I’m going to let you in on a secret. It’s not much of a secret for those who study economics or pay attention to the world. In fact, it’s been known for some time except to the average guy on the street, who is busy living his life and supporting his family. He thinks the struggle is between the rich or the poor or between Democrats and Republicans. It’s not.
Most of what you are seeing in today’s economy was predicted decades ago, including the timeline upon which it was going to happen. What is occurring with these movements such as “Occupy Wall Street” was prophesied in one of the most famous business books of all time, Management, by legendary thinker Peter Drucker.
The Coming Economic and Political War Between Manual Workers and Knowledge Workers
Drucker predicted that the rise of the microchip and the inevitable end to the industrial revolution build-up period of the past few centuries would split society into “knowledge workers”, who carried their own financial destiny in their head and didn’t rely on production provided by employers, and “manual workers” who were increasingly being made obsolete by productivity gains due partly to low-cost global labor but mostly due to computer automation.
[mainbodyad]Succinctly, Drucker stated: “The knowledge workers, collectively, are the new capitalists”. They control the means of production. It’s in their heads; between their ears. They are the asset.
Peter Drucker warned that the day was coming when the manual workers would wake up and realize they had become obsolete and the spoils of society were going entirely to knowledge workers, leaving them to starve. Here is an excerpt from page 185 with emphasis added to highlight this point, talking about the fall of the manual worker from the days when it used to be a source of pride to put on a hardhat, pick up a lunch box, and head to a factory; keep in mind the first edition of this book was written almost a quarter of a century ago:
With the rise of the knowledge workers, the manual workers are endangered again. Their economic security is threatened. And their social position and status are rapidly diminishing. In the developed countries, industrial workers see themselves as severely deprived. They are defeated, losers, before they even start.
Drucker goes on to say:
The manual workers in the developed countries today have little self-respect. This inevitably makes them bitter, suspicious, distrustful of themselves, as well as of organization and management, and resentful. They are not revolutionaries, like their parents, grandparents, and great-grandparents, for it is obvious to them that revolution cannot alter the fundamental conditions. But they are likely to become militant as the center of social gravity keeps shifting toward knowledge work and the knowledge worker.
The rhetoric of workers’ parties and movements still attacks the profit system. But the true class war is increasingly being fought between the hard hats – manual workers – and the middle-class knowledge workers. During most of this century it has been the coalition of manual and knowledge workers that has dominated politics in the developed world – in America’s New Deal as well as in the social democratic and labor parties of Europe. The major political event for the early part of the twenty-first century may well be the growing split between these two groups.
Drucker then goes on to prophesy that the inevitable result was “severe difficulties for the manual worker’s own institution, the union” and that the vacuum created by the most capable people in society becoming knowledge workers was going to cause the leadership of these political groups to become people driven by resentment rather than ability, revenge and envy rather than hope and progress. The goal, in other words, would be to “take back” what the knowledge workers had achieved rather than transforming into useful knowledge workers themselves.
Drucker also went on to predict that the work environments for knowledge workers would become increasingly individualized, long before the days of Google’s free use of plug-in electric cars and on-site massage therapists or leadership conferences held at the offices of Facebook.
Knowledge workers, except at the very lowest levels, are not productive under the spur of fear; only self-motivation and self-direction make them productive. They have to be achieving in order to produce at all.
That is why knowledge workers typically have far greater freedoms, from lunch times and bathroom breaks to flexible schedules and benefits, than their manual worker counterparts. This increasing inequality was going to lead to resentment and envy as knowledge workers captured ever-large portions of the income pie and manual workers struggled to survive; to even feed their kids.
The Knowledge Worker Will Believe and Behave Differently Than Americans in the Past
Knowledge workers are going to behave and have different beliefs than manual workers of the past.
- Global thinking; a great doctor can work just as easily in London or Hong Kong as he can in Seattle or New York
- Winner-take-all systems where the best, brightest, and most talented have and expect to keep a bigger chunk of the pie, just like in a sports game
- Knowledge learning and acquisition will never stop. You don’t go to school and then expect to have a job for life. You are constantly learning, updating skills, and putting new data to use
- Identity revolves around knowledge acquired; e.g., “I’m an anthropologist” or “I’m a therapist” and not just organization, “I work for Acme Industries”.
- Upward mobility is potentially unlimited but will only go to those most capable. We’re seeing this now: Of the top 1% of wealth in the United States, 90 to 95 out of every 100 in the class made their money on their own without inheriting it. That is almost the reverse of what it was when the country was founded.
- A growing number of knowledge workers who are not in the top of their field will “plateau” in their forties, having achieved all they are going to achieve. If they are tied up in their work, they are going to be in serious trouble. Vital to their happiness will be a rich life outside of their profession, including playing in an orchestra, working with kids, donating time to charity, and being involved in community.
- The split of knowledge based workers will begin when you see women enter fields such as nursing, paralegal, or computer technology because these types of work can allow someone to take 15+ years out to raise children and then renew skills and return to the workforce
The most successful knowledge workers will be those who convert their knowledge into “wins” for the customer. Just knowing a lot of stuff won’t do you much good. You have to do something with that knowledge that other people want and for which they are willing to pay you.
How We Deal with the War Between Knowledge Workers and Manual Workers Will Have An Enormous Influence on Society
Drucker goes on to warn us that, inevitably, there is coming a day when the knowledge workers will have to decide how they are going to deal with the manual workers, who by this time are probably rioting or causing political unrest.
One possibility is that the manual workers demand more benefits including unemployment benefits, retirement benefits, and other “transfer” payments that come directly out of the paycheck of knowledge workers in the form of taxes.
This might have worked in different times and demographics but will likely result in a call for austerity from the upper echelons of society, who want to cut such programs. From a psychological standpoint, this makes perfect sense because knowledge workers put themselves through years of schooling at high costs. They aren’t pursuing worthless degrees, but instead have a marketable skill in demand relative to supply, such as geological engineering for a petroleum company. With the declining retiree-to-worker ratio and the pressure of student loans, knowledge workers who have “made it themselves” are not likely to look kindly upon those who receive benefits from society, thinking they are lazy, stupid, or made poor choices (all of which may or may not be true; what counts is the social results of such a belief). This conflict could turn brutal if left unchecked.
Another option for the knowledge worker and manual worker struggle, which I find much more palpable and reasonable, is a societal investment in institutions that provide low-cost, quality training in knowledge based work. That way, someone from the poorest demographics can learn to become a plumber, dentist, or doctor without bankrupting themselves. Upper education would become, for all intents and purposes, a basic human right. There would still be massive income inequality but everyone would have a shot due to access to the training and skills necessary to succeed. That does not mean studying things such as music or art would be a human right. Education must be tied to specific job skills, which is already part of the education reform President Obama signed into law a year or two ago.
Peter Drucker summarized the big challenges of managing economic life in the 21st century as:
… “the changed psychological and social position of the manual worker (better educated and often better paid, he still sees himself as moving down from yesterday’s self-respecting working class into second-class citizenship); and the emergence of knowledge work and the knowledge worker as the economic and social center of what is the postindustrial, knowledge society.
Proof That the Occupy Wall Street Movement Is Part of This Struggle
I get the impression that some Occupy Wall Street protestors are doing it because they believe that corporations being treated like people is wrong, that bribes from powerful business organizations are undermining and dismantling our democracy, and that our society cannot be beholden to special interest groups. This is wise, just, reasonable, and true. I’d wholeheartedly get behind such a movement. These folks are rational.
In contrast, a much larger portion of the Occupy Wall Street movement seems to be protesting income inequality and the top 1% of wealth, a different issue. For these folks, their goals are hopeless until they realize we have entered a third industrial revolution that might as well be called the knowledge economy. Without that realization, they can’t solve their plight because they don’t understand the core, root cause of the struggle in which they are engaged. If anything, they threaten to attempt to tear down the very institutions that might, properly harnessed, save them. It’s a group version of the Dunning-Kruger effect.
Take a look at the official blog of the Occupy Wall Street movement called We are the 99 Percent. With the exception of relatively rare medical catastrophes, almost everyone on the site posting their story consists of low-skill, low-wage workers who are in debt, in many cases due to foolishly pursuing a worthless degree that had no marketable skills for which the world was willing to pay. An engineering degree costs just as much as a history degree; a chemistry degree just as much as a political science degree. You aren’t going to see a lot of doctors, lawyers, portfolio managers, engineers, chemists, or astrophysicists on there. Why? They have wages that are increasing on an inflation-adjusted basis if – and this is the key – they are any good at their job. The unemployment rate for some of these fields is below 2%.
Yet, the people on the blog, many of whom are my age or younger, think that a magic piece of paper called a B.A., B.S., or B.F.A., is going to entitle them to a good living. It won’t if you didn’t pursue skills the world demands! And, remember, both Aaron and I went to school on a classical music performance scholarships as first-generation college students who paid their own way; we know what we’re talking about when it comes to this area. We’re speaking from experience.
The people who are part of the “we are the 99%” movement are not bad people. But their movement is misnamed. They are not representative of the 99%; they are disproportionately made up of the bottom 20%. They know that something is wrong. They know their life is a struggle and that it isn’t supposed to be this way (it may not have been for their parents or grandparents). They see the rich getting richer and because of a mental model called the spotlight fallacy, assume the only way to get rich is through inheritance or being famous when those are some of the tiniest minorities within the super-rich demographics. They haven’t realized it’s all about a shift to a knowledge based economy. They are being left behind. They know it. They just don’t know why and they are blaming the wrong people.