In our recent review of Professor Carlota Perez' work. We determined that now is the point in time when the Information & Communication Technology Revolution (ICTR) has begun. Where the last 40 years in communication and computer technology were the installation period. A time when things are developed and installed but still have not all of the associated technologies operating in the marketplace. This last point being reflected clearly in the development of the Internet in the 1990's. Without the Internet their would be no ICTR, and until computers could be developed to the level they are today, the benefits would not, and could not, commence.
Professor Perez has also documented what changes will occur as a result of the ICTR, based on her review of the former industrial revolutions and similar economic phenomenon. These changes include significant upheaval in the markets of existing firms. This upheaval due to the greater efficiencies of those firms built on the new technologies. Professor Perez shows these market upheavals are the 2008 financial crisis, and the 2000 dot com meltdown.
Where we now stand is at what Professor Perez calls the "Deployment" period. Where the value generated by these new technologies lifts all boats. Or as Professor Perez calls it a "Sustainable Global Knowledge Society Boom." We now begin our review of Professor Perez' paper "Technological revolutions and techno-economic paradigms". Her abstract reads as follows;
This paper locates the notion of technological revolutions in the new-Schumpterian effort to understand innovation and to identify the regularities, continuities and discontinuities in the process of innovation. It looks at the micro- and meso- foundations of the patterns observed in the evolution of technical change and at the interrelations with the context that shape the rhythm and direction of innovation. On this basis it defines technological revolutions, examines their structure and the role that they play in rejuvenating the whole economy through the application of the accompanying techno-economic paradigm. This over-arching meta-paradigm or shared best practice 'common-sense' is in turn defined and analysed in its components and its impact, including its influence on institutional and social change.
This is exactly what we need. A road map of sorts of how innovation will be implemented, and how the technologies that are employed to enable this "common-sense" revolution. We know that the future is going to be prosperous, but how, and what will the ICTR look like after it has run its course. That is to say what will the next few years look like.
1. Introduction
People, Ideas & Objects is a reflection that we are Object based developers. "Objects" replacing Professor Paul Romer's "New Growth Theory" of People, Ideas & Things. Using the Joint Operating Committee is the cultural, operational decision making, financial, legal and communication frameworks of the oil and gas industry. The truer that we can sail towards these frameworks, the greater our productivity, as measured in global oil and gas production. Professor Perez begins her analysis of the origins of economic growth.
Schumpeter is among the few modern economists to put technical change and entrepreneurship at the root of economic growth (Schumpeter, 1911, 1939). Yet, strangely enough, he saw technology as exogenous and - together with institutions and social organizations -- 'outside the domain of economic theory' (Schumpeter, 1911, p. 11). His focus was the entrepreneur and his goal was to explain the role of innovation in economic growth and on the cyclicality of the system.
and
This paper will concentrate on technological revolutions and techno-economic paradigms: their definition, the causal mechanisms that bring them about, their impact on the economy and institutions and their relevance for economic analysis. Yet, since these macro phenomena are deeply rooted in the micro-foundations of technical change, the following section will refer to some of the basic theoretical advances made at the micro and meso levels. p. 186
2. Innovation as the dynamic space for the study of technical change
In the May 2004
Preliminary Research Report the key or primary research into innovation was through Professor Giovanni Dosi's "Sources, Procedures and Micro-Economic Effects of Innovation" 1988. There I suggested an application of these "trajectories" as
An excellent example of this would be the discovery of the north-south orientation of horizontal under-balanced drilling in the Jean Marie formation of British Columbia, where knowledge and collaboration lead to a fundamental low cost solution to a technical problem. This simple change, reflecting the effect of the thrust of the Rocky Mountains, has lead to significant findings and deliverability of gas.
Professor Perez notes;
Indeed, the space of the technologically possible is much greater than that of the economically profitable and socially acceptable. p. 186
And points directly to Professor Dosi's earlier works.
The meaningful space in which technical change needs to be studied, therefore, is that of innovation, at the convergence of technology, the economy and the socio-institutional context. That space is essentially dynamic and, in it, the basic concept is that of a trajectory or paradigm (Dosi, 1982), which represents the rhythm and the direction of change in a given technology. p. 186
We see Professor Perez' point about technical trajectories when we understand the north - south orientation of a horizontal leg of a well. Has grown to the point where the multiple fracing of horizontal wells, based on this earlier knowledge, has opened massive deliverability in the shale gas formations.
3. The regularities of technical change: innovation trajectories
It is critical to point out here the development of the multi-frac laterals in oil and gas production. The situation in the May 2004 Preliminary Research Report regarding north-south orientation became common knowledge in the industry in 1997. Why did it take almost a full decade for the common-sense knowledge to develop into the shale gas bonanza that we find ourselves in today?
Changes generally occur slowly at first, while producers, designers, distributors and consumers engage in feedback learning processes; rapidly and intensively once a dominant design (Arthur, 1988) has become established in the market; and slowly once again when maturity is reached and Wolf ’s (1912) law of diminishing returns to investment in innovation sets in. Besides rhythm, a trajectory also involves directionality within a possibility space. That is what Dosi (1982) emphasised when, with the Kuhnian parallel in mind (Kuhn, 1962), he introduced the term technical paradigm to represent the tacit agreement of the agents involved as to what is a valid search direction and what would be considered an improvement or a superior version of a product, service or technology. A paradigm is thus a collectively shared logic at the convergence of technological potential, relative costs, market acceptance, functional coherence and other factors. pp. 186 - 187
The Draft Specification employs this thinking in the
Resource Marketplace Module. To accelerate a trajectory necessitates the noted process highlighted in the previous quote. The Resource Marketplace Module suggest that this trajectory is accelerated when the collective understanding of all producers, as reflected in their long term capital budgets, is aggregated and shared in a common interface for other producers and service industry representatives to see clearly what is on the collective producers mind of what is possible in each geographical region.
A similar interface is operational in the marketplace today. It is the Google Health application that provides high quality security to its users. It also is able to take the information that is made available, in aggregate, to search for possible trends and other information that is generally not available in any other form. Welcome to the 21st century.
The notions of trajectory or paradigm highlight the importance of incremental innovations in the growth path following each radical innovation. p. 187
4. New technology systems and their interactions
Emphasis on the
Community of Independent Service Providers and the User communities is important, not just because it is fashionable. There is a defined and tangible benefit to organizing the solutions to these problems. Individuals such as Einstein, Ford and Edison operated in a time when an individual could single handily make a difference. Today collaboration amoung highly motivated individuals are what are necessary to take us to the next level of what is possible. These actions take place in Marketplaces.
Innovation is usually a collective process that increasingly involves other agents of change: suppliers, distributors and many others, including consumers. The techno-economic and social interactions between producers and users weave complex dynamic networks that are what Schumpeter referred to as clusters. Furthermore, major innovations tend to be inductors of further innovations; they demand complementary ones upstream and downstream and facilitate similar ones, including competing alternatives. p. 188
These clusters of innovation are not represented in the bureaucracy. The ten years needed to go from single to multiple fracs of a horizontal lateral is a long time. We need a far more capable and dynamic means of organizing our approach to the heightened demands for energy.
The interrelatedness of technologies and of the knowledge and experience bases that underlie their development, together with the infrastructures and service networks that complement them and the multiple learning processes that accompany them, provide externalities for all participants and competitive advantages for the economy in which they are embedded. p. 189
Recall what Ludwig von Mises said about the Industrial Revolution. Quotation from Ralph Raico.
Back in the early 1700's there were slums, people were poor, people died, every possible plague. Mises says you cannot understand the industrial revolution without understanding the western world was undergoing an un-precedented population explosion. For example, England in 1750 had a population of about 6 million; by 1850 the population was 24 million. The question was how would these new tens and tens of millions of people survive? Mises said the industrial revolution was the answer to the population explosion. That's how they survived, by society becoming immensely more productive.
Today society needs the oil and gas industry to be "immensely more productive", there is a lot at stake. If your an enlightened producer, an oil and gas investor or shareholder, who would be interested in funding these
software developments and communities, please follow our
Funding Policies & Procedures and our
Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our
Royalty Policies & Procedures and
email me. And if your a potential user of this software, and possibly as a member of the
Community of Independent Service Providers, please join us
here.
More of Professor Perez later this week.
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