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

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Suppose this guy has bananas[br]and this guy has oranges.

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He needs oranges for marmalade[br]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[br]through trade.

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

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about the modern world[br]involves more than simple exchange.

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More than merely moving[br]existing things around.

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We grew rich by also producing[br]more stuff per person.

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

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It might take an hour[br]for you to prepare the meal

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because you individually[br]do everything.

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You start the grill,[br]you cook burger,

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chop the fries,[br]slice the vegetables --

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on and on and on.

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Now look at how a burger joint[br]makes hamburgers.

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Each worker has a specific job[br]in the chain of production

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that serves burgers and fries[br]to its customers.

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Each worker is specialized.

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This specialization,[br]what Adam Smith called

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the division of labor,[br]makes individual workers

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more productive.

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No more lost time[br]switching between tasks.

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Plus as a worker concentrates[br]his effort, he gets better

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at doing the task at hand.

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But it's not just[br]the specialization of workers

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that increases output.

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It's also the development[br]of specialized tools

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that modern workers use.

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The burger joint has tools[br]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[br]one of these around.

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The container: they're everywhere!

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Cargo transported by ship[br]used to be stored in barrels,

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

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The invention of the container,[br]though, created more

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than just a metal box[br]to put stuff in.

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With it came a wave[br]of specialized technology

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that dramatically increased[br]the productivity of shipping

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and offloading.

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Ships themselves evolved,[br]dwarfing their predecessors

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with the ability[br]to stack containers

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below and on the deck.

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Ports changed too,[br]dredging deep waters

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and providing specialized pilots[br]and gantry cranes

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to quickly park and unload ships.

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Driverless yard tractors[br]magically whisk containers away.

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The containers are put[br]on trucks and trains

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built specifically to hold them.

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Workers today are superhuman[br]compared to their brethren

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of yesteryear.

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We went from carrying bags[br]on our backs

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to lifting the equivalent[br]of two school buses

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with mere flicks of our wrists.

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

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For example, there is no point[br]specializing in hamburgers

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if you plan to cook[br]only one burger a week,

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or buying a forklift or crane[br]simply to unload weekly groceries

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from the family car.

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Trade provides a market[br]big enough to make it worthwhile

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to invest in specialization[br]and the bigger the market,

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the more we specialize, and hence,[br]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[br]the specialization

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of the most productive engine[br]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[br]we should cover.

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

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