Technology and the economy

The future is predicted by the technologies that created it

I would hazard to guess that all of us think we know what technology is. But do we? Perhaps we know a lot about a particular technology, such as computer technology, automobile technology or power generating technology. But what is technology in more general terms? And what might we gain from understanding the nature of technology, particularly as it relates to business and the economy?

A fascinating book by W. Brian Arthur, “The Nature of Technology: What it is and How It Evolves,” goes a good way towards answering these questions and is accessible to the general, non-technical reader. He tells us some surprising things, such as “technologies [are] not ‘inventions’ that came from nowhere.” He adds that technologies consist “of other technologies, (and) arose as combinations of other technologies.” And he suggests that “if new technologies were constructed from existing ones, then considered collectively, technology created itself.” Still, the most fascinating conclusion that Mr. Arthur comes to is this: Technology creates our economy; the economy arises from its technologies.

So, as businessmen and women, what are we to make of this in practical terms? What does it mean for the economy to arise from its technologies? I think it means that technology and its evolution enables us to do more and to capture value in ways that create new wealth. I also think that it means that the path to business success lies in the better application, development and relentless improvement of technology.

Consider, for example, that virtually every technology has some unforeseen, unanticipated consequences that creates new problems, the solutions for which result in additional new forms of technology. It is often said that “today’s problems were yesterday’s solutions” and that means that the ongoing improvement of technology adds greater value. Think of how we see products improve: For many years, electric blenders had acquired great utility in our homes and a few brands showed modest improvements over time, although some limitations remained. Along came Vitamix, which is simply an evolution of blender technologies to solve most of those earlier limitations. It gave us a “blender on steroids” and business success for Jodi Berg and Northeast Ohio.

Over the years, I often have said that the future has always been predicted by the technologies that created it. I think that is very much in line with Mr. Arthur’s ideas, and with what we have seen from Jodi Berg and others, such as Steve Jobs, Bill Gates or Elon Musk. To succeed in business, we must be prepared to take technology to its next problem-solving, wealth-creating level. That is what innovation is all about. Doing so solves problems and that creates new value to be captured in the economy.

Our business models, accounting practices, legal frameworks and other socially constructed aspects that we use in business are themselves also technologies. Improving upon them is therefore another way of evolving technologies to acquire added value. Think about it and thrive.

Luis M. Proenza is president emeritus at The University of Akron and serves as a Distinguished Fellow at the U.S. Council on Competitiveness and co-chairs the Innovation Policy Forum as a member of the Science, Technology and Economic Policy Board (STEP) of the National Academies of Science, Engineering and Medicine.