It's not what you know, but who you know

by Sean McGrath

February 16, 2007 —

There is a lot of talk about the all-engulfing knowledge economy these days. Workers of the near future in (relatively speaking) high wage economies will either work with their heads in the field of knowledge or with their hands in the field of services. All other activities that can move, chasing the cheapest economic environment, will do so. So the story goes.

The knowledge side of this hinges on the market value of something scarce. That is, some skill/trick/know-how that you have a better handle on than than most guys. The services side hinges on your ability to turn up every work day on time and get through some measurable body of finite skilled labor, servicing the needs of others.

On the knowledge side, it is a matter of fighting for a place for your skill/tricks/know-how against everyone else in the sector. Thanks to technologies like the Internet, this is increasingly a global activity. Your competitors are not just the guys in the same local economy as you. Your competitors are in Boston, in Bangalore and in Belmullet too.

Now an interesting tension exists in the knowledge economy between the Internet as a self-help tool for finding specialist knowledge and the Internet as a tool for the selling that same specialist knowledge. Let us say, for argument sake, that I have a skill/trick/know-how that most people do not. I want to monetize it in as big a market as possible. To do that I set up shop on the Internet/Web. I run a little website where I cobble together some words, some videos, some audio and hook it all up to a payments system. Some of my content I give away for free. I have no option really. I need to market my skill/trick/know-how somehow. The rest of my skill/trick/know-how I keep hidden until I get paid for it. I rely on the free stuff to pull in customers for the paid stuff.

Fine. So far so good. Simple, obvious stuff. However, I operate in a global market for my skill/trick/know-how with other practitioners. They too are doing the same thing as I. Namely, setting up Internet shop, giving some stuff away, keeping other stuff hidden... All these practitioners in the marketplace watch each other and compete for the paying customers. No player in the market can differentiate themselves if everyone gives away the same stuff and keeps the same stuff hidden. A key differentiating tool is to give away something different from the other players in the marketplace.

A sort of freebie arms race ensues. I try to attract the paying customers by revealing more of my skill/trick/know-how than the other guys. They in turn, do the same thing and a spiral - downward on upward, depending on your point of view - forms. As a consumer, this looks pretty rosy. More and more and better and better free stuff! As a producer, it is perhaps not so rosy. The promise of a global market enabled by technology may appear to be more full of competitors than potential customers.

I have no idea where this is leading us in economic terms but in knowledge terms it looks very good to me. The economic implications will shake themselves out over time I guess. My parents were fond of saying that 'It is not what you know, but who you know.'. For a while, I thought the knowledge economy proved this to be incorrect but I'm increasingly unsure. The 'race to zero' of hidden-knowledge based business models may bring us back full circle to a Twenty First century variation of the concept of a 'local economy'. In the coming world, 'local' will mean those in your network, your circle of contacts, rather than those in your physical vicinity. It will be none-the-less local for that minor tweak on the concept.

Maybe it is all about who you know after all? Even if - in the future - some of these contacts are avatars[1]? A minor detail economically speaking?

[1] http://secondlife.com/

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