An Economics Lesson from a Talking Pencil (Update)

Summary

Freakonomics Radio: An Economics Lesson from a Talking Pencil (Update) – Detailed Summary

Release Date: June 11, 2025
Host: Stephen Dubner
Podcast Network: Freakonomics Radio + Stitcher

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1. Introduction to the Economics of Everyday Objects

Stephen Dubner opens the episode by addressing the ongoing discourse surrounding international trade and tariffs, referencing former President Trump's defense of tariff policies. Dubner introduces the central theme of the episode—a revisited bonus episode from 2016 titled "An Economics Lesson from a Talking Pencil." This episode delves into the intricate economics behind seemingly simple everyday objects, using the pencil as a primary example.

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2. The Story of the Talking Pencil

a. Caroline Weaver and CW Pencil Enterprise [02:42 – 05:39]

Stephen Dubner introduces Caroline Weaver, the passionate proprietor of CW Pencil Enterprise, a unique storefront located on New York City's Lower East Side. Weaver, only 25 years old at the time of the store's inception, exhibits an extraordinary fascination with pencils. Her lifelong obsession is evident through personal anecdotes, such as a pencil tattoo on her forearm and her creative Halloween costumes inspired by pencils.

• Notable Quote:
  • "[04:02] Caroline Weaver: I like to make things, and I'm really interested in the way that things are made."

Weaver's store specialized in a vast assortment of pencils, ranging from common American models to rare and antique varieties from Japan, Germany, Britain, Switzerland, and India. Despite the niche market, CW Pencil Enterprise proved profitable, catering to "closet pencil nerds" who shared Weaver's enthusiasm.

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b. Exploring the Mongol 482 Pencil [05:33 – 07:02]

During a visit to Weaver's store, Dubner highlights the Mongol 482, an Eberhard Faber pencil from the 1950s. Weaver explains the evolution of pencil manufacturing, noting advancements like the incorporation of wax for smoother writing and the introduction of signature ferrules distinguishing different pencil lines.

• Notable Quote:
  • "[05:43] Weaver: It's technically Faber, but people call it Faber. I often call it Faber."

Weaver elaborates on the variety of pencils produced by Eberhard Faber, emphasizing models like the Blackwing, known for its superior quality.

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3. Leonard Read's "I Pencil" and Economic Insights

Dubner transitions to discuss Leonard Read's seminal essay, "I Pencil," published in 1958 by the Foundation for Economic Education (FEE). The essay anthropomorphizes a pencil, narrating its complex journey from raw materials to a finished product, thereby illustrating the intricacies of free-market capitalism.

a. Introduction to "I Pencil" [07:06 – 09:26]

• Notable Quote:
  • "[08:40] Matt Ridley: I am a lead pencil, the ordinary wooden pencil familiar to all boys and girls and adults who can read and write."

Science writer Matt Ridley praises "I Pencil" as both "extremely obvious" and "extremely revelatory," highlighting its profound simplicity in explaining economic principles. Economist Tim Harford adds that the essay underscores the complexity of creating even the simplest products, emphasizing humility and caution when attempting to solve large-scale economic problems.

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4. The Manufacturing Process: Insights from General Pencil Company

a. Interview with Jim Weissenborn [24:23 – 28:09]

Stephen Dubner interviews Jim Weissenborn, a fourth-generation pencil maker from General Pencil Company in Jersey City, New Jersey. As one of the last remaining pencil factories in the United States, General Pencil exemplifies the detailed manufacturing process described in "I Pencil."

Manufacturing Highlights:

1. Graphite and Clay Mixture [25:38 – 26:16]:
   The process begins in the factory's basement, where graphite and clay are pulverized into a fine mixture using traditional tumbling barrels.

2. Extrusion and Firing [26:16 – 26:57]:
   The mixture is dried, ground, and extruded into long strands resembling soft, gray spaghetti, which are then fired in kilns at approximately 1800 degrees Fahrenheit.

3. Wood Processing [26:57 – 27:08]:
   Wooden slats, typically California cedar, are grooved to accommodate the pencil lead, which is then sandwiched between glued wooden pieces.

4. Adaptation to Market Changes [27:08 – 27:58]:
   Faced with competition from cheaper imports, General Pencil shifted from mass-producing standard yellow pencils to crafting smaller batches of specialized, higher-quality products like drawing and coloring pencils.

• Notable Quote:
  • "[27:53] Jim Weissenborn: You know, romantically? That's a nice story. No one makes a pencil. I think we make a pencil."

Despite Weaver's assertion that "no one makes a pencil," Weissenborn acknowledges the collective effort involved in pencil manufacturing, mirroring the sentiments expressed in "I Pencil."

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5. A Parallel Narrative: Thomas Thwaites' Toaster Project

a. The Challenge of Making a Toaster from Scratch [31:31 – 41:24]

Dubner introduces the story of Thomas Thwaites, a London design student who embarked on a mission to build a toaster entirely from raw materials. This endeavor serves as a modern parallel to "I Pencil," illustrating the immense complexity inherent in manufacturing everyday objects.

Key Steps and Challenges:

1. Material Acquisition [32:34 – 34:54]:
   Thwaites sourced iron ore from a disused mine in Wales, only to realize the difficulty in converting it into usable metal without advanced equipment.

2. Experimentation and Failure [35:03 – 35:55]:
   Utilizing unconventional methods like a backyard furnace and a microwave smelting process, Thwaites faced repeated failures, including an exploded microwave and unsuccessful attempts to create functional metal components.

3. Plastic Procurement [36:34 – 38:41]:
   In lieu of extracting oil to produce plastic, Thwaites resorted to recycling plastic waste, highlighting the reliance on existing industrial processes and materials.

4. Final Assembly and Partial Success [39:09 – 41:24]:
   The homemade toaster, though aesthetically resembling a toaster, failed to function as intended, melting into an unstable structure that caught fire during a demonstration.

• Notable Quotes:
  • "[35:49] Caroline Weaver: I literally bought an empty suitcase with me and filled it up with iron ore."
  • "[39:09] Caroline Weaver: To me, it looks kind of beautiful, but other people have said it looks like a weird kind of melted caveman toaster."

Lessons Learned:

Thwaites' ambitious project underscores the vast network of expertise, specialization, and industrial infrastructure required to produce even the simplest consumer goods. His repeated obstacles and eventual partial failure mirror the complexities highlighted in "I Pencil," reinforcing the notion that individual endeavors to recreate such products from scratch are fraught with insurmountable challenges.

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6. Deeper Economic Conclusions

a. Interdependence and Specialization [16:39 – 19:23]

Economist Milton Friedman and Matt Ridley discuss the profound implications of "I Pencil," emphasizing the interconnectedness and specialization that underpin modern economies. The absence of a single orchestrator in the pencil's creation exemplifies how free markets facilitate complex productions through voluntary exchanges and the "invisible hand."

• Notable Quotes:
  • "[16:42] Stephen Dubner: Did it get made? That's Milton Friedman..."
  • "[17:20] Matt Ridley: Nobody has had a gun to his head."
  • "[17:36] Matt Ridley: The absence of a mastermind of anyone dictating or forcibly directing these countless actions which bring me into being."

Friedman articulates that the pencil's creation involves countless independent actors, none motivated by the objective of producing a pencil but rather by self-interest—earning money, supporting families—thereby demonstrating the efficiency and creativity of free-market systems.

b. Addressing Market Failures [20:13 – 23:09]

Tim Harford provides a nuanced perspective, acknowledging the benefits of free markets while also recognizing inherent market failures. He cautions against extreme libertarian interpretations, advocating instead for a balanced approach where governments avoid overstepping but still address areas where markets falter, such as infrastructure, education, and legal systems.

• Notable Quotes:
  • "[21:08] Tim Harford: ... there are all kinds of areas of the global economy where you could say, I'm not happy with what the free market is giving me."
  • "[22:10] Tim Harford: So, yes, one lesson is that there will always be unintended consequences whenever you start messing around with a complex system."

Harford emphasizes humility and meticulous experimentation when addressing complex economic and societal issues, suggesting that the free market's resilience stems from its capacity for continual adaptation and innovation through trial and error.

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7. Reflections and Closing Thoughts

Dubner concludes the episode by intertwining the narratives of the pencil and the toaster, reinforcing the central thesis that the remarkable products of modern economies are products of intricate, interdependent systems facilitated by specialized knowledge and voluntary collaboration within free markets.

• Notable Quote:
  • "[28:09] Matt Ridley: Simple, yet not a single person on the face of this earth knows how to make me."

The episode underscores that while individual efforts to replicate complex products highlight their sophistication, they also illuminate the underlying economic structures that make such products accessible and affordable to consumers worldwide.

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8. Production Credits

• Produced by: Christopher Worth
• Updated by: Dalvin Abuaji
• Mixed by: Merritt Jacob and Jasmine Klinger
• Staff Includes: Alina Coleman, Augusta Chapman, Teo Jacobs, Eleanor Osborne, Ellen Frankman, Elsa Hernandez, Gabriel Roth, Greg Rippon, Jeremy Johnston, Morgan Levy, Sarah Lilly, and Zach Lipinski.
• Theme Song: "Mr. Fortune" by The Hitchhikers
• Composer: Luis Guerra

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Conclusion

This episode of Freakonomics Radio masterfully explores the hidden economic intricacies behind everyday objects, using the pencil as a focal point to elucidate broader principles of free-market capitalism, specialization, and global interdependence. By juxtaposing the pencil's complex production with Thomas Thwaites' ambitious yet flawed toaster project, the episode vividly illustrates the marvels and challenges inherent in modern economic systems.

Transcript

[Stephen Dubner]

Freakonomics Radio is sponsored by Intuit QuickBooks. Do you own a business that's ready to thrive? Intuit QuickBooks is an all in one business solution that can help with those day to day tasks like invoicing and expenses. Manage and grow your business all in one place. Intuit QuickBooks your way to money get 90% off for 3 months limited time only terms and conditions apply. Money movement services are provided by Intuit Payments, Inc. Licensed as a money transmitter by the New York State Department of Financial Services. As America's leading business lender, bank of America is on your corner and in your corner. With $215 billion in business loans and over 3,700 business specialists across the nation, we help businesses thrive so communities prosper. What would you like the power to do? Learn [e-mail] LOCALBUSINESS bank of America Official bank of FIFA Club World Cup 2025 Copyright 2025 bank of America Corporation. All rights reserved. Hey there, it's Stephen Dubner. We've all been hearing a lot lately about international trade and especially the restrictions on trade in the form of tariffs. President Trump, defending his tariff policy on Meet the Press, said that restricting trade means Americans will have to make do with less stuff, but that that's okay. I don't think a beautiful baby girl needs that's 11 years old, needs to have 30 dolls. I think they can have three dolls or four dolls. They don't need to have 250 pencils, they can have five. Most economists think that tariffs are a bad idea. They argue that restricting trade has more downsides than upsides. Elon Musk, back when he was still the president's first buddy, was in that camp, and he reportedly urged Trump to reverse the tariffs. Musk also posted an interesting video on X, formerly known as Twitter. There's not a single person in the world who could make this pencil.

[Matt Ridley]

Remarkable statement.

[Stephen Dubner]

Not at all. There's a lot more to be said about tariffs and free trade, and we will get into that over time. But for now, here's a simpler question. Why are they talking about pencils? To answer that, we're playing you this bonus episode, which we made in 2016 and have now updated facts and figures as necessary. This episode is about the pencil, something apparently simple that turns out to be very complicated. It begins, hi.

[Caroline Weaver]

Hello.

[Stephen Dubner]

Good morning. Do you have any pencils?

[Caroline Weaver]

I'm looking for many pencils.

[Stephen Dubner]

I'm Stephen.

[Caroline Weaver]

Caroline.

[Stephen Dubner]

Nice to meet you. In an unusual New York City shop, a tiny storefront on the Lower east side back when we made the episode, the shop had just opened.

[Caroline Weaver]

We sell only pencils, new pencils, rare pencils, antique pencils, novelty pencils, pencil accessories.

[Stephen Dubner]

That is Caroline Weaver, who was the proprietor of CW Pencil Enterprise.

[Caroline Weaver]

I grew up in Marietta, Ohio, which is in the southeast corner of Ohio, just across the river from west Virginia.

[Stephen Dubner]

Weaver was only 25 years old when she opened her store. That's young to be the proprietor of any shop, much less a pencil shop. But then after you speak with her for a bit, it's hard to imagine Weaver doing anything else.

[Caroline Weaver]

It was just kind of a lifelong obsession.

[Stephen Dubner]

On the inside of her left forearm is a pencil tattoo.

[Caroline Weaver]

My mother drew it for me. I asked her to take a black ticonderoga, sharpen it three times, and draw it to scale. And that's what she did.

[Stephen Dubner]

And you can surely guess what Weaver and a friend dressed up as for Halloween.

[Caroline Weaver]

We both wore these paper pencil point hats that we made, and we wore pink shoes like an eraser, and then painted whatever, the logo of our pencil on our clothes.

[Stephen Dubner]

What is it about the pencil that so captured Caroline Weaver's imagination?

[Caroline Weaver]

I like to make things, and I'm really interested in the way that things are made. And so at a really young age, I developed an interest in these objects that appear to be really, really simple, but are actually very complicated in the nature in which they're made and kind of the nuances to all of the parts that they're made of.

[Stephen Dubner]

She sold American pencils, Japanese and German and British and Swiss and Indian pencils.

[Caroline Weaver]

Every country kind of has its own normal as far as pencils go, and often those things aren't available outside of their home countries.

[Stephen Dubner]

So talk for just a second about the economics of your shop.

[Caroline Weaver]

Mm.

[Stephen Dubner]

Is it profitable?

[Caroline Weaver]

Believe it or not, it is profitable. It turns out there are a lot of closet pencil nerds out there who want these things as much as I do.

[Stephen Dubner]

Weaver's store closed in 2021, which, as you will recall, was a terrible time for most retail. She now runs the locavore guide, an online directory that promotes small businesses in New York City like the one she used to run. While it survived, CW pencil enterprise carried an impressive variety of pencils, variety in color, in country of origin, and in price, some costing as little as 30 cents, and some vintage pencils selling for $75. We had visited her to see one particular pencil, which is so unassuming, so typical of its pencilness, that I didn't even realize Weaver had opened a drawer and pulled out a box of them. Oh, this is the 482.

[Caroline Weaver]

That is the 482. Yeah.

[Stephen Dubner]

It's a classic Mongol from roughly when?

[Caroline Weaver]

From roughly the 1950s.

[Stephen Dubner]

Mongol 42 from Eberhard Faber. It's Faber, not Faber.

[Caroline Weaver]

It's technically Faber, but people call it Faber. I often call it Faber.

[Stephen Dubner]

Okay, so how many different pencils did Eberhard Faber make?

[Caroline Weaver]

Oh, probably hundreds. They were mostly known for the Mongol and the Blackwing and the Van Dyke and the microtonic.

[Stephen Dubner]

Was the Mongol 482 kind of the star of the line or.

[Caroline Weaver]

No, I would say that the Blackwing was the star of the line, but the Mongol was their sort of, like, middle range everyday pencil. By the point that this one was made, graphite technology had advanced a little bit. And so it's generally a much smoother pencil because that's when they figured out that if they put wax in pencils, they're a whole lot smoother than just using graphite and clay and some sort of binder. They changed the aesthetic of it a little bit too. The classic Mongol ferrule is black with a gold band. Around that time, that's when pencil companies kind of started developing their signature ferrule for their different pencils.

[Stephen Dubner]

Today on Freakonomics radio, the Mongol 482 may be just a middle range everyday pencil, but it's also one of the most famous pencils in history. Famous at least in economics, because the Mongol 482 has written its autobiography.

[Matt Ridley]

My family tree begins with what, in fact, is a tree, a cedar of straight grain that grows in Northern California and Oregon.

[Stephen Dubner]

It is a complex story about how a simple thing comes into being.

[Caroline Weaver]

If I really wanted to, I could probably make a pencil.

[Stephen Dubner]

But could you really, Caroline Weaver? Could you really?

[Caroline Weaver]

All these kind of different, specialized materials, and I was like, oh, God, you know. So I'm trying to replicate this entirely myself. Where do I start?

[Stephen Dubner]

And what can a lowly pencil teach us about solving some of the world's hardest problems?

[Tim Harford]

The lesson I draw. When you try to fix those problems, be humble, be careful, because they're far more complicated than you could possibly imagine.

[Stephen Dubner]

This is Freakonomics Radio, the podcast that explores the hidden side of everything with your host, Stephen Dubner. Let's begin in 1946. That's when a man named Leonard Reed starts an organization called the foundation for Economic Education, or fee. The FEE is a think tank meant to extol the virtues of free market capitalism. It's an early proponent of libertarianism in the U.S. reid was a Businessman from Michigan, he started out in wholesale groceries, later ran the Los Angeles Chamber of Commerce. In 1958, the Fee published an essay written by Reid called I Pencil.

[Matt Ridley]

I am a lead pencil, the ordinary wooden pencil familiar to all boys and girls and adults who can read and write.

[Stephen Dubner]

Yes, the essay is told in the voice of the pencil, an Eberhard Faber Mongol 482.

[Matt Ridley]

You may wonder why I should write a genealogy, which is a bit weird.

[Stephen Dubner]

But also this pencil has a chip on its shoulder.

[Matt Ridley]

Sadly, I'm taken for granted by those who use me as if I were a mere incident and without background.

[Stephen Dubner]

The pencil is also a bit of a braggart.

[Matt Ridley]

I have a profound lesson to teach.

[Stephen Dubner]

But you know what? It does have a profound lesson to teach. I Pencil has become a classic in the canon of economics literature, translated into every major language.

[Milton Friedman]

It's rather beautifully written, this essay.

[Stephen Dubner]

That's Matt Ridley, a science writer, a British viscount, and a retired member of the House of Lords. He has been very much influenced by the ideas of I Pencil.

[Milton Friedman]

And it really struck me between the eyes because this essay is at once both extremely obvious when you think about it and extremely revelatory.

[Tim Harford]

Hello. Hello. This is Tim.

[Stephen Dubner]

And that is Tim Harford, an economist.

[Tim Harford]

Sometimes known as the Undercover Economist. I write books of that title and a Financial Times column.

[Stephen Dubner]

Tim Harford and Matt Ridley are going to help us retell the pencil's autobiography, which is really more of a parable. It first conveys a set of facts, then it reaches a shallow conclusion and ultimately a deeper conclusion.

[Matt Ridley]

Just as you can't trace your family tree back very far, so it is impossible for me to name and explain all my antecedents. But I would like to suggest enough of them to impress upon you the richness and complexity of my background.

[Stephen Dubner]

While researching the essay, Leonard Read visited an Eberhard Faber pencil factory in Wilkes Barre, Pennsylvania. What he found was a supply chain that even in the 1950s, reached around the globe. Let's start with the wood.

[Matt Ridley]

My family tree begins with what, in fact, is a tree, a cedar of straight grain that grows in Northern California and Oregon.

[Tim Harford]

Think about all the processes, all the people who were involved in cutting down those trees and in machining those trees, the people who designed the chainsaws and the axes and the trucks that ship the cedar across country.

[Matt Ridley]

Why untold thousands of persons had a hand in every cup of coffee that the loggers drink.

[Stephen Dubner]

Next, the pencil tells us the logs were shipped to a mill in San.

[Milton Friedman]

Leandro, California, and there they were milled and cut into Pencil like shapes.

[Stephen Dubner]

The pencil acknowledges all the workers who built the hydroelectric dam that powers the mill. And then there's the lead, which of.

[Tim Harford]

Course is not made of lead, is.

[Milton Friedman]

Graphite, mined from Ceylon, Sri Lanka, mixed with clay, paraffin wax, candelilla wax, and hydrogenated natural fats. Did we know that? No, we didn't.

[Stephen Dubner]

And here the pencil nods toward all the graphite miners, the men who built the ships that transport the graphite, the harbor pilots who guide those ships in from the sea.

[Matt Ridley]

Even the lighthouse keepers along the way assisted in my berth.

[Stephen Dubner]

And then there's the lacquer, the paint that gives the Mongol 482 its bright yellow color.

[Matt Ridley]

My cedar receives six coats of lacquer.

[Stephen Dubner]

The lacquer is made with oil from castor beans and a load of other ingredients.

[Matt Ridley]

Why, even the process by which the lacquer is made, a beautiful yellow, involved the skills of more persons than one can enumerate.

[Milton Friedman]

The number of people involved in creating this pencil is enormous.

[Tim Harford]

And then he goes into the same detail about the ferule, which is the brass metal at the end of the pencil.

[Milton Friedman]

The brass on the top of the pencil, the so called ferrule, is made from zinc and copper, which have to be mined again.

[Stephen Dubner]

Many, many hands involved, many machines, many processes. The same goes for the eraser, which you might think is made of rubber. I thought it was made of rubber, but it's actually made from rapeseed oil.

[Milton Friedman]

Mixed with sulfur chloride and pumice and calcium sulfide to give it color and that kind of thing. All these incredible ingredients going into this very simple object.

[Tim Harford]

The pencil explains all this detail. But in each case, the pencil is pointing out that there are these global supply chains, there are all of these different inventions going way back in all of these different people involved. And if you put it all together, you realize there isn't a single person in the world who would really understand how to make a pencil from scratch from the raw materials.

[Matt Ridley]

Simple, yet not a single person on the face of this earth knows how to make me.

[Stephen Dubner]

This is the shallow conclusion of I pencil.

[Matt Ridley]

Actually, millions of human beings have had a hand in my creation, no one of whom even knows more than a very few of the others. There isn't a single person in all these millions, including the president of the pencil company, who contributes more than a tiny, infinitesimal bit of know how.

[Stephen Dubner]

It's a bold claim the pencil makes. Not a single person knows how to make me. But the claim would seem to be justified. And it's an interesting way of looking at the world. I think you'd agree at how interdependent we are, how specialized we are. The deeper conclusion that Leonard Read was making. However, this is where things get really interesting. That's coming up after the break. I'm Stephen Dubner and this is Freakonomics Radio. Freakonomics Radio is sponsored by Empower. Say you've always wanted to take a spontaneous trip to the Caribbean by getting smart with your money, you can do things like that. With Empower, you can start making the most of your money so you can go out and live a little. So use Empower and get good at money so you can be a little bad. Join their 19 million customers [e-mail] not an Empower client, paid or sponsored. Hi, Zoe Saldana. Welcome to T Mobile. Here's your new iPhone 16 Pro on us. Thanks. And here's my old phone to trade in. You don't need to trade in. When you switch to T Mobile, we'll give you a new iPhone 16 Pro Plus. We'll help you pay off your old Phone up to 800 bucks and you still get to keep it. There's always a trade in. Not right now. @ T Mobile. I feel like I have to give you something in return for karma. That's okay. I don't really have much in my purse. Oh, let's see. Hand sanitizer. It's lavender. I'm good. Seriously. Let me check this pocket. Oh, mints. Really, I'm fine. Oh, I have raisins. I'm a mom. Wait, wait one sec. I've got cupcakes in the car.

[Matt Ridley]

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[Stephen Dubner]

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To 800 bucks with 24 monthly bill credits. New line 100 plus a month on experience beyond Finance Agreement 999.99 and qualify imported for well qualified plus tax and $10 connection charge. Pay off via virtual prepaid card. Allow 15 days credits and balance due if you pay off early or cancel. See T mobile.com Ten years from today, Lisa Schneider will trade in her office job to become the leader of a pack of dogs. As the owner of dog Rescue. That is a second act made possible by the reskilling courses Lisa's taking now with AARP to help make sure her income lives as long as she does. And she can finally run with the big dogs and the small dogs who just think they're big dogs. That's why the younger you are, the more you need AARP. Learn more at aarp.org skills okay, we've been talking about Leonard Read's amazing talking pencil. He likes to say that nobody knows how to make me. The miracle of this pencil isn't that.

[Matt Ridley]

Nobody knows how to make it. The miracle of the pencil is how.

[Stephen Dubner]

Did it get made? That's Milton Friedman, one of the giants of modern economics. In 1980 he made a public TV series called Free to Choose and published a book of the same name. He borrowed Leonard Reed's parable, this is the only prop I have for this TV show. As you can see, it's a plain yellow pencil. The miracle that allows for the pencil to be made, Friedman says, is the price mechanism that lets buyers meet sellers and which makes free markets flow freely. I am trading with thousands of people all over the world. Not one of them has been forced to do it.

[Matt Ridley]

Nobody has had a gun to his head.

[Stephen Dubner]

They've all done it.

[Matt Ridley]

Why? Because each one of them thinks he's.

[Stephen Dubner]

Better off in this transaction. You might know this concept as the invisible hand, as the proto economist Adam Smith named it. Which suggests, as the pencil puts it.

[Matt Ridley]

The absence of a mastermind of anyone dictating or forcibly directing these countless actions which bring me into being.

[Stephen Dubner]

In other words, none of the millions of people involved directly or indirectly in making a pencil or cared one bit about making a pencil, maybe didn't even know what they were making.

[Milton Friedman]

Not one of them is motivated by making a pencil. They're motivated by earning money, providing for their family. And the astounding thing, as Leonard Read says, is the absence of a mastermind. There is no one dictating or forcibly directing these countless actions, as he put it.

[Stephen Dubner]

So the deeper conclusion of I pencil is that a well oiled free market can create something that even an alchemist wouldn't dream of. Now this may not be the way you see free market capitalism. And let's be honest, there are market failures. There are segments of the economy that seem stacked against small players or are too susceptible to self dealing or corruption. But the point is that free market capitalism is, is better than all the known alternatives. Now let's keep in mind that Leonard reed writing in 1958 and even Milton Friedman speaking in 1980 were responding to a different political climate. They were both concerned about the legacy of Roosevelt's New Deal programs and the growing involvement of the government in American economic life. They were also concerned about communism and what they saw as the tyranny of state run economies in places like The Soviet Union. Just listen to the pencil.

[Matt Ridley]

If you can become aware of the miraculousness which I symbolize, you can help save the freedom mankind is so unhappily losing.

[Stephen Dubner]

The freedom mankind is so unhappily losing. Reid sounds worried. Worried that the US Government and others like it were disastrously veering to the left, that the government wanted to get more involved in running things. And the governments don't always do such a great job of running things, especially when it comes to the economy. So really the deep, deep conclusion of I pencil is hey, US Government, get out of the way.

[Matt Ridley]

Leave all creative energies uninhibited. Merely organize society to act in harmony with this lesson. Let society's legal apparatus remove all obstacles the best it can. Permit these creative know hows freely to flow. Have faith that free men and women will respond to the invisible hand.

[Stephen Dubner]

Does Leonard Read's essay sound like libertarian propaganda? Of course it does. That's what it was to some degree. So if you don't lean that way, you may not buy its message. There's also an argument to be made, as some people have made, that the pencil conveniently omitted some important facts from its autobiography, like all the goods and services the government provides that help directly or indirectly in the pencil's manufacture and sale. The roads that move the lumber and other materials, the public schools that educated the loggers and the mill workers, the same schools that, at least in 1958 would have ordered thousands upon thousands of pencils for their students. And then there are the less tangible things, like a legal system to uphold contracts and the protections provided by police and the courts. Here again is the economist Tim Harford.

[Tim Harford]

Clearly, in a modern economy, a tremendous amount of the infrastructure that we rely on has been paid for by taxpayers and coordinated in some way by state government, local government, or by the federal government. Some of these things could be provided privately, but as a matter of fact, they are provided by government and they seem to be provided reasonably well.

[Stephen Dubner]

So if your takeaway from I pencil is that governments should get completely out.

[Tim Harford]

Of the way, I think that's an extreme reading. It's not impossible to read it that way, but you're really pushing it. If your reading, however, is the free market can do a lot. It does amazing things, and government should be careful before it sort of stamps its great big boots all over free market process, then I think that that's a fair reading, and I think that's a wise warning.

[Stephen Dubner]

It is a warning that Harford says is worth heeding, especially as we are collectively thinking about how to deal with things like climate change, income inequality, the stability of our financial system.

[Tim Harford]

So there are all kinds of areas of the global economy where you could say, I'm not happy with what the free market is giving me. The lesson I draw from the story of high pencil is when you try to fix those problems, be humble, be careful, because they're far more complicated than you could possibly imagine. And any fix to, for example, the energy system is going to involve far more people and far more countries and far more technologies than you could imagine. Now, that doesn't mean that you should just leave the market to do everything, but it does suggest a particular way of solving problems.

[Stephen Dubner]

And I guess in addition to requiring input from a lot of other people because of the complexity, it also implies that you may indeed solve one part of the problem, but that solution may indeed ripple up and turn into a bigger problem in another realm that you may not care about. But that actually does affect a lot of people. I mean, some kind of unintended consequence, I guess. Yes.

[Tim Harford]

So, yes, one lesson is that there will always be unintended consequences whenever you start messing around with a complex system. I think another lesson is that trial and error is a really important process. This is the lesson I draw in my book, Adapt. You need to carry out lots of experiments and you need to create a system that allows lots of experiments. The free market system is an experimental system, but it's not the only experimental system. If you're going to start messing with global supply chains, with the energy system, with the financial system, you want to make things work better, you are going to need to do that step by step, constantly gathering data about what's working and what's not and running really good experiments. And I think where Leonard Read was absolutely right was to suggest that when the free market works well, it delivers amazing results. Well, why does it deliver amazing results? One reason is because there's lots and lots of small experiments and lots and lots of small failures. There are pencil manufacturers or lumberjacks or coffee companies or truck companies making bad decisions and going bankrupt all the time. But the system as a whole is resilient and stable and creative. As Leonard Reid rightly pointed out, it produces miracles.

[Stephen Dubner]

And some of those miracles are produced here.

[Jim Weissenborn]

Okay, here we go. Jim weizenborn. I'm a fourth generation pencil maker and we're in Jersey City, New Jersey, at the home of General Pencil Company.

[Stephen Dubner]

General Pencil was incorporated in the late 19th century.

[Jim Weissenborn]

We've been in this location since 1917.

[Stephen Dubner]

When we spoke with Weissenborn back in 2015, he was the boss at General Pencil. He's now mostly retired, but he still helps some of the younger members of the Weissenborn family run the company. General Pencil is one of the last few remaining pencil factories in the United States.

[Jim Weissenborn]

You're going to see probably something that's not available anyplace in the world. It's a total production of a pencil from the very rawest materials to the finished product. We even do all our own marketing. It's a kind of fun.

[Stephen Dubner]

There are only a handful of American pencil factories left. Sometimes, when one shut down, Weissenborn would buy their old machinery and store it away for spare parts.

[Jim Weissenborn]

I'm going to take you in the way from the very beginning of the process. Okay?

[Stephen Dubner]

All right, Sounds good.

[Caroline Weaver]

We're going down.

[Jim Weissenborn]

Graphite slippery.

[Stephen Dubner]

Weissenborn led our producer, Christopher Worth, on a tour. It began by walking down a steep set of stairs into the factory's basement, where giant metal barrels were churning up a mixture of graphite and clay.

[Jim Weissenborn]

These barrels are the secret to our product. These are tumbling barrels they used in Germany 100 years ago. We've never changed this process. And what you hear going around in there are Belgian stones off the coast of Belgium, and they pulverize the graphite and clay into a top real fine. And that's where your pencils become smooth.

[Stephen Dubner]

That fine mixture is then dried, ground up again, and mixed with water. Then it's extruded through a machine that makes pencil leads that at this point look like long strands of soft, gray spaghetti. Those are then dried again and fired in kilns at around 1800 degrees Fahrenheit.

[Jim Weissenborn]

This is the traditional way of making. If you went through a pencil factory 100 years ago in Germany, this is what you see. I mean, you're in a time warp.

[Stephen Dubner]

The tour heads into the wood shop.

[Jim Weissenborn]

Great stuff, huh?

[Stephen Dubner]

Yeah. A machine is cutting a row of tiny grooves into the thin, rectangular wooden slats. This is how the lead gets into the pencil. A lead is laid into each of the grooves, and then another grooved wooden slat is glued on top.

[Jim Weissenborn]

These are number two HPA pads coming down the slats. The bonding process is that the glue goes the bottom one. They're flipped over and make a sandwich.

[Stephen Dubner]

Most of the wood that General Pencil uses is California cedar, just like in I pencil. So some things have stayed the same, but a lot has changed also.

[Jim Weissenborn]

The old days, 80% we made were yellow pencil. We had all the contracts. The yellow unified school districts in Seattle, school districts in state of New York we were running a truckload, a truckload of pencils out of here. I have all the kids, my wife working in here. This is back 40 years ago.

[Stephen Dubner]

But today those standard yellow pencils, Weissenborn says are made so cheaply elsewhere, primarily in China, that it's impossible to compete. General Pencil's solution was to start making smaller batches of specialized, higher quality products. Drawing pencils and coloring pencils, things like that. All told, There are 117 steps in making a pencil in this factory and Jim Weissenborn knows every single one. So what does he think of the pencil's argument in I pencil?

[Jim Weissenborn]

You know, romantically? That's a nice story. No one makes a pencil. I think we make a pencil.

[Stephen Dubner]

But Weissenborn admits he's never even been to a graphite mine or a clay mine. He doesn't cut down the cedars out west. Which means Leonard Read was right. Doesn't it?

[Matt Ridley]

Simple, yet not a single person on the face of this earth knows how to make me.

[Stephen Dubner]

Not a single person, even the owner of a complete pencil factory really knows how to make an object as seemingly simple as a pencil. Not that most of us would ever want or need to do such a thing. Right? That was really Leonard Reed's point, that the miracle of a well functioning free market is that it provides us with what we want, generally speaking, at a price we can afford, at least most of the time. So a kiwifruit grown in New Zealand or Italy, I can buy that for a dollar in a New York grocery store, even an online grocery store which delivers to my door. What do you want to buy? A German made car? A T shirt made in Indonesia and Bangladesh, spun from cotton grown in Mississippi? Yep, you can buy that too. But this does not stop some people from trying to make their own stuff from the ground up.

[Tim Harford]

So it's a simple everyday product. We British, we love our toast.

[Stephen Dubner]

That's coming up after the break. I'm Stephen Dubner and this is Freakonomics Radio. Freakonomics Radio is sponsored by netsuite. It's an interesting time for business. Tariff and trade policies are dynamic and your business needs to adapt in real time. You need total visibility from global shipments to tariff impacts to real time cash flow. That's NetSuite by Oracle, your AI powered business management suite. Trusted by over 41,000 businesses. NetSuite is the number one cloud ERP bringing accounting, financial management, inventory and HR into one source of truth, giving you the control you need to make quick decisions. Get real time forecasting with actionable. Data and automate everyday tasks with AI so your teams stay strategic. NetSuite helps you know what's stuck, what it's costing you, and how to pivot fast. If your revenues are at least in the seven figures, download the free ebook Navigating Global Trade. Three insights for leaders at netsuite.com freak that's netsuite.com freq with leading networking and connectivity, advanced cybersecurity and expert partnership. Comcast Business helps turn today's enterprises into engines of modern business Powering the engine of modern business powering possibilities. Restrictions apply. Craftsman days are here at Lowe's with big savings on the tools you need. Now get a free select tool when you buy the Craftsman V22 pack battery kit. Whether it's the backyard, the bathroom or beyond, Craftsman has the tools to help you power through and get the project done right because DIYing is unpredictable. But your tools shouldn't be. Shop Craftsman at Lowe's today valid through 618. Wall supplies last selection varies by location. It could be that by this point in our episode, you are sick of pencils, so it's time to talk about how something else gets made.

[Tim Harford]

You wouldn't think so, but there is a very interesting modern parallel to Len Reid's eye pencil story.

[Stephen Dubner]

That again, is the economist and writer Tim Harford.

[Tim Harford]

A few years ago, a London design student called Thomas Thwaites decided that he was going to build a toaster from scratch.

[Caroline Weaver]

You know, mundane electric toaster.

[Stephen Dubner]

And that is Thomas Thwaites. He wanted to better understand just how finished consumer goods get. To him, a toaster seemed like a relatively simple project.

[Caroline Weaver]

You know, obviously I use technology every day. It's like amazingly complex. But at source, it came from just a bunch of rocks and sludge buried in holes in the ground around the world.

[Stephen Dubner]

Thwaites now works as a freelance designer and he teaches at Central St. Martin's which is part of the University of the Arts, London. His toaster quest began when he was a student at the Royal College of Art.

[Caroline Weaver]

So I went and bought the cheapest toaster I could find because I thought the cheapest toaster will be the simplest to reverse engineer.

[Tim Harford]

And this toaster costs about five or six dollars at the local store. So it's a simple, everyday product. We British, we love our toast.

[Stephen Dubner]

Thwaites took home the toaster and took it apart.

[Caroline Weaver]

And to my dismay, there were kind of 400 individual bits that had been made and then come together into this item whose sole purpose was to make toasting a slice of bread Slightly more convenient in the morning.

[Stephen Dubner]

Those 400 individual bits were made of many different materials.

[Tim Harford]

There's copper, there's nickel, there's plastic, which is really important because it makes the toaster look good and also means you don't get electrocuted. There's mica, which is a sort of slate like material. And that's what you wrap the heating.

[Caroline Weaver]

Elements around, all these different specialized materials. And I was like, oh God, I'm trying to replicate this entirely myself. Where do I start? So my strategy became to simplify and substitute and pare back to five materials that I thought I could manage and would give me the best toaster I could make.

[Stephen Dubner]

Those five materials were steel, nickel, copper, mica and plastic. But even with the first material, steel, Thwaites hit a roadblock. The steel making process is incredibly difficult, especially for an art and design student. So he settled on iron, which is somewhat less complicated.

[Tim Harford]

It turns out Britain's a post industrial society. We don't have any iron mines anymore, but we have a disused iron mine.

[Stephen Dubner]

Thwaites called up an old iron mine in Wales that had been turned into.

[Caroline Weaver]

A museum and said, oh, hi, I'm trying to make a toaster. The guy on the other end of the phone was like, yeah, sure, come down. So I jumped on the train and went to Wales to this iron mine.

[Tim Harford]

Turns out when he got there, they'd misunderstood him on the phone. They thought he'd said, I'm a design student and I'm trying to make a poster, which I think makes a lot more sense. But anyway, they cleared that up and he went back home with a suitcase full of iron ore.

[Caroline Weaver]

I literally bought an empty suitcase with me and filled it up with iron ore.

[Tim Harford]

But then once you've got iron ore, well, what do you do with that? How do you turn iron ore into iron?

[Caroline Weaver]

Good question. Yeah, it's like fundamental, isn't it? How do you make metal from rock? Have a vague idea. You've got to get it hot. Turns out it's a little more complex than that.

[Stephen Dubner]

Thwaites consulted professors and some books on metallurgy. He landed on a method from the 15th century with a few modifications.

[Tim Harford]

He got a big trash can, he got a leaf blower, he got barbecue coals. And so he created this backyard furnace.

[Stephen Dubner]

There is a video, just search for Thwaites. That's T H W A I T E S and toaster project. And the video shows flames pouring out of the trash can.

[Caroline Weaver]

Well, it might be working. We don't actually know.

[Stephen Dubner]

The fire produced a Big lump of heavy gray matter that looked like metal.

[Caroline Weaver]

I thought, my God, I have done it. First time. I must be some kind of genius, because it took the rest of humanity thousands and thousands of years to move from the Bronze Age to the Iron Age. But, hey, me just pulled it out of the bag.

[Stephen Dubner]

Alas, Thwaites was not quite as genius as he imagined. The lump was still just iron ore. So he read some more and landed on another idea.

[Caroline Weaver]

What about a microwave?

[Stephen Dubner]

He found a patented process for smelting iron in a microwave oven.

[Caroline Weaver]

My mum had a microwave, so I went round to her house and kind of borrowed it.

[Stephen Dubner]

Kind of borrowed because his mother's microwave, in fact, exploded.

[Tim Harford]

But the second one survived and he managed to get iron.

[Stephen Dubner]

I love that in the service of making a toaster, he destroys at least one microwave along the way.

[Tim Harford]

He destroys a microwave and he has to go through a lot of shortcuts.

[Stephen Dubner]

To get the toaster with the nickel he needed. For example, Thwaites couldn't find any old nickel mine turned museum in Britain. The closest extant mind he could find was in Siberia.

[Caroline Weaver]

So in the end, I had to. Even though they had the picture of the Queen on them, which makes it illegal, I had to melt down some Canadian commemorative nickels to get my nickel.

[Stephen Dubner]

Thwaites also finally managed to get hold of some copper and mica.

[Tim Harford]

Tremendous difficulty in making all of these.

[Stephen Dubner]

Materials, but he still needed plastic.

[Caroline Weaver]

I was determined that this toaster would have a plastic case, because a plastic case is kind of the defining feature of cheap consumer electrical objects. You know, this kind of smooth plastic shell to hide the mess inside. So how do you make plastic? Plastic comes from oil. So I phoned up BP and spent a good 45 minutes on the phone trying to convince this PR guy that it would be fantastic PR for BP, which they really kn need if they would put me, you know, spare seat in a helicopter out to an oil rig in the North Sea, and then there I could get a jug full of crude oil and start going for plastic at source. But he said, we're just really not set up to work on that kind of scale. In fact, it would sort of be easier for me to help you if you wanted a tanker full of crude oil to turn up outside your house.

[Stephen Dubner]

Instead, Thwaites turned to a less raw source of plastic household waste on the streets of London.

[Caroline Weaver]

You know, a plastic baby toy or chair or broken plastic tub. I mean, it's everywhere, so it wasn't difficult to find.

[Stephen Dubner]

He smashed up the pieces, put them.

[Caroline Weaver]

In a bucket Floating in oil like a Bain Marie for plastic recycling. It was kind of a horrible process. It was smelly. And I worry about my lungs in the future because there were these fumes coming off this stuff. God knows what additives it had in.

[Stephen Dubner]

It, but it worked. And in the end, Thomas Thwaites had something that sort of resembled a toaster.

[Caroline Weaver]

To me, it looks kind of beautiful, but other people have said it looks like a weird kind of melted caveman toaster.

[Tim Harford]

If I try and describe it to you, it's a bit like imagine, Stephen, that you were making a birthday cake for one of your children and they had requested a birthday cake in the shape of a toaster for some reason. So you're making this homemade toaster shaped birthday cake. But imagine that before you did that, you drank five or six shots of whiskey and so you were quite badly drunk and you tried to make this toaster cake. That's effectively what Thomas Thwaites toaster looks like. And then of course, the question is, well, does it work? Does it actually make toast?

[Stephen Dubner]

An art gallery in Rotterdam invited Thwaites to show off his toaster and to try it out. That's when he plugged it in.

[Caroline Weaver]

Big demo, put my bread in, switched it on, and for like a beautiful moment, this thing was glowing red. It nearly brought a tear to my eye.

[Tim Harford]

And the toaster immediately caught fire, which he described as a partial success.

[Caroline Weaver]

I got my bread out and I think I'd be lying if I said it had changed to toast. It was slightly warm.

[Stephen Dubner]

And what was the final tally on this partially successful drunken caveman birthday cake breadwarmer? About nine months.

[Caroline Weaver]

And I think I spent £1,300 on my toaster in the end.

[Stephen Dubner]

Yeah, Converted to dollars and updated for inflation. That's around US$2,500. And Thwaites had to cheat quite a bit along the way. The leaf blower, the Canadian nickels, the train from London to Wales.

[Caroline Weaver]

I was trying to make this toaster from scratch. And that brought up the question of what is from scratch? Because if I was really going to be making this toaster from scratch, I would have to go to the middle of the woods and get rid of all of my worldly belongings and burn my clothes. And that would be starting from scratch, starting from naked in the woods. And then the process would begin of making this toaster. But that was impossible. I would have just died.

[Tim Harford]

I think that is a perfect illustration of the point that Leonard Read was making in eye pencil.

[Caroline Weaver]

It was actually recreating I pencil in a way. But just with the toaster, I could have picked a pencil, I think, and had equally as difficult a time.

[Stephen Dubner]

As difficult as the project was, it did lead Thwaites to appreciate the march of civilization.

[Caroline Weaver]

Trying to do these processes and failing so often really made me think. It's just been this incremental process of slight improvements, lifetimes and lifetimes of building this pyramid of knowledge and techniques.

[Stephen Dubner]

Tim Harford, as an economist who himself lives near London, a most global city, he understands how any one of us might feel alienated by this pyramid, the big, complicated global processes that produce the pencil or the toaster that show up in a local shop.

[Tim Harford]

But of course, you could also take Len Reid's perspective, the more pro free market perspective, and say, hey, look, you can have a toaster. It'll cost you five or six dollars. It works really well. All you need to do is to trust the market, and the market will bring all of these things together. There doesn't need to be anybody in charge. Nobody needs to understand it. It will get you your toaster.

[Stephen Dubner]

Let me ask you one more question. If you, Tim Harford, wanted to take up the Thomas Thwaites challenge or something like it, and go into the forest naked and create something from scratch, anything, what do you think you could pull off?

[Tim Harford]

Oh, I would be absolutely finished if I could light a fire. If I could just light a fire, I'd be delighted.

[Stephen Dubner]

So you think you'd starve and be eaten to death by squirrels and that's the end of your line?

[Tim Harford]

I think being eaten by squirrels would be a mercy. If I could be quickly eaten by squirrels, I would count myself lucky.

[Stephen Dubner]

And that's it for this bonus episode. I hope you enjoyed it. We will be back soon with a new episode. Until then, take care of yourself and if you can, someone else too. Freakonomics Radio is produced by Stitcher and Renbud Radio. This episode was produced by Christopher Worth and updated by Dalvin Abuaji. It was mixed by Merritt Jacob and Jasmine Klinger. The Freakonomics Radio Network staff also includes Alina Coleman, Augusta Chapman, Teo Jacobs, Eleanor Osborne, Ellen Frankman, Elsa Hernandez, Gabriel Roth, Greg Rippon, Jeremy Johnston, Morgan Levy, Sarah Lilly and Zach Lipinski. You can find our entire archive on any podcast app [e-mail] where we also publish transcripts and show notes. Our theme song is Mr. Fortune by the Hitchhikers, and our composer is Luis Guerra. As always, thank you for listening.

[Caroline Weaver]

Sometimes I'm like, oh, God, and we're all gonna die. And then sometimes I'm like, yeah, it's happening, it's happening.

[Stephen Dubner]

The Freakonomics Radio Network the Hidden side of Everything Stitcher. You see where your business can go. To get there, you may need another 10 trucks. At Sentry Insurance, we put more than 115 years of industry experience to work.

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[Milton Friedman]

Hey.

[Stephen Dubner]

I'm journalist Sam Sanders. I'm poet Saeed Jones. And I'm producer Zach Stafford. And we are the hosts of a podcast called Vibe Check. On Vibecheck. We talk about everything news, culture and entertainment and how it all feels. That's right, we talk about any and everything on our show, from real life issues like grief to music and movie critiques. And that barely scratches the surface. Yes, indeed. And it doesn't stop there. We have got a lot to say, so join our group, chat, come to life, follow and listen to Vibe Check wherever you get your podcasts. With leading networking and connectivity, advanced cybersecurity and expert partnership, Comcast business helps turn today's enterprises into engines of modern business. Powering the engine of modern business powering possibilities. Restrictions apply.