaling and process improvements, Ford was able to bring the price of the basic Model T down to under $350 by 1918. 

This is a simple real world illustration of what economists like to refer to as the 'experience curve' and the notion of cost reduction per unit of production based on learning functions, often classified as 'learning by doing' and 'learning by researching.'

The gist of the experience curve: as cumulative production of some good doubles, cost per unit of production decreases by some percentage.  This percentage is usually referred to as the learning rate or learning ratio.

I recently applied the experience curve to an exiting new technology with great potential as a future fuel for the auto way of life Mr. Ford and the Model T helped build.  I modeled an experience curve for algae biofuel production and scale up in order to quantify potential investments necessary for the technology to reach cost parity with fossil fuel sources of transportation fuel.  I'll share my work in some upcoming posts.  I thought Model A's birthday was a particularly symbolic way to kick things off.