Does Knowledge Matter?

Earnings, Creativity, Learning, and Economic Growth

Beyond the prospect of a looming exam, it’s hard to see the significance of many facts we learn throughout our lives, or what bearing they can have on us as adults. Knowing the names of the seven major tectonic plates or the fate that befell Henry VIII’s wives may leave us in a good position in front of a pub quiz machine, but does it really improve our quality of life, enhance our skill set or make us more employable? The answer to this question may indeed be yes — there could be material value in pursuing knowledge for knowledge’s own sake. William Poundstone’s Head in the Cloud highlighted that knowledgeable people, who scored highly on trivia quizzes, earn more than their less knowledgeable counterparts, even after controlling for the different levels of education between the two groups. But why is this? And how can seemingly trivial knowledge be so important? In answering these questions, we can gain some valuable insight from neuroscience, psychology, and economics.

“Knowledge, both general and specific makes learning and remembering easier and therefore individuals with knowledge have a significant edge.” Bors & McLeod (1996)

In 1991, a group of psychologists, led by Patrick Kyllonen, found that the amount of knowledge a person already possessed predicted how fast they learned new information. People with larger pools of knowledge learned faster and retained information better than people with smaller pools of knowledge. When learning, your brain makes inferences in order to fill in any gaps left by authors and these inferences rely on your existing network of knowledge. When Chiesi & Spilich (1979) and Spilich et al (1979) explored the impact of knowledge on Baseball spectators, they found that those with larger pools of knowledge made more plausible inferences about the game and recalled more of the key events. The principles behind this study, however, stretch far beyond the ballpark and have been readily applied to the classroom. Another study, by Recht & Leslie (1988), found that when trying to improve understanding of a text, increasing students’ background knowledge of a subject was more effective than improving students’ overall reading ability. So if you were to learn about neuroscience from a standing start, building some awareness from a popular science book is probably a good idea, building a core pool of knowledge, which can then enable you to graduate to more complex material further down the line.

“There are many ways to rearrange the material world & some of these rearranged configurations may prove to be far more valuable than the individual elements alone.” (Paul Romer, 1994)

In Economics, it was Martin Weitzman who proposed the theory of Recombinant Economic Growth. He theorised that new ideas come about by combining existing ideas and processes: for example, Uber combines Smartphones, GPS, and Taxis; Spotify combines Digital Music with algorithms and a subscription model; and Tinder combines a simple user interface with online dating profiles. Those with large pools of knowledge are likely to have awareness of more products, concepts, and systems, leaving them well-positioned to come up with Weitzman’s recombinant innovations. In Paul Romer’s words, “there are many ways to rearrange the material world and some of these rearranged configurations may prove to be far more valuable than the individual elements alone.” As these ideas combine, then, economic growth would continue to roll on in a positive feedback loop, or so the theory goes. So instilling deep pools of knowledge, could enable people to create the products and systems that can improve the world for everyone.

William Poundstone found that “easy” facts — i.e. facts that displayed a superficial understanding of a topic — predicted an even larger income gap than “hard” facts — i.e. facts that required a deep knowledge of a topic. This implies that there is some value to being a “generalist”, who has some knowledge of many different domains. This attribute makes even more sense if you believe that the best innovations come through combining concepts that span different industries, disciplines and cultures.

“Our ideas are influenced by what we learn from the world around us. ”

Focusing on ideas and creativity at the individual level, Adam Grant, the author of Originals, argues that “our ideas are influenced by what we learn from the world around us.” A 2015 study, led by Frederic Godart found that exposure to different cultures, time spent working overseas and the degree of cultural immersion were all predictive of the success of fashion designers. So knowing more about different cultures and geographies can improve our creative instincts, our productivity and our sense of style, all at the same time. These arguments imply that creativity is not some mysterious innate “power”, but instead a synthesis of experiences and knowledge. Dean Simonton (2015) found that what really distinguished “Originals”, defined in Grant’s book as “persons of fresh initiative or inventive capacity”, was not the quality of their ideas, but rather the quantity. Creativity is at least in part, a numbers game. Not every single innovation out of Amazon or Google is a resounding success, but the volume of ideas and initiatives certainly skews the odds in their favour.

Much like the brain, the value of knowledge appears to come from its network and connections, rather than the components of knowledge themselves. Although facts or concepts can appear trivial at first glance, they can coalesce into a broader network that can accelerate our learning, create more fashionable clothing and perhaps even drive economic growth. So, the next time you are thinking, “is there really any point in knowing this?”The answer is quite probably, yes. In isolation, concepts and facts may seem tangential, but as part of a network, their true value emerges.