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April 8, 2025 17 mins
Chris celebrates the ‘wonderful, miraculous supply chain’ with a passionate reading of Leonard Reed’s 1950s classic, I, Pencil. This humble writing tool becomes a profound symbol of free market genius, weaving a tale of loggers in Oregon, graphite miners in Sri Lanka, lacquer makers, and shipbuilders, whose tiny, uncoordinated know-hows spontaneously craft a pencil no single person could mastermind. Mocking central planners like Xi Jinping, Markowski marvels at the invisible hand’s dance, from cedar trees to brass ferrules, proving freedom, not control, fuels prosperity. A lesson in awe and faith, he argues this beats government meddling, urging us to trust free people over utopian schemes. www.watchdogonwallstreet.com
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Episode Transcript

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Speaker 1 (00:00):
The Watchdog on Wall Street podcast explaining the news coming
out of the complex worlds of finance, economics, and politics
and the impact it we'll have on everyday Americans. Author,
investment banker, consumer advocate, analyst, and trader Chris Markowski.

Speaker 2 (00:16):
The wonderful, miraculous supply chain. That's right, I just said it,
the wonderful, miraculous supply chain. One point that I often
make is again, I look at the world in so
many ways, whether it be nature or whether it be
the free market, and I look at it with amazement,

(00:41):
with wonder. I make fun of, make fun of the
central planner types, the utopian types that think that they
have some sort of control, some sort of control over
the markets, the communists, diseasion pings of the world, that
they're going to engineer it. They're going to engineer it

(01:02):
out of some capital somewhere with all of their experts.
I've talked about this story by Leonard Reid. It's from
the nineteen fifties many many times over the years here
on the program. I've never read it. I've never read it.
And again this is again, this is parents, grandparents out there.

(01:26):
This is a great way, great way of trying to
explain to your kids just the wonders of the free market,
wonders of freedom, and how it works, and how miraculous
it is. The story is I pencil. I am a

(01:49):
lead pencil, the ordinary wooden pencil, familiar to all boys
and girls and adults who can read and write. Writing
is both my vocation and my advocation. And that's all
I do. You may wonder why I should write a genealogy. Well,
to begin with, my story is interesting. And next I
am a mystery, more so than a tree, or a sunset,

(02:12):
or even a flash of lightning. But sadly I am
taken for granted by those who use me, as if
I were a mere incident and without background. This attitude
relegates me to the level of commonplace. This is a
species of grievous error in which mankind too long persist

(02:35):
without peril. For the wise. GK. Chesterson observed, we are
perishing for want of wonder, not for want of wonders.
I pencil, simple, though I appear to be merit your
wonder and awe a claim I shall attempt to prove

(02:59):
in fact, if you can understand me. Now that's too
much to ask of anyone. If you can become aware
of the miraculousness which I symbolize. You can help save
the freedom of mankind is so unhappily losing. I have
a profound lesson to teach, and I can teach this
lesson better than can an automobile, or an airplane or

(03:23):
a mechanical dishwasher, because well, because I am so seemingly
so simple, simple, yet not a single person on the
face of this earth knows how to make me. Sounds fantastic,

(03:46):
doesn't it, especially when it's realized that there are about
one and one half billion of my kind produced in
the United States each year. Again, I don't know what
that number is. Now, this is the nineteen fifties. Okay,
pick me up and look me over. What do you see?
Not much meats the eye. There's some wood, lacquer, printed labeling, graphite, lead,

(04:08):
bit of metal, and an eraser. Just as you cannot
trace your family tree back very far, so it is
impossible for me to name and explain all of my incents,
but I would like to suggest enough of them to
impress upon you the richness and complexity of my background.

(04:31):
My family tree begins with what, in fact is a tree?
A seater of straight grain that grows in northern California
and Oregon. Now contemplate all the saws and trucks and rope,
and the countless other gear used to harvesting and carting
the cedar logs to the railroad siding. Think all the
persons and the numberless skills that went into that fabrication.

(04:52):
The mining of the ore, the making of the steel
and its refinement into saws, axsis motors, the growing of
hemp and bringing it through all the stages a heavy
and strong rope, the logging camps with their beds and
mess halls, the cookery and the raising of all the foods.
Why untold thousands of persons had a hand at every
cup of coffee the loggers drink. The logs are shipped

(05:14):
to a mill in California, San Leandro. Can you imagine
the individuals who make flat cars and rails and railroad engineers,
and who construct and install the communication systems. These legions
are my descendants. Consider the millwork and San Leandro. The
cedar logs are cut into small pencil link slats less

(05:35):
than one fourth of an inch in thickness. These are
kiln dried and then tilted for the same reason women
put rouge on their faces. People prefer that I look pretty,
not a pallid white. The slats are waxed and kiln
dried again. How many skills went into the making of
the tint and the kilns, and to supplying the heat,
the light, the power, the belts, motors, and all the

(05:57):
other things a meal requires in the mill. Among my ancestors, yes,
and are included are the men who poured the concrete
for the dam of the Pacific Gas and Electric Company hydroplant,
which supplies the mill's power. Don't overlook the ancestors present
and distant, who have a hand in transporting sixty car

(06:18):
loads of slats across the nation once the pencil factory. Again.
This is nineteen fifties, four million dollars in machinery and building,
all capital accumulated by thrifty and saving parents of mind.
Each slat is given eight grooves by a complex machine,
after which another machine lays lead in every other slat,
applies glue, and places another slat atop a lead sandwich,

(06:42):
so to speak. Seven brothers and I are mechanically carved
from this wood clinched sandwich. My lead itself contains no
lead at all. It's complex. The graphite is mined in
Sri Lanka. Consider these miners and those who make their
many tools, and the makers of the paper sacks in

(07:04):
which the graphite is shipped, and those who make the
string that ties the sacks, and those who put them
aboard the ships, and those who make the ships. Even
the lighthouse keepers along the way assisted in my berth
and the harbor pilots. The graphite mixed with clay for Mississippi,
in which a pn aumonium hydroxide is using in the

(07:25):
refining process. Then wedding agents are added as sulfonated tallow
animal fats chemically reacted with sulfuric acid. After passing through
numerous machines, the mixture finally appears as endless extrusions from
a sausage grinder, cut to size, dried and bake for
several hours at eighteen hundred and fifty degrees fahrenheit to

(07:46):
increase their strength and smoothest. The leads are then treated
with a hot mixture which includes candillo wax for Mexico,
paraffin wax, and hydrogenated natural fats. My cedar receives six
coats of lacquer. Do you know the ingredients of lacquer?
Who would think that the growers of castor beans and
refiners of castor oil are a part of it? They are.

(08:09):
Why even the process by which the lacquer is made
a beautiful yellow involved the skills of more persons than
one can enumerate. Observe the labeling. That's a film formed
by applying heat to carbon black mixed with rosins. How
do you make rosins? And what prey is carbon black?

(08:30):
My bit of metal, the frul is brass. Think of
all the persons who mind zinc and copper, and those
who have the skills to make shiny sheet brass from
these products of nature. Those black rings on my fruit
are black nickel? What is black nickel? How is it applied?
The complete story of why the center of my furroil
has no black nickel on it would take pages to explain.

(08:52):
Then there's my crowning glory inelegantly referred to in the
trade as the plug the part man uses to erase
the errors he makes with me. An ingredient called factus
is what it does the erasing. It is a rubber
like product made by reacting rape seed oil from the
Dutch East Indies Indonesia with sulfur chloride rubber, contrary to

(09:18):
the common notion, is only for binding purposes. Then two,
there are numerous vulcanized and accelerating agents. The pumpus comes
from Italy, and the pigment which gives the plug its
color is cadmium sulfide. Does anyone wish to challenge my
earlier assertion that no single person on the face the

(09:42):
earth knows how to make me? Actually, millions of human
beings have had a hand in my creation, no one
of whom even knows more than a few of the others. Now,
you may say that I go too far and relating
the picker of a coffee berrier and far off Brazil

(10:03):
and food growers elsewhere to my creation, that this is
an extreme position. I shall stand by my claim. There
isn't a single person in all these millions, including the
president of the pencil company, who contributes more than a tiny,
infinitesimal bit of nohow. From the standpoint of know how,

(10:25):
the only difference between the miner of graphite and Sri
Lanka and the lagger in Oregon is the type of
know how neither the miner nor the lagger can be
dispensed with anymore than the chemist at the factory or
the worker in the oil field, paraffin being a byproduct
of petroleum. Here's an astounding fact. Neither the worker in

(10:51):
the oil field, nor the chemist, nor the digger of
graphite or clay, nor any other man's or makes the
ships or trains or trucks, nor the one who runs
the machine that does the neurally on my bit of metal,
nor the president of the company, performs a singular task
because he wants me. Each one wants me less, perhaps
than does a child in the first grade. Indeed, there

(11:12):
are some things some among this vast multitude who never
saw a pencil, nor would they even know how to
use one. Their motivation is other than me. Perhaps it's
something like this. Each of these million sees that he
can thus exchange, exchange, trade his tiny know how for
the goods and services he needs or wants. I may

(11:38):
or may not be among these items. There is a
fact still more astounding, the absence of a master mind
of anyone dictating or forcibly directing these countless actions which
bring me into being. No trace of such a person

(11:59):
can be. Instead, we find the invisible hand at work.
This is the mystery to which I earlier referred. It's
been said that only God can make a tree. Why
do we agree with this? Isn't it because we realize
that we ourselves could not make one. Indeed, can we

(12:20):
even describe a tree? We cannot, except in superficial terms.
We can say, for instance, that a certain molecular configuration
manifests itself as a tree. But what mind is there
among men that could even record, let alone direct, the
constant changes in molecules that transpire in the lifespan of

(12:41):
a tree. Such a feat is utterly unthinkable. I pencil
am a complex combination of miracles, a tree, zinc, copper, graphite,
and so on. But to these miracles, which manifest themselves

(13:02):
in nature, and even more extraordinary miracle has been added
the configuration of creative human energies, millions of tiny no hows,
configurating naturally and spontaneously in response to a human necessity
and desire, and in the absence of any human masterminding.

(13:26):
Since only God can make a tree, I insist that
only God can make me. Man can no more direct
these millions of no hows to bring me into being
than he can put molecules together to create a tree.
The above is what I meant when writing. If you
can become aware of the miraculousness which I symbolize, you

(13:47):
can help save the freedom mankind is unhappily losing. For
if one is aware that these no hows will naturally,
yes automatic, arrange themselves into creative and productive patterns and
response to human necessity and demand, that is, in the

(14:07):
absence of governmental or any other coerceive masterminding, than one
will possess an absolutely essential ingredient for freedom of faith
and free people. Freedom is impossible without this faith. Once

(14:28):
government has had a monopoly of a creative activity, such,
for instance, as the delivery of male, most individuals believe
that the male could not be efficiently delivered by men
acting freely. And here is the reason. Each one acknowledges
that he himself doesn't know how to do all the
things incident to male delivery. He also recognizes that no

(14:51):
other individual could do it. Assumptions are correct. No individual
possesses enough know how to perform a nation's mail delivery anymore,
and individual possessions enough know how to make a pencil. Now,
in the absence of faith and free people in the
unawareness that millions of tiny nohows would naturally and miraculously

(15:12):
form and cooperate to satisfy this necessity, the individual cannot
help but reach these erroneous conclusions that male can be
delivered only by government masterminding. If I pencil were the
only item that could offer testimony on what men and
women can accomplish when free to try, then those with

(15:35):
little faith would have a fair case. However, there's testimony galore.
It's all about us, and on every hand. Mail delivery
is exceedingly simple when compared to, for instance, the making
of an automobile, or a calculating machine, or a grain combine,
or a milling machine, or tens of thousands of other things.
Delivery why in this area where men have been left

(15:57):
free to try. They deliver the human voice around the
world in a second. They deliver an event visually and
in motion to any person's home when it's happening. They
deliver one hundred and fifty passengers from Seattle to Baltimore
in less than four hours. They deliver gas from Texas
to one's range or furnace in New York at low
rates without subsidy, and they deliver each four pounds of
oil from the Persian Gulf to our eastern seaboard, halfway

(16:20):
around the world, for less money than the government charges
for delivering a one ounce letter across the street. The
lesson and I have to teach is this, leave all
creative energies uninhibited. Merely organize society to act in harmony.
With this lesson, let society's legal apparatus remove obstacles the

(16:41):
best it can permit these creative know hows freely to flow.
Have faith that free men and women will spawn to
the invisible hand. This faith will be confirmed. I pencil
seemingly simple, though I am awful, the miracle of my
creation as testimony that this is a practical faith, as

(17:04):
practical as the sun, the rain, a cedar tree, The
Good Earth Watchdog on Wall Street dot com
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