Tuesday, February 25, 2014

The Algorithmic Frontier

In our recent paper we introduce the idea of the algorithmic frontier to represent our current era of globalization. The idea of a frontier has a long history in American thought, starting with Frederick Jackson Turner’s seminal work, The Frontier in American History (1892). Frederick Jackson Turner wrote of the closing of the American frontier, but the physical closing of a land based agricultural frontier, which he described, marked the end of only one type of frontier. In Agwara et al. we summarize different dominant interpretations of the frontier over the past four hundred years of U.S. history: the agricultural frontier described by Turner (1610s-1880s), an industrial frontier typified by the Ford Motor Company (1890s-1930s), a scientific frontier following WWII (1940s-1980s), and the algorithmic (1990s-present).

The algorithmic frontier coincides with the latest period of globalization that began with the third wave of democracy, the reintegration of China and India into the world trading system, and most recently the end of the Cold War. Although the algorithmic frontier lines up neatly with the large scale resumption of trade, the focus of this paper is not with trade flows per se, but with the mechanisms that facilitated such activity; we are interested in the innovations that have led to our modern system of innovation based on global supply chains.

The primary difference between the algorithmic frontier and the earlier era of the scientific frontier is the rise of distributed networks of production and innovation (Auerswald & Branscomb, 2008). If we view these networks as the principal innovation demarcating the new frontier, then the current era of globalization is really a process of interdependence and interconnectedness (Acs & Preston 1997). The driver expanding the algorithmic frontier is the increasing reach of collaborative networks of all kinds—particularly production, but also research.

Shared standards and business practices have been a precondition to this process of economic integration. In contrast with the traditional multinational assembly of subsidiaries, the global enterprise is a flexible assembly of firms around the world, with skills and capacity that can be drawn upon for the most efficient combination of business processes. Firms traditionally relied on product and internal process standards but the rapid globalization and economic integration witnessed in recent years has created the need for standardization of management systems, which are essentially the interface layer between production subroutines. As then-CEO of IBM Palmisano wrote in 2006:
[S]tarting in the early 1970s, the revolution in information technology (it) improved the quality and cut the cost of global communications and business operations by several orders of magnitude. Most important, it standardized technologies and business operations all over the world, interlinking and facilitating work both within and among companies.This combination of shared technologies and shared business standards, all built on top of a global IT and communications infrastructure, changed the sorts of globalization that companies found possible.
Agwara, Hezekiah and Auerswald, Philip E. and Higginbotham, Brian D., Algorithms and the Changing Frontier (October 1, 2013). GMU School of Public Policy Research Paper No. 2014-02. Available at SSRN: http://ssrn.com/abstract=2377168 or http://dx.doi.org/10.2139/ssrn.2377168