The catallaxy of Industry 4.0

Consider the following prediction by Matt Ridley, in his 2010 book The Rational Optimist:

I forecast that the twenty-first century will show a continuing expansion of catallaxy — Hayek’s word for spontaneous order created by exchange and specialisation. Intelligence will become more and more collective; innovation and order will become more and more bottom-up; work will become more and more specialised, leisure more and more diversified.

Catallaxy is an alternative to the term economy, emphasising the emergent properties of exchange not among actors with common goals and values, but rather among actors with diverse and disparate goals, a concept central to the Austrian School of which Friedrich Hayek was a renowned contributor.

Could one argue that Ridley’s prediction, and Hayek’s definition of catallaxy, represent a central tenet of Industry 4.0? In other words,

should we be discussing Industry 4.0 catallactics rather than economics?

While those questions are far too broad to address in a blog post, we can nonetheless address a single concept that we at reelyActive believe to be core to Industry 4.0: ubiquitous real-time location. If computers are able to understand who/what is where/how in any physical space, they can elevate efficiencies by magnitudes rivalled only by previous industrial revolutions. For instance, Jeremy Rifkin argues for a trebling of aggregate energy efficiency from 13% to 40% or more.

But alas, applying ubiquitous real-time location to the benefit of “actors with common goals and values” too easily equates with Big Brother, or surveillance by a state or entity, typically under the auspices of the “greater good”. In short, top-down organisation of ubiquitous real-time location is likely to restrict the free exchange of real-time location data, and hence the efficiencies of Industry 4.0, unless all actors’ interests are aligned.

And it is not difficult to argue that the actors—individuals, entities and their assets—are not aligned and do indeed have “diverse and disparate goals”. For instance, when you walk into a store, you may be motivated to find what you’re looking for as quickly as possible while a salesperson may be motivated to upsell you, while a competitor may be motivated to promote their product or get you into their store. If a delightful retail experience is to spontaneously emerge, it will be the result of the voluntary exchange of location data by the “motivations and actions of individuals”: the basis of the Austrian School. In short, bottom-up organisation of ubiquitous real-time location arguably affords better outcomes to actors with competing motivations, especially when those actors and their interests vary so greatly across countless industries and contexts!

Would it be possible to imagine an emergent Pervasive Sharing Economy as anything but bottom-up?

Perhaps the closest thing to ubiquitous location we have today is through mobile, hence the retail example above. In Still Place for optimism? we illustrated how industry relies on top-down “baseline location data” where, often to the detriment of the located mobile user, that user’s competing interests are ignored rather than embraced. Couple this with state surveillance by means of mobile location data, and it becomes very difficult to make the case for a top-down approach as the catalyst for the widespread exchange of real-time location data necessary to deliver the promised efficiencies of Industry 4.0.

So, returning to Ridley’s prediction, the case for expansion of the catallaxy and bottom-up order is therefore strong, provided we can break from the long-standing top-down traditions of Industry 3.0. But isn’t breaking established traditions what revolutions are all about? And if we are to break from tradition, the economy of Industry 4.0 may well be described as a catallaxy. At least in the case of ubiquitous real-time location it’s difficult to imagine otherwise!

Let us not forget

On the 11th hour of the 11th day of the 11th month, in Canada and in many nations around the world, a minute of silence is observed. Remembrance Day, as we call it here, is special this year as it marks the 100th anniversary of the signing of the armistice of the First World War, and this profound occasion reminded us of the wise words of two exceptional thinkers and innovators of the previous century, which are well worth sharing.

After the Second World War, which followed the First a mere generation later and concluded with the advent of atomic weapons, Norbert Wiener wrote in the Introduction of his seminal book, Cybernetics:

Those of us who have contributed to the new science of cybernetics thus stand in a moral position which is, to say the least, not very comfortable. We have contributed to the initiation of a new science which, as I have said, embraces technical developments with great possibilities for good and for evil. We can only hand it over into the world that exists about us, and this is the world of Belsen and Hiroshima. We do not even have the choice of suppressing these new technical developments. They belong to the age, and the most any of us can do by suppression is to put is to put the development of the subject into the hands of the most irresponsible and most venal of our engineers. The best we can do is to see that a large public understands the trend and the bearing of the present work, and to confine our personal efforts to those fields, such as physiology and psychology, most remote from war and exploitation. As we have seen, there are those who hope that the good of a better understanding of man and society which is offered by this new field of work may anticipate and outweigh the incidental contribution we are making to the concentration of power (which is always concentrated, by its very conditions of existence, in the hands of the most unscrupulous). I write in 1947, and I am compelled to say that it is a very slight hope.

It is not difficult to replace the word cybernetics with artificial intelligence or the Internet of Things and appreciate the relevance of these words in a modern context. Fortunately, Wiener’s “very slight hope” proved sufficient for humanity to avoid nuclear war, while continuing to advance technology at a relentless pace. To this point, Buckminster Fuller wrote in 1980 in the Introduction of his final work, Critical Path:

History shows that, only when the leaders of the world’s great power structures have become convinced that their power structures are in danger of being destroyed, have the gargantuanly large, adequate funds been appropriated for accomplishing the necessary epoch-opening new technologies. It took preparation for World War III to make available the funds that have given us computers, transistors, rockets and satellites to realistically explore the Universe.

The lessons of history and the words of Wiener and Fuller remind us that great threats to power have brought about great technological progress, but unfortunately, they have also brought about the devastating wars upon which today we reflect and remember. Should you find yourself like Wiener, able only to muster a “very slight hope” about the future, perhaps Jeremy Rifkin‘s contemporary views on the Third Industrial Revolution can elevate such sentiments to a feeling of “guarded optimism”.

Let us not forget that we have history as a guide towards a peaceful and perpetual advancement of humanity, limited only by our collective capacity for technological innovation.