Game Design, Programming and running a one-man games business…

On the visualization of voter approval distribution in Democracy 4

My politics game, Democracy 4, has a user-experience issue. Its not critical, and its less prevalent in Democracy 4 than any of the other games in the series, and I am working on fixing it, but it remains an issue nonetheless. the fact that this issue is based on real world phenomena does not make it any less frustrating for a player who experiences it.

Some background: The game is a ‘run the country simulation’, that models an entire country, and the electorate are represented by 2,000 simulated AI voters. Those voters go through a very complex web of calculations to decide what they think in the years that you are in power, and at election day, they cast their vote either for the player, or for one of the opposition parties. In a two party system, the decision is quite simple, as players who have a . 50% ‘approval’# of the government vote for the player, and the rest vote for the opposition.

During the game, the player can regularly check on how they are doing regarding polling, by checking out a screen that shows two graph lines. One of these is voting intention, and the other is average approval. This is a NEW thing for Democracy 4, because previously we would only show voter intention. The difference between the two is incredibly, incredibly important. Let me explain why.

An individual voter has a fluid measurement of their approval, in that it ranges from 0% (Hardline hatred of the government) to 100% (fanatical dedication and loyalty to the government). However, for most people they likely hover closer to the center. Not many people would sacrifice their lives for, or against a government in a western democracy. So people’s opinions float around. For many, that float is always above 50%, or always under 50%, but depending on how the government is doing, a lot of people might float below and above that line, and pollsters call these people ‘floating voters’.

Here is the problem: Although approval is fluid, voting is binary. On election day, assuming you vote, you vote for the government, or you do not. You don’t vote ‘more’ or ‘less’ for the government. You either ticked the box or did not. Thus, its important to realize the distinction between the two systems of measurement. The graph above illustrates the difference. Voting intentions in blue are basically a binary poll of yes/no on the government. The green line is the aggregate of asking everyone to rate the government on a 1 to 100 scale. These are MASSIVELY different.

Take an extreme example, where everyone in the country thinks alike. The government has been…ok, but a bit corrupt, a bit untrustworthy, but the economy is doing well. On balance, the consensus opinion is that the government rates as 49 out of 100. When everyone is asked in a survey, they give the same answer, so average approval is 49%. Not bad. However, if forced to vote now, everyone would naturally vote for the opposition, so the election result would be 0% votes. Absolute defeat.

Then the next turn (3 months in game time), a surprise event happens. Scientists make a breakthrough in quantum computing, thanks to a science budget you raised 2 years previously. This good news bolsters the stock market, some voters feel a bit more wealthy, and this boosts GDP just a tiny fraction, pushing wages up just a tiny fraction. Everyone in the country is just a tiny bit more satisfied with the government, hardly noticeable. Maybe 2% difference?

Now its election day, and again, if answering a survey people give very similar results to before, but just slightly better. Average approval has nudge upwards just a fraction to 51%. Barely noticeable on the green line. However, the election is again binary, so given their new scores, every single voter in the country votes for the government. An overwhelming landslide of historic proportions. Total electoral dominance. The blue line shoots to the top of the graph!

This is why the two-lines are introduced into Democracy 4, because in theory, this could really happen. A slight change in voter happiness can yield a massive electoral win…or unexpected crushing defeat. And when I have paragraphs of text to explain how it works…this makes sense. The trouble is, I’m not there to give post-election analysis to every player who thinks the game is broken because of a sudden reversal of fortunes…

In practice, this problem is not overwhelming, because the voters in the game are very sophisticated AI models of widely varying people. Voters might be in 10 different voting groups, each at different levels of membership, and are being pulled in many directions at once, as you can see in the focus group screen:

…so in most cases, for most players, at most elections, this does not occur that wildly. But nevertheless, its possible, and a good game would never surprise the player with what seems like an unfair loss, or an unfair win. They have to be able to see immediately what is going on.

Funnily enough, all the information the player needs to understand this is already in the game, its just not necessarily in the right place. For example, I present to you the parties screen:

This represents approval as the Y axis (chart on the right btw…) and plots every single AI voter. Depending how distributed they are, the effect we describe may vary. In my nightmare 49/51% example, every voter is on the same horizontal line just moving up and down. In this case, the voters ARE very clumped, and just below the point of approval where they would vote for me, as this is a 3 party country, and they are tempted by the middle party. Right now, this is dreadful news for me, and awesome news for the middle (blue) party, but given the voters are so similar, if I can shift my policy positions closer to those the voter’s prefer, I should get an overwhelming avalanche of voters tilt my way!

This is also something you can see if selecting the ‘happiness distribution’ button on the ‘Everyone’ voter group. This time its represented on an X axis, where the left is 0 (angry) and the right is 100% (happy):

This is the same game, with the same voter distribution, and as you can see, in this case (start of game for the UK), its pretty clumpy. BTW the color of each dot represents happiness. Those green voters are happy, but they need to be super-green to vote for me, as there are 3 party options.

So all the information is kinda there, but people still don’t understand those wild swings in voting outcomes. As a result I have decided to try and represent it another way, in another position. I think that in general, players are expecting to get all their polling information from that earlier polling screen, so if I am going to represent voter approval distribution I need to do it there. PLUS, ideally I need to show it changing over time, not just a snapshot in time which is how its shown on these two graphs. Here is my current solution:

Same chart as before, but the background is now filled out with some extra information in the form of green blobs. These are presenting the voter approval distribution at each point in the game. The larger the blob, the more voters it represents. Over time, the blobs both move and change size, as the opinions of the electorate change.

The ideal situation for the player is to have substantial big green blobs way above the line, so they represent committed voters who are unlikely to suddenly drop below the line. If you have the green and blue lines above the threshold…BUT… there are large green blobs right on the line… then this represents fickle voters whose opinions might easily shift against you.

In code terms, each turn I’m asking each voter what their approval is, and sticking them in to one of 20 vertical ‘buckets’ of popularity. Each of these is a blob. Then in the chart I’m showing the number of people in each of those buckets by the size of the circle. Its more complex than it sounds because you need to work with circle areas, not radius, and also do some pre-processing to detect the largest blob, so you can then scale everything so the blobs are as large as possible (for legibility) while also being in proportion to each other and thus accurate.

The HUGE challenge is, as ever, not technical but UI/UX related. Does this help? does this make sense? and given that players often do not read tutorials, guides or walls of text, is it conveyed clearly enough just by the phrase ‘approval distribution’? Does the red approval line need its own key to explain what it is? (I think maybe so).

As always I’m interested to hear what people think. There is a complexity cost in adding this (it complicates this graph, potentially distressing newer and more casual players), and I need to be confident that the increased visual complexity is offset by the greater insight for the player into what is happening out there in opinion poll land…

An update on balancing Democracy 4 for longer games

I’ve blogged about this a few times in the past, but basically I use a lot of staring at data and charts to evaluate how well balanced my game Democracy 4 is. Its a ludicrously complex game, and balancing it perfectly, so it plays like chess, is actually pretty much impossible (maybe something for deep mind to tackle next), but its always worthwhile chasing that goal as a more balanced game will mean more replayability, and more player satisfaction, so here we go again :D

The last time I collected stats on the games late game balance was in January and some of the headline numbers are here:

Its pretty clear that there is a problem in that everything gets solved as things go on, and things are too easy in the late game (3 terms on…) so lets look at the data for the current shipped version:

A pretty trivial improvement to be honest. Sure, popularity in term 3 is a BIT harder, but health and education are still pretty much solved problems, and crime is still relatively under control. Unemployment is *not* solved, but this doesn’t seem to be holding people back in either economic or popularity terms :(. Stronger, or more creative measures are called for… But first lets compare the other stats. Old:

and new:

Again, not much change to talk about here. In fact equality has got better! Lets look at the voting stats. Old:

New:

‘Winning’ is an internal hidden measure I use that scales some difficulty-related measures, so the increase there is a *good sign* and shows that some internal hidden difficulty-adjusting systems are working more strongly now./ This seems to have resulted in a bit of a drop in votes in later terms, which is a good thing. Winning with 72% of the votes is still not ‘fun’ but its more fun than winning with 75%. Still… I am being too meek about this.

One statistic of interest is complacency. Its modeled in game based on the happiness of each voter group. If they are massively happy, then complacency creeps in. They take the policy decisions you made for them for granted, and start to expect more. The trouble is, a canny player can keep all the voter groups happy… but not too happy, resulting in an electorate that keep voting for you, because they prefer you to the opposition, without any complacency having an impact…

In the real world, there is definitely a phenomena where people get just ‘sick of’ politicians and political parties. Eventually, the long list of dumb things a specific politician has said, or crisis that happened on their watch, becomes so long that the electorate becomes tired of them, and starts to want change. Here is some data from UK elections:

What I find interesting is that we don’t have many cases where a party wins one term, then gets kicked out. Its almost like once you win an election, the next win is pretty guaranteed, and then it gets a bit harder from then on. The 92 conservative win was pretty narrow, for example.

Obviously there are ‘events’ which influence each election outcome, but it does look like British politics is basically a sine wave, oscillating between center left and center right governments fairly regularly. The US picture is fairly similar:

Basically a regular swing from red to blue and back again, with actually pretty small swings. It really does feel that there is this big block of ‘swing voters’ who are very susceptible to a ‘I am tired of this team, lets back the other team’ mentality.

I guess this could be coded into the game by a steady increase in complacency of the ‘everyone’ group, but that feels a bit hacky. I also think that doing so would really just be papering over the problem, which is more simulation-model based, rather than political. In other words: The player keeps winning, not because the voters are not sufficiently cynical, but because things are actually going really well for them.

In the real world, this is not the case. The US/Germany/UK/Italy have not all collectively solved healthcare, or solved education, or eliminated crime. What has happened is that either the goalposts have moved, or the causes of the problems have mutated, but they are definitely still there.

For example: Mental Health. This is a much bigger deal in 2020 than in 1940, but are we pretending that there were not mental health issues in 1940? of course! but other problems were so bad, we didn’t pay much attention. Gender dysmorphia is not a new phenomena, nor is anorexia, nor is depression, or related conditions, but there is a much stronger focus on these issues now, probably *because* so many other health issues have been improved upon.

The game frankly does not model this. We model education just as badly. Its a 0->1 scale, that never changes, and if you improve education to 1.0, you are done! but the real world is different. The world has become more complex. The understanding of modern economics, modern electronics, modern physics involves a lot more stuff now than in 1950. Go back to when I was at university, and economics was simply macro/micro. Then along comes behavioral economics and we all have to go back to school.

Medicine is another area where the goalposts are in constant motion. As our lifespan increases, and technology advances, the demands on healthcare race upwards too. People who in 1950 would already have died, are now living relatively healthy independent lives….but at a great cost in terms of pharmaceuticals and technology.

I really need to improve my modeling here. Right now, the game *does* have some of this, because for example, technology does boost healthcare demand (by up to 22%), but maybe this needs to be on a curve, and more pronounced. Lifespan also boosts demand, but again, not by much. Maybe this needs looking at, and a review of other similar effects. The only design dilemma is how to represent this. Currently the entire game is coded around a system where voters look at the current state of affairs, and judge it against an arbitrary value like this:

“Healthcare is at 60% so I am 60% happy. When it was 62%, I was 62% happy”

Whereas in reality people probably think:

“Healthcare has fallen 2%. Things are getting worse. I’m voting for the opposition, they might be better?”

I REALLY do not want to change any core mechanics of the game, especially now we are no longer in early access, but I am continuing to think of ways in which to accommodate this phenomena into the way the game already works…

side note: I use WordPress (An absolute trainwreck piece of software btw), and as of the last update, the font it shows in post editing mode is totally different to the one the actual blog uses, with seemingly no way to change or fix this. presumably this is just some stupid new bug introduced by a pointless update I never asked for. Is it too much to ask for software developers at big megacorps to give a damn about quality? The almost weekly complete redesigns of their UI apparently do not trash their users productivity enough, so introducing dumb-ass bugs like this has apparently now become a priority. Absolutely useless…

Why you SHOULD get a smart meter

In the UK, we are in the middle of a smart meter rollout. Basically energy firms keep pestering their customers to get a smart meter. The government is encouraging this. Many people I know are very negative and grumpy about this, probably because they are, in general, cynical about government initiatives, and have a hostility towards electricity companies. Plus there is a ton of silly conspiracy theory bullshit to select from.

Getting a smart meter is involved because you need some space around your existing meter to install it. This means for people like me whose meter was crammed into a box, you have to do a staggering amount of work to make a (free) smart meter install possible. I did it anyway. This blog will explain why.

Firstly…what is a smart meter? Its basically an electricity meter that connects via the phone network to a wide-area-network and can report your electricity usage in half hour segments remotely. This means nobody has to come to your house and ‘read’ the meter. Its also digital (at last) instead of an old fashioned 1950s style monstrosity with a spinning disk and analog readouts… Smart meters are fitted for free by your electricity company. My install was way more involved than that for tedious reasons, not least because I have a solar panel array and also an electric car charger. Thus my setup now looks this complex:

Top left is a fusebox (consumer unit in modern-speak), top right another fusebox (for the solar panels). Middle left is the solar panel generation meter for calculating my feed-in-tariff from the government, the white box to the right is the smart meter, and to the right of that is the black box with the main power fuse for the house. MOST people’s houses have far less complex electrics than this!

Why does the government want us all to have smart reasons? Well there are two reasons. One is talked about, another is fiendishly complex, and you have to do a lot of reading about energy markets and the national grid and talk to solar farm installers to work it out. Lets start with the first reason.

Smart meters make you save energy

This is the official reason we all need one. It sounds like it must be nonsense, but its actually super-true. I’m someone who is OBSESSED with efficiency and knows a lot about energy efficiency, and the smart meter effect even works on me. You get a remote gadget like a tiny tablet that shows you your current energy usage, and how much you have spent so far today. You can also get an app for your phone, which is tons better and displays pretty graphs and goes into a lot more detail, but ignoring that for now the in-home-display unit is actually quite cool.

Why do smart meters come with an In-Home Display? | Blog | Bulb

The display even has a tiny, not-oft-seen icon that lights up to show you when you are exporting power back to the electricity grid, should you be fortunate enough to have solar panels and generating more than you are using. This is an immediate sign that you should charge some laptops or phones or put the dishwasher on :D

Cynically, you might think that just ‘knowing’ how much power you use will achieve nothing, but it really does. We can see the massive spike when we put on an electric heater, and an even bigger spike if I plug in my electric car. If you look at the more fine-grained data on the smartphone app, you can see every time you boiled a kettle. Just seeing the massive difference between using one appliance versus another makes you think. And energy prices having shot up means those numbers are about to get way bigger.

So this reason is all about social engineering. Show people WHEN they are spending most of the electricity and they will make smarter decisions. Dishwashers running half empty are a waste of energy. Leaving an electric heater on when you are not in that room is a big waste of money. As people realize this, they will adapt their lives in subtle ways that reduce their energy consumption.

This is the main reason given, but its only part of the puzzle

Demand shifting and protecting the grid

Almost all western countries electricity grids are the same. There are a few super-huge power stations, normally in coastal areas, or remote areas, then a big fat network of pylons carrying the power to local substations, which then run cables to each house. I missed a few steps there, but generally that is the layout. Also most grids are OLD. population density is higher since the grids were built out, but the layout has remained the same. Until recently its kind of worked ok. Before I explain why its not working so well now, here are some technical details.

The UK electricity grid runs at a certain frequency. Its *roughly* 50 HZ. In fact, there are real-time-websites that let you see the current frequency of the grid. Right now it is 49.965HZ. This is really important. Its important because a lot of electrical equipment, especially really expensive electrical equipment, will absolutely freak out and fail/catch fire/explode if its much above or below that frequency. The frequency depends on the balance of supply and demand.

What that means is, that some organization (in the UK its national grid plc) has to keep turning power plants on and off again, to ensure that supply matches demand closely enough that the energy grid frequency remains within a narrow band. If they are going to fail to achieve that, they have to take drastic action, like closing entire sections of the grid off, in other words a power cut. This is a VERY big deal, so its to be avoided at all costs. How do they manage this?

Its generally not been too bad, because demand for energy is pretty predictable. The national grid checks weather reports, to see what temperatures will be (to determine the need for heaters or fans/air conditioning), predicts that supply, and then schedules power station output to match it. This sounds easy, and it is…for certain types of power. Britain gets about 15% of its power from nuclear, which always runs flat-out, which means the flexibility has to come from other sources. In our case, thats gas-fired power stations, which can be turned on and off fairly quickly.

This has been happening for decades and everything has been fine. What makes it work even in cases of extreme demand is that we also have cables connecting us to France, and other countries that let us export power (rare) or import it (more common). However its starting to get tricky, really tricky, its starting to get unmanageable.

Renewable energy has entered the chat

Renewable energy is awesome. I’m a true believer, I’m even building a solar farm. But it brings challenges. Renewable energy is cheap, and environmentally awesome, but its variable. Some days its cloudy. Some days its windy. This introduces instability into the grid, meaning its MUCH more likely that we sometimes have way too much energy, and other times we have way too little. This can be accounted for and managed…but its introducing huge complexity.

FWIW, the national grid has put in place LOTS of ways to manage this. They all have exciting names and acronyms like ‘Fast Frequency Response’ and ‘Load Shedding’ and ‘Peak Shaving’. Its a whole super-involved ecosystem of trying to manage, in real-time, to keep that demand equal to supply while handling multiple different energy types, and demand spikes, and free-market energy trading systems.

You might think that electricity has just gone up 50% in the UK and that this is a big deal. Haha. You know nothing Jon Snow. Lets look at the real charts behind the headlines, that nobody outside the industry even looks at:

BTW, if you are on a long term fixed price energy tariff, you are paying the equivalent of about 50-60 on that chart. So…. looking forward to a potential trebling of energy prices? maybe even a quadrupling? But although this chart should alarm politicians, its not the one that alarms people trying to balance our grid with renewables. here are some more fun charts:

Electricity is traded in half hour chunks. No idea why, so 48 on the X axis is one day. You can see that the electricity price on the wholesale free market in the Uk yesterday ranged from £-50 to £229.90 per megawatt hour, in a single day. This is NOT at all unusual. This chart is an outcome of some desperate attempts to match demand to supply. Talking of supply:

This is what they are trying to balance. Nuclear is 100% inflexible, and must run all of the time (for economic reasons). Wind and Solar do their thing, and then we try and balance the rest by exporting/importing using the interconnectors. The thing is… we still cant do it, so we need to change the demand as well as the supply, or the whole house of cards will collapse…

Demand Management

If supply is an absolute random number generator, you need to change demand, otherwise we are in trouble. The grid already has systems in place to do this in both directions. You can be paid a regular flat fee by the grid, to agree that if they REALLY need to, they can turn off your electricity. This is for big factories and aluminum smelting plants, which draw huge power. If what you do is super-time-critical, this is unattractive, but for some industries its perfect. Thats load-shedding.

Another method is to create a market for energy storage. This is a real thing. The solar farm I am building will also have a 500kwh battery. Thats like 7 or 8 electric cars. The options available to you when you have battery storage are myriad, and very complex. This is where peak shaving and firm-frequency response come in. Peak-shaving is basically a way of smoothing out a sine wave by storing energy when you have too much, and releasing that energy back when you have too little. Some solar farms or other renewable systems can do this. Its especially helpful for solar farms because typical solar output looks like this over a day:

Thats my solar output yesterday. The thing is…if you scale this up we have a huge huge problem. The problem is this: The electricity grid cannot cope.

Remember my earlier description. The grid is old, and designed for a small number of big phat power stations. Incredibly high power and capacity cables run from sites like Sizewell nuclear power station to big cities like London and Birmingham. This works fine. But the cables that go out to all the smaller towns and the rural locations with wind farms and solar farms? These cables suck. They have no capacity to add further generation. They are ‘constrained’ in energy-industry-speak. Upgrading these cables costs a FORTUNE, and I know that, because I’m making a bank transfer today of £50k as a down-payment on an upgrade to some cables for my solar farm. Even if you are happy to pay, in many cases the grid upgrades are just catastrophically hard to do, and slow to do, and we don’t have time for that. We NEED to add renewable energy faster than we can upgrade the grid.

Save the grid!

In a situation where you cannot upgrade the grid, you are left staring at that solar chart thinking “hmmm…if only this was more predictable…”. Like this:

This is peak shaving. Take off the peaks and fill in the troughs. Its still not a flat supply, but its capped at a much lower level than the natural peak. If that natural peak would overload the grid, then we can still connect our big solar farm, but we use peak shaving to put less of a ceiling on our grid output. Plus the grid loves us…because they get a way less ‘spiky’ energy supply to contend with.

To make it clear: when the chart is red, we are sending some of our power to the battery. When its green, we are draining the battery.

Thats peak shaving. Firm-frequency response is different. Thats when the grid pays you, as a battery owner, to reserve usage of your batteries, with no-warning, if they suddenly need to dump power in it, or to whip that power back if they suddenly need it back. This happens on a VERY short timescale (think seconds or less). This is how they can keep that frequency where it should be.

How does this make me want a smart meter?

What I’m describing there is how renewable energy companies can make money, and how the energy industry is coping with renewables. But this also can affect us. To put it bluntly: we are not, and can not build enough batteries to keep up with the demand for frequency response issues for quite a while. For the foreseeable future, we will need to expand the size of the economy that we can do demand-management on. That means that individual home owners need to get in on the action.

Right now, my electricity company charge me £0.24 per kwh of power. If I want it now, its £0.24. If I want it at 3AM, it £0.24, so I frankly don’t care when I use power I KNOW I have to use.

Luckily I have 3 weapons at my disposal that will allow me, as a smug smart meter owner, to ‘haggle’ with the energy company. I own a dishwasher, a washing machine and… *drumroll* an electric car. I NEED the dishes washed today, the clothes washed today and the car charged over the next 12 hours, but I dont REALLY care the exact time any of this happened. So make me an offer…

Star Trek Minus Context on Twitter: "https://t.co/Svy8TL5am9" / Twitter

I don’t plug my car in every day, it doesn’t need it, but if I knew that I might get an offer of power for £0.01 /kwh at 4am tomorrow, I’ll fill my car up to the max. That suits me fine, and it suits the desperately-balancing grid even finer. Its a huge win-win, and smooths out some of those crazy price spikes. This sort of thing is ONLY possible with smart meters.

I’m about to swap to a different tariff, for EV owners, that gives me nighttime power at 75% off. This suits me perfectly, I’ll schedule the car charging and other stuff to run during those off peak hours. Excellent. Good for me, and good for the grid. And yes…EV owners are a minority for now, but a rapidly growing one. A big EV has an 85-100kwh battery, which represents a HUGE chunk of your electricity consumption. If everyone ends up with an EV, and we can all have the charging times auto-negotiated with the grid, thats a big win.

Notice that this is NOT ‘vehicle-to-grid’, where your car acts as a grid-connected battery. Thats a different, and interesting issues, but we don’t even need that. What we need is just to have ‘smart’ usage of electricity. We need to do localized peak-shaving in our communities so that the draw from each community is smoothed out and manageable.

The need for this is even greater when you consider rooftop solar. In an ideal world, if I’m on holiday but its sunny, my solar panels can charge my neighbors EV or run their dishwasher, without that energy ever needing to leave this village and put a strain on the main trunk-roads of the grid. It CANNOT put a strain on the grid, because the grid is already creaking like crazy.

Climate change is driving us to have more electric cars AND more renewable energy, meaning we demand more from the grid, just as it becomes more unstable. Smart meters HAVE to be rolled out to everyone ASAP, and I decided to get ahead of the chaos and the crush by getting mine early. If you live in the UK you WILL end up with a smart meter, and it will likely save you money. There is no real reason to avoid getting to the front of the queue before the queue explodes in size. It took me 3 months to get mine. Electricity prices have risen dramatically since I applied…

Solar farm development update: panels

I know it seems that there is no progress on my solar farm… but there is. I last posted about it in october, and despite the pandemic and Christmas, there has actually been some progress.

To recap, there is a list of things you need to do in order to build a solar farm:

  • Get planning permission
  • Sign a lease with landowner
  • Get an electricity grid connection quote
  • Order panels and optionally a battery
  • Actually build out the farm

In theory, you would get planning first, and do nothing else, because ALL the other things are super expensive, so if you fail to get planning permission, its all money wasted. However, planning can take months to prepare and maybe 2-3 months to actually get, so that adds 2-3 months at the START of the project. You then may need to wait 6 months for a grid connection, and 3 months for panels to be delivered (given current supply woes, normally easier).

So if you do everything in the right order it could easily end up dragging to over a year from the start before you actually put a single post in the ground on-site.

Frankly, we need to hurry this shit up. There is a reason we now say climate emergency. We need to get extra renewable energy capacity operating right NOW. And also, I hate waiting for stuff, and find the process to be stupidly drawn out, so I am pushing to go faster and faster. As a result here is where we are:

  • Lease is signed at my end (still awaiting final bill from lawyer and countersigned copy.
  • Planning permission has been applied for, and paid for (about £9k….just to APPLY for permission).
  • A grid connection quote was paid for, and we have it, but have not accepted yet (its a six figure sum, will wait for some feedback on planning, if not full permission).
  • Panels got ordered this week.

This is all pretty good progress. Building out the farm will take maybe 8 weeks. I’m hoping to get planning permission on the first attempt, hopefully in the next 8 weeks, so some time in April with any luck. Panels are expected to show up at the start of Q3, so in July.

This means that if we get good planning feedback, we can take the risk of agreeing to the grid connection earlier (maybe March?) and that then starts the clock ticking on that. Even assuming a rapid (ha!) 6 months for that, we will not get a connection until August/September.

This whole project is a minefield of timelines, because its a situation where the actual useful operation of the farm is dependent on the slowest/latest part of the process. No point in having an installed farm with no grid connection. No point in having a connected farm, with no panels. My gut feeling is that we end up with planning permission, panels delivered, everything else delivered, even the battery, and we end up with a farm, sat idle and not connected because we are waiting on the grid.

If you think being charged a six figure sum for some upgraded powerlines would get you super-fast priority, then you would be wrong. Frankly the grid is just not designed to handle this at all, and the companies seem to have no tight schedule enshrined in law to ensure new power generation gets connected on a short timescale.

But anyway…

Progress at last, and it means my spin off energy company is no longer a small side project. We ordered over 3,000 panels, and they are BIG ones (410 watts each), and the total weight is 70 tons. I’m not sure how many truckloads or container loads 70 tons is, but its certainly not trivial.

For those technically interested, the panels are from QCells (South Korean), 410watt. Black (monocrystaline) They are 20.9% efficiency (which is pretty good). After 10 years they guarantee 93.5% output, after 25 years its 86%. This is pretty standard for high quality panels.

I’ll do another update when another chunk of stuff happens, probably when we say yes to the grid connection, or planning goes through. You *can* get a partial refund on a grid connection you agree to, but cancel if everything fails (ie: you only pay for works they have currently carried out). I think agreeing early will be prudent, because I strongly suspect that the connection costs are pretty back-loaded, with real costs not being incurred until workmen are out on site installing new poles and building a substation.

Its 2022. Why you should still buy or hold Tesla stock (TSLA)

I last blogged about this in June 2020. The stock was about $1,000. Its now $937. OMG what happened? was cliff wrong? Nope, there was a 5:1 stock split, and if I check the data, the stock has risen from $187 (adjusted pre split) on that day, to $937 today (in the middle of Ukraine war fears, a pandemic, supply chain and chip shortages, and other geopolitical headwinds no less…). So I feel like my last stock projection on this blog was pretty good. Probably puts me in the top 5% of stock analysts. I should go work at a hedge fund. Haha. No.

So anyway, partly for my own benefit in terms of clarifying my analysis, here is my updated view on tesla, as an investment as of January 2022.

We just had the earnings release last night, and now have full financials for 2021, so its a good time to evaluate the stock. Lets look at some numbers to compare 2021 to 2020:

  • Automotive revenue: Up 73% YoY
  • Profit margins: Up from 6.3% to 12.1% YoY
  • Earnings per share: Up 666% YoY
  • Supercharger Network: Up from 2,564 to 3,476 YoY.

All of this is pretty darned good, given that every other car company seems to be flatlining or declining. Still, Tesla only makes roughly a million cars a year (2021, but with a current run-rate of 1.2million, and guidance of 1.5million for this year), which is peanuts compared to Ford, General Motors, Toyota, so surely the valuation is crazy right?

Actually no.

What matters in terms of being an investor is profit, not car production. If you value Tesla purely as a car company, (and this would be short-sighted), then comparing #units is meaningless. What matters is profit, and tesla somehow have a profit margin of about 29% on each car, compared to 0-5% for most car companies. The average Tesla sells for about $50,000 with no middle-man. Tesla are easily and comfortably making $10k pure profit on every car they sell…

Not only that, but their FSD (full-self-driving) software is now $12,000 per car, with virtually zero marginal cost. Currently only 60,000 owners have the FSD beta, but many more have ordered autopilot, and as that gets rolled out across all countries, and the performance of it improves, the take-rate should climb.

So we are talking here about a company that sells every car it makes, with no advertising budget and no middlemen, a huge backlog of orders, banking $10,000 per car as profit, with the potential for single-click software upgrade of another $12,000 per car. Thats insane.

By comparison, its worth checking out General Motors, who sold 26 EVs in Q4 2021 versus Tesla’s 308,000. (yes 26). Also…every single EV GM has ever made got an urgent battery recall that has wiped out the profit (slim though it was anyway) from every car. To put it bluntly: General Motors have so far not made a single cent in profit on electric vehicles. Oh and GM’s vehicle sales were down 43% btw.

To take another comparison, we have Ford, who actually have a decent EV in the mach-e, but sales are no where close to the model 3 or model Y, and there is no potential software revenue or subscription revenue. Like all the other legacy car companies, Ford leave it up to you to work out where to charge your car on a roadtrip. Tesla not only have the most reliable and largest charging network, its integrated into the cars route-finding, oh and its owned by tesla. So they sell you the car, the autopilot software (as a subscription if you choose), plus potentially the insurance (5 states so far, but expanding rapidly now), and also the fuel.

Imagine a world where all technological development at Tesla mysteriously vanished, and they never innovated again, and cancelled all current in-development vehicles. In this nightmare scenario, you have a company growing its sales of its $55k cars at 50% a year, with $10-22,000 profit per car, decreasing costs per vehicle, an unrivalled charging network and an unrivalled self driving capability. Thats the absolute disaster, apocalyptic scenario.

But then consider the reality:

Tesla has not yet fully rolled out its new line of battery cells (4680s) which mean quicker, cheaper production using dry-battery-electrode systems which vastly reduce required production space. They are just starting to produce cars at Texas with these batteries in a structural pack, which reduces the car weight and cost, boosting profitability and efficiency.

Together with this, they are also switching to using enormous casting machines for the front and back of the model Y, again a huge reduction in required factory footprint (way fewer welding robots), plus higher precision construction (no accumulative weld precision errors), and a lighter, cheaper construction. Again… boosting profits and efficiency even more.

Those two innovations will eventually be rolled to the model 3 and Y at Berlin, Freemont and Shanghai. The only reason they don’t do it now is that the cars are selling so well, and demand is so high, that they cannot yet justify the switchover time to retool the lines. Meanwhile other car companies are shutting down factories and sending workers home.

So the model Y and 3 are about to get lighter, cheaper to make, better range, more profitable.

…and then, we have future products, such as the semi, cybertruck and roadster.

The most interesting statements on last nights earnings call have been totally ignored by the incredibly poorly informed financial press. There were two BIG pieces of news in there which have gone over people’s heads. Firstly: Tesla production is no longer battery constrained. Secondly, they are confident of growing 50% this year in their existing factories, ignoring new ones.

BTW Tesla have completed the initial build out of two massive factories, about to come on-line. They are the biggest and most efficient layouts yet, designed purely to build EVs, with no legacy nonsense. The dry-battery process means the factories output per square meter is way higher than people are expecting, Ditto with casting. Absolutely nobody seems to be prepared for the volume of EVs that will roll out from Texas and Berlin. Tesla are already getting good at efficient production. (Even in old, legacy factories).

…which brings us to batteries. Tesla is the only large car company that takes direct control over its battery manufacturing. They still partner with CATL and Panasonic and probably others too, because their demand for batteries is insatiable, but their new factories are being built with battery production facilities on site. While other car companies are left to the free market to beg for supplies from the big players, Tesla have had gigafactory Nevada running for years already.

In theory, being chip or battery constrained would be bad, because both stop you reaching targets, but frankly if the battery constraint has now faded, that leaves tesla open to start producing real quantities of its semi truck quite soon. The company seems to be going out of its way to avoid mentioning this truck, and quite happy to leave people guessing, but as it is clearly a vehicle that requires more batteries than it does chips, its likely that we will see serious production of the semi sooner rather than later.

People get upset with the CEO on twitter, and err…ok, if thats your investment thesis, you do you, but frankly having a CEO with 77 million twitter followers seems a great way to keep a zero advertising budget. People also fixate on Elons ambitious timelines and obsession with FSD and humanoid robots and doge coin. Thats fine… but its blinding so many people to the fact that tesla is an industrial giant thats accelerating and accelerating. You don’t have to listen to breathless youtubers with backwards baseball caps rapidly spewing hyperbolic bullshit to believe in this company, you can simply look at the financial statements, and try out the vehicles (and comparison shop a tesla versus any other EV).

All the data is right there, in the open. Its like a cash-vending machine that people are walking past and ignoring because Elon said a mean thing once. You do you, but I’ll keep enjoying the profits.

…oh, and by the way, I haven’t even mentioned Tesla energy, or the fact that ICE car bans are rolling out in the next decade, or any EV incentives that Biden may get passes. Those are all extra icing on the stupidly profitable cake. I’ll leave you with a vehicle production chart

(I should probably state this is not investment advice. FFS I am a game developer, not a regulated financial whatever. This is just my opinion. Do your own research. Just because the company has grown 1,500% since I suggested investing does not guarantee future results etc :D)