Adam Smith writes about the division of labor and its essential role in industry and innovation. He uses the example of a pin-maker with little experience, who may by himself manufacture only one pin in a day. There are as many as eighteen distinct steps that go into making a single pin; these are tasks that if all executed by one man take much longer to master and much longer to carry out. If these eighteen tasks are delegated to different pairs of hands however, each pair carrying out only two or three of these eighteen steps, the production of pins will skyrocket. This is also true for any industry. Even the simplest products take many steps and many different processes to manufacture. These individual tasks require varying levels of skill. When labor is divided among many different laborers there is less time wasted sauntering from task to task. A worker may concentrate on one task throughout the work day without switching his attention to another distinct task and having to adapt to that task after performing the previous one.

While it is natural for a person to saunter between tasks and to initially perform at a lower rate when starting a new task, it is also natural to innovate to improve efficiency. Smith uses the example of the boy responsible for opening and shutting alternately the communication between the boiler and the cylinder on the first fire engines. The boy naturally preferred to spend time with his friends over being constantly employed on the fire engine, so he invented a device to replace his job on the engine: he “observed that, by tying a string from the handle of the valve which opened this communication, to another part of the machine, the valve would open and shut without his assistance” thereby allowing him to “divert himself with his play-fellows.” Smith notes that the operators of machines are not the only drivers of innovation; the makers of machines and observers are also major drivers of innovation and improvements in efficiency. There are those whose only occupation is to observe and create improvements to existing machines and processes.

The division of labor in individual industries is an important device for efficiency, but specialization is also essential for innovation and efficiency. Smith points out all the different processes and industries that go into making something as simple as a wool coat: ship-builders, sail-makers, and rope-makers were needed to facilitate the ability to transport goods from place to place; tool-makers made the shears that were used to get the wool from the sheep and the shepherd raised that sheep. There are countless other professions and specialties that go into the seemingly simple process of making a wool coat. This is true for any other manufactured good as well.