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Objective: Explain how advances in information technology and automation will affect the economic system. In this section we shall ask the question what information is required to make markets efficient. In the next section we shall ask how this demand for information should be curtailed in increase privacy at the expense of efficiency. We will also consider the impact of a high rate of discovery, invention, and innovation. The index for this section is:
As communication capacity expands, an increasing number of markets will gravitate to the Internet. One factor that makes this possible is the creation of reasonable security for Internet transactions. This is rapidly occurring in markets for goods for industrial buyers. Retail stores order their supplies by computer of the stores talking to the computer of the supplier through communications channels. Manufacturers are also using this approach to ordering parts from suppliers. For example, PCOrder lays out the entire market for components for builders of computers. Success in several markets will hasten the creation of such software for all industrial markets.
For consumer markets to shift to the Internet, computer shopping must be able to offer the consumer a better way of shopping than going to the mall. Currently some Internet stores are beginning to expand at the expense of mall stores. One example is Amazon.com that sells books on the Internet and competes with Barnes and Noble who has expanded onto the Internet. Amazon.com offers 2.5 million books online whereas a large Barnes and Noble mall store only has 0.25 million books on its shelves. Amazon.com has created several alternative ways to search for the desired book and the consumer receives his or her copy through the mail in a couple of days.
Shopping for an automobile has been made more efficient through the creation of online information services such as Autoconnect.com that enable a car buyer to first find a small set of cars that have the desired features and then to compare these features in a side by side display. This approach is much faster than obtaining the information from various auto dealers and arranging it into a spreadsheet. Although in some cases the buyer can purchase his automobile through the Internet, most buyers would want to test drive the small number of autos deemed worthy of serious consideration before buying an auto. Starting the auto search through the Internet is much more efficient that starting the search through physical travel to dealerships.
Technological advances will increase the amount of shopping over the Internet. For consumers to do most of their shopping for clothes through the Internet, the manufacturing process of clothes will have to be automated so that clothes would be made on demand to the exact measurements of the customer whereby the customer will know that the clothes will fit exactly. The advantage of such an approach is that the customer using virtual reality simulation that displays the viewer wearing new clothes in many poses on their monitor or television. Numerous alternative styles in numerous colors could be evaluated with the click of a mouse. The disadvantage is that the customer would have to have samples of the various fabrics, but Internet clothing stores will have an incentive to send repeat customers such samples.. Also, groceries are sold over the Internet and computer networks. One such firm is Peapod. Some consumers may be reluctant to buy groceries over the Internet until there are better ways to evaluate the quality of such as items as fruit, for which grocers may come up with a measure of the sugar content.
Many people will buy directly through the Internet and take delivery from warehouses (or the factory) without display areas. The leaders in using the Internet for shopping will be those consumer who place a high value on their time. In contemporary society an increasing amount of household shopping takes place in the home through catalogs. For example, families with small children and both parents working have little spare time and shopping in malls on crowded weekends is frequently not a pleasurable experience when accompanied with small children and this creates an incentive for catalog shopping, that are rapidly being displayed on the Internet. Internet catalogs will gain more appeal than printed catalogs or shopping in malls as increasing communication bandwidth promotes advances in graphics, data organization, and interactive programs that give the consumer control over the flow of information. With the increase in computerized markets the number of middlemen will definitely decrease.
For products where other senses such as taste, touch, or smell are important, however, onsite inspection will remain important for some time. Shopping malls are therefore likely to become much more specialized in goods for which taste, touch, and smell are important and entertainment activities are likely to replace stores whose markets have shifted to the Internet. Because most people like convenience, the 7-Eleven type store will continue.
In current society, the transactions costs make organization of
consumers expensive. With the Internet household computers facilitate
the organization of various types of consumers groups. Two types of
special interest are:
Buyer's Groups: If households
tend to select communities with similar interests, they would have a
powerful incentive to form buyer's groups in order to obtain discount
prices through large purchase orders. With the advance in home
computers and community intranets the organization of such purchases
can be greatly facilitated by software. For example, the community
could purchase its weekly groceries in a single purchase, and such
buying groups would obtain quantity discounts. Deliveries could be
made to and distributed at the community center. This would be
socially desirable in reducing the transportation costs for each
family transporting the groceries in a individual car in that reduce
energy consumption, pollution and the green house effect. To do this
the advances in scheduling concepts and software currently used in
industry applications would be applied to more efficient operation of
households producing goods and services by the members for the
members.
Buyer's Services:
Alternative sources of information for consumers are not well developed. To evaluate his alternatives, the consumer has incentives to acquire information, but with a rapid rate of new product introductions, knowledge through experience rapidly loses value. Also information from word of mouth has no desirable properties from the perspective of sampling theory. Sellers do have incentives to provide potential customers with information. Sellers in promoting the adoption of new products, constantly invent new forms of advertising such as Internet ads. Advertising has an impact on the formation of tastes towards new products, makes the consumer aware of his alternatives and provides information such as price to evaluate the alternatives. Advertisers have incentives, in presenting material to consumers, to use the knowledge of the limitations in the consumers' cognitive skills to sell the product. They have no incentives to provide consumers with an impartial evaluation service. Nevertheless, for some items, such as personal computers, private magazines provide evaluation services. The best general quality evaluation service, Consumer Union, which publishes Consumer Reports only evaluates a fraction of the goods on the marketplace. Private organizations are inhibited from providing better evaluation services because of the free rider problem of clients giving away the information to friends such efforts are not likely to be profitable.
Who should provide such evaluation services. The government's role in providing evaluation services is to require numerous disclosures such as the ingredients in foods sold in supermarkets. However, the government frequently acts not to inform the consumer, but to protect him from any possible ignorance. For example, since the pure food and drug legislation of 1906, the food and drug administration, the FDA, has taken direct responsibility for testing drugs. The FDA releases drugs it considers safe. The consumer is not allowed to weigh the risk, unless he is willing to travel to another country with less strict laws. The government should not expand its role into making subjective evaluations of alternatives. For this purpose there exist very large economies of scale to be exploited in the identification and analysis of alternative decisions as consumers, on the basis of tastes and incomes can be stratified into large groups facing similar consumption decisions.
In an unregulated market, firms frequently deliver a wide variety of quality of goods at widely varying prices. The same would be true for the evolution of evaluation services. The new evaluation services on the Internet are funded by advertising presented to the viewer with each new page accessed. Such a funding method creates a conflict of interest in providing impartial information. Some evaluation services like Consumer Union would not accept advertising and have customers with passwords to log on to their services. On the Internet as in their magazine they would pride themselves in being impartial.
An appropriate information policy will enable entrepreneurs to innovate information services which supply consumers with software and data for making analytical comparisons of goods at a much lower cost than currently1. At present, price comparisons of alternative goods can only be made by examining alternative catalogs, traveling from store to store, or by phoning the alternative stores. Catalogs are not organized for the convenience of price and product comparison by the consumer, and travel is expensive both in time and resources. Price comparison by phone is frequently frustrated by the difficulty of precisely identifying the product being considered and the reluctance of sellers to give out this information over the phone. But for the consumer to take full advantage of the potential advances in hardware and software to lower his transactions costs, he needs certain information rights. His home computer must have access to product codes, to specifications of the products' qualities, and to the price offered by all potential sellers.
The purpose of the right to learn is to categorize information such as that listed above as operational information needed to analyze alternatives. Under this arrangement, if legislation was not forthcoming, the necessary information rights could be defined by legal precedent in interpreting the right to learn. Once these operational information rights were in place, sellers who could not list their wares in the Internet would be at a distinct disadvantage. Accordingly, the focus would shift from ensuring that buyers had access to information to ensuring that all potential sellers had access to the electronic marketplace.
The ability of the buyer to obtain the price and qualities of the product information by having his home computer communicate directly with the computer of the potential seller creates the basis for improving consumer performance. First, administrative programs could organize the acquired data in order to analyze the relevant alternatives. For any given product the buyer could determine his best deal at a very low cost. And since the product information would be obtainable, the shopper could make analytical comparisons of alternative products by using analysis packages at home. This means that consumer could base household purchases more on analysis and less on psychological appeals of advertising.
Great economies of scale exist in exercising these information rights. Desirable data organization from the perspective of the buyer is quite different from optimal data organization from the perspective of the seller. Suppose the buyer wants to find the lowest price for a particular item. Under data organized for the benefit of each individual store, the buyer must access the database of each store, figure out how the data is organized, find the price, and finally obtain the lowest price. Each buyer seeking the same information must repeat the same steps. From the perspective of the buyer, all the data from every store should be reorganized by product in a single database. If the prices for each store were arranged in ascending order, the search for the lowest price would be reduced to single table lookup. Given property rights to processed information entrepreneurs would create consumer service companies to perform frequently employed searches once and organize the data for sale to the consumer.
To be a much more effective shopper, however, the consumer needs much more than a low-cost approach to identifying his alternatives. He must also have a low-cost method of evaluating their merits. In light of rapidly advancing technology, experience with past products is not a good guide if the next purchase involves newly designed goods. To provide a contrast with current conditions, consider first the problem of buying a horse in the 19th century. At that time the buyer accumulated information concerning the quality of horses over his entire lifetime. As the characteristics of horses changed very slowly due to breeding, knowledge from previous purchases could improve the buyer's future judgment. Contrast this consumer purchase problem with the problem of buying an automobile in the 20th century. Currently the technology of an automobile changes at a sufficiently fast pace that past information is of questionable value in making current purchases.
Advocates of pure competition assert that the market in its operation creates the information to evaluate the alternatives. Market information is generated and used by consumers in evaluating their alternatives. The question, however, is how efficiently the consumer obtains the information and how well he uses it. Consider the consumer versus a quality engineer evaluating the quality of a product. The quality engineer uses a statistically designed experiment to analyze the quality of the product being considered, whereas the consumer has only word-of-mouth information and information from trade magazines such as Consumer Reports. The problem with word of mouth is that it is does not provide a representative sample. For goods which are used by only a fraction of the population, then, word of mouth may provide little information. Furthermore, when it comes to highly technical products the consumer, for the most part, is not capable of evaluating the quality of the product. For example, most consumers are not capable of evaluating the issue of radiation leakage from microwave ovens, as the damage is not directly apparent to the senses. Furthermore, market competition is unlikely to reveal much useful information concerning leakage. The limited scope of existing consumer services are inadequate for providing consumers with all the product information they need.
To determine what information rights are desirable for evaluating the quality of alternative goods on the market, suppose that every time the consumer had a product repaired he received a machine-readable bill; that is, his home computer could access the information and store it. If the repair records of most available equipment were kept in a machine-readable form, systematic analysis of the quality of alternative products would become a straightforward matter. Assuring the consumer an information right to all his transactions, establishes the basis for a mechanism for better evaluating products. Again, there are tremendous economies of scale in the exercise of this information right. Given property rights over processed information, customers of consumer service companies would transmit their repair files to the consumer service company for statistical processing. Knowledge concerning product reliability would thus accumulate quickly and be available to potential buyers within the product cycle. Similarly, if accident reports were transmitted to the consumer service company, the statistical determination of the safety of alternative products is a straightforward matter.
The economies of scale in providing consumers with the basis for analysis will be obtained by cooperative consumer groups, private consumer service companies selling services, or by government consumer services providing free information as a public good. To obtain the economies of scale in evaluating products, these organizations would need to serve a large number of consumers. The problem with consumer services as they exist today is the high cost of performing tests and obtaining survey data. For example, in obtaining information on automobiles, the Consumer Union relies on a survey of its readers. As filling out this survey constitutes a burden to consumers, the participation rate is less than complete, and the results are unlikely to represent an unbiased sample. With machine readable repair records, however, the information would be available to any consumer service to which the consumer subscribed at almost no labor cost to the consumer. Sample survey questions would be limited to preference questions concerning such issues as liked and disliked features of a product. The burden of participation in such surveys could be greatly reduced by interactive programs and by making a fixed amount of participation in surveys a condition of membership. With complete information on the performance of their client products, the detection of problems would be much, faster than is possible through word of mouth. The consumer would obtain this information through his buyer services.
The biggest impediment to the growth of a strong consumer analysis industry in the current market organization is the free rider problem. If Consumer Union publishes an edition of Consumer Reports, any valuable information quickly becomes public knowledge without Consumer Union receiving any return on its investment in providing the information. Under the proposed design, however, consumer services would generate most of their income through charges for access time to run consumer software services. As the charges would be based on access time, the consumer service would collect even if a client allowed a friend to use the software provided. Suppose, for instances, a household wanted to buy a refrigerator. As this type of a purchase is generally made at very infrequent intervals, the consumer, when he starts his search, has very little information concerning the alternatives in the market. Furthermore, his neighbors are unlikely to have any information either, given the change in technology and the inability of the average individual to correctly assess the advertising claims. The individual, therefore, frequently relies on the image of the company providing the product and the salesman's personality.
However, suppose the consumer service offered a user-friendly program for assessing the alternatives in the marketplace. The program would start by finding out the user's needs through a series of questions. For example, if the consumer's grocery transactions were organized in a form accessible to the consumer service company, the demand for refrigerator space could be determined primarily by the consumer service company's communicating directly with the consumer's home computer. Then the program might suggest some alternative configurations and narrow the selection down to a few types. Next, the program would have at its disposal all the latest engineering assessments of the quality of all the alternatives in the marketplace. The consumer would then indicate some preference as to brands or specific options.
The program now sets up the relevant market from the perspective of the consumer. The consumer is asked the area to search-for example, the metropolitan region, the entire state, or nation or world. Again this could be made automatic. After examining the alternatives, the program displays the best, say 10, alternatives, and the best, say 10, alternatives in each of the close substitute markets as well. Now the question arises with his consumer service program: Can the consumer make a more informed judgment than currently? First, seated in front of his computer screen the consumer can review all the background information which went into his decision. He can display the product, review the analytical comparisons between the close substitutes, and search over all possible purchase plans in the market. His consumer service from the repair records can estimate the quality of service each of the alternative sellers is likely to provide. His program can recommend between the close substitutes based on the criteria he supplied. He can modify his criteria and immediately examine the consequences of his choice. His great advantage over present consumers is his ability to positively identify all alternative products and their qualities. In a physical search in today's market, it is hard to remember the qualities of the close substitutes, especially if there are a large number of similar products, and so the price quality comparison is very difficult.
Software aides would greatly aid consumers to analyzing problems beyond their sublinear capabilities. For example, while the FDA provides the components of foods on labels, it is prohibitively expensive for consumers to copy all the data and then systematically analyze the quality of their diet. The sublinear to polynomial property of computers makes this a straightforward matter if the food were bought off the Internet or if the consumer had a small scanner in the grocery store. With a scanner in the kitchen measuring how much of each food was being used at each meal and snack, a diet analyzer program could provide the user with a real time analysis of the quality of his or her diet. Similarly quasi-intelligent software is likely to be developed for the hard problem of budgeting. Intuit may be the first to provide a program to help users better budget their salary from pay period to the next.
Periodically, demands are made for government to take a stronger role in promoting the consumer side of the market. In the proposed design, the government first enforces the information rights of the various parties in the marketplace. When these information rights are in an electronic medium for information, powerful incentives are created for consumer service companies. Through surveys of their members and analysis of repair records, consumer service companies can use statistical techniques to generate much more accurate assessment of product qualities much more rapidly than current word of mouth and limited testing means allow. By creating software services that are either sold or run on the consumer service computer, the consumer service company can greatly reduce the free rider problem which currently limits the scope of contemporary consumer services.
This approach of granting consumers specific information rights contrasts greatly with the current trend whereby the government generates the information that is provided to the consumer. The amount of analysis the consumer can do in comparing his alternatives under this system is dependent upon the extent of his information rights. Consider the purchase of previously owned objects such as automobiles or houses. If the consumer's information rights extended to all previous transactions, then the consumer could analyze the status of the object objectively. Information rights can also improve the safety aspects of products. Suppose the consumer were granted the information right to inspect the product development and safety testing reports. Having this information right would inhibit corporations from knowingly releasing defective products. Under such conditions, it is improbable, for instance, that Ford would have released the Pinto, which posed a fire hazard if hit in the rear. Furthermore, with the complete report of the development of the product, the consumer services and trade magazines could forecast expected performance with some reliability.
Finally, information policy through market action would greatly reduce the need for direct government involvement in consumer affairs. As market firms, consumer services would offer a menu of services to attract customers. Some, in order to attract customers, would take an aggressive attitude towards promoting consumer's information rights in the marketplace. While individuals would seldom have the incentives to use the courts to obtain information, a consumer service with a million customers would. Much like current consumer rating services, the consumer software services would in varying degrees maintain independence from producers. Most of the positive impacts of information policy, in fact, would be achieved through the high quality services' efforts to maintain strict independence from suppliers.
Nevertheless, the federal government should determine the qualities of products for which the expense of testing and the economies of scale are very large as a public service. Currently the government provides a considerable amount of consumer information as a public good, but in the future some of these services may be taken over by consumer service firms. One example is the data on the gasoline mileage ratings of automobiles; if the consumer service were to provide this information, the clients automobiles on the road would record their actual gas mileage and the consumer service would report the tabulated results to all members. On measurements of quality for which consumer service firms have low cost methods of measuring the quality, there is no need for the government to provide the service. One area where the federal government has a legitimate role in consumer services are areas where the economies of scale are very great. For example, testing drugs requires both expensive laboratories and a highly paid professional staff. A second such area is the promotion of research into new methodologies for product testing and safety evaluations. In such cases new scientific theories must be translated into new test procedures. The government has a legitimate role in such instances of basic research.
If consumers obtain the information rights suggested in this chapter, their ability to identify and analyze their alternatives will greatly increase. Such a decision environment would appear to eliminate the contemporary role of advertising. With his consumer service the buyer would be much less susceptible to sales pitches based solely on psychological appeals, nevertheless a role for advertising remains. In the choice process there is one step which requires imagination: the manufacturer or service supplier can specify the properties of a product, but the consumer must decide how he plans to use the product. While decisions made concerning this step are obvious with familiar products, when it applies to new products this step taxes the imagination of many potential customers. To promote new products advertisers would therefore focus on bringing to the potential consumer's attention the innovations the product provides the user. Most consumer services would have a policy for including this type of advertisement, provided it met the consumer service standards, as background material which the client could view at his discretion.
In addition, the creation of the Internet creates a media for the development of buyer's services to provide information concerning purchases made through the Internet. Such information includes the best price plus information and software to analyze the various attributes of market products. The impact of buyer's services on the market would be enormous if consumers were given sufficient information rights. For example, if the buyer's service represented 1M households and received overnight by E-mail the repair records of all equipment bought by its clients, the buyer's service could quickly spot defects in products on the market. If the buyer's service issued a warning to its clients not to buy these products, the manufacturers would be under constant pressure to immediately correct any known defects.
As has been pointed out in the Chapter on Automation-Information firms are creating enormous data bases of information concerning their customers and potential customers. This data includes information in the public record such as marriages, information freely given by product registration forms, information concerning all purchases, and with the growth of the Internet every click a customer makes on the firms web site. Theses data files are mined to find patterns that can be profitable exploited.
The ultimate goal of advertisers is to have enough information on every household that each household can be sent individual ads that the household is most likely to respond. From the perspective of economic efficiency this is desirable because resources in advertising will not be wasted such as advertising for pampers in a household that does not have babies. The privacy implications of such an economy will be discussed in the next chapter.
Within a corporation the goal is to integrate the entire corporation data system to improve the coordination of the various activities in the corporation. Early in the development of information technology the various units of a corporation might have incompatible equipment and data organizations. This has new being overcome.
Since WWII producers have been steadily reducing the inventory of parts, work in progress and finished goods in the production and supply process. This process which is a area of business of the consulting industry is called supply chain management which involves a lean production process that strives to deliver to the customer the correct amount of the desired product at the correct time. These innovations are made possible because computers can tractable solve polynomial problems and give reasonable approximations to difficult scheduling problems. The trend is to switch from production for inventory to production for final demand. One of the most successful proponents of this concept is Dell Computers that has grown from a startup to one of the largest PC manufacturing firms manufacturing for final demand.
A second factor in production is that automation will gradually reduce the cost of batch production to the level of mass production. This means that producers will be able to produce a much wider variety of products supporting the niche markets created by variations in community tastes.
The increasing trend in services is to offer their services through the Internet. This trend will be accelerated by broadband communications that will facilitate visual teleconferencing of groups at remote locations and the ability to demonstrate their products such as advertising through the Internet. Ernie is one of the first attempt by a consulting firm to take this route. The problem with conventional consulting with trips to the clients location is the large amount of overhead to keep the consultants in a great lifestyle. As service firms compete through the Internet the market for services will become increasingly globally competitive.
To compete in rapidly changing markets, firms must develop mechanisms for organizing work that efficiently consider the impact of automation on the nature of work. As was discussed in the previous chapter, the gradual programing of tasks in a firm will leave a sequence of one-time tasks to be performed by humans. Management will focus their attention on the problems of the sequence of inventions and innovations. With the routine aspects of staff work encapsulated into software such as expert systems, human staff tasks will become more random and will require a wide range of skills. With market transactions taking place through the social nervous system, the sales force and customer representatives will handle the exceptional cases. Workers in manufacturing plants will increasingly handle nonroutine events such as installing new machinery or repairs when machinery malfunctions. Given the nature of work, firms will need much more flexible organizational structures than is custom currently.
Instead of requiring a stable work force performing primarily repetitious tasks, firms will need a variable workforce which can change in response to the demands of the one time projects to be accomplished. Recent trends towards establishing such flexibility2 have been the increasing use of temps, or temporary workers, and the trend towards transferring activities previously performed in house to activities contracted in markets.
As the firm's activities become a sequence of one-time tasks the use of temps and outside contracting should continue to increase3. For example, because the firm would need temporary staff services possessing special skills at random intervals, the firm could obtain the service best suited for their various needs by hiring producer services on a temporary basis. In this way, given an efficient market, firms would achieve greater efficiency than would be possible if they maintained a large staff of specialized producer services that would only be needed at random intervals. The efficiency of producer services should increase as many of these services could be supplied through the social nervous system by means of interactive visual communication. As markets in the social nervous system expand in scope and as competitors become less dependent on physical location, the number of participants competing for any opportunity should increase.
The efficiency with which a firm can use markets to organize tasks depends on the efficiency of markets. More efficient markets will result if both buyers and sellers have better means of identifying and evaluating their alternatives. As markets move into the social nervous system, the producer will be able to identify all his alternatives quickly by computer. The problem which must be overcome to make such markets efficient, however, is developing analytic techniques capable of evaluating the large numbers of alternatives.
The difficulty in developing analytic techniques to evaluate alternatives depends on the uniformity of alternatives. To aid the producer in purchasing uniform inputs, such as office equipment, economic incentives would create producer buying services to provide evaluation criterion. Large firms, which have economies of scale in testing the quality of their own purchases, would have an incentive to recoup part of their testing costs by selling the information to the producer purchasing service.
The more difficult problem remaining, then, is the task of providing information and criteria for evaluating nonuniform situations. Consider, for instances, the problem of a manufacturer subcontracting the production of a part. To evaluate the alternatives analytically the producer needs to know much more than just the prices bid by the competitors, since the producer's profits are a function of the subcontractor's ability to deliver the part on time and without defects. To evaluate the bids analytically, then, the producer would have to have a database with all the requisite information. For example, in order to evaluate analytically a large number of advertisers who might develop a promotion for a new product, the producer would need analytical measures of past performance.
Producers face similar problems in output markets as well as input markets. One example is the case of a bank providing credit for customers. The bank must evaluate the risk of default on a case-by-case basis. For this task, credit rating services have evolved which provide banks with measures of past credit performance.
The extent that information services will evolve to provide analytical information and criteria depends on the capability of advancing technology to provide useful measures. With the advance of information technology, performance in the workplace will increasingly be measured numerically and, accordingly, the ability to make more detailed measurements will also advance. Information services providing information necessary for evaluating alternatives in most markets will flourish. For example, for subcontractors, the accumulation of data on on-time delivery and number of defects becomes automatic. Developing an information service to evaluate subcontractors in an industry requires major contractors establish conventions to collect the data in a comparable form. In advertising, the effectiveness of promotions will be measured in terms of customer response. Establishing conventions establishes the basis for an information service.
The growth of information services will enable firms to efficiently screen large numbers of external alternatives, such as temps, subcontractors, or producer services, for one time tasks. Suppose a firm needs to hire a software service to develop a new program. With teleconferencing, the relevant market for software services is worldwide. When the firm places a request for a proposal in the social nervous system, the firm is likely to receive a large number of bids. Because of cognitive limitations, the firm could not, in a meaningful fashion, screen a large number of bids. The firm would be forced to use an arbitrary criterion to reduce the number to an intuitively manageable level. With performance files provided by an information service, the firm would be able to develop meaningful analytic criteria to screen all the bids quickly to obtain a small number of promising candidates for a more intensive intuitive screening. The advantage of the initial, analytic screening over an initial, subjective screening is that the analytic approach is much more likely to reveal up-and-coming firms.
The discussion, so far, has presented three reasons why firms will increase the use of the market in organizing tasks. First, automation will reduce work to a sequence of unique events demanding random special skills. Second, competition will be worldwide because many of these skills will be available through the social nervous system. Third, with much better information and analytic capability to analyze alternatives, the firm will be better able to match its needs in the market. An additional reason for firms to use the market in organizing tasks is to reduce risk. Firms will want to subcontract secondary activities undergoing rapid technological change not directly related to the core of the firm's business. Given the bounded rationality of managers, the ability of the manager to administer the core activities will be increased by his not having to focus on rapid change in secondary activities. With more efficient markets, then, secondary activities in the firm will be increasingly subcontracted.
The more efficient markets become, the more a firm could institutionalize change by transforming its business into a sequence of contracts through the market4. With each renewal of fixed-period contracts, the structure of the firm would be reorganized to best meet the current challenges. At the extreme limits of this scenario the firm becomes a network organization which contracts out most of its activities; the firm therefore exists as a set of contracts. The extent to which a firm becomes a network organization depends, however, on the conditions in an industry. One factor limiting the extent of contracting is the uncertainty of supply, since a firm would prefer to maintain an activity in-house if the supply were uncertain. Another limit of contracting is the fact that a firm would not contract activities of proprietary concern. The more the performance of activities in a firm depends on close cooperation, the less incentive a firm has to use markets for organization. Such firms would tend, instead, to focused on the core activities of their main product lines.
In addition to a greater reliance on external markets, firms are also likely to use internal markets more extensively to allocate resources5. Because of their humanly limited cognitive skills, managers can effectively manage only a small number of subordinates. With analytic management based on measured results the number of subordinates a manager can effectively manage will increase. Firms with multiproducts will therefore have fewer managers in total, but each manager will manage more subordinates. Product managers, for instances, would compete for production runs on flexible manufacturing systems or computer resources. As a result of larger numbers of managers and temporary groups competing for internal resources at each level, firms are likely to increase the use of internal markets to allocate resources.
To achieve greater flexibility firms would depend less on permanent hierarchy and more on temporary task organizations. As informational society evolves, the amount of information available to managers for decision making will increase. At the same time, the number of levels of middle managers needed to process the raw data into reports for higher levels of managers will greatly decrease. Using programs such as expert systems and report generators, higher managers supported by a few assistants, will analyze data bases themselves. Hierarchies in firms such as corporations will thus have fewer levels of managers. Consider, for a moment, the role of the manager within the projected system. Within his firm a manager would spend much time using the social nervous system forming and directing direct temporary organizations to accomplish specific tasks. Most of these task organizations will be accomplished by establishing a visual communication channel between the members of the taskforce. In this manner a firm can very quickly bring the appropriate people in contact with one another to solve a particular problem. A firm would also have the ability to reconstruct communication links on demand. In other words the organization of a firm would be the network of communication channels linking the members together. Within such an organization, the physical location of the members of the various taskforces would decrease in importance. This would enable task organizations to include members of the firm and along with members of subcontractors or producer services. As understanding of how to organize activities through dynamic image communications increases, more of the permanent activities of organizations will take place through this medium.
In addition to relying on frequent temporary task reorganizations, the underlying organizational structure will require reorganization on a regular basis in order to incorporate new knowledge and technology into the organization. Given a rapid advance in knowledge, firms will have a problem in matching the most qualified manager with new openings in the management hierarchy. The solution proposed here is the creation of a management situations market of finite time management contracts. A high rate of scientific and technological advance will force managers to devote time to intensive study of advances which are applicable to their industry. Because of competitive pressures on the job, managers will not share the general decline in the workweek experienced by other workers. While on the job most managers will be working too many hours on projects to have any time for significant study. Consequently, managers on the job would be using primarily acquired skills. Upon completion of their contract, however, they would take a vacation and engage themselves in a period of study before reentering the management situations market. The advantage which the management situations market gives the firm is that it institutionalizes the need for constant reorganization and evaluation. With each new series of contracts, the firm can make substantial changes in organization, technology or product line. As managers would take a break between assignments, the not so humorous problems of the Peter Principle would be avoided. And as the substitution of communication for travel advances, the manager like other professionals, would have increasing freedom of location. What this means is that for any management position the number of potential managers who could assume the role without physically relocating their home will gradually increase. With automation of middle management the number of management positions will decrease; consequently, there will be an excess of potential managers as compared with the available management positions. Since the function of management can take place through the terminal, in the long run the potential competition for each available management position is worldwide.
From the perspective of the manager, the management situations market gives the manager total control over his career, since he can select the sequence of contracts upon which he wishes to bid. For a management situations market to work much better performance data would be necessary in order to evaluate managers. With increasing numerical measures, each manager would have a performance history in terms of such measures as the profitability of previous profit centers managed and the number of successful new products introduced. And with the right to learn, information services would create databases to facilitate analytical comparisons of the past performances of managers.
The competition for line manager positions would be a two-stage process involving a preliminary analytic screen followed by a more intensive evaluation of the final candidates. The details would vary by industry and the firm. Consider, for a moment, a possible scenario. First, the corporate or higher level of management would employ analytical criteria based on past performance to screen all applicants in order to obtain a small group of final contestants. The evaluation criterion could use any measure defined over the applicants' accumulated performance. In most cases the evaluation functions would be a weighted sum of a variety of criteria. A service industry would develop to make recommendations on how to specify the criteria to achieve specified objectives. The criteria to meet social objectives such as no discrimination would need to be substantiated by systematic study.
The second stage would be a more subjective evaluation of future projected performance. One such approach to final selection of a new manager is a competition through management proposals. The final contestants might be given a thirty-day contract to prepare their proposal on how to manage the prospective operation. The evaluating managers would establish the operating guidelines, such as the amount of investment money allowed for improvements, the goals, such as cost reduction or increase in the share of the market, and the conditions, such the decisions which are decentralized and which must be cleared through higher management. The bidders might also be provided with the proposals of outside management consultants. The objective of the evaluating manager, then, is to ensure through competition of managers that all profit centers of the corporation obtain their highest rate of return. The evaluating manager could specify whatever criterion he desired for the profit center. The objectives could be, for instance, some weighted average of profits, return on assets, growth, and share of the market. An alternative would be to simply have the potential managers compete to lease the profit center or where the production facility is producing a component of a larger durable good, the criterion might be cost minimization.
The final contestants would carefully study the current operation and decide how to apply new knowledge and technology to improve performance. Their proposals might include recommendations for purchasing certain types of technology or software, suggestions about how to reorganize lower levels of the organization under their control, and proposals for new product strategies. One approach to the bidding process might be to have potential managers compete as management teams, that is small groups with the requisite diversity of skills to manage the contract for which they are competing. Some of the management teams would form while the participants were in their twenties and would continue throughout their careers. Relationships within the group would therefore come to be personal relationships and the internal organization would vary from group to group. Some would have a clearly identifiable leader, while others would have an inner circle of approximately equal partners.
The competition by management proposal or bid ensures that new knowledge is incorporated into the firm. The managers of mature industries in informational society, like their current counterparts would be professional managers meaning that most of these people will include in their training formal study in management techniques such as those taught in an MBA program. What is different between future and current managers, however, is that a management career would have the quality of a work-study approach to education except that the work-study period would extend through a manager's entire career. During the period that managers were not managing they would be vacationing and then preparing for the next contract. To compete they would have to study intensely the latest advances in knowledge and technology applicable to their industry. The management proposal would be the means by which they would apply their knowledge to a particular situation.
With a constant cycle of fixed-period contracts the structure of a corporation would adapt to changing conditions with each round of competition for positions. This process of change would emanate downward from the corporate management group, the management group at the top of a corporation's hierarchy. The functions of this group would be to manage the day-to-day operations of the corporation and to make investment decisions in software and hardware, including the more traditional plant and equipment. This group would manage the day-to-day operations of the firm through the criteria specified in the management contracts of lower-level managers. The investment decisions would include expansion through merger or creation of a new plant and restructuring through selloffs and spin-offs. Most major investment in research and development would be decided by the corporate managers. In preparing the criteria for creating management situation contracts, the corporation management group would provide a fund for investments promoting productivity advance. The means by which line managers would obtain these funds and the expected rate of return would both be part of the bidding process. What has not yet been considered, however, is who specifies the competition for the corporate management group.
Currently, mature corporations become self-perpetuating bureaucracies after the founder has left active management. In the separation of ownership and control, however, the interests of managers do not always coincide with the interests of the stockholders. Moreover, as the managers propose the slate of new officers of the corporation, the stockholder has a very difficult time expressing his concern with the management practice. Currently, poorly managed firms with hidden assets become takeover targets by financiers, who are called corporate raiders by managers. This threat of a takeover places pressure on the managers to obtain the highest return on assets. With the advance of the social nervous system, however, much more effective methods are available for stockholders as a group to exercise an ownership role in a firm.
First, to exercise their ownership role stockholders need information rights which will allow them to analyze the performance of their agents, the managers of the corporation. As a result of advances in computing, corporate performance can be analyzed down to the level of each profit center, however the corporation provides the stockholders only aggregate data in the quarterly and annual reports. To ensure that the stockholder can analyze the performance, the corporation would place in the public domain, a system of files containing disaggregated performance data maintained by the SEC6. This data would be transmitted from machine to machine and stored on one-time write type storage devices for public perusal. The stockholder would be able to analyze the profitability of each product line, the effectiveness of the system of corporation incentives, and the return on each type of asset held by the corporation. As was the case for the consumer, the stockholder would not exercise his right directly but rather through his evaluation service, for example, Value Line. These evaluation services would be able to analyze corporation performance in much greater detail than is currently done by either the major trading houses or by purveyors of stock market analysis letters.
Besides much better data to analyze the performance of their agents-the managers, stockholders need rights in order to exercise their ownership function. A set of stockholders rights has been proposed by the United Stockholders Association7, a movement led by the eminent corporate raider, J. Boone Pickens. These rights include: the basic principle of one share-one vote, removal of takeover defenses such as the poison pill, stockholder access to the list of stockholders, and the secret ballot for stockholders. These rights would greatly strengthen the stockholders ability to remove inept management from office.
The exercise of a secret ballot would require a new institutional arrangement for stockholder voting. One possibility would be for the voting to be administered by an outside firm with a fiduciary trust to the stockholders. But because low cost communications greatly reduce the transactions cost of creating organizations, stockholders of many firms would develop stockholders associations to run the elections. For a well managed firm the stockholders would generally accept the recommendations of the existing officers, but in a poorly managed firm, the corporate raider of today would have an inexpensive mechanism for shifting the direction of the corporation. Competing groups for control would present their case through the stockholders' association bulletin board.
For some corporations, the stockholders would not vote for a new slate of officers but rather for the criteria describing the corporation manager's contract in the management situations market. While the existing managers would propose their criteria, the stockholders would consider their proposal one of the possible alternatives. While most stockholders, especially small stockholders, would participate indirectly in these battles through proxy, having a low cost means of communication and organization would facilitate much greater competition for setting the policy objectives of each corporation.
The market structure in which the management groups operate under the proposed design would be very different from the current structure. Upon obtaining the rights to control a production facility, the new managers would start by making the major improvements for the duration of their contract. The management group would take the environmental regulations as given and would find the best resource use of the profit center. For plants which make products for final consumer sale, the management group in many cases would be free to lease the right to produce any product in existence. In this way the management group would be determining the output mix. Using forecasts of consumer demand the manager would vary this output mix to maximize profits according to changing demand conditions. As a professional the manager would be held responsible for the conditions of the contract, including his obligations to the ownership group and to the public.
The performance measure of the management group is how well they fulfill the conditions of the contract. In seeking employment, management groups would generally consider the entire industry rather than a particular firm. Managers from declining industries would retrain in order to enter expanding industries. The management situations market, then, provides managers with total control over their careers. Moreover, managers working within such a market would know that increasingly their careers will be judged on the basis of merit.
As transportation and communication costs continue to fall, the world market becomes the only market. As less developed nations advance they become proficient at producing products made in more advanced countries. This means that industries tend to move from the advanced countries toward the less developed world. To increase their prosperity, the advanced nations must constantly invent new industries. The advanced nations will maintain a high rate of spending for basic research to maintain their position on the frontiers of science. The less advanced nations will create research universities to acquire the skills to succeed with existing industries. The world economy will become increasingly competitive.
Multinational corporations will evolve into true international entities with multinational management. Currently, multinationals must hire local managers for operations within a foreign country. In order to attract the best local talent, multinationals over time will have to offer successful local managers opportunities to advance into the highest levels of management. As time progresses, the top management of multinationals will gradually become international. Increasingly multinationals will adopt a global as opposed to a national perspective.
In order to transfer basic research more rapidly into marketable products, nations will innovate in the transfer of knowledge from research universities to the market. Consortia among private firms and among private firms and various levels of government will become commonplace to share the risk in developing new technology inventions. Because innovations in business organization and incentive systems are such an important part of maintaining a competitive edge, the methodology for innovation will become more systematic.
With major national efforts to promote new technology, new
industries will be constantly displacing old industries. In the
advanced countries, most of the new industries will be created by
startups because new technology is usually not understood by managers
in existing firms. Then, as the industry matures, competition will
result in a small number of large producers. In the less developed
world, new industries will frequently be started by multinationals
seeking lower labor costs and new markets.
Nevertheless, national economies will be characterized by large
numbers of smaller specialized firms. In the 19th century competition
drove firms to vertically integrate to protect themselves from a
rival capturing any component of their operations. With intense
international competition, firms will concentrate on their core
business. They will outsource secondary activities knowing that in a
competitive world market the threat from a rival capturing a needed
service is remote. Thus, in most national markets there will be a
very large number of smaller firms supplying intermediate products to
larger.
In developing a more flexible organization, firms will more rapidly take advantage of the opportunities created by an increasing rate of discovery, invention, and innovation. Intense international competition will force government and private firms to constantly innovate to increase this rate. First, government will develop a better allocation mechanism for research and development expenditures and gradually increase the level of funding. Second, the intuitive improvisatory strategy will gradually be replaced with a more systematic strategy for implementing innovations. Finally, public and private institutions will develop better transfer mechanisms from public research to private inventions and innovations.
The level of funding for research topics is roughly related to their perceived long-term effects in producing positive social benefits. One weakness in the current funding mechanism, however, is that with the collapse of the scientific advisors under the Reagan administration, the mechanism for establishing priorities according to a science policy created by science advisors has broken down. While improvements in the funding of science can be made by creating a better review process, funding will always have a political component. Because the future benefits cannot be accurately forecasted, no review process can precisely allocate resources based solely on marginal benefit versus marginal cost. In the next century the funding to natural sciences and engineering will gradually increase due to the pressure of intense international competition. The potential for spectacular results in the biological sciences and applied biology should markedly increase funding in these fields. And with society unable to afford medical progress, funding may shift to research leading to cheaper, more effective medical procedures.
In the past century, social evolution has transformed the process of invention from the lonely inventor using trial and error methods to an organized activity using systematic research and development methods. To a much smaller degree social evolution in the past century has transformed the process of innovation from one which depends on the heroic figure of the intuitive entrepreneur to one which proceeds as a systematic, organized activity. Given the failure of US business firms to innovate in quality control and to maintain the leadership in manufacturing, the public recognition of a need for a much more systematic approach to the problem of innovation is increasing. In the next century systematic strategies for implementing innovations will be developed to replace the intuitive improvisatory strategy.
The development of a more systematic strategy for implementing innovations requires the a much higher rate of discovery in the social sciences and applied business disciplines to develop analytic theories which can predict the consequences of alternatives. The advance of discovery which promotes innovation will be greatly improved by the observational implications of the right to learn. For scientific purposes the right to learn guarantees that an investigator is at least entitled to an unlabeled, representative sample of observations of any phenomenon. How researchers will exercise this right to balance the benefits of better observations against the possible infringements of privacy and trade secrets will be discussed in the next chapter.
The empirical study of management would improve by much more statistical testing of theories across corporations using nonexperimental statistics. An example would be a study-using an industry wide data sample, of incentive and performance data of the impact of the variation in incentives on manager performance. Representative samples might also provide data for a better understanding of consumer behavior, a topic of great interest to both producers and consumer services. As decisions become increasingly computerized, continual research is required to evaluate the decision rules. In practice, such evaluation requires a data sample of the consequences of variations in the decision rules, which generally would require a data sample from representative decision makers. While considerable research of this sort takes place today, the researchers are frequently restricted to posing questions which can be answered by the available data. Removing current data-gathering restrictions would greatly accelerate the advance of knowledge leading to innovations.
The right to observations implied in the right to learn is insufficient to guarantee progress in innovation-producing knowledge as nonexperimental statistics frequently contain too little variation to enable the research to discriminate between alternative hypothesis. To obtain greater variation systematically, the separation strategy currently used for innovation in agriculture should replace the intuitive improvisatory strategy, wherever possible. This will require building expensive research facilities to test, for instances, alternative organizational structures and incentive systems made possible by dynamic image fiber optic communications. The justification of the more expensive, systematic approach to innovation is that it would produce superior results much more rapidly.
Parallel to the current institutional arrangements for rapidly transmitting advances in the natural and biological sciences into inventions, a similar development will take place for transmitting the advances in the social and allied business disciplines into innovations. With much better observations and experimental stations, innovation research will much more rapidly discriminate between alternative theories. And with better theories, innovations will become more an exercise in applying theory and less an exercise in pure intuition. With the slow, gradual creation of bodies of theory in the social sciences, the ability to demonstrate the superiority of a systematic approach to innovation over the intuitive improvisatory strategy will in all probability increase. With the exception of controversial, political innovations, the funding for basic research promoting innovation should also increase dramatically as a systematic approach to innovation is developed.
Firms will also improve their capability to invent and innovate. One aspect of this improvement will be the elimination of the current weaknesses in American manufacturing8. By reorganizing to achieve much better coordination between engineering design and manufacturing US firms will achieve much better coordination between the invention of new products and the associated innovations needed to manufacture them. Also, manufacturing will attract more competent people as salaries for manufacturing executives and automation engineers are raised. Finally greater communication between the producer and customer will promote faster market driven invention and innovation.
Another avenue to invention and innovation improvement will be the sharing of risk through the creation of research and development consortia. The 1984 National Cooperative Research Act permitted the creation of research consortia between business rivals. As was discussed in Chapter One, consortia have promise in bridging the gap in incentives between basic research, with a long term economic potential, and product research and development. For basic research, which has long-range economic promise but great expense and risk, a research consortium between competing firms promotes applied research in the gap between basic research and specific product research and development. The much wider communication network than that resulting from single-firm product development will aid advance discoveries promoting invention and innovation. Research consortia will also develop for innovation in production processes which are undergoing rapid technological change. The evolution of consortia will necessarily take time as firms work out compromises between the benefits of cooperation and their inherent, underlying competition. The means by which the public interest should resolve the conflict between promoting faster transfer from research to products and promoting economic competition should be determined by observing the performance of consortia.
The advance of communication technology will aid both basic research and the transfer of basic research to the marketplace. Today, researchers involved in a particular research topic are scattered throughout universities and research centers. Because of the lengthy review process for professional journal articles, communication in professional journals is usually simply recognition for a new result. Conferences, too, are formal procedures which require a long lead time for planning and organizing. Both of these means of communication will ultimately be overshadowed by inexpensive, dynamic-image teleconferencing which will promote many informal meetings between specialists scattered at remote sites. Scientific interest groups will accordingly become communications networks.
Improved communications will also accelerate the transfer of knowledge from basic research to invention and innovation. Already universities trying to obtain a higher rate of return on research and to promote startups for economic development are creating databases summarizing university research activities. One example will be the use of image teleconferencing to promote faster transfer between basic research and applied research groups. Transfer of such knowledge to applied groups will tend to increase, because applied groups can more easily identify potential marketable ideas. Also, by promoting miniteleconferences between research groups and potential application groups, the university can reduce real cost of communication, that is travel costs and time delay.
In addition to improving communication between researchers and potential developers universities will take an active role in promoting startups by performing such services as providing help with property rights. With a high rate of advance in knowledge and an easing of the knowledge transfer problem, there will be more invention and innovation opportunities surrounding major research universities. These universities will attract consortia and high technology firms in the specialties of the university.
New inventions and innovations are created by individuals alone or in teams associated with all types of public and private institutions. The greater the change associated with an invention or innovation, the greater the probability that the invention or innovation will be created by a startup, that is a new firm. The types of changes we will be considering here are changes in production technique, organization, or customer behavior. While larger organizations will become more flexible, they are less adept at change than new organizations since skills used within an existing large firm do not have a competitive advantage in dealing with a completely new situation. Large firms can reduce the risk in invention and innovation by allowing startups to develop a new market. Firms producing completely new products, face great uncertainty concerning the performance and cost of the mass produced item. By waiting until the startups reduce the risk through learning, a large firm can enter the market later either by creating an imitation or buying out a startup. Large firms have a competitive advantage in access to capital and large scale production and marketing, hence a large firm has a better chance of competing in the race towards market share in the mass market than the initial startup.
An important factor in the dynamics of firms is the competition between firms to expand production of a successful new product in order to obtain the economies of mass production. A new market frequently starts with a large number of startups. From these, a few startups make the transition from startup to mature corporation, and in this way a new markets evolves. The transition from a startup to a major corporation is difficult, however, because it requires constantly changing organization and talents. Moreover, with economies of scale a far smaller number of firms can supply the market, creating a survival of the fittest situation. A major corporation has an incentive to enter new markets in the growth phase to promote overall corporate growth. Major corporations can compete in manufacturing and marketing. With a constant stream of new products entering the marketplace the dynamics becomes the struggle of startups to reach maturity, with older larger firms constantly repositioning themselves through acquisitions and spinoffs in growth markets.
With changes in the tax structure, startups will have an easier time in financing the transition. Startups are initially financed by venture capitalists and shift to retained earnings or equity finance as the firm prospers. As was recommended in Chapter 4, the tax burden should be shifted from income to consumption. With the end of double taxation on dividends, corporations will pass more profits on to stockholders and retain less as retained earnings. Thus, individual investors will make more choices in picking the potential winners among startups. With the move to deregulation, investment banking should return as means of financing the transition.
As has already been explained, most people in informational society will be employed in smaller firms9. With the advance of automation, routine work will be displaced first, while work and conditions of work will be increasingly varied. With constant change, jobs will tend to exist for fixed time periods such as the duration of the firm's contract to supply a product or service. Startups which are expanding to become major corporations can guarantee long term employment, but once the new industry matures, automation will decrease the demand for workers forcing the former startup to devise a strategy to retrench. Increasingly, then, workers cannot count on lifetime employment in a particular industry. When employment in an industry peaks, workers must start retraining for the next step in their career within a new expanding industry. Under these conditions the life of the worker, whether blue-collar, information, or professional, will tend to cycle between work and study to prepare for the next job. Workers who, like managers, work long hours while on the job, will tend to cycle between full-time study and full-time work. In work situations where the worker works a short work week, he will very likely pursue both activities simultaneously.
The Internet provides the future worker with two advantages over today's worker. First, much of the training to prepare for a new job can be accomplished at any terminal through the social nervous system. A worker, as a student, could obtain courses from practical instruction in how to operate new software to the most advanced post graduate instruction. Only for training sessions actually requiring special type equipment would workers have to travel to a specific location; however, with advances in virtual reality workers would only have to travel to a specific location for the final stages of such training. Second, to achieve low cost matching of supply and demand in fluid labor markets, the matching will take place through the social nervous system. Both the available workers and the available jobs will both be in databases addressable by any terminal. In industries where performance standards have been established the file on potential workers will contain sufficient information to apply analytic criteria to quickly screen potential applicants. The time required to find a new job will be greatly shortened.
As workers gain greater freedom of location Internet they can search for jobs over a much greater physical area without relocating their home. As the work week shortens, a trend in work patterns for physical work will be to work concentrated periods and then have longer periods with no work. Such workers, for example, might work one week with 10-hour days and then have two weeks off. As physical plants in an industry frequently locate relatively close together, they will tend to create orderly markets for physical object workers, as these individuals can work at any plant and live a considerable distance away during their off periods. For workers manipulating informational objects in the social nervous system, freedom of location would be even greater. The counterpart to the current salesperson in a department store is the information worker who would come on screen to help people who were unable to use a particular aspect of the social nervous system software. Such workers would tend to work during the peak demand periods. With cheap communication, the change in time zones can be used to smooth out employment hours. And as communication costs fall the potential pool of information workers increases.
With a more efficient information system to match supply and demand and with a greater pool of potential workers for every job, market forces would quickly clear the labor markets. In response to the fragmentation of work, the ability of unions to set wages will decrease markedly, and the market itself will replace union contracts. This does not mean that unions would disappear totally, however. The role of unions and professional societies in markets would shift to ensuring that the market clearing processes satisfied due process and the workplace satisfied the safety code. The union would also act as a special interest group for workers' legislation.
Provided that society maintains a high level of investment, average income over lifetimes should increase; however, with short-term work and decreasing work hours, work for all economic workers whether owners, managers, professionals, information workers, or blue-collar labor, would be much more professional and much less personable and would offer very little day-to-day job security. To maintain a stable level of consumption with fluctuating incomes all workers would need to be knowledgeable about finance. However, the more personable lifestyle in the new towns would compensate for the less personable nature of economic relations. And, with a decreasing work week most workers will be more oriented towards their communities and less towards the workplace. Moreover, with shorter, more flexible work hours and part time telecommuting to work and school, working couples with children would find it much easier to organize their schedules to promote family life than currently.
STUDENTS: In a rapidly, constantly changing environment, you must be prepared for a career of constantly changing jobs which will necessitate you constantly acquire new skills. As automation progresses, human work is constantly being reorganized. After such reorganization, workers will have to learn new skills to be effective. Increasingly, you will alternate between work and school, whether company or university, to learn new skills. Universities (very reactionary institutions when it comes to change) will pump educational products into firms using teleconferencing. Most major Universities including UT have made a start in this direction.
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