Managing in The Next Society – Book Review

In Greensboro, NC, there is a quaint little bookstore called Pages Past. Their card says “Buying & Selling Used & Rare Books,” and a recent business trip I took afforded me the opportunity to stop in and take a look.

I’m glad I did.

Managing in The Next Society by Peter Drucker was there. I wasn’t specifically looking for the book itself – it was the author I was looking into. I’ve seen Peter Drucker’s name several times in John Maxwell’s books and thought he would be someone worth reading.

My hunch was right.

This book was a fantastic read. What’s particularly interesting to me is just how prophetic Drucker has turned out to be since he wrote this in 2002 (more on that later).

 

Introduction or Preface

“For the thesis that underlies all the book’s chapters is that major social changes that are creating the Next Society will dominate the executive’s task in the next ten or fifteen years – maybe even longer…Indeed, it is the thesis underlying every chapter of this book that the social changes may be more important for the success or failure of an organization and its executives than economic events.” – Page xi

Right from the beginning, the author proves he is a prophet. This was written in 2002 – 22 years ago, now – and who among us could say he’s wrong? Recall the growing social drives, initiatives, and intentionality companies are driving – for right or wrong.

Whether you like it or not, the changing society has, in fact, brought about what the author predicted. I’m impressed.

 

Part 1: The Information Society

1. Beyond the Information Revolution

 

“It is something that practically no one foresaw or, indeed, even talked about ten or fifteen years ago: e-commerce – that is, the explosive emergence of the Internet as a major, perhaps eventually the major, worldwide distribution channel for goods, services, and, surprisingly, for managerial and professional jobs.” – Page 3

Precisely. I have been saying this for a while now: the construction industry (and just about every other industry that could be considered “legacy”) has failed to observe just how much competition has been created in the past 25 years. The internet has changed things – DRASTICALLY.

Consider this tweet I took a screenshot of from Mr. Beast earlier this year – the most popular and famous YouTuber today:

 

AND THAT IS JUST FROM YOUTUBE!

The major point of this chapter is that the internet is to the Information Revolution as the railroad was to the Industrial Revolution. Indeed, we have the benefit of hindsight the author did not – and it’s crystal clear this is true.

“In the new mental geography created by the railroad, humanity mastered distance. In the mental geography of e-commerce, distance has been eliminated. There is only one economy and only one market.” – Page 12

Perhaps more remarkable is his understanding of the necessary treatment of people – “knowledge workers,” as he calls them – and how a social adjustment in the mindset and/or fabric of society is needed.

“This means that the key to maintaining leadership in the economy and the technology that are about to emerge is likely to be the social position of knowledge professionals and social acceptance of their values. For them to remain traditional ’employees’ and be treated as such would be tantamount to England’s treating its technologists as tradesmen – and likely have similar consequences.

Today, however, we are trying to straddle the fence – to maintain the traditional mind-set, in which capital is the key resource and the financier is the boss, while bribing knowledge workers to be content to remain employees by giving them bonuses and stock options.” – Page 23

He rounds out the chapter by saying, “Increasingly, performance in these new knowledge-based industries will come to depend on running the institution so as to attract, hold, and motivate knowledge workers. When this can no longer be done by satisfying knowledge workers’ greed, as we are now trying to do, it will have to be done by satisfying their values, and by giving them social recognition and social power. It will have to be done by turning them from subordinates into fellow executives, and from employees, however well paid, into partners.” – Page 24

I’d speculate THIS is the reason we see so many new start-ups, new apps, and new innovations: it allows those who are creating as entrepreneurs to do so and not simply be someone’s employee.

Indeed, I could even make a case that it is this societal change that gives workers (at least skilled ones) an upper hand. From societal change to new industries that compete with “legacy” ones and everything in between – we are seeing some very interesting and significant workforce changes.

 

2. The Exploding World of the Internet

 

Another wonderful feature of this book is the layout: periodically, there are chapters that are interviews, and I find them refreshing.

This is one such chapter.

On offering stock options, he writes, “Furthermore, those two alumni associations which were the largest – Procter & Gamble and IBM – those alumni love their ex-companies. Microsoft alumni hate Microsoft. Preciesly because they feel the one thing it offered them was money and nothing else, they resent all the publicity goes to the top people, to one top man, and they don’t get recognition. Also, they feel the value system is entirely financial, and they see themselves as professionals. Maybe not scientists, but applied scientists. So their value system is different.” – Page 26

This is an interesting take. Sure, those who are not thinking outside the box and are constrained by their poor decisions in the past may be elated by stock options (increased compensation). In an increasingly expansive opportunity environment, however, I’m of the opinion he’s right. For those who are intentional about doing great things, they are going to desire more than money.

Ownership is the word of the day.

“The idea that American health care is in particularly bad shape is nonsense. They’re all in total disarray…Incidentally, I’m going to shock you. Medical advances since antibiotics have had no impact on life expectancy. They are wonderful for tiny groups, but statistically insignificant. The great changes have been in the workforce.” – Page 33

Interesting. Way back in 2002, the author knew this to be true. I found it interesting since I listened to Robert Kennedy Jr. and his take on the medical establishment, and his view – based on other studies – concluded the same thing. It was engineering practices that have greatly improved lives.

 

Related: Read The Real Anthony Fauci – Book Review 

 

Even more remarkable is his sounding of population decline – even back in 2002. Elon Musk has become somewhat of an expert discussing this, and Peter Zeihan has been examining this from a geo political perspective. But back in 2002, Peter Drucker was following the data, also.

“Look, in the developed countries, with the exception of the U.S., the number of young people is already going down sharply.” – Page 35

“We have shifted very heavily from being labor-intensive to capital-intensive. So far that has compensated for the loss of relative purchasing power of manufacturing goods. How much longer will that continue? I don’t know.

But all the world over, the blue-collar manufacturing worker is losing something more important than income. He’s losing status.” – Page 40

Ahh, in his time, the author evaluated the data, made assumptions based on it, and delivered it in the written word. And, in that day, he seemed to be right.

Ironically, 2002 was the year I actually came into the skilled trades as an Ironworker. I joined a Registered Apprenticeship Program (RAP), and, upon graduating in 2006, have built a rather good career.

BUT – those who are my age and in my generation specifically are largely absent from the trades. The reasons for this are numerous – many of which I cover on the podcast – but surely one of them was the pervasive thought the trades were a dinosaur – dying a thousand deaths.

As we’ve discussed numerous times, though, this isn’t the reality of today.

The trades are in high demand – probably more so than many pundits thought possible – and I’m here for all of it.

In fact, I’d argue that the shortage is significant enough to warrant fresh thinking about the trades: their importance, the respect they should have, and how we need a seismic shift in thinking.

 

3. From Computer Literacy to Information Literacy

 

Back in 2002, being computer literate was waning – and in its place was a growing need for information literacy. Indeed, for my part, I believe it’s the same need, today.

“These are big challenges. And we don’t know the answers. We know only that we will pay much more. Money will become far more important because in the past thirty years, we have substituted title for money in many cases. We have had rapid promotions in title with very little increase in salary. That’s over.” – Page 48

“You can’t know everything. You can know only what you know. This is why the enterprise of tomorrow is going to be very narrow in focus.” – Page 49

For my money, he is absolutely right. In the past, we’ve tried to discourage this, and have “jack of all trades;” in the end, however, the information boom has brought us back around full circle.

How about that?

 

4. E-Commerce: The Central Challenge

 

“In most businesses today delivery is considered a “support” function, a routine to be taken care of by clerks. It is taken for granted unless something goes drastically wrong. But under e-commerce, delivery will become the one area in which a business can truly distinguish itself. It will become the critical “core competence.” Its speed, quality, and responsiveness may well become the decisive competitive factor even where brands seem to be entrenched…E-commerce does not merely master distance, it eliminates it. There is no reason why, under e-commerce, the vendor has to be in any particular place. In fact, the customer as a rule does not know and does not care where the e-commerce vendor is located. And the e-commerce vendor in turn, for example Amazon.com, today the world’s biggest bookseller, neither knows nor cares where the purchase order comes from.” – Pages 57, 58

Looking back 20 years, who would have predicted that the internet would have been the vast opportunity creator it’s become?

I doubt few could – but Peter Drucker was one.

“E-commerce separates, for the first time in business history, selling and purchase. Selling is completed when the order has been received and paid for. Purchasing is completed when the purchase has been delivered and actually not until it satisfies the purchaser’s want.” –  Page 60

Again, who predicted this model?

You already know the answer.

 

5. The New Economy Isn’t Here Yet

 

“And I am appalled by the greed of today’s executive.” – Page 64

Perhaps one of the most interesting observations I’ve made about the author – and this book illustrates it quite nicely – is his disdain for the greed that is prevalent in today’s economic theory. Organized labor has long held since 1970 (thereabouts) the gulf has exploded between worker and executive, but for a wise sage who routinely advises large companies to criticize? Refreshing, to say the least.

Interesting, too, is his observation that the average knowledge worker will outlive the average company.

Indeed, the construction industry is facing this very situation today; many of the established companies are smaller, owned by baby boomers, with no succession plan in the works.

He also addresses innovation and entrepreneurship:

“So the market is almost never where the investor thinks it will be…Timing is also important. An invention may not succeed, but ten years later someone else does the same thing, gives it a slight twist, and it clicks…Sometimes a so-called improvement can become a new product. Of the people and companies I know, 70 percent of the new comes from a slight modification of what already exists.” – Pages 70, 71

This, I think, is important because we are in a rapid age of innovation with the increase of technology.

“In the last forty or fifty years, economics was dominant. In the next twenty or thirty years, social issues will be dominant. The rapidly growing aging population and the rapidly shrinking younger population means there will be social problems.” – Page 73

Once again, the author has turned out to be prophetic. Who among us can say he is wrong – 22 years later? What social issues – even ones he didn’t address, here – have not taken a more predominant place in American society?

 

6. The CEO in the New Millenium

 

Discussing the supposed end of hierarchy (you know, as some “social construct” and not what it REALLY is: a hierarchy of competence like Jordan Peterson rightly points out), he says, “Well, it hasn’t happened and it isn’t about to happen, for one simple reason: When the ship is going down, you don’t call a caucus – you give a command. There has to be somebody who says, ‘Enough dithering – this is it.'” – Page 79

“I once was a securities analyst, so that gives me license to say that it is virtually impossible to make a financial person understand business. I am not being facetious. Financial people don’t deal with the issue of balance between often conflicting elements – short term versus long term, continuity versus change, improving today versus creating tomorrow. Corporate leaders who wrestle with these issues every day know the amount of struggle involved, but it’s difficult for financial people to understand this…One of the most critical jobs ahead for CEOs will be to think this all through in relation to their particular business and come up with ways to strike reasonable balances.” – Pages 80, 81

The above caught my eye because when writing The Principle of Leading by Example, the example used – Jim Sinegal, former CEO of Costco, did just that: attempt to strike a balance. What’s more, the ONLY criticism he received from his tenure at the helm was from those in the financial sector.

“Technologies now crisscross each other all the time, and productivity is no guarantee of achievement.” – Page 85

That is an interesting observation that warrants some reflection on the part of the reader.

It is also in this chapter we come to a difference of opinion with the author. He conflates knowledge workers with college students – a serious blunder, but understandable when written. It was 2002, after all, a time when “you have to go to college to get a good job” enjoyed unprecedented support.

Rounding out the chapter, he notes something I believe good leaders in the construction industry have known – and practiced:

“Tomorrow’s leader won’t be able to lead by charisma. He or she will need to think through the fundamentals so that other people can work productively.” – Page 89

There certainly is a space for someone to do this very thing.

 

Part II: Business Opportunities

7. Entrepreneurs and Innovation

 

Beginning in the chapter, the author speaks about the dangerous belief that American entrepreneurship is the best in the world. Moreover, he asserts they have a faulty understanding of what it really is:

“But American businesses with few exceptions – Merck, Intel, and Citibank come to mind – still seem to think that innovation is a “flash of genius,” not a systematic, organized, rigorous discipline.” – Page 95

Interesting, also, is his take on pitfalls most entrepreneurial minded people/companies make. From points to examples, this chapter has some really good advice for people to read, contemplate, and wrestle with.

A back-and-forth interview gives us this nugget:

“Do you think entrepreneurs today are smarter about avoiding the pitfalls you’ve been describing?

No.

No? With all the education, with all the MBAs?

No. Education gives you neither experience nor wisdom.” (Emphasis mine) – Page 103

 

LOUDER IN THE BACK FOR EVERYONE, PLEASE.

This chapter – an interview-style – yields some interesting discussion. Explaining social entrepreneurship, he said,

“First, it’s as important as economic entrepreneurship. More important, perhaps. In the United States, we have a very healthy economy but a very sick society. So perhaps social entrepreneurship is what we need the most.” – Page 106

I’m left to wonder what he’d think were he to witness society today – just 22 years after this book was published.

” We still talk about big, ambitious, nationwide education cure-alls, yet in a lot of places, local schools – public, parochial, and private – are having successes based on local entrepreneurs. And we know that the American public – especially the young, educated, double-earner family – is ready to support social entrepreneurship, especially as volunteers.” – Page 107

He was right then – and local is even more applicable today.

“These are social entrepreneurs, not business entrepreneurs. The social entrepreneur changes the performance capacity of society. Clearly the need is there, or we wouldn’t have founded eight hundred thousand nonprofits over the past thirty years.

Yesterday charity meant writing a check. Today more and more people who are reasonably successful don’t feel that’s enough. They are looking for a parallel career, not a second career. Very few of them change jobs.” – Pages 107, 108

This is an interesting observation from the author, and the more I reflect on it, the more I believe it rings true.

Rounding out the chapter talking about innovation and entrepreneurship in government, he writes, “That’s probably our most important challenge. Look, no government in any major developed country really works anymore. The United States, the United Kingdom, Germany, France, Japan – none has a government the citizens respect or trust.” – Page 109

Ha!

What would he say today, I wonder?

 

8. They’re Not Employees, They’re People

 

Temp agencies – a topic ripe for discussion. It’s something that, in my own working career, I’ve seen grow, but it wasn’t until I read this chapter that I understood just how long this practice has been going on.

“Clearly, something is happening in employee relations and employee management that does not fit what the management books still write about and what we teach in management school. And it surely does not fit with the way human relations departments of most organizations – businesses, governments, and nonprofits – were designed and are meant to function.” – Page 114

Prophetic once more.

“Many of these costs [compliance fines, paperwork, regulations, and the like] can be avoided altogether by using temporary workers in place of employees. That’s why so many companies are contracting for workers with temp agencies – even though the hourly cost of a temp is often substantially higher than the wage-and-benefit cost of an employee. (Emphasis mine) – Page 115

I find this FASCINATING. First, the fact that temp agencies have become such a large middleman when it comes to manpower – especially with the extra cost – is a testament to how lazy various industries can be. I’m specifically thinking of the construction industry, here. I’ve talked with people who know it to be true.

Second, and I think there is a small correlation – is that temp agencies have capitalized on a model that’s existed for over a century now: organized labor. While not an apple-to-apple comparison, enough is there to seriously reexamine what organized labor brings to the table when compared to temp services.

Third, I’m thinking of the gig economy we see exploding around us. It makes me wonder how this all will play out going forward.

 

9. Financial Services: Innovate or Die

 

The author opens up by discussing the rebirth of London – into one of the world’s financial capitals. The entire financial picture painted is a chapter that many may find over their heads somewhat. However, there are a couple points worth noting:

First, he mentions how Edward Jones, a relatively unknown investment professional in St. Louis, discovered a market in finances that many were ignoring: the middle class. So convinced of his find, he stopped selling everything else and ONLY on what was right for that group.

He was wildly successful. What’s more, his success wasn’t limited to America, either; indeed, the author notes, “The Jones type of customer constitutes the fastest-growing group in every developed and emerging country. In addition to North America, this includes all of Europe, the most populous countries of Latin America, Japan, and South Korea, but also the metropolitan areas of mainland China – close to half of the human population.” – Page 144

That’s interesting, to say the least.

“After twenty-five years of pooh-poohing the middle-class investment market, some of the traditional American financial services institutions have lately come to accept its existence and importance.” – Page 145

From my perspective, I’d say the author was right – again.

I’m only left to wonder what his thoughts would have been on Bitcoin and digital currency.

 

10. Moving Beyond Capitalism

 

Ahh, we come to one of my absolute favorite parts of this book.  Another interview chapter and right out the gate, we read the following:

“What is your biggest critique of capitalism]?

I am for the free market. Even though it doesn’t work too well, nothing else works at all. But I have serious reservations about capitalism as a system because it idolizes economics as the be-all and end-all of life. It is one-dimensional.

For example, I have often advised managers that a 20-1 salary ratio is the limit beyond which they cannot go if they don’t want resentment and falling morale to hit their companies. I worried back in the 1930s that the great inequality generated by the Industrial Revolution would result in so much despair that something like fascism would take hold. Unfortunately, I was right.

Today, I believe it is socially and morally unforgivable when managers reap huge benefits for themselves but fire workers. As societies, we will pay a heavy price for the contempt this generates among the middle managers and workers.

In short, whole dimensions of what it means to be a human being and treated as one are not incorporated into the economic calculus of capitalism. For such a myopic system to dominate other aspects of life is not good for any society.” – Pages 149, 150

THIS IS ONE OF THE BEST ACKNOWLEDGMENTS OF THE PITFALLS OF CAPITALISM I’VE READ YET.

What makes it particularly refreshing is that it comes from someone who routinely advised large companies – so he’s seen the good, bad, and ugly. Moreover, he has his finger on the pulse of something I don’t really hear others talk about; namely, that at the core of EVERY single economic model, there is the same thing – the greedy, selfish, exploitative human being.

I have used this quote several times already, and suspect I’ll use it several more times in the future. I have found it that potent.

Oh, and before we continue, allow me to say that, yes, I am pro-capitalism. But I understand unfettered capitalism is simply a return to the robber baron era – which, I might add, is something we are heading for again.

Organized labor is the check to this balance.

 

“The state tends to define a problem in a standard way and then monopolizes the solution. But what works in St. Louis usually doesn’t work even in Kansas City, let alone New York or Los Angeles.

With its singular profit motive, or course, the market simply has no interest or capacity to cope with social problems.” – Page 155

Here, the author makes a point and his case for a third social entity – the nonprofit – and how government and business can’t bring about the community a country really needs. And, once again, he’s right.

“In Europe, the basic struggle was to free the state from the dominion of the church, which explains why continental Europe has such an enormous anticlerical tradition.

In the U.S., it was the other way around. When Jonathan Edwards established the doctrine of separation of church and state around 1740, it was in order to free the church from the state. Anticlericalism has never had a place in this country.

Because of this freedom, the U.S. developed a tradition of religious pluralism and nongovernmental churches.” – Pages 160, 161

Lest you believe this is a religious text – it’s not. Again, what the author is building a case for is a social component and how it is good for society. Government is inept – and business has no interest. Nonprofits (and in America, the church is a large section) are what can and often do.

I’d only note that anticlericalism has been on the rise in the United States in the past 20 years, and most notably in the past 10.

 

“Add to this the unrivaled stupidity of the Korean businessmen who learned nothing from the Japanese next door about how to treat their workers. Japan learned the hard way – through two bloody strikes that almost overturned the government in 1948 and 1954 – to treat human beings like human beings. (Nobody seems to know that Japan had had the world’s worst history of labor troubles dating back to 1700).” – Page 162

All of a sudden I am now looking for a book on this.

In any case, the author remarks how many different countries have difficult and challenging labor struggles, and he opines on the lack of compassion for our fellow human beings.

There are other sections in this chapter – notable little sections on Japan and China, for example, but I will end this section with one last observation:

“The demographic challenge. In all the developed countries, the issue is not so much the one everybody talks about – the aging of the population – but the shrinking of the young population.

The U.S. is the only advanced country where there are enough babies – 2.2 per woman of reproductive age – to replace the population. But only because of our high immigration.” – Pages 171, 172

In 2023, we are sitting at 1.20.

 

Part III: The Changing World Economy

11. The Rise of the Great Institutions

 

This is a short but interesting chapter. The author talks about various institutions – labor unions, civil service, hospitals, and universities – all of which have their own governing and managing systems.

Pluralism, then, is the word of the day. Pluralism, for those who may be interested, is where two or more states, groups, institutions, etc., have their own sources of authority.

This, of course, includes the Christian church, too.

Telling is how the author notes the need for autonomy of these and other institutions independent of the state – and how the world will have to figure this out.

“The challenge of the next millennium, or rather or the next century (we won’t have a thousand years), is to preserve the autonomy of our institutions – and in some cases, like transnational business, autonomy cover and beyond national sovereignties – while at the same time restoring the unity of the polity that we have all but lost, at least in peacetime. We can only hope this can be done – but so far no one yet knows how to do it.” – Page 180

 

12. The Global Economy and the Nation-State

 

This is a very interesting chapter and, in the case of those who are curious about the financial system, you’ll receive an education. For example, he writes about fixed exchange rates of the old system [pre-1973]:

“Instead, there has been no period in peacetime, save the early years of the Great Depression, in which currencies have fluctuated as widely and abruptly as since 1973. Freed from external constraints, governments have gone on spending binges.

The Bundesbank in Germany is practically free from political control and is dedicated to fiscal rectitude. It knew that the spending spree the politicians proposed during the country’s reunification was economic folly, and it said so loud and clear. Still the politicians went ahead, gaining short-term popularity while risking long-term economic costs…It is the same with politicians everywhere; it makes little difference which party is in power or how much it promises to cut or control.” – Page 186

Ha! And this was in 2002. I wonder what he’d say about a 34 TRILLION National Debt today??

Moreover, there is something else that he mentions: virtual money. It’s mystifying, enormous (in one day or trading, there is enough “virtual money” to run the world for a year), and powerful.

“The unrestrained financial and monetary sovereignty given to the nation-state by floating exchange rates twenty fine years ago has not been good for government. It has largely deprived government of its ability to say no. It has transferred decision-making power from government to special interest groups (emphasis mine). – Page 190

In 2024, who can say he’s wrong?

 

Another interesting discussion where the global economy and nation-states are concerned is how, in the past, war was seen as something to be kept from civilians.

Not anymore.

“The rules of total war are so firmly established by now that most people take them to be akin to laws of nature. With missiles, satellites, and nuclear weapons, there can be no return to the nineteenth-century belief that the military’s first task is to keep war away from the country’s civilians. In modern war, there are no civilians.” – Page 199

Indeed. coupling the two together, one can look back at the last 20 years to see special interest groups who want war for profit – and how it isn’t just the military of other countries who suffer – EVERYONE does – including civilians on BOTH sides.

 

13. It’s the Society, Stupid

 

Ah, this is the chapter that shows the age of the book. Recall it was written (or rather, composed of numerous other articles) in 2002, when the second largest economy was Japan.

Now it is China.

A lot can happen in 20 years, it seems.

The AP reported that in 2023, Japan actually fell to the fourth largest economy, behind Germany, China, and the United States.

In any case, there are some interesting observations worth noting.

“Bureaucratic elites have far greater staying power than we are willing to concede. They manage to keep power for decades despite scandals and proven incompetence.

This is because developed countries – with the sole exception of the United States – are convinced that they need a ruling elite, without which they fear social disintegration.” – Pages 204, 205

The United States has a rather large bureaucratic structure – and yes, I believe he’s right about their incompetence, too – but what I didn’t know was other countries actually believe they need it. As of right now, I have no way to corroborate this, and he has been right about so much, I’m inclined to give him the benefit of the doubt.

In any case, I’ll give him a nod here: he is absolutely right about the United States does not believe it needs a ruling class. Individualism – even in the fan-flamed culture wars of today – still is steep in American culture.

“American society has not had a ruling elite since the early years of the nineteenth century. Indeed, as almost every foreign observer of America since Tocqueville has remarked, the truly unique feature of U.S. society is that every group feels itself unappreciated, disrespected, if not discriminated against – a feature many of us consider the country’s greatest strength.” – Pages 210, 211

Now, some would argue with Drucker, here, laying claims that many of the political class believe themselves ruling elite. There may even be Americans who see them that way, too.

But this was in 2002 when he wrote this, and for my part, I hope it never changes.

The rest of the chapter is a treatise on Japan – but there is one more caveat to note:

“Americans assume that the economy takes primacy in political decisions, unless national security is seriously threatened. The Japanese – and by no means the bureaucracy alone – accord primacy to society.

Again the United States is the exception and Japan nearly the rule. In most developed countries other than the United States, the economy is considered a restraint on policies rather than their major, let alone sole, determinant. Ideology and, above all, the impact on society come first.

Even in the United States, the primacy of economics in public life and policy is fairly recent, dating no further back than World War II. Until then, the United States, too. tended to consider society first. Despite the Great Depression, the New Deal put social reform well ahead of economic recovery. American’s voters overwhelmingly approved.” – Pages 221, 222.

A nice little history lesson that has the clear ring of truth in it.

 

14. On Civilizing the City

 

Another short – but singularly important chapter.

Over the past century or so, we have seen an explosion of urban areas. The author remarks that “civilizing the city will increasingly become top priority in all countries…However, neither government nor business can provide the new communities that every major city in the world needs. That is the task of the nongovernmental, nonbusiness, nonprofit organization.” – Page 225

If he could have only peaked in the future and seen the state of the city in 2023…

“In the city was a brilliant ‘high culture.’ But it was a wafer-thin layer over a stinking swamp.” – Page 229

“Since World War I – and certainly since the end of World War II – the majority of all countries, whether democracies or tyrannies, believed that government should and could supply the community needs of an urban society through ‘social programs.’ We now know that this was largely delusion. The social programs of the last fifty years have, by and large, not been successes. They certainly have not filled the vacuum created by the disappearance of traditional community. The needs were certainly there. And so has been the money (and in many countries in enormous quantity). But the results have been meager everywhere.” – Page 230

This is an interesting observation. I’d add that if we treated people like human beings with intrinsic value in our business endeavors, then we’d have the ability at least to form communities of our own in these urban areas. As it currently stands, when you squeeze blood from a turnip, people can do little else but survive.

“The twentieth century, now coming to an end, has seen an explosive growth of both government and business – especially in the developed countries. What the dawning twenty-first century needs above all is equally explosive growth of the nonprofit social sector in building communities in the newly dominant social environment, the city.” – Page 232

The idea that the city needs some civilization isn’t new but it’s clear since writing this chapter, nothing has materialized.

 

Part IV: The Next Society

15. The Next Society

What will the Next Society look like?

 

Wrapping this all up, Drucker has some interesting observations – and some are reiterations of points made in previous chapters.

For example, he notes that “In every single developed country, but also in China and Brazil, the birthrate is now well below the replacement rate of 2.2 live births per woman of reproductive age. Politically, this means that immigration will become an important – and highly divisive – issue in all rich countries. It will cut across all traditional political alignments.” – Pages 236, 237

As it turns out, Mr. Drucker is, in fact, a prophet. Immigration is, to a large degree, a divisive issue – and what’s more, when people aren’t having kids, with some estimates having it that 45% of women by 2030 will be single – this only complicates matters.

He rightly predicts the Internet will make institutions competitive since it will give consumers everywhere the information they need. The increase in the volume of farming and manufacturing – but its overall decline in countries’ GDP is educational – and he foresees new protectionism measures. Of course, the ever-increasing and complex demands on CEOs are included here, too.

And, after assessing various populations of developed countries, he writes, “For all big countries but America, immigration on such a scale is unprecedented.” – Page 244

“E pluribus unum” – Latin for “out of the many, one” has been America’s strength from its inception. It’s also what gives it an edge in declining population rates the world over. Immigrants integrate in America easier than other developed countries, with “the one big obstacle to the full integration of recent immigrants in America is the poor performance of American public schools.” – Page 246

If he could only see the pitiful state of schools, today.

After a crash lesson on the baby boom (baby boomers), baby bust (generation X), and then the next baby boom (millennials), he notes, “The truth is that we simply do not understand what determines birthrates in modern societies. So demographics will not only be the most important factor in the Next Society, it will also be the least predictable and least controllable one.” – Page 251

Demographics, then, play a huge part in countries – and they are often blamed for some of the problems citizens bring about – i.e. low birth rates.

“The largest group of knowledge workers, however, barely existed until the start of the twentieth century and took off only after the Second World War. The yare knowledge technologists – people who do much of their work with their hands (and to that extent are the successors to skilled workers), but whose pay is determined by the knowledge between their ears, acquired in formal education rather through apprenticeship.” – Page 256

Again, this was written during the height of”you have to go to college to get a good job.” It was just as wrong then as it is now. I doubt the author foresaw the shortage that is crippling the skilled trades today. What’s more – and this is a personal bias, here – the comparison of formal education to apprenticeship is a bit off. There is more to the trades than many think.

In some respects, Peter Drucker is the forerunner for Peter Zeihan, a geopoliticist who, in 2023 and beyond, continually talks about many of the things the former predicted.

“The economic miracles of the second half of the twentieth century – Japan, South Korea, Taiwan, Hong Kong, Singapore – were based on exports to the world’s rich countries of manufactured goods that were produced with developed-country technology and productivity but with emerging-country labor costs. This will no longer work.” – Page 267

Indeed. Globalization was revealed to be extremely fragile when COVID-19 manifested, and combining it with declining populations the world over has brought about manufacturing onshoring to the United States.

But will there be employees to work there?

“The means of production is knowledge, which is owned by knowledge workers and is highly portable.” – Page 273

What’s more, and “just as important, the people in every one of these organizational categories will have to be satisfied. Attracting them and holding them will become the central task of people management.” – Page 281

While workers in a manufacturing environment are not, at least the way the author defines it, knowledge workers, the labor market IS tight – and will likely be for at least a decade – or more.

“Of course knowledge workers need to be satisfied with their pay, because dissatisfaction with income and benefits is a powerful disincentive. The incentives, however, are different. The management of knowledge workers should be based on the assumption that the corporation needs them more than they need the corporation. They know they can leave. They have both mobility and self-confidence.” – Page 282

What he just described, while at the time attributed to the “knowledge worker,” is directly attributed to the experienced skilled tradesman today. It will also be true a decade from now, too.

 

“Shareholder sovereignty is also bound to flounder. It is a fair-weather model that works well only in times of prosperity.” – Page 288

What an insight! Another pearl of wisdom, here. Jack Welsh, former CEO of GE, said, “On the face of it, shareholder value is the dumbest idea in the world,” Welch said. “Shareholder value is a result, not a strategy . . . Your main constituencies are your employees, your customers and your products.”

Concluding the chapter, I see that “The central feature of the Next Society, as of its predecessors, will be new institutions and new theories, ideologies, and problems.” – Page 299

 

Wrapping it all up

 

This book was an absolute joy to read. Books are a way to sit down and have a conversation with someone – albeit one-sided – but there was a lot to learn from Peter Drucker.

Indeed, there is STILL much to learn. Perhaps what’s most intriguing is just how right he has proven to be in his predictions, 22 years later.

If you are looking to get a book that is rich in history, theory, application, predictions, and will make you think, do not miss this book.

It comes highly recommended.