Who determines the path of new technologies: the engineers in the R&D lab, the decision makers of a company (or at a university or government sponsor), or the consumers and citizens who put that technology to use? For many people, W. Brian Arthur’s theories about complexity and innovation have provided the most effective answer. In the 1980s, as an economist based at Stanford University and the Santa Fe Institute (to which he would move full time in 1996), Arthur began to develop agent-based models of stock market behavior. These showed the extent to which irrational factors such as investors’ subjective expectations could bias the behavior of the whole system.
In the mid-1980s, as the full impact of personal computers on business began to be felt, Arthur put forth the idea that increasing returns — the expanding value of a technology as more people use it — could lead economies in unexpected directions. For example, Microsoft’s Windows operating system, deliberately set up as an open-architecture platform, was increasingly valuable because of the large array of hardware and software components that worked with it. The greater the number who used it, the more companies would fit their products with it, and thus the greater the number who would use it. Such a system would be vulnerable only to another product with an even stronger network effect (such as Google’s search engine, eventually). Arthur’s concepts provided an apt strategic explanation of the ways in which innovative products, surrounded by networks of avid users, came to dominate niches in the technology industry. (See Joel Kurtzman, “An Interview with W. Brian Arthur,” s+b, Second Quarter 1998.)
Arthur’s latest work, The Nature of Technology: What It Is and How It Evolves (Free Press, 2009), delves more deeply into the meaning of innovation over time. He observes that new technologies are put together from existing technologies. Thus, the collective body of technological endeavor evolves by creating new elements from within itself. It forms a system that is constantly changing in ways that nobody can quite predict. This evolutionary process provides the impetus in turn for large-scale changes in science, the economy, and much of human culture.
“We put together pieces of metal alloy and fossil fuel so that we hurtle through the sky at close to the speed of sound; we organize tiny signals from the spins of atomic nuclei to make images of the neural circuits inside our brains; we organize biological objects — enzymes — to snip tiny slivers of molecules from DNA and paste them into bacterial cells,” Arthur writes. “Two or three centuries ago we could not have imagined these powers.”
Recently, s+b spoke to Arthur at his home in Palo Alto about the evolution of technology and how people and companies can harness innovation for their own benefit and the benefit of the world around them.
S+B: You wrote in your new book that an economy is an organizing system for technology. What did you mean by that?
ARTHUR: If you consider what an economy consists of — organizations, laws, markets, banking systems, and so on — you realize that human beings have created an enormous system of means or arrangements to meet our needs. And then when you look closely at all of these arrangements, which have become enormously complicated, incredibly interlinked, hyper-communicative, and very much dependent on each other, you realize that they are made up of a huge panoply of technologies. I find this actually quite marvelous — that one of our primary accomplishments as human beings is to get ourselves organized to meet our needs, and we’ve done it in a brilliant way that’s evolved over centuries.