"Now we discover there are no limits to the number of ideas we can generate and combine."

BY CHARLES M. SAVAGE

We are on the verge of a truly exciting development in the world economy, the shift to the knowledge economy. In the agricultural era, we generated wealth with land and labor. In the industrial era, we combined the resources of land with labor and capital. Now we are realizing that it is knowledge that makes the difference.

Thanks to our knowledge about DNA, we are able to develop designer cows and sheep. We are now packing more intelligence into both automobiles and milk. Power lines not only carry electricity, but now also convey telephone conversations and Internet communications.

Until now we have struggled with limited resources. There have only been so many hands, so much land and so much money to accomplish what we have wanted to do. Out of this experience we have developed the rules of the economy of scarcity. Now we discover there are no limits to the number of ideas we can generate, or the ways we can combine and recombine these ideas. The economy of abundance has a different set of rules.

The possibilities opening up are endless, and yet, we are still captive to the assumptions and values that shaped the industrial era. The industrial era was built on five simple assumptions: 1. Divide work processes into little steps as a way of dealing with complexity; 2. Pay people for what they do, not what they know; 3. Fit people to narrowly defined jobs; 4. Control them; 5. Assume the invisible hand of self-interest. This often results in a culture of distrust where people devalue one another's talents.

The industrial era has brought many parts of the world a significantly higher standard of living, yet its assumptions and values limit our ability to focus on a higher character of life. Second, an economy based on extracting natural resources and transforming them into goods with supporting services is by nature limited. If we want to develop an even more robust economy that can meet the employment needs of an expanding population, we will need a fundamental shift in thinking, feeling and valuing.

Early signs of the emerging knowledge economy are already with us. There are an ever growing number of conferences on "knowledge management" taking place in Japan, Australia, Canada, Sweden, Germany, the United Kingdom and the United States. Companies such as Dow and Xerox are paying more attention to their intellectual assets such as patents and brand marks. Skandia regularly issues a supplement to its balance sheet dealing with its use of intellectual capital.

A language is evolving to describe the elements and dynamics of the knowledge economy. We already know the value of explicit data and are coming to value that of tacit knowledge and experience. Subjective insights, intuitions and hunches are as valuable as the facts. We understand that knowledge is not just a thing moved on the Internet, but is also a process, a process of seeing things in new ways because we are able to shift mindsets and values. We understand that our intellectual capital is composed of the dynamic interaction of individual knowledge (human capital) with organizational knowledge (structural capital) and our relationships with customers and suppliers (relational capital). To make these processes come alive, we need to unlearn the confining notions of the industrial era.

Instead of dividing and subdividing work, we will need to team and reteam professionals around whole assignments. Instead of paying people for what they do, we will need to pay them for what they know. Instead of closely controlling people, we must set cultural norms and values and trust people. Instead of assuming blind self-interest, we will find that interest in other selves sets a new dynamic of creativity in motion. This last point is the key to opening up the knowledge era.

One corrosive legacy of the industrial era and its economy of scarcity has been our tendency to look for weaknesses in others. Because of the supposedly competitive nature of the hierarchical organization, either you win or I do. In the knowledge era scarcity will remain, because things are indeed limited, but at the same time the abundance of knowledge and ideas will create a new dynamic. We will look for and build upon one another's talents and capabilities in innovative and creative teams.

In short, it is trust that brings for the value of knowledge, the new source of wealth and opportunity. The dynamics of the knowledge era bring exciting new meaning and possibilities to individuals and companies, from knowledge management over the Internet to the leveraging of our intellectual capital. Our talents, our integrity, our abilities, our values and our visions will count like they have never counted before, driving the new economy-- the knowledge economy— forward.

© 1998 New World Magazine, 2/98