SPEAKER_01: Amazing, fascinating stories of inventions, ideas and innovations. Yes, this is the podcast about the things that have helped to shape our lives. Podcasts from the BBC World Service are supported by advertising.
SPEAKER_02: 50 Things That Made the Modern Economy with Tim Harford
SPEAKER_00: Denver Thornton hates the Billy Brookcase. He runs a company called Unflatpack.com. If you buy flat-pack furniture from anywhere like IKEA but you're terrified by dowels and allen keys and cryptic instruction leaflets featuring happy cartoon men, you can get someone like Mr Thornton to come to your house to build it for you. And the Billy Brookcase? It's the archetypal IKEA product. It was dreamed up in 1978 by an IKEA designer called Jilis Lindgren. He sketched it on the back of a napkin, worried that he'd forget it. Now there are 60-odd million in the world, nearly one for every 100 people. Not bad for a humble bookcase. In fact, so ubiquitous are they, Bloomberg uses them to compare purchasing power across the world. According to the Bloomberg Billy Brookcase index, yes, that is a thing. They cost most in Egypt, just over $100. In Slovenia, you can get them for less than 40. Every three seconds, another Billy Brookcase rolls off the production line of the Jilinsvands Merbler factory in Kjetlstorp, a tiny village in southern Sweden. The factory's couple of hundred employees never actually touch a bookshelf. Their job is to tend the machines, imported from Germany and Japan, that work 24 hours to cut and glue and drill and pack the various components of the Billy Brookcase. In goes particle board by the truckload, 600 tonnes a day, outcome, ready box products, stacked six by three on pallets and ready for the trucks. In reception at the Jilinsvands Merbler factory, in a frame on the wall, is a typewritten letter, the company's very first furniture making order from IKEA. The date of the letter? 1952. IKEA was not, back then, the global behemoth it is today, with stores in dozens of countries and turnover in the tens of billions. Its founder, Ingvar Kamprad, was just 17 when he started the business with a small gift of cash from his dad, a reward for trying hard at school despite dyslexia. By 1952, aged 26, young Ingvar had already got a hundred page furniture catalogue but hadn't yet hit on the idea of flat packing. That came a few years later, as he and his company's fourth employee, the very same Jules Lundgren, were packing a car with furniture for a catalogue photoshoot. This table takes up too much darn space, Jules said. We should unscrew the legs. It was a light bulb moment. Kamprad was already obsessed with cutting prices, so obsessed some manufacturers had started to boycott him. And one way to keep prices low is to sell furniture in bits, rather than paying labourers to assemble it. In that sense, it may seem perverse to get a Denver Thornton in to construct your Billy Bookcase, like buying ingredients at a supermarket and hiring a private chef to cook your dinner. And that might be true if outsourcing the labour to the customer were the only thing that made flat packs cheaper. But even bigger savings come from precisely the problem that inspired Jules Lundgren. Transport. In 2010, for example, IKEA rethought the design of its Ektorp sofa. It made the armrests detachable. That helped half the size of its packaging, which halved the number of trucks you need to get the sofas from factory to warehouse and warehouse to store. And that lopped a seventh of the price, more than enough to cover Mr Thornton's labour for screwing on the armrests. It's not just furniture where constantly questioning product design can reap dividends. Consider another IKEA icon, the Bang Mug. You've probably had a drink from one. With yearly sales reaching 25 million, there are plenty knocking around. IKEA changed the height of the mug when they realised they could make slightly better use of the space in their suppliers kiln in Romania. And by tweaking the handle design, they made them stack more compactly, more than doubling the number you could fit on a pallet and more than halving the cost of getting them from the kiln in Romania to the shelves in the store. It's been a similar story with the Billy bookcase. It doesn't look like it's changed much since 1978, but it does cost 30% less. That's partly due to constant tiny tweaks in both product and production method. But it's also thanks to sheer economies of scale. The more of something you can commit to making, the cheaper you can get it made. Look at Jyllands van Möbler. Compared to the 1980s, it's making 37 times as many bookcases, yet its number of employees has only doubled. Or consider again the bang mug. Initially IKEA asked a supplier to price up a million units in the first year. Then they said, what if we commit to five million a year for three years? That cut the cost by a tenth. Not much perhaps, but every penny counts. Just ask the famously penny-pinching Ingvar Kamprad. In a rare interview to mark his 90th birthday, Kamprad claimed to be wearing clothes he'd bought at a flea market. He's said to fly economy and drive an old Volvo. This frugality may help to explain why he's the world's eighth richest man, although the four decades he spent living in Switzerland to avoid Swedish taxes may also have something to do with it. Still, penny-pinching isn't all it takes to succeed. Anyone can make shoddy ugly goods by cutting corners, and anyone can make elegant sturdy products by throwing money at them. To get as rich as Kamprad has, you have to make stuff that's both cheap and acceptably good. And that's what seems to explain the enduring popularity of the Billy bookcase. Simple, practical, and timeless is how Yilis Lundgren once described the designs he hoped to create. And the Billy is surprisingly well accepted by the type of people you might expect to be sniffy about mass-produced MDF. Sophie Donaldson edits the Interiors magazine House Beautiful. She says the Billy is unfussy and unfettered and modern without trying too hard. The Billy is a bare-bones functional bookshelf, if that's all you want from it, or it's a blank canvas for creativity. On ikeahackers.net you'll see it repurposed as everything from a wine rack to a room divider to a baby changing station. But economics nerds like me don't admire the Billy bookcase for its modernity or flexibility. We admire it, and IKEA in general, for relentlessly finding ways to cut costs and prices without reducing the quality of the product. That's why the Billy is a symbol of how innovation in the modern economy isn't just about snazzy new technologies, but boringly efficient systems. The Billy bookcase isn't innovative in the way that the iPhone is innovative. The innovations are about working within the limits of production and logistics, finding tiny ways to shave more off the cost, all while producing something that looks inoffensive and does the job. And that annoys handyman Denver Thornton. It's just so easy and monotonous, he says. I prefer a challenge.
SPEAKER_02: We learned a lot from the article IKEA's Almost Fabulous Global Supply Chain by Rolf G. Larsen in a book titled Lean Management of Global Supply Chain. For a full list of our sources, please see bbcworldservice.com slash 50things.
