An occasional review of technology, markets, and ideas.

I, Pencil

A pencil is made of cedar, graphite, factice, and wood. How these raw elements come together into a pencil is a testament to the power of the prices to provide dispersed knowledge which forms the basis of cooperation without coercion.

Socialism is having a moment. Public polling suggests that it's viewed more favorably by the younger generation. However, when Pew asked respondents to articulate what they thought of when they discussed "capitalism" and "socialism" there was no mention of how either system handles complex coordination.

This is why the essay, "I, Pencil" is so enduringly important. The essay traces - from the point of view of a pencil - how it came into being. It also serves to impress upon people the unimaginable complexity in creating something so simple which serves to illustrate the importance of prices in complex coordination.

A pencil is made of cedar, graphite, factice, and wood. We'll first look at how each are produced and then how they are brought together.


  • Cedar trees grow in Northern California and Oregon.
  • To harvest the trees, you need saws, trucks, ropes and other gear. Each of these components has its own supply chain associated with it.
  • Once the trees are cut, the logs are shipped via a railway to the mill where they are processed.
  • The cedar logs are then cut into pencil-length slats less than one-fourth of an inch in thickness and are kiln dried.
  • The cedar gets 6 coats of lacquer to enhance the way it feels to the touch.


  • Graphite is mined in Sri Lanka and is shipped over the ocean to the United States.
  • Once in the US, it is mixed with clay and ammonium hydroxide. Then, other agents are added, the graphite passes through another machine and it is baked at 1,850 degrees Farenheit.
  • After this, the lead is treated with a wax to increase the strength and smoothness.


  • The metal that holds the eraser is brass which is made with zinc and copper which needs to be mined, shipped, and processed to be the proper size to mount on the pencil.


  • Factice is the element which enables erasing and it is produced by reacting rapeseed oil from Indonesia with sulfur chloride.
  • After this, there are other vulcanizing and accelerating agents that are added.


  • The factory consists of $4,000,000 of machines and buildings and here is where the cedar, the graphite, the metal, and the eraser are combined into one product.

Understanding the complexity in the creation of a pencil it's easy to see why Read concludes "that no single person on the face of this earth knows how to make [a pencil]" despite millions of people playing a role in the creation of a pencil. Read's takeaway is clear: given the complexity of coordination in making a pencil, the best approach is to "leave all creative energies uninhibited" and "organize society to act in harmony with this lesson." Failing to do so means learning the perils of the calculation problem the hard way.

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Jamie Larson