Classifying Ignorance and Information Asymmetry

Brad Appleton has an information rich article entitled "The Trouble with Tracing: Traceability Dissected". In the article, Appleton cites the "Five Orders of Ignorance", which are as follows:

• Order Ignorance (0OI)—Lack of Ignorance
  I have Zeroth Order Ignorance (0OI) when I know something and can demonstrate my lack of ignorance in some tangible form, such as by building a system that satisfies the user.
• Order Ignorance (1OI)—Lack of Knowledge
  I have First Order Ignorance (1OI) when I don’t know something and I can readily identify that fact.
• Order Ignorance (2OI)—Lack of Awareness
  I have Second Order Ignorance (2OI) when I don’t know that I don’t know something. That is to say, not only am I ignorant of something (I have 1OI), I am unaware of that fact.
• Order Ignorance (3OI)—Lack of Process
  I have Third Order Ignorance (3OI) when I don’t know of a suitably efficient way to find out that I don’t know that I don’t know something. So I am unable to resolve my 2OI.

There are of course other classifications of ignorance. Another one that comes to mind is the 4-types of uncertainty identified by Meyer. Meyer identified these four types as Variation, Forseen Uncertainty, Unforseen Uncertainty and Chaos. The first three types maps to the first three orders of ignorance. The fourth type indicates an even higher order of ignorance. That is, you don't know that the process to find out doesn't even exist!

Now there's this Economic theory that won the Nobel Prize called "Information Asymmetry". That is, if there is a gap between the knowledge of a seller and buy, a seller can sell his product to the buyer at a margin above its true cost.

Now if one can define a rough classification of the order of ignorance, as demonstrated above, then one can conjure up a conjecture as follows:

The transaction cost is lowest when the "order of ignorance" of the two involved parties are adjacent.

Let's work out a couple of examples. It's likely that I can sell you my knowledege if you know you don't have that knowledge. I can still make a sale if you were unaware that what I didn't know even exists (i.e. unable to recognize my incompetence). I can sell you process even if if you didn't know what you wanted and even if you did, I wouldn't know what it is. These are all adjacent orders of ignorance.

Now let's look at the problem for the orders that aren't adjacent. That is for 2OI to 0OI and 3OI to 1OI. In the first case, it's a tough sell if I sold you a solution to a problem that you didn't know existed. In the second case, its equally as frustrating. I can tell you what you don't know, unfortunately I don't know it either. Finally, there's 3OI to OOI, I know what you don't know, but the fact would be you wouldn't give a damn.

JINI, the dynamic distributed environment proposed by Bill Joy has all the attributes of a system that solves a solution that very few are aware that a problem exits. The Web Services concept on the other hand is 2OI, and have sold the SOA process to an audience that was mostly 3OI. Vendors have neem quite succesful selling the idea, unfortunately to the demise of the buyer. The lesson learned here is that, selling solutions to extremely complex problems is a tough sell indeed. Even more ironic, you can still sell something even you knew nothing.