The Real Adam Smith: Ideas That Changed The World - Full Video — Transcript

Full transcript

1. 0:04The progress of the last two hundred fifty years has been explosive. Year after year,
2. 0:09the world and its people have grown more connected and more prosperous. It seems unimaginable.
3. 0:14And yet, a man who lived in a world of sailing ships and horse drawn carriages, of great
4. 0:22wealth, and great poverty, imagined our very world. He set pen to paper and recorded the
5. 0:28ideas that would revolutionize the world's marketplaces.
6. 0:33Free markets and global trade have created more prosperity, and for more people, in the
7. 0:37past two hundred years, than was created in the previous two thousand years. We are living
8. 0:42longer and more comfortably than the vast majority of people who ever lived.
9. 0:47But in todays' seemingly ruthless competitive environment, where the stakes are high and
10. 0:52winning is the name of the game; can an ethical and honest business still prosper?
11. 0:57Has the global economic system become so big and complex, that morality and human empathy
12. 1:01are no longer relevant? Where insiders and the rich get richer and the middle class and
13. 1:06the poor get poorer and the free market is no longer "free"?
14. 1:10I'm Johan Norberg, a writer and an analyst, born and raised in Sweden, and these issues
15. 1:15are of great concern to me. Therefore, I'll take a new look at the ideas of the man many
16. 1:20consider to be the father of the modern world. He was a Scotsman named Adam Smith: a moral
17. 1:26philosopher, a bold voice of the Scottish Enlightenment and the world's first economist.
18. 1:32He recorded his revolutionary ideas in two remarkable books: The Theory of Moral Sentiments
19. 1:37and The Wealth of Nations. Those ideas changed the world and in the next
20. 1:42hour we'll explore how they continue to power our world today.
21. 1:48Funding for this program has been provided by: John Templeton Foundation and Templeton
22. 1:56Religion Trust. The Maersk Mc-Kinney Moller is one of the
23. 2:08largest ships in the world. It is also one of the most modern cargo carriers on the oceans
24. 2:14today, carrying Adam Smith's ideas on world trade to a level imagined by only one man.
25. 2:20"By opening a more extensive market for ... the produce of their labour... it encourages them
26. 2:26to improve productive powers... and thereby to increase the real revenue and wealth of
27. 2:31the society." In command of the huge ship is Captain Jes
28. 2:36Meinertz, a 25-year veteran of the sea-lanes. You see the vessels getting bigger and bigger;
29. 2:42you have seen an increasing volume of cargo going from one port to another port... and
30. 2:49I think that trend will continue. The massive scope of international trade today
31. 2:54would have been unimaginable even a few decades ago. But Adam Smith foresaw the workings of
32. 2:59such a world more than 200 years ago. He wrote that free markets and free trade would connect
33. 3:05the continents and result in global prosperity. Today's markets have grown to global proportions
34. 3:12and revenue and wealth have soared: just one way that Adam Smith's ideas continue to change
35. 3:18the world. Captain Meinertz and his crew are on a journey
36. 3:22that will take them over twelve thousand nautical miles from Shanghai to three more stops in
37. 3:28mainland China, Hong Kong and then through the Suez Canal.
38. 3:32Now, after 20 days at sea, they are nearing Algeciras, Spain. Then it will be on to Rotterdam
39. 3:39and other European ports. The economic facts of life in the cargo business mean that bigger
40. 3:45is better. Size is everything. The Maersk Mc-Kinney Moller is over twenty
41. 3:51stories high and 1,300 feet long. This ocean-going behemoth carries 18,000 containers. If they
42. 3:59were loaded aboard a train, the train would be 68 miles long
43. 4:05The containers hold everything from fruits and vegetables to furniture and electronics,
44. 4:10from appliances and kitchenware to vehicles and auto parts; a vast variety of consumer
45. 4:15and industrial goods to feed the growing demand of a globalized world.
46. 4:20In China, for example, you have 1.2- 1.3 billion people and the middle class is growing. And
47. 4:27of course, they will be consumers like in the U.S. and like in Europe.
48. 4:32And, of course that will- that will create even more demand for goods to be transported
49. 4:38around the world. It's early evening when the ship arrives in
50. 4:45Algeciras, Spain. Now, working through the night, over 2,500 containers will be offloaded
51. 4:52within 10 hours. Then, once again, the ship will be on its way.
52. 4:57Every day of the year, thousands of container ships enter hundreds of ports around the world.
53. 5:03Adam Smith would be amazed: every corner of the earth is now linked to every other. Each
54. 5:09day, more people become connected by global trade. Each day, because of it, life gets
55. 5:15better for millions of people. So, who was this man who predicted that trade
56. 5:21would lead to prosperity? Who foresaw this global progression out of poverty?
57. 5:28Smith took ideas of economics that were really in the bow and arrow stage and made them into
58. 5:34a modern theory, which actually still drives our economic thinking today.
59. 5:39People call him an economist; he was really a social psychologist. He wrote about ethics,
60. 5:43he wrote about law, he wrote about politics and obviously, he wrote about economics.
61. 5:49The man many consider most responsible for today's prosperity. Indeed, the father of
62. 5:54modern economics first made a name for himself as a young man here, in Edinburgh, Scotland.
63. 6:01This historic city was then the center of the Scottish Enlightenment and Adam Smith
64. 6:05was one of its brightest lights. He had written an amazing book, The Theory
65. 6:10of Moral Sentiments, and that had propelled him into popularity. He would go on to write
66. 6:16another, which was equally popular and eventually better known, The Wealth of Nations.
67. 6:22Together these two books described a powerful system of guidelines linking morality and
68. 6:27economics. Adam Smith was one of the greatest minds of
69. 6:31all time. His great gift was observation, and his study
70. 6:36of human nature as it appeared in different types of society at different periods of history-
71. 6:42is absolutely awesome. Adam Smith was born in 1723, in the small
72. 6:50seaside town of Kirkcaldy, Scotland, where he learned about morality and economics at
73. 6:55the local merchants' market. He studied at Glasgow University, became its
74. 7:00top administrator and then a pillar of the unlikely intellectual revolution called the
75. 7:04Scottish Enlightenment. He lived, lectured and socialized in Scotland's
76. 7:09capital city of Edinburgh. He had eloquently argued the power of free
77. 7:13markets and the division of labor, to enable people at all strata of society to become
78. 7:18more prosperous. The institutions that Adam Smith recommended
79. 7:22have proved- empirically and historically now- to correlate positively with all of these
80. 7:27metrics of human well-being. Smith was particularly concerned about the
81. 7:30well-being of the least well-off, and thought that markets, especially the type of commercial
82. 7:34society he wished to defend, would be of immense benefit to precisely those people.
83. 7:40He was the man that gave us modern economics with concepts like gross national product,
84. 7:46and productivity, and supply and demand, and labor, and capital, and all of these things
85. 7:50we just take for granted today. Smith matters, because he posed a question
86. 7:57that every single government since has had to address. Should governments intervene in
87. 8:03the management of economies? Should they leave it to market forces?
88. 8:08Could market forces- on their own- alleviate poverty? Smith actually believed that they
89. 8:14could. He had lived to see that his revolutionary
90. 8:17ideas worked, to see life for the average Scotsman actually improve. And most important
91. 8:23for Smith, that the poor were beginning to do better.
92. 8:26So, do Adam Smith's revolutionary ideas, now over two centuries old, apply to the poor
93. 8:33in today's developing world, as they did in Europe and America in Smith's day? Do they
94. 8:38still have the power to transform the world? One success story with a surprising Scottish
95. 8:46connection is Hong Kong. For much of its past, Hong Kong had been one
96. 8:51of the great trading cities on earth. Packed with thriving businesses, large and small,
97. 8:56Hong Kong had no natural resources and little agricultural land... only a beautiful harbor
98. 9:03and a population of remarkably industrious people.
99. 9:08By the 1960s, the colony was crammed with millions of refugees fleeing the civil war
100. 9:13in mainland China Hong Kong was a city hobbled by poverty. There
101. 9:19were water shortages and thousands of refugee families called the harbor home.
102. 9:27But everything would change because of the vision of one determined man, Sir John James
103. 9:32Cowperthwaite, Hong Kong's financial secretary from 1961 to 1971. He was also a Scotsman
104. 9:40and very much a disciple of Adam Smith. Sir John Cowperthwaite is one of the great-unappreciated
105. 9:48heroes of political economy. He implemented, in Hong Kong, an experiment. He applied his
106. 9:54theory of what he called benign neglect, so he instituted in Hong Kong the system of Smithian
107. 9:59political economy to see what would happen. Cowperthwaite built a Hong Kong that had relatively
108. 10:06little corruption, an efficient and independent judiciary, individual property rights, and
109. 10:12respect for the rule of law. He instituted an uncomplicated tax system with low rates
110. 10:17on both individuals and business. The overall tax burden was half that of the United States
111. 10:23at the time. And he implemented the Smithian system of
112. 10:26peace, easy taxes, and a tolerable administration of justice... and look what happened.
113. 10:32"Little else is requisite to carry a state to the highest degree of opulence ... but
114. 10:38peace, easy taxes and a tolerable administration of justice; all the rest being brought about
115. 10:44by the natural course of things." In Cowperthwaite's decade as financial secretary,
116. 10:51real wages rose by fifty percent. Between 1960 and 2014, Hong Kong's GDP per capita
117. 10:58adjusted for inflation, increased more than ten times.
118. 11:03And they turned what was effectively a rock in the 1950s to one of the most prosperous
119. 11:09places on earth today. Even now, under Chinese rule, Hong Kong remains
120. 11:14one of the world's most important financial centers.
121. 11:17It's proof that with the right policies in place, change can come quickly. And today,
122. 11:21the people of Hong Kong, despite continued unrest and demands for a greater say in their
123. 11:26future, have a higher income per capita than their old colonial masters in Britain.
124. 11:35While Hong Kong- along with Japan and the other Asian Tigers- was prospering, China
125. 11:40was stagnating. Twenty years of Soviet-style centralized planning
126. 11:44and control had crippled the country. After Mao died both the Chinese leaders and
127. 11:49the Chinese people recognized that socialism didn't work.
128. 11:54Ning Wang is professor of economics at the Ronald Coase Institute, and author with Ronald
129. 11:59Coase of the book How China Became Capitalist. They tried new ways to organize the economy.
130. 12:06What emerged was spontaneous, was something we here recognize as the market economy. And
131. 12:13in China it's called socialism, with Chinese characteristics.
132. 12:18Socialism with Chinese characteristics translates to change from the ground up or spontaneous
133. 12:23development. Add to this the power of a market economy and you have two of Adam Smith's most
134. 12:29essential concepts. They gradually opened up the economy, allowed
135. 12:35private sector to enter in one industry after another, and of course, once the private enterprises
136. 12:42entered any sector, they quickly out-performed state enterprises.
137. 12:48The small market economy, which leaders had allowed to even out the rough spots in centralized
138. 12:52planning, mushroomed. Today, China's private sector contributes 60 to 80% to the country's
139. 12:58job growth and 60 to 70% of its GDP. So, that forced them to resort to their own
140. 13:07tradition: seeking truth from facts. Be practical. Be open minded, not trapped by any preexisting
141. 13:17ideology. It's estimated that in the last three decades,
142. 13:22over 600 million people have risen out of poverty in China. That's an accomplishment
143. 13:28unmatched anywhere, at any time, on earth. And today, thousands of young Chinese are
144. 13:34joining a global movement to discover how to maximize their nation's potential.
145. 13:40Tens of thousands of students, from all over the world, have come to America to study.
146. 13:44Many of them are here at the University of Chicago, one of the world's foremost academic
147. 13:49institutions. Xingxing Li is a PhD student at the University
148. 13:53of Chicago Law School and she's studying the effects of government regulation on the economy.
149. 13:58And I just wanted to come here and learn from the best of the best and then return to China
150. 14:04and help to spread the knowledge to Chinese students.
151. 14:09This may be the best place on earth to study the causes of wealth and poverty: almost thirty
152. 14:15professors, students, and alumni have won Nobel Prizes in economics.
153. 14:19Today, Professor Ning Wang is at the University of Chicago to preside over a unique seminar.
154. 14:25These University of Chicago scholars and students are from China and they've all come together
155. 14:30for a luncheon and a seminar to explore an interesting and surprising mix: Adam Smith,
156. 14:37capitalism, and communist China. Such a conversation, even their presence here
157. 14:43in the west, would have been unthinkable just a few years ago.
158. 14:46Good afternoon, welcome everyone, and a welcome to have this seminar, Adam Smith in China.
159. 14:54And we have a group of scholars, students, who have expertise on Adam Smith.
160. 14:59Adam Smith is the first generation of economic theorist.
161. 15:03I think classical economics would believe that like, until [the] market fails, there's
162. 15:09no need for governmental intervention. It is the highest impertinence and presumption
163. 15:15in kings and ministers, to pretend to watch over the economy of private people."
164. 15:21Yes market works, but market needs something like morality. So people will trust each other,
165. 15:29or at least they want to try to trust each other.
166. 15:33Adam Smith not only has one book called, Wealth of Nations, he also has another great book,
167. 15:38called The Theory of Moral Sentiments, and in that book he really lays out what kind of morality
168. 15:43standards should the people have when they have the market kind of exchange.
169. 15:48I think they were surprised, happily surprised that actually what they got from Adam Smith
170. 15:54actually consistent with their own tradition, traditions from Confucianism and traditions
171. 16:02from Taoism. Chinese students are not just studying Adam
172. 16:06Smith in the west... they're studying him in China. All of the major Chinese universities
173. 16:10teach the ideas of Adam Smith. And they are learning how their own traditions are similar
174. 16:15to those of the west. It doesn't surprise me at all that more people
175. 16:19in China read Adam Smith, than, you know, people here in the States.
176. 16:24The previous Chinese Premier, Wen Jiabao, on many occasions praised The Theory of Moral
177. 16:32Sentiments, and I remember once, he- visiting a Chinese campus, and in front of students,
178. 16:39he raised that book, "Hey guys, you have to read this book, The Theory of Moral Sentiments."
179. 16:46Is China coming full circle? Will it once again embrace its cultural roots, with a deeper
180. 16:52understanding of how its history and commercial traditions merge naturally with the ideas
181. 16:57of Adam Smith and contemporary market economics? Is communism the future of China, or will
182. 17:03it be seen as just an aberration, a blip, in China's long history?
183. 17:09But for China to move forward it has to strengthen its own innovative capacity.
184. 17:16The most severe defect of the Chinese system is that China now has an open market for goods,
185. 17:25but doesn't have a free market for ideas. A free market not only opens our minds to
186. 17:33new ideas, it helps us to be far more productive. From thousands of independent suppliers around
187. 17:42the world, millions of parts have been shipped to Airbus in Toulouse, France.
188. 17:48Here they will be assembled into the largest and most modern airliner on earth... a product
189. 17:53of the vast benefits of a global division of labor, a concept popularized by Adam Smith.
190. 17:59"The division of labor, so far as it can be introduced, occasions in every art, a proportional
191. 18:06increase of the productive powers of labor." Few things better illustrate the benefits
192. 18:12of the division of labor, than factories like this. Smith would have been amazed.
193. 18:18What was an extraordinary insight in Smith's day; the productive potential of the division
194. 18:23of labor is now a commonplace, common sense global phenomenon.
195. 18:27Here we are in our mockup hall here in Toulouse; we have full size models of the major models
196. 18:34that we produce for Airbus. Alan Pardoe is the head of marketing communications
197. 18:38at Airbus in Toulouse, France. They're fully furnished so they have seats
198. 18:43and galleys and furnishings just like a real airplane. If you like, it's sort of a showroom.
199. 18:48We are many thousands of people in Toulouse, but we are of course a global company, we're
200. 18:51not just French. So an A380 is a very big airplane; in fact,
201. 18:55it's the world's largest commercial airplane. And what really distinguishes it- is the fact
202. 18:59that it's got two decks, two levels, two cabins. And it's an airplane that probably has something
203. 19:03in the order of four million individual parts. Two and a half million of those are unique
204. 19:07part numbers. We must have something in the order of 1,500 suppliers in probably about
205. 19:1230 countries. And each of those suppliers does what they
206. 19:16do best. They specialize in their own area of expertise.
207. 19:21The wings are constructed in England and each contains 32,000 individual parts.
208. 19:26The wing is enormous; it's huge. The wingspan of this airplane is about 80 meters. That's
209. 19:31something in the order of 250 feet, so it's bigger than almost every other airplane ever
210. 19:36flown, and certainly the largest commercial airplane flown.
211. 19:40Smith first described the division of labor by looking at the manufacture of simple pins.
212. 19:45We've come a long way since, but the principle is still the same: the larger the scale of
213. 19:50the cooperation, the greater the chance of specializing.
214. 19:53I think for one company to try to do everything on its own would be prohibitively expensive
215. 19:59in terms of just not money, but resource, people... know-how. It's a global business.
216. 20:05People fly around the world day in, day out. It's a global supply business. It's a global
217. 20:09manufacturing business. You concentrate on doing the things that you're
218. 20:13good at. I concentrate on doing the things that I'm good at, and then we exchange, and
219. 20:18then we're both really much, much better off, because we're very much more efficient.
220. 20:22What we see in the world today in a globalized economy is millions, indeed, billions of people
221. 20:27who are cooperating with one another in innovative new ways around the world. In some sense,
222. 20:32that really is the Adam Smithian world With incredible machines like these, we can
223. 20:37travel from one continent to the other, supported by a vast network of millions of people and
224. 20:43thousands of systems that keep everything up in the air.
225. 20:47And while we're flying, tons of freight is traveling with us in the cargo holds.
226. 20:52But by far, most products traded between nations, still travel, as they did in Smith's day...
227. 20:59on the seas. With every one of the allotted containers
228. 21:04unloaded in Algeciras, the Maersk Mc-Kinney Moller is ready to depart.
229. 21:09A cargo ship rests at its dock only long enough to unload and load. At most ports, the crew
230. 21:16never leaves the ship. Before dawn, with the moon setting behind
231. 21:20the mountains, she heads into the crowded Strait of Gibraltar.
232. 21:24I would say that's a favorite place to be- on the bridge- watch the sunrise.
233. 21:31And you have this deep orange sun coming up. And you see the light changing in the horizon
234. 21:38just before it breaks. Aboard the Maersk Mc-Kinney Moller, the crew
235. 21:49on the giant ship settles into their daily rhythm: Checking the bracing on the containers,
236. 21:55keeping the ship clean and performing routine maintenance.
237. 21:59Maersk is a Danish company; the captain and his senior officers are from Denmark. The
238. 22:04rest of the crew is international. In the past, everything had to be done manually.
239. 22:13Nowadays, a lot of the functions that we control are done automatically via computers and-
240. 22:18and monitors and that, of course, requires less manpower.
241. 22:22An officer or a navigator nowadays is actually, he's not steering the big wheel anymore; he's
242. 22:30basically monitoring all the automated systems on board.
243. 22:37The 24 crew who run the ship are spread over its quarter mile length. They seldom see one
244. 22:42another. They come together at mealtime, three times a day.
245. 22:47Romey, the Phillipino cook and the oldest member of the crew, prepares a diverse menu
246. 22:51with dishes that make the men feel at home. It's a time to relax, share information and
247. 22:57plan for the work ahead. This huge ship demonstrates the impact Adam
248. 23:03Smith envisioned international trade would have on prosperity. It's not what's in the
249. 23:08containers, but what they represent that's important.
250. 23:12Smith believed that wealth is not just the things you own- like gold in the bank- but
251. 23:17also your labor, and the things you can get in exchange. The more others create and the
252. 23:23more you trade with them, the better off you are.
253. 23:26And with ships like this, world trade is much more efficient and environmentally friendly.
254. 23:33At the heart of the vessel is its unique state of the art propulsion system.
255. 23:37They are what they call super long stroke, when you have super long stroke you have a
256. 23:43slower speed. Per Schilling Nielsen is chief engineer. He's
257. 23:48been with Maersk for 25 years. They're doing maximum 73 revolutions per minute.
258. 23:55They're directly linked to the propeller; that means the propeller is doing maximum
259. 24:0073 RPM. The long stroke engine is designed to squeeze
260. 24:04the most miles possible out of every drop of oil. It lowers fuel consumption by 37%
261. 24:12and carbon dioxide emissions per container by 50%.
262. 24:15We spend a lot less fuel consumption moving one box from one of the major ports in the
263. 24:21Far East to one of the major ports in Europe. In fact, per container, this ship emits less
264. 24:27greenhouse gas than almost any other method of transportation.
265. 24:31It emits less CO2 per ton of goods moved; fifteen times less than a truck and six times
266. 24:37less than rail. Much of this efficiency is due to the sheer number of containers secured
267. 24:44on board. We are carrying at least close to 60% of the
268. 24:48cargo below the deck. So people have a tendency to forget that because you don't see it; it's
269. 24:54just hidden below the hatches of the ship. Rene Hansen is the ship's chief officer and
270. 25:01among other tasks, is in control of the cargo. Looking at a stack like this we see we have:
271. 25:08one, two, three, four, five, six, seven, eight, nine ten, stacked on top of each other. This,
272. 25:14combined with loading nine on deck, gives a very good idea that the vast amount of cargo
273. 25:20that is being carried, which you cannot see when the ship just passes by on the open oceans.
274. 25:24So, whatever you can imagine that can be put inside this box we can more or less carry.
275. 25:32And today more and more of what's carried aboard ship are perishable goods, enabling
276. 25:36growers to sell into markets thousands of miles away, at a fraction of the cost of airfreight.
277. 25:42Torben Andersen is the electrical engineer aboard ship.
278. 25:47Every morning I go around- look at every single container; see if there's any malfunction,
279. 25:52if the temperature is as it's supposed to be.
280. 25:56Everything that you put in your refrigerator at home we put in the refrigerators on board
281. 26:00the ship just in vast scales. And if you look at our refrigerator containers
282. 26:04we can carry flower bulbs from Netherland for tulips. We can carry chocolate from Poland.
283. 26:10We can carry wine, expensive French wine we carry in refrigerated containers.
284. 26:15Fruits and vegetables stay fresh for dramatically longer periods of time...
285. 26:19We can make an artificial atmosphere in our containers.
286. 26:23...by controlling the levels of oxygen, carbon dioxide and nitrogen .
287. 26:26And then, as we're getting closer to the port of delivery, then we will start increasing
288. 26:33the oxygen level in the container and then the bananas are so to speak ready, when they
289. 26:38hit the supermarket The shelves of supermarkets throughout the
290. 26:44world are stocked with goods transported aboard cargo ships like the Maersk Mc-Kinney Moeller.
291. 26:51This is a Whole Foods Market in Austin, Texas. There are over 400 Whole Foods Markets in
292. 26:56the United States, Canada and the United Kingdom. They sell products from around the world.
293. 27:01Their "Whole Trade Guarantee" promises that consumers can shop with a conscience.
294. 27:07Most businesspeople are honest and ethical. In fact, it turns out that the more ethical
295. 27:11they are, the better the company performance. In the cutthroat supermarket business it's
296. 27:16important to stake out your own territory. The company's motto is "Whole Foods, Whole
297. 27:20People, Whole Planet." At the center of this amazing story is Co-Founder
298. 27:27John Mackey. To understand Whole Foods Market, you have to understand him.
299. 27:32The original vision for Whole Foods was- very simply is: we wanted to sell healthy food
300. 27:36to people, earn a living, and have fun. The higher purpose of Whole Foods has become
301. 27:42a lot deeper and more complex than it was back 34 years ago.
302. 27:48And that brings us to mission. Mission is something Mackey takes seriously. It's not
303. 27:53just platitudes for a wall plaque in a corporate lobby. It's the statement that embodies his
304. 27:57ethical perspective. We want to sell healthy food to people, help
305. 28:02people to reach their highest potential through having good health. We also have a sense that
306. 28:07the people that work for us should be flourishing and should be happy in their work, and we
307. 28:13also feel a responsibility for the larger communities that we're trading with.
308. 28:16It's been on Fortune's 100 Best Companies to Work For list for eighteen years in a row.
309. 28:22What seems to make Whole Foods so successful is that the people who work here are strongly
310. 28:26committed to all the stakeholders, to customers and team members, to stockholders and suppliers,
311. 28:34which has resulted in highly committed employees and very faithful customers.
312. 28:40And a lot of John Mackey's philosophy is based solidly on Adam Smith.
313. 28:44I mean... Adam Smith was so far ahead of his time.
314. 28:48The totality of his ideas are still very, very important and very relevant today.
315. 28:54Smith gives us a way of thinking about markets and morality together. For Smith, these are
316. 28:59not two things that can easily be extricated from each other, as if one can simply talk
317. 29:04about rational, economic men on one hand and then moral men in a different sphere on another.
318. 29:11Smith understood that you're going to be better at business if you can understand your customers
319. 29:19and generally sympathize with them, as well as understanding and sympathizing with your
320. 29:23employees. I think that most of our guests when they
321. 29:31walk in the door know that there's something different.
322. 29:34For a lot of people it's the energy of the team members, right? I think a lot of our
323. 29:38team members feel empowered and feel fulfilled and therefore feel happy and satisfied in
324. 29:43their work. Lindsay Mucha is store team leader of one
325. 29:46of the Whole Foods Markets in Austin. She's been with Whole Foods for over 10 years.
326. 29:52My goal was to work here for six months, graduate from college and then go off and find my career
327. 29:57path, and I very quickly fell in love with Whole Foods. I loved the values and the mission.
328. 30:05The greatest source of creativity and innovation exists in our team member base. A big part
329. 30:12of what we're trying to do is allow them to- to be themselves, to be authentic, to be spontaneous,
330. 30:19allow them to- to experiment, to create new things, to create the innovations.
331. 30:25This helps to illustrate Adam Smith's principle that top down command structures aren't always
332. 30:30the best. Things organize themselves better from the bottom up.
333. 30:34"The natural effort of every individual to better his own condition... is so powerful,
334. 30:41that it is, alone... capable of carrying on the society to wealth and prosperity."
335. 30:47Many of the institutions that we have, language, markets, you name it, these are indeed the
336. 30:54results of human action, but they're not the results of human design. We never planned
337. 30:59these things; they just evolve naturally. So note that phrasing, "individual human action,
338. 31:05but not individual human design." You don't need a central planning authority
339. 31:10to run your society well. And that's a really cool thing about the Whole
340. 31:13Foods Market culture. You know it's not top down. It's not a mandate on everything. If
341. 31:18someone has a good idea that someone else likes, there's a good chance it's going to
342. 31:23spread and- and work for a lot of people. Carol Medeiros is produce coordinator at Whole
343. 31:28Foods Markets in Austin, Texas. I would say that you know we're always trying
344. 31:31to find what's new and what's next, and a lot of the times- most of the time- our best
345. 31:35ideas come from the team members that work in the stores every day.
346. 31:38Because the team members genuinely care... because it's theirs, right?
347. 31:44Whole Foods Market's success in promoting healthy foods has spawned increased competition
348. 31:49in the marketplace. In response, the company is opening a new line of stores called "365
349. 31:55by Whole Foods Market," which they hope will make their products more accessible to more
350. 32:00consumers. When stakeholder philosophy is adopted in
351. 32:04a more conscious way and businesses begin to act in more conscious way for higher purpose,
352. 32:09I think most of the hostility towards business and capitalism will disappear.
353. 32:13And I think what's really nice about this, and companies that are able to be mission
354. 32:16driven and purpose driven, and still be profitable, is that when you put that out there for people
355. 32:20to choose there are people who choose it and there are people who will vote with their
356. 32:24dollars, right? And do it because that's what's valuable to them. So I think that's nice,
357. 32:30it's about choice. For markets to make good on the hope that
358. 32:34they would bring, what Smith called, universal opulence to all ranks of people, Smith thought
359. 32:39that it was necessary for them to be supplemented by a certain conception of morality.
360. 32:46By "morality" Smith meant fairness and a level playing field for all. But what happens when
361. 32:53some are able to tilt the market to their advantage?
362. 32:58Adam Smith asked the very same question 250 years ago. And the problem can be easily illustrated
363. 33:03by taking a walk in the woods. In state and national parks all across the
364. 33:07United States you'll often find signs like this that say, "Please do not feed the animals."
365. 33:13Because if you feed the wild animals they lose their ability to gather food in the wilderness
366. 33:21and as a result, they tend to be less resilient and their survival is at risk.
367. 33:28Luigi Zingales is professor of entrepreneurship and finance at the Booth School of Business
368. 33:34at the University of Chicago. I think that a similar sign should be put
369. 33:39in Washington to say, "Please don't feed business," precisely because I love business I don't
370. 33:46want business to become fat and unable to compete in the global marketplace.
371. 33:52Smith was very suspicious of partnerships between government and business. That's effectively
372. 33:56what we call cronyism today. This is the result of feeding the animals,
373. 34:02Washington style. In recent years housing values around the U.S. capital have skyrocketed.
374. 34:07There is no real industry, there is no real commerce and it's pretty scary that the wealthiest
375. 34:14counties in the United States are in the suburbs of Washington, D.C.
376. 34:19The top two richest counties in the United States, and 6 of the top ten, are suburbs
377. 34:24of Washington, D.C. All that money is basically money that is
378. 34:29sucked from the system and wasted in lobbying. Lobbying pays very well. And not just for
379. 34:36the lobbyists. The real payoffs go to the corporations they represent.
380. 34:41Smith thought that any institution- government included- could become corrupted if it was
381. 34:45too big and made too many decisions centrally. "To widen the market and to narrow the competition
382. 34:53is always the interest of the dealers... Any new law or regulation of commerce... ought
383. 34:59always to be listened to with great precaution." A series of recent governmental regulations
384. 35:06illustrates Adam Smith's fear. Corn ethanol is a bio-fuel. It's basically
385. 35:12fuel that comes from corn. It's more costly and far more inefficient to make than ethanol
386. 35:17from sugar. But now almost 40% of the nation's corn crop
387. 35:21goes into making ethanol, which has driven the price of corn way up. It makes corn farmers
388. 35:27and processors happy because it gives them a guaranteed profit. But all of us have to
389. 35:31pay more for foods that use corn, especially meat and poultry.
390. 35:36The fuel companies are required by federal law to buy ethanol whether they want it or
391. 35:41not, or whether motorists want it or not. Between 2007 and 2012, the corn ethanol lobby
392. 35:49spent 139 million dollars, and in return, gained over 28 billion dollars in corn ethanol
393. 35:55tax credits. So once you have this kind of returns then
394. 36:00people will not invest in R&D. They will not invest in new sort of organizational form.
395. 36:06They will not invest in new technology. They will not invest in new property plant and
396. 36:11equipment. They will invest in lobbying. Many corporations prefer to get their profits
397. 36:15by legislating them rather than by selling goods and services that people want in an
398. 36:19open market. Adam Smith saw exactly the same forces at work in his day.
399. 36:25What Smith saw was that when business people go to the government and they say we want
400. 36:28a special royal charter, we want special protections from competition, we are a vital national
401. 36:34industry and we need special privileges, you've got to be careful, because when this happens,
402. 36:39this is really people conspiring to protect their own interests at the expense of others.
403. 36:44Adam Smith understands that in order for competition to work its magic you need to have rules in
404. 36:51place because otherwise rather than competition, you have the law of the jungle.
405. 36:56This is Adam Smith's key insight; competition is not a way of giving power to companies.
406. 37:02It's a way of giving us power over them. The Founding Fathers not only established
407. 37:07a government of the people, by the people, for the people. They also established a economic
408. 37:13system of the people, by the people, for the people. This is what distinguishes the United
409. 37:19States from the rest of the world, and this is what gives us hope.
410. 37:25But is it possible to have markets that operate in the interests of sellers and buyers, without
411. 37:30a lot of government regulation? The answer might be yes, if they embody Adam Smith's
412. 37:36ideas. It used to be that when you wanted to go someplace
413. 37:40in a city you had to wait for a taxi or rent a car. But now, with apps like Uber and Lyft,
414. 37:47that's all changed. Lyft? Yes.
415. 37:50Hi are you David? Yes.
416. 37:56People today ride with strangers in their cars and with sites like Airbnb they sleep
417. 38:00in strangers' homes. It's just a tiny part of a much larger, and much more important,
418. 38:05social trend: an explosion of trust, enabled by the internet.
419. 38:08And the granddaddy of them all is eBay. Almost every country in the world has buyers
420. 38:15and sellers who work inside the eBay marketplace. Devin Wenig is CEO of eBay Marketplaces.
421. 38:23eBay is founded on this principle of economic democracy; that individuals around the world
422. 38:29who don't know each other and have never met can work in a system to be able to conduct
423. 38:35economic transactions fairly and securely and have confidence in that.
424. 38:39eBay was founded in 1995 by Pierre Omidyar. Pierre thought very strongly about the notion
425. 38:47of the free market. He believed in Adam Smith's principles. He believed that an economic democracy
426. 38:53would not only be a great business, but it had the potential to do immense amounts of
427. 38:58good around the world. eBay has hundreds of thousands of small sellers
428. 39:02around the world that are now doing more than half their business outside of their national
429. 39:06borders. One retailer that is profiting in this new era is Gelb Music.
430. 39:11Gelb was started in 1939... about 75 years ago. Located right here in Redwood City, California,
431. 39:17it's been here ever since. And about- carry about a little over 50,000 products here.
432. 39:22Mike Craig is Gelb's ecommerce/marketing manager. We have a complete line of drums, bass guitars,
433. 39:30recording equipment. We were waiting for our-our own website to
434. 39:34be built, we took about 200 products, mostly snare drums, did about $200,000. The test
435. 39:39definitely worked. The following year we put up about a thousand
436. 39:42products, maybe a little bit over and we did about $750,000 in sales.
437. 39:46We now have about 160 million active consumers who buy and sell in our marketplace every
438. 39:52day. We now sell a little less than $90 billion of goods every year. And consumers access
439. 39:59us from over 190 countries. Well, eBay has saved the store number one.
440. 40:05But has also opened our eyes to markets that we didn't think were obtainable.
441. 40:11One of the great things about marketplaces is that they act as an incredible price discovery
442. 40:15mechanism. Because if you're looking at a collectable
443. 40:18or a coin or a comic book or a rare automobile, the likelihood is that there were more sales
444. 40:27in eBay for that particular item than in any other marketplace in the world.
445. 40:32Adam Smith would have said that an "invisible hand" guides eBay sellers around the world.
446. 40:37As prices are on the rise, because buyers want a particular item, sellers stream into
447. 40:42the market to satisfy that demand. And when demand drops... prices go down.
448. 40:49Imagine a world where there're screens everywhere. Those screens are connected to a global marketplace.
449. 40:57That global marketplace has all the worlds' inventory- priced fairly- because it's an
450. 41:01open marketplace. And you're one click away from buying anything you want at any time
451. 41:06for a fair price. There are millions of exchanges, each minute,
452. 41:12all of them without regulation, among strangers, across borders and oceans. It's an enormous
453. 41:18amount of business... based solely on trust. Pierre's notion was, let the buyers and sellers
454. 41:25in the marketplace determine who the best buyers and sellers are. So the eBay feedback
455. 41:30system was born. The way ratings work is that when you sell
456. 41:33a product, the customer can go back and rate you: Was it a good experience? Was it a bad
457. 41:38experience? And that goes onto your record where everyone sees it.
458. 41:41"Public services are never better performed than when their reward comes in consequence
459. 41:47of their being performed, and is proportioned to the diligence employed in performing them."
460. 41:54I think being judged by your customers is a wonderful idea. I think that keeps us as-as
461. 41:59sellers on our toes. You have to deliver on what you promise, and if you do, that you're
462. 42:03rewarded by more customers and you'll grow. The free market isn't about robbing people
463. 42:09or cheating them, stealing from them; it is about cooperating with them. If people trust
464. 42:16you, if you're giving them a good service, they will do business with you. If you're
465. 42:20trying to cheat them, they might deal with you once, but once they've been cheated, you'll
466. 42:25never see them again. Part one of the promise is a fair, open, fast,
467. 42:31trusted marketplace that's enabled by technology. Coordinating a global marketplace like this
468. 42:37takes one of the largest site operation centers in the world.
469. 42:40We do about 300 million searches a day on the eBay marketplace. There are computers
470. 42:48and people, and systems and processes that all have to work in sync to make sure that
471. 42:54that's working 24/7. When we look at forecasting and eBay's going
472. 42:59to make up anywhere from 50 to 80% of our-our sales, that's- that's a huge number.
473. 43:04There is a concept of a micro-multinational, which I think is fascinating. And there are
474. 43:11hundreds of thousands of them alive inside the eBay marketplace.
475. 43:15It's that family owned independent, just homegrown kind of store. We're just being able to sell
476. 43:21around the world now. So, without either a strong corporate intervention
477. 43:27in the sense of eBay, or a strong government or regulatory intervention, this is a community
478. 43:34that has grown enormously because in essence it's self-regulated.
479. 43:38A free market is one of the most powerful forces on earth. And we've seen that with
480. 43:44our business. Adam Smith presented his ideas on the free
481. 43:49market in his second great book, The Wealth of Nations which was published in 1776, just
482. 43:55months before the American colonies exploded in revolution. Copies made their way across
483. 44:01the Atlantic and into the hands of those shaping the structure of the new republic.
484. 44:06The Founders were dealing with things like how to structure a government, an economy,
485. 44:11the banking system, the church... the military. And Smith had a lot of things to say on all
486. 44:15these points. So does the United States follow Smith's principles? The answer can be found
487. 44:21here, at the Library of Congress, in Washington, D.C.
488. 44:28The Library of Congress is the largest library in the world.
489. 44:31Its holdings include more than 32 million cataloged books and other print materials,
490. 44:36and the largest rare book collection in North America.
491. 44:40Included in the collections is the personal library of Founder, Thomas Jefferson, author
492. 44:44of the Declaration of Independence, and a lifelong admirer of Adam Smith.
493. 44:48His library at the time numbered 6,487 volumes. Mark Dimunation is chief of the Rare Book
494. 44:56and Special Collections Division at the Library of Congress.
495. 45:00Certainly one thing you can learn by looking at Jefferson's library is the pervasiveness
496. 45:05of Enlightenment Philosophy, and intellectual conversation that plays throughout the creation
497. 45:12of the American government. In fact, you could claim that Jefferson's
498. 45:16book collection brings the enlightenment to America.
499. 45:19In 1814, the British attacked and burned Washington. On learning of the burning of the Capitol
500. 45:26and the loss of the 3,000-volume Library of Congress, Jefferson offers Congress his personal
501. 45:32library as a replacement. And in 1815, gentlemen arrived with horse
502. 45:39drawn wagons, took a collection that took Jefferson 50 years to build, left him in Monticello,
503. 45:45he never saw his books again, never went to Washington again.
504. 45:50But a second fire on Christmas Eve in 1851, destroyed two-thirds of those volumes.
505. 45:55Through a private grant, the Library of Congress is now reassembling Jefferson's Library, as
506. 46:00it was when he sold it to Congress 200 years ago.
507. 46:05It was the entire world of Thomas Jefferson's mind... the understanding of the roots of
508. 46:09so much of what influences American culture, the nature of the Constitution, the nature
509. 46:14of the revolution, the foundation of separation of church and state, the whole philosophy
510. 46:19of politics as it is in the United States is embedded in that collection.
511. 46:27One book that has survived is Thomas Jefferson's original copy of The Wealth of Nations.
512. 46:33This is the three-volume set of Inquiry into the Nature and Causes of the Wealth of Nations
513. 46:39by Adam Smith. These are books that belonged to Thomas Jefferson.
514. 46:43He writes a lot about his reading but he very rarely marks his books. There's no underlining
515. 46:49here, there's no, "Good idea use in the Declaration of Independence," there's nothing like that,
516. 46:55so you really have to read what Jefferson says about books in order to understand what
517. 47:00he gains from them. Jefferson didn't just read Smith's book; he
518. 47:04frequently studied it, referenced it, and recommended it to others.
519. 47:09In a letter to John Norvell, Jefferson writes: "If your views of political enquiry go further
520. 47:15to the subjects of money and commerce, Smith's Wealth of Nations is the best book to be read..."
521. 47:20There has to have been a moment in which Jefferson and Hamilton had a conversation that was at
522. 47:25least laced with Smithian philosophy if nothing else- whether they identified him or not.
523. 47:30This is a book however that- that Jefferson would take seriously.
524. 47:34But Jefferson wasn't the only Smith devotee among the Founders. James Madison, considered
525. 47:41the principal author of the Constitution, was also an admirer.
526. 47:44I think of Madison as having a view of government very similar to Smith's in a very, very deep
527. 47:50way. Sam Fleischhacker has written extensively
528. 47:53about Adam Smith's influences in Colonial America.
529. 47:56Both Madison and Smith believed that human beings are strongly motivated by self-interests,
530. 48:02but also capable of virtue, and that what you want to do is design institutions such
531. 48:07that first of all, freedom is protected, whether people are acting in a self-interested fashion
532. 48:12or not. And secondly, they have the opportunity to develop their virtues.
533. 48:17So the Founders certainly knew of Smith and his works. But to what extent did Smith influence
534. 48:23the American character? Is the United States "Smithian"?
535. 48:28I think the United States is Smithian in its bones.
536. 48:31Smith fits extremely well with the vision of the Founders, and indeed, of the vision
537. 48:37of most Americans from that time until our own.
538. 48:40And what you see in the Constitution is an attempt to implement and integrate into a
539. 48:44governmental plan some of the ideas Smith had about what could allow for a prosperous
540. 48:49society. "Every man is left perfectly free to pursue
541. 48:53his own interest in his own way... The sovereign is completely discharged from a duty [for
542. 49:00which] no human wisdom or knowledge could ever be sufficient; the duty of superintending
543. 49:06the industry of private people." The United States sees itself and talks about
544. 49:11itself as a land of opportunity. That's really the Smithian vision in a nutshell.
545. 49:15You have a limited government with a few but specific and robust protections. Much of the
546. 49:22actual work of making your life better was left to the individuals.
547. 49:26But to do that in a way that was stable, to do it in a way that had long term benefits,
548. 49:31to do it in a way in which there weren't simply the concerns of the moment but to have a lasting
549. 49:38constitutional order. This, I think, binds the American Founders to the Scots and especially
550. 49:43to Smith in a deep way. Well, here you have a groundbreaking book
551. 49:47in how to run an economy and more than that, it's really a general book on politics. So,
552. 49:53it makes a good deal of sense that these people who were founding a new country would look
553. 49:57over to the best work in the Enlightenment, not just to Smith, but to the other great
554. 50:02social scientists of the day, as it were, and be particularly interested in them.
555. 50:08Ideas matter. When faced with the challenge of how to create and structure a new nation,
556. 50:13the Founders turned to the Enlightenment- and to Adam Smith- for guidance.
557. 50:16As the Maersk Mc-Kinney Moller steams across the English Channel, she is just a day from
558. 50:29her next port of call. Now the pace aboard ship quickens.
559. 50:37Lines are prepared for tomorrow's docking. Unloading and loading schedules are reviewed.
560. 50:45And charts for the approach to the next harbor are studied.
561. 50:48Their destination is the largest port in Europe. Here, where the Rhine meets the North Sea,
562. 50:57is the Port of Rotterdam, in the Netherlands. It is the gateway to the markets of Western
563. 51:03Europe. It is the point of entry to a vast network of rail, highways, and inland waterways
564. 51:09that serves 350 million people. It's pitch dark and hours from dawn when the
565. 51:16Maersk Mc-Kinney Moller finally nears the entrance channel to the Port of Rotterdam.
566. 51:22Bringing a ship this size to a safe berth in such crowded sea-lanes will require keen
567. 51:27judgment and expert skills. Maas Approach, Maas Approach this is Maersk
568. 51:32Mc-Kinney Moller, Maersk Mc-Kinney Moller. Maersk Mc-Kinney Moller, Maas Approach, go
569. 51:37ahead... When, when the vessel approaches the- the
570. 51:40port you have this interaction, informing you about the in and out bound traffic, the
571. 51:46weather conditions... if there's any change to the pilot time.
572. 51:50Maersk Mc-Kinney Moller, ETA 06:45, your draft 1-4, decimal 9, is that correct, over?
573. 51:56Maas Approach, Maersk Mc-Kinney Moller, that's correct, over.
574. 52:01Still hours before dawn and 14 miles off the Dutch coast, the boat carrying the pilot pulls
575. 52:06alongside. To guide the vessel into the crowded port, the local pilot will rely on his unique
576. 52:14knowledge and experience. From now until they dock, the pilot and the
577. 52:20captain are a team. We slowly maneuver the vessel into the port...
578. 52:26and it's a quite kind of slow process but Rotterdam Port, it's one of the biggest ports
579. 52:32in the world. A vessel like this you can't turn like a car
580. 52:35so every maneuver, and every turn, and every swing takes time. A vessel this size you cannot
581. 52:44stop like this. You've got to plan your maneuver and you always need to have a plan B if plan
582. 52:52A is not working. Joining the Maersk Mc-Kinney Moller are almost
583. 53:07one hundred other cargo ships; a third of them from Asia.
584. 53:15In the last forty years, global trade increased from less than two trillion dollars to almost
585. 53:21nineteen trillion dollars. And Adam Smith predicted that that kind of development would
586. 53:26also result in a reduction in global poverty. In fact, 750 million people were lifted out
587. 53:33of poverty over those forty years. As the last containers are unloaded from the
588. 53:39Maersk Mc-Kinney Moller... those offloaded first are making their way to waiting trucks,
589. 53:43where they will be delivered throughout Europe. And Adam Smith would argue that those containers
590. 53:49don't just carry products, they carry prosperity and a better quality of life.
591. 53:56Two hundred years ago, a man who lived in a world of sailing ships and horse drawn carriages,
592. 54:01imagined how much better the world could be. He wrote two masterpieces providing an astonishing
593. 54:08road map. He wanted to create the conditions by which
594. 54:12ordinary people could go about their own business and to work, and save, and prosper, and help
595. 54:20themselves and their families. He wasn't interested in protecting the wealth
596. 54:23of the already privileged, the monied, the aristocrats, what he was interested in is:
597. 54:29How can we raise the estates of the least among us?
598. 54:31And I think that the two books together form a coherent project in trying to give a vision
599. 54:37of a commercial society that was not just a market society but also a market society
600. 54:42built on a very particular conception of morality. Every generation has to cope with the problem
601. 54:49of how far should governments intervene in the business of trying to maximize the wealth
602. 54:57of their own country. Perhaps more than any other person, Adam Smith's
603. 55:04ideas have led directly to the first real, broad-based advancements in mankind's quality
604. 55:10of life in thousands of years. He was a proponent of free markets and morality.
605. 55:17His writings and ideas have spread around the globe. And in spite of the progress we
606. 55:22have yet to make, his ideas truly changed our world.
607. 56:13Funding for this program has been provided by: John Templeton Foundation and Templeton
608. 56:18Religion Trust.