Tag: tools

The Inevitable Next Economy

On January 23, 2012

The Human Productivity Chart:

Human civilization has progressed through many stages. Each stage arose from the “integration” of the tools developed in the prior stage. Believe it or not, the next economic paradigm will arise from the integration of the tools being developed in the current stage of human development. Let me explain:

Hunter -gatherer:

We started as hunter-gathers who traveled from place to place to follow animal migrations and seasonal flora. People would collect fallen branches and burn them for heat or cooking. Then people started to sharpen rocks that could be used to hunt food better than a dull rock. They sharpened rocks to chop down trees for warmth and shelter. Soon they sharpened rocks to till soil.

The agrarians

The arrival of the agrarian age came when the arrow, the axe, and the plow were integrated; that is, the output of one became the input of another – allowing people to conserve energy and increasing productivity. The emergence of communities led to the division of labor as people specialized their skills. People soon developed tools and techniques for forging metals, building structures, and harnessing of forces such as wind, sun, water, and domesticated animals.

City-states

The arrival of City-States arose when division of labor, harnessing forces, and transportation became integrated. Spare time became available to experiment in ideas such as governance, laws, civil services, and currency. Travel allowed for trade of goods, services, and the spread of knowledge across great distances.

Philosophers

The age of philosophy emerged as the leisure class, knowledge exchange, and civil law integrated such that people began to question existence, spirituality, and test theories about the observations that they constantly witnessed in the natural world.

Scientists

The scientific age emerged from the integration of tools developed during the philosophical age. Written language, mathematics, geometry, came together as alchemists attempting to turn lead into gold, instead created many other new and useful things from the elements. Astronomy, calculus, the scientific method, and modern finance were born.

Industrialists

The industrial age emerged as an integration of the tools developed by the scientific age. Eli Whitney demonstrated the “interchangeability of parts” paving the way for modern production. The printing press and cotton gin demonstrated the scalability of machinery while capitalization and securitization of value (finance) allowed a merchant class to allocate land, labor, and capital.

Information

The age of information formed from the integration of tools created by the industrial revolution. All that machinery created a tremendous amount of data. Computers were developed for processing data creating information that could be used to make productivity more efficient.

Knowledge

The Knowledge age emerged from the integration of tools developed during the information age. The Internet vastly accelerated the amount of information available from which knowledge could be applied as factors of production in physical systems from weather prediction, space travel, medicine, and new ways for people to organize their selves.

Innovation

The innovation age will emerge from the integration of tools developed by the knowledge age. So called “social media” is creating thousands of platforms upon which people reorganize themselves around interests, affinities, relationship, and commerce. As these tools integrate; that is, when the output of one tool becomes the input of another tool (and vice versa), a new economic paradigm will emerge.

Wisdom

Keep in mind that the agrarian economy and all previous stages are still with us today. Keep in mind that elements of future economies also exist today. Keep in mind that the US dollar has not always been the currency of trade nor should we expect that it will always be with us in the future. We can assume that the productivity inherent in people and communities is not dependent on the currency, rather, currency is dependent on it. Time is the only scarce resource and everyone has an equal amount of it. As such, time is the only true currency.

Economics of Innovation

By Admin

On September 16, 2008

In General Information

Every time humans invent better ways of doing things, the economy gets a little bigger. This is a simple idea. The cave dwellers discovered that they did not have to travel as much hunting and gathering if they could sharpen a rock enough to chop a tree down for firewood or for spearing animals. That same tool helped them to dig holes to plant seeds. By growing food and domestication animals, they could stay in one place and conserve energy. By living in cities, the division of labor led to more efficiency as the farmer, metal smith and rancher bartered their services. Enough surpluses were created so that a leisure class was free to develop philosophical thought leading to early scientific principals.

After a while, the invention of the printing press greatly advanced the availability of formal education. In the Early 1800’s, Eli Whitney stunned the world first with the cotton gin and then with his concept of “interchangeable parts” where he disassembled ten working muskets, scramble the parts and reassembled ten working muskets. What seems trivial today lead to great advances in the industrial revolution, becoming further refined in the manufacturing economy. Computers then ushered in the Era of Information followed by the knowledge economy that we live in today.

At each stage, there was a quantum leap in human productivity and financial wealth. Obviously the two are related.

If we look at this history from the big picture, we notice that each level of human development was derived from the prior level by integrating the tools of that prior level. As such, the knowledge economy was derived from the information era by integrating the computer tools leading to the Internet. The agrarian economy was derived from the hunter-gatherer tribes by integrating the wheel, wedge, and lever into agriculture and livestock. The industrial revolution integrated scientific principles from the Renaissance. This is fairly consistent.

If we look at this history from a microscopic view, we see that no single idea drove human development, rather, billions upon billions of little ideas from many diverse sources combined in unique ways to form larger ideas which then combined to form even larger advances eventually leading to those big innovations that we see as the milestones above.

Also, we notice that the over time, rate of change at which these ideas have been combining is getting faster and faster. The hunter-gatherer phase lasted 2 million years, The agrarian age lasted about 40,000 years. The scientific revolution lasted 1500 years. The knowledge economy is barely a single generation in play.

These are important concepts because later, when we build a mathematical model for the next economic paradigm, we will use a few tricks of calculus called the “derivative” and the “integral” to describe how things change over time so that we can measure and analyze productivity and wealth creation in the new economy.

Finally, we ask, what comes after the knowledge economy? There are two things that we can be certain of. The next great leap in economic development will be derived from the knowledge economy by integrating the tools that we developed in this knowledge economy. I strongly suspect that computer enabled society – or social networking will have something to do with it.

Welcome to the Innovation economy.

The Next Economic Paradigm

Tag: tools

The Inevitable Next Economy

Economics of Innovation

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