The Role of Design Complexity in Technology Improvement

TL;DR

This paper models how the complexity of a technology's design influences the rate of performance improvement, revealing a power-law relationship between cost reduction and innovation attempts, with complexity slowing progress.

Contribution

It introduces a simple, analytically tractable model linking design complexity and technological progress, highlighting the impact of component interactions and bottlenecks on improvement rates.

Findings

Cost reduction follows a power-law with respect to innovation attempts.

Higher design complexity results in slower improvement rates.

Bottlenecks can cause periods of stagnation and sudden progress.

Abstract

We study a simple model for the evolution of the cost (or more generally the performance) of a technology or production process. The technology can be decomposed into $n$ components, each of which interacts with a cluster of $d-1$ other, dependent components. Innovation occurs through a series of trial-and-error events, each of which consists of randomly changing the cost of each component in a cluster, and accepting the changes only if the total cost of the entire cluster is lowered. We show that the relationship between the cost of the whole technology and the number of innovation attempts is asymptotically a power law, matching the functional form often observed for empirical data. The exponent $\alpha$ of the power law depends on the intrinsic difficulty of finding better components, and on what we term the {\it design complexity}: The more complex the design, the slower the rate of improvement. Letting $d$ as defined above be the connectivity, in the special case in which the connectivity is constant, the design complexity is simply the connectivity. When the connectivity varies, bottlenecks can arise in which a few components limit progress. In this case the design complexity is more complicated, depending on the details of the design. The number of bottlenecks also determines whether progress is steady, or whether there are periods of stasis punctuated by occasional large changes. Our model connects the engineering properties of a design to historical studies of technology improvement.