The Challenge of Generating Distributed Prosperity in the Age of Robotics, Process Automation and Artificial Intelligence

One of the great challenges our society will have to face in the near future is how to provide a solid response to periods of economic stagnation and the lack of attractive job opportunities. These phenomena, which directly affect the lives of so many citizens in western countries, are due primarily to three factors: (1) the lack of ideas, ethics and leadership we have observed in the western world for decades, (2) the disruption caused by the systemic irruption of new technologies, which are transforming productive systems and interpersonal relations in employment; and (3) the globalization of international trade, which has enabled the rise of new economic powers, particularly in Asia.

Over the next three decades, the middle classes of countries such as China and India are expected to triple in size. This will represent a dramatic shift in power and trade relations on the geopolitical plane. Similarly, emerging technologies based on artificial intelligence, robotics and process automation are threatening to destroy at least a third of jobs in the western world as we understand them today. The west in general, and Europe in particular, is showing clear signs of exhaustion and of having lost both its flair for innovation and its leadership in developing new solutions that generate virtuous economic circles to benefit the majority of its citizens.

Consequently, western society is currently facing a period of great uncertainty. Europe, for example, has gone from representing 34% of world GDP to representing just 17% in four decades, and the downward trend is continuing. Europe is a major center of consumption but it seems to have lost the productive and creative drive that characterized it for centuries. Nevertheless, the current state of European society and economy is not written: while making short-term predictions is not difficult, all the deterministic and materialistic theories of economics and history have unfortunately shown a total lack of rigor. The key question is: how can we better understand the problem, obtain a more accurate diagnosis, reverse the trend, and attract a renewed impulse if we rely on the most valuable legacy we have inherited?

Is it up to us to create an economic model that generates distributed prosperity? Complexity Science and Network Theory shed new light on the economy

Despite the objective risks and dangers the above factors may represent in European society in general and Catalan society in particular, our individual and collective future is not determined. Analysis tools are available for designing strategic interventions that will enable us to boost our potential and generate opportunities that structurally benefit society as a whole.

One field that has experienced vigorous advances in recent years is that of Complexity Science and Network Theory, and in particular its applications to economics. The studies led by Ricardo Hausmann (Harvard) and César Hidalgo (MIT) shed great light on the problem of identifying which ingredients and dynamics are the engines of prosperity for nations. The model that Hausmann and Hidalgo have designed goes far beyond previous studies on identifying key factors that provide countries and regions with a diagnosis and prediction model of their economic strength.

Hausmann and Hidalgo assert that the engine of a country’s economy is its collective knowhow and the ability of its people, companies and institutions to work collectively to produce new products and services that respond to the needs of society as a whole and provide solutions to its problems. They synthesize collective knowhow by employing the concept of Economic Complexity, which is calculated by analyzing the power, diversity and sophistication of a country’s exports, i.e. the Product Space of Exports. This complexity index is also positively correlated with greater degrees of political freedom, less crime and corruption, and greater security for citizens. Although Hausmann and Hidalgo’s model is useful for elucidating precise diagnoses and decision-making at the country level, it has an important limitation: the vast majority of important economic decisions take place on smaller scales, i.e. at the regional, city and company/collective level. How, then, can we bridge the enormous distance between the bulk of the decisions that determine the development of knowhow on the one hand and the objective limitations of current analysis tools, decision-making and urban fabric design criteria on the other?

High resolution of Economic Complexity: the challenge of innovation analysis on an urban scale

Our research team on Urban Innovation at Harvard University analyses, on a regional scale, the criteria for urban design and the composition of individual talent and organizational structures that release the latent potential of society to create a more humane society, a more dynamic and creative economy, and more distributed prosperity.

To construct a more humane society for tomorrow, we need to strengthen a model for supporting the productive fabric that will enable us to create distributed prosperity and to recognize and reward the merits and individual and collective contributions of citizens. The driving force behind this distributed prosperity must be the reinforcement of collective know-how, while the engine that propels collective know-how is innovation. For these reasons, we have analyzed the factors that allow a society’s latent innovative potential to be unleashed.

To answer this question, we analyzed the 50 most powerful Innovation Districts in the United States, in cities such as New York, Boston, Chicago, Los Angeles, San Francisco and Seattle in accordance with Complexity Science and Network Theory.

One of our main findings that has made it possible to measure, elucidate and understand the phenomenon and dynamics of innovation on an urban scale is the territorialization of the Economic Complexity model on the following three scales:

1) the Regional Scale: the urban, infrastructural and operational fabric that allows the empowerment of high value-added industries and exports, where the dynamics that impact the three major phases of regional innovation have been identified, measured and analyzed:

– Research and Academy

– Technology Transfer

– Mass production.

2) the Urban Scale: innovation districts generating non-linear benefits of the strategic aggregation of knowledge-intensive activities, where the five major phases of urban innovation have been identified:

– inputs (strategic investments, design criteria, regulatory framework and exogenous shocks),

– innovation intensity,

– innovation dynamics,

– innovation performance, and

– social impact of innovation.

3) the Architectural Scale: high performance teams creating new solutions, new products and new services to respond to human needs, where the seven major phases of innovation at the team level have been identified, measured and analyzed: new idea, data analysis, working hypothesis, prototype, model iterations and calibration, minimum viable product, and mass adoption of the solution.

The three factors that unleash a society’s latent innovative potential

From our analyses we have detected and examined three networks for unlocking a society’s innovative potential:

1) Talent networks,

2) Networks of Organizational Structures and Incentive Systems, and

3) An Urban Design and Infrastructure Network that configures the physical space in which the productive fabric is developed.

The good news is that the three main factors depend on human decisions and that human factors are what condition their development. The main cause-effect relationships have been identified that favor or hinder the ability of societies to enable their citizens to develop new solutions and to transform what initially are usually pure intuitions into scalable products or services that generate wealth and allow citizens to develop a fuller life.

For example, when the non-linear benefits of strategic aggregation produced in the most consolidated innovation districts were measured, analyses revealed that four times more inventions are produced per employee (new patents, new products, new services, R&D, scientific articles) and nine times more workplaces are generated per resident. Also, 15 times more workplaces in knowledge-intensive work are created and up to 20 times more wealth is generated. Moreover, for each knowledge-intensive job, an average of five support work sites are generated, which helps to reduce unemployment and generate cycles of distributed prosperity throughout the city’s metropolitan area.

One possible winning strategy is to design innovation districts capable of hosting leading edge research and technology transfer centers, innovation-intensive companies and people and teams that, through collaboration, can generate new products and services. In turn, this can generate immense worksite opportunities for the vast majority of society through high value-added production centers and intermodal hubs that allow these products and services to compete in the global market. In short, an economy based on innovation and personal merit.

In the next few weeks, MIT Technology Review, the World Economic Forum and other international publications will issue the world’s first Atlas of Innovation Districts, which was developed by the Urban Innovation research group as an evolution of the thesis I published in 2018 with my colleague Jeremy Burke. This first edition will focus on the 50 leading Innovation Districts in the United States, but future editions will be extended to Europe, Latin America, Asia and other world regions. This new methodology, drawn from sources such as Évariste Galois, Ildefons Cerdà and Louis Durand as well as the models developed by Barabasi, Hidalgo and Hausmann, may be the key to better understanding the phenomenon of innovation on an urban scale. It may also serve as a stimulus and guide for better decision-making and better design criteria. Similarly, in our region, in Barcelona and in the Tarragona area, it may help to unlock the door to a society that offers quality professional opportunities and enable progress towards a more prosperous, dynamic, free and, ultimately, more human society.