The Wealth of Nations

Book 1, Chapter 1

the Division of Labor

Download Preston's Free Checklist

Download Preston's free checklist. His checklist was developed after spending countless hours studying billionaires like, Warren Buffett, Carl Icahn, and Ray Dalio. With his checklist, you can find safe picks that protect and grow your principal. Additionally, Preston reads a lot of books and writes an executive summary for each book he reads. If you download his checklist, you will be added to his monthly e-mail list where he sends his book summaries. There are never any advertisements...ever. Here's an example of one of Preston's executive summaries, based on the book written by Billionaire Charlies Koch.

Chapter 1 Summary

The greatest improvements in the productive power of labor, as well as the development of specialized skills, dexterity, and judgment, occur when there is division of labor (specialization).

Let us look at the example of a pin-maker. An unskilled tradesman could perhaps produce one pin a day. But if we divide the work involved into a number of different trades—one man draws out the wire, another straightens it, a third cuts it, a fourth points it, etc.—separating the production of the pin into about eighteen distinct operations, then ten men could produce 48,000 pins in a day.

There are three reasons for this exponential increase in productivity:

Firstly, this division of labor increases each workman’s dexterity; since each man is working on a sole task, his specialized knowledge of that task will grow, thus increasing his dexterity.

Secondly, division of labor in this way will save time for each worker. Since the worker is focusing on an individual task, he does not have to pass from one task to another in order to change tools, for example. This will save time and thus increase each worker’s productivity.

Thirdly, workers who spend large amounts of time on a single, repetitive operation often come up with ideas for machines to streamline the equipment and tools used, thus increasing productivity. Further improvements have been made thanks to the ingenuity of the manufacturers of these machines.

Next Chapter

Don't get lost in the Wall Street Fee-Factory

It's taken us a few years to finally figure out the right mix of tools that get results and save money. If you click on the toolbox, you'll see an article we wrote that lays-out the brokers and research tools we personally use.

Got Questions?

The Investor's PODcast

Get a free autographed copy of the Warren Buffett Accounting Book or Warren Buffett's Three Favorite Books. Simply submit your question to The Investor's PODcast. If your question gets answered on the air, the founders of this site, Preston Pysh and Stig Brodersen, will send you a free signed copy of their book!

The Warren Buffett Forum

Ask your question at the Buffett's Books money forum and interact with other smart investors like yourself. You won't find any day traders on this forum! Here's the link to The Warren Buffett Forum.