Nobody Knows How to Make a Pencil

Or, why we turn up for work in the morning.

What makes humans human?

A few things usually spring to mind whenever this light-hearted question arises: language, use of tools, walking upright and so on. But Bonobos are pretty good at walking upright; tools are used by chimps, crows and some parrots; and language, while still the subject of much research, is certainly prevalent beyond its most basic form in whales, dolphins and birds.

Not averse to occasional tool use.

Trade, however, is one of the few purely human characteristics. It’s a fundamental part of our existence. Homo sapiens were making chert and flint in Ethiopia from the time of their own inception and fossil evidence of established, long-distance trade puts it in the Neolithic period.

Division of labour and specialisation

Trade can be defined as an exchange of value; it gets more stuff into the hands of those who value it most. How much of that stuff there is comes down to division of labour.

If you can create axes of high enough quality for the people in the next jungle clearing to want, it makes sense for you to specialise in axes — rather than try to create spears and arrows as well — because that will enable you to make more high quality axes than you otherwise could, which means you can trade more of them for more of the other things you want. The overall productivity of the group and wealth of the individual both increase as a result of your decision to specialise.

In The Wealth of Nations Adam Smith famously noted that for one man to do all the work required to manufacture one pin would take one whole day. But if you were to divide up the labour among ten men — sharpening, gluing, squeezing out the metal, chopping up the rods — they could churn out 48,000 pins in one day (a fact currently referenced rather sloppily on our £20 notes).

But division of labour is even more powerful than that.

Take Winston Churchill. He was a fantastic bricklayer. It’s safe to say he was much better than your average bricky. He did it as a hobby, building straight, strong walls in the back of his garden that still stand to this day. But he was even better at being a global statesman.

Therefore, it was more efficient for him to employ someone to build walls so that he could focus on being a global statesman, even though he was brilliant at both. Because if he’d tried to do both — to seriously contribute to housebuilding in the UK while being a global statesman — he would have been substantially worse at both and the overall productivity of the UK would have gone down.

This concept of the division of labour, along with the specialisation of knowledge and skills, are and always have been the greatest drivers of economic growth for the simple reason that they increase trade.

‘That’s the equivalent of one person toiling away since 769 BC and not doing anything remotely productive until 1946.’

The limitations of trade

So, trade is one of the most powerful agents of change, expansion and improvement the world has ever seen. So what?

The issue is this: trade is powerful, but creating trade relationships is still extremely inefficient. Every year, around 3 billion telemarketing calls are made in the UK. Assuming that each call lasts 30 seconds, that’s 2,853-person years of work every year.

Our own research suggests the average outbound B2B conversion rate for telemarketing is 2.4%, which means roughly 2,784 person-years of work is being completely wasted every year. That’s the equivalent of one person toiling away since 769 BC — around the time the ancient Greeks were drawn west by the promise of tin — and not doing anything remotely productive until 1946.

Badly. It’s performing badly.

And bear in mind that the 2.4% of business relationships formed through telemarketing is the 2.4% that people tried to form. Of course some businesses shouldn't really exist but there are many more that fail because, while they could have contributed to the sum of human value, they weren't able to grow quickly enough.

Therefore it’s true to say that if a B2B relationship can exist profitably for both parties and for the overall benefit of the human race, far more often than not it doesn't and never will. There are more missed relationships that should exist than do exist.

Clearly, we need to make the process of establishing trade relationships simpler and more efficient. Our mission in life is to supercharge trade, to make it orders of magnitude more powerful as an agent of change by solving this two-part problem of us being unable to a) find each other and b) find each other at the right time.

That’s why all of our big data, Python-powered development is focused on automating the detection of all of the potential B2B relationships on a massive scale. We do this by collecting publicly available unstructured data and contextualising it using data science and machine learning.

In 1958 Leonard Read published I, Pencil, in which the pencil-as-narrator details every component and step required in its own creation. There’s a person who knows how to chop down trees, saw lumber, catch fish, turn the fish bones into glue, mine graphite, bring coffee to the miners, manage a graphite mine, buy and sell graphite, glue it into pencils and on and on, but there’s no mastermind; no individual overseeing the whole process — only Adam Smith’s ‘invisible hand’. Thus the aphorism, nobody knows how to make a pencil.

Now, think about a MacBook.

I mean maybe Steve Jobs knew how to make one from scratch, but you get the point. Read’s message is only ever going to become more applicable and the need for division of labour and hyper-specialisation more acute. As a result, it’s only ever going to become more necessary to improve the rate at which we form successful business relationships with each other; we need to make more things that should exist, exist.

Everything around you, from software to shoes, is a product of B2B relationships. And that’s what we’re here to do: to supercharge global trade in order to increase the sum of human value. It’s a bit of a lofty ambition, but there’s no reason it can’t be achieved. Plus it makes turning up for work quite exciting.