Dan Wang, in his wonderful essay on how technology grows, describes process knowledge as the sine qua non of industrial capitalism, more fundamental than the machines and factories that everybody sees:
The tools and IP held by these firms are easy to observe. I think that the process knowledge they possess is even more important. The process knowledge can also be referred to as technical and industrial expertise; in the case of semiconductors, that includes knowledge of how to store wafers, how to enter a clean room, how much electric current should be used at different stages of the fab process, and countless other things. This kind of knowledge is won by experience. Anyone with detailed instructions but no experience actually fabricating chips is likely to make a mess.
I believe that technology ultimately progresses because of people and the deepening of the process knowledge they possess. I see the creation of new tools and IP as certifications that we’ve accumulated process knowledge. Instead of seeing tools and IP as the ultimate ends of technological progress, I’d like to view them as milestones in the training of better scientists, engineers, and technicians.
The accumulated process knowledge plus capital allows the semiconductor companies to continue to produce ever-more sophisticated chips. […] It’s not just about the tools, which any sufficiently-capitalized firm can buy; or the blueprints, which are hard to follow without experience of what went into codifying them.
Process knowledge lives in people, grows when people interact with other people, and spreads around when skilled individuals relocate between cities or companies. But this also means it can wither and die, can be lost forever, either when old workers shuffle off to the Big Open Plan Office in the Sky, or when an ecosystem no longer has the energy or complexity to sustain a critical mass of skilled workers in a particular vocation. Some East Asian societies have gone to extreme lengths to retain process knowledge, for instance by deliberately demolishing and rebuilding a temple every 20 years.
In fact this is far from the most extreme thing East Asian societies have done to retain the process knowledge that lives within their workers! There are some components of an ecosystem, whether natural or technological, that are especially important keystone species. In the technological case, these species can be unprofitable at the current scale of an ecosystem, or inefficient, or they might not make economic sense until one or more of their customers exist, but those customers might not be able to exist until the keystone species does. Venture capital is very practiced at solving this kind of Catch-22, but in the East Asian economic boom it was national governments that actively sheltered keystone industries until they could get their footing, thus making entire ecosystems possible. A wonderful book about this is Joe Studwell’s How Asia Works, but if you can’t read it, read Byrne Hobart’s thorough review instead.
Process knowledge is so powerful, the ecosystem it enables so vital, it can break the assumptions of Ricardo’s theory of trade. Steve Keen has a perceptive essay about how the naive Ricardian analysis treats all capital stock as fungible and neglects the existence of specialized machinery and infrastructure. But naive defenders1 of trade liberalization often make an exactly analogous error with respect to the other factor of production — labor. Workers are not an undifferentiated lump, they are people with skills, connections, and expertise locked up in their heads. When a high-skill industry moves offshore, the community of experts around it begins to break up, which can cripple adjacent industries, stymie insights and breakthroughs, and make it almost impossible to bring that industry back.
John Psmith, “REVIEW: Flying Blind by Peter Robison”, Mr. and Mrs. Psmith’s Bookshelf, 2023-02-06.
- Like all coastal-Americans, I am generally in favor of trade liberalization, but I’m consummate and sophisticated about it, unlike Noah Smith.
January 15, 2026
QotD: Process knowledge
Comments Off on QotD: Process knowledge
No Comments
No comments yet.
RSS feed for comments on this post.
Sorry, the comment form is closed at this time.
