Network Formation in a Society with Fragmented Knowledge and Awareness

In modern society knowledge is extremely fragmented and production typically requires the linking of knowledge of many specialists. To study the incentives for linking knowledge across society, we combine a model of knowledge and awareness with a model of strategic network formation. We highlight the role of specialists and generalists. Specialization allows for “deep” knowledge that is potentially beneficial for society. Yet specialists with their “tunnel” view often fail to realize the benefit of linking knowledge across specialists. In contrast, generalists although they “know nothing” see many connections. They are in the center of resulting social networks and “talk a lot” despite having just superficial knowledge. When structuring hierarchies in a social network, it is efficient to put generalists in “positions of power” where they can impose communication on specialists. Finally, the generalist will emerge as an entrepreneur by employing specialists and retaining the residual profit.