Intelligence moderating all the Factors of Production
Every era has a factor of production that organises the rest. All factors matter but some matter more than others as certain times. For the agricultural economy it was land. For the industrial economy it was capital. For much of the last century it was labour. The argument of this series is that the binding factor has shifted again, to intelligence; the capacity to sense, reason, decide and act well. Intelligence is not a factor of production in the traditional sense, insofar that it now rests within both human capital, intellectual property assets, and fixed assets like devices and machinery. Some may contend that it is a product of the other factors, but increasingly it is self propagating and self perpetuating. It is taking on a new role within the economy. While it is not a factor of production in the economic (Cobb Douglass) sense it will be the organising factor for all other types of production, notwithstanding physical land assets.
Crucially, that intelligence does not only live in machines. It lives in people as expertise, in organisations as accumulated knowledge, in networks as coordination, and in institutions as the rules that let large groups think together. It is tacit knowledge, as well as knowledge subsumed into systems. Artificial intelligence is the most visible new form, but this is just a manifestation of a longstanding shift, that we previously referred to as a shift to a knowledge economy, where those with intellectual assets carried the greatest power and influence. Now knowledge is a commodity and increasingly so is artificial intelligence. The consequences for the economy are the focus of this platform, understanding what will matter most within this new Intelligent Economy.
How value is created
When intelligence is the scarce factor, value accrues to whoever can create it, organise it, augment it and convert it into decisions. The winning firm is no longer the one with the most assets, but the one that turns information into good judgement fastest, and does so reliably at scale.
“Twenty years from now, AI may not be the defining story. The economics of intelligence almost certainly will.”
What becomes abundant, what becomes scarce
Raw generation is becoming abundant and therefore cheap. What stays scarce is everything that gives generated intelligence its value; trustworthy provenance, sound judgement, institutional memory, and the human expertise that knows which questions are worth asking. Abundance in one layer creates scarcity, and opportunity, in the next.
What has to change
If intelligence is the factor of production, our institutions need to be redesigned around producing and coordinating it well. That is the work of this publication: to examine each economy of intelligence in turn, and to ask, patiently, how value is created, what becomes scarce, who wins, and what capabilities and institutions the transition will demand.
