The Future of Success (32 page)
A society intent on giving caring attention to its young children would, in addition, acknowledge that parenting isn’t just a private role but also an important social responsibility. Any parent who decided to remain at home with a child under the age of three would be eligible for financial support equaling half the nation’s median income. Such support could come in the form of a refundable tax credit.
Reverse the sorting mechanism.
The sorting mechanism is at its most pernicious when it comes to schools, whose quality now largely depends on the incomes of the families residing in the school district. Because families are sorting by income into different townships, and because about half of school funding still comes from local property taxes, families whose children are most at risk of failing in the new economy cannot afford the schools they most need. A society intent on reaping the advantages of economic dynamism while minimizing its social injustices would shift school financing away from local property taxes. One option would be to replace local property taxes by a national education trust fund, financed by a small tax on the net worth of all citizens.
School vouchers might improve the quality of schools, but we would need to guard against the possibility that the poorest children with the biggest learning or behavioral problems would get sorted together into the least desirable schools. One way to avoid this would be to make the size of the voucher proportional to family needs. Children from the very poorest families would have the largest and most valuable vouchers, thereby making the children sufficiently attractive for good schools to want to compete for them.
A way to break up high concentrations of poverty would be to give all poor families housing-assistance vouchers, enabling them to afford homes in higher-income communities. Preliminary evidence suggests that poor children of families who have the opportunity to move to higher-income neighborhoods do better than the children who remain behind in the poor ones.
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In addition, we could require that housing developers include in their plans for upscale communities a certain proportion of low-income residences. “Inclusionary zoning” like this has met with considerable success in specific places around the nation. And we could bar private insurers from imposing higher-risk premiums on people because of where they live, what they earn, or their genetic makeup.
We could seek many other opportunities for different communities of race, income, and age to interact with one another. In fact, such bridging could become an overarching goal of community-based nonprofit organizations. Faith-based institutions would seem uniquely qualified to reach across such divides. Universities could link up with poor high schools and grammar schools in their region; their undergraduates could tutor in such schools, university faculty could teach occasional classes and keep the faculties of the schools apprised of new research, and promising high-school seniors could be given university scholarships.
P
ROPOSALS
such as these are points of departure rather than a full agenda of reform. They are merely a sampling of what might be done, fodder for debate about what should be done. The basic idea common to all of them is this: Rather than preserve and protect the old, or go to the opposite extreme and let rip with the new, a balanced society would ease the economic transitions and bring most of its people along, so that citizens’ lives could be materially better, more cohesive and equitable, and psychologically saner. Although this path won’t be paved cheaply, a dynamic economy can well afford the cost; and I believe the cost is worth accepting for the sake of social and personal tranquillity.
Some will argue that the better-off members of society should not be required to foot most of the bill for initiatives like these, and that they will refuse to do so if they are asked. In a pinch, they’ll move themselves and their personal fortunes to the Netherlands Antilles, or to any other comfortable retreat around the world. But I think this view is far too cynical. The sorting mechanism is a powerful force, to be sure, but the vast majority of better-off citizens feel allegiance to their society, and want to keep it from becoming further fractured and stratified. In fact, the sorting mechanism may itself have discouraged some people from taking a more active role, since any singular sacrifice on their part—say, moving into a poorer community than they could afford to live in, or sending their children to one of its schools—would impose a larger burden on them than would be the case if richer and poorer were better mingled to begin with.
Sorting may also have blinded the better-off to the conditions in which the less fortunate actually live, allowing the better off to pretend that almost everyone else is “like them.” Reversing the sorting mechanism would help restore a sense of common ground. In addition, the better off will be more willing to contribute if they understand that the likely alternative is an eventual backlash against economic dynamism—including trade protections and neo-Luddite controls on technology—that will be far more costly to them in the long run. A yawning gap between rich and poor threatens the peace and stability of society, including its better-off members. Finally, it seems likely that some of the better off would prefer more economic security in their own lives, and a lower risk that they or their families might suddenly lose economic ground.
THE THREE CONVERSATIONS
We stand at the precipice of a new era. The economic and technological forces that have been building for more than two decades are about to crest, and thereby change our personal and social lives even more profoundly than they have been affected so far. There is no turning back to the old jobs and the old securities, to the old families and the old communities. So where do we turn? We delight in the terrific deals of the new economy. We stand in awe of its technological prowess. We are dazzled by the instant opportunities it presents for vast wealth. Yet where is the moral anchor? To what do we attach ourselves, our loyalties and our passions? Where do our friends, families, and communities come in? In what do we invest our integrity? How, in the end, shall we measure success—our own, as well as our society’s?
The measure of a successful life surely goes beyond what we can acquire or the extent of our net worth; the test of a successful society extends beyond its gross national product. Success depends on our spiritual grounding, the richness of our relationships, the sturdiness of our families, and the character of our communities. Yet most of us are racing into this new era with remarkable insouciance—blindness, perhaps—toward what it means for our lives beyond our roles as consumers and investors.
Rather than debate the larger trade-offs, we’re engaged in at least three separate conversations. The first is a breathlessly enthusiastic one, about the wonders of the new economy. That economy’s terrific deals are very real, and will vastly improve those aspects of our lives that can be enhanced by what we buy. In a few years, through broadband and wireless Internet connections, as well as advances in molecular and genetic research, today’s terrific deals will be overshadowed by even better ones. Many products and services will be cheaper, faster, more powerful. Some will enable us to live longer, or be more readily entertained, invigorated, stimulated, and interconnected. The dizzying exuberance of the new economy is justified. But the terrific deals alone don’t prove that the price we pay for them with the rest of our lives is worth it.
The second conversation is a fearful one, about the dangers and depredations of unfettered capitalism, the power or greed of global corporations and international finance, and, sometimes, the encroachments of immigrants, foreigners, and ethnic minorities. These concerns can be heard with increasing vehemence on both the left and the right of the political spectrum, in America and elsewhere around the world. Given the scale of the dislocations wrought by the new economy—dislocations and upheavals that are only beginning—it’s entirely understandable that many people will be afraid or disoriented and many others will feel unfairly burdened. For several decades, factory workers in advanced economies have experienced job loss and declining incomes. What happens when many salaried, professional, and service workers experience the same things? But this fearful conversation misplaces the blame. It assumes that the cause of the upheavals lies in corporations, globalization, international capital flows, or in the flows of immigrants and ethnic minorities. It thereby confuses causes with consequences. Corporations, capital flows, and immigrants are responding to the widening range of choice open to consumers and investors around the world, the increasing ease by which all can switch to better deals, and the intensifying competition that results. Some of those who complain loudest are simultaneously reaping great benefits from the new economy.
The third conversation is a private one, about the difficulties of achieving a balanced life in this new era. As we work harder and sell ourselves more intensely, and as we adopt the market-directed (have the “Courage to Be Rich”!) ethos of our age, many of us are anxious about what’s becoming of our families, our friendships, our broader communities, and even our innermost selves. Yet we tend to view this unease in solely personal terms. To the extent that we feel we’re failing in one domain or the other, we blame ourselves for being “inadequate” parents, spouses, workers, friends, or citizens. We thus overlook the larger forces that are making all such personal attempts to achieve “better balance” more difficult or complicated.
These three separate conversations are different responses to the same set of phenomena. Some of us might even be engaged in all three conversations simultaneously without seeing the connections between them. We may delight in the terrific deals we can obtain, while we also fret about what seem like encroachments by global corporations, trade, and immigrants, and at the same time worry about the personal demands our work is exacting from the rest of our lives. But if we are to deal effectively with the larger trade-off before us, we must understand the connections between these three conversations.
It is time for a larger discussion about what combination of economic dynamism and social tranquillity we want for ourselves, our families, and our society; and about the public choices we need to make in order to achieve this balance. What is the proper measure of success in the Age of the Terrific Deal? The new economy confers vast benefits, but it also generates social dislocations and personal stresses. All are intensifying. We will shortly be presented with vastly better deals and greater opportunities. Yet we, and every society, will have to cope with a much greater degree of social upheaval, and to struggle more arduously with the escalating demands of work on the rest of our lives.
This cannot be—it must not be—solely an economic conversation. It is more fundamentally a moral one. We are not mere instruments of the new economy. We are not slaves to its technological trends. And we should not misdirect the blame for its less desirable, more worrisome consequences. As citizens, we have the power to arrange the new economy to suit our needs, and in so doing to determine the shape of our emerging civilization. Every society has the capacity—indeed, the obligation—to make these choices. Markets are structured by them. Families and communities function according to them. Individuals balance their lives within them. It is through such decisions that a society defines itself. The choices will be made, somehow. They cannot be avoided. The question is whether we make the most important of these choices together, in the open, or grapple with them alone and in the dark.
NOTES
INTRODUCTION
. Data mentioned in this introduction are included in more detail within the book, as are the relevant citations.
ONE: THE AGE OF THE TERRIFIC DEAL
. This discussion owes an intellectual debt to the eminent political economist Albert Hirschman, who once listed “exit” as one of three rational responses by individuals to firms, organizations, and governments that were in decline. By “exit” he meant abandonment of a failing firm, organization, or government, in pursuit of a better situation elsewhere. The two other responses he listed were “voice” and “loyalty.” Rather than abandon a difficult situation, the individual either would voice his concern and seek improvement through negotiation, deliberation, and compromise; or would simply stay put out of loyalty to the firm, organization, or political entity. Arguably, of the three responses, exit has been America’s preferred one. The nation was founded by individuals who had left other places where life was proving difficult in pursuit of something better. In the emerging economy, as I argue, exit is not a response reserved only for organizations that are failing or deteriorating. Now, and increasingly in the future, people will exit quickly from any commercial relationship, regardless of how satisfactory, when a better deal comes along. See Albert Hirschman,
Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States
(Cambridge: Harvard University Press, 1970).
. The data show that Americans continue to be on the move, although not necessarily at a higher rate than thirty years ago. See
Statistical Abstract of the United States,
1999, Section 1, Table 30. See also Sally Ann Schumaker and Daniel Stokols, “Residential Mobility as a Social and Research Topic,”
Journal of Social Issues,
vol. 38, no. 3 (1982), pp. 1–19. See also data cited in
The Economist,
September 20, 1997, p. 27.
. Frederick Jackson Turner’s notable essay is called “The Significance of the Frontier in American History,” 1893, reprinted in Turner,
The Frontier in American History
(New York: Henry Holt, 1920), p. 38.
. Horace Greeley popularized the phrase “Go West, young man,” but did not originate it. It came from John Babsone Lane Soule, in an article first published in the
Terre Haute
(Indiana)
Express
in 1851. Moreover, Greeley did not urge every young man to go West, but only those with nothing better to do. “The best business you can get into you will find on your father’s farm or workshop,” he advised. “If you have no farm or friends to aid you, and no prospect open to you there, turn your face to the great West, and there build a home and fortune.” In “To Aspiring Young Men,” quoted in James Parton,
Life of Horace Greeley
(1855).
. The essential elements of the planning system for mass production are described in John Kenneth Galbraith’s
The New Industrial State
(Boston: Houghton Mifflin, 1967).
. Readers interested in a more detailed description of the shift from the stable high-volume production system of the industrial age to the “high-value” system of the information age can find it in my book
The Work of Nations
(New York: Alfred A. Knopf, 1991), especially chapter 7.
. Adam Smith,
The Wealth of Nations
(1776), Book 1, Chapter III (New York: Modern Library, 1994), p. 19.
. For an abundance of evidence of the declining costs of moving objects, services, people, and messages across distances, see Frances Caincross,
The Death of Distance
(Cambridge: Harvard University Press, 1997).
. Even such business services as advertising, marketing, law, finance, and consulting, which used to be provided in close proximity to clients and customers, are moving greater distances away. Evidence can be found in Jed Kolko, “Can I Get Some Service Here? Information Technology, Service Industries, and the Future of Cities,” unpublished ms., Harvard University, November 1999.
. The calculation is credited to Federal Reserve chairman Alan Greenspan. See David Wessel, “From Greenspan, a (Truly) Weighty Idea,”
Wall Street Journal,
May 20, 1999, p. B1. See also Alan Greenspan, “Goods Shrink and Trade Grows,”
Wall Street Journal,
October 24, 1988, p. 21.
. Even as search engines become quicker and more sophisticated, the number of Web sites continues to mushroom. There’s no reason to suppose that search engines will ever be able to assess more than a small percentage of the sites. Lisa Guernsey, “Seek—But on the Web, You Might Not Find,”
New York Times,
July 8, 1999, p. B8.
TWO: THE SPIRIT OF INNOVATION
. One commendably candid example of neo-Luddite logic is Jeremy Rifkin’s
The End of Work
(New York: Putnam, 1995). “Caught in the throes of increasing global competition and rising costs of labor, multinational corporations seem determined to hasten the transition from human workers to machine surrogates” (p. 6).
. Further discussion of the relationship between unstable markets and changes in the organization of the firm can be found in my book
The Next American Frontier
(New York: Times Books, 1993), and also in M. Piore and C. Sabel,
The Second Industrial Divide
(New York: Basic Books, 1994). A formal treatment can be found in Masanao Aoki, “Horizontal and Vertical Information Structure of the Firm,”
American Economic Review,
vol. 76, No. 6, pp. 971–83. See also D. Thesmar and M. Thoenig, “Creative Destruction and Firm Organization Choice: A New Look Into the Growth Inequality Relationship,” unpublished ms., presented at the National Bureau of Economic Research Summer Institute, Cambridge, Mass., July 19, 1999.
. For more on Joseph Schumpeter, see Robert Heilbroner’s insightful treatise on the lives of notable economists,
The Worldly Philosophers
(New York: Simon & Schuster, 1953), p. 238.
. Schumpeter’s glum predictions can be found in his
Capitalism, Socialism, and Democracy
(New York: Harper & Brothers, 1942).
. The number of new patent-related lawsuits exploded from 800 in 1980 to more than 2,100 in 1997, according to a review of federal court records by Eugene Quinn, Jr., of the Franklin Pierce Law Center. Reported in Richard Korman, “Lo! Here Come the Technology Patents. Lo! Here Come the Lawsuits!”
New York Times,
December 27, 1998, Section 3, p. 4.
. Company value per employee is found simply by dividing the total capitalization of the company by the number of employees. By the time you read this, both the numerators and the denominators are likely to have changed, but the value per employee is likely to remain in the same broad range.
. For more on the small, entrepreneurial companies of southern California, see Joel Kotkin, “The Rise and Fall of the Big Bureaucratic Organization,”
American Enterprise,
January 1, 2000, pp. 30–33.
. Microsoft obviously disagrees with the proposition that its operating system should be available to all competitors and all product developers free of charge because it has become a basic standard akin to a generic name like “aspirin.” In this respect, it’s not without irony that Microsoft demanded that AOL establish a common standard for “instant messaging” so that Microsoft users could gain easy access.
The rise of industrial standards and the importance of standards for spurring innovation during the first decades of the twentieth century have not received the attention they deserve. The best discussions I’ve found are in Robert H. Wiebe,
The Search for Order 1877–1920
(New York: Hill and Wang, 1967); Louis Galambos and Joseph Pratt,
The Rise of the Corporate Commonwealth
(New York: Basic Books, 1988); and Ellis W. Hawley,
The New Deal and the Problem of Monopoly
(Princeton, N.J.: Princeton University Press, 1966).
THREE: OF GEEKS AND SHRINKS
. For a formal argument that increases in the supply of skills more than proportionately increase the demand for skilled people by altering research and development activity, see Daron Acemoglu, “Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality,”
The Quarterly Journal of Economics,
vol. 113, No. 4 (1998), p. 1105.
. For evidence on the effects of information technologies for magnifying good ideas and allowing them to spread more quickly through organizations, and to diffuse more rapidly to clients and customers, see T. Bresnahan, E. Brynjolfsson, and L. Hitt, “Information Technology, Workplace Organization, and the Demand for Skilled Labor,” National Bureau of Economic Research Working Paper no. 7136, May 1999. See also L. Katz, “Technological Change, Computerization, and the Wage Structure,” in E. Brynjolfsson and B. Kahin, eds.,
Understanding the Digital Economy
(Cambridge: MIT Press, 2000).
. Ellen Langer’s provocative book is entitled
The Power of Mindful Learning
(Reading, Mass.: Perseus Books, 1997), and the quote is found on p. 114.
. The passage by Annie Dillard is found in her small, lovely volume on the craft of writing,
The Writing Life
(New York: HarperPerennial, 1990), p. 56.
. Research analysts are spending more of their time advising and less of their time gathering information, which is what you’d expect as they shift from being information brokers to becoming knowledge brokers. In one study of major investment research firms in the late 1990s, conducted by Tempest Consultants for Reuters Group, analysts were asked how they allocated their time. The amount of time spent on fundamental research, including company visits, steadily dropped, while the amount of time spent advising institutional clients steadily rose. See Gretchen Morgenson, “So Many Analysts, So Little Analysis,”
New York Times,
July 18, 1999, Section 3, p. 1.
FOUR: THE OBSOLESCENCE OF LOYALTY
. For evidence on the declining importance of corporate headquarters in relation to their “hometowns,” see Charles H. Heying, “Civic Elites and Corporate Delocalization: An Alternative Explanation for Declining Civic Engagement,”
American Behavioral Scientist
, vol. 40, no. 5 (1997), pp. 657–68.
. Quoted in Ian Somerville and D. Quinn Mills, “Leading in a Leaderless World,”
Leader to Leader
, Summer 1999, p. 32.
. Data on executive compensation are available in the proxy statements filed with the Securities and Exchange Commission. These data have been accumulated and analyzed by Graef Crystal, who for many years published his findings in a series of “Crystal Reports.” At this writing, Crystal distributes his studies through Bloomberg Business News. See, for example, Graef Crystal and Brian Rooney, “CEO Pay Soars, Supercharged by Options: Bloomberg Pay Survey,” Bloomberg Business News, at Bloomberg.com, April 19, 2000.
. A study of 1,300 occasions between 1980 and 1996 when chief executives at Fortune 500 firms left their jobs revealed that one-third left involuntarily. Controlling for level of performance, a chief executive appointed after 1985 was three times more likely to be fired as one appointed before that date. See Rakesh Khurana, “Transitions at the Top: CEO Positions as Open and Closed to Competition,” Sloan School of Management, Massachusetts Institute of Technology, working paper, 2000. See also Jay Lorsch and Rakesh Khurana, “Changing Leaders: The Board’s Role in CEO Succession,”
Harvard Business Review,
vol. 77, no. 3 (1999), p. 96.
. Quoted in Steve Lohr, “Compaq Computer Ousts Chief Executive,”
New York Times,
April 19, 1999, p. A17.
. Quoted in Ellen Schultz and Susan Warren, “Pension System Ousts Company’s Board in Big Victory for Institutional Investors,”
Wall Street Journal,
May 29, 1998, p. A2.
. Evidence that the growing threat of hostile takeovers has resulted in more cost-cutting, including lower wages for employees and a higher likelihood of plant closures—thus improving productivity but hurting incumbent workers and managers—has been documented by Marianne Bertrand of Princeton and Sendhil Mullainathan of MIT, who undertook a number of studies using state antitakeover laws in the 1980s as “exogenous” measures of changes in takeover threats facing firms chartered in different states. See M. Bertrand and S. Mullainathan, “Micro-evidence of the Effects of Corporate Governance,” Massachusetts Institute of Technology, 1999; and M. Bertrand and S. Mullainathan, “Executive Compensation and Incentives: The Effect of Takeover Legislation,” National Bureau of Economic Research, No. 6830, December 1998. See also Paul Osterman, “Work Reorganization in an Era of Restructuring: Trends in Diffusion and Effects on Employee Welfare,”
Industrial and Labor Relations Review,
vol. 53, no. 2 (January 2000), p. 179.
. Quoted in Constance Hays, “Coca-Cola to Cut 20 Percent of Employees in a Big Pullback,”
New York Times,
January 17, 2000, p. A1.
. Described in Marcia Stepanek, “How an Intranet Opened the Door to Profits,”
Business Week,
July 26, 1999, p. EB32.