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Alvin Toffler


									                               THE SHOCK OF THE 21ST CENTURY

                                       Lecture by Alvin Toffler

                               Summary prepared by Sylvia Petter
                             Communications Service/IS Department

       On Tuesday, 23 May 1995, Alvin Toffler, the renowned author and social thinker, spoke in
Lausanne before an audience of 300 Swiss businessmen. Alvin Toffler is American and the author
of the trilogy: Future Shock (on the process of change), The Third Wave (on the directions of
change), Power Shift (on managing change). His latest book, War and Anti-War, deals with
creating a new civilization. He works in close intellectual partnership with his spouse, Heidi Toffler,
who is renowned in her own right as a social thinker.

Part 1:

        Toffler raises a number of questions as he observes what others see as chaos. He looks to
the future, not with fear but with an awareness of "what's happening" and a conviction that this
chaos can be used to benefit the world. Some people call Toffler a "futurist". Toffler maintains that
no serious futurist deals in "predictions". But we can read the signs.

        We must become aware of the change forces that are shaping the world. Toffler maintains
that we are facing a period of turmoil, as can be seen from events in Mexico and China, and trade
talks between the US and China and Japan. He refutes popular commentary that much of today's
chaos and that before us is the result of the Cold War. Indeed he does not view chaos in the
negative. Toffler prefers to speak of waves of change.

        The first wave was the agricultural revolution which began more than 10,000 years ago by
the planting of the first seed, possibly by a woman. There, the economic property was land -
exhaustible, unable to be shared. Social structures included various groupings that stayed where
they worked, feudal states, etc. The second wave began about 300 years ago with the industrial
revolution as peasant society moved towards an urban one, bringing with it commuting, rote work
and pollution.

        1956 in the US was a pivotal year - for the first time the labour force had changed with
white-collar workers outnumbering blue-collar ones. Other powerful changes came about in the
latter half of the 50s - the universalisation of television, the first civilian use of computers, sputnik
and the pill. All these changes have to be taken together. The "brute force" economy was
becoming the "brain force" one and the third wave of the information economy had started. If we
don't understand what the information economy means for Europe and global power, then our
strategies will be wrong. Traditional economic tools from the first and second waves are no longer
relevant. Knowledge as a resource was not taken into account.

        In the third wave, knowledge is the dominant factor and the right knowledge in the right
head at the right time can substitute for all other factors of production. What are the
consequences? In the first wave, capital (land) was tangible. In the second wave, it was still
tangible, but had become symbolic (shares), but physical assets were still dominant. Today, if we
have stock in Microsoft, it is still symbolic, but we no longer care about the plant and other
tangibles; we only care about what is inside the heads of the people at Microsoft. We are
approaching a super-symbolic economy where for the first time "capital" as knowledge can be
shared and, if it is used intelligently, leads to yet more. Knowledge is an inexhaustible resource
and consequently, our economic assumptions need reviewing. Our tools for measuring no longer
work for knowledge-based processes and enterprises.

        The challenge lies in finding new ways for evaluating. The mass production of the industrial
age with its high cost of change, for example in assembly-line work in factories, is a backward
form of production. The move is towards demassification. This can be seen from the demand for
variety and the upsurge of niche marketing. As primitive technologies impose standardization,
information-driven production brings down the cost of customization. We are moving towards
particle marketing, precision targetting of the individual - made possible by data bank accesses.
The catchword is "think globally, sell individually." Micromarkets and technology allowing
customization are running in parallel, their link being the mass media. But even mass media is
becoming demassified, apparent from the more than 30 cable channels in each household. The
carrier is becoming irrelevant as in reality a person is reachable through an infinite number of
channels as the cost of targetting and communications comes down. These narrowing market
segments and the narrowing media conflict with the industrial society's principle of mass
production and also the second wave's capacity for mass destruction.

        Family structure is not dead. The nuclear family of the second wave has given way to
multiple forms of family life. From the standardization of the nuclear family (in the US - father
mother, two children under 18) the move is also toward demassification. Indeed, demassification
may be seen on every level. A demassified population is in flux and politics have become organic,
as expressed in grass roots organizations. When we speak of individualism, this is not selfishness
- perhaps what is meant is individualization, the possibility of expression in many different ways.

       In companies we still think in human-relations categories. Mind work is increasing, muscle
work diminishing. Today, work is becoming less interchangeable. Just think how hard it is to take
someone out of a team and plug a new person in. Support is becoming of greater importance, with
the value added being a result of mind work and leading to intelligent products. Rates of
innovation accelerating due to competition lead to enormous technological changes.

        In the second wave, big was better. In the third wave, businesses and work units are
becoming smaller. The diseconomy of scale leads to suffering from the downside of business
which is reflected in unsatisfactory internal communication and difficulty to adapt. In 1994, 3.5
million jobs were created in the US. The majority were in companies employing fewer than 4
people. These people were young, technology dependent, service oriented and aiming for
international markets.

        With respect to organizations, a change in scale demands a change in structure.
Bureaucracies are ways not of organizing people but of organizing information, with domination
through knowledge. If we strip internal information structures to their essence, we find horizontal
and vertical flows. With a horizontal flow the company faces the outside. The information it needs
is fragmented, compartmentalized. This is not helpful for decisions. Often the information does not
get past the "information gatekeeper" . Such gatekeepers were at every unit. But decisions require
synthesis, thus a vertical hierarchy. The hierarchical information structure was efficient at the time
of the first world war. Today, every company is trying to flatten its information technology.
Bureaucracies are now less efficient due to the struggle over the control of information, the fact
that more communication is done informally (coffee breaks) rather than through reports, and the
introduction of outsourcing to ease the work load. This leads to upheaval in a rolling wave of
restructuring. In bureaucracies, we take for granted that those higher up have better information,
make better decisions and that the people at the top are smart. But those at the top don't have a
clue of what those at the bottom need. So they move to empowerment, to enable people to be
able to do their work. And organizations begin to take on strange new forms. For an organization
to work in the new structure it needs a new internal infrastructure and electronic tools.

        Telecommunications are an important part of the shift from first/second wave economies to
a third wave one. The new brain force economy is faster operating with shorter deadlines and
delivery. So we must move to real time management, since the difference between fast and slow

sectors of the economy and fast and slow economies are more and more accentuated. The third
wave shift comes with a continual pressure for change. Changes will speed up even more as the
biological revolution converges with the information one. We shall move towards a new way of life
and our civilization must go beyond today's most common global scenarios.

Part 2:

        We have seen how interrelated changes affect the economy, but the process is not yet
complete. The economy of the future will be very different and a number of social, political and
other questions will be raised. The impact of organizations of a global system is changing as we
see that our politicians, diplomats and policy makers, what we refer to as international relations,
are way behind. In the US, all the major systems, like health, values, etc. are in crisis. They
functioned well in the industrial society but can no longer do so. Changes are taking place on a
global scale and what most projection forget is conflict. It is impossible to make changes of this
scale without experiencing conflict. The second wave of change was beginning as the first wave
was playing out, leading to conflicts between the elite of the land and the industrial elite, thus
bringing further conflict in the social and political arenas.

         The American Civil War (1861-1865) was not only a war to end slavery. It mirrored the
rising industrial wave in the north conflicting with the slave-based agrarian power of the south - the
economic collision of increasing tariffs and cheap labour. In Japan, the revolution was less bloody.
Yet it concerned the samurai feudal elite conflicting with the rifles of the emperor - a first versus
second-wave conflict. Today, many conflicts close to us can be analyzed with wave analysis. Take
Sarajevo, where the traditional religious folk are pitted against the modern thinking of the city -
again a first/second wave conflict, albeit with other things happening at the same time. In Northern
Iraq, where there is a large Kurd population, we find another example of first/second wave conflict
as the city-based parties fight tribal interests. Similar conflicts may be seen in Turkey, China and
South Africa. In South Africa, the city-based ANC conflicts with the rural Inkatha. In the Ukraine,
the agriculturally dependent west conflicts with the industrialized east. First and second waves are
still playing themselves out as conflicts arise between the elites of different systems.

        If we take GATT, the main battles are being waged with respect to intellectual property
which has become an issue since intellectual property is information intensive. We should also
note the rise of Asia as an economic force since the beginning of the third wave. Japan was the
first country to use information technology in manufacturing and to invest in Asia. But it's mistake
was to neglect to apply it to service sectors, and in telecommunications it is still on the second

        Compared to the US and Japan, is European unemployment an accident? In Europe,
agriculture is still heavily subsidized (first wave) and the third wave is starved. Second wave jobs
are being hit since the third wave has been ignored. This strategic error accounts for the rise in
unemployment in Europe. European integration has failed to prevent the horrors of ex-Yugoslavia.
Was there perhaps too much haste in recognizing Croatia? European common security, law
enforcement and currency have all failed and Europe's difficulties have been due to a strategic
error. The fathers of Europe in the 50s aimed to integrate Germany economically so as to avoid a
future war. Yet, as the third wave is rising, the European Union is recreating economic structures
of the industrial age in standardization, education, currency, mass marketing and centralization,
even to the extent of acting on the internal mechanisms of Member countries. Europe has tried to
reinvent a second-wave structure at a time when the third wave is well underway in the US. In the
EEC, things are still too centralized, with blurring of the boundaries between agriculture,
manufacture and services. In Germany, where the second wave is still heavy and dependent on
physical exports, the value of the currency has been affected, leading to 3.8 million unemployed.
France has the highest unemployment in Europe. These and other pointers show that European
integration is based on an obsolete strategy.

        It should be noted that most opposition to the third wave comes from the first and second
waves. This can be seen from current dangerous political tendencies. If Europe, and Switzerland,
are to succeed, then they must change their strategies. Advanced information-based technology is
needed to compete on the world market.

         World power structures are changing. In some countries there is still a first-wave power
structure, in others a second-wave one and in countries like the US, Japan and Singapore, the
third wave is well under way. The world can be divided into economies that are land based,
assembly-line based and computer-based. The different requirements have different needs,
illustrating deepest global fracture. This leads to turbulence and instability. In such collisions all the
rules change in a global system.

        In the first wave there were a variety of structures like city states and others not clearly
defined. In 1648, models of world change were captured in a map of the world where every area
had a boundary. In international affairs, the dominant players were nation states. The modern
nation state was a product of the industrial revolution and economic and political structures were
integrated. Railways opened the way to international markets. Local markets were no longer big
enough so the scale of markets changed and this was reflected in ideology. Artists, musicians,
(Sibelius, Smetana) glorified the State. Culture mirrored the changes.

        Today we have global disorder and nations are no longer what they were. They are losing
control of the three elements of power: monopoly of violence (police, army); currency; information.
The old nation states functioned in closed systems and sovereignty was different. Nation building
became an important principle, including army, currency, flag, and a UN seat. Countries moving
from the first to the second wave became very nationalist. Those moving from the second to the
third wave have a looser perception of sovereignty. In recent talks between the US and Japan,
both countries engaged in invading each other's sovereignty: the US demanded that Japan
change its retail marketing system to move towards the mass merchandising approach of Toys R
US. This meant wiping out a social class of small retailers, the backbone of the then governing
party. Such demands made on a country elsewhere would probably have resulted in the burning of
effigies of the US president. But Japan agreed, and in return said the US should change its
education system and think more long term. Sovereignty changes and the power of states

        Nations don't die, but other players move in. Regions emerge and become more important,
not because of uniformity within them, but because of differences. In this context one could
envisage a Europe of Nations where nations operate at a regional level. Multinational companies
are of growing importance and new business units develop which are no longer tied to any nation.
Consortia emerge as do ad hoc temporary structures. What country can be responsible since they
are no longer neatly definable.

        Religions start to play a big role again. How can there be a global order in terms of nations
with Islam, the Catholic Church, and others. Here consider also criminal consortia, like the Mafia
and the narco network. These are all transnational networks tending toward the global. Are such
global networks already in power in countries like Mexico and Colombia? In civil society,
Greenpeace is a transnational. There are global media networks and ethnic networks like the
overseas Chinese. Complex sets of forces are all interacting at a global level, with different

        Policy makers must take all this into account since the "national interest" no longer works.
These complex forces are also connected and first, second and third wave differences are
apparent. First wave countries have a low dependence on the outside world economy, being only
heavily dependent on one or two outside trading partners. Second wave countries are more
integrated with outside world economy and need more connection with it. But interdependence is

still limited. In 1938, the US had 34 treaties with the outside world. In the 80s, it had 282 treaties.
Today, the US is rapidly moving over to the third wave. Its connectivity needs are rising and there
are more than 1,000 treaties and tens of thousands of agreements which proliferate during the
third wave. The paradox is that the US's power is now so linked with other countries that before
making a serious decision it has to consult with them. The more power there is, the more
constraining it is to exercise it. This is why the US is no longer in Somalia. This is called the War of
the Flea.

         This all shows that the world will begin to look like a first-wave global system operating at
high speed in its interaction, and this has enormous ramifications. We are entering a new zone of
history which will be characterized by extreme socio-political turbulence. If we can maintain Asia's
growth we will be able to raise billions of people from poverty, but to do this we must maintain
political stability. The possibility of raising people from poverty is an enormous human opportunity.
FAO statistics say that the undernourished have dropped by 16%. Third-wave technology is less
damaging to the environment than second-wave technology. There are many positive aspects
inherent in the third wave, but the times will be different and turbulent. They will demand a
rethinking of corporate and government strategies. We must ask ourselves what are our vital

        Today there is confusion about what our vital interests are. There is a vacuum where
strategy ought to be. If third wave leaders want to retain their leadership, they must do it in
different ways. If they don't practice strategic leadership and long-range thought, others will do it
for them.



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