Monday, March 08, 2010

Reading :: Revolutionary Wealth

Revolutionary Wealth: How it will be created and how it will change our lives
By Alvin and Heidi Toffler

Alvin Toffler has been open, particularly in the preface to Powershift, about the fact that his wife Heidi is his coauthor even on the books that bear only his name. For whatever reason, after Powershift, her name started appearing on spines as well as in prefaces. The line of reasoning, however, is still the same - their 2006 book Revolutionary Wealth works within the framework established in previous books dating all the way back to 1970's Future Shock. But, like the other books, it extends that framework to new areas - here, to the question of wealth creation in the 21st century.

The Tofflers acknowledge that new technologies will continue to produce wealth. But they argue that "to forecast the future of wealth, we also need to look not just at the work we do for money but at the unpaid work we all do as 'prosumers'" - that is, work we do as we consume. This blog is one example - but others include Amazon and YouTube reviews, amateur astronomy, and tweeting about speed traps (my examples, not theirs). "Because prosuming is set to explode, the future of the money economy can no longer be understood, let alone forecast, apart from that of the prosumer economy. The two, in fact, are inseparable. Together they form a wealth system" (p.5). So far the Tofflers sound a lot like others who have written about open source, wikis, and other aspects of the new economy. They further postulate that since the US is in the forefront of this shift to a new economy, perhaps that change is at the root of rising anti-Americanism (p.6). (Side note: Phillip Bobbitt argues in The Shield of Achilles, which I will soon review, that the US is leading a move from nation-states to market-states. The argument is somewhat related, but not the same.) They invoke Robert Reich in noting the changes afoot: redefined disciplines, loss of work/life boundaries, porous organizations, transdisciplinarity, and mashups (p.8).

So what do they mean by wealth? “Wealth, in its most general sense, is anything that fulfills needs or wants. And a wealth system is the way wealth is created, whether as money or not” (p.19). They relate wealth to the “waves” described in The Third Wave: The first wealth system was agriculture (p.20; glossed as “growing things” on p.23), the second was industrialism (p.21; glossed as “making things” on p.23), and the third, emerging one is knowledge (p.22; glossed as “serving, thinking, knowing, and experiencing” on p.23). A wealth system, they argue, needs a host society and culture – but these are shaken when two wealth systems collide (p.23).

What goes into a wealth system? The Tofflers propose that there are many “fundamentals,” but only a few “deep fundamentals,” that is, “some fundamentals [that] are so vital to wealth creation that they matter in all economies, at all stages of development, in all cultures and every civilization, past or present” (p.26). These include work (not the same as a job) (p.27) and division of labor (p.27). They also include time, space, and knowledge; these three are covered in their own sections later in the book.

Time, for instance, is covered in Ch.5-8. The Tofflers argue that industrial-age bureaucracies are slowing the move to the new wealth system (p.31). In an open system, it’s impossible to totally synchronize all parts. So what happens when one institution leaves the others behind? Using the analogy of cars on the road, the Tofflers evaluate business (100 mph), civil society (including NGOs) (90 mph), the family (60 mph), labor unions (30 mph), government bureaucratic and regulatory agencies (25 mph), schools (10 mph), global governance (5 mph), political structure in rich countries (3 mph), and law (1 mph) (pp.32-39). We must, they conclude, invent new-style institutions that can keep up and synchronize better (p.40).

Part of that shift involves thinking of labor in new ways. The measure of labor productivity as output per hour, they argue, is a Second Wave measure (p.53). But in a Third Wave economy, each interval of time is worth more than the last (p.55). We’re moving toward customized, personalized time (p.56): a shift to continuous-flow operations that enable individualized consumption schedules, leading in turn to irregular time, demassified time (p.59). (Think about the choice of, say, recording American Idol on Tivo, then tuning in 45 minutes late so that you can fast forward through Kara’s comments.) The interrelated shifts of “acceleration, irregularization, and continuous flow” are changing the landscape of wealth creation, they argue, and “push us farther toward ad-hocracy – the shift away from permanent or long-lasting organizational structures in business to one-shot, short-term organizational formats” (pp.59-60).

Enough on time; let’s talk about space. The Tofflers argue that “wealth, as never before, is on the move” (p.63). Digitalization, for instance, doesn’t transcend space, but it does speed up and facilitate wealth creation (p.66). Partially for that reason, when outsourcing happens, it tends to go to places with political stability and infrastructure as well as labor costs (p.69).

Knowledge is the third deep fundamental. Unlike agriculture and industry, knowledge can be used by many simultaneously (p.99). Knowledge is non-rival; intangible; nonlinear; relational; mates with other knowledge; more profitable than any other product; compressible into symbols or abstractions; storable in smaller and smaller spaces; explicit or implicit; and hard to bottle up (pp.100-101). Increasingly, knowledge becomes part of every job. Learning becomes continual-flow and knowledge has a limited shelf life (p.111). Unfortunately, the Tofflers don’t say much on learning; more unfortunately, they detour into a fairly thin attack on postmodernism in Ch.20, apparently not having read much Latour.

In the next section, the Tofflers tackle prosuming, the invisible economy (p.152). One example is that of the patient who comes to the doctor armed with Internet research, influenced by pop culture and commercials, and full of “take charge” attitude (p.165). But prosuming also gives us a competitive advantage in hypercompetition, which has fueled a shift from sequential to simultaneous activity (p.168). Prosuming increases “producivity,” that is, it increases the growth of the money economy (p.194). Their example is that of the PC gurus who informally help new users get up to speed. Prosumers perform unpaid work; buy capital goods; lend their tools and capital to users in the money economy; improve the housing stock; “marketize” products, services, skills; “demarketize” the same; create value as volunteers; provide valuable free information to for-profit companies; increase the power of consumers; accelerate innovation; create and disseminate knowledge rapidly; and raise children to work in the labor force (pp.199-201). Personally, I think the Tofflers are trying to commoditize everything here, including child-rearing, but I suppose they are trying to look at all factors of wealth creation.

Let’s skip a bit. The Tofflers tread ground that should be familiar to readers of this blog, arguing that capitalism’s assumption of limited supply is challenged by endlessly reproducible intangibles (p.256); suggesting, like Alinsky and Drucker, that stockholders are the realization of the people owning the means of production (pp.259-260); arguing that customized products result in customized prices (p.268); and reviewing the many forms of para-money that are springing up as alternatives to money (p.278). They predict pay-by-the-minute work (see (p.281).

Toward the end of the book, in Ch.44-48, they look at the prospects and dangers for various parts of the globe (China, Japan, Europe, US, misc.). The picture is mixed. They end with an epilogue in which they question the notion of counting jobs – a notion that seems meaningless given the prosumer work, shared jobs, and other changes in work (p.383). They also have other very Toffleresque thoughts about the future, most of which you can imagine if you’ve read their other work. I don’t mean to sound dismissive – the Tofflers’ work is of such scope and within such an established framework that they have been able to make some solid arguments and predictions. But by the same coin, these arguments and predictions are in themselves relatively predictable.

So what’s the takeaway? The book is solid, and provides some characteristically systematic thinking about what various changes mean for wealth creation in the future. I’m not sure I’d put it at the top of my reading list, but it’s worth reading.

Sunday, March 07, 2010

Reading :: Powershift

Powershift: Knowledge, Wealth, and Violence at the Edge of the 21st Century
By Alvin Toffler

Powershift is the 1990 followup to 1970's Future Shock and 1980's The Third Wave. As Toffler tells us in the preface, whereas Future Shock looked at the process of change and The Third Wave took up the directions of change, "Powershift deals with the control of changes still to come" (p.xix). The three books form a trilogy that attempts to outline what was then the future: the impending 21st century.

And like the other parts of this trilogy, Powershift sometimes seems quite prescient about this future. For instance, Toffler argues that "closely held specialists' knowledge is slipping out of control and reaching ordinary citizens. Similarly, inside major corporations, employees are winning access to knowledge once monopolized by management. And as knowledge is redistributed, so, too, is the power based on it" (p.8). We might think of several 21st century examples here: Rathergate comes to mind, but so does WebMD; the Iranian protests coordinated in part via Twitter and Facebook; and Climategate. If some of these examples make you want to object that specialists' knowledge is sometimes twisted and misconstrued, yes, you're beginning to see a problem with what Toffler is describing: when knowledge escapes its customary boundaries, it's not simply a wayward package, it's interpreted. Multiply the number of interpreters and the number of backgrounds from which they draw, and you don't just get redistributed power, you also get ambiguities and distrust. In any case, it's certainly a "powershift."

In The Third Wave, Toffler argued that the world had undergone three major waves of change based on three objects of human work: agriculture, industry, and knowledge. Here, he argues that each of these waves is associated with a type of power: violence (force), wealth (cash), and knowledge (culture) (p.12). These are additive: the first-wave source of power, violence, has never gone out of style, but it's now layered under the other two sources (p.16). Toffler specifies the definition of power for purposes of future discussion: "purposeful power over people. ... the use of violence, wealth, and knowledge (in the broadest sense) to make people perform in a given way" (p.14). Unlike the other two sources, though, knowledge is more flexible, not finite, and simultaneously usable by many; therefore, knowledge is the most "democratic" source of power (p.19). It's also the highest quality source of power, he argues, compared to violence (low-quality) and wealth (medium-quality) (p.41). Indeed, wealth in particular is undergoing a transformation due to knowledge: the investor (capitalist) is alienated from the source of her wealth (p.59; cf. Drucker in Post-Capitalist Society). And the finite character of capital, he says, is over: something that explodes classical and Marxist assumptions about capital (p.59; cf. Zuboff & Maxmin in The Support Economy).

Toffler also makes the now-familiar argument that "skills are now so varied and fast-changing that workers can't be interchanged as easily or cheaply as in the past" (p.71). All work now has knowledge work and service work components (p.73).

Later, Toffler notes that once, the manufacturer stood between the retailer and consumer, controlling information to both (p.93). But the UPC shifted information control to the retailer by allowing them to examine the many dynamics of retail (from shelf space to placement) at great speed and scale (p.95). More recently, customers have begun paying partially in data (think loyalty cards), data that further accrues to the retailers (p.97). As Toffler says a little later in the book - sounding exactly like Drucker in Post-Capitalist Society - "it is knowledge about knowledge that counts the most" (p.124).

Let's skip ahead a little. Toffler [was "Drucker", fixed 2010.03.10] argues that superior organization is a strategic weapon, the most important weapon in a Third Wave world (p.161). And this "is what today's attack on bureaucracy is all about" (p.161). He characterizes bureaucracies as having two key features, two routine controls: cubbyholes (held by specialists) and channels (held by managers) (p.162). Cubbyholes are places where "specialized information and personal experience are stored"; and with demassification, organizations have become more complex, meaning that more information is trapped in cubbyholes (p.163). Channels are places where information is interpreted and shared: "in every bureaucracy, information is broken apart horizontally and put back together vertically" (p.168). But a faster pace, with more information, means that these channels are choked (p.168). These two features of the bureaucracy are bottlenecks, and in Toffler's view, they are leading to a crash.

So how might an organization develop if it develops away from a bureaucratic organization? One way is the "flex-firm" of small family businesses based at home (p.176). Toffler argues that "huge firms will become more dependent than in the past on a vast substructure of tiny but high-powered and flexible suppliers" such as flex-firms (p.178). Toffler associates flex-firms with "networks" (p.182) but cautions that many other forms are available.

This brings us to those other organizational forms. Toffler identifies several.
  • "The pulsating organization": organizations such as the US Census Bureau, which "expands and contracts in a regular rhythm" (p.187). He sees ad-hocracies (such as taskforces or project teams) as one-pulse organizations (p.187).
  • "The two-faced organization": a unit that can shift from hierarchical to nonhierarchical command to meet demand (p.188).
  • "The checkerboard organization": Alternating categories of people at each level of a hierarchy, as when a Japanese bank in California "alternates Japanese and Americans at each level of the hierarchy" (p.190).
  • "The commissar organization": Ensuring that each level of a hierarchy has two or more information channels. Toffler likens these to Soviet Army units with political officers, and suggests that they represent CEOs' desparate bids to keep control in a bureaucracy (pp.190-191).
  • "The buro-baronial organization": Feudal organization in large hierarchies (e.g., universities, and to some extent accounting houses and the military). The "barons" feud with each other and form alliances (p.191).
  • "The skunkworks organization": "Here a team is handed a loosely specified problem or goal, given resources, and allowed to operate outside the normal company rules" (p.192). "The skunkwork format is inherently and militantly antibureaucratic" (p.193).
  • "The self-start team": These emerge without formal sanction or organization and "can function only in an atmosphere that gives individuals considerable autonomy" (p.194). Toffler links these to electronic media.
Toffler argues that this high level of diversity requires new styles of leadership (p.194).

Toffler also cautions that the term "networks" has been overused, becoming a panacea (p.195). He sees flex-form as a broader concept that includes networks. And he foresees the atomization of the company into a consortium of independent contractors and free entrepreneurs (p.198).

This new form of work, he argues, involves new organizations and new discipline (p.205). A heavier load of information requires that the knowledge load be distributed through the managerial ranks. Workers have to continually learn, unlearn, and relearn (p.206). And, as Toffler intimated earlier, it becomes harder to replace the individual: training takes longer, and individuals work in teams that must reach some measure of trust and cohesion (p.208). Along these lines, he predicts that the trend of offshoring labor will reverse because speed will become more important than the low expense (p.392) - a prediction that does not seem to have panned out widely.

Given all that, Toffler makes various policy suggestions, most notably an aggressive buildout of national digital infrastructure (p.400).

My thoughts? It's fascinating to read Toffler's books to see how we've developed differently. As in his other books, he's gotten several things right in Powershift. I'm particularly interested in how he's attempted to build a taxonomy of emerging organizational types, although I'm not sure how useful this taxonomy is. I'm also interested in how closely this text sometimes parallels Drucker's Post-Capitalist Society, which was published a few years later. On the other hand, I think Drucker actually underestimates some of the complications of more pervasive digital information, particularly in undermining (in some cases, further undermining) public trust in political, scientific, corporate, and academic institutions. Nevertheless, a fascinating read.