Brian Arthur on technology, software, and economic systems
Jun 27, 2022
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Brian Arthur, storied economist and complexity thinker, discusses topics such as the evolution of technology, the role of software in shaping economic systems, the concept of increasing returns, and the representation of the human condition in Star Wars.
Technology evolves through the accumulation of existing technologies, shaping our lives and standard of living.
Software benefits from increasing returns, with initial high costs but subsequent low costs to replicate and distribute, leading to market advantage.
Widespread adoption of software creates a positive feedback loop, increasing its value and dominance through network effects.
Deep dives
The Nature of Technology and Its Evolution
Technology, according to Dr. Brian Arthur, is a means to a purpose or multiple purposes. He delves into the evolution of technology and its common patterns, drawing parallels between the evolution of species and the evolution of technology. He emphasizes the importance of understanding how technology works and its origins. Dr. Arthur spent years studying different technologies and their components, noticing that technologies are built out of other existing technologies. He also highlights the significance of technology in shaping our lives, stating that our standard of living depends on the advancements of technology.
The Role of Software and Increasing Returns
Dr. Arthur discusses the relationship between software and increasing returns. He explains that software has advantages in terms of cost efficiency and adoption due to increasing returns. The cost to produce software is high initially, but the cost to replicate and distribute subsequent copies is significantly lower. As software becomes more widespread, it can become a standard, benefiting from network effects and increasing its advantage in the market. Dr. Arthur uses examples like the launch of Java to illustrate the application of increasing returns in the software industry.
Network Effects and the Impact on Software Adoption
Dr. Arthur highlights the concept of network effects and its impact on software adoption. He explains that the more people using a certain software or programming language, the more advantageous it becomes for others to adopt it. The standardization of software, similar to the adoption of the English language, creates a network effect where more people speaking the same language or using the same software increases its value and usability. This leads to a positive feedback loop where widespread adoption drives further advantage and dominance in the market.
Originating New Technologies
New technologies, such as radar, are created in response to a pressing need. For example, the development of radar in the mid-30s was driven by the need to detect incoming aircraft for defensive purposes. By utilizing high-frequency radio waves and detecting their echo off metal objects like ships or aircraft, a reliable aircraft detection system was created.
The Transition to the Digital Economy
The economy has evolved from physical, labor-based systems to digital, autonomous systems. In the digital economy, functionalities and algorithms replace human involvement in various processes. Examples include the autonomous conversation among aircraft in air traffic control and the potential future of driverless cars on highways. While many jobs may be replaced by technology, human interaction, imperfections, and unique characteristics continue to hold importance in society.
Brian Arthur is a storied economist and complexity thinker. He is a pioneer in a number of disciplines including increasing returns, complexity economics, and the evolution of technology. Brian previously served on the science board and the board of trustees of Santa Fe Institute. He is one of the youngest endowed chair holders at Stanford University. Brian is also the author of The Nature of Technology: What it is and how it evolves.
Our conversation with Brian centers on technology and its manifestation within economic systems. More specifically, we cover: the nature and evolution of technology, the role of software in shaping economic systems, the concept of increasing returns, and Star Wars as a representation of the human condition.
