OASIS SEMINAR – 27 JULY 2007

1. OASIS SEMINAR – 27 JULY 2007 Time Value of Knowledge — time-based frameworks for Valuing knowledge William P. Hall, PhDAustralian Centre for Science, Innovation and SocietyUniversity of Melbourne whall@unimelb.edu.au Peter Dalmaris, PhDFutureshock Research, Sydney Steven Else, PhDCenter for Public-Private Enterprise, Alexandria, VA Christopher Martin, PhDandWayne Philp, PhDLand Operations Division, DSTO, Edinburgh, SA

2. Some questions • What is knowledge? • What is an organisation? • How is knowledge important to organisations? • How can knowledge-intensive organisations value knowledge and knowledge-related activities? • How does this value change and depreciate with time? • We need a vocabulary for considering how cognition, knowledge and time interact!

3. Introduction • My own background • evolutionary biology, epistemology, computers, defence industry content and knowledge management • emergence of knowledge in complex adaptive systems • Background to this project • a day of brainstorming at DSTO Land Ops Division • biologically based paradigm of organization • Karl Popper’s epistemology • Maturana and Varela’s autopoiesis • need to gain & maintain strategic power in competition • bounded rationality and limits to organisation • improving knowledge intensive organisational processes

4. Paradigms and today’s presentations • Thomas Kuhn’s (1962, 1982) concepts • scientific paradigms held by communities • paradigmatic incommensurability • this presentation a product of an emerging community developing a biological theory of organizational knowledge • KM consultants/practitioners working in industry • most with PhD’s • academically unaffiliated (but looking for a home) • planning a workshop, “Theory, Ontology and Management of Organizational Knowledge”, to bring players together • the group framework combines several paradigms from the fringes of theories of knowledge and organisation

5. Epistemology paradigm • Karl Popper’s (1972) evolutionary epistemology • Knowledge is solutions or claims to solutions for problems of life • All claims to know are fallible (knowledge is constructed, its truth cannot be proven) • Three ontological worlds • W1 – uninterpreted physics and dynamics of reality • W2 - cybernetics of life or the dynamics of subjective experience; “dispositional” and “subjective” knowledge • W3– objectively codified products of knowledge (e.g. the logical contents of DNA molecules, books and libraries, computer memories), the “built” environment • Knowledge grows through trial & error elimination Pn → TT/TS → EE → Pn+1

6. Knowledge building cycles TS TS TS 1 1 1 TS TS TS 2 2 2 P P P EE EE EE P P P • • • n n n n n +1 +1 +1 • • • • • • • • • • • • TS TS TS m m m • Popper's “general theory of evolution” Pn a problem faced by an entity TS a tentative solution/theory.Tentative solutions are varied EE a process of error elimination (e.g., selection, criticism) Pn+1changed problem faced by an entity incorporating a surviving solution The whole process is endlesslyiterated iteration • Knowledge is constructed by living systems • TSs may be tacitly embodied in in the structural dispositions of the individual entity, or • TSs may be explicitly expressed in words as a hypothesis subject to intersubjective criticism • Objective expression and criticism lets our theories die in our stead • Through cyclic iteration, tested solutions can approach reality

7. Organisational paradigm • Maturana and Varela (1980) Autopoiesis(cognition) is the definition of life • Criteria after Varela et al. (1974) • Bounded(demarcated from the environment) • Complex (identifiable components within boundary) • Mechanistic (driven by cybernetically regulated dissipative processes) • Self-referential(boundaries internally determined) • Self-produced (intrinsically produces own components) • Autonomous (self-produced components are necessary and sufficient to produce the system). • Organisations are complex living systems (Hall 2005)

8. Bounded rationality & limits to organisation • Need for knowledge-based decisions & actions • Limited time & resources to process information in a relentlessly changing world • Bounds to individual rationality (Simon 1955, 1957) • Time • Cognitive processing power • Organisational limitations • Arrow (1974) • Greiner (1972-1998) • Else (2004)

9. Competition and survival in harsh environments • Living systems (i.e., orgs) are dissipative • grounded in non-equilibrium thermodynamics • Resources to feed dissipative processes are limited • degraded by use • Competition in a finite world • direct • competition for resources • To grow/survive living systems must maintain at least some strategic control over external environment & competitors • knowledge = solution to problems of life

10. Achieving strategic power in the world OBSERVE (Results of Test) ORIENT DECIDE (Hypothesis) ACT (Test) O GUIDANCE AND CONTROL PARADIGM OBSERVATION PARADIGM CULTURE PARADIGMS PROCESSES DNA GENETIC HERITAGE EXTERNAL INFORMATION D A O INPUT ANALYSIS SYNTHESIS CHANGING CIRCUMSTANCES MEMORY OF HISTORY UNFOLDING ENVIRONMENTAL RESULTS OF ACTIONS UNFOLDING INTERACTION WITH EXTERNAL ENVIRONMENT John Boyd's OODA Loop process • Achieving strategic power depends critically on learning more, better and faster, and reducing decision cycle times compared to competitors. See http://www.belisarius.com.

11. Info transformations in the autopoietic entity Autopoietic system Cell Multicellular organism Social organisation State World 2 Classification Memory of history World 1 Semantic processing to form knowledge Observations(data) Meaning Predict, propose Perturbations Intelligence Related information An "attractor basin"

12. Another view Time Codified knowledge World 3 World State 2 World 2 World 1 Medium/ Environment Autopoietic system Memory Observation World State 1 Classification Perturbation Transduction Synthesis Decision Evaluation Processing Paradigm(may include W3) AssembleResponse Observed internal changes Iterate Effect Internal changes Effect action

13. From the paper OODA “now” as itinexorablyprogresses through time divergent futures divergent futures divergent futures × × the world × t1+j t1+i t1 t2 stochasticfuture chart temporal divergence journey thus far × convergent future immutable past OODA perceivableworld tgs temporal convergence t4 proximalfuture t3 intendedfuture cognitive edge perceived present calendar time

14. t1 – time of observation divergent futures divergent divergent t3 – planning & decision × × × t1 temporal divergence immutable past temporal convergence t3 calendar time the world “now” as itinexorablyprogresses through time t2 – orientation & sensemaking t4 – effect action Anticipating and controllingthe future from now t2 stochasticfuture × convergent future OODA t4 intendedfuture

15. divergent futures divergent futures divergent futures × × × t1 temporal divergence temporal convergence Cognitive edge calendar time • convergent future: the entity’s mapping of the proximal future against an intended future in which tgs can be specified. t1and t1+j can also be mapped to tgs and then tgs+1 forecasted in the form of some subsequent goal. • divergent future: a world state where the entity’s actions in the proximal future (t1+j) failed to achieve the world state of the intended future at tgs. Intended future: the entity's intended goal or situation in the world farther in the future (at tgs, where gs is a goal-state and tgs is the moment when that goal is realised). Intentions are not necessarily time specific but are always associated with an event or goal-state (i.e., the arrival of a set point in calendar time can also be considered to be an event). Proximal future: the entity's anticipated future situation in the world (W2) at t4 as a consequence of its actions at t1+j, where j is a time-step unit—typically on completing the next OODA cycle. This anticipation is based on observed recent past, perceived present and forecasting of the future up to t4. • Present: calendar time: when an action is executed. • perceived present: the entity's constructed understanding in W2 of its situation in the world at time t3; • actual present: the entity's instantaneous situation in W1 at time t4. recent past: recent sensory data in calendar time concerning the perceivable world at t1 (i.e., observations) the entity can project forward to construct a concept of the present situation (i.e., at t3), or some future situation. Recent past is constructed in W2 based on what existed in W1 leading up to t1. journey thus far: the memory of history at t2 as constructed in W2. Memories tend to focus on prospective and retrospective associations with events (event-relative time) and can also be chronological in nature (calendar time) “now” as itinexorablyprogresses through time perceivable world: the world that the entity can observe at t1 in relationship to the chart. This is the external reality (W1) the entity can observe and understand in W2 (i.e., within its "cognitive edge" chart: received and constructed world view that remains extant and authoritative for a single OODA cycle. recentpast t2 t1+j tgs stochasticfuture chart × journey thus far convergent future immutable past OODA OODA Perceivable world t4 proximalfuture perceived present intendedfuture t3 the world

16. Utility value of knowledge • Pattee (1995) • “Knowledge is potentially useful information about something. ... By useful information or knowledge I mean information in the evolutionary sense of information for construction and control, measured or selected information, or information ultimately necessary for survival” • Utility value of knowledge (Cornejo 2003) • Direct • direct relationship with improvements in processes and operations, usually derived from the knowledge acquired by members of the organization. • Indirect • When the organization knows that it is benefiting from the acquired knowledge but can’t identify the mechanism with clarity, and it therefore can’t find a reliable way to measure and value it.

17. Value and time • Knowledge value function • claim’s accuracy reflecting the true state of existence (i.e., the degree that rational actions based on the knowledge produce predictable results) • claim’s applicability to particular circumstances • quality and effects observed when knowledge enacted • Time issues • relentless advance • temporal lag of constructed W2 vs actual W1 • old and multiply tested knowledge vs depreciation • tacit (uncriticisable) vs explicit issues

18. OODA cycle times and strategic power • Concerns in the decision & action cycle • rationality bounded in time • decision risk • intimidation and dithering about uncertainties • Danger of stuck OODA (“analysis paralysis”) • decisions by “running out of time” or “fiat” • paralysis blocks dependent decisions • Knowledge that is not refreshed depreciates • Minimax • increased observation time gives more detail for a larger perceivable world and a more accurate model of it • striving too long to reduce uncertainty gives more time for random events and other actors to create a stochastic future diverging from the intentional future, leading to less relevant world views and less effective control information • Advantage from changing world before competitors complete their own OODA loops

19. Conclusions • Delaying decision & action without new observation and orientation depretiates the knowledge on which they depend • increasing unpredictability of results of actions • Operating inside a competitor’s (OODA) loop breaks its external bonds with its environment and creates mismatches between the real world and its perceptions of that world. • Initial confusion and disorder can degenerate into internal dissolution that erodes the will to resist. • Current world-knowledge doesn’t age well, but… • Some kinds of knowledge can become more valuable with time. • The most valuable knowledge may be “old” knowledge that has survived testing in many OODA loops as cultural heritage. • Rapid decision also benefits from cultural paradigms that don't have to be revisited often (Boyd) • At the tactical level, one needs to deal aggressively with latency issues.

20. Any questions?

21. Cybernetics and emerging complexity • “Cybernetics" is the regulation, communication and application of control information, beginning at the biophysical level • “System” is a set of distinguishable components that dynamically interact to facilitate and cybernetically regulate the flow of information, matter or energy • “Complex system” a system whose emergent behavior cannot readily be predicted from the behaviors of its components (i.e., non-linear/chaotic) • “Levels of organisation”. Systems may be complex at hierarchically different levels of structure (Salthe 1983) • “focal level”. A selected level of analysis for observing a system in a hierarchically complex world. System may include sub-systems at lower focal levels as components and be a single component in a complex system at higher level of focus (Salthe 1983, Gould 2002)