Civilization has progressed from an agrarian economy, to an industrial economy, to a service-based economy, and now, in the digital age, to the “knowledge economy.” The first three are fairly simple, but what exactly is a knowledge economy? How is it quantified? And what does it have to do with cyber security?

Intellectual Capital

Whereas the agrarian and industrial economies are based on physical capital and factors of production like land, labor and commerce, the knowledge economy is based on the production and consumption of intellectual capital. Moving to this type of economy requires a change in the way we think about value and assets. We can easily measure the value of produced goods, but it’s much more difficult to measure the intangible asset values of collective employee expertise and insights — otherwise known as intellectual capital.

Information Becomes the Product

In a very real sense, all it takes to acknowledge that we are now trading in intellectual capital is to realize that our focus has shifted from producing goods and rendering services to implementing business ideas. The characteristics of a knowledge economy extend beyond this:

  • Knowledge-intensive sectors such as communications and education are growing.
  • The sharing of knowledge boosts value.
  • New skills and abilities are being implemented to codify knowledge.
  • Innovation is driven by both producers and users of knowledge.
  • Changes in business processes across industries is accelerating.

This is the reason U.S. multinational companies see themselves as information companies first. American Airlines is not merely a provider of domestic and international flights; it is an information company that happens to fly passengers. CSX is no longer a company that merely transports goods by train; it is an information company that also runs railroads. This broadening of scope and perspective opens up business opportunities.

We see this thinking predominate leadership visions in the high-tech sector, such as electronics and aerospace. Apple does not invest in gadgets; it invests in transformative thinking, like the iPhone, which has created countless revenue streams for itself and entire industries — consider podcasts, games, and service providers like Uber and DoorDash.

Similar levels of innovation are occurring in industries like education and healthcare, both of which are being transformed more by ideas than by specific products and services. Business services like banking, communications and insurance are being re-envisioned through this process, and we see examples of it in online trading platforms and mobile banking apps. Individuals are also benefitting from the shift to intellectual capital via the “gig economy,” leveraging technologies such as online service boards and digital agencies to sell their own intellectual outputs.

Knowledge economy innovation begins with explicit knowledge of basic facts and figures, known as data. From these, visionaries extrapolate tacit knowledge of how facts synthesize and work together. Then they apply their own educations, experiences and intuitions about how things might evolve.

It is a natural move from learning to doing: Think how satellite television came into being through such an evolution. Satellites were developed as a way to monitor NASA installations, then they became useful in helping us track weather, for example. Ultimately, they became a cost-effective means of transmitting cable TV signals.

Nations around the world admire the head start the U.S. has on the knowledge economy and want to replicate a sort of Silicon Valley in their own countries. Kenya, for example, has an innovative vision. The government is ambitiously aiming to push information and communications technology companies to 10% of GDP by 2030 through the Kenya Vision 2030 plan.

Cyber Security, the Defender of Knowledge

The thousands of recent crippling cyber-attacks on businesses, governments and financial entities is sobering. As we see on a weekly basis, the knowledge economy is vulnerable to criminals, terrorist groups and the attacks of foreign nations. Money and power are there for the taking. For example, Russian interference with the U.S. election and cyberattacks on Yahoo!, Target, Equifax, South Korean credit card holders showed just how vulnerable the data systems of some organizations are.

For better or worse, the knowledge economy is here to stay. Intangible assets may prove easier to pry from the hands of producers than tangible assets. That remains to be seen. One thing is certain: It will take many highly trained cyber security professionals to enable civilization to reap the rewards of the knowledge economy.

Learn more about Baylor University’s online MBA with a Concentration in Cyber Security program.


Investopedia: Knowledge Economy

Simplicable: 11 Examples of the Knowledge Economy

SciDevNet: What Is a Knowledge Economy?

Economics Help: The Knowledge Economy