Friday, September 14, 2007

Structural Difference

The basic concept which surrounds the whole idea of Knowledge Management can be summed up in a riddle we used to play with as children ...

What is the one thing which increases when you give it away (apart from love, of course!)?


And, this is a basic difference between the concepts involved in the economics of the industrial economy, and the knowledge economy. Essentially, every Dr need not be balanced by a corresponding Cr because unlike with the traditional accounting principles, the sum total of resources in the system do not remain constant when we are talking about knowledge. In other words, the basic concepts of accounting value cannot be applied to knowledge.

So, for example, if you take the theory of Demand and Supply, and the concept of the Equilibrium Price, the question we need to ask is whether this concept can be applied to knowledge. For example, if we take value as a proxy for price, can we determine the equilibrium value using traditional economics? I dont think so. This is simply because, unlike traditional economics, the economics of knowledge are not dealing with a finite resource. Also, they are not dealing with a resource which comes in quanta, and where the supply of the resource follows the demand for the resource. And, most importantly, because exchange of the resource actually increases the total value of the resource availabe in the system.

What this implies is that there needs to be a rethink on the way the concepts of economics can be applied to knowledge, and to the economy which is driven by knowledge. And, this is something which should come not from economists, and not from KM practitioners, but rather, from the users of knowledge, because they are the people who are in the best position to attach a value to knowledge, and hence, define how, and to what extent it is adding value to their work. This, of course, also means that it is not only about the quantum of value (I think we still need to look at value in the form of quanta, unless someone can come up with an idea which goes otherwise), but about the how ... The context within which the knowledge is being utilized. More on this soon ...

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