Intellectual capital is now the most important creator of wealth. The physiocrats are long gone, but the human resistance to change will always be with us. Those who did well under the old system may not be able to make the transition. Like matinee idols of the silent movies who were unable to speak lines convincingly when the talkies arrived, some old business and political structures are unable to adapt.

The new source of wealth is not material--it is information, knowledge applied to work to create value. When we apply knowledge to ongoing tasks we increase productivity. When we apply it to new tasks we create innovation. The pursuit of wealth is now largely the pursuit of information, and the application of information the means of production. The rules and customs, skills and talents necessary to uncover, capture, produce, preserve, and exploit information are now mankind's most important rules, customs, skills, and talents. Companies or nations competing for information will be vastly different from those that once competed primarily for territory and material resources.

The new economic powerhouses are masters not of huge material resources, but of ideas and technology. Singapore and Hong Kong, two Asian tigers, demonstrate the growing irrelevance of territory in weighing wealth and power. This shift affects not only nations, but also individual businesses. The changing perception of what constitutes an asset poses huge problems in expanding or even maintaining the power of government. Unlike land or industrial plants, information resources are not bound to a particular geography, nor easily taxed and controlled by governments. In an economy dominated by products that consist largely of information, this power erodes rapidly.

While the politicians in Washington rail against the importation of autos that Americans want to buy, a person like Bill Gates with the skills to write and market a complex software system that can produce a billion dollars of revenue can walk past any customs officer in the world with nothing of "value" to declare. Our system of measurements was designed for another age and is rapidly becoming an artifact of the past. Bad data produce bad decisions and leave us puzzled as to why old policies no longer work.

Many terms we use today to describe the economy no longer reflect reality. Everyone knows, for example, that all the lights would go out, all the airplanes would stop flying, and all the financial institutions and many of the factories would shut down if the computer software that runs their systems suddenly disappeared. Yet these crucial intellectual assets do not appear in any substantial way on balance sheets. Those balance sheets, however, are chock full of tangible assets--buildings and machinery. And yet most of the machinery would grind to a halt if the software that controls them failed. Indeed, the machines that produce things and the computers which control them are now so intertwined that there is no meaningful line between manufacturing and service.

The methods of measurement have simply not caught up with the new world. Balance of trade figures are a case in point. It can be argued that the very concept of a trade balance is an artifact of the past. And yet this outdated accounting concept can ignite a trade war. As long as capital--both human and money--can move toward opportunity, trade will not balance.

Former Secretary of State George Shultz recently remarked, "I once saw a snapshot of a shipping label for some integrated circuits produced by an American firm. It said, 'Made in one or more of the following countries: Korea, Hong Kong, Malaysia, Singapore, Taiwan, Mauritius, Thailand, Indonesia, Mexico, Philippines. The exact country of origin is unknown.' That label says a lot about where current trends are taking us."

Whatever the correct word for these phenomena, "trade" certainly seems an inadequate description. How does one account in monthly trade figures for products whose "exact country of origin is unknown"? Of what value are our trade figures since they do not include services? Indeed more is left uncounted than is tabulated. How are national governments to regulate the complexities of transnational production with anything like the firmness with which they once regulated international trade?

How does a national government measure capital formation when much new capital is intellectual? How does it measure the productivity of knowledge workers whose product can't be counted on our fingers? If it can't do that, how can it track productivity growth? One can question whether productivity, in the classic sense, is the best or even a relevant measure for knowledge workers.

How does one track or control the money supply when the financial markets create new financial instruments faster than the regulators can keep track of them, and electronic money is already moving over the network? And if it can't do any of these things with relative precision, what becomes of the great mission of modern governments: controlling and manipulating the national economy? Much economic theory which was based on national markets is rendered suspect by the reality of a global market.

Business corporations face equally powerful challenges to their and will undergo profound changes. We see new corporate structures developing to manage new manufacturing methods, products, and delivery systems. What has been called "Continuous Commerce"--the 24-hour sales and service line--is becoming common. Now more than 40 percent of businesses with 1,000 employees or more operate 24 hours a day, seven days a week. Management structures are changing dramatically. Layers of management that used to do nothing but relay information are disappearing. Technology allows the rapid transmission of vital information to all levels of management without human intervention.

The old military model of hierarchical organization is giving way to flatter structures designed for the faster response times needed to serve dynamic global markets. Information technology is bringing huge amounts of geographically dispersed knowledge to bear on a problem. Successful companies are in a kind of non-stop restructuring, a non-stop learning process to be quicker and more responsive.

The sovereign has lost control of what people can see and hear. As with all revolutions, we are moving into unknown territory for which there are few maps or guides. Knowledge, which at one time was a kind of ornament to be displayed by the rich and powerful, is now combined with management skills to produce wealth. The vast increase of knowledge has brought with it a huge increase in our ability to manipulate matter, increasing its value by the power of the mind and generating new products and substances unhinted in nature and undreamed of only a few years ago.

The future will remain unbelievable, because we will continue to extrapolate from what we know. The great historian Arnold Toynbee put it succinctly when he observed that: "Familiarity is the opiate of the imagination."

Tomorrow's problems and solutions will be found at the intersection of technology, sociology, demographics and politics. To think about systems and not focus on specialties may become even more necessary in the future.

Tomorrow is already here and we have to think anew about finding solutions to the problems created by the new forces let loose in the world. Fortunately modern information technology makes it possible to better utilize the skills and knowledge of all members of society to a much greater extent than ever before.