Loving Drucker, Fearing the Full Drucker

When is a resource especially useful? The answer often varies based on the technological advancement of the society in question. Human capital is especially susceptible to this variable, as it is only as useful as its carrier’s tools are. In this Fourth Industrial Revolution, the knowledge worker’s debut is the consequent shift of human capital owing to information technologies such as the computer and artificial intelligence. Just how monumental this shift may be is to be analyzed. Historically speaking, few resources aside from hard currency like bullion and necessities like water have maintained a constant degree of usefulness. Clearly, an abundance of fossil fuels offers a different meaning to a hunter-gatherer tribe and an industrialized nation just as a plentiful supply of spices means different things to a medieval European kingdom and any country today. More often than not, though, these differences in meaning can be attributed to differences in technology. A hunter-gatherer society has no means and no purpose to exploit fossil fuel technology, while any industrial nation will demand (at least for now) a constant supply of non-organic energy due to lighting systems that require the energy from fuels. Even the disparity in significance of spices can be attributed to technology, however indirectly. The medieval European kingdom was at the mercy of the Italian merchants, Ottoman sultans, and Indian planters to attain expensive spices, especially without any technologies in the fields of preservatives, cultivation, or transport. By contrast, today’s globalized trading network, mixed with extensive advancements in preservatives and wider spice cultivation have reduced salt and pepper from the most expensive commodity on a continent to a kitchen counter constant. Typically, changes in the usefulness of resources go in tandem with shifts in the technologies that put them to use. The introduction of steam power in the Industrial Revolution, for example, necessitated the use of coal and other fossil fuels. Great Britain’s vast underground coal reserves, thus, suddenly became a valuable asset to the country in propelling it to industrial powerhouse. These shifts can also go the other direction. With the rise of oil- and diesel-powered combustion machines in the 20th century, those same coal reserves declined in significance, reducing Britain’s industrial advantage. Human capital is not exempt from these shifts in usefulness. Engineers became of great use whenever the technologies to develop siege weapons (as well as the capital and organization to build them) became available to states; Roman and Chinese armies of antiquity employed great numbers of siege engineers. Similarly, architects were commissioned whenever the means of building elaborate structures became available; the Renaissance abounds with examples of this. Thus, the Fourth Industrial Revolution (or more aptly the Digital Revolution) will enact unique shifts in the usefulness of workers and resources alike, thanks to the nature of the technology involved: the computer. Though Drucker passed away in 2005, he foresaw the rise of artificial intelligence within his predictions about the computer in “What the Computer Will be Telling You” (date unknown), calling out its potential to analyze data akin to what artificial intelligence does nowadays. This brings meaningful shifts for all levels of human labor. The combination of computing with robotic technology and affordability has made it possible for unskilled labor to be replaced en masse, reducing the use for unskilled labor. Even lower-level white collar jobs like clerks and accountants face stiff competition given their work is repetitive at a digital level and liable to be replaced by artificial intelligence. The one field of employment that is expanded as a result of these technologies is the knowledge worker. Partially born from the growth of computing technology, partially an existing beneficiary of said technology, the knowledge worker performs their work on the premise that the grunt work of crunching numbers and calculating growth metrics can be easily done by the tools at their disposal. In an economy where physical production is a linear metric of economic performance, the knowledge worker has limited use. In such an economy that furthermore relies on a chain of human calculators and analog communication, the knowledge worker is extremely limited in capability and is thus not a significant factor in economic output. Hence why the knowledge worker has only risen to prominence within postindustrial economies. Thus, the American economy is especially susceptible to shifts in usefulness as one of the most postindustrial economies on the planet. This has significant consequences for its future economic prospects. For one, it was able to reach its status as a global powerhouse due to the growth of its giant manufacturing base, which took place between the Civil War and World War II. Its further investment in STEM education, priority on innovation, and corporate dominance during the Cold War allowed it to keep its top position throughout the 20th century. However, the Fourth Industrial Revolution has introduced some subtle changes to the economic calculus that necessitate reform of the current system. For one, even though the American economy is already heavily service-based, the automation of tasks at the lower level combined with the augmentation of capabilities in the office means the labor shift is geared towards prioritizing higher educated workers as primary human factors of economic output. Given much of the service sector is not necessarily aligned with knowledge work, the usefulness of the service sector in general is skewed upwards in terms of human capital. For another, the productivity of the knowledge worker rests with both production and mentality. Drucker stressed the autonomy of the knowledge worker as one of their defining characteristics, made possible by the powers of computing and AI. Because the complex calculations are automated by these technologies, that leaves the decision-making up to the human. Of course, the knowledge worker must still be trained in the technical skills required to use the tools at their disposal. However, the decision-making facilities of the knowledge worker, including foresight and rationality, matter greatly if they are to efficiently perform their job. The future competitiveness of the American economy, and by extension many other economies, is dependent upon this. In its manufacturing heyday, the United States was the world’s superpower due to its towering advantage in scale over its European counterparts and the absolute lack of industrialization elsewhere in the world. During the Cold War, the United States once again strode the world economically due to sheer scale, concentration of capital, and worker efficiency. Now, however, economic disparities in the world have narrowed. After rapid industrial development in the twentieth century, East Asia has caught up to America in terms of economic development and has even surpassed it in certain fields like semiconductors. Developing nations, most notably the BRICS countries, have become manufacturing leaders. China in particular has bridged being both the “world’s factory” and a center of highly educated talent. What this all means is that the United States cannot rely on simple scale and the virtue of being the earliest as it did in the past. The combination of knowledge workers requiring extensive high-quality rearing and the dilapidated nature of American institutions like education and infrastructure puts the country at risk of losing its economic edge in the world. However, the American economy is not consequently destined to decay. Its national culture of pursuing individual advancement and success is well-fitted for the world of the knowledge worker. It already possesses a well-educated population that has been used to living in a developed economy for a century. It holds the largest concentration of financial capital in the world. While this by no means encourages complacency, it simply means the country must pursue a different utilization of its resources in order to keep its current economic position in the world. It cannot compete in human numbers, for India and China boast populations far larger and countries like Indonesia and Nigeria are quickly catching up. It cannot compete in manufacturing, as Brazil and China are now the biggest producers of the commodities that America dominated over a century ago. Even in higher-tech industries like semiconductor chips, countries like South Korea and Taiwan have demonstrated that small populations can easily and quickly trounce less-prepared competitors many times their sizes, as the United States has learned of late. So ultimately, the United States ought to perceive that through the synergy of its relative strengths in all the aforementioned fields with investment into cultivating a robust knowledge worker base, it will be best positioned to retain its premier status as a global economic leader. In conclusion, the American economy will have difficulties adjusting to this new reality in spite of its current advantages in education and economic maturity. What matters most - not only for the United States but for the other economies of the world - is that with the Fourth Industrial Revolution, the usefulness of labor will play a defining role in each country’s economic standings. Those that grasp this concept will prosper, while those that neglect it will fall behind. The use of the knowledge worker, and subsequently the highest level of human capital, will become top priority. References Drucker, P. F. (1995) “What the Computer will be Telling You” – in People and Performance (Routledge)

Welcome to the fourth blog post in this series. We’ve covered debates about the nature of knowledge, the concept of knowledge work and its evolution, and the wise use of knowledge and information. In this issue, I’d like to focus on the importance of transdisciplinary knowledge in critical thinking in all organizations. We don’t have to be experts in a given field to use the skill sets and expertise that different disciplines can teach us. The field of history is an excellent example of how to use interdisciplinary thinking in exercising judgment. For instance, what can the discipline of history teach managers and practitioners who make decisions in today’s organizations? Different kinds of evidence : Historians are trained to understand the importance of evidence. First-hand sources are crucial to gaining a sense of what happened from multiple perspectives. These are accounts from people who witnessed events as they happened. Secondary sources are filtered through someone’s viewpoint. John Dean, an American attorney, served as Richard Nixon’s White House counsel during the Watergate scandal. Dean played a significant role in the coverup of the administration’s attempts to illegally obtain information from the Democratic National Committee during Nixon’s 1972 re-election campaign. Dean’s statements and testimony regarding events during the Nixon administration would be considered primary evidence. Journalist Garrett Graff’s 2022 book, Watergate: A New History, is a secondary source, analyzing the historical event using multiple sources, including public records. While Dean’s statements reveal his own perspective of events, the Graff work presents his analysis of multiple sources, including many primary sources. We need both the evidence of people who were “in the room” and those who are more removed. Lincoln famously assembled a cabinet that was a “team of rivals,” consisting of people who would have reason to disagree with him or challenge his decisions. Drucker discussed the importance of dissenting opinions/perspectives in decision making. As leaders, we need to watch for our tendency to listen to or consider sources that seem comfortable and familiar to us. Understanding bias : When I taught history, students often resorted to the argument that all sources were biased, and therefore unreliable. I told them that if their life project was a search for an unbiased source, they would be unfulfilled. Human beings are, by nature, filled with implicit and other biases. The sooner we realize this, the better. As historians, we deal with this all the time as part of the context of our sources. A slaveholder during the debates on the Constitution would obviously have favored maintaining slaveholding states. The fact that we find this position abhorrent today is irrelevant; the debates regarding the validity of slavery were a real part of American history, and economic interests played a pivotal role in arguments for maintaining the system of bondage. Today, a major oil and gas landholder will obviously be “biased” against legislation that is unfavorable to her position. Those who favor more affordable housing will be “biased” towards legislation that forces rent controls, low-income housing construction, and accommodations for unhoused people. The problem is with the word “bias” and its negative connotations. Advocates for a particular position will advance arguments that give more weight to their viewpoint. They may be paid to do so, or they may do so as part of an organizational mission and vision. The more interesting questions lie in our unrecognized biases. Every individual needs to be held accountable for considering their own implicit biases. Are there people that I, for some reason, view in a negative light? Is it because of their economic status? Political leanings? Speech patterns? Appearance? The more we engage with interdisciplinary thinking, the more we are forced to confront our own state of knowledge, its basis on assumptions, and our blind spots that result from a lack of exposure to different modes of analysis. Importance of context : Decisions and judgments are not made in a vacuum. Local, regional, and international events can impact even small decisions. Rosa Parks did not sit in the white section of a public bus because she was old and tired. She was a political activist capitalizing on a change signaled by a Supreme Court decision (Brown vs. Board of Education). In this context, a single individual’s decision was driven by a shift in attitudes about race in the United States that had been building since the early 1900s and exploded after the end of the Second World War. Sometimes, the timing of a decision involves understanding the temperature of society, not just the room. If you have a major change to implement in your organization, is now really the time to do it (even if you want to do it now, or the budget calendar pushes you to do it, or whatever other internal force is driving that decision)? Look at some of the corporate blunders that involved a failure to read the room (Bud Light’s transgender promotional campaign for example). The “culture wars” in the United States over what is acceptable in popular culture and advertising has created a mine field for marketers seeking to cultivate customers in various demographics. Importance of ‘why’ : We spend a lot of time on “what” decisions (what to do, what to buy, etc.). But do we think about why? I’ve always felt that it was my obligation as a person in any leadership position to explain the why behind anything: why are we taking on a new activity, spending money, bringing on people, applying for a grant, cutting a program, instituting a policy, etc. We should think a LOT about why more than what, and we should spend a LOT more of our time discussing why with people we work with. History gives us examples again. Why were George W. Bush and so many Americans convinced that Iraq would welcome a democratic program of nation building in that country? Why are we surprised when some decisions we make end up going in a completely different direction than expected? Open mindedness : Historians don’t just deal with organizing facts. They deal with making sense of those facts. And, sometimes, that involves new interpretations of old facts. Some really innovative and fresh historical scholarship has involved looking at old material with a new view. Historians have taken revered figures, such as Martin Luther King, Jr., and depicted them as real people with faults and character flaws. Similarly, they have rehabilitated people that have been depicted as shallow villains, such as Benedict Arnold, as more complicated actors. While such nuanced views of people might require effort to understand, it reflects the reality of our world, which is not black and white with easy answers to complex problems. Thinking of new ways of looking at “what we all know” is an important skill that Drucker excelled at. We face incredible challenges with respect to exercising judgment and wisdom. It is too easy to fall into habits ingrained by our disciplines. If we are quantitatively inclined, we tend to rely on data to make decisions for us. But this discounts the importance of phronesis – the marriage of wisdom to action. We all have biases related to experience, culture, upbringing, and a multitude of other factors. Are we fuzzy or techie, and do we appreciate both? Do we lack experience, or have too much of the wrong kind of experience? Drucker’s admonition that management as a liberal art involves self-knowledge and wisdom indicates that we need to constantly think about challenging ourselves as decision makers.  Next time, in our final installment of this issue, we bring knowledge, wisdom, and technology together: How can human wisdom and AI collaborate to redefine knowledge, knowledge work, and a knowledge society? Graff, G.M. (2022). Watergate: A new history. Simon & Schuster. Hartley, S. (2017). The fuzzy and the techie: Why the liberal arts will rule the digital world. Houghton Mifflin.