You would think that someone who spent his entire career working in publishing, film and television, online services and telecommunications would embrace whole-heartedly the notion that we are in a “knowledge economy” today—but you would be wrong.

The very notion of a transition from a manufacturing economy to a knowledge economy seems to me to be completely wrong-headed—not to mention unbelievably insulting to a very large number of people upon whose work and experience—their deep knowledge—we have relied upon so heavily and for so long.

All jobs involve knowledge of some sort, even the so-called “unskilled labor” jobs that are at the heart of today’s immigration debate. (If you doubt me, just follow an experienced farm hand for a day, and see which one of you is more productive.)

Manufacturing of all kinds is intensively knowledge-based. Knowledge is acquired both explicitly through education and training and implicitly through performance and experience, through tacit acquisition that is more difficult to pass on or quantify. But different types of knowledge carry both different societal and economic value at different times in our history, and so while there is indeed a fundamental shift occurring in our global economy, it is not from industrial to knowledge-based industries. Instead we are witnessing the emergence of an information-based economy where the knowledge required to work with, manipulate, and bend information is more highly valued than the knowledge required to bend metal.

Many people use information and knowledge interchangeably, but they are in fact two very separate things. During my last two years at AT&T, I had the privilege to have an office in the Claude Shannon Laboratory at AT&T Labs in Florham Park, New Jersey. Claude Shannon was the father of Information Theory, which demonstrated that information is a quantifiable, measurable “thing” just like energy or a chunk or ore.

What began as an attempt in the early-mid 1900’s to answer the simple question, “How many conversations can be carried simultaneously on a single telephone line?” turned into one of the most radical breakthroughs in the history of science—the repercussions of which are still being felt today and which may even hold the key to physicists’ efforts to come up with a unifying Theory Of Everything. Breakthroughs like the microcomputer, CD, and iPod—all of which are dependent in some way on Shannon’s work—pale by comparison with what might be coming in the future.

I won’t try to explain Shannon’s theory here, but if your at all interested, intrigued, baffled or amused by the thought that information theory might hold the key to decoding the universe, I suggest you check out Charles Seife’s book on the topic. For now, though, I’m going to shift back to the economic implications of this fundamental shift in how we think of and work with things in the material world.

Most of us are familiar with the story that society (our society at least) has advanced from being largely agrarian to an industrial economy and is now moving into the (improperly labeled) knowledge economy. That story oversimplifies and distorts the reality of what has taken place, and it is adversely affecting the decisions we make about what we need to do to prepare for the new “new economy.”

Earlier posts have covered the role of disruptive technologies, and Clayton Christensen’s translation of the work of economist Joseph Schumpeter into language business people can understand. In his excellent book, The Past and Future of America’s Economy, Robert Atkinson takes us back to Schumpeter’s observations of the long cycles our economy goes through, and provides a much better breakdown of what those are.

From the 1840s to the 1890s, we lived in a largely mercantile/craft-driven society. Knowledge was passed on from craftsman to apprentice, and protected not by patents but by the social hierarchy and a guild system that emphasized the tacit transfer of knowledge rather than the explicit transfer.

The 1890s ushered in a more explicit, factory-based industrial form of work, one that lasted until around the 1940s when it was surpassed by its logical successor, corporate mass production, which dominated from 1940 until around 1990, when it began to run out of steam and began to be replaced by a more entrepreneurial, information theory-based (Atkinson uses the word “knowledge”, but his text reveals he means information) economy.

Each of these major 50-year cycles share similar features: “economic growth flourished in the early and middle period, and as the economic, technological, and organizational drivers lost steam at the end of the period, growth slowed.” Two other major features these cycles share are 1) a complete and dramatic change in the organizational structure of business entities; and 2) complaints about the failure of existing educational systems to adequately address the needs of the new economy.

Sound familiar yet to anybody?

Atkinson continues: “The rise of each new economic era also changes the dominant skills and occupations. During the mercantile/craft period, over half of Americans worked on the farm, and of those who were in production, virtually all were craftsmen. The industrial era saw the rise of the unskilled blue-collar factory worker. The workers employed in Ford’s River Rouge plant, seen standing in long rows all doing the same repetitive task, become the prototypical worker….With the rise of the corporate mass production economy, the prototypical job became the white-collar paper-pushers with their in-boxes on desks arrayed in row after row. In today’s New Economy, the prototypical worker is the higher skilled ‘knowledge worker’, [sic] working in a cubicle in a suburban office park.”

I quibble with Atkinson’s classification of high vs. low skilled jobs, and his use of “knowledge” as if it were synonymous with “information.” Those quibbles aside, however, is there anyone still reading this who can’t see the history of Northeast Ohio’s rise, fall, and potential rise again in the cycles he describes? Or where we are in this latest cycle?

Substitute the word “valued” for skilled and the word “information” for knowledge and you can see more clearly how we can take advantage of this current cycle—something it is far beyond our abilities to change or halt—in order to prepare our children and rebuild our industries to meet the information driven economy of today. In healthcare, we see the growing importance of both greater transparency and increased portability of personal health records; the sequencing of the human genome and bioinformatics; and the use of imaging (information) technologies and ultrabroadband transmission in providing high-quality care. New chemicals and materials rely increasingly on complex combinatorial work that expands well beyond the boundaries and capabilities of any one human’s mind to grasp, or even one single computer’s capabilities to process.

Whether its nanotechnology, power/propulsion systems, new sources of energy and more sustainable systems, our understanding—our knowledge about—the connections between energy, entropy, and information will determine how successful we will be in creating and dominating the information-based markets of tomorrow.

This entry was posted on Tuesday, May 23rd, 2006 at 2:18 am and is filed under Strategy, Policy, Information and Communications Tech, Manufacturing, Education, Innovation, Broadband, Entrepreneurship. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.