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Stanford Report, August 11, 1999

'Knowledge network' founders strive to preserve, pass along what is known

BY KATHLEEN O'TOOLE & DIANE MANUEL

Saturn rockets that helped put astronauts on the moon have at least one thing in common with Egypt's pyramids, says Syed Shariq. The knowledge necessary to build both has been lost to humanity.

"You can go to a pyramid and marvel at it and read some hieroglyphics, but nobody has a blueprint and we certainly don't know what kind of organization built it," says Shariq, a visiting research scholar at Stanford who is a former NASA manager. "We have ideas, but the technology, the architecture of the institutions involved has been lost over the years and is very hard to re-create."

Knowledge learned directly from experience -- so-called "tacit knowledge" -- is vital but difficult to preserve, says visiting research scholar Syed Shariq, who is a former NASA manager.

Photo by Linda Cicero

But what about Saturn rockets built just 30 years ago? "We have a copy of Saturn and all the blueprints," he says. "We also have knowledge of what NASA was like then and its budgets. But still, rebuilding Saturn requires understanding why the rocket designers chose to make the engine only so big. They wrote down the design, but they did not say what ideas they considered and why they made the choices they made. We do not have those whispers in the ears."

Humans have invented all sorts of written codes and other recording and storage devices for knowledge. But whispers in the ears -- so-called "tacit" knowledge, or knowledge learned directly from experience -- is still difficult to share across space and time, and the problem may be growing exponentially, along with the quantity of knowledge that people feel they need to know. "Tacit knowledge about technology that is important to our economy is at a premium today," Shariq says. "People come to the Silicon Valley to get that knowledge through human networks."

Shariq has helped create one such knowledge network -- for people who want to know more about knowledge networks: how to create them, make them work and expand them to more people. The hope of some participants is that a better understanding of these networks will permit their scaling up so more regions of the globe can reap economic benefits from a knowledge-based economy.

Part of Stanford's Institute for International Studies, the network's formal name is Knowledge: Networks, Exchange and Uses -- KNEXUS, for short. Shariq is the director, and the program's principal investigator is Nathan Rosenberg, the Fairleigh S. Dickinson Jr. Professor of Public Policy, a leading expert on the economics of technological change. Launched last October with an initial grant from the Bechtel Initiative on Global Growth and Change, the network includes "global fellows" from participating industries, as well as researchers from several countries. KNEXUS held a symposium Aug. 2 at which leading researchers on knowledge networking shared their latest work with other researchers and business participants. Topics included the architecture of the brain for processing and using knowledge; institutions that provide both knowledge storage and rules for its use and exchange; the role of regional and scientific networks in economic growth; and the development of competitive knowledge markets to aid the diffusion and use of knowledge.

Nobel laureate Douglass North, who is known for his work on economic institutions and has consulted with countries trying to develop market economies, kicked off the symposium by sharing his view of how economic change occurs. "Nobody knows what reality is," he said, but everyone tries to understand what is going on by developing a set of beliefs or models upon which to act.

A society's formal and informal rules about how people should interact are its institutions. They help structure reality by creating expectations and reducing uncertainty, said North, who is a Hoover Institution senior fellow and professor at Washington University. Laws governing contracts, customs about appropriate business behavior and a national patent system are examples of institutions that affect economic expectations.

"The world probably works best when institutions reduce uncertainty but also leave enough flexibility to allow people to try lots of alternatives," he said. "With an unlimited opportunity set, you end up with chaos." Too little choice reduces the odds of success. "We get very imperfect feedback. It all adds up to getting it wrong throughout history along with occasionally getting it right."

Merlin Donald, a neuropsychologist at Queen's University in Canada, laid out the evolution of the human brain in order to explain the cognitive constraints on knowledge use and transfer. People's thinking, he said, is heavily shaped, even controlled, by cultural institutions because the brain has "adapted for culture."

"Human brains are not different structurally from their closest relative, the ape, but they are larger in size," he said. "We still need all the lower structures for what we think of as the subconscious level."

The first big change in the human brain took place about 2 million years ago, when the species developed whole-body expressions, including mimicry and group displays such as dance, he said. A second transition, in which the jaw also enlarged, came about 500,000 years ago as humans developed oral language and narrative thought. "Telling a story is still the most universally understood form of thought," he said.

Donald has proposed a third brain transition: when humans invented symbols. This allowed them to store information external to their bodies and to think more theoretically with assistance from codes, such as written language, mathematics and music notation. Showing 7,000-year-old pictograms representing "mountains" in several of the earliest known writings, he noted that the modern American is surrounded by symbols from corporate logos to maps to car dashboards. Their meanings are collectively created and constantly changing, he said, and probably built upon some very old meanings that others do not share. "Our culture is a subculture of human culture. If you want to play a game that is universal, you have to tap these other layers" of thinking that predate the use of symbols, he said. Even in our own culture, "rock video and cinema reveal our mimetic underbelly. The [lasting appeal of] narrative comes out in our celebrity culture."

Stanford's Rosenberg shifted the focus to how Western institutions have shaped the growth of technical knowledge and responded to it. A key institutional innovation was the industrial research lab developed in late 19th-century Germany and expanded upon in the United States. "These labs made the scientific community more responsible to society," he said.

People think of scientists as pursuing basic knowledge for its own sake, but "the R&D we do today depends on the R&D we did yesterday," he said. Even in universities, much research is an attempt to understand existing technologies on a deeper level, and industrial developments, such as DuPont's development of nylon, often lead to expansion of research areas in universities. Old technologies, such as the automobile, airplane, camera and transistor, continue to be the subject of research.

Speakers in the afternoon sessions of the symposium discussed organizational change, how innovative ideas can be encouraged and how technologies can be transferred.

James March, Stanford professor emeritus of management, political science, sociology and education, director of the Scandinavian Consortium for Organizational Research and a member of the KNEXUS steering committee, discussed how innovative ideas can be developed and encouraged within companies.

Noting that there is a "systematic bias against exploration" in business and that "most new ideas are lousy," March argued that rewards systems have to be changed to make exploration of good ideas more feasible.

"In this world of smoke and mirrors . . . how do you persuade people that something is a good idea?" he asked. "That's one of the things we ought to be doing research on."

Gavin Wright, Stanford professor of economics and a specialist in economic history, used the example of the U.S. South to support his thesis that technological progress historically has been a "network phenomenon," in which people who may not know one another nevertheless share a common technical language and problem-solving environment. As technology has become more scientific, it also has become more flexible, Wright said, and more readily transported across barriers of distance and place. Wright is also a member of the KNEXUS steering committee.

Ashish Arora, who earned his doctorate at Stanford and is now an assistant professor of economics at Carnegie Mellon University, spoke about developing markets for technology to aid knowledge diffusion. Markets occur when companies with specialized knowledge are willing to license it to others or create mergers or spin-offs.

Although professional literature traditionally has supported the notion of the tacit nature of technological knowledge, Arora said those who argue that it therefore cannot be transferred have "vastly overstated" the situation.

"Tacit knowledge is not an insurmountable barrier for markets," he said. "You can write simple and robust contracts for the transfer of tacit knowledge."

In a draft paper for the symposium, Arora wrote that specialized engineering firms transferred the technical knowledge of chemical production plants to developing countries at lower costs than the original developers of the knowledge. People remotely located from a source of new knowledge, such as the Silicon Valley, can benefit by adapting technical knowledge to particular needs. Regions that want to enter the knowledge economy, he suggested, need to monitor international technical developments and develop local technical skills to increase their absorptive capability.

In an after-dinner keynote talk that evening, William Miller, former provost, CEO emeritus of SRI International and professor emeritus at the Graduate School of Business, told about a conversation he'd had with William Hewlett in 1968, at a time when Hewlett-Packard was shifting its focus from instruments to computers.

"Bill told me three things were different here [in Silicon Valley]," Miller recalled. "First, he said, it's okay to change your job. Second, it's okay to fail. And third, it's okay to talk to competitors."

Miller said that kind of open business environment still defines the area, and he went on to discuss other characteristics of successful entrepreneurial regions, including rewards for risk taking, highly mobile work forces and well-developed venture capital.

Citing a recent article in Fortune magazine, which reported that 70 percent of venture capital investments between 1993 and 1998 were failures, Miller argued that small companies nevertheless have been the big job-creation engines in the United States in the past two decades. Those that built diffuse networks, he added, drove the rejuvenation of Silicon Valley in the late 1980s and early 1990s.

"And the network is really what the valley is all about," he said. SR