Seth Godin, read "I, Pencil"

Michael Geary | Sat, 2006-07-22 22:26

Seth Godin is one of the smartest marketing guys around. But he seems misinformed about economics.

In his article No stoplights, Seth says:

While individuals might moan about how they were treated, we all realize that without some sort of central allocation of scarce resources (like a piece of tarmac or a booth at a trade show), chaos ensues. And the chaos hurts everyone.

Well, no. Consider the lowly pencil. Cheap, effective, ubiquitous. But nobody knows how to make one. Nobody.

There is no one person on Earth who knows how to find, process, and assemble all of the materials that go into a pencil. A lot of people know their own parts of the puzzle, but nobody knows the whole thing.

No central allocator. But somehow pencils get made, and plenty of them.

Leonard Read can explain it better than I can:

I, Pencil

Now, if nobody knows how to make a pencil, how could anyone centrally allocate all of the scarce resources needed to make one? How in the world would they know what to allocate?

And watch out. If you do get that central allocator, it will turn out to be somebody who believes:

A pencil factory is not a big truck. It’s a series of tubes.

And if you don’t understand those tubes can be filled and if they are filled, when you put your lead in, it gets in line and its going to be delayed by anyone that puts into that tube enormous amounts of material, enormous amounts of material…

Submitted by seth godin (not verified) on Sun, 2006-07-23 03:26.

it’s funny, because I turned the “series of tubes” remix into the ringtone on my phone.

Your analysis doesn’t quite match with mine, and the reason is simple… the resources to make pencils aren’t scarce, not at all, at least not in comparison to booth space near the entrance of CES (only three booths) or spots to go through an intersection (only one or two) or flights on the active runway at LGA.

The runway actually is a series of tubes!

I’m no economist, it’s true, but my guess is that systems with more resource capacity (like Linux, for example) lend themselves to self-organization far better than those with ordinal scarcity and high value to the few spots available.

Thanks for reading!

Submitted by Michael Geary on Mon, 2006-07-24 12:38.

Thanks for the reply, Seth. I must apologize for calling you “misinformed”, and I appreciate your not taking offense over it. I like your way of putting it (“Your analysis doesn’t quite match with mine”) better. :-)

I learned to fly at SJC, so I can certainly agree that the runway is a series of tubes, where I often had to get in line behind enormous amounts of aluminum, enormous amounts of aluminum…

In a way we may not be too far apart: you said that an extremely scarce resource like a runway needs a central authority; I would say that it needs an owner.

Are scarce resources really that different from more plentiful ones? The “rubber” eraser in a pencil is a material that doesn’t even exist in nature. It’s hard to get more scarce than that. The eraser is the end result of a multi-step process involving people and raw materials from all around the world.

No central authority told all those people, “We have no rubber to make erasers! Here is what you must do…” It really does seem like a miracle, as Read says.

For the nine kids agreeing on a Little League batting order, I have to admit I’d probably do just as you said, step in and impose an order. But here’s an idea: what the kids had a market in batting order? Give them each a dollar, in dimes, and let them buy and trade batting positions. I think they might sort it out pretty quickly. If not, it would at least be an interesting experiment. :-)

Submitted by Don Hosek (not verified) on Tue, 2007-06-19 14:13.

After all, what exactly are they buying or selling? The addition of money into the system doesn’t make it any easier to determine who has the rights to which position. I think your experiment would result in chaos and a loss to you of nine bucks.

Lack of existence in nature, incidentally, does not make something a scarce resource. After all, gold exists in nature, so by your reasoning, you should be willing to make a trade of a pound of gold for a box of pencil erasers (and if you are, I’ll be by with the box of pencil erasers post haste).