We Need More Jobs...Or More Like Him

            Anyone who has used the internet, read the news paper, listened to the radio, turned on the TV, or talked to anyone who has in the past 24 hours has doubtlessly heard that Steve Jobs passed away.  In a country where the super rich as a whole are demonized by society for their wealth, he enjoyed incredible popularity in his time.  While we all praise his numerous inventions and the steps he took to make the computer accessible to the common people (apparently he innovated the mouse and cursor in computers), I’d like to take a minute to appreciate his life from an economic standpoint.

            When we look at where he came from, Jobs started as a man with an idea.  Through the founding of Apple Computer, he became an entrepreneur in a class he shared only with Bill Gates.

            I will refrain from going into further detail about all the things he designed and the Apple Empire because everyone already knows what he’s done.  So instead of Jobs the inventor, I’d like to look at Jobs the entrepreneur and what people like him mean for the economy.

            But before going there, I’ll spend a bit on economic growth.  How does the economy “grow”?   That is a long discussion and there are many ways of measuring it.  A general way is to measure the output of an economy as a result of physical and human capital.  Physical capital would be buildings, factories, machines, roads, etc.  Human capital would be hands, feet, brains, brawn, etc.  Human capital does work and designs technology while physical capital facilitates the production of goods and services.  So by working together, humans and machines produce the things we use today. A nice way to grow an economy is to build more physical capital.  This allows for the employment of more people as well as higher volume of output.  But at some point a country reaches the point where it isn’t worth it to build more.  Take a farmer, for example, if he has no tractor, getting a tractor will be a huge boon to his farm.  If he gets a second tractor, he can maybe hire someone else to drive it and farming will go even faster.  But it doesn’t make as big of a difference as the first one did.  Say he keeps on buying more and more tractors.  At some point, it just isn’t worth it to buy more. This is the Law of Diminishing Returns and you can see it everywhere.  At some point, Intel only presses so many chips that it isn’t worth it to build more factories.  Ford only makes so many cars that investing in more plants isn’t worth it.  So what happens when a country has reached the limit of physical capital’s potential?  Is it not able to grow anymore?

            Luckily there is a second way that an economy can grow: through innovation.  People can invent things and come up with new technologies that allow us to produce more value with the same amount of physical capital.  Consider the evolution of the written word over the course of human history.  Writing was first done on stone tablets.  People would spend hours and hours engraving words into stone and only the very skilled could do it.  But then at some point, papyrus and ink were invented.  All of the sudden, writing became much faster so people were able to write much more in the same amount of time and more people could be trained to do it.  Fast forward again to Gutenberg: the inventor of movable type printing.  He was able to produce the printed word both quickly and at a large quantity relatively quickly compared to writing on papyrus.  Consider how typewriters changed the game for writing again!  All of the sudden, a skilled person could write dozens of words every minute.  The most skilled, like my grandmother when she was a secretary, could type 95 words per minute on a typewriter.  Then those evolved into computers such as the one I’m writing on now which allow just about anyone to write even more!

            In the long-run, economic growth comes from new ideas, from innovation that allows us to produce more with the same or less amount of physical resources as before.  We see this happening in writing and in just about every industry from lighting to textiles and automobiles to telephones.   This is just the kind of growth that came about through the efforts of Steve Jobs. 

            Because we live in a free market, Jobs had the ability to design something, sell it for profit, and use the money he earned to fund future development/innovation as well as personal gain.  Essentially, the Apple 1 that Jobs and Wozniak (his underappreciated co-founder) built in 1976 allowed eventually for the creation and sale of over 250 million iOS devices (iPod Touches, iPhones, and iPads), plus hundreds millions more of computers, peripherals, other iPods, and software.  Furthermore, Apple employs thousands of engineers, designers, lawyers, public relations managers, sales representatives, and others.  The manufacture of Apple’s goods provides employment to thousands more in the United States and abroad.  Plus we can’t even begin to appreciate the body of work that has been accomplished through the use of Apple products.  All this growth came from a man who had some ideas and introduced them to the world.

            So when our economy is stagnating, the way to make it grow in the long-run isn’t by the government hiring people to build bridges and roads and schools but rather to encourage innovation and invention.  That is why I said in the beginning: we need more Jobs.  

 from the Apple frontpage