The Age of Knowledge

 An illustration of the second industrial revolution written for “The Futurecast,” a monthly column in the

Library Journal

Originally published September 1991. Published on KurzweilAI.net August 6, 2001.

The industrial revolution of the last two centuries –the first  Industrial Revolution –was characterized by

machines that extended, multiplied, and leveraged our physical capabilities. With these new machines,

humans could manipulate objects for which our muscles alone were inadequate and carry out physical

tasks at previously unachievable speeds. As a result, the world during this period was hungry for natural

resources and labor. Mao’s postulate that “power comes from the barrel of a gun” was true when he said

it. Through physical coercion, one could control natural resources and compel people to labor. While not

providing the happiest or most productive of workers, it worked well enough.

The second industrial revolution, the one that is now in progress, is based on machines that extend,

multiply, and leverage our mental abilities. A remarkable aspect of this new technology is that it uses

almost no natural resources. Silicon chips use infinitesimal amounts of sand and other readily available

materials. They use insignificant amounts of electricity. As electronics, computers, and other forms of

technology (bioengineering, for example) grow smaller and smaller, the material resources used are

becoming an inconsequential portion of their value. Indeed, software uses virtually no resources at all.

The value of such technology lies primarily in the knowledge governing the design of the hardware,

software, and databases that constitute our intelligent machines, and in the ability to continue advancing

these designs.

Today, even manufacturing is dominated by its knowledge content, not by natural resources or labor.

One has only to tour modern factories with their delicately programmed robotic assemblers and material

handlers to recognize the increasing dominance of knowledge as a cornerstone of wealth. This

decreasing importance of material resources has allowed Japan, a country very poor in natural resources

but rich in knowledge and expertise, to prosper. While the first Industrial Revolution increased the

demand for and the value of natural resources the second industrial revolution is doing the opposite.

In the case of computer software, it is apparent that one is paying for the knowledge inherent in the

design and not for the raw materials represented by the floppy disk and user’s manual. What is

sometimes less apparent is that the same economic model holds for most computer hardware as well.

 An advanced chip generally costs no more to produce than a floppy disk. As with a software program,

the bulk of the cost of a chip is neither raw materials nor manufacturing labor, but rather what

accountants call amortization of development, and what philosophers call knowledge.

It is estimated that raw materials comprise less than two percent of the value of chips (which is about the

same estimate as for software) and less than five percent of the value of computers. As our computers

become more powerful, the percentage of their value accounted for by raw materials continues to

diminish, approaching zero.