1/ Information is rare and hides in pockets as it battles the universe’s perennial march to disorder: the growth of entropy.

2/ Earth is a very special place in the Universe as it is a singularity of physical order, or information as defined by Shannon in information theory.

3/ First, information is physical or more precisely it is physically embodied. Information is not a thing; rather, it is the arrangement of physical things. It is not an amorphous soup of atoms but physical order.

4/ Crash a 1m$ Ferrari against a wall, the dollar value evaporate while its weight doesn’t. The value was store in the way those atoms were arranged. This arrangement is information.

5/ Second, information is meaningless. Meaning only emerges when a message reaches a life-form or a machine with the ability to process information. Meaning is not carried in the message it is derived from context and prior knowledge.

6/ History from the lifeless (physical) to the living (biological) to the social and then to the economic is centered not so much on the arrow of time but on the arrow of complexity: the growth of information.

7/ The mechanisms supporting this growth of information lie around three main pillars: out-of-equilibrium system, accumulation of information in solids and ability of matter to compute.

8/ In a close physical system, the second law of thermodynamics states that the entropy always tends to increase, meaning that systems march from order to disorder, from an information-rich state to an information-poor state.

9/ In an out-of-equilibrium system, the steady states that matter reaches tend to be spontaneously organized or information-rich.

10/ Our planet is an out-of-equilibrium pocket inside a larger system—the universe—that is moving toward equilibrium. The free energy of the sun drives our planet out of equilibrium and provides the energy required for information and biology to emerge.

11/ For information to stick around it must be accumulated in solids. From a physical perspective, a solid is “frozen” because its structure is stable to the thermal fluctuations of the environment. Information has no way to endure and grow in a scalding world like the sun.

12/ In “What Is Life”, Schrödinger understood that the information required to build a biological organism was hidden inside the cell. From a physical perspective, both proteins and DNA are technically crystals.

13/ In his thesis, Prigogine explains the prebiotic nature of computational ability of matter by showing that a simple chemical system (a kind of chemical transistor) through bifurcation models a primitive metabolism. Outputs are conditional of the inputs.

14/ A tree, in its semi-“frozen” state, is a computer powered by sunlight. While a tree is not conscious, it shares with us a general ability to process information. A tree has knowhow, similarly to the processes our own bodies do without knowing how: digestion, immunity…

15/ Life is a consequence of the ability of matter to compute. Information helps bridge the gap between the physical and the biological.

16/ We are born from it and while we interact in social context the reverse is also true: it is born from us. We are small neurons in a vast social and economic universe.

17/ Crystals of imagination represent ordered arrangements of atoms (ie solid objects) that humans create to accumulate information generated through mental computation. They do not just embody information but also imagination.

18/ The main difference between apples and Apples is that the apples we eat existed first in the world and then in our heads while the Apples we use to check our email existed first in someone’s head and then in the world.

19/ Economic development is based not on the ability of a pocket of the economy to consume but on the ability of people to turn their dreams into reality. Economic development is not the ability to buy but the ability to make.

20/ Our ability to crystallize imagination, to build products give us access to the practical uses of the knowledge and knowhow residing in the nervous systems of other people.

21/ An electric guitar allows us to “sing” with our hands by embodying knowledge of how the music’s sound waves can be captured using a transducer, and how these sounds can be amplified for many of us to enjoy.

22/ In a metaphorical sense, the world is populated by ghosts. Faraday’, Tesla and many others live in electrical products.

23/ It also allows us to transform our ideas into shareable reality. Crystallizing our thoughts into tangible and digital objects is what allows us to share our thoughts with others. It augments us.

24/ Therefore economy can be seen as a system that amplifies the practical uses of knowledge and knowhow through the physical embodiment of information. It is a sociotechnical system by which humans make information grow.

25/ A “personbyte” is defined as the maximum knowledge and knowhow carrying capacity of a human. At the individual level, there is a limit to the amount of knowledge and knowhow we can accumulate in our brain and nervous system.

26/ Therefore, it not only requires that we break up knowledge and knowhow into chunks that are smaller than the ones an individual can hold but also a structure to reconstitute it: a network.

27/ Our collective ability to accumulate knowledge is therefore limited by both the finite capacity of individuals and the problem of connecting individuals in a network.

28/ A successful band not only requires each musician to have a deep knowledge of his instrument but also requires musicians to know how to play together. Practice time is required when replacing one of the musician.

29/ Bonding social capital understood as ability to connect people is as important as human capital defined as knowledge and knowhow that is embodied in humans.

30/ The basics of social network formation is based on three simple ideas: shared social foci, triadic closure, and homophily.

31/ A shared social foci means simply that links are more likely to form among people who share a social focus (i.e., classmates, workmates…)

32/ Triadic closure means that links are more likely to form among people who share friends.

33/ Homophily, on the other hand, attempts to explain the links that stick—it is the idea that links are more likely to form among people who have similar interests and characteristics.

34/ An outcome of these tie formation mechanisms is that social networks are composed of clusters of similar people, who often have highly overlapping knowledge and information.

35/ Social networks help drive the formation of professional networks and tend to bring into a firm people who are similar to the ones already there. Deloitte got 49 percent of its experienced hires from referrals.

36/ Firms, networks of individuals, developed according to the classical view of Adam Smith’s division of labor and scale economies.

37/ Simply put, cooking dinner for one is more expensive than cooking for a family of five: cooking for five does not take five times the effort or ingredients than cooking for one.

38/ Nevertheless, firms don’t grow endlessly and analogously to the “personbyte” have also a quantization limit: the “firmbyte”.

39/ Transaction cost theory study the cost of economic links and the ways in which people organize to deal with commercial interactions.

40/ When the external transactions become less costly than the internal transactions, firms stop growing since it is better for them to buy things from the market than to produce these internally: the cheaper the link, the larger the network.

41/ Williamson’s classifies the links (ie transactions) in two axes: by frequency (recurrent and occasional) and specificity (nonspecific to idiosyncratic).

42/ Buying coffee is a nonspecific recurrent transaction. Purchasing a home is an occasional and specific interaction. It is easy to understand the difference in term of paperwork and people needed to establish a commercial link.

43/ During the last decades the cost of market transactions has fallen due to for examples transportation costs but a as well as emergence of standards.

44/ Language is the quintessential standard. While still linguistically fragmented, language allows people to weave networks by empowering them with the ability to communicate complex ideas and coordinate their actions.

45/ While those costs decrease, a network of firms is developing, increasing our ability to accumulate knowledge in networks of markets interactions.

46/ Nevertheless, links requiring large amount of paperwork and people’s time can be a bureaucratic burden and very costly.

47/ Extreme levels of inefficiency can only be supported by organizations whose revenue stream does not depend on their interactions with others. In a government, most of the personbytes available are consumed by internal procedures.

48/ Bureaucratic transactions costs (detailed contracts, insurance …) can be significantly reduced with trust. Trust makes links cheaper, allowing networks to grow larger. Trusts is the large networks’ glue.

49/ At a macro level, we can observe a diversification toward related varieties. There is a bias favoring the emergence of an industry in the places, or networks of people, that already have accumulated much of the knowledge and knowhow needed for that industry.

50/ Places producing curtains are preadapted to produce tablecloths but not espresso machines. By analogy, a zebra and a crocodile might be similar in terms of overall complexity, but evolving a horse from a zebra is easier than evolving a horse from a crocodile.

51/ Another good example of this nestedness of industry-location data is the Silicon Valley. If HP, Atari, and Xerox PARC had not been located in the valley, it is likely that the knowledge and knowhow needed to get Apple started would not have been there.

52/ The idea of product space, a network connecting similar products, help understand the dynamics of industrial diversification and at a fundamental level explains the growth of economies as the growth of information.

53/ As the universe moves on and entropy continues to increase, our planet continues its rebellious path marked by information rich pockets. Our lives compute forward in a universe that has no past.

NOTE1: All credit goes to @cesifoti, author of the most interesting book I read in 2017: "Why Information Grows: The Evolution of Order, from Atoms to Economies”.