Division of Labor: Burgers and Ships

A simple example of hamburgers being made at home versus at a restaurant can help illuminate the explosion of prosperity since the Industrial Revolution. The story of the division of labor and development of specialized tools is not a new one — Adam Smith began The Wealth of Nations with this concept. Yet it still has tremendous explanatory power about the world we inhabit.

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

Suppose this guy has bananas
and this guy has oranges.

He needs oranges for marmalade
and this guy needs bananas

for banana bread.

They swap -- they exchange.

Each guy is made better off
through trade.

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

about the modern world
involves more than simple exchange

More than merely moving
existing things around.

We grew rich by also producing
more stuff per person.

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

It might take an hour
to prepare the meal

because you individually
do everything.

You start the grill,
you cook burger,

chop the fries,
slice the vegetables --

on and on and on.

Now look at how a burger joint
makes hamburgers.

Each worker has a specific job
in the chain of production

that serves burgers
to its customers.

Each worker is specialized.

This specialization,
what Adam Smith called

the division of labor,
makes individual workers

more productive.

No more lost time
switching between tasks.

Plus as a worker concentrates
his effort, he gets better

at doing the task at hand.

But it's not just
the specialization of workers

that increase output.

It's also the development
of specialized tools

that modern workers use.

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

and to fry the fries.

That's just Specialization 101.

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

The container: they're everywhere!

Cargo transported by ship
used to be stored in barrels,

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

The invention of the container,
though, created more

than just a metal box
to put stuff in.

With it came a wave
of specialized technology

that dramatically increased
productivity of shipping

and offloading.

Ships themselves evolved,
dwarfing their predecessors

with the ability
to stack containers

below and on the deck.

Ports changed too,
dredging deep waters

and providing specialized pilots
and gantry cranes

to quickly park and unload ships.

Driverless yard tractors
magically whisk containers away.

The containers are put
on trucks and trains

built specifically to hold them.

Workers today are superhuman
compared to their brethren

of yesteryear.

We went from carrying bags
on our backs

to lifting the equivalent
of two school buses

with mere flicks of our wrists.

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

For example, there is no point
specializing in hamburgers

if you plan to cook
only one burger a week,

or buying a forklift or crane
simply to unload weekly groceries

from the family car.

Trade provides a market
big enough to make it worthwhile

to invest in specialization
and the bigger the market,

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

Specialization doesn't stop there.

In our next video, we'll explore
the specialization

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

What about the videos after that?

Well you decide.

You tell us what topics
we should cover.

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

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