Wealth of Nations by Adam Smith | Honest Book Review

I’ll tell you 5 of my main takeaways from this book, that I enjoyed the most. I highly recommend you’re a physical copy of this book, or if you get an audio book, you are extremely focused while reading it.

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1. Nail Factory ( economy can grow through innovation)
– High productivity does not always equal high wages
– Organization can lead to innovation which can then lead to growth in the economy ( 1 man can make 10-20 pins per day: but 10 can make 48,000 how?)
– However in the 1970s because of more innovation and more machinery a pin factory could make 800k pins per day

Now check this out: something I learned from Warren Buffet and Charlie Munger
– If you have a business like this, where innovation results in higher quality pins and also more volume ( but machines keep getting better and better every 3 years, who is making a profit from it)
– Is it the employees, owner, or consumers
– The truth it’s the consumers because they get better quality and also lower prices because of production and competition ( and the employer has to keep buying new machinery)
– Because the person that doesn’t buy the machines they need to carry out business, is already paying for it in some way.

2. Invisible hand ( lesser fair) – Free market
– Remember when I first heard about this term, was the idea that we should have a free market and we shouldn’t have that much government intervention
– And then reading this book just cemented a few of thoughts and no I’m not saying under any circumstance the government should never get involved

My favorite example is this:
– The economy can run fine without massive government intervention and their proof of it
– Who makes sure that their enough water, rice, milk, and food today
– The answer is People do: because naturally when people are working for their self-interest they tend to work better.
– When you have a market and opportunity, someone will come and take advantage of it and fulfill the need.

However:
– In this book, Adam Smith Does mention Monopolies and how they hurt the economy, but also how there are forms of monopolies that need to exist.
– For example: when you have a bad monopoly that company has to threaten it, no competition no need to innovate but in reality just maintain ( that’s not what you want )
– But natural monopolies that form are, for example, energy sectors, railroads, and government. ( however, this is a subject I need to keep learning more and more on )

3. Gold currency and labor
– Wealth is not about the gold you have or the money you have, but about the purchasing power that it has
– And nation is just not rich because it has a lot of money but it is rich because of the transactions made within its economic system.
– And when I heard this I was kinda confused and didn’t really understand the relevance to it

However, hear is my idea:
– People think that currency is the problem, and returning to the gold standard is the problem or that bitcoin is the future or that the dollar is going to fail ( and that we just need more forex traders )
– But in reality money, currency, gold, bitcoin, is not a measurement of wealth ) the purchasing power of it is, and the labor it can command is )
– so the point is whether it’s paper, virtual or solid gold doesn’t matter ( what matters is the labor and purchasing power ) – and that determines through the market.

4. Capitalism and Slaves

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