Author Archives: Michael Griffiths

Last year, a blog at Harvard Business Review talked about “knowledge flows vs. stocks.”

The idea, briefly, is:

1. Knowledge creation and transfer is happening faster and faster.
2. Stocks of knowledge are outdated faster than they can be capitalized upon.
3. Therefore, the flow is where the value is.
4. But to have access to the flow, you have to participate (which, among other things, means you have to be in geographical proximity).

I think this is a compelling way of looking at the world. It’s true (in some industries) that knowledge of how to do things is progressing faster than that knowledge can be “locked in place” by the organization.

If the organization attempts to control the knowledge – or its flow – it will fail; both because the flow cannot be controlled (by any individual), and because attempting to control it will introduce friction, making the organization(‘s employees) fall behind the cutting edge of the flow – and thus behind where they need to be.

However, I think the analysis is misleading – because it’s incomplete; the domain of analysis is too limited.

What constitutes a knowledge flow is a transaction – a series of transactions – of knowledge between people. Knowledge is unusual because it’s a non-rival good; therefore, new knowledge is highly valued, where old knowledge has little value (assuming no artificial controls on knowledge, e.g. patents).

A “stock of knowledge” is analogous to capital, which you could trade in the knowledge flows. However, because knowledge is non-rival, a knowledge stack shared is no longer a competitive advantage (everyone can use it).

So, while the more knowledge you have (the larger your “stock”) the more value you can add to the knowledge flows, the more you have to lose.

The people who have something to gain from a knowledge-flow market are those who create knowledge, not those who have accumulated knowledge. Think universities, not libraries.

Of course, it may be necessary to have a large knowledge stock to be able to create valuable knowledge (it’s almost guaranteed).

So having a knowledge stock becomes a necessary prerequisite to entering the knowledge flow economy. But creating more knowledge is the way to survive in the knowledge community.

Now, companies with knowledge stocks typically fail to capitalize upon them in time. If you have a stock of knowledge larger than what is publically available, and a knowledge flow market starts outside of your organization, you have no reason to join it (sacrificing the value of your knowledge stock). But the entire purpose of a knowledge-flow market is to increase the volume, increase the innovation – so, essentially by definition, they will devote more resources to creating more knowledge faster. Thus, over time the value of the knowledge stock will decline in comparative value – as the accumulated knowledge in the flow market catches up, then eventually overtakes it. .

(Yes, you can prevent this by investing in knowledge creating to “out-compete” with the knowledge flow economy. Good luck justifying that to stock brokers, though).

The article makes the point that you can’t participate without contributing knowledge. This is true, but it’s misleading (though accurate) to talk about the “free rider problem.” Instead, think of the flow as transactions – and a transaction cannot occur unless both parties agree. If you don’t offer anything, then you don’t get anything.

The currency is just different – it’s knowledge, not money.

Now, the larger picture: This is only possible if the cost of transferring knowledge is very low (thanks, Internet).

If the cost of transferring knowledge is high, then the value is not in knowledge creation, it’s in knowledge aggregation. An aggregation of knowledge is a “stock” of knowledge. As the cost of knowledge communication, the value of the aggregation diminishes because the cost of aggregating also drops.

Now, in some industries, you can also apply technology to perform automatic aggregation and organization of knowledge (such as Google, with the internet). This is not the case with all knowledge, of course.

The governing principle, then, is cost. If the cost of knowledge communication is high, then aggregation is expensive – and therefore value. If it’s low, then the expensive component is the knowledge creation – so that’s valuable.

This explains the distinction the authors make between “tacit” and “explicit” knowledge (which they do, actually, just not clearly). Tacit knowledge requires experience, education, etc. This makes it hard to transfer. But it’s actually pretty easy to get: there may not be many opportunities to get the right experience, but you rarely have to pay for it. The cost of education is likewise dropping (more and more info available online).

In contrast, explicit knowledge is easy to transfer but hard to make. You can go and look at info from the Human Genome Project. But it was damn expensive to get.

The framework of knowledge flow, stock, tacit and explicit knowledge – is not changing. The economics, the logic underlying the system, is remaining constant. What is changing are the value – and on a case by case basis. Yes, the world is different; but the more things change, the more they stay the same.

As a plug, the authors bypass one of problems that cheap knowledge communication introduces: discrimination. A problem that the “knowledge explosion” introduces is the explosion of junk knowledge. So, which knowledge is more valuable than other knowledge? If knowledge is being created so quickly, how to you determine which knowledge to use?

It’s the new version of the aggregation problem: knowing what knowledge to use. You only get one chance.

It’s this question which drove me to my self-determined major.

Recently, I’ve been reading a lot about the psychology of error. It’s interesting that quite a few journalists are publishing books that amount to little more than a summary of the psychological research. A pretty good summary of the very basics are provided in Joseph Hallinan’s Why We Make Mistakes (change blindness, preference for additional layers of explanation, confirmation bias, memory distortion to reduce cognitive dissonance, framing & schemas, quite a bit more).

Yesterday, I read a book which helped me connect the dots between the psychology and the business application. The book, Simplicity, was published a decade ago advocating for a new “simpler” organizational style. By “simplicity,” they meant the practice of focusing on the important stuff and ignoring the unimportant stuff.

The premise (though unstated) was simple: people make mistakes. To reduce the number of mistakes people make, reduce the number of choices they have. Fewer choices  – simplicity – leads to greater clarity, effectiveness, organizational speed, etc.

Another book I read yesterday, The Art of Woo, took a related approach. Because people are bad at making reasonable decisions – in fact, of the five factors people use to make decisions, one is “rationality” – you can, through a strategic application of psychology, persuade people.

And – much more importantly – through a failure to work with human psychology, people can fail to make good decisions. They cite a substantial number of examples of companies failing to shift in response to the market because the people advocating for the shifts simply couldn’t manage the “soft” or “non-rational” aspects – the persuasion.

The take-away is pretty simple: the more you ask people to do (particularly when what they should be doing is unclear, they don’t have enough time to understand the issues, the incentive scheme rewards a byproduct of good performance and not actual good performance, etc), the more they make mistakes.

The biggest casualties are executives, who are asked to navigate an unstructured environment, accomplish a great deal with relatively little guidance, and have a vast array of options of what to do – with little indication with is better until after the fact. Worse still, they are typically promoted or moved away before the long-term consequences of the changes they made impact the organization; making it impossible for them to really learn what works and what doesn’t. (It’s no wonder so much business knowledge seems to reduce to simplistic analogies with little indication of how applicable they are to the current situation).

The shift in my thinking is simple: the focus should not be on making the organization do more. It should be focused on making the people do less – to do a few things very well, and not get bogged down in useless details and meetings which increase the probability that people will make mistakes. The damage from someone making a serious mistake is almost certainly larger than the benefit a company could get from said person doing 10% more.

Or: how do you make the organization people-proof? How do you make it easy for people to work, easy for them to learn what is successful, give them accurate feedback, etc? How do you get people to concentrate on the really important things, and ignore the unimportant things?

Technical knowledge stops at the outer edge.

– David Brooks

Since my defense of the liberal arts, David Brooks has published an ostensible defense of the humanities. While I didn’t take many humanities classes, let me take a stab at evaluating his argument.

Ignoring his conflation of the liberal arts with the humanities – as many seem to do – I think David Brooks provides a few good reasons.

His argument comes down to the four useful things a humanities graduate will obtain:

1. Learn to write well.
2. Adopt the “language of emotion.”
3. Draw from a “wealth of analogies.”
4. Befriend “The Big Shaggy” (“people have passions and drives that don’t lend themselves to systematic modeling”).

But in order for a defense of the humanities to be credible, and not merely [something], the humanities have to provide more than useful skills; they have to provide something impossible to obtain anywhere else.

At the very least, reasons (1) and (2) are not unique to the humanities; good writing can be learned anywhere, and specialized (e.g. technical) writing may be domain-specific. Analogies are useful – but of what use are analogies that only you can understand? If, as David Brooks claims, people “think by comparison,” then surely it would be better to study a subject in depth and pick up analogies the people you will work with will know.

One may read Thucydides; but of what use is it to reference, say, the Mytilenean Debate when no one could draw the analogy or understand its meaning?

For David Brooks, what humanities students learn is “emotional knowledge:” how to take the je ne sais quoi of humanity, and “understand these yearnings and also educate and mold them.” It is this understanding of emotion which David Brooks finds indispensible, and which only the humanities instructs.

Except I must disagree with David Brooks.

The humanities certainly address emotion. In fact, they address far more; as traditionally defined, the humanities attempt to answer the question of “What does it mean to be human?” Its preferred source materials are great literature, religion, art, language, history, and the Classics: in short, the sum of all works the human race have produced which ask “Why are we here?” or “What does it mean?”

Nor is emotion unique to the humanities. Psychology also addresses emotion, and in a far more systematic way. It asks specifically the circumstances, causes, and consequences of “go-go enthusiasm intoxicat[ing] investment bankers” or “self-destructive overconfidence overtak[ing] engineers in the gulf.” In fact, these questions have far more to do with human cognition – thought, belief, action – than they do with Brooks’ vaguely-defined “Big Shaggy.”

Yet if it’s not emotion which permeates the humanities, what is it?

My answer is meaning.

Meaning is not a trivial question; nor does it have a trivial answer. The answer to the question “What should I do” must, ultimately, have a question emanating from the humanities. Other answers, such as “make money” or “get married” or “have kids” are not ends in themselves, and are such intermediate.

For the breadth of human history people have been concerned with this question; and since the rise of relativism (thanks Nietzsche!), the diversity of answers to this question have become increasingly apparent. It’s widely believed that the question has no answer.

Of course, that raises an additional question: If the question does not have an answer, why is it worth studying at all?

It certainly cannot be to understand a niche topic, such as motivation (psychology does it better), or human nature (biology, psychology…).

No; moreover, such an avenue misses the entire point.

The humanities does not seek to answer the question of what gives life meaning. It seeks to understand what has given life meaning, by studying those great works which have defined centuries of thought. It seeks to deconstruct myths which have led to glory and devastation; beliefs which have shaped the course of nations, people who have altered the course of the world.

In studying what has given meaning, the students of humanities learn what provides meaning – regardless of truth. They learn what makes a story inspirational, a narrative compelling, and a dream worth dying for.

In doing so, they learn – as David Brooks notes – a bevy of practical skills. Writing, certainly, but specifically storytelling. An array of statistics and an airtight argument are – provably – less convincing than a touching story or anecdote. People don’t just think via analogies – they decide via stories (an analogy is really just a story fragment).

As well, they learn argument – first, how to deconstruct a story. Not only to understand how the story works, but also all that it implies; to decode what makes it convincing, to piece out any flaws. Second, they deal with ambiguities: every class in the humanities forces students to deal with multiple interpretations. There is no right answer, and it’s nearly impossible to judge it one answer is better than another. This ambiguity mirrors the real world far more closely than the lure of mathematic precision.

These skills are not taught anywhere else.

The sciences teaches induction, reasoning from the data; applied disciplines, like business, teach one where to find the answer (or how to do X). Both assume that there is an answer, that it’s just some work to find it out (in the case of science, a bloody long time).

Are the skills the humanities provides valuable? I would argue they are – and that they are essential for “the real world.” Whether any individual applies their skills as fully as they may is, of course, a different question.