Building Wealth: The New Rules for Individuals, Companies, and Nations in a Knowledge-Based Economy

Rating:
Summary: Duh
Review: "Building Wealth: The New Rules for Individuals, Companies and Nations in a Knowledge-Based Economy"

Review by Madanmohan Rao, Bangalore, INDIA ([e-mail])

The 301-page book is an excellent read, and covers a wide range of issues including emerging knowledge-based industries, global economic integration, entrepreneurial skillsets, business scaleability, national economic policies, and the digital divide; comparative analyses also cover the U.S., Asia and Europe.

The "wealth and productivity pyramid" in the New Economy, according to Thurow, is based on layers consisting of social organisation, entrepreneurship, knowledge creation, workforce skillsets, infrastructural tools, and natural resources.

The steam engine ushered in the first industrial revolution at the end of the 18th century, electrification heralded the second industrial revolution a hundred years later, and the third industrial revolution is now underway, spearheaded by technologies like the Internet, designer materials and biotechnology.

Technologies like the Internet help companies globally source and sell new products. The biggest changes of the third industrial revolution may well occur in areas like retailing.

"Entrepreneurs are needed to see the economic possibilities of new technologies such as Internet retailing, and break the old barriers that will attempt to prevent them from happening," says Thurow.

"With the onset of the third industrial revolution, the ability to rapidly open up the new and close down the old becomes the central characteristic needed for economic success. The American system - typified by the dismantling of phone giant AT&T or the transformation of Intel from a DRAM to a semiconductor company - was built to open up the new and close down the old," observes Thurow.

"Entrepreneurs built the national companies that destroyed local companies at the end of the 19th century - and they are building the global companies that are now destroying national companies," says Thurow.

Entrepreneurs are risk takers, organisers and doers - not usually thinkers and inventors. "Bill Gates has invented no new technologies and was never a creative software programmer. He is, however, an entrepreneur and a builder," says Thurow.

To advance and use knowledge, a society needs the right mix of chaos and order. Too much order (China and Singapore) does not work; too much chaos (Russia) does not work either.

As for other parts of the world, Europe has to reinvent itself to allow enterpreneurs to emerge, says Thurow. Europe saves a lot, is well educated, has a strong technological and infrastructural base, and will have a well-integrated regional economy - but lags considerably in entrepreneurial change capacity.

Japan has an excellent workforce with skill levels in the bottom half - but currently lacks creativity at the top; it has more than enough order to be efficient but too little chaos to be creative and risk-taking, according to Thurow.

In a time of such turbulent change, individuals will have to play the game based upon their education and their skills - and their willingness to change. Adult education, lifelong learning, network literacy, and on-the-job training are becoming increasingly important.

"In a knowledge-based economy, successful regions have to have the ability to grow new big companies rapidly. No one has been to rapidly grow new big companies as in the U.S.," says Thurow.

But in the U.S., the bottom two-thirds of the labour force is poorly educated and less skilled as compared to world standards, says Thurow. "Its rapidly rising earnings gap between the top and bottom quintiles of the workforce is in the long run unsustainable. It is a low savings and investment society," he says.

"These technological opportunities are creating fortunes faster than they have ever been created," says Thurow, but are also creating greater uncertainties in areas like intellectual property enforcement and the financial turbulences of a global economy.

"Just as the second industrial revolution moved us from local to national economies, so the third industrial revolution is moving us from national economies to a global economy. But the transition from national to global is going to be far more turbulent than the transition from local to national. There is no global government to learn how the new global economy should be managed," Thurow warns.

In sum, this is a very thought-provoking and comprehensive treatise on the emergence and future of the New Economy. It effectively weaves together of the roles of various actors like the individual, organisation, nation and culture. Some more comparative analysis of different parts of the world like eastern Europe or Latin America would have helped give it more global appeal. Still, it is a must read for all those wanting to reflect on what exactly this New Economy has wrought on our futures.

Rating:
Summary: badly dated, often wrong, but worrisome in the right ways
Review: Before the high tech stock meltdown last year, techno-boosters breathlessly proclaimed a "third industrial revolution," that of the "knowledge-based" or "new" economy. Unlike revolutions one and two - the steam engine and then the electric power tools that liberated us from dependence on muscle labor - this time it was the human mind, somehow magnified by dazzling new gadgets and software, that was supposed to generate economic value: knowledge workers, engineers, and scientists would control data, the structure of matter, and even of life itself for our benefit. For all its seductive hype - and the cult status of Wired magazine illustrates how extolling the third industrial revolution has become a cottage industry in itself - this vision remains controversial and unproven, now perhaps fatally flawed.

In "Building Wealth," Thurow wanted to examine it all by applying a formula he honed to perfection in previous bestsellers: he articulates, and to a degree analyzes, trends that we find confusing and frightening, tying them together in coherent form. Only this time, while swallowing the fashionable rhetoric of info-revolution whole, he played a kind of booster who also wants to be a critic. Barely able to contain his enthusiasm for the enormous fortunes then being amassed in the name of high technology, Thurow was mesmerised by "glittering eye" atop the "wealth pyramid" on the back of the dollar bill. "Wealth," Thurow writes, "is the only game to play if you want to prove your mettle...If you do not play there, by definition you are second rate." But he is also worred about the direction of American capitalism, which he portrayed as dangerously imbalanced in wealth distribution and opportunity. The result is an awkward book that tries to do too many things at one time.

Thurow is at his worst as a techno-booster pundit, and in retrospect he appears to have been as gullible as the rest of us. That makes this book dated - badly. Moreover, except for some vague references to the growing importance of knowledge in wealth creation, he never clearly defines what is new about the so-called knowledge-based economy. Is it the systematic application of science to business problems? The emergence of new technologies? Or sheer computing power? Rather than addressing these questions, Thurow presents a series of faintly illustrative anecdotes, such as the use of seismographic tests in the search for oil, which have replaced the old-style wildcatters who simply drilled holes. This leaves a huge gap at the core of the book, allowing Thurow to avoid legitimate questions about whether the revolution exists as of yet (it doesn't) or whether the Panglossian visions of the Wired crowd simply conceal traditional, extremely conservative economic views (they do).

In addition, the thirteen New Rules of his subtitle fail to add to the text. For example, Rule One states: "No one has ever become very rich by saving their money. The rich see opportunities to work and invest in situations where large disequilibriums exist..." Such observations, which in my opinion are way beneath Thurow's dignity and talent, are sprinkled abruptly throughout the book as if some editor added them to mimic the banality of the "Seven Habits of Highly Effective People." It would be pathetic if it wasn't comic.

It would have been far more useful for Thurow to step back and ask whether this booster rhetoric is premature or if it is even "revolutionary." As events have shown, the industries that techno-boosters celebrated were built on far shakier ground than was commonly acknowledged, even those like Cisco that supplied "Internet plumbing." Almost all of those hot new internet companies failed or remain stubbornly unprofitable, some disastrously. In defense of these industries, techno-boosters invariably (now lamely) argue that it is too early to judge (or "accurately measure") these results and that extremely high failure rates are typical of "embryonic" industries. Which is precisely my point.

Even the booming PC and telecommunications industries, which accounted for nearly 35% of the growth in the U.S. economy, were vulnerable. At any rate, an information-technology recession could finally put the sector back into realistic perspective: it has improved productivity in certain limited applications, but overall its impact has been modest.

Nonetheless, Thurow is a very good worrier. Sensing that something may be amiss in the U.S. economy, he returns with conviction to his familiar themes of education reform, the impact of social systems on economic well being, and the need for government investment strategies to create long-term advantages. Though more traditional economists disdain Thurow's willingness to plunge into messy subjects that transcend their basic algebra, it is here that he has the most to contribute to the national debate. That glittering eye on the greenback, he says, must be supported by a solid base in the "wealth pyramid," that is, in order for any economic revolution to take hold, workers have to benefit as well. Unfortunately, this is not happening.

There it is. I am sorry to say that this is a mediocre book, as I have gotten a great deal about Thurow's perspective in the past.

It is now so dated - after only a few years - that I would not recommend it.

Rating:
Summary: A Wealth of Knowledge! Must Have For The 21st Century!
Review: Heh, a reviewer claimed that the book is out dated, and reffered to the media hyped "technology meltdown" as a reason to give up home in technology and the building of wealth through intellect. We are now 2 years into the 21st century (3 years if you think it started in the year 2000), the markets are readjusting, and technology is abounding. The "internet bubble" or "Dot Com Crash" was a cataclysm of investors and venture capitalists, smart and stupid, who got too greedy, and forgot the fundamentals of business, internet or no internet. The markets will ALWAYS naturally receed and recess after "bubbles", which is what happened. Technology, however, did and has not receeded. Wealth is being built upon the foundations of intellect, and Thurow's book shows how this is to be accomplished by analyzing all other economic revolutions and what occured to make them possible. If Thurow was giving stock predictions and analysis, and "hot picks of the week" (which he absolutely does not), then i would understand the discredit which some reviewers have given him. But this is just not the case. Thurow analyzes the wealth being generated by Global corporations, and small businesses alike through the internet. He gives examples of those who have made it to the top of the wealth pyramid. He points to revolutionary ideas and systems which have fueled economies for decades. He answers questions, he asks questions. For futurists, insight, knowlegde, and analysis of history is key. If you want to be someone who is ahead in the future, and if you want to know what it will take to grow financially in the current century, "Building Wealth" gives insights into how it has been done, and what it may take. As with all good financial books, a disclaimer: This is not going to TELL you how to get RICH. It will teach you about current debates on the direction of capitalism, and what is believed will happen in 21st century buisness. Expand your mind, expand your wealth, even if it be only a wealth of mind.

Rating:
Summary: One Tiny Criticism
Review: I've read many of Professor Thurow's books. I agree with him on most issues, and believe that he is accurate in his explications of the requirements for the economy. His prose style is also lucid, if undistinguished. His book, "Building Wealth," is an explanation of a brave new world to arrive in a global economy. But I believe that he does not take something into consideration that would wreck a future economy for the planet. He does not consider evil in the world. I believe that there is very little evil in him, and that is why he overlooks it. I will illustrate it by one small example. Professor Thurow is an advocate for all the new technologies that the world will require for its continued existence, and possible increasing affluence. When he mentions biotechnology and the probable ability of scientists to increase intelligence in people, as he does a number of times, I have to restrain myself from bursting into laughter because the thought invariably pops into my head: Of course we will increase intelligence in human beings if and when it can be done---and thereby create worse villains than we have ever had! TRC

Rating:
Summary: How can one be wrong so much, and yet be successful?
Review: It is so sad how wrong someone can be proven over and over again and still, he/she is rewarded, called a genius and is allowed to teach our youth. Here is a quote from the author: "Can economic command significantly... accelerate the growth process? The remarkable performance of the Soviet Union suggests that it can... Today the Soviet Union is a country whose economic achievements bear comparison with those of the United States." This was in 1989, just shortly before the Societ Union collapsed. Unfortunately, being this wrong in economics gives one awards and allows you to teach college students while being described a genius. Sad. Mr. Thurow may be a 'genius', but geniuses can be wrong too.

Rating:
Summary: How can one be wrong so much, and yet be successful?
Review: It is so sad how wrong someone can be proven over and over again and still, he/she is rewarded, called a genius and is allowed to teach our youth. Here is a quote from the author: "Can economic command significantly... accelerate the growth process? The remarkable performance of the Soviet Union suggests that it can... Today the Soviet Union is a country whose economic achievements bear comparison with those of the United States." This was in 1989, just shortly before the Societ Union collapsed. Unfortunately, being this wrong in economics gives one awards and allows you to teach college students while being described a genius. Sad. Mr. Thurow may be a 'genius', but geniuses can be wrong too.

Rating:
Summary: How Rich Countries Get Rich
Review: Overall, it is a fascinating read for anyone interested in economics, or how rich countries become rich. Lots of good facts which reflect on the competitive, and opportunistic capitalist paradigm we currently live in.

1) There has been significant change in the economic landscape, and that change continues to accelerate. Before the industrial revolution, 98% of the world's population had income only from farming. Now less than 2% are farmers.

2) The world is increasing a global market. Coca Cola gets 80% of its revenues from outside the United States.

3) The gap in wealth continues to widen.
- Bill Gates market value is the same as the poorest 110,000,000 Americans.
- In the United States, the average CEO pay is 212x the average worker.
- The top 1% of people in the US own 40% of the total wealth.
- Africa GDP is the same as it was in 1965. Has not changed in 35 years.

4) We are all busier. With the invention of electricity, the average hours of sleep dropped from 9 hours to 7 hours a day.

5) Old companies must destroy themselves (re-invent themselves) in order to stay competitive and grow. Also, individuals must constantly change and grow to remain competitive. If not, they will fall behind.

6) Capitalism is a tough game. The number of businesses failing (88% a year) is almost as many as new business are formed. Wealth is constantly being transferred from one group ~ to another.

7) There are many basic ingredients to create wealth. Some are cultural (like entreprenuership), some are created and enforced by the government (intellectual property, law and order, infrastructure), some are learned by the individual (skills, knowledge)

8) Each country, and region has its strengths and weakness. In order to build wealth for the future, each country must act differently:

- Japan: Clean up the banks, bring in professional management, restore government credibility, and create internal growth. Japan is too big to play the export game anymore.
- US: Break the two-tier society (rich and very poor) by improving education for more skilled workers, and investing more in infrastructure
- Europe: Encourage entrepreneurs and corporate flexibility

9) Wealth is created when there is a disequillibrium (imbalance) in technology, or society. When there is change, there is opportunity ~ because wealth is being transferred.

10) Know your weakness and go where that weakness is not important.