Thread by @kamilkazani

Today I will introduce one more concept critical for understanding of how the manufacturing industry has evolved over the last few decades. It is the shift of technological knowledge from esoteric to exoteric

In the pre-digital era, manufacturing used to be mysterious, esoteric

To visualize how the manufacturing worked in the pre-computer/early computer age, imagine the atmosphere of magic, mysticism, enigma. That would be not very far from truth.

To illustrate the idea, I will give you one simple, straightforward example. The train car production.

Train production is a very, very rare example of a Russian machinery industry that survived through the post-Soviet collapse. Of course, it contracted. Of course, it suffered losses. Still, it made it through, while most of the Soviet machinery sector was simply wiped out.

The year 2003. You a private investor who just bought an old Soviet train car plant. There's a positive surprise. The plant you have purchased is actually making trains, and selling them, for money. Unbelievable.

(As I said, it was not the case for most Soviet machinery plants)

In a heavily railroad centric country, the rolling stock producers had more or less guaranteed demand on the entire 1,520s mm gauge space (red). Demand that could not be that easily satisfied by competitors from the 1,435 mm countries (black), such as China.

So, they survived.

So, you bought a plant. And the plant is making trains. And these trains can roll (& sell). Cool.

The problem, however, is that you, as an investor, have very limited understanding of how your plant works. Honestly, you have little idea of what does your plant even do, exactly.

Like how would you even know, what is your plant is doing to make the rolling stock roll? What are all the workers, technologists, engineers doing exactly?

In theory, you could scroll through the technical documentation. In practice, it sheds very limited light on that.

In theory, the entire production process must be described on the technological cards, step by step.

In practice, you find that to not be the case.

First, some of the technical documentation is simply false. Sometimes, it describes the production processes as they used to work years and years ago (and were never updated ever since). Sometimes, it describes them as they might have never ever worked in the first place.

Much more often, it is cryptic. What you have is the laconic notes your engineers, technicians, workers made for themselves. They can get it. No outsider, including the owner, can.

Imagine deciphering the hieroglyphs. Now your task can be way more difficult.

Furthermore, all the documentation you have, whether it is accurate, inaccurate or somewhere in between, whether it decipherable, indecipherable or somewhere in between, is very inexhaustive.

Few pieces of a puzzle at best. Not enough to make a picture.

Add to that, that it is all very difficult to navigate through. It is not impossible that the specific piece of information you are looking for, is perfectly documented. You are just not going to find it.

Long story short, the functioning of your plant is not codified clearly, exhaustively, accurately and in a sufficiently structured way for an outsider to understand it.

It's a black box to pretty much everyone, including the new owners and the new management.

Still, your plant makes the rolling stock that actually rolls. You can observe it rolling. Which means that your engineers, technologists, workers all collectively hold the knowledge of how to make a rolling train car.

It's just their knowledge is not really codified.

When they document the knowledge, they primarily document it for themselves. In practice, that means they own this knowledge. Documentation (if it exists) requires a key, and only the insiders would have it.

If a key employee retires or dies without training a replacement, some pieces of knowledge may very well be lost. An outsider (like a fresh graduate, or a hire from another structure) will not be able to reconstruct what is lost based on the existing papers

As the critical knowledge does not exist anywhere except for the employee's brains, some of them hold a significant leverage. This includes the top technical workers, such as the Chief Design Engineer and the Chief Technologist

It's all in their heads, or much of it

Now why would anything of that be a problem in the eyes of investors?

First, the lack of transparency. Owners want to see it all through to optimize it all financially

(While their employees may not want to)

Second, the irreplaceability of key knowledge holders. If irreplaceable, they have too much power. The owners would like to see everyone replaceable.

(Which their employees certainly don't want to)

Third, the lack of the overall manageability, especially by the outsiders.

(Which may very well be preferable from the employee's perspective)

To put it simply, the old, esoteric organization of knowledge favors insiders, especially the key technical employees. And vice versa, codifying it in the most structured, transparent and exoteric way possible favors outsiders, especially the investors and professional managers.

There is a clear and obvious conflict of interests here. The class conflict, I would say. This may be the key reason why the exoterisation of knowledge can never grow "naturally", from below. It can only be imposed from above, breaking the opposition of qualified labor.

The end