It's five years since C.K.Pralahad's The Fortune at the Bottom of the Pyramid was first published, and an updated anniversary edition is now out. The new edition is greatly expanded from the first one, and in ways that make it a fascinating read.

The concept of 'bottom of the pyramid' businesses was catalytic half a decade ago. Pralahad both identified some emerging business models which successfully served very low income consumers; and also at the same time provided a focus and clarity for many other businesses which were just starting to recognize the potential of low income markets. A few companies had found transformative business models – Unilever's packaging, price points, marketing and distribution for its consumer products, the innovation of the very low cost pre-pay card in mobile telephony, for example. After the publication of the book, with its case studies, many other companies were encouraged to think creatively about the market opportunities.

So the bottom of pyramid concept is now a defining frame of reference in many emerging economies. It has served consumers in those countries well by making it apparent to businesses that there are good profit opportunities.

The new edition offers, as a result, many more case studies of successful bottom of the pyramid business model innovations. One aspect of these which is particularly interesting is the evolution of whole supply chains starting from one success, and the mutually reinforcing success of the companies involved. It's a great micro-level case study of how the virtuous circle of endogenous growth gets started. Another lesson is the role information technology has played in making bottom of the pyramid business feasible, due to the cost reductions and scope for co-ordination.

I was struck, however, by the great preponderance of case studies from India, and elsewhere in Asia. It's not clear whether this is just an accident of where the research possibilities were easiest, or rather reflects the importance of the scale and growth of the Indian and other Asian economies. Scale is often under-estimated as a factor in the success of an economy – it's certainly important in the US lead in productivity. I'd like to understand better whether the opportunities for bottom of the pyramid business in African countries would be released by some economic reform, of the kind India introduced in 1991, or whether instead they are inherently limited by the small size and geographical distance from large markets of African economies. And if the latter, the implications for Africa's need for a genuine regional economic union are pretty powerful.

Anyway, this goes beyond the scope of what the author is trying to do in this book. The case studies in the new edition will be of interest to those who've read the first edition as well as new readers. There's also a CD with video case studies.

As the paperback of Outliers has been on the bestseller list for ever, I'm probably the last person to read it. It's an enjoyable read and for a book that's about research results in social science, that must be high praise. 'Outliers' are the people who are extraordinary successes in their field. Here's how Gladwell describes his ambition in writing the book:

My wish with Outliers is that it makes us understand how much of a
group project success is. When outliers become outliers it is not just
because of their own efforts. It's because of the contributions of lots
of different people and lots of different circumstances— and that means
that we, as a society, have more control about who succeeds—and how
many of us succeed—than we think. That's an amazingly hopeful and
uplifting idea.

It's a less unified book than you might think from this description, however. Some of the parts I found most interesting were about how people communicate and make decisions. It's a slight stretch to link that to the notion of extreme success – the link is that people who succeed in difficult circumstances (such as the near-crash of an aeroplane) do so as part of a team of people.

Having said that, I applaud his aim of making readers appreciate that success stems not just from talent, but also from hard work, culture, and the luck of timing and happenstance. The sooner we move away from the idea of the lonely genius (or the heroic leader) the better of we'll all be. This is partly understood, I think. People do appreciate that a star athlete has put in hours of training to burnish a natural talent – but they probably do not know about the impact of arbitrary selection dates in turning athletes born in certain months into successes. We just don't pay enough attention to the role of luck – a theme of Nassim Taleb in Fooled by Randomness and The Black Swan. But to be a big success, an outlier, you need all of the above, the genes and talent, the effort, the teammates and the luck.

The readability of Outliers lies in Gladwell's gift for storytelling – a good lesson for others who want to popularise serious research. It did sometimes make me uneasy, however. Perhaps such a strong storyline reflects the suppression of the messiness and confusion which usually surrounds empirical work in social science?

As I'm so late to the book there are plenty of other reviews around. Here are the ones from The Independent, Business Week, Time and an astute Huff Post review which points out the glaring absence of any mention of gender in Gladwell's analysis. In a way, the fact that he doesn't discuss why all the 'outliers' are male makes his point over again – success isn't a question of individual genius but rather a social construct.

My interest in things related to mobile communication is boundless so I picked up Mobile Communication and Society by Manuell Castells and a series of co-authors from my heap of books with enthusiasm. It turned out to be old – at least by the standards of this technology. The hardback came out in 2006, this paperback in 2007. This means that it seems extraordinarily out of date. That in itself is revealing. The diffusion of mobiles in the developing world was already amazing in 2005 (from close enough to zero in 2000), and the pace of growth has continued.

But it's the issues which seem salient which really show how rapidly things have evolved. When this book was written, the researchers' concerns were issues such as gender imbalances, the youth culture of mobiles, their role as status symbols. Near ubiquity, even in quite poor countries, has overtaken all of these concerns which stemmed from the fact that some social groups got earlier access to mobile communications. Today's issues are very different – the scope for the mobile web and applications that might support, the types of business models that work with mobile technology, the interaction of mobiles with social networks and the social and political implications. It's a different world in 2009 than in 2007.

The authors are sociologists, who write in a version of academese I always struggle with. Even so, and despite the age of this book, I found some new thoughts. I hadn't before linked the spread of mobile to the recent milestone in urbanization, with half the world's population now living in towns and cities (p57). I was intrigued to realize that pagers are still (or were in 2005) quite widely used in the US, partly because of cost, and partly because it gives users more control over the ability of their employers to get in touch with them at all times. And I knew about but was interested to read again about the evolution of the main point of the mobile – from providing mobility to providing a personal communications device – making the ability to retain the same number when switching provider a key consumer protection.

Another big plus is that the book cites my work in Vodafone's research programme, along with the other authors of our landmark 2005 Africa: the Impact of Mobile Phones report. Since then we've covered mobile transactions and India. The next phase will be research on the mobile web.

‘The Nature of Technology – What it is and how it evolves’ by W. Brian Arthur (Allen Lane)

By Richard BRONK
Visiting Fellow, LSE

Brian Arthur is well known in the economics and business world for his work on increasing returns in high-technology markets and as one of the pioneers of Complexity Theory and its application to economics. The arrival of his new book, The Nature of Technology, was therefore always likely to cause a stir. But for me, as author of The Romantic Economist, it had special promise: for here was a work dedicated to understanding the dynamic and self-creating properties of technologies and the economies that use them.

For Arthur, a technology is organised around a principle of how to exploit natural (or social) phenomena for some particular purpose. All technologies are made up of component sub-technologies and, crucially, can in turn act as building blocks for other technologies. Armed with these abstract premises, Arthur develops a ‘combinatorial’ theory of technological evolution. Since all novel technologies are combinations of existing technologies (or combinations of pre-formed modules of multiple technologies), the potential for new technologies grows exponentially with the number of extant technologies. At the same time, the need for new technologies grows rapidly, not least to support other emerging technologies and offset the problems they create. In this sense, technology as a set is self-creating or ‘autopoietic’.

There are many particular insights in this fascinating book. For example, technology’s relationship with science is shown to be fully symbiotic, with technology (the telescope, for example) as important to the evolution of science as science is to the development of technologies. Likewise, technological innovation is not something that happens to an economy and to which it must adjust; rather both economy and technology develop in a continual process of mutual reconfiguration. For Arthur, the economy is ‘an expression of its technologies’: it mediates the creation of new technologies, and these in turn continually alter the structure of the economy. This echoes and develops Schumpeter’s insights about the process of creative destruction incessantly changing the economy ‘from within’. Arthur also combines his understanding of increasing returns with subtle epistemological arguments to account for technology ‘lock-in’ and the clustering of new technology providers.

With my Romantic Economist hat on, there are several other facets of Arthur’s book worthy of applause. First, Arthur returns to the tradition of Marshall and other early economists by writing in what Wordsworth called a ‘language really used by men’, thereby making his arguments and assumptions accessible (and open to scrutiny) by specialists and non-specialists alike. Accessible but not always easy: the book operates at a level of abstraction and with a frequency of precise redefinition of terms that some will find off-putting even if perhaps necessary in a book aiming at the complete reconceptualisation of its subject. The abstraction is, though, relieved by numerous beautifully explained examples of real technologies that serve to bring the text alive. Arthur’s main intended audience may be theorists and academics, but the text is also peppered with general practical pointers for how to manage technology businesses. The reader is left in no doubt that steady-state optimisation and rational analysis of defined problems is not enough in the world of self-creating technology. Instead managers must continually adapt, innovate and experiment with ways to make sense of their dynamic and unpredictable environment.

I also applaud Arthur’s paradoxical but convincing insistence on applying the sort of organic and biological metaphors preferred by the Romantics to the machine world of technology. ‘Technology is becoming biology’: as a collective it ‘builds itself organically from itself’, with cascades of novelty only partially offset by mass extinction events (as obsolete technologies are superseded). The representative individual modern technology is ‘a fluid thing, dynamic, alive, highly configurable’. Moreover, the jet engine, for example, is a ‘metabolism’, a set of interacting parts that senses and reacts to its environment. Such use of metaphor helps shake us out of our mechanistic way of looking at technology, to reveal aspects that are usually ignored.

But Arthur is not a thoroughgoing Romantic. For one thing, while interested in the constitutive role of language in how we think, he abstains from any serious consideration of the supportive role of different national or regional institutions for different types of technology specialisation. For another, he is determined not to sprinkle the stardust of imagination over the serious world of technology. While admitting that good design is ‘like good poetry’, and that a technology domain is a ‘realm in the imagination’, he is concerned to demystify the process of innovation as much as possible: ‘the fact that all inventions are supported by a pyramid of causality means that an invention tends to show up when the pieces necessary for it, and the need for it, fall into place’. There is nothing pre-ordained or precisely predictable about Arthur’s self-creating technology, but his epistemological position is revealed by the fact that when talking about invention he uses the language of discovery and finding solutions rather than creating them. This implies that, by the time the invention is made, the solution is already ‘out there’ waiting to be noticed. For reasons I will explain, I believe this to be misleading.

It is certainly true that much of Arthur’s demystification of innovation is highly desirable and warranted. Rather than being an isolated moment of intuition, innovation is usually the product of experience, careful articulation of problems and the organised exercise of reasoning imagination in looking for new connections between inherited building blocks of thought and technique. But equally I would argue that Arthur underestimates the degree of creativity and imagination (as opposed to rational deduction and analysis) that innovation requires at the micro-level of individual inventors. Very often, the number of possible permutations of existing conceivably pertinent technologies is so vast that inventors must create, as much as find, a feasible path to a new solution. In addition, the required imaginative receptiveness to new ideas, new connections and new ways of looking at problems (roughly equating to Keat’s ‘negative capability’) – the willingness not to rush to impose an established template of understanding – is perhaps more unusual in the real world than Arthur implies. Even more rare is the imaginative ability to build a consistent vision of how things might be, without being blinded by the scale of different possibilities. For these reasons, I would also argue that Arthur overstates how much new technologies have an ancestry; and he understates the degree to which, as George Shackle put it, ‘novelties of the imagination’ inject ‘in some respect ex nihilo, the unforeknowable arrangement of elements’, thereby ‘cutting into the fabric of governance of time-to-come by time past’ (‘Imagination and the Nature of Choice’, Edinburgh University Press, 1979).

I have one related quibble about the book as a whole. Much of its freshness undoubtedly comes from the fact that Arthur develops a largely original framework for thinking about technology that is not cluttered by references to too many other works. But this comes at the cost of Arthur sometimes having to reinvent conceptual wheels. It is also a pity because Arthur is at his best when he does engage with other thinkers. For example, he makes excellent use of Kuhn’s theory of paradigms to suggest by analogy how the cycle of technology develops, and he explores to great effect the resonances and dissonances of the metaphor of Darwinian evolution applied to technology. Furthermore, there is an irony in Arthur not engaging more with his predecessors: for, in his view, innovation is always a function of new combinations of existing theories; and yet his innovative book reminded me at times of Wordsworth’s immortal line on Newton, ‘Voyaging through strange seas of Thought alone’.