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The Cognitive Limit of Organizations. The structure of a society is connected to its total amount of information
                                               Click image to enlarge

The vertical axis of this slide represents the total stock of information in the world. The horizontal axis represents time.

In the early days, life was simple. We did important things like make spears and arrowheads. The amount of knowledge needed to make these items, however, was small enough that a single person could master their production. There was no need for a large division of labor and new knowledge was extremely precious. If you got new knowledge, you did not want to share it. After all, in a world where most knowledge can fit in someone’s head, stealing ideas is easy, and appropriating the value of the ideas you generate is hard.

At some point, however, the amount of knowledge required to make things began to exceed the cognitive limit of a single human being. Things could only be done in teams, and sharing information among team members was required to build these complex items. Organizations were born as our social skills began to compensate for our limited cognitive skills. Society, however, kept on accruing more and more knowledge, and the cognitive limit of organizations, just like that of the spearmaker, was ultimately reached. (…)

Today, however, most products are combinations of knowledge and intellectual property that resides in different organizations. Our world is less and less about the single pieces of intellectual property and more and more about the networks that help connect these pieces. The total stock of information used in these ecosystems exceeds the capacity of single organizations because doubling the size of huge organizations does not double the capacity of that organization to hold knowledge and put it into productive use.

In a world in which implementing the next generation of ideas will increasingly require pulling resources from different organizations, barriers to collaboration will be a crucial constraint limiting the development of firms. Agility, context, and a strong network are becoming the survival traits where assets, control, and power used to rule. John Seely Brown refers to this as the “Power of Pull.”“

The Cognitive Limit of Organizations, MIT Media Lab, Oct 7, 2011.