What's really new about the new economy.

With six decades of research and teaching behind him, Peter F. Drucker continues to be a leader and prophet of modern economics. In this book, a collection of essays and interviews spanning from 1999 to 2002, Drucker tackles the shifting reality that is business in the 21st century. Profound social changes, he says, demand a new style of management from executives.

Drucker focuses his inquiry on the start of the information technology revolution and the subsequent economic collapse of the dot-coms. He begins by reminiscing on the turbulence of an earlier "new economy" of decades past. in 1929, Drucker was an intern in the European offices of an important Wall Street firm. That era, like the 1990s, was a time of remarkable economic growth resulting from a stock-market boom that was in many ways repeated nearly 70 years later. Drucker's boss was so convinced of the bull market's immortality that he wrote a book, titled Investment, which tried to demonstrate the supposedly infallible connection between ordinary U.S. stocks and guaranteed wealth. The book was published just two days before the New York markets crashed in 1929, instantly turning the book into a publishing disaster.

During that time, no one talked about the "new economy" or "irrational exuberance." Instead, the phrase in fashion was "permanent prosperity." Scared stiff before the age of 20, Drucker scrutinizes the exuberance of this earlier time.

Nevertheless, Drucker warns his readers that the fever surrounding the new economy of the 1990s created fundamental changes in society in both developed and emerging nations, changes closely linked with the tech revolution and dizzying advances in communication, all of which have led to new types of work relationships. Drucker also examines other changes with major social and economic repercussions, including demographic shifts: aging societies, and marriages bearing fewer children, for example. High levels of migration also have rapidly altered the ethnic face of developed countries.

In conjunction with these fundamental changes, the book also looks at another transformation, that of capitalism itself. Traditional divisions between managers and employees, Drucker says, have become more flexible. Labor inelasticity has been replaced by a growing importance in outsourcing-the use of external consultants-thanks to the surge of a new class of "knowledge" workers, individuals with specialized skills useful to a variety of companies.

Tycoon-economics. The outdated notion that tycoons, the virtual architects and governors of the economy, create wealth is no longer valid. Drucker offers as evidence the lives of John Pierpont Morgan and John D. Rockefeller, whose decisions and investments dictated the future of North American economics for more than a century. Today, that role has passed on to giant corporations that are owned instead by millions of stockholders. Bill Gates has amassed a fortune. But, unlike the captains of industry of the past centuries, Gates's US$40 billion in assets could not sustain North America's multitrillion-dollar economy for even a few days.

Drucker says his book offers no perfect solutions, in contrast to many of today's bestsellers, so quickly invalided by swiftly changing economic realities. He does, however, argue that the social changes caused by the tech revolution, in conjunction with demographic changes, will strongly influence the type of work executives have to do in the next 10 to 15 years. Drucker predicts that those changes will be both the fiercest threat, and a fountain of opportunity, for any business, large or small, in any country. In that sense, this book provides a guide to what has changed, what will change, and how one should act as a consequence.

--Andres Hernandez Alende

Excerpt from Managing in the Next Society:

"The information is now at the point at which the Industrial Revolution was in the early 1820s, about forty years after James Watt's improved steam engine (first installed in 1776) was first applied, in 1785, to an industrial operation--the spinning of cotton. And the steam engine was to the first Industrial Revolution what the computer has been to the Information Revolution--its trigger, but above all its symbol."