When employees have the ability to shirk or steal, firms may invest in monitoring devices to ensure against theft. In the lab, Walter supervises Jesse, but their employer monitors both Walter and Jesse as they work. Hypothetically the guard may be paid a handsome salary to disincentivize him from cheating his employer.
Walter tries operating the facility by himself and he’s struggling to move a barrel with Jesse gone. Normally, the two would work together to specialize in particular tasks to reach their intended goal. Having only one worker means that they aren’t able to gain from specialization.
This clip represents a wonderful account of all the moving parts of Walter’s methamphetamine enterprise. Walter and Jesse cook, Lydia arranges and oversees the international shipments of methamphetamine, which are disguised as shipments of various chemicals between the subsidiaries of the multinational enterprise she works for, Todd coordinates the transportation operations, and Skyler is in charge of accounting and money laundering. Here, the division of labor and the comparative-advantage based specialization is what makes their enterprise successful. If one or two individuals tried to run the same operation (like when it was just Jesse and Walter), they would not be able to produce as efficiently. The downward sloping portion of the average total cost curve is the area where the benefits of specialization outweigh diminishing returns from adding additional workers.
Ed visits and cares for Walter. As Ed prepares to leave, Walter offers him $10,000 to stick around for two more hours. Ed takes the offer but only for one hour and the two start playing cards. Based on the earlier exchange, Ed’s reservation price for each hour is above $5,000 but below $10,000.
Jesse calculates that Fring is earning $93 million from Jesse and Walter producing meth, but he doesn’t feel adequately compensated. His focus on Fring’s revenue rather than his profits is causing him to feel vastly underpaid. What is Jesse forgetting? What about costs with the lab, packaging, distributing, and guarding the meth. In addition, the risk that Gus (the owner of the methamphetamine operation) takes represents an additional cost of doing business.