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And finance Allah Shmoop What is productivity Oh all right

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people let's just jump into this one with an example

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You make delicious dog muffins not muffins made out of

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dog sick people Muffins for four dogs Your dogs love

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them Friends always ask you to make the muffins for

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their dogs And sometimes you suspect some of your friends

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are actually eating the muffins themselves Bob we're looking at

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you But whatever making these muffins is you know kind

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of your thing So you decide to start a dog

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muffin making business you by big bags of all the

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ingredients and flour sugar butter salt dog food kale cumin

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liverwurst and you know a special secret ingredient You can't

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tell people at first While it's just you working out

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of your kitchen you can make two batches of muffins

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and our orders start coming in more orders than you

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can handle You need to make more muffins Teo You

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know really grow the business Main problem Your mixer You

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have this old tiny mixer that you got when Aunt

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Sally died Trying to climb the Matterhorn Sentimental value aside

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you need to upgrade the mixer If this business is

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going to take off So you take some of your

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profits and you buy an industrial mixer Unfortunately you can't

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get elves to do things for you but we'll talk

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about more about getting helpers and a bit non union

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elves What you seek for now let's just upgrade your

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mixer Now you could make bigger batches of dough with

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no extra work which means you could make more muffins

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Well you discover that with the new mixer you can

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make four batches an hour and you just improved productivity

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there Still just one of you though You still spend

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just one hour working but you made four batches instead

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of two You improved productivity by one hundred percent You

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know productivity A professional obstetrician for waterfowl or a professional

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actor in native ity pageants who happens to be a

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duck You know Hamilton really opened up the options for

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casting Well of course there's the economic concept of productivity

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We suppose we should talk about that one for a

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little bit Okay that leads us to the title card

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here Pro activity like productivity measures how much stuff you

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can make with the labour you put into it It's

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sort of about how you leverage technology and or machinery

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to make the efforts of mankind be worth the more

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When you do something that lets you make more stuff

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with the same amount of labour that's an improvement in

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productivity This Khun B new technology you know like the

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upgraded mixer here Or it could be a new process

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like Think Henry Ford's Model T assembly line thing Need

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more Alright to show you what we mean Let's step

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into our time machine for a sex Hundreds of years

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ago to make a shirt one person would spend months

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weaving and sewing one shirt at a time Then the

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Industrial Revolution happened People started to use machines to do

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a lot of the work They could make hundreds of

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shirts in the time it used to take them to

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make one shirt This process has continued regularly over the

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past couple hundred years More machines allowing fewer employees to

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make more and more shirts or cars or dog muffins

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or you know whatever And this process of improvement continues

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today as a I R Artificial intelligence and automation improves

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factories which then need fewer and fewer employees While still

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making more and more cards and stuff right Maybe the

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robots are preparing to take over Maybe but for now

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we get all that stuff Yeah back to your muffin

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growing business Your dog muffins remain a big hit Even

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with the improved productivity you still get more orders than

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you can handle You've got the big industrial mixer You

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still have room in your oven The problem While you

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just can't get work fast enough getting all the ingredients

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doing the cooking sorting through the orders Well there's just

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no way to make more than four batches an hour

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if it's on ly you the sole proprietor doing all

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this stuff Well the fix you hire a helper Well

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now you just doubled your output again You collectively together

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you two you're making eight batches an hour But you

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didn't change the productivity of your business Instead you just

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added employment or another body There's two humans working now

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One two That's it So you were able to go

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from four batches an hour Tow eight But productivity remain

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the same The ratio one human four batches So here

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let's break down the math for a minute and we'll

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show you how productivity stayed Same Yep You're working one

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hour And your assistant or else there is working the

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same hour So total hours work too The finance world

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Well these air known as man hours Or maybe it's

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more PC to calm people hours or human hours It's

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a measure of how much labor gets put into a

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product to humans Each working one hour is too Well

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just call him man hours Yeah So to get productivity

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divide output by man hours and you've got eight batches

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and then you've got two men ours Divide output by

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the amount of hours worked and you get four batches

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an hour Well your output per man hour is still

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the same as it was when it was just you

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You increase the output because you increase the labour you

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put into it Employment went up productivity stayed the same

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Your business And while it continues to expand along the

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way you make improvements to increase productivity new equipment better

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processes Meanwhile you also add to employment you know hiring

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new workers to increase output even more And why is

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this such a big thing Well if you have to

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hire lots and lots of workers to put out more

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product Your profit margins aren't going to go up like

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when you have a machine that does the same repetitive

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motion again and again and again Usually the cost of

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power That machine is just the electricity or whatever in

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a little bit of maintenance and cleaning And that's it

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Where is when you have a human being Particularly lots

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of them Well they want raises and benefits and they

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unionize and then stop If you don't do everything they

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want them to dio any profit margins Well then kind

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of stay the same or go down It's a tough

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tough slog So machinery in this sentence is your friend

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and you have to love it or well you know

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it won't love you back now The only thing you

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need to worry about well keeping your secret ingredient a

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secret Well OK two things to worry about there Someday

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the very near future There might be a robot coming

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for your job You know what We're betting on it 00:05:52.724 --> [endTime] Actually

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