WEBVTT

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The benefits of voluntary trade are
obvious.

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Suppose this guy has bananas and this
guy

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has oranges. He needs oranges for marmalade
and this guy needs bananas for banana bread.

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They swap-- they exchange. Each guy is
made better off

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through trade. In our last video though we saw
that a key fact about the modern world

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involves more than simple exchange.

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More than merely moving existing things
around. We grew rich by also producing

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more stuff per person. Say you're cooking
hamburgers and fries for your family. It

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might take an hour to

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prepare the meal because you
individually do everything. You

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start the grill you cook burger chop the fries slice the vegetables--

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on and on and on. Now look at how a burger joint
makes hamburgers.

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Each worker has a specific job in the
chain of production that serves

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burgers to its customers. Each worker
is specialized.

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This specialization, what Adam Smith
called the division of labor,

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makes individual workers more productive. No more lost time switching between

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tasks.

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Plus as a worker concentrates his effort
he gets

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better at doing the task at hand. But
it's not just the specialization of workers

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that increase output.

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It's also the development of specialized
tools

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that modern workers use. The burger joint
has tools to slice potatoes

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to cook burgers and to fry the fries. That's
just specialization 101.

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I'm sure you've seen one of these around.

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The container: they're everywhere! Cargo
transported by ship used to be stored in

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barrels,

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in sacks, in wooden crates, and off-loaded
by hand.

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The invention of the container though created
more than just a metal box to put stuff in

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With it came a wave specialized
technology that dramatically increased

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productivity of shipping

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and offloading. Ships themselves evolved, dwarfing their predecessors

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with the ability to stack containers
below and on the deck. Ports changed too,

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dredging deep waters and providing
specialized pilots and gantry cranes

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to quickly park and unload ships.
Driverless yard tractors

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magically whisk containers away. The
containers are put on trucks

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and trains built specifically to hold them.
Workers today are superhuman compared to

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their brethren of yesteryear.

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We went from carrying bags on our backs to
lifting the equivalent of

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two school buses with mere flicks of our
wrists. To make specialization worthwhile

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you need to make a lot stuff. For example

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there is no point specializing in hamburgers
if you plan to cook only one burger a

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week

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for buying a forklift or crane simply to unload

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weekly groceries from the family car.

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Trade provides a market big enough to make it
worthwhile to invest in specialization

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and the bigger the market the more we
specialize and hence

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the more we can produce. Specialization
doesn't stop there

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in our next video, we'll explore the
specialization of the most productive

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engine known to humankind:

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The human mind. What about the videos after that?

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Well you decide. You tell us what topics we
should cover.

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Here's the current leader board of
questions from our viewers.

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