European Affairs

Indeed, in our society, technology is evolving at an accelerating rate and having a greater impact in more sectors and more places.  Consider how over the last 15 years just one technology, the Internet, has transformed how we find and analyze news and information, how we communicate with each other, how governments interact with their citizens and how we entertain ourselves.  Without a clear understanding of how technologies evolve, we cannot fully understand the impacts of the technologies shaping our economy, our society, and the geopolitical landscape. That said, why is Arthur’s book so important book and why should everyone read it?  Here are  ten reasons, among others:

1)    The book is worth the time and money if only for the fact that he defines in very clear terms the words “technology,”      “invention,” “innovation” and “technique,” words that have been used (and abused) for decades, leading to confusion among policy-makers trying to craft intelligent policies, among business leaders trying to set viable business plans and among investors trying to make profitable investments.  He defines “technology” in three ways: (1) a means to fulfill a human purpose, (2) an  assemblage of practices and components and (3) a collection of devices and engineering practices available to a culture.  In his own words, this three-part definition provides a framework for the entire book: the thesis he defends and demonstrates is that the development of “technology” means that individual devices and techniques are built up of subsystems and components, which then in turn provide the subsystems and components, which when combine make our technology-driven economy possible.  Perhaps even more important for many readers will be the distinction that Arthur makes between invention and innovation.  While inventions often result from a single flash of genius, innovation is a more evolutionary, step-by-step process as components and subsystems are assembled, tested, refined, and reassembled in an ongoing process of improvement.  Defining and understanding these terms properly is critical, both for a corporate manager trying to develop a R&D strategy and for a policy-maker trying to design a patent system that rewards and fosters both invention and innovation.

Complexity Theory

2)    W. Brian Arthur is one of the most revolutionary and influential economists of the last forty years.  He helped lay the foundation of complexity theory and was a founder of the Santa Fe Institute where much of the best work on complexity is being done.  He developed the economics of increasing returns, which showed how in many situations, particularly in the high-tech sector, classic economics just do not apply.  In particular he showed that the classic assumption that the more you invest in producing a product, the lower your profit margin will be, is often not true.  It is true when producing T-shirts or toothbrushes (because you saturate the market, resulting in lower prices, among other reasons).  But it is not true for products such as consumer electronics or software, where by investing much more than your competitor can enable your company to grab the “first-mover advantage,” define the standards for that product, and dominate the market, leading to higher profit margins (or even monopoly pricing).  Without the economics of increasing returns it is impossible to explain the phenomenal growth of both Microsoft and Google.
3)    The Nature of Technology is written in very clear, non-technical English (and no doubt in other languages soon).  Arthur chose to do this because, as he stated in the preface, “technology is too important to be left to the specialists,” and because he wants to “stir an interest . . . in a subject of great beauty.”  The Nature of Technology is full of fascinating case studies, both historical and current, showing how technologies have evolved and why.  These examples range across all sectors, from military aircraft to DNA sequencing, from railroads to laser printers.
4)    Arthur explains in layman’s language how often technology arises out of a better scientific understanding of a natural phenomenon.  For instance, radar would never have been possible without a scientific understanding of electro-magnetic waves and the equations needed to explain how they interact with matter.

Technology Creates Technology

5)    Perhaps the most important insights in the book regard how technologies are combined in new ways to meet new needs and how technologies --  whether a jet engine or a piece of software --  tend to have a hierarchical structure of assemblies and subassemblies, which form the building blocks of a particular device or process.  Explaining how these building blocks develop and how they are assembled forms the core of the book.  According to Arthur, it is not appropriate to compare the evolution of technology to Darwinian evolution, where different components of a plant or animal change in response to the environment around it.  Instead, he emphasizes “combinatorial evolution” in which the actual subsystems and processes that make up a technology are replaced or augmented by new components.
6)    One of Arthur’s key insights follows from his concept of combinatorial evolution.  Because technologies consist of existing systems and processes augmented by new devices made possible by better scientific understanding of natural phenomenon, we will see an increasing acceleration in the development of technology because with more devices there is an exponentially growing number of ways to combine them—as well as  more technological tools with which to measure, study and understand natural phenomena.
7)    Another key insight is that more and more technological progress will happen in the interstices between disciplines and sectors as tools and techniques from one field are combined with those from other fields.  For instance, medical imaging devices, such as MRI scanners only became possible when insights from nuclear physics were applied to medical problems.  Arthur stresses the need to go beyond a single domain of technology to develop new technologies: “It is a constant re-expressing or redomaining of old task—accounting, or transportation, or medical diagnostics—within new worlds of the possible.”

How Innovation Happens

8)    Arthur provides a full understanding of many different ways in which innovation happens:

  1. through “standard engineering, ie the thousands of small advancements and fixes that cumulate to move practice forward,”
  2. from the invention of “radically novel technologies,”
  3. by changes in the components within a device (“structural deepening),” and
  4. by assembly of “whole bodies of technology, emerging, building over time.”

9)    Finally, the most generally-applicable paragraph of the book can be found on page 163, where Arthur emphasizes that the development of domains of technology is not a magical, linear process marked by a series of “Eureka!” moments.  “The process is not so much like the development of the jet engine: focused, concentrated, and rational.  It is more like the way a system of legal codes forms: slow, organic, and cumulative.  With domains, what comes into being is not a new device or method, but a new vocabulary for expression -- a new language for ‘programming’ new functionalities in.  And this happens by slow emergence.”

What will be clear to anyone who reads this book is that W. Brian Arthur has made a groundbreaking contribution to our understanding of technology.

Michael R. Nelson is a Visiting Professor of Internet Studies in the Communication, Culture and Technology Program at Georgetown University and a member of the Advisory Board of the European Institute.