Never Do Anything for the First Time

Wriston, Walter B.


Suppose we could assemble together in one room all the real philosophers who've ever lived and ask them one question. It would not have to be an especially big room; there would probably be space left over to throw in a few historians, some politicians, and maybe two or three economists.

The question we might put to them is this: "In all your experience and ruminations, is there any single idea, any one word, which always applies to this world we live in -- everywhere and all the time?" I think their answer would be: Change. Except for the Greek, Parmenides in about 500 b.c., the existence of change has never been denied -- and Parmenides only managed to do it by saying that everything we see and feel is an illusion that ought to be ignored. That is always a possibility, of course, and every now and then there is somebody who tries it. But the results are usually unsatisfactory.

The Roman Emperor-philosopher Marcus Aurelius would undoubtedly be part of our little group, and he would probably repeat the advice he originally gave us back in the 2nd century: "All these things you see change immediately and will no longer be. Remember how many of these changes you have seen already. The universe is transformation, life is opinion." We have had 1,800 years to learn that lesson. It would be interesting to hear what the emperor thought of our progress.

What, for example, would he have thought of all those people a hundred years ago who refused to invest in railroads because rails are made of iron, and iron rusts? They kept their money in canal bonds because, after all, what can happen to a canal?

Or of the chief engineer of the British post office, Sir William Preece, who testified in 1879 that the telephone had little future in Britain. "There are conditions in American which necessitate the use of such instruments more than here. Here we have a superabundance of messengers...The absence of servants has compelled Americans to adopt communications systems."

Thomas Edison invented the phonograph primarily as a repeater station to help boost messages along a telephone line. He thought there would be a time when people could go to a central office and pick up their recorded messages the way they get their letters at the post office. It also occurred to him that lawyers would find the gadget useful for recording their clients' last wills and testaments in their own words. The idea of recording music and selling records never occurred to him.

Thomas J. Watson, the founder of IBM, is said to have estimated that there would never be a world market for more than about five big computers.

The list is almost endless. What's obvious is that even the best and brightest of us, the people who not only believe in change but who do their best to create it, can rarely predict what is going to happen next. What is certain, however, is that everywhere one goes today the air is full of change of all kinds -- political, technological, economic and social.

As has usually been true in the past, most of the surprises are being produced by technology. Some technology is merely of intellectual interest, but if it impacts in some fundamental way the way men and women conduct their lives, the seeds of a social revolution are planted. These social changes spread rapidly, expanding the area that is impacted, because information about changes as they occur are immediately known. There is no historical precedent for this state of affairs. It simply did not exist in prior years. There were enormous time lags in the spread of knowledge. It took about 3,000 years from the time the horse was trained to carry men until the stirrup was invented. There have also been time lags in the opposite direction. Things have been invented before there was any known use for them. The parachute, for example, was invented years before the airplane. Information about these discoveries tended to be confined to very small groups, as communications were slow and few could read or write. As recently as at the end of the last century, news of any kind moved across a land mass about as fast as a horse could run. There were some exceptions, as Claude Chappe in 1792 invented the optical semaphore which was used by the French military. The most sophisticated semaphore could carry messages from the Rhine to Berlin in about 15 minutes, and was one of the reasons for Napoleon's ability to control his conquests. Such wonders, however, were not available to the ordinary people. At the start of the 19th century, traveling from Europe to the United States was as uncertain as the winds that blew: the journey could take three weeks or two months. In our own country, after the War of 1812 stimulated road building, the time it took for a wagon to go the thousand miles from Massachusetts to South Carolina was cut to about 75 days. As man's ingenuity sought ever faster ways to communicate, the legendary pony express carried the mail some 1,950 miles from St. Joseph, Missouri, to Northern California in just eight days. Despite the nostalgia with which we remember these brave riders, a single telegraph wire put the service out of business after it had been in operation for less than a year. It was not the first time, nor will it be the last when technology put an entire industry out of business.

The movement of information, and indeed of some knowledge, at the speed of light and to an enormous audience has made today's world different in kind and not just in degree from the world we used to know. Examples abound. Most historians would agree that as many as 15 or 20 thousand people gathered to hear Lincoln that November day in 1863 when he delivered his address at Gettysburg. No one can say how many were within the sound of his voice or how many could actually hear him. It is possible that, in addition to those who could hear Lincoln's voice, a few thousand more may have read his words in the newspapers, although they were relegated to inside pages by the editors of the day. But it would take months for most of the country to learn of his call for a new commitment to freedom. Contrast this with the speed with which the news of President Kennedy's assassination reached the American people. Studies have shown that 44 percent of the American people knew of the tragic event within 15 minutes, and 62 percent knew within 30 minutes, 80 percent within 45 minutes, and 90 percent within an hour. It was the first time in history that the population of an entire continent learned about a single event in an hour's time. It is this kind of speed that has transformed the rate of change in the world. A man whose ideas have impacted the world forever, Robert Oppenheimier, put it this way: "The world alters as we walk in it so that the years of man's life measure not some small growth or rearrangement or moderation of what he learned in childhood, but a great upheaval."

The "great upheaval" has affected all society and thus all business enterprises. Some relationships that seem stable, begin to move and shift. It is hard to believe, in these days when floating rates and volatile markets are the norm, that at the end of World War II the prime rate at New York banks stood at one and a half percent, and it remained at that level for seven full years. U.S. Treasury bills sometimes had a negative carry. The old English proverb "In a calm sea every man is a pilot" prevailed. In these circumstances, it is understandable that the theory of the time value of money was not the most exiting idea around.

In the late 1970s, as interest rates climbed into double-digits every corporate treasurer suddenly understood the time value of money. Since that time corporate treasurers have been putting the theory to practical use every hour of every day, and cash management based on this theory has changed the treasuries of many corporations from cost centers to profit centers -- a change that few if any ever foresaw.

Today many managers are looking carefully at another concept that holds the potential for the same kind of fundamental change. Just as the idea of the time value of money changed many business practices, today a case can be made that the theory of the time value of information is having, and will continue to have a revolutionary effect on our society. Businessmen who face an increasingly tough competitive world are beginning to appreciate the concept, not only as an intellectual theory, but as a matter of survival. The time value of information is moving out of the text books into the board room in the same manner as did the time value of money in the last two decades. Business systems which used to be viewed as a cost of doing business are now often looked at as the hope for the future of the company. What the military calls command and control systems, which have now been broadened to C 3 I - that is, command, control, communications and intelligence - have become as critical to the survival of business as to our national defense. While each company builds formal and informal C 3 I systems to manage its resources most effectively, I would suggest that even more fundamental tides are running which will affect the future health of our businesses and our society in dramatic ways.

Basic changes in science and technology change the fabric of society, often in ways no one can foresee. When societies change, markets change with them. When markets change, the competitive structure of almost all business changes. Early leaders in the race for profitable market share, often are replaced by new entrants who correctly estimated the impact of change on their business. A shift in technological foundations is always dangerous, and presents unusual challenges to management and labor. History is replete with examples of intelligent people managing once great companies who were unable to accept the fact that the world had changed in fundamental ways. The experience of Billy Mitchell in trying to persuade his colleagues that the invention of the airplane would have an impact on how wars would be fought is instructive. If you accept that a court martial is more humane than an inquisition, then General Mitchell fared slightly better than Galileo, but not by much. Government bureaucrats in all countries, and in many corporations take for their creed the sentiment expressed on a sign said to hang over the desk of a French bureaucrat: "Never Do Anything for the First Time." It's a good thing for all of us that this sign did not hang in the Garden of Eden. Each of us has run into this attitude, not only in governments, but in our own companies. Even scientists are prone to limit their imagination to an extrapolation of what they know. This tendency accounts for why the great science fiction writers are often better at foretelling change than those who have to stick to the known facts. Even a man who did so much to change our world, Albert Einstein, opined in 1932: "There is not the slightest indication that nuclear energy will ever be obtainable." Today's debate on Star Wars, the Strategic Defense initiative, is spawning many similar statements, some of which will not seem very sensible in ten years' time. All of this should make us skeptical about the permanence of the status quo.

Today in the business and academic communities, a futile argument rages about the relative value to our society of manufacturing jobs and service jobs. Just as real men don't eat quiche, so real men, we are told, don't hold service jobs. Indeed, some CEOs in heavy industry often dismiss service employment by categorizing it as people washing each other's cars. Although its partisans continue to repeat it, this argument has long since lost any validity it may have had. A walk through a modern competitive factory makes the point. The manufacturing plants are already being run by hardware and software, the manufacture and operation of which are classified as service jobs, although the factory turns out hard goods. Digital controls of machine tools are now linked together through communications and software to orchestrate entire production facilities. The goods that are turned out are themselves combinations of service and manufacturing. The automobile that talks to you and tells you your fuel is low, the refrigerator that beeps if you leave the door open, the digital watch on your wrist, the calculator on your desk all represent the fact that service and manufacturing have, to a large extent, merged. It is time that we realize that old definitions, like old technology, have been by-passed. If we are to understand our world, we have to describe it clearly even if this means giving up some cherished beliefs which were once true, but which no longer are.

The fundamental catalyst of massive change in our society is the transition from several hundred years of technology based on the mechanical model to one based on information. Peter Drucker recently put it this way: "For these three centuries advances in technology meant - as it does in the mechanical processes - more speed, higher temperatures, higher pressures. Since the end of World War II, however, the model of technology has become the biological process, the events inside an organism. And in an organism, processes are not organized around energy in the physicists' meaning of the term. They are organized around information."

In order to do just about anything, we have to communicate and what we communicate is information. As the speed of communications increases and the volume of accessible information explodes, it can come as no surprise that the entire fabric of our society is changing. It affects everything from health care to manufacturing processes. Just as a walk through a modern factory gives visual evidence of enormous change, so also will a visit to a modern health care facility. The old X-ray has evolved into a CAT scanner and MRI machine; blood samples are being analyzed on the spot by rapid computer technology, and indeed so-called "patient management" in the age of the DRG's has become essential. Indeed the speed and solving problems that used to take years of calculations, is now done in seconds.

All of this also impacts on the law -- that framework of rules constructed by a free society. Is a computer terminal a branch of a bank, for example? How do we protect intellectual property in the age of the Xerox machine, the VCR, and direct dialing to most places in the world? Who owns and assigns the radio frequencies of the world, or how should the 200 slots in the geosynchronous belt be allocated and by whom? The law is no longer able to cope with onrushing technology. As the interface between man and machine becomes progressively easier -- and it will -- whole new public policy issues regarding everything from privacy to the meaning of sovereignty will have to be rethought.

The entire competitive structure of our economic system is changing and as it does old definitions become obsolete. As markets have expanded to encompass the world, cost reductions become essential to stay in business. The original management drive aimed at reducing costs through automation, the assembly line, which employed some automation equipment, was to a certain extent, a cost displacement device. The advent of the assembly line impacted management science and changed some management structures. Alfred D. Chandler put it this way: "As the number of workers required for a given unit of output declined, the number of managers needed to supervise these flows increased. Mass production factories became manager-intensive." As machines became linked with material handling devices which assure the automatic flow of materials, management tasks and structures began to change again in response to new situations. Today, management structures are being flattened and sharply reduced by those who understand the impact of new technology on their business. There is no reason to believe this phenomenon has run its course. Indeed the reverse is true. The need for layers of management is reduced everywhere when information becomes available to more and more people at all levels at a faster and faster pace. This phenomenon is not limited to business, but is rapidly being developed into a National Information Network, linking together research libraries and university centers across the country. This is the kind of development that free societies not only tolerate, but encourage. The sharing of these vast data bases -- something totalitarian governments cannot tolerate -- will give us a huge competitive advantage in the years ahead.

As we have developed better use of the electromagnetic spectrum in the last 15 years, the capacity of satellites has increased by a factor of 50 and the cost per circuit year has gone down by a factor of about 45. This advance in satellite technology is inexorably drawing the developing world into the global market for goods, service and ideas. But even as satellites come on line, they are being replaced for some applications by the speed and cost effectiveness of fiber optic cables. One hair-thin fiber can now carry the same traffic as 900 twisted copper wire pairs in a telephone cable. In addition, fiber optics has low attenuation and is not very sensitive to electromagnetic interference. The impact on the world market for copper wire and the demand for electrical engineers is only one of the effects this technology will have on all business. It has also affected the economics of Intelsat, and indeed of all satellite transmission where fiber optic cable can be laid with some ease.

Advances in other technology are also affecting business management. Read-only optical disks are presently repeating the history of the phonograph, but in reverse. While the phonograph was intended for business applications, but eventually succeeded in the music world, the optical disk was unsuccessful when it was introduced for home video entertainment, but is now being viewed as the latest business tool. These disks which have the capability of storing 500 million characters and can be made for as little as three dollars, are ideal when the information you need does not need to be constantly updated.

To be of use to management, however, data has to be turned into useful information. The object of the game is to enable the person who needs the information to get access to it in a way and in a time frame that is useful. While we are all aware of the explosion of information, not every company has yet thought through who needs what information, in what time frame, for what purposes. If this is to be done, corporations may have to develop formal information strategies just as they have developed business strategies. Since the successful companies are market driven, timely access to market information must be put in place, but also linked to internal management information systems. The market data should furnish the basis to analyze the size and nature of the market, what competitors are doing, can do, or are likely to do. Sorting out the useful from the dross will also require new techniques and new training for personnel.

To further complicate matters, technology is redefining not only products, but also delivery systems. It may not be enough to make yesterday's products better and more cheaply. We will have to find and fill new market needs and deliver those products in new ways at less cost. The first phase of wringing more manufacturing productivity from the system is well advanced, and if your comptrollers are smiling at your cost savings -- so are your competitors' comptrollers. Your profits may not increase unless you improve your relative position, and that means employing information technology not only to take out hard costs, but to generate "soft" savings through new management techniques and structures. Like all change, these developments will be uncomfortable, but all industries will have to adapt to new realities or go the way of the buggy makers. The real gains in the years just ahead will go to companies which understand the revolution being driven by today's technology. This understanding will dictate which industries create the necessary new products and services to prosper. It will spawn many new industries, and it will determine which old industries die.

A climate of innovation, the willingness to take risks, and a clear understanding that the information age really is different from the industrial society we have known, will shape the winners and losers of the future.

  • The document was created from the speech, "Never Do Anything for the First Time," written by Walter B. Wriston for the Nolan Norton Symposium on 16 January 1986. The original speech is located in MS134.001.007.00004.
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