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The Absolute Cost of Knowledge Transformations

By Roy D. Follendore III

Copyright (c) 2002 RDFollendoreIII

All Rights Reserved


August 19, 2002

The total process that changes the value of a system is a transformation. Transformations of value occur when a change is induces within a physical or logical system.  In this paper we are using the term transformation rather than words like net or gross profit because profit implies the result somehow is taken from the system under question.  Within a transformation the value is gained or lost but remains within the system.  What this paper is concerned with are the assumptions related to the process of ultimately accounting for value and cost.  By cost it is meant to be understood that there are different kinds of processes which may transform in terms of value but which is lost.  The absolute cost of transformations must therefore consider the total potential transformation value minus the resulting value.

The concept of the absolute cost of transformations includes accounted value that has been induced but also unaccounted potential value that was not. This paper discusses the reasons why the true cost of economic transformations that create new value with respect to the absolute value of knowledge is often never well understood. The need to store data, information and knowledge as more relatable elements that can be more readily transformed can not be fully expressed as a linear formula. The underlying mechanism involves the idea that logic affects value in different ways than rationality.  Rational associations of elements affect the value of knowledge in nondeterministic ways.  Within the context of this paper, to speak of a process as being rational is not the same as speaking of that value as being logical.  Logic is based on a deterministic array of mathematical axioms and postulates which are formed in such a way as to be self reinforcing.  Rationalism is a way of thinking using meta justifications which may reinforce or negate the rational under consideration.  Logical thinking is therefore a continuous self supportive lattice of connected thinking, whereas rational thinking is a more  topological way of thinking.  In this way logic can be said to be more transactional and rationality can be said to be more transformable. The act of valuation to obtain potential cost requires transactional acts of logic as well as transformational acts of rationality.   

Let us assume that there existed a universal unit of value where one unit of X equaled one unit of Y or one unit of Z and Y would equal in value to Z. Within this system X could be transformed to Y or X could be transformed to Y such that the transformation would equal the value of X and therefore Y or Z.  We may say that the transformation of X to Y or Z is X.  (X=Y=X) However it is not necessarily the case that the transformation of X, Y, or Z as represented by XY, XZ, YX, YZ , ZY, ZX are equal to X and therefore Y or Z.  It is therefore also not the case that XYZ would necessarily be equal in value to X, even though the transformation of X to Y or Z might equal X.  The value of two combined components of equal value may or may not equal the standing or the independent transformation value of themselves. Perhaps the relationships of X, Y, and Z are such that they are less relevant to us when combined together and therefore have less value.  Perhaps the relationships of X, Y, and Z are such that they are superior to our relevance to their independent existence and therefore have more value.   Therefore we may assume that the combined value of XYZ as being <=> to X+Y+Z.

If we were to assume the cost of the transformation of X to Y, the cost would be X.  But if we were to assume that cost of X to XY, XZ, YX, ZX the cost could be <> X.  Conversely, if we were to assume the transformation of Y to X the cost would be X.  But if we were to assume the transformation of XY, XZ, YX, ZX to X  the total transformation cost would be <> X, depending on the independent intrinsic relative values of XY, XZ, YX, ZX.  In other words, total transformation costs are multidimensional.

The reasons why this is so is the inherent valuation of the transformation as well as the value of relevance.  Since relative value is discontinuous from component value, even when a universal unit metric is specified, transformation is nonlinear.  XY does not necessarily imply the same value as YX.  The value of granularity is sensitive to juxtaposition.  There should be no surprises here since this is basic economics 101 for those who value physical items like fine art or real-estate.  Transformation of the unit to and from the whole value changes the valuation of both the collection and the unit.  As we translate this idea into a physical examples other issues become illuminated. 

Assume a new car is purchased in 1992.  At the moment the car was purchased, the value of the car consisted of the value of the components and the value of the transformation of the components into a car.  Since the car consisted of some new parts such as the new fender design, the value of the fender, which could not be purchased anywhere but as the new car is figured as part of the value of the components of the new car.  Ten years later, in 2002 the value of the car as a collection of components may have dramatically diminished, while the value of the individual parts dramatically increased.  The transformation of turning a particular part of a car into an individual part again increases the unit value of the part while the total value of the car as a collection of universal unit values may dramatically decrease.

So much for the value of physical objects.  Instead of a physical thing like a car consisting of engine parts, tires & wheels, gas cap, windshield wipers, e.t.c.... we were to consider a report containing valuable knowledge.  Like all reports, ours would consist of different data and informational parts which are collected and arranged in a specific order and sequence so that something we call knowledge can be assumed.  Like the concept of arranging physical parts in a specific way to create the vehicle that we allow ourselves to call a car, a report represents the vehicle for the concept we may be willing to call knowledge.  Like the parts on our car, these data parts may have cost different amounts to manufacture.  This acceptance becomes the transaction which affects the value and of course it is also the nature of the concept of transactions that we introduce time as part of the process of the transformation of value.  

It might be that a particular statistic as an item of data involved the design and use of a large collection of expensive devices over a particular period of time.  Maybe it was a particular statistic that involved the loss of life.   If we had  to add this statistic to all of the others which may or may not have been as expensive to produce, the initial product could be far more valuable than the sum of the parts.  The Gestalt of  the concept of valuation takes place within the transformation of the concept of Noise to Knowledge, just as the transformation of value took place in the example of our car.  If we then assume that some period of time goes by and like our car, our report becomes well used, the value of our report as a whole may go below the value of the sum of the individual parts.  Knowledge has been overcome by physical and logical change through time.

To effect a valued transformation it is first necessary to perform transactions on basis of our knowledge report and reduce it back into data and information units which can be valued and sold independently.  The justification for this may very well be to create a new and more valuable report to be used for the same purposes.  The three steps to accomplish a valued transformation are disassembly, specification and rationalization. 

In the case of knowledge, disassembly simply means that we successfully are able to break down knowledge into its base components and then set them aside as independent and separate elements.  When we have accomplished this we must then be able to specify those components so that they can be classified and ordered.  To specify means that we redefine the elements that we have set aside. This classification and order is not only dependent on the components but also the rationality.  Rationalization means that we have created a meta concept of how the specification will be used for order and reorganization.  

To be useful, rationality must at a minimum be able to answer a coherent question that can be communicated and acted upon.  The resulting value of the transformation becomes dependent on the ability to perform these three steps in the face of the level of need and degree of preciousness.  Concepts like usefulness and rarity has relevance with respect to need and preciousness which involve sensitivity and therefore the need for security.  Furthermore, the rationalization of the elements of a body of knowledge that has been disassembled may be an iterative and continuing process of respecification.  The act of respecification and continuous rationalization illuminates gaps of continuity that must be filled before the elements of old knowledge can be transformed in to new knowledge. It is for these reasons that the secure fine grain control and storage of data, information and knowledge is the underlying cost of the transformation of the value from knowledge.  

Within this paper we have discussed the reasons why the valuation of knowledge is different from valuation of physical processes.  The ability to transform knowledge in affect value is different. The ability to store and manipulate knowledge by breaking it down, rearranging it, and adding to it is endless.  Therefore with respect to knowledge, the affect of the process of manipulation through the storage means becomes the physical dynamic limitation ultimately representing the true absolute cost of transformations of value.  

If you want to understand more about what this means with respect to information you may read my 1999 paper on "Qualities Related To General Information Value."




Copyright (c) 2001-2007 RDFollendoreIII All Rights Reserved