ONE firm of tomorrow which exists today is America’s The Limited. Each evening it collects the data from its Electronic Points of Sale (EPOS) showing what number, size, colour, fashion of clothes have been sold that day in its 3,200 stores across the United States. This is at once telecommunicated to its workshops in Hong Kong, Singapore, Sri Lankaand becomes their main cutting order for next day. A few days later a Boeing 747 takes off from Hong Kong for Ohio with these just-in-time inventory replacements. It is easy to put computerised design changes for fashion experiments into such a system, and to see from the EPOS if, where and to what income groups they sell well. Eventually in such firms customers should be able to design their own clothes by playing with graphics on a computer, and inserting the required hieroglyphics into the cutting order.
Most other things will also be made in smaller and smaller batches, so that even cars can be almost custom-built. There are already several hundred optional extras or modifications you can choose in models of Japanese cars made in America. The flexible-robot systems concerned can be ordered to make a stated modification on item number 998 coming down the line. Similarly, Mr Smith’s daily newspaper will eventually not be the Daily Express but the Daily Mr Smith. He will be able to order the news service of the Daily Telegraph and Asahi Shimbun, the opinion columns of the Wall Street Journal and Pravda, anything written about the 2.30 at Sandown and leather miniskirts or whatever are his particular kinks, anything written on the future provided it is not by me. The Daily Mr Smith will then come out of a fax machine at the back of his television set, accompanied by advertisements geared to his thus-revealed tastes (he will have to pay more to avoid being sent these).
Most metal-bashed goods will still be fashioned by professional designers, but they can go straight to prototype without the aid of a production engineer. Tests through EPOS will inexpensively show which experiments succeed, and the designer can call his experimental shots by computer from his own home. A lot of factory workers may not even need to go to the factory. In one factory of the future near Mount Fuji, robots make robots. By day 20 workers tend the factory. By night the automatic machinery pounds on under the supervision of a single man at a control console. He could, if he wished, eventually operate that console from home, even if it were a home in a different continent.
People transporting the supplies and finished goods of the factory will have to go to it, but these distribution workers will also become brainworkers with computers at fingertip. Their vans will be warehouses-on-wheels tied electronically into the just-in-time inventory systems of the factories or distributors they are delivering from or to. Already some trucking companies in America allow customers to play straight into their computers to find where a particular order they have placed now is. Public post offices will go bust unless they allow the same.
Full employment in competitive teams
The usual spectre aroused by the story of the Mount Fuji factory is of mass unemployment. That is the opposite of what is going to occur. The Japanese factories that have automated most fiercely are precisely the ones that still offer their workers jobs for life. Apart from in recessions caused by politicians’ macroeconomic mistakes, and there is soon (see later) going to be a short humdinger of one, jobs should be plentiful in non-protectionist rich countries in 1990-2030. In the past two decades their labour forces have absorbed the baby-boom generation born in 1946-68, plus the mums’ rush into work. It is the baby-bust generation that is now moving through the schools, into markets that will feel short of labour.
The jobs into which they are enticed may often be called business opportunitiespartly because that sounds yuppier, but also because teams and networks will take over from hierarchies and bureaucracies. Teams will often grow to be the equivalent of a small business within a large business, although team members will sometimes telecommunicate from thousands of miles apart.
As a humblish example of teams, one European chain of stores at last saw it had better keep open in the eveningwhich was the only time its customers could shop. It said it would pay a certain sum for one set of counters to be staffed by four women 16 hours a day, but the women could decide whether to split the job among eight or 12 or 16 friends or whatever. They could fix their own flexitime and rotas (the sensible ones did this informally), and would get a bonus from the store if sales went up. Some teams were so successful they were offered extra counter space, then took over ordering of just-in-time (plus experimental) inventoriesand thereby became small businesses in their own right. A similar example is the Finnish paper company that found its machinery was always under repair. It sold its tree-harvesters to teams of its operators, and gave them contracts to do their old jobs. Productivity soared because it was no longer to any operator’s advantage that his tree-harvester broke down.
When TV channels first developed the video-recorder as an expensive instrument for action replays, the half-dozen big Japanese electronic companies saw a business opportunity. They said to competing teams of researchers: if you can get the retail price of these things below $1,000 they will be a consumer good for tens of millions of homes; try to get a working model before one year. In future that sort of definition of a target product will often be put out to competing teams of telecommuting researchers, playing into the databases from afar. This will be more efficient than relying on the 30 or so people that you happen to have in your R&D department. It will change the whole nature of companies’ R&D, and help to transform universities.
The latter face a change of life anyway, because it will be odd if the present age of undergraduates proves the right one. If education is competitivised into efficiency, many brainworkers will be ready to be productive professionally much younger, while any professional aged 50 should already go back to school. The whole concept of the subject he was expert in at age 18 will have changedalthough often the professors themselves, in a science like economics, haven’t noticed.
A career as intrapreneur
These systems of subcontracting, and the race to replace everything the EPOS shows to be fading, will change the whole idea of career structures. No youngster entering a big corporation today should dream of being corporate vice-president by age 50. When he is 50, corporate bureaucracies should hardly exist. Everybody in the company, down to the janitor, should be aiming to run his own small business. The proper ambition of a young entrant should be to become rich through managing successive spin-offs. He will hope to lead into stock-market floating some of the successful minority of the many small intrapreneurial ventures into which almost every big company will progressively split.
When a team’s venture succeeds, the team will want it to become as much a separate small business as possible, getting profits from it and then moving to something else. The big company, by crafty contrast, will prefer to pay by results the majority of intrapreneurial ventures that make losses. Always remember the president of a very successful company who told Messrs Peters and Waterman that “24 out of 25 of our products fail inconspicuously in test markets. The alternative is the colossal cost and humiliation of failing on a national scale”. But executives who acquire the reputation of succeeding with a string of intrapreneurial ventures will be enticed into new ones with a variety of stock options. And it will usually be part of the corporate culture of big companies that those who have failed in one venture can start up in another one (up to a reasonable number of flops), even if telecommuting from afar.
One short, sharp and early recession
There will be some difficulties in these prospects, and it may be worth picking out three. First, many telecommuters will move to areas in which it is nice and sometimes cheap to live, This will bankrupt organisations committed to working from places that are nasty and expensive.
That applies sharply to the banks and near-banks in one square mile of Manhattan and of the City of London and of downtown Tokyo. The rental cost of the square foot occupied by your wastepaper basket in each of them is higher than that of a whole apartment a few blocks away. These organisations will be undercut because bankers could now look into their screens from anywhere, and telecommute. Some of the jobs in them will move to places like North Carolina, others (perhaps and eg) to the 2,000 lovely tropical islands into whichwithout politiciansthe Philippines and Indonesia could be turned.
Places like Wall Street and the City of London would look savable if the herd instinct from crowding together there had brought marvellous and bright achievements in financial services in the first two decades of computerdom. The herd instinct has brought precisely the opposite. The big banks are about to go spectacularly bust for the third decade in succession.
In the 1970s the banks drew in deposits from OPEC’s dear-oil surpluses which (although banks did not see this) could not last because dear oil depended on a cartel managing to repeal permanently the laws of supply and demand. The banks then lent this money to countries like Mexico which had to borrow even while getting 80% of its export revenue from dear oil that was bound to fall, so Mexico could not conceivably repay. Simultaneously, the banks pumped more money into other Latin American countries with money supplies already so overbloated they had annual inflations above 300%. There was a danger that central banks, when it became clear this money was lost, might withdraw other money from the marketas the Federal Reserve did in 1929-33 when it reduced America’s money supply by 30%, and precipitated the great depression. Instead the Federal Reserve, after the Mexico crash in 1982, rightly started to pump up world money supply forthwith.
The investment banks then took over folly from the commercial banks, and used the new money to send security prices sky highprompting a wild stock-exchange bull market, Until the l980s stock exchanges had been run as cartels, and firms in them had whinged they would go bust if they were not allowed to continue with these cartels. When the cartels were rightly disallowed, member firms clearly needed to cut their costs and staffs. Instead some multiplied their staffs threefold and their own salaries fourfold. The inevitable crash in October 1987 therefore carried a risk that some finance houses might collapse as fully as British fringe banks did in 1974-75. They were saved because monetary authorities in October 1987 again pumped up money supply: the British and Americans through the central-bank window (which exacerbated inflation in their two countries), the Japanese by telling their top security firms to support equities with a promise of bail-out if things went wrong (whichWashington and London, please note before the next crash has, proved less inflationary and probably- makes more unorthodox good sense).
The next crash is quite plainly coming, maybe in 1989 but in the early 1990s if not. It is probable that the monetary authorities will pump in money less quickly this time, and that there will be big bankruptcies. They will include some of the large companies that have borrowed too much to buy each other at far more than either is worth, and in many countries there will be a temporary increase in the number of unemployed. This will not actually lead a nosedive into long great depression, because no central bank will repeat 1929-33 and cut money supply by 30%.
The disruption that will hit some parts of the world economy will not he one-tenth as great as (for example) the physical destruction that hit Japan and West Germany in 1945; and they were boom areas again within a decade, having reaped some advantages because various stuffy old organisations had been ploughed through. But it is important for any chief executive to keep constant tabs on what would (I’d say will) happen to his own organisation when, rather soon, stockmarket prices suddenly halve in one day.
The underclass and tomorrow’s aged
The second worrying problem, at the far end of this coming short recession, will be the possible festering of an underclass. This is not because the new computer age of brainworkers will be terribly difficult even for dumbclucks. Most of us on The Economist have learned how to use our computers in the past decade, with less danger to the public than when we learned to drive a motor car at age 17. Always remember that Mercedes in 1903 thought there would never be a world market for more than 1m automobiles, because there were not 1 m artisans in the world trainable as chauffeurs.
But at this beginning of the brainworker age, it was crucial that educational differences between classes should narrow. Instead, they widen. The worst education is going to groups that have too many babies born to uneducated unmarried women. Their education will have to be made competitive, with especially high vouchers given to them. The brightest people in the early twenty-first century look like being determinedly thrusting, mobile Asians, for the same reasons as mobile Jews were the brightest in the early twentieth century family cohesion, education hunger, commercial sense and a desire to show past oppressors how.
The third big coming problem affects only one generation, but awkwardly the biggest generation that rich countries have: those born in 1946-68. Their children will be able to move off and telecommute. Their grandchildrenoften brought up in sunbelt homes from which both mummy and daddy telecommutewill have family values again. As in the family farms of yesteryear, the smallest children will have useful chores in the family business to do; this could marvellously breed self-confidence. But the baby-boomers born in 1946-68, some of them stuck in crumbling areas from which all but the alienated may have fled, could face a troubled eventide.
Part 5 - Old Men don't regret.