GLOBAL ECONOMIC VIEWPOINT
NOBEL LAUREATES PLUS
Alvin Toffler, the futurist, is author with his wife, Heidi, of a new book, "Revolutionary Wealth: How It Will Be Created and How It Will Change Our Lives." Their previous books have included the groundbreaking "Future Shock" and "The Third Wave." He spoke with Nathan Gardels recently in Los Angeles on a variety of topics included in the new work.
By Alvin Toffler
Nathan Gardels: iPods, cloning, outsourcing, Googling. All these disparate changes and breakthroughs are not only transforming our lives; you argue they are converging into “a new wealth system.”
How is this new system a departure from the economics we're familiar with?
Alvin Toffler: In two ways: First, knowledge is now the key driver of wealth creation, and, second, the radical fusion of production and consumption will lead to the explosion of the “non-money” economy.
Conventional economics is about scarcity. But knowledge is essentially inexhaustible. If you grow rice in a paddy, I can't grow rice in the same paddy at the same time. If you use a machine tool, I can't use it at the same time. But we can both use the same knowledge at the same time — and not deplete it. No matter how many people use arithmetic, it doesn't get used up. In fact, the more people use knowledge together, the more new knowledge they tend to create.
It's more portable than any other product. It can be compressed into symbols and abstractions. It tends to leak and is hard to protect. It's non-linear, so that tiny insights can yield huge outputs. Above all, it's intangible.
Intangible factors have always been entwined with tangible assets. As Hernando de Soto, for example, points out in “The Mystery of Capital,” a piece of land is not “property” in any tangible way unless its ownership is enforced by an “intangible” legal title or by “intangible” social norms that secure its ownership. These intangibles are like the protective skin around an orange.
Today, companies like Google are all orange peel. They have no tangible core. Yet they are worth billions! In advanced economies the tangible property base of capitalism is being outpaced by the intangibles.
Just consider the dramatic development of the “outside brain” -- data banks, connectivity, word searches, genetic mapping or the World Wide Web -- that radically expands our capacity and possibilities in almost every realm. And the knowledge at our disposal will only continue to grow. Everything a person remembers in a 70-year lifespan can be stored digitally on a 6-gigabyte chip. And today we have 400 gigabytes in a personal computer!
At the same time, it is becoming harder and harder to protect many intangible assets — harder, for example, to enforce intellectual property rights.
Gardels: What do you mean by the non-money economy — and why do you say it is going to explode?
Toffler: When we work at a job, when we buy and sell, when we invest, when we use our credit or debit cards,we are operating inside the money economy.
But that doesn't end the list of things we do with our lives. We raise children. We care for our elders. We fix a leaky faucet. We help a friend paint the living room. We cook. We clean up our house. We garden. We jump-start the car battery. The do-it-yourself activities might be called prosuming, because we are both the producer and consumer.
We sometimes pay people to do many of these things for us. When we do, we're operating in the money economy, and the activities are seen by economists as creating value in the gross domestic product. If, however, we choose to do these things ourselves, or if poverty requires us to do so, our efforts would not be added to GDP and would not be counted as having added any value to the economy — i.e., the money economy.
The non-money economymay well create as much value as the money economy because a myriad of unpaid activities feed “free lunch” into the money economy. In effect, they subsidize it.
Just stop for a minute to think about Linux open-source software and the huge impact it's had all around the world. Here is a product initially produced by Linus Torvalds without pay, almost as a hobby, which then attracted large numbers of unpaid programmers to adapt, adjust and expand it, encouraging still others to volunteer time producing other kinds of software. This prosumer activity in the non-money economy has transformed the way software products in the money economy are produced.
Gardels: Prosuming has been with us a long time. What’s so new?
Toffler: What’s new is that cheap new technologiesare shifting activities from the money economy into the non-money economy. More and more companies in the money economy are externalizing labor by requiring customers to perform tasks previously done for them by employees. We use ATMs and punch in the data ourselves — and tellers get laid off. That is prosuming.
We used to send film off to Kodak to be developed and printed. Today we perform those functions ourselves in the palms of our hands. We take our own diabetes readings. We produce our own digital movies and music CDs.
All this is just the beginning. We are going to see an explosion of unpaid work. Soon there will be 1 billion people over 60. They will be using new technologies, from self-diagnosis to toilet urinalysis, to do for themselves what doctors used to do.
All this will make the prosumers far more important. We'll buy technology in themoney economy and use it in the non-money economy that, in turn, will feed back into the creation of new value in the money economy. Just wait until desktop manufacturing — still in its infancy — puts the equivalent of a small factory in everyone's home.
OUTSOURCING AND THE THIRD JOB
Gardels: Doesn't this externalization of labor from the producer to the consumer also put new costs and burdens on the consumer?
Toffler: We call this externalization of labor the “third job.” Your first job is the one you get paid for when you go to your office or factory and get a paycheck every week or month. Your second job is taking care of yourself, your kids, your parents or your home, cleaning up or doing the dishes.
The third job is the work being “outsourced” by the producer not to India or the Philippines, but to you, the consumer, from the friendly companies all around you.
A few years ago, if I wanted to find out what happened to a FedEx or DHL package, I'd call some number in Memphis or Frankfurt or Tokyo to talk to a clerk. Now, I'm my own clerk. I go to my computer, punch in the tracking number and trace the package myself. I'm doing what the clerk used to do and was paid for. The same is true when we use an ATM machine. We do what the teller used to do.
So, in this new economy, our “third job” is the work we do for all these companies, but don't get paid for! Clearly, this adds to our daily stress and is yet another reason we always seem to have less and less disposable time.
Gardels: And just by making transactions in cyberspace, we are providing valuable personal information that marketing companies used to have to find out through research and had to pay for. Every time you do a Google search, it is tracked and noted so that advertisers can match their product to your interests for future marketing.
Toffler: Absolutely, this is another aspect of the “third job.” In an information-based system, everything is out there. Some consumer advocates are already starting to demand payment for the sale and use of their personal information, whether revealed by their purchases at the supermarket or a visit to a Web site.
THE CLASH OF SPEEDS
Gardels: How is the knowledge-based system affecting what you call in the book the “deep fundamentals” of wealth creation — time, for example?
Toffler: In two key ways. First, we are leaving behind the impersonal, collective time of standardized mass industrial society where everyone works from 9 to 5, going to the job and coming home at the same time. That time is homogenous.
Now we are seeing the advent of personalized, irregular time. New technology reduces the costs of variety that would have undermined mass assembly. It enables niche production and thereby customization and diversification in how we schedule our daily lives, both at work and at play. Twenty-first century time will thus be 24/7, flexible time.
Second, when you accelerate changes in technology and society, by definition you accelerate the rate at which knowledge becomes obsolete. What we “know” is undone almost on a daily basis, whether because we've discovered a new planet or uncovered the chromosome linked to hypertension. This acceleration can transform current knowledge into what we call “obsoledge” — outdated information — overnight. Time and the rapid decay of knowledge are very much related in an information society.
In the past, both truths and untruths endured for centuries, if not millennia, without challenge. Now, much of our decision-making is based on facts that could change tomorrow or are already obsolete.
Gardels: What kind of problems does this diversification and acceleration of time produce?
Toffler: One of the key problems in the world today is de-synchronization — “the clash of speeds” between the old, lumbering mass system and the new diversity, flexibility and acceleration demanded of institutions built on knowledge. They are out of sync.
One of the biggest clashes is with standardized education, which was originally designed to turn the children of farmers into industrial workers comfortable with the requirements and rhythms of a mass society. Education is among the slowest institutions to adapt to the new wealth system.
If you were a cop at the side of the road monitoring the speed of the cars going by, you would clock the car of business, which is always changing rapidly under competitive pressures, at 100 miles per hour. But the car of education, which is supposedly preparing our young for the future, is only going 10 mph. You cannot have a successful economy with that degree of de-synchronization.
Gardels: There is not only institutional inertia, but active political opposition to this new regime of speed, flexibility and diversity. Look at the French students, who have been demonstrating against a “precarious” working life they fear a new labor law would introduce.
Toffler: What we are seeing today on the streets of Paris is “wave conflict” — the conflict that arises from the shift out of a “second wave” mass society to a “third wave’ knowledge society; it is a battle between those who benefit from the old system and those who would benefit from the new.
But for Europe, this is only a symptom of a larger problem. While the revolutionary wealth system is all about decentralization, niches, flexibility and devolution to networked and distributed power, Europe's leaders are trying to build a megastate headquartered in the gray ministries of Brussels.
Europeans have very slow-moving institutions and societies. And they are proud of that fact. That is fine, but there will be a price. The large states — France, Germany, Italy — are falling into relative decline behind quick-paced Americans and Asians who are thrust into the future not only by business competition, but also by the lure of the new opportunities created by the knowledge economy. It is the small states— Finland or Ireland,for example — that are in sync with the revolution nowunder way.
Gardels: According to Moore's Law — Silicon Valley's rule of thumb — the number of transistors per square inch of integrated circuits will double every 12-18 months for the next two decades, at least. This ever-larger capacity enables ever-faster speed for computer calculations.
What is the impetus behind this quest for speed that drives the information revolution? Why is it better to embrace this path than, say, the slow food movement in Italy?
Toffler: First, competition. Second, the allure of diversification within your own life. The faster you can do things, the more diverse things you can do. In mass society, large parts of life are repetitious. Revolutionary wealth brings with it diversity and a wide range of potentials for the individual.
Gardels: It seems the biggest “clash of speeds” is not only between the West hurtling into this accelerating wealth system and those who want to return to 12th century Islam, but the clash with all religions. All religions emphasize equilibrium, pace, patience, withdrawal and meditation. “Haste is the devil's work,” the Prophet Mohammed warned.
Toffler: Well, there is certainly a clash with 12th century Islamists. But the rules of most religions were laid down in times when the spatial reach of experience was small — people traveled on average just 15 miles from their village during their lifetimes — and the pace of social, economic and technological change was imperceptibly slow.
These religions claim that they have found the right pace to live one's life for all time. But what makes it the right pace? The human race has had a better shot at a decent and longer life the more it has sped up. The quickened pace of the industrial revolution created an immeasurably better life for most people than the peasant life before it, or the pre-agricultural life before that.
But the more relevant point here is that the knowledge-based wealth system will not impose one homogenous time on everyone. On the contrary, it creates a diversity of possibilities for everyone to set their own pace. Some may want to rush around the planet or cyberspace getting money-rich; others may want to lie on the beach all day or have long meals with their family and friends. They may want to do both at different times. One slogan for this new era might well be, “Each to his own tempo.” Above all, the emerging new civilization is a civilization of choice.
WEALTH CREATED EVERYWHERE, NOWHERE AND OUT THERE
Gardels: What about changes in space and spatial relations, another of the deep fundamentals included in your book? Today the new venues of wealth are everywhere — globalization, outsourcing and “the flat earth” are part of the lingo, but also, as you suggest, are “nowhere” and out there — outer space.
Toffler: By now it is widely understood that the diffusion of technology, capital and skills means wealth can be created everywhere on the globe. Comparative advantage is now more about skill sets than, in most cases, natural resources or capital assets. In the U.S., the state of Indiana used to try to attract business by bragging about its limestone deposits and non-union labor; now it advertises its universities and cultural amenities.
Add to this the “nowhere” — cyberspace. Of course eBay, Amazon.com and others have their servers located in geographic space somewhere, but they make their money in the intangible zone of electronic transfers. Kenichi Ohmae, the Japanese management expert, calls cyberspace “the new continent” where entrepreneurial explorers are seeking — and making— their fortunes.
Few ever think, however, about the new wealth-creating zone in outer space —12,000 miles above planet Earth. This development may well go down as the greatest turning point in this historical moment.
Global positioning satellites(GPS) today are key to synchronizing precision time and data streams for everything from a cell-phone call to an ATM withdrawal. They allow us to precisely track packages or shipping containers as they make their way from the factory to the market — something critical for just-in-time productivity, but also for security. Soon, GPS will be the central system that allows air-traffic controllers to manage ever more congested skies full of planes that carry us to business conferences or vacations. Weather-tracking satellites can increase agricultural productivity and give early warning of impending disaster through more accurate forecasting.
In time, these satellites will be available to all, spreading the wealth. Algeria, Pakistan and Nigeria have already bought microsatellites weighing little more than 100pounds, making them inexpensive to launch.
Gardels: How will all this affect us in our personal lives;in particular, how will it change the family?
Toffler: The family has been evolving for the past century at historically unprecedented speeds. In pre-industrial times, most families were multigenerational and had many responsibilities. They were the school for the child and the hospital for the elderly;they were the place of work. With the industrial revolution, the family shrunk down to the one-generation nuclear family; kids went to school, fathers went to the factory, the sick went to hospitals and the grandparents lived elsewhere. A family's previous functions were stripped away.
Now, we see not the death of the family, but the diversification of family formats in sync with the diversifying wealth system. We are on the verge of accepting gay civil unions, if not marriage. There are single mothers. Unmarried couples. Married couples with no kids. There are fathers and mothers in serial marriages. Monogamy won't go away, but polygamy may gain wider acceptance.
Also, many functions will return to the home. Home schooling is already on the rise in the United States. And most kids in America didn't learn to use a computer in school, but at home. Increasingly, parents will work at home, at least part-time. Prosuming will bring much health care back home from the hospital.
THE END OF THE JOB
Gardels: Won't work itself be transformed?
Toffler: Yes, and not only through prosuming. We may see the end of the job, as such. “The job” has not always been there. The regularized relationship between a worker and an employer, usually based on the number of hours spent doing some task for a regular paycheck, is a recent historical invention. Most of our ancestors never had a “job.” You had slaves or indentured servants who largely worked according to the seasons, not the clock.
What we are seeing now is a shift away from formalized “job” relationships to individualized agreements. It will be non-physical “piece work” or project work for which you or a team ispaid. You may come together as a team for one project, disperse, and regroup with others for another project. You may work together as a family at home, just as before the industrial revolution. Like the family, the work experience will be highly diversified, both in what you do and where you do it.
CHINA’S TWO-TRACK STRATEGY
Gardels: Most assumptions about China's future are based on a linear projection of its current rapid growth. Do you see it that way?
Toffler: Straight-line extrapolation is the surest path to being wrong. This is particularly true of China. Sometime in the next 20 years, the odds are strong that there will be significant social upheaval that will throw all such projections into question. Certainly, the new regime in China under President Hu Jintao has taken the 74,000 officially acknowledged uprisings last year alone as a warning sign that corruption, inequality and environmental issues must be dealt with sooner rather than later.
The Chinese leadership, at the same time, fully understands the need to move ahead toward a third-wave knowledge-based system if they are going to succeed. In fact, they have revolutionized the sequential way we used to think about development — first agriculture, then industry, then high technology. The Chinese are moving ahead by simultaneously developing both an industrial and information society.
Yes, they are becoming the “factory of the world” with their cheap labor, but they are not going to wait to become an industrial society before they move into the third wave.
This two-track strategy has already resulted in one of the most advanced telecommunications infrastructures in the world. The Chinese have invested hugely in research and development, graduating hundreds of thousands of engineers yearly. In short, Chinese leaders are keenly aware that acceleration itself is a critical weapon of development. To win, they have to stay ahead of the game. India has caught on to this twin-track development strategy and is following suit.
JAPAN NEEDS TO LOOSEN UP
Gardels: Finally, we once spoke of Japan in the glowing terms we now speak of China. What happened?
Toffler: Japan has some very big decisions to make. The revolutionary wealth system is not just a technical or economic phenomenon, but social and cultural as well. It is civilizational change.
The technology is the easy part, which Japan has mastered. The hard part is to make consonant changes in institutions and social structure to bring it all into sync. This is where Japan, with its notorious social and cultural rigidity, has fallen down — even though it has mastered the technology. Everything from the lifetime employment of the “salaryman” to the subjugated role of women has slowed it down while others — especially China — speed on ahead.
Japan's main challenge is how to loosen up. They are doing it. But can they do it in time?
(c) 2006, Global Viewpoint
Distributed by Tribune Media Services, INC. (Distributed APRIL 17, 2006)