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♪ [music] ♪

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- [Don] The benefits
of voluntary trade are obvious.

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Suppose this guy has bananas
and this guy has oranges.

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He needs oranges for marmalade
and this guy needs bananas

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for banana bread.

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They swap -- they exchange.

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Each guy is made better off
through trade.

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In our last video, though,
we saw that a key fact

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about the modern world
involves more than simple exchange.

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More than merely moving
existing things around.

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We grew rich by also producing
more stuff per person.

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Say you're cooking hamburgers
and fries for your family.

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It might take an hour
for you to prepare the meal

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because you individually
do everything.

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You start the grill,
you cook burger,

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chop the fries,
slice the vegetables --

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on and on and on.

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Now look at how a burger joint
makes hamburgers.

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Each worker has a specific job
in the chain of production

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that serves burgers
to its customers.

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Each worker is specialized.

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This specialization,
what Adam Smith called

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the division of labor,
makes individual workers

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more productive.

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No more lost time
switching between tasks.

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Plus as a worker concentrates
his effort, he gets better

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at doing the task at hand.

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But it's not just
the specialization of workers

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that increases output.

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It's also the development
of specialized tools

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that modern workers use.

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The burger joint has tools
to slice potatoes, to cook burgers,

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and to fry the fries.

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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!

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Cargo transported by ship
used to be stored in 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

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than just a metal box
to put stuff in.

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With it came a wave
of specialized technology

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that dramatically increased
productivity of shipping

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and offloading.

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Ships themselves evolved,
dwarfing their predecessors

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with the ability
to stack containers

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below and on the deck.

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Ports changed too,
dredging deep waters

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and providing specialized pilots
and gantry cranes

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to quickly park and unload ships.

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Driverless yard tractors
magically whisk containers away.

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The containers are put
on trucks and trains

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built specifically to hold them.

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Workers today are superhuman
compared to their brethren

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of yesteryear.

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We went from carrying bags
on our backs

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to lifting the equivalent
of two school buses

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with mere flicks of our wrists.

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To make specialization worthwhile,
you need to make a lot stuff.

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For example, there is no point
specializing in hamburgers

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if you plan to cook
only one burger a week,

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or buying a forklift or crane
simply to unload weekly groceries

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from the family car.

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Trade provides a market
big enough to make it worthwhile

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to invest in specialization
and the bigger the market,

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the more we specialize, and hence,
the more we can produce.

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Specialization doesn't stop there.

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In our next video, we'll explore
the specialization

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of the most productive engine
known to humankind: The human mind.

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What about the videos after that?

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Well you decide.

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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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♪ [music] ♪