Pillow forts are astonishing things, magnificent testimony to human ingenuity as they are. They are also useful, because in building them, you gain one of the most important insights of economics there is to be learned, namely that there was never a more awesome pillow fort than that one you built with your cousin.
Because your cousin focused on the walls, you could work entirely on the ceiling, making both the ceiling and the walls the most awesome ceilings and walls in pillow fort history.
Your cousin
Learning all there is to know about building pillow forts in just one weekend can be tough, but if you focus on ceilings, you will learn a lot about them. Likewise, your cousin will learn a lot about putting up walls. So the pillow fort will have great walls and a great ceiling, because you help each other out.
What is really fascinating is that we can actually show that had you been building two separate pillow forts instead of working together, the total pillow-fort-awesomeness-level of the two forts would be exponentially lower than your combined fort. The reason is that you both become great at two separate things, instead of both being mediocre ceiling and wall builders. I know that sounds strange, but just hang on, I’ll give a better example in a second.
This applies generally. If you are working on a big enough project, participants can focus on a few things, and focusing makes you learn faster. In economics, this idea is called specialization, and it is the underlying driver of a concept called economies of scale.
A guy named Adam Smith studied a factory that made sewing pins a while back. What he found was that one guy making pins alone could make perhaps ten pins a day. I know what you are thinking (except for “what the hell does this have to do with pillows?”). That seems like very little. But there is a lot involved to make pins you know. You need to cut the right length of steel wire, straighten it, sharpen it and cut the top to prepare for the pin head. The head takes three distinct steps to make, then you need to put it on and then very, very carefully paint it.
Adam, most pleasing angle
Now, to answer your first question. What the hell do pins have to do with pillow forts? Well, Adam found that when ten people made pins together instead of working alone, and each specialized in one or two things, they were able to make forty eight thousand pins a day. That means each person “makes” 4,800 pins per day. That is four hundred and eighty times more pins than when working alone, enough to sew up a storm. Such is the power of specialization.
If you think about this, you quickly realize how this makes trade very beneficial. Through trade, specialization can spread throughout the world. Someone specializes in making pins, someone in shipping iron ore to the pin factory. Someone specializes in mining for that ore, and someone specializes in making mining equipment for the miners. Someone else specializes in making clothes for all these people, and someone in making fabric for the clothes. The list of interdependencies permeates throughout the world economy, all because of the same simple idea that lies behind a truly great pillow fort.
Still here? I’m done. Here, listen to This American Life instead, about what happens when 920 000 people specialize in building iPhones: http://www.thisamericanlife.org/radio-archives/episode/454/mr-daisey-and-the-apple-factory