Information & Knowledge Society
An information society is a society whose primary economic activity is the processing and exchanging of information and knowledge.1 It is built upon a new wave of technological development brought about by the advent of the digital format, microprocessor, personal computer and the Internet. The information revolution is enabling a new networked structure to our systems of social and technological organization and giving rise to a fledgling knowledge economy. It is often identified as one of the most powerful forces shaping our world in the 21st century; having a structural transformation to both the technology and institutional infrastructure of our economies as they become networked, adaptive, automated and virtualized.
We can define a society as a set of cultural, social, political and economic institutions that are interconnected in a particular structure. Societies are supported by a set of technologies and production processes that enable their access to the resources required for their physical subsistence. When we talk about a Stone Age or agrarian society for example, we mean that it was the technological engine of stone tools or farms that enabled that particular set of socio-cultural institutions. When we transitioned from being Stone Age hunter- gatherers to being sedentary farmers, it created a whole new social context. It essentially enabled a whole new world or way of being for people and represented a very fundamental restructuring of beliefs, values and distribution of socio-economic power as we went from living in small tribes to the emergence of large complex empires. The industrial age was the next systemic transition within the make-up of society, as the harnessing of the new technologies of the combustion engine and fossil fuels allowed for the development of the modern nation state as the social infrastructure behind the emergence of a new form of mass society and mass culture. During the latter half of the 20th century, the industrial economies became increasingly linked up into a single global economy. Outsourcing and advanced automation drove rapid commoditization of manufacturing and the industrial sector. Alongside the growth of economic globalization was the so-called information revolution, built upon the core technologies of the microprocessor and the global telecommunications network of the Internet. It once again enabled a fundamental restructuring of society.
It is within this paradigm that we can understand the environment organizations operate within today as primarily defined by this transition from an industrial to postindustrial information society. Similar to the technologies of the stone tool, agriculture, and the combustion engine, information technology is enabling a radical and rapid reshaping of all areas of society from how we work to how we socialize, trade, learn and once again restructuring the socio-economic power relations that shape our world. The information revolution is based primarily on the technologies of the digital format, microprocessor, personal computer and the Internet, these technologies are today having a pervasive effect on almost all areas of society and its technological substrate as they enable the rapid proliferation of horizontal networked systems of organization.
Complexity theory has in many ways taught us that connectivity is a fundamental parameter to a system. When we have a low level of connectivity within a system, the component’s states can remain asynchronous for a prolonged period of time. I might totally disagree with my neighbor about what color shoes people should wear, but as long as there is a big fence between us and I only see him once a month to say hi, this is not going to be a big problem and we can go on maintaining our very different philosophies about the coloring of shoes. But now let’s turn up the connectivity by saying me and my neighbor get employed by the same company to design the same pair of shoes. This connectivity means we cannot go on in our previous isolated asynchronous state. We will inevitably come into conflict and/or coordination, because we are now, and this is the important thing, interdependent. The dynamics of independence, which was our first state, and interdependence which connectivity creates, are very different.
With interdependency, the gains and losses of one are directly correlated to the gains and losses of another. Within this dynamic, an individual cannot systematically get ahead by reducing the value of another one, but you have to make the whole pie bigger in order for you to get ahead. This fundamentally changes the dynamic towards openness and cooperation not because people all of a sudden become nice, virtuous individuals. We are not changing the variable of how altruistic actors are. We are assuming that stays constant. What connectivity changes though is the structure to the game we are playing. Connectivity drives interdependence and non-zero sum games.
Information and communications technologies are changing the structure and dynamics of organizations, whereas previously, the high cost to communications and the tools of collaboration promoted centralized well-structured professional organizations due to the overhead required to maintain them. I.T. has reduced the barriers to collaboration so low that anyone can set up their own networks of collaboration that are unstructured, dynamic and loosely coupled. This has opened up whole new markets and new forms of value generation on what is called the long tail. The long tail represents the vast majority of people who were not productive enough or consumptive enough to be serviceable at the high collaboration costs of professional organizations. Reduction in collaboration cost is unleashing a whole new framework through which we create value and orchestrate capability within society through the harnessing of the so-called crowd – the mass of people, each of which only has a small amount to contribute, but when summed up it comes to a powerful force.
I.T. enabled networks have become a key characteristic and structure of the information age. Traditional hierarchical organizations that once had virtual monopolies due to economics of scale are rapidly becoming re-contextualized as simply large nodes in networks where they are one among many and have to compete with the masses on the long tail. This is the world where the previously elite New York Times has to compete for attention with millions of individual bloggers. Increasingly I.T. is enabling the creation of dynamic, real-time, self-organizing networks of collaboration that can be on a global scale and exert a powerful force wherever they emerge.
Added to this is the network effect, which basically means that the value of something is in its capacity to interoperate with other things. In an interconnected world, value is in the network, not so much in a thing, product or organization. Almost all the valuable knowledge your organization has is not in your organization. It is in the internet, and your organization is going to have to have access to that network for it to maintain relevancy. That means you have to be part of these networks and your value is in your differentiated function within them. Information technology is driving connectivity, which leads to both greater conflict and cooperation but ultimately greater interdependency. Because of the dynamics of interdependence it tips the balance towards open systems of organization instead of closed systems. This is going to present major problems to our traditional economic models based around closed systems and zero-sum games that we discussed in the previous video.
Commoditization of Information
The information revolution has given us a vastly more efficient and systematic set of technologies for the processing and exchanging of information than previously existed. And although a massive amount of value is still to be derived from this as it ripples through the business world and the social fabric, but the technological revolution continues in advanced analytics and machine learning, where in the not too distant future standardized, routine information processes will become commoditized, this once again drives value up the value change. Within the advanced economies where the primary and secondary sectors have been commoditized, where information also is fast becoming commoditized, the capacity to learn is the only sustainable competitive advantage. It is no longer what you know; This is just information. It is truly the dynamic process of learning and applying that to solving problems, that is thinking, that comes to be the only sustainable value added activity.
Something as profound as the information revolution has many ramifying effects across the whole structure to advanced economy, and another one of these is mass automation. Information technology is commoditizing basic information processing and services as the next generation of software systems algorithms are specifically designed to automate these functions. Whether we like it or not, whether we are ready for it or not, mass automation is upon us in the coming decades with significant economic consequences. You can take many basic services, information processing and manual tasks, and there will be some team in Silicon Valley working on automating this process, and major breakthroughs in the technology that supports them in doing this are happening right now. As IT commoditizes basic economic activities, it will drive value up the value chain and it is within this context that we can talk about the burgeoning knowledge economy.
The information revolution has enabled knowledge to break out of its traditional confines. In an advanced information society, knowledge is no longer a static thing that is confined to the elite of academia. Knowledge and intellectual capabilities have always been valuable and scarce resources, but when enabled by advanced information technology that is in turn connected up to a high-tech global economy, it has the capacity to be actuated and reshape the world at an unprecedented speed and scale. Unleashing the cognitive capabilities of millions that was previously dampened down within industrial systems of organization is one of the greatest sources of potential in our world today, but it is an inherently complex task as knowledge defies all our traditional economic logic. It is nonlinear and nonrival. When people communicate and share their knowledge, it can become more than the sum of its parts. Knowledge services and learning are processes. They are unique and take time. If data is the capital of the information economy, attention and time are the capital of the knowledge economy.
As the sea of data and information grows exponentially, the amount of knowledge and intelligence become relatively scarce. If you have spent any time in the world of business management, you would have heard the word innovation and a relentless demand for more of it, as human capital and innovation are moving to the forefront of how organizations generate value. Commoditization of basic production processes and services puts business organizations, and in particular multinational corporations, in a very competitive space, as they have to move up the value chain to maintain differentiation. This makes the knowledge economy ever more clear and presents reality enabled by information technology. Suffice it to say the knowledge economy runs on very different rules to that of the industrial age economy.
Another major factor to be considered here is what we might call economic virtualization. Information technology always and everywhere enables virtualization. Virtualization is the process of decoupling information from its underlying physical supporting structure. The image of a plant once only existed as an extension of a physical plant. Information technology has enabled us to decouple that information from the physical presence of the plant, and we cannot store, manipulate and exchange this information independent from the underlying physical structure.
Of course, this process is nothing new. We have been doing this for thousands of years, but with the information revolution it is in hyper-drive. As with almost all other areas, this virtualization process is also happening to our economics. With respect to our discussion here, money can be thought of as a piece of information that represents some form of economic value. Finance is then the storage and exchange of this virtualized economic value. From this perspective, finance is the information layer that sits on top of the economy. It is then possible that anything forming part of the real economy can be converted into a financial instrument and become part of the financial system. The process of doing this is called financialization, and financialization is a major trend that has been taking place over the past few decades