FACTORIES, THE CHIEF innovation of the industrial revolution, are cathedrals of productivity, built to shelter specialized processes and enforce the division of labor.
Adam Smith, who illuminated their function on the first page of The Wealth of Nations, offered the celebrated example of a pin factory: “I have a seen a small manufactory… where ten men only were employed, and where some of them consequently performed two or three distinct operations. [They] could make among them upwards of forty-eight thousand pins a day… Separately and independently… they certainly could not each of them have made twenty, perhaps not one pin a day.”
But the benefits of factories suggest their limitations. They are not reprogrammable: To make different products, a factory must retool with different machines. Thus, the first product shipped is much more expensive than the next million, and innovation is hobbled by the need for capital expenditure and is never rapid. More, specialization compels multinational businesses to circle the globe with supply chains and warehouses, because goods must be shipped and stored.