1. Chapter 25
Production
and
Growth

2. Marshmallows

3. How many
marshmallows would
you have in 24 hours if
you started with one
and they were doubled
every 15 minutes?

4. 96
2
79,228,162,514,264,300,000,000,000,000
x 1,200

5. Productivity
Output
divided by
Input

6. How do we go
from this...
to this?

7. 1800 2010 Change
Population one billion seven billion 7x
Life Expectancy 26 years 66 years 40 +
GDP Per Capita Per Day $3 $30 10 x

8. GDP
Per Capita
GDP: $70,000,000,000,000
Population: 7,000,000,000
GDP Per Capita: $10,000
Source:
https://www.google.com.sa/publicdata/explore?
ds=d5bncppjof8f9_&met_y=ny_gdp_mktp_cd&tdim=true&dl=en&hl=en&q=world%20gdp#!
ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_pcap_cd&scale_y=lin&ind_y=false&rdim=region&ifdim=regi
on&tdim=true&hl=en_US&dl=en&ind=false

9. Rates
and
Compounding
Linear
versus
Exponential

10. Linear versus Exponential
Adding versus Compounding
64
^
64
56
48
40
32
32
24
16 +
16
12
8 10
8 8
6
0 2 4
1 2 3 4 5 6

11. Rule of 70s
Years to Double
70
divided by
the rate of growth
70
Rate of Growth

12. Years to Size in
Rate Double 70 years?
1% 70 ÷ 1 = 70 2x
2% 70 ÷ 2 = 35 4x
3% 70 ÷ 3 = 23.3 8x
4% 70 ÷ 4 = 17.5 16 x
5% 70 ÷ 5 = 14 32 x

13. Why do
Standards of Living
differ?
One word
Productivity

14. Productivity
Better at
making stuff

15. What is Wealth?
What people want

16. What is Capital?
Anything that helps you
create wealth

17. Five Types of Capital
Cultural
Human
Physical
Intellectual
Financial

18. Cultural
Capital

19. Worldview
Political
Legal
Economic

20. Cultural Capital
How people
view and treat other
people
Expectations

21. Cultural Capital
Property Rights
Rule of Law
Political Stability
No peace ... No prosperity

22. Free to Trade

23. Human
Capital

24. I look for three things in
hiring people.
The first is personal
integrity, the second is
intelligence, and the third
is a high energy level. - Warren Buffett, CEO,
Berkshire Hathaway
But of you don’t have the
first, the other two will kill
you.

25. Trust
Integrity
Competence

26. Human Capital
Trust
Knowledge and Skills
Health and Nutrition
Social Relationships

27. Health & Nutrition

28. Physical Capital
Two types
Tools
Natural Resources
Water, Oil, Minerals

29. Physical Capital
Tools we use to make stuff
Natural Resources
Renewable
Non-renewable

30. Intellectual Capital
Technology
How the world works
How we make
smart things and make
things smart

31. Research and
Development
Patent System
20 Year Monopoly on
your idea

32. Intellectual Capital Human Capital

33. Financial Capital
Money
Allows us to store
labor and shift time

34. Spend or Save?
Savings
versus
Consumption

35. Three Steps
Save instead of consume
Investment in new capital
Increase productivity

36. Capital Allocation
Right capital at the right time

37. Innovation - Productivity

38. Continuous Innovation

39. Education
Each year in school
adds 10 percent to
income
Invest versus consume

40. Population Growth
More people
Smaller slices
GDP
GDP per capita
Grow the pie
faster than
population

41. Population Growth
A smaller slice
of a larger pie
is bigger than a
larger slice of
a smaller pie

42. U.S. Farmers
1900 - 40 percent

43. U.S. Farmers
2012 - 2 percent

44. Productivity Growth
More people
More ideas
More innovation
More wealth