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