Adam Smith Explains the Network Economy

The economy is a network. To understand how new ideas integrate into it, we first have to understand how interconnected and interdependent it is. Here is a passage from The Wealth of Nations by Adam Smith making this point (from Adam Gopnik’s good review of Smith’s work in The New Yorker):

The woollen coat, for example, which covers the day-labourer, as coarse and rough as it may appear, is the produce of the joint labour of a multitude of workmen. The shepherd, the sorter of the wool, the wool-comber or carder, the dyer, the scribbler, the spinner, the weaver, the fuller, the dresser, with many others, must all join their different arts to complete even this homely production… Let us consider only what a variety of labour is requisite in order to form that very simple machine, the shears with which the shepherd clips the wool. The miner, the builder of the furnace for smelting the ore, the feller of the timber, the burner of the charcoal to be made use of in the smelting-house, the brick-maker, the brick-layer, the workmen who attend the furnace, the mill-wright, the forger, the smith… Without the assistance and co-operation of many thousands, the very meanest person in a civilised country could not be provided, even according to what we very falsely imagine, the easy and simple manner in which is commonly accommodated.

All that is just part of making a woollen coat over 200 years ago. How many people, skills and trades are necessary for making a smartphone?

Ideas diffuse through these networks, which can be good and bad. The high level of interconnectedness can make it easy for new ideas to spread. But the high level of interdependence can make this networks highly resistance to change.

This is one of the challenges we face in innovation.

(I’m not sure how many labourers are needed to create that replica 19th century woollen coat for Second Life though…)

Student and teacher of innovation - University of Queensland Business School - links to academic papers, twitter, and so on can be found here.

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