Starting from building back better America to massive job loss threats in developing economies, the human race has been bewildered by daunting issues. At the core, it is the dynamics of the industrial economy. But shedding light on the industrial economy as the reoccurring pattern has been a challenge. Fortunately, the evolution of the light source itself offers us valuable lessons to comprehend the dynamics and predict the unfolding future so that we can leverage it better.
A bit of history of the light source to shed light on the industrial economy
At the very beginning of existence on this planet, human beings were after a few essential things to support living. One of them was the source of light to find a way in darkness. Hence, our ancestors were after ideas of having an artificial light source, leading to the oil lamp invention 4500 years ago in Iraq. A long path of the quest to have a better light source led to the candle’s invention in 500 BC by the Romans.
The candle was far better than many other alternatives, but it had limitations. Particularly during a windy night, it was of no use. Hence, it led to the invention of the cold-blast design of hurricane—oil lamp–by the American inventor Mr. Irwin in 1873. By the way, in 1856, Polish inventor Ignacy Łukasiewicz invented the first modern kerosene lamp. In his design, Mr. Irwinin carefully used the science of the need for oxygen flow for the burning flame in a glass enclosure, and the necessity of the opening at the top for giving the pathway for the hot air to exhaust. Hence, his design meticulously attempted to reach the optimization.
Craftsmanship-based making technique of hurricane allowed many entrepreneurs–often, craftsmen themselves– to get into the production and trade of this light source. It needed high skill. But it didn’t support the formation of large firms. There had been two underlying causes. The entry barrier was low and the economy of scale was also very low. As a result, the industry of hurricane making had many micro-enterprises. Thus, there was not much of a need for managers and financers. On the other hand, there was little room for incremental progression through creating of flow ideas. Hence, this industry did not support the job creation for scientists and engineers either.
The invention of the electric light bulb opened the era of the modern industrial economy of light bulb making.
The search for a better light source continued, culminating in Thomas Alva Edison’s electric light bulb patent granting in 1879. Unfortunately, like many other great inventions, it emerged in a primitive form. Hence, the evolution of the filament light bulb started, and it lasted over 50 years. This evolution race also created entry opportunities for aspiring new entrants. One of the notable ones is Philips. At saturation, the technology core was changed with the fluorescence effect. But the quest of getting better quality light at less cost did not stop. It kept progressing, leading to the light-emitting diode-based light bulb invention.
This journey of the evolution of light sources over 2500 years sheds light on the underlying patterns driving the industrial economy. There have been serval reoccurring patterns. It happens to be that these patterns are also present in the evolution of other products and their industries. In fact, these patterns shed light on the industrial economy in driving prosperity, transforming jobs, changing the geographical focal points, and creating a monopoly effect.
Unfolding Creative waves of destruction–sheds light on the industrial economy
There are five major generations of products in the evolution of light sources. Irrespective of greatness, an invention has a limited life span, followed by a better alternative. However, all of a sudden, the next version of the light source did not show up in a mature form in taking over the market of the predecessor. Invariably, each of them emerged in primitive form, creating little willingness to pay—often generating loss-making revenue at the beginning. Hence, incremental progression played a vital role, often, powered by the competition race.
The compounding effect of the incremental progression of the next wave succeeded in causing destruction to the demand of the previous generation. This dynamic has been articulated as a creative wave of destruction. At the inflection point of these two waves, the successive generations offered better quality light at less cost. The continued advancement of quality and reduction of cost led to creating a growing scale effect, leading to diffusing deeper in society, and creating a greater market. The growing scale effect also opened increasing monopolization scope.
Role of labor, natural resources, and Ideas
The role of knowledge, ideas, and intellectual assets in inventing and nurturing successive generations of light sources kept increasing. The role of engineering also kept growing. On the other hand, the amount of natural sources and labor required to produce each unit of light from successive generations kept falling. Moreover, there had been an increasing role of intellectual assets in making successive generations.
Interestingly, those intellectual assets are being integrated into production machinery. For example, instead of labor-intensive craftsmen for making hurricanes, we need highly sophisticated machinery in processing LED chips for making LED light bulbs. Furthermore, LED light bulbs are far more efficient than the previous generation light sources in producing each unit of light. Thus, there has been a growing need for ideas and less labor and natural resources for the successive generations of light bulbs. This important characteristic helps in shedding light on why we need a growing R&D workforce, and less skill as well as labor in manufacturing. Moreover, it also helps us interpret the issue of manufacturing job migration from advanced countries to less-developed ones, and stagnant factory floor salaries.
Dynamics in labor, capital, and productivity sheds further light on the industrial economy
In the early days, we needed highly skilled craftsmen for making each piece of the hurricane. Contrary to it, we need a low-skilled workforce to perform the bonding of LED chips and pack them into the glass bulb. In fact, the increasing complexity of making successive generations has been converted into ideas and integrated into machine capability. As a result, there has been a decreasing need for human knowledge and skill and an increasing need for more sophisticated capital machinery for manufacturing.
Hence, there has been a growing need for capital for sourcing production machinery and less requirement of humans’ skill and Codified knowledge. Therefore, due to the increasing role of ideas in the form of capital machinery, human labor productivity has been increasing. But it has also been reducing the labor requirement, as ideas are taking over it. Hence, higher productivity does not necessarily increase the value or demand for labor. Therefore, we should carefully investigate the evolution of light sources for shedding light on the industrial economy to shed light on key issues.
Dynamics of the center of excellence and monopolization
The invention of the light source—and its further improvement–moved from Europe to America in the middle of the 19th century. Thomas Alva Edison’s electric light bulb consolidated America’s position. However, Europeans and Japanese showed strong interest in the production and further improved electric light bulbs. Particularly, the role of Philips and Toshiba is notable. Despite the globalization of light bulb making and further improvement, American GE maintained a dominant position. But the landscape sharply changed with the emergence of Japan’s Nichia. This little Japanese company made a radical advancement in perfecting LED, leading to a perfect substitute for the filament and fluorescent light bulb. In creating this success, Nichia’s R&D effort also led to a Nobel prize-winning scientific discovery. Subsequently, Nichia has emerged as the world’s best and largest supplier of LED light bulbs.
Furthermore, the increasing role of ideas in the design of LED chips and the capital machinery has also been expanding the economy of scale advantage. Hence, there has been a growing monopoly. By the way, such a monopolistic pattern has been present in all major industries of the world, primarily due to the growing role of ideas, often in the form of software.
The strategy of the industrial economy
Day by day, relative roles of natural resources and labor have been falling in producing industrial outputs. On the other hand, the role of ideas or intellectual assets has been growing. Ideas are increasingly being added in both the products and the production processes. Hence, the core requirement for developing a sustainable industrial base has been changing. It increasingly depends on the ability to innovate and get into the race of evolution of industrial products. On the other hand, high-paying manufacturing jobs have been disappearing. This is due to the decreasing need for knowledge and skills in production. As a result, a low-skilled workforce of developing countries has been taking over the manufacturing jobs. In fact, once those tasks used to be performed by the Americans and Europeans.
Moreover, the manufacturing capability of producing previous generation products has no market. For example, there is no value for Edison’s filament bulb and GE’s manufacturing capacity of producing them. Hence, to make America great again, it needs to take over the idea edge. It should lead to next-generation products around the new technology core. Thus, the evolution of light sources helps to shed light on the industrial economy for answering many challenging questions.
On the other hand, developing countries cannot keep increasing the number and pay for manufacturing jobs, as ideas are taking over the role of labor. But these countries are producing a growing number of science and engineering graduates. Hence, they should deploy them to produce ideas for making lateral entries into the evolution of products for both local and global markets. However, there has been a significant challenge in profiting from ideas. There has been no natural correlation between conventional indicators and success in creating Wealth from ideas in a globally connected competitive market.