Back in 1967, the management guru Peter Drucker published a piece in the McKinsey Quarterly in which he predicted the impact that computers would have on society and corporate management.

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The article became a classic, with good reason. As I re-read it this morning, I was struck especially by this passage:

The computers, despite all the excitement they have been generating, are not yet economically important. It’s only now that IBM is shipping them out at a rate of a thousand a month that they’re even beginning to have an impact. But we haven’t begun to use the potential of the computer. So far we are using it only for clerical chores, which are unimportant by definition. To be sure, the computer has created something that had never existed in the history the world—namely, paying jobs for mathematicians. But that is hardly a major economic contribution, no matter what the graduate dean thinks.

So the economic impact of the new technologies is still in the future. If we subtracted every single one of them from the civilian economy, we would hardly notice it in the figures—perhaps a percentage point or two.

But this situation of linear movement is rapidly changing in every respect. And the greatest change is one that our Rip Van Winkle economist, looking only at the figures, wouldn’t even notice: In the past 20 years we have created a brand-new form of capital, a brand-new resource, namely knowledge.

Almost fifty years later, the impacts of this new form of capital are everywhere. And while Drucker correctly foresaw an age where younger and  younger managers would be needed to keep up with the rapidly shifting nature of information and the systems that create and manage it, what he could nod see yet was the way in which knowledge-based business would multiply the value of human labor by staggering amounts. In other words, Drucker saw computers as machines that would reduce the drudgery of management analysis by making the right information more easily accessible. In that sense, a computer was a tool that existed to make human labor and management more efficient, not unnecessary. But things have not worked out that way.

Computers have made it possible to eliminate whole tranches of labor and management, and in many cases it is the human labor element that is added only  after the computers have reached their limits of ability — this is the opposite of what Drucker envisioned. As I noted in my review of Piketty’s book, this has created a real dilema for society. On the one hand, technology can make  knowledge-based business fantastically successful. On the other hand, that success only goes to the few humans needed to make the machines work.

It would be interesting to have Drucker’s fictional “Rip Van Winkle economist” wake up fifty years later and look around at the world computers have created. I think he would be shocked to find that in the 21st century economy the “morons” are mandatory but the “managers” are optional.

Read more:

http://www.mckinsey.com/Insights/Organization/The_manager_and_the_moron?cid=other-eml-cls-mip-mck-oth-1409

https://reconnomics.com/2014/06/21/must-read-capital-in-the-21st-century-by-thomas-piketty/

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Posted by Carlos Alvarenga

Carlos Alvarenga is the Executive Director of World 50 ThinkLabs and an Adjunct Professor at the University of Maryland's Smith School of Business.

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