post/interview 3 finale/correction

Thu May 1 09:11:30 MDT 2003

Norman Swan:    It was also a centralist response in a federal situation to
a complicated problem where the market was failing, and it's a very similar
situation in Australia. It's often only the federal government that will
insist on certain standards by the States.

Alvin Toffler:  Well, and what that does however, is homogenise,
standardise, make uniform, and what it is is a straight second-wave
response. And as long as you're running what is essentially an
assembly-line, smokestack, mass manufacturing economy, those tools
sometimes are valuable. But as we become more diverse, the principle of
one-size-fits all becomes what my wife and I frequently say,
one-size-misfits-all. So what we need is to re-think this. Ibelieve that we
cannot solve our social problems, our unemployment problems; the danger of
the further development of an underlcass as the information revolution
progresses, within the framework of conventional economics, whether they're
right-wing or left-wing, whether they're environmentalists or they're not

Norman Swan:    So what would third-wave economics look like?

Alvin Toffler:  The central change that the economists have not yet been
able to get their arms around, is the change in the role of knowledge in
the broadest sense of information and ideas and data, the relationship of
that to making wealth in an economy.

Norman Swan:    Dealing with the Microsoft phenomenon, dealing with the
Intel phenomenon, the large telecommunications companies.

Alvin Toffler:  Yes, but also it's not just that kind of knowledge that's
important in the new economy, it's people who know how to organise.

Norman Swan:    This is the intangible economy that you talk about, which
is what we didn't talk about in the third wave, which is that the assets in
the Industrial Revolution was a huge steel factory, or your shop; it's hard
to actually define what the assets are in Microsoft.

Alvin Toffler: Exactly. In 'The Third Wave' we wrote about the so-called
commanding heights of industry, and that was the slogan of the Labor Party
in Britain at the end of the war. 'We must capture the commanding heights.'
Well the commanding heights they captured are no longer the commanding
heights of industry, they were yesterday's commanding heights. The new
commanding heights are knowledge-based, and that's why you see companies
like Microsoft suddenly emerge out of nowhere and become huge, and the
people who understand this better than the economists are on the one hand
the people who are building these new high tech systems, and also
investors. And that's why investors will value some of the
information-based companies without much in the way of fiscal assets, at
very high multiples. So investors and technological pioneers and the
scientific pioneers actually understand this better than the economists do.

Norman Swan:    But don't the economists say, 'Look, well that's OK, we've
got neoclassical economics, we can go back if we have to, the basic laws of
supply and demand and the fittest wins out in the end'.

Alvin Toffler:  Yes, but they go back to equilibrium theories for a world
in which there's damn little equilibrium. They have defined productivity,
and that's a very important thing. They use the word 'productivity': 'We've
got to do this, or that to improve productivity'. Their concept of
productivity is extremely narrow. They define producitivy in terms of your
participation in the formal, paid-for work economy. There are millions of
people in this society who are productive and do extremely valuable things
for the economy, who never get paid, and the joke I frequently make with
audiences of businesspeople is 'How productive would your workforce be if
it hadn't been toilet trained?'

The point is that somebody out there is raising children and acculturating
them and there are certain sets of values that are being inculcated. These
have an effect on productivity, but the work done mostly by women, is
simply not counted as part of the economy. And that has to change. And as
long as we continue to analyse things in terms of second-wave economics:
just use the word 'economics' because most of it is second-wave, we are not
going to be able to reconceptualise our problems and solve the issues of
unemployment and a growing polarisation in the society.

Norman Swan:    You've been quite critical in the past of one of the more
controversial areas of economics and economic theory in the last few years,
which is that shrinking an organisation is the way to go and have a core
group. Another futurist, Charles Handy, talks about this, where you
interact with outside organisations or individuals who then supply
services. What is your view on that?

Alvin Toffler:  My view is that the second-wave, the Industrial Revolution,
and the second-wave of change in history that it brought, emphasised things
like standardisation, specialisation, centralisation, maximisation of
scale, and if you put them all together in a single organisation, they
create bureaucratisation. And the pyramidal bureaucracy, the big company we
all know that we worked for and it's got a Chairman and a President, and
then it's got a bunch of Vice Presidents, and Assistant Vice Presidents,
all the way on down the line, that this great humungous pyramidal
hierarchal organisation was the dominant way that companies got organised
in the late industrial age.

Well it turns out that they were extremely efficient as long as the
external environment was not continually changing, as long as --

Norman Swan:    You didn't need too much customisation out there.

Alvin Toffler:  You did not need customisation, and you did not have
educated people and you did not need or want educated people. When I worked
in a factory, the last thing in the world they wanted from me was to have a
university education.

Norman Swan:    Because you might come up with an idea?

Alvin Toffler:  I might come up with an idea, and it might interfere with
their predictability. Had they known that I had a university education when
I was working in the factory, I'd never have had that job. But working in a
factory, as my wife and I both did for four or five years, was like a post
graduate education for us. It taught us first of all that people working in
factories are no less intelligent than people who work in white shirts; and
it taught us that although they may have less education and less skills
that are relevant to today's kind of production, and it taught us how the
industrial world actually worked in reality. It also made us very unhappy
with economists who talk about 'a trace of -unemployment is salutary'. Yes,
for whom? And so on.

So we know how that system works, and that system is now, as we see,
diminishing. To sum it up in a simpler phrase: moving from brute force to
brain force, the economy.

Norman Swan:    So you support outsourcing in that sense?

Alvin Toffler:  In the advanced system, what you want is - no one company
can have all the skills it needs. It's not good at everything; companies
are good at some things and not at other things. So instead of having a
single, big pyramid, with orders coming down from on high, a more flexible
model, capable of responding better to rapid change would be to have a
smaller, lighter, less hierarchal, flatter organisation networked with
other organisations who provide counterpart or needed skills or

People think that a bureaucracy is a way you organise people. In fact a
bureaucracy is a way of organising information. In a bureaucracy you have a
vertical structure and a horizontal structure; in the horizontal structure
let's say here you have a marketing department, there you have a
manufacturing department, there you have the engineers, there you have the
financial. So each of those departments or units collects information
relevant to its function. It then is controlled by a gatekeeper, some
person who is the Assistant Assistant-Vice-President of X, Y, Z who will
sit on that information very often because it gives him power. In fact, in
the new high speed economy, where knowledge is vital, people need access to
cross departmental information, diagonal and random information, they need
to know what's going on everywhere, all the time, as needed. And the old
structure where people would lock up bits of information in their
departments, what they did was they broke problems into marketing,
engineering, manufacturing, legal, finance and so forth, but then you had
to have a vertical chain of command. Then you needed a Vice-President, a
Group Manager, etc. etc.; these were the people who took information from
two or three departments down below and synthetised it and then either
moved it up the ladder to the next higher level, or sat on it, as the case
may be.

So what you had was a horizontal structure that fragmented information, and
a vertical structure that synthetised information, and it moved very
slowly. I'll give you a personal example: when I worked in a steel foundry,
I was called a millwright, an archaic term for a mechanic. And if the
assembly line broke down for some reason, Joe the worker was told to tell
Mike, his foreman. Mike would call the supervisor, Jim, and say, 'Jim, Line
No.1 is down.' Jim would phone across the yard to another building, where
he would speak to George, who was the maintenance supervisor who would then
call the maintenance foreman, who would then send me out to fix the thing.
In the meantime, the thing's been sitting there, right? low speed. You can
afford to do that. High speed, you can't afford to do that. Now what
happens is the worker sees it's broken, he calls the maintenance department
directly and speaks to somebody and probably somebody at his own level, and
takes all of those communication links out of the scale, and accelerates
it. So now somebody comes and fixes it right away, in principle.

So we discovered that bureaucracies turn out to be highly inefficient in
moving information around, and it's that information that provides the
value that goes into our products.

Norman Swan:    Just on the topic of outsourcing smaller organisations
which are more flexible, not everybody can live easily in a world of rapid
change where they have to be endlessly flexible, even though their level of
education is extremely high. They actually need an environment where there
is some personal security and humanity. Well a) do you agree, and if you do
agree, how do you put that back into the system?

Alvin Toffler:  I think that it's a lot easier to deal with all of that if
you know who you are and if you have a fair fix on what your values are.

Norman Swan:    As an individual, or as a corporation?

Alvin Toffler:  Well probably both, but I'm talking about individuals now.
I know in my family, because there is a health problem, I know that that is
our primary issue, and I know that our family life is more important than
anything else other than saving life. And I know certain things. So I have,
and others have, different problems and different value systems, and that's
fine. But in order to be able to make decisions at high speed and in great
complexity (and we all face more and more of those decisions) you need to
know what your criteria are. You need to know what you value more than
anything else.

So I would argue that anything that helps you clarify your values, so that
you have a good fix on what they are, is going to help you adapt
personally. Obviously in another sense, obviously getting an education,
getting appropriate skills are very important to finding a part in this new
economy. But I also don't believe that everybody has to be a rocket
scientist. Society needs people who take care of the elderly and who know
how to be compassionate and honest. Society needs people who work in
hospitals; society needs all kinds of skills that are not just cognitive,
they're emotional, they're affectional. You can't run the society on data
and computer screens alone.

Norman Swan:    Speaking of running society, if we are moving to a more
customised, to use your phrase, demassified society, you've got lots of
small groups, which as you say, they form, re-form, create their own
environments, it's going to be very hard to get consensus or a majority for
a democratic government.

Alvin Toffler:  That is true, and I think we see that already. If by
majority you mean an election, and there are two parties and only two
parties, by arithmetic alone one of them's going to have more votes and the
other's going to be a majority. But if you the day after the election, look
not at the election results but at what people are actually doing, and what
they value, you find increasing diversity, and it's very hard to find a
majority on most issues. And therefore we're going to have to
re-conceptualise democracy if we want to maintain democracy.

Norman Swan:    In what way?

Alvin Toffler:  Well, I'm not prepared to give up majority or majority rule
in the absence of something better, and nobody has an easy answer to that
one. And I can remember a wonderful screaming fight my wife and I had about
that issue at 3 o'clock one morning, when we were writing 'The Third Wave':
in a draft we were talking about majority rule, and she pointed out,
correctly, that the way it was written in draft would be completely
misinterpreted in South Africa under the apartheid regime. They said, 'Ah,
majority rule is dead. Wonderful.' they would say. And so we really had to
think that through and reformulate our ideas and did. And when the book
came out in the South African edition, there were five-column headlines in
the papers 'Futurist says majority rule in trouble, but not in South Africa'.

That mass democracy is what we have.

Norman Swan:    You see devolution, decentralisation being the way to go.

Alvin Toffler:  I think that that is clearly part of the way. If you look
at political parties, we still use these obsolete terms, 'right' and
'left'. The left still seems to be hung on more central responses to
problems and has a hard time accepting devolution or shifting budgets from
this national government to the State or provincial governments. But I
think we do have to do that. And I feel that if we don't that those
countries, particularly countries with a large and varied population like
the US, and I can't speak enough for Australia, that countries that do not
devolve power will face more serious secessionist movements, demanding that
devolution, perhaps not in a peaceful way. And I think that we have
incipient secessionist movements in the United States as well, these
militia groups and so on. So I am in favour of getting ahead of the curve,
and devolving many functions.

The other thing is this: that if we live in an extremely accelerating and
complex time, it makes decision-making harder and harder. What you've got
are political institutions, whether you're looking at the US Congress, or
the Japanese Diet, or the White House or the Canberra equivalent of that,
you have a group of people who, no matter if they were saints and geniuses,
would be overloaded by the demands on them. Too many things are changing
too fast in ways far too complex for them to make intelligent decisions
about, and if you talk privately with honest politicians - I mean I got a
call from a friend of ours who is a United States Senator, and he said, 'I
spend two-thirds of my time either doing public relations or raising funds
for re-election. In the remainder of my time, I'm on this committee and
that task force and this joint working group and this blah, blah, blah -'
He said, 'Do you think I can possibly know all the things I need to know to
make intelligent decisions?' And I said, 'Clearly you can't.' He said,
'You're right, so my staff makes them.' And I said, 'Who elected your
staff?' So there is a real problem. The reality is that many of our
political institutions are overloaded. The decision load is too heavy. They
don't stop making decisions because they want to hang on to the power that
goes with that, but they make worse and worse decisions, and devolution is
the way you lighten the decision load on the centre so it can deal with the
really important things.

Norman Swan:    And just finally and briefly, I want to deal with the
contradiction that I think some of your ideas throw up. And that is, you
say demassification, and yes, you can see diversity out there, and you
yourself quote the example of say Levi's customising jeans now for people,
and diverse groups in the community. But the overwhelming feeling,
certainly in a country like Australia, is that we've never been as
massified as before. You've just got instead of General Motors, you've now
got Microsoft. Globalisation means a breakdown of borders and a loss of
that identity.

Alvin Toffler:  There's a good reason for that, and I believe that we
account for that. We didn't talk about the fact that the way we think about
change, our model of the way change occurs. When we talk about waves of
change, a country or a region can undergo more than one wave of change at
the same time. If you look at Asia, you see more and more second-wave mass
manufacturing, cheap labour operations and so forth, but you also see
Singapore, and you see Malaysia struggling to create a multimedia super
corridor. And you see the Japanese having brilliantly applied third-wave
technology, unfortunately just a technology, not to other aspects of the

So it is not a contradiction to see both things happening at the same time.
And where I see increasing massification, to me that's the second wave of
change playing itself out. That's still completing the process. But
simultaneously, there are plenty of people in Australia who are on the
Internet and who are thinking and organising and creating new businesses
and operating in new ways. They represent the future of Australia.

As for Microsoft, people always ask me, 'Is Microsoft the third wave
organisation?' Well, call it a two-and-a-half-wave organisation. The reason
I say that is it's product is obviously the result of symbolic
manipulation, ideas, information. It's third wave in that respect.

Norman Swan:    Super symbolism, I think you call it.

Alvin Toffler:  Super symbolic. But if you look at how they market. They
bundle all kinds of functions into their software that you don't need, and
I don't need, because somebody else needs it somewhere else. They do the
opposite of customising. They bundle all these functions together, shrink
rapid, and then market it in a straight second-wave mass-marketing
campaign, the kind you'd get from Disney for a movie.

So they are in part, they are trying to run a third wave organisation with
second wave elements.

Norman Swan:    But they're vulnerable to a third wave company.

Alvin Toffler:  I think so. And not only that, but many companies are torn
by this contradiction, that you have parts of companies that run fast and
are based on knowledge, and other parts which still are not. I talked to a
Canadian company years ago, in which one part was a paper mill, and the
other part produced bottles, and the third part produced packaging. And if
you talked to the executives, you found that there were basically three
different cultures. The paper business producing newsprint, changes very,
very slowly; we're still producing newsprint in much the same way we did.
And they have a relatively small number of huge customers. And life doesn't
change very much or very fast. The bottle business is a faster business.
But the packaging business, that's running at high speed because the
customer market out there and the public is changing all the time, so
packaging is changing all the time.

We've got three different cultures inside the same company, and they are in
conflict with each other not infrequently. So I believe it is not a
contradiction to see second wave, smokestack massification still spreading.
And in effect I think completing itself as the new stuff starts to come in,
become more important.

Norman Swan:    Alvin Toffler, thank you very much.

Alvin Toffler:  My pleasure, thanks.

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