Many,
including myself, argue that we're living in a knowledge economy. But we're
not.
At least: not yet.
There is no
question that knowledge is or has become a major driver for our economy: many
business models are clearly based on knowledge, rather than for instance the
exploration of raw materials or the production of goods out of such raw
materials. Still, even in those latter examples knowledge cannot be taken out
of the equation. One can argue - but
this is not the purpose of the present discourse - that knowledge has always
been, since the beginning of commerce, a
key component in any successful and sustainable business model: knowledge to
grow crops or raise cattle, knowledge to drill for oil or mine for ore,
knowledge to design goods or adverts aimed at specific market segments,
knowledge to convince customers to buy your goods or services.
But today perhaps
more that any ever before, knowledge can be the sole driver of a business
activity: today's social media and tsunami of apps for our mobile communication
devices exemplify our ability to turn streams of information into something
valuable for hundreds of millions of people.
Yet therein
lies the conundrum: in spite of generating value for so many, the current
business models manage to capture but a fraction of that value. The reality is
that most social media are used for free by a majority of its members; that the
only value captured is through revenues generated from selling information
regarding social media users (to potential advertisers or marketing agencies
tracking consumer preferences, etc.). This has no relation to ...
how a
knowledge economy actually works!
Since
'knowledge is in the eye of the beholder" - and this depends on the
context of the beholder - the value of
knowledge cannot be determined removed from the context in which it is to be
used. In fact, if and as long as knowledge remains idle, unused, its value is
effectively nil!
Moreover,
since knowledge is an intangible and as such not bounded by scarcity (in the
way that tangibles are), knowledge cannot be consumed but instead may be used
again and again, in many different contexts, until such time it has lost its
relevance and/or is superseded by other knowledge. One can even say that the
more one uses specific knowledge, the more it becomes valuable - which stands
in sharp contrast to how the value of tangibles depreciates with usage!
As a
consequence the value of knowledge cannot be determined at the time it is
shared on a marketplace but only as and when it is used - every time it is
used, in whichever context. And so, payment for sharing one's knowledge should
be made at the time of use, not of exchange.
Current
information and communication technologies have reached a point of maturity and
cost, where it becomes possible and practical to log and keep track of who
shares what knowledge, with whom, and when and how it is used. That makes for a
way to ensure payment reaches those that shared their knowledge with others, in
proportion to the value it eventually creates. In effect, the sharing of
knowledge earns a share of any and all future value it helps create, an option
if you will on future revenues. (And these options may be traded in their own
right, but more on that later).
Consider how
this could work in the world of consulting or training, both knowledge-based
businesses by excellence: Currently they sell knowledge (in the form of advice
or presentations and exercises) but only charge for the time spent in sharing
that knowledge. That they may charge different rates for their time has no direct
bearing on the value that their knowledge holds for the receiving parties. Nor
do the receiving parties have the possibility to resell or indeed return what
they bought in case it does not meet their purpose. What should happen instead,
is that consultants and trainers ought not only sell their time - indeed a
scarce resource - but also, and separately, their knowledge. If the knowledge thus shared fails to yield
added value to the client, no additional payment should be due; conversely, if
added value is indeed realised, whether in terms of additional revenues, higher
margins, higher productivity, cost savings, or other means, then the
provider(s) of that knowledge should get a proportional and thus fair reward.
What would
remain to be negotiated is of course the size of that proportional reward, i.e.
the percentage of added value realised.
Knowledge Market Risks
It is
important in this discussion to consider how risk is distributed among both
parties in an exchange of knowledge: Information asymmetry makes that at the
time of the exchange the receiving party
has little or no idea of how valuable that knowledge will eventually be. This
puts downward pressure on what the receiving party should be willing to pay for
that knowledge at the time of the exchange. In contrast, the selling party has
no way to demonstrate or prove the true value of the knowledge in the context
of the receiving party, short of already making that knowledge available. At
the time of the exchange of knowledge the risks are therefore significant for
both parties: the buyer bears the risk of paying for "a cat in a bag"
with uncertain benefits, whereas the seller runs the risk of not getting a fair
reward for all future value his/her knowledge helps generate (including, by the
way, that the buyer may cut short the period over which future benefits are
taken into consideration for the purpose of determining what for them is fair
payment).
If instead
payment for knowledge is made contingent on future benefits as and when those
are realised, then effectively the risk on the shoulders of the buyer (that the
knowledge bought may not bring added value) have all but disappeared, and will
be limited to the payment of the consultant's or trainer's time. Conversely, the risk on
the seller is limited to the buyer not actively putting the knowledge to work and
therefore realising much fewer benefits than perhaps anticipated; but the
upside is unlimited and at any rate the time spent will be paid for.
Watch this space ...
A project is currently under way, supported by the European Commission's Horizon 2020 programme, to create a market for knowledge, where knowledge can be shared but paid for as and when it is used. In essence, create what Performance Rights Organisations do in the entertainment sector: collect royalties from users of knowledge and distribute these to its authors.
Interested? Contact me on philippe.leliaert@telenet.be.
