The Recipe

for everything made has only two ingredients

Every manufactured thing on earth is made from only two ingredients… natural resources and human resources. Everything produced is simply a unique form or combination of those two primary ingredients. What! How can that be? What about all of the other things that are used up during the production? What about the energy needed?

Well let’s break it down. All of the raw materials themselves originally came from nature. Sure human tools, machinery and labour were needed to extract them from their original form and location, but the materials themselves, the wood, the ore, the chemicals were all provided free by nature. Human ingenuity and labour created the first hand tools using only natural resources like stone, cane and wood. Using those first simple tools, more complex tools and products like wheels and wagons were invented.

Each step along the product development path required the use of previously created tools, but really they were just combinations of previous human labour and natural resources stored in a particular shape or form. So the new inventions were really just combinations of new human & natural resources + stored human & natural resources (tools). That’s it, nothing else was added.

Eventually tools turned into machines that could access and acquire more types of natural resources, again using only human & natural resources and previously created tools. As new power sources were created they too were simply different combinations of blended human & natural resources. Windmills, waterwheels, wood and coal powered steam generators and eventually gas engines, electricity and nuclear power were all developed using only the same two primary ingredients. The machines that were used to dig the ore that was used to make the iron that was used to make the machines that produced the energy were all just new combinations of new and stored human & natural resources.

Now the significance of this realization unveils an opportunity to account for the cost of things in an entirely new way. If there are really only two primary components used to produce everything and one of them has been provided by nature for free for all to use, then the only true cost of everything made are the human resources. We already track how much time is required to make the things we produce and to pay workers for their labour. It would be extremely easy for any company to convert its own internal labour costs from dollars to hours. The accounting would be much simpler without dollar-based hourly pay calculations. Unit costs would simply be total production time divided by the number of units produced. If it took 10 hours to produce 1,200 units each unit would cost 600 minutes divided by 1200 units which equals half a minute or 30 seconds.

If all producers switched to time-based pricing and accounting then every required input into the production process would already be priced in hours and minutes. Production managers would know the exact time cost of all external raw materials, supplies and services consumed during the production run. Adding their own internal labour costs would complete their product pricing. Everything shipped out whether it was to another business, consumer or government agency would be priced in increments of time. If adopted world wide there would no longer be any need for currency exchanges and because time is based on the same universal physical reality of the earth’s rotation, its value would be stable and consistent no matter where you went in the world.

O.k. this all sounds wonderful but what about things like profit and debt repayment, interest charges and taxation expenses, how would they be added in to prices? I know the answer to this will go against everything you have been taught to believe about those subjects, but I’ll address that in the next article in this series. I want to keep these posts short so that I don’t lose you. The answer is… they won’t be.