Monday, July 2, 2007

Techonomic Market Crises and Recommendations

If you could kick the person in the pants responsible for most of your trouble, you
wouldn’t sit for a month.
— Teddy Roosevelt
The relentless march of knowledge in applied form (technology) has always been
the force behind human productivity. In product after product, service after service,
endeavor after endeavor, and market after market, continuous improvement in technology
and its expanding deployment have resulted in more output with less human
labor and material resource. Techonomic progress has reshaped the fundamental
productivity of organizations on all levels throughout history.
In view of the applicability of techonomics to so many fields, crossing time and
national boundaries, and with the rate of techonomic change accelerating, could
there possibly be any current markets where techonomic forces are not working?
Can a market defy techonomic trends? Unfortunately, some markets and endeavors
not only defy but reverse them. They can do this only when a powerful external
force is exerted and maintained on the marketplace, however. And the price is high.
As the technology gets better, the economic cost to provide endeavors is increasing,
because these organizations are failing to become more productive.
Under normal circumstances, the techonomic theory of organizational evolution
would anticipate that the competitive market, the natural selection mechanism, would
eliminate negative productivity trends. Remember, each key element in Darwin’s
theory of organic evolution has an analogous element in techonomic theory. In the
competitive economic arena, it is techonomic intelligence that gives some organizations
the edge over others and results in their survival and growth, just as in the
natural environment, it is some favorable characteristic — better eyesight, coloration,
speed, etc. — that gives an animal the competitive edge and “selects” it for survival,
growth, and reproductive success.
Competition in an open market, where techonomic forces can operate freely, is
the selection mechanism that favors productive organizations and promotes their
health and growth. Fundamentally, techonomic theory posits that technology advance
results in productivity gain, thereby providing greater output for less cost. This theory
also anticipates an inverse result when free economic competition is artificially
In three major U.S. markets — energy, healthcare, and education — techonomic
trends are operating in reverse, resulting in an economic decline headed to crisis.
The missing element in each of these markets is competition. Each of these troubled
markets exhibits a different way of diminishing the corrective force of competitiveness,
but the external force perpetuating the artificial market originates from the
same source — government:

The energy market:
Domestic competition from nearly all energy
sources has been stymied by unilaterally expensive environmental regulations.
These regulations render domestic exploration and production
economically unjustifiable relative to international sources.

The healthcare market:
By removal of personal responsibility within a
multilayer system of insurers, providers, litigators, beneficiaries, and suppliers,
competition has been diminished. The motivation for efficiency,
beginning with the individual, has been eliminated because “someone
else” pays the bills.

The educational system:
Monopoly leads to waste and inefficiency. The
public education system is a monopoly with a firm agenda to maintain a
perception of adequacy.
In this chapter we shall look at the negative trends in each of these markets, and
we shall consider specific suggestions for reintroducing competition into these key
markets. Due to the size and importance of these three markets, strength within them
is actually vital for sustaining the competitiveness and health of our remaining
economy. However, we shall no doubt have to suffer the ill effects of these negative
trends for a while longer before the will of the American people requires its government
to free these markets.
Since techonomic trends are active in the global economy, performance of these
U.S. markets must be viewed in terms of contemporary world markets. Techonomics
predicts that U.S. trends in these markets are very likely to be corrected in reaction
to a reduced economic living standard in our country relative to the world. However,
if the nation does not act decisively to address the major noncompetitive markets
producing these combined trends, then
more efficient and effective nations tempered
by the competitive fire of the international marketplace will economically
In addition to competition, the free market attracts capital, bringing resources
to productive causes. Capital formation, the act of acquiring monetary resources for
the execution of a productive endeavor, is increasingly more important as technology
advances. The acquisition of capital for an endeavor demands a marketplace wherein
a reasonable return is possible (not guaranteed, but at least possible). It has been
aptly said that entrepreneurs are not risk takers; they are calculated risk takers. If
an opportunity is going to attract the capital it needs to grow, there must be a
reasonable governmental, economic, and cultural system in place that respects the

importance of capital. Investments must have the opportunity to bear fruit. If such
conditions do not exist, then elevated capital risk demands payback rates and shortened
time frames that reduce or eliminate the financial foundation needed to proceed.
The current situation in China is a clear example. In recent years, China has
systematically opened up trade and free market practices on its borders. Figure 8.1
shows the growth in trade between the U.S. and China over the past 20 years.
Capital formation for China has had to come from revenues generated from
product sales and from corporate partnerships with foreign firms willing to bear
the risk of unknown capital markets and government policies.
Conversations with
leading international equities brokers have confirmed my conviction that investment
in equities listed on Chinese exchanges remains a very risky endeavor. The high risk
is there mostly because of the uncharted performance of their equities regulatory
oversight system. China’s transformation will be slower as a result, but it will still
progress because of free trade and free markets around the world seeking low-cost
goods, wherever they can be found.
The techonomic productivity (output/cost) of manufacturing in China is increasing
rapidly as China embraces the competitive world marketplace. By contrast, the
techonomic productivity of manufacture in the U.S. is on the decline because we
are burdened with decreasing performance in the three influential markets: energy,
healthcare, and education.
has already considered aspects of these
markets both historically and recently, but this chapter offers analysis to pinpoint
the means by which marketplace competition was removed and to suggest corrective
To restore competition, it is essential to understand the means by which
it has been constrained.


What economic protectionism does to organizational competitiveness, cultural entitlement
does to individual initiative and character development. Note this cycle:
improved standards of living come from greater productivity. Greater productivity
comes from greater specialization. Greater specialization produces greater interdependence,
which maintains standards of living. Entitlement also runs a spiral course.
As the entitlement cycle spirals, the expectation to receive more (standard of living)
while doing less (specialization) leads to mass dependency (entitlement).
With the establishment of the Great Society effort in the U.S. in the mid-1960s,
the U.S. Government declared war on poverty. How has the war been going?
Comparing income statistics from 1966 and 2003 provided by the U.S. Census
Bureau in their historical poverty tables, it is clear that the percentage of people in
the U.S. living below the poverty line has not significantly changed (1966: 14.7%,
2003: 12.5%) and has never been below 10%.

Even with the expenditure of billions
of dollars to address the problem, the measurable economic results have been
marginal at best.
to produce is as important in the techonomic economy as the
produce. With computers and networks acting as leverage for the mind, anyone possessing
the will to serve can find an opportunity to serve. Agricultural workers displaced
by the industrial age did not have it as good. Industry was slow to develop and expand
into the rural agricultural regions, leaving displaced workers with few options.
Computers and process have created a more level playing field for entry-level
positions. But with welfare payments approaching minimum wage earning capacity,

the motivation fueled by basic needs has diminished the will to work. Subsidized
housing, subsidized meals, subsidized transportation, and subsidized healthcare challenge
the thinking poor to consider the economic advantages of
not working.
marginal economic benefits of minimum wage work are seen as negated by the
constraining commitment of time and the costs (transportation, clothes, food) associated
with work. The honor of self-sufficiency and pride of accomplishment has
been erased in large segments of the community.
Techonomics anticipates that those
cultures constraining or eliminating the entitlement mentality will be the cultures
to dominate future markets.
Technology will assure that those who desire to be
productive have the opportunity to be. Economics will assure that those willing to
perform an honest day’s work for an honest day’s pay will be rewarded for doing
so. Conversely, technology placed into the hands of one lacking a work ethic will
never be optimally deployed, no matter how innovative. Global competition ultimately
guarantees the demise of entitlement.
In this chapter, we have used techonomics to anticipate the key trends of our
generation, the transition to the Virtual Age. To anticipate trends in the marketplace,
techonomics assumes that the evolutionary powers of the free market are able to
work. But when the free market is constrained, a techonomic analysis can also be
used to study the detrimental trends in the market and offer corrective recommendations.
The next chapter will review contemporary economic challenges of our
time, seeking practical, workable techonomic remedies.


When governments intervene in an effort to protect segments of industry or population
from the realities of the competitive economy, the result is always the same:
descent into the abyss of mediocrity. The clearest evidence on an international level
in my lifetime was the condition of the Soviet Union at the time of the fall of the
Berlin Wall. The Soviet Union, with abundant natural resources and a vibrant people,
had outwardly acted as a world superpower for 40 years. But on the inside, the
government pursued a noncompetitive socialistic economic policy and could barely
feed its populace. When the wall fell, none of the country’s producers were strong
or capable enough to assume a competitive role in the world economy. Fifteen years
later, progress is still slow. Once destroyed, the infrastructure and will required to
embrace competition is not easily cultivated.
The free market economy is the filter in techonomics providing natural selection
of best technology practices and causing them to proliferate. When markets are
contrived or unduly constrained, the long-term effects are analogous to creating a
zoo in the biological world. Animals confined to the protective environment of a
zoo for years or for generations lose the knowledge, cunning, and will to survive in
the “wild.” The zoo, where the weak and feeble are protected and allowed to
procreate, fosters a sort of inverse natural selection.
Some years ago, red wolves were reintroduced into the Great Smoky Mountains
National Park. These particular wolves had never lived in the wild. They were
reintroduced into a protected area and fed with meat thrown over a tall wooden
fence. After several weeks, the frequency of the feedings was reduced to encourage
the wolves to begin hunting. Instead, the wolves spent most of their waking hours
walking around the area looking up at the trees waiting for food to fall from the
sky! Only a small number made the transition to freedom. The reintroduction program
for the red wolf in the Smokies has been discontinued.
Protectionism in economic markets works the same way. The market cannot
protect itself; quite the contrary. A market left to itself will reward best practices
with economic success and punish poor practices with failure. Protectionist practices
have to originate outside the system. The laws of economics govern the marketplace
unless a powerful external influence dictates a modified set of standards. The outside
influencer of major markets is commonly a national government — no other single
entity has enough power over the market.
The U.S. government has, for example, used antitrust measures to protect the
market. Whether it was the breakup of American Telephone and Telegraph (the Bell
System), the paring down of International Business Machines, or the decoupling of
Microsoft’s key products, in the past when a company became (in the government’s
view) too successful and powerful, the government would act. In the age of multinational
corporations holding little national allegiance, techonomics anticipates that
this form of imposed corporate control will become much more difficult to impress.
Wal-Mart is a good example. With its significant nation-sized revenues, Wal-Mart
is capable of influencing the international balance of trade. Locally, Wal-Mart is
such a powerful provider of jobs, employment taxes, and local sales taxes that it can
frequently obtain assistance from local governments to procure desired land for new
outlets. Few government officials will take a stand to weaken such a corporation,
no matter how large it gets.
Will multinational corporations become so powerful they overshadow nations,
or will nations, with tariffs, taxes, and antitrust regulations manage to control businesses?
If Wal-Mart is any indicator, the multinationals are going to win if it comes
to a test. Why? Techonomics. The multinational corporation in the age of virtual
companies is no longer bound to location. It can move headquarters, distribution,
manufacturing, research, and marketing to any location on Earth. If the government
presses anticompetitive suits against a giant like Wal-Mart, they are hurting every
consumer in the nation. Just about every voter is a consumer! Excessive business
or employment taxes will have the same effect in the level playing field of this
century. Just as U.S. companies often incorporate in Delaware before a public
offering, due to tax considerations, multinationals will seek tax-sheltering countries
if the tax and liability costs of headquartering in the U.S. are significantly more
burdensome than in other nations.
When a nation chooses protectionism, which in turn encourages inefficient
organizational practices, organizations lose the ability, will, or both, to compete.
Economic protectionism is advanced by several methods: creating artificial trade
barriers, providing unequal access to resources (land right-of-way, water access,
broadcast frequencies, etc.) that result in an economic monopoly, or evaluating
“competitive” bids on a basis other than economic merit.

If such practices ultimately result in weaker economic organizations, why does
government perpetuate them? Most protectionist practices are an effort to gain
political power or financial capital from those protected, or to maintain the status
quo of past economic tradition (to maintain political influence with the general
populace). However, they can also result from the unintended consequences of an
action targeted at another market.

As observed with the ultimate demise of the economies of the Soviet Block
nations, protectionism leads to economic failure. In the U.S., protection of the steel
industry simply slowed its demise. In Japan, protection of the rice industry resulted
in higher prices for rice and other grains.


The last 150 years of technological advance, combined with an economic system
that rewards proper use of capital, has resulted in a material standard of living for
U.S. citizens and first-world nations that is higher than that enjoyed by any people
previously on Earth. The “natural selection” forced by the competitive economy
and the accelerator of capital, attracted by the best opportunities, has caused best
technological practices to be advanced, benefiting many millions of people. The vast
majority of citizens in this society have access to food, healthcare, entertainment,
and educational opportunities beyond the reach of kings two centuries ago.
Competition has caused a relentless journey toward efficiency and its counterpart:
specialization. As we group together in ever-larger communities of specialized
individuals, we become much more dependent on each other for the basic sustenance
of our daily lives (food, fuel, etc). While our standard of living is far advanced over
any ever known, reliance upon the productive output of others is also increasing.
Such is the march of techonomics. The tangible sides of the organizational square
— energy, computation, and communication — progress at accelerating rates linked
inextricably to each other. What of the fourth side: community and its spirit? Will
community life progress in the midst of superlative material comfort?
In his classic study of successful individuals,
Think and Grow Rich,
Hill repeatedly observed that an individual’s greatest success was never reached
before a great failure.

Success had a price. Might that also be true for organizations
and societies — that the times of greatest progress follow times of greatest challenge?
Is there a collective will that contributes to the constitution of a people that is valuable
to nurture, protect, and preserve, or are the citizens of a nation simple cogs in a
scheme too large to influence? A superpower economy followed the Great Economic
Depression. A superpower military followed the great struggle of World War II. The
challenge from one man, John F. Kennedy, and fear of a competitor with a lead, the
Soviet Union, urged a nation to send a man to the moon and back by a definitive
date, and the nation responded.
Facing trials and overcoming them builds character in organizations as well as
individuals. The free market global economy is creating many trials in this time of
transition. It always has. The U.S. Civil War was a battle between the Agricultural
and the Industrial Ages at the same time it was a battle for states’ rights and freedom
of slaves. How to maintain high material standards of living for the masses will be
the key battle in the transition from the Industrial to the Virtual Age.
The enemies of healthy organizations, as well as of interdependent communities
of working people, are excessive protectionism and entitlement. Certainly, societies
have a moral obligation to protect their economic interests from being overpowered
by businesses or foreign interests. But the entitlement mindset is a great destroyer
of personal initiative and ultimately diminishes the ability of societies to effectively
participate in the operation of global free markets and their benefits.

Sunday, July 1, 2007


Combined with the powerful leverage of the computer, the growing network of
digital communications provides an expanding breadth of control in the Virtual Age.
Management, via electronic networks, can be
anywhere. Fading away are
organizational charts with layers of middle-level management to carry out executive
directives. While vestiges of these organizations still exist, primarily in older companies
with their roots in the industrial age, there is a measurable increase in the
span of control in Virtual Age companies. It is evident from the techonomic metric,
described earlier, of “revenue per employee.” It is also evident in the vernacular of
the last decade: right sizing, lean engineering, flat organization, remote operations,
Free market economic pressure is the companion of technology advance causing
this sweeping organizational change. Companies must not only produce good products,
they must use the most efficient methods of production, distribution, capital
management, and customer service to provide their products/services at a competitive
price. The organization and use of labor resources become increasingly critical
to the continued economic success of an enterprise. Information technology has
become the tool to optimize labor use, just as mechanization was the tool that
transformed labor patterns from the agricultural to the industrial age. Organizational
structures must change, or the organizations themselves will become extinct.
Ubiquitous communications in the form of high-bandwidth digital connectivity
is opening the possibilities of expanding remote operations. Plant engineers for
Tennessee Eastman operate plants across the world, remotely, by observing plant
performance via distant sensors and making adjustments to processes a world away.
The University of Phoenix and the National Technological University train thousands
of graduate students across the nation by satellite and Internet links rather than in
brick-and-mortar classrooms. You gain access to more information than is available
in the Library of Congress many times a day simply by making a query on Google
or other search engines on the Web. Not only has there never been a period in the
world’s history where so much information was being generated, but there also has
never been a period when that information was accessible in a nonlinear, “searchable”
manner by the masses. The resulting shifts in organizational structure are only
beginning to emerge and will continue to develop as the Virtual Age matures.
The foundational laws of techonomics — continued electronic intelligence,
continued network expansion, and continued organizational efficiency — anticipate
several organizational trends including:
Organization structure will flatten.
A broader span of control, supported
by communications and information structures, will grow simultaneously
with reducing layers of management and bureaucracy in all organizations
driven by the private sector. The pressures of competition will force
nonoptimal (price and productivity) labor use to be eliminated.
Virtual companies will proliferate.
Small leadership teams will commandeer
the needed resources, wherever the best are located, and manage
them remotely using electronic commerce methods. The term “micromultinationals”
has recently been coined to describe technology startups
that obtain capital with a small domestic team while most of the development
labor is scattered around the world. One key to success is to retain
the “crown jewels” of the organization as outsourcing occurs, or the day
comes when the organization has no sustainable competitive advantage.
Franchise structures will continue to grow.
Within this growth structure,
a successful organizational model is conceived, tested, and proven on a
local scale and then rapidly distributed worldwide with electronic checks
and balances to monitor progress and foster success.

Global labor rates will equalize.
Availability of inexpensive global communications
breached the last natural barrier to large differential labor
rates for information workers. Twenty years ago, a transpacific call could
easily be $1 a minute ($60/hour). Today, it is under $0.05 a minute
($3.00/hour). The international labor rate communications differential for
information worker jobs is now very small (thanks to technology advance,
communications deregulations, and capital investment in building the
networks). Indirect labor costs now become important in determining any
competitive labor rates. Healthcare, retirement, unemployment insurance,
workman’s compensation insurance, and liability insurance become significant
labor considerations as the communications costs diminish to
insignificance. Hence, the U.S. consumer is serviced by telemarketing
calls from India, architectural drawings from Taiwan, software programming
from Ireland, manufacturing from China and Japan, and accounting
assistance from Singapore. Traditional barriers to entry for skilled labor
have been eclipsed by the ubiquitous network and virtual digital workflow
in the Virtual Age.
World languages will converge.
The Internet, television, and other technologies
are healing the curse of the Tower of Babel. Today, humankind’s
ability to work together is being restored on a large scale, and the return
of “universal language(s) is the key. Because of TV, verbal language
accents in the U.S. have become more homogenized. Computer programming
in English language (COBOL, FORTRAN, BASIC, C++, HTML,
etc.) has caused the technologically elite in many countries to learn
English. Commerce and communications today are crossing more international
boundaries. According to Manfred Sellner, assistant professor of
linguistics at the University of Salzburg, “English, formerly perceived as
a symbol of linguistic imperialism, is now accepted as the primary vehicle
of economic globalization.”
Techonomics anticipates a trend toward unification
of languages as more people become bilingual in one of the
languages of major population groups for commerce: Chinese, Spanish,
and especially English.
Whether the job is software development, telemarketing, product service call
center, accounting, drafting, or Web site design, the digital pipeline moving at the
speed of light is not concerned about the source or destination of the endeavor.
the Virtual Age labor cost, cultural work ethic and trainability are more important
than societal infrastructure (roads, water, utilities, etc.) as long as the digital
pipeline is available.
In some regions, the first installation of the digital pipeline
will be wireless, reducing the capital and land “right-of-way” requirements for the
infrastructure while leapfrogging the wired infrastructure of other nations.
Hence, another past U.S. labor protection barrier, the great physical infrastructure
for support of commerce in the U.S., is leapfrogged by these innovative communication
This competitive pressure is accelerating industrial evolution into the Virtual
Age at an unprecedented rate. The economic barriers to significant labor rate differential for mental labor have been removed by the onslaught of technology in
the digital age. A few of the key product trends in communications to note include:

Wireless world
. The combination of diminishing electronic costs (First
Law) and increasing network connectivity (Second Law), along with the
desire to be more efficient (Third Law), is leading to the rapid expansion
of wireless networks. Cell phones have blazed the path, and mobile computers
are rapidly following. RFID tags will enable every package/product
of any significant value to be tracked from cradle to grave, and any useful
information (maintenance, owner, location of manufacture, location of
use) will travel with the product. It will be cheaper to automate this
process, having the information always available, than it will be to maintain
any written records of the product history.
Anticipate an expansion
in the Internet protocol numbering system so every manufactured product
will have its own address.
The RFID communicates to a unique Web
site for every significant product you own, tracking usage patterns, location,
maintenance records, etc. Expect RFID in passports, too, following
people across every border. Blue Tooth technology will allow handheld
devices to communicate with each other while they also communicate
with any intelligent device requiring transactional information (vending
machines, toll plazas, checkout registers). The wireless world will complete
the promise of 7/24/365: anyone, anywhere, anytime. The access to
products and information that companies like Amazon and Google have
brought to the desktop will be available ubiquitously. Instant gratification
just keeps getting more gratifying, instantly, in the Virtual Age. The realworld
delivery companies (United Parcel Service, Federal Express, etc.)
should see continued expansion as they become the physical fulfillment
channel for virtual commerce.

Media convergence: home, mobile, vehicular.
Convergence is happening
in three key areas today: home media, hand-held devices, and vehicular
media. The pockets of our generation are filled with small, electronic
gadgets, thanks in no small part to Moore’s Law. Cell phones, digital
cameras, personal digital assistants, video cameras, MP3 players, personal
dictation devices, web browsers, e-mail sending and receiving devices,
Global Positioning System (GPS), and Blue Tooth activating keys are
cluttering our pockets and countertops. The “Swiss Army Knife” of mobile
convergence will emerge as the device that joins many of these functions
in a small, reliable, high-performance package. Many cell phones now
take pictures, include e-mail, track GPS, play music, and so on. The next
decade will bring an army of product offerings that seek to find the market
optimum between functionality, price- and ease of use.
As chip performance
increases (First Law) and the wireless network expands in coverage
and capacity (Second Law), the ability to package more media
forms into the same package will continue.
The question remains: What
is the market interested in, and what price will the market bear? The
successful business models will arise from the hardware/service models that currently dominate the cell phone market. Such an approach allows
the high-entry-level cost of new, cutting-edge technologies to be distributed
over several payments of a monthly service agreement. The resulting
residual service payments create predictable revenues, typically with
strong profits, once the capital of the infrastructure is recovered.

Vehicular media expansion
. With the advent of GPS in automobiles and
trucks, color displays in vehicles are now becoming commonplace. The
conflict between useful service and driving distraction is growing. Convergence
in the automobile will bring together the same devices as the
handheld convergence, with the addition of a screen large enough to
provide maps and entertainment. These systems are now available in highend
vehicles and will progress into mass applications as price falls and
the features and network increase. Anticipate widespread use of mobile
text messaging, web browsing, MP3 interfaces, DVDs (on rear screens),
integrated GPS, integrated mobile phone coverage, and a smart sensory
system reporting vehicular conditions to “big brother” in the event of an
emergency. As the network of intelligent sensors on our major roadways
is expanded, anticipate communications of that information and of
weather information directly to the vehicle. Honda has developed an
interactive path-planning agent that takes traffic information into consideration.
Also anticipate a host of safety sensors that monitor speed and
following distance, alert when highway sideline is crossed, and monitor
road conditions to recommend safe speeds. The network of networks,
combined with wireless access, will provide traffic information, weather
information, hotel availability, make dinner reservations, and read your
e-mail to you as you drive. Most of this is already available in vehicles
as optional products, but it will soon follow First and Second Law trends
to the mass market.

Ubiquitous sensory network.
According to
One Digital Day,
you should
carefully consider how you look in New York City, because you are
captured on video over 20 times in the typical day.
Video cameras in
elevators, lobbies, restaurants, convenient stores, gas pumps, street lights,
etc. are capturing and saving, at least for a while, your image.
and storage costs have plummeted due to Moore’s Law, and remote
cameras can send information to a central repository via the expanding
Cameras do not just track us; they track our transactions with
the aid of the network. Federal Express captures a digital image of every
package it ships (over 3 million a day in the Memphis processing center)
and retains this information for months in case of a delivery question.
Major highways have sensors to monitor and redirect traffic flows and
control traffic lights. New vehicles have global positioning sensors that
track location, speed, and perhaps even cargo manifests. Cellular telephone
towers will be equipped with sensors to monitor the air quality to
provide early warning for pollution alerts or terrorism acts. All the
foundational laws of twenty-first-century techonomics point to an ever-expanding network of sensors, data collection, data storage, and automatic
evaluation of our every act.

Automated bureaucracy.
Although this may sound like an oxymoron,
the automated bureaucracy is growing at an increasing pace. A combination
of high labor costs (economics) and advancing computer capabilities
(technology) has made the replacement of human mental labor economically
possible and a competitive necessity. Touch-screen systems are
eliminating the need for bank tellers, post office clerks, cash register
attendants, and tollbooth operators. Automatic telephone systems eliminate
the need for receptionists and greatly reduce the number of personnel
needed to field product inquiries and technical support. Automated form
processing for everything from loans to computer orders streamlines the
labor content. Look for more evidence of the automated bureaucracy in
retail stores as they trim costs to compete with the most efficient purveyor
of automated bureaucracy, the Internet.

Personalized pharmaceuticals.
Many advances in the understanding of
DNA and metabolism have been made in the last decade due to new
imaging instruments (First Law), massive data processing (First Law),
and collaboration (Second Law) in the research community. The field of
personalized medicine, particularly personalized pharmacology, is emerging.
This refers to the development of pharmaceuticals and treatment
methods based on the DNA of the individual being aided. Rather than a
blanket approach to a given disease, these treatments take into account
the DNA configuration of the patient to determine the treatment option
most likely to succeed, even to the point of creating drug delivery “tags”
based on DNA from the patient. Without the massive computational effort
to identify the human genome in the 1990s, the information needed to
develop these treatments would not be available. The Human Genome
Project represented massive scientific collaboration from many participants
to address a large research target simultaneously. The next step in
the effort is to convert this data and knowledge into treatment regimens
resulting in personalized treatments. The network of networks will be able
to track the spread of epidemics and the effectiveness of treatments on an
ongoing basis, provided confidentiality considerations do not make information


The advent of electronic computation and mass information communications is
causing another age to dawn. Calling this age the Information Age would be like
calling the Industrial Age the Steam Age; information is only one key part of the
picture. For lack of better terminology, this age has been referred to as the postindustrial
or postmodern era. Perhaps a better term is
the Virtual Age: an age in which
digital computation, the ubiquitous network, and increasing personal productivity
allows virtual representation of all that was once physically tangible.
As we view organizations through the simple four-square analysis — energy,
computation, communications, and community — it is evident that advances in
computation and communications dominate the current transition beyond the industrialized
age. The spotlight in this age is on the computer. Society’s current journey
is “from atoms to bits.”
It is an economic transformation. The old economy measured
the cost of goods in terms of intrinsic weight, while the new economy measures the
cost of goods based on the intrinsic value of the function they perform.
New goods and services give rise to new occupations, new businesses, and
entirely new ways of organizing society. Pictures, documents, money, video, music,
telephone calls, entertainment, and records of all types have migrated from analog
or atom-based media to digital representations. In the digital form, any data type
can be stored and computed upon with the same electronic hardware. There is no
need for multiple information and media formats for video storage, audio information,
photographic information, written information, etc. The universal world of data
storage, management, and manipulation has arrived. The information is digital, and
its storage is electronic memory.
In digital form, information can be shipped anywhere at the speed of light. It
can be transformed, manipulated, searched, stored, retrieved, shared, or massively
distributed, all within the virtual world of the computer and the Internet. Today,
actions on information can be performed instantaneously, simultaneously, anonymously,
ubiquitously, and inexpensively. Labor transformation will be as significant
in this age as it was in the move from Agricultural Age to Industrial Age. Steam

power supplanted (to a large degree) physical effort in the previous transition.
Computational power will “supplant” mental labor in the current transition.
long-held promise of automation has been realized in this generation in the form
of a personal computer capable of replacing bureaucratic labor at a fraction of
the cost
Franchised business models replace thinking positions with simplified repetitive
processes that can be quickly learned and accurately repeated. Tougher assignments
like inventory management and financial accounting operations are automated by
the network of computers in everything from the cash register point of sale to the
delivery truck global tracking system. Those mental labor functions that the computer
cannot fully automate can be quantified and transported worldwide, to be performed
by the most cost-effective labor pool.
The move from atoms to bits means complex, effective models of reality are
now resident in computers, and the line between real and virtual is blurring. Money
is electronic, consummating financial transactions at the speed of light — no more
mail float at the end of the month. Fluency and ease with the computer is the
technologic skill required for this economy. The labor of thinking for the working
masses — that is, of “task-oriented” mathematical thinking and any systematic,
repetitive thinking — is diminished. Computers, and their increasingly sophisticated
software, do this kind of thinking for the user.
Computers are superb at doing the math (spreadsheets, making changes, etc.).
They write reports from automatic measurements (financial reports, applications,
etc.). They search the available media for your preferences (search engines, Tivo,
etc.). The information worker need only follow the script. Work ethic, computer
literacy, and compensation requirements are the economic measures of workforce
competitiveness. Human labor in this specific context is not particularly creative or
interesting, but the efficiency of this system will free human time for other pursuits.
Here are a few of the computational product trends gathering momentum from
twenty-first-century techonomics:

Digital omniscience
The big brother to data is knowledge. All electronic
transaction data is available on the network of networks (Second Law),
and the computational power to analyze it is rapidly progressing (First
Law) without the need for human intervention (Third Law). With the
volumes of data being collected from transactions on the ubiquitous network,
the companion advance will be intelligent systems that mine useful
information from this data. Consider how much the network knows about
you. Every time you use your credit card: electronic transaction; every
time you write a check: digitized transaction; every time you write an email:
electronic record; every time you search the Web: cookies watch;
every time you make a telephone call: electronic transmission. Following
your electronic data footprint reveals a lot about you. Cash transactions
are not the answer, either. Radio Frequency Identification (RFID) devices
are becoming so inexpensive (First Law) that they will be embedded into
major currencies within the decade. has been an early mover
in trying to understand customer preferences and use that understanding to increase sales to that customer. Such buying recommendations are the
tip of the iceberg of data mining for specific value added. In the fight
against terrorism, automated monitoring capabilities and data mining for
all forms of personal communications have been enhanced and used. We
face a brave new world in which not only every transaction is captured,
but the computational capability exists to infer potential future behavior
from combinations of those transactions. Certainly, the data and analysis
means are available if the models of human behavior become more accurate.

Genesis of the virtual world
This generation will witness the creation of
a virtual world for interaction, entertainment, commerce, and education.
First Law computation advances make graphic displays realistic, compelling,
miniaturized, low power, and inexpensive. The Second Law joins
the world, via the Internet, into a virtual community only a keyboard
away, or in a totally wireless world, provides the virtual anywhere. Threedimensional
animated video games create worlds so compelling that players
spend all their waking hours in an imaginary environment. Animated
movies blur the line between the real and the computer generated.
Each year, technological advances in hardware, software, and content further
blur the line between real and virtual. Today, a greater diversity of physical goods
can be accessed via the Internet virtually than can be made available physically at
the largest real shopping mall. The eminent missing product, which will link the
masses with a compelling virtual world, is the transformation of the computer display
to a head-tracking, eyeglass-like immersive device.
Such a device could lead to the
creation of totally virtual life experiences rivaling the experience of the real world.
A comfortable system combining high-resolution, wide-angle stereo display, seamless
kinesthetic tracking, and directional stereo audio output would immerse the user
into 90% of the real-world data input of the human sensory experience. In the years
ahead, such devices will change our comprehension of the media experience. With
techonomic trends supporting electronic miniaturization, community network interaction,
realistic generation of animated displays, and a market demanding an evermore-
realistic entertainment experience, the age of the virtual world is approaching.

Emerging Techonomic Trends

The first three laws of techonomics provide a foundation for analyzing other developments
currently shaping our society. When two or more of the first laws combine
to support an emerging endeavor, that endeavor will likely become economically
viable and find widespread adoption in the future. We are now seeing several
endeavors being shaped into techonomic trends because they are highly favored by
these laws. These techonomic developments are active in all four sides of the
organizational square: energy, computation, communications, and community. This
chapter discusses the marquee trends anticipated in the next two decades categorized
by the organizational square and specific technology developments to watch as trend
leaders (see Chapter 9 for techonomic trends in the more distant future).
To understand contemporary techonomic effects on the direction of society, one must
first understand their effects on energy. It was steam power that ushered in the
Industrial Age, replacing the animate labor of the Agricultural Age with machine
power. The Industrial Age rapidly developed based on fossil fuels — a nonrenewable
source — magnifying our muscle. Society flourished materially, but the resulting
pollution from combustion of finite fossil fuel reserves raises serious energy production
questions in the postindustrial era. Answers to energy questions must be
based on a holistic picture: technology, economics, politics, the environment, and
The key question to answer is this: What is acceptable risk for provision of
energy? The way each nation/society answers this question over the next decade
will set the course for their economic viability over the next 50 years. This is because
it takes a long time to design and construct major power generating facilities, and
worldwide competition for energy resources is increasing. Intelligent national leaders
recognize the need to plan and develop energy generation capacity before
crisis arrives rather than waiting for catastrophic shortages that demand emergency

Societies need energy to function, and twenty-first-century societies worldwide
need energy in increasing quantities to support improving standards of living. While
conservation efforts are laudable, society can no more save its way out of an energy
need than an individual can starve his/her way out of a nutritional need. Individuals
function on food, societies on energy. Remove energy, and the standard of living is
instantly diminished (remember what happens when we are without electricity for
an hour, day, week, longer). This section considers various avenues of energy
production readily at hand or eminent, not futuristic possibilities with no time
horizon for their broad commercial application.
For this broad discussion, renewable energy sources are categorized into four
broad classifications: biological (ethanol from plants, etc.), cyclical (solar, wind,
wave, geothermal, etc.), chemical (batteries, fuel cells, hydrogen cycle, etc.), and
nuclear (breeder fission, fusion, etc.) Techonomics balances the technology trends
with the economic realities of the marketplace to give insight into the near-term
future of this industry.