Revolutionary Wealth by Alvin and Heidi Toffler 2006

Revolutionary Wealth by Alvin and Heidi Toffler © 2006 “A revolution is on the way that will challenge everything we thought we knew about wealth. ” By Jack Carter, Principal, Wealth Generation 13889 62 nd Avenue North, Maple Grove, MN 55311 Phone: 763 -559 -7425, fax: 763 -559 -0664; email: jack@wealthgen. com

Introduction • Revolutionary Wealth is an overview of an evolving world in crisis; and how individuals, organizations, and nations might use change to advantage via the insights of two of the world’s most famous futurists. • In about 40 slides and two parts, you will learn: – Why the past 50 years have been only a prologue in a transformation from making things to generating wealth by serving, thinking, knowing, and experiencing. – How and why America, Japan, and the European Union (EU) are being eclipsed by China and other Asian nations. – What you can do to join and enjoy such a revolution. © 2007 Wealth Generation

Overview Part 1 Part 2 • Define revolution • Define wealth • Introduce “deep” fundamentals like Time, Space, and Knowledge • Define K-tools and obsoledge • • Define prosumers Define D-I-Y markets Explore the worldwide systemic breakdown and potential solutions The future belongs to whom? © 2007 Wealth Generation

2 schools of thought • John Naisbitt sees an evolving world shaped by “economic determinism, ” as opposed to others, he says, who see only a “clash of civilizations. ” • The Tofflers take a systemic view of individuals and civilizations. Knowing that each supports the other in knowledge-based economies, they know that nations fail when not supported by individuals, just as most people fail when they’re not supported by an empowering culture. © 2007 Wealth Generation

Revolution • Revolutionary change occurs when thousands of seemingly unrelated changes form a new economic system, accompanied by nothing less than a new civilization and a new way of life (similar to the Industrial Revolution). • Revolutions are always opposed by those who benefit from the existing system, which explains why the last 50 years have been merely a prologue to revolutionary wealth (a full embrace of the knowledge economy). © 2007 Wealth Generation

Wealth • Wealth is anything that satisfies a need or desire. Wealth is the “child of desire. ” • Tokens or symbolic expressions of wealth include: – – Money Good health and education A strong and loving family Respect from those whom you respect • To be revolutionized wealth has to be transformed in quality as well as quantity; and in how it’s created, allocated, circulated, spent, saved, and invested. © 2007 Wealth Generation

Waves of wealth Three completely different ways of living, working, and generating wealth are constantly in conflict with each other. • Agrarian civilization – growing things • Industrialization – making things (1. 2 B people in 30 countries) • Knowledge economy – serving, thinking, knowing, and experiencing. When Balance Sheets Collide With the New Economy • Note: Hunting and gathering is a system of wealth, which still exists today © 2007 Wealth Generation

Focus on “deep” fundamentals and their interaction They are the driving forces below the fundamentals. • Family structure, education, healthcare, distribution of income… work and wealth as presented. • Energy and quality of environment too. • 3 more are economic essentials, yet often overlooked: § Time § Space § Knowledge © 2007 Wealth Generation

Deep fundamental #1: Time • To optimize national wealth and security economies need to be in sync with their hosting society, culture, and institutions. • To optimize growth and profit employees, jobs, technologies, assets, products, services, customer relations… must be in sync with missions. • They need Management by Enlightenment™ supported by Archetypal Complements™. © 2007 Wealth Generation

Life on the freeway 1. Businesses run at 100 mph. 2. NGOs (Non-government, Grassroots Organizations) run at 90 mph. 3. The nuclear family (industrial), estimated at 60 mph. 4. Labor unions, 30 mph (33% of workforce in 1955 to 12% today) 5. Gov. bureaucracy and regulatory agencies, 25 mph. 6. The American school system runs at 10 mph. 7. Institutions effecting global economy, 5 mph UN, WTO, WB 8. Political structures in rich countries run about 3 mph 9. The law: courts, bars, and the law itself, 1 mph © 2007 Wealth Generation

What if we don’t synchronize? • De-synchronization undermines progress, which leaves our futures to chance, or to be controlled by other people, or other nations. • Rapid change undermines motivation. • We are revolutionizing humanity’s links to time, one of the most important fundamentals of wealth creation. © 2007 Wealth Generation

Deep fundamental #2: Space • We are also changing our relationships with Space: the places where wealth is created; the criteria we use to select those places; and the way we link them together. • The increasing mobility of wealth will affect the future of jobs, investment, business opportunities, the structure of companies, location of markets, and the daily lives of ordinary people worldwide. • It will determine the fate of cities, countries, continents. © 2007 Wealth Generation

Wealth maps are being redrawn • We are witnessing a global transfer of wealth. • In 2003, China, Singapore, South Korea, and Taiwan had a GDP about equal to Germany, France, UK, Italy, and Spain combined. • Add Japan and India, and the six nations have a combined GDP of $3 T greater than the U. S. – or all 25 EU nations. © 2007 Wealth Generation

Without new strategies, America will be left behind • Cleveland is now the poorest big city in America, a victim of industrial success and lack of 3 rd wave growth. • China, however, has companies in fields like information technology, new materials, new energy, biotechnology, and laser-machine-electronic integrated systems manufacturing. Apart from research at the prestigious Case Western Reserve, few of these can be found in Cleveland, or any of its rust-belt sister cities. © 2007 Wealth Generation

Growth potential abounds • Any one of the following could have explosive effects on wealth and society: hyper-agriculture, neurostimulation, customized healthcare, nanoceuticals, new sources and new forms of energy, streaming payment systems, smart transportation, flash markets, new forms of education, nonlethal weapons, desktop manufacturing, programmable memory, risk management, privacy invasion sensors, conductive polymers, composite materials, microfluidics, cloning, supra molecular chemistry, optics, memory research, and nanotechnology… leading to a bewildering array of goods, services, and experiences. • Opportunities abound not just for business entrepreneurs, but for social and cultural entrepreneurs as well. © 2007 Wealth Generation

Deep fundamental #3: Knowledge • A different wealth system has arrived that is driven not only by time and space but by knowledge. • Knowledge is profoundly different. It can substitute for traditional factors: land, labor, capital, know-how. • Knowledge is mostly intangible. It can have layers of meanings and can mean different things to different people. Attempts to define it are difficult, but to grow and prosper we must try. We must understand follow through, taking risks and constantly improving. © 2007 Wealth Generation

Exploding knowledge • We are generating and accumulating new knowledge at unprecedented speeds. • Systems that have been dominated by Western approaches to logic and thinking will soon be enriched by alternative epistemologies and more diverse ways to organize thought. • We are transforming the entire relationship of wealth, in all its forms, as well as time and space. Until we digest this point, our vision of the future will falter. © 2007 Wealth Generation

K-tools drive productivity • K-tools help us access and produce knowledge like machines helped workers make more and better machines in the industrial economy. • K-tools facilitate collaboration between knowledge workers through instantaneous communications. • K-tools include: – – – computers and supercomputers, software and super-software, hardware, software, printers, faxes cell phones, picture phones, recording equipment, Internet, websites, and intranets documentaries, PBS, BBC, cable TV, CDs, and DVDs © 2007 Wealth Generation

The “obsoledge” trap (obsolete knowledge) • Much of what we think and believe is false. • In rapidly changing times every chunk of knowledge has a limited shelf life (wisdom? ) • As we confirm our beliefs on the Internet, a greater and greater percentage of what we know will become less and less true • No one knows what obsoledge costs us in the form of degraded decision-making. © 2007 Wealth Generation

Summary of part 1 • Two Schools of thought – the Tofflers are systemic • Wealth is anything that satisfies a need or desire. • Revolution is when thousands of seemingly unrelated changes form a new social and economic system. • Deep Fundamentals – Time, Space, Knowledge • Obsoledge – obsolete knowledge and old ways of thinking undermine growth and progress © 2007 Wealth Generation

Questions in review • Is this a revolution of science and technology, or a revolution in buying and selling? What else? • To get a glimpse of the future, why not focus on interest rates, inflation, and employment stats? • What will happen to us if we continue to work, think, and act as we always have? © 2007 Wealth Generation

End of Part 1. Thank you. Please return on December 8 th for part 2. (See next slide for highlights).

Overview of part 2 • Prosumers • Do-It-Yourself (D-I-Y) markets • Putting the paid and unpaid economies together • Systemic breakdown worldwide; what’s been done; and what we must do. • The future belongs to whom? © 2007 Wealth Generation

Prosumers • Once we take our eyes off the money economy, we discover the prosumer economy. It is huge, important, and open to everyone. It’s made up of people who contribute to the economy but are not counted because money isn’t involved. (Originally, housewives… and hobbies that led to work and enterprise). • The prosumer economy is the subsidy on which the money economy depends. © 2007 Wealth Generation

The prosumer sector transforms the quality of wealth • As billions of poor people enter the global economy, millions of others are opting out • Spending and consumption will be transformed along with the roles of business and government: – Healthcare, education, pensions, taxes, budgets and innovation will be heavily impacted. • Fantastic new materials that will permit us to do things ourselves that we could never have imagined. – Biology, nano-tools, desktop factories replace hammers and screwdrivers © 2007 Wealth Generation

Rapidly growing D-I-Y markets D-I-Y Markets are outside the economy: • $200 B/yr home improvement in U. S. , $30 B Japan, $33 B Germany, $100 B/yr. EU in 2003 • $37 B/year in U. S. auto repair • $40 B/yr. lawn and garden care U. S. , $5 B in Britain, $7 B Germany, $15 B/yr. in Japan. • DIY kits – electric guitar, computers, golf clubs, sail boats, log cabins, airplanes. • DIY independent film movement, “The New Talkies: Generation D. I. Y. ” Three relationships… © 2007 Wealth Generation

D-I-Y wealth • 18 -yr. old Shawn Fanning created Napster to share songs with friends. Before long, 80 million kids swapping copyrighted material. • 21 -year old Linus Torvalds created Linux from an offshoot of UNIX after working on it for 3 years without pay (40% U. S. firms and 160 governments worldwide) • Tim Berners Lee invented the www for no other reason than to help him remember connections among people, computers, and projects where he worked. • Yahoo, IBM, Microsoft… creating “mash up” systems Do the Mash © 2007 Wealth Generation

rd 3 Your job: customers and employees “helping themselves” • Wondering where all your time has gone? On top of Job One (paid), Job Two, family/household work (unpaid), most of us find ourselves working Job Three (unpaid) – “helping ourselves” over the phone/fax/Internet. • Companies like GE boast about cutting expenses by $96 M by enabling customers and employees to help themselves through puzzling arrays of options. • They steal those gains from customers and employees. © 2007 Wealth Generation

Putting the paid and unpaid economies together • What we do without money will have a bigger and bigger impact on what we do with money. • Quality of Life meets Standard of Living • The money system will expand dramatically. • Prosumers are the unsung heroes of revolutionary wealth • Organizations need to reconsider profiting at the expense of their customers and employees. © 2007 Wealth Generation

Complex-or-ama • Diversity and interdependence create complexity. • We are experiencing a historic, system-wide leap toward greater economic and social complexity that affects everything from business to politics, and parenting to shopping. • Bill Gates speaks of “astronomically rising complexity, ” as complexity at a personal level (more and more choices) is amplified in business, finance, economics, and society. © 2007 Wealth Generation

Systemic breakdown worldwide • What we have is the breakdown of industrial-age institutions, and people fighting change, struggling and spending to hold it all together, instead of embracing and investing in growth via the deep fundamentals. • I say, what’s needed is a recommitment to the power of Enlightenment. We need to understand what’s going on, then take appropriate action, starting with the way we do business, supported by enlightened cultures that provide moral guidance as well as empowerment. • Let’s look at America, India, China, Asia and the EU © 2007 Wealth Generation

Inside America • America is the world’s greatest social and economic laboratory where new ideas and ways of life are eagerly tried – in culture and arts, sexual patterns, family structure, fashion, diets and sports, startup religions, brand new business models, etc. • Many Americans want to go back to “the good old days” – Who wants to live in or near a laboratory and who wants to suffer loss of jobs, influence, power, even lives? © 2007 Wealth Generation

The good news • Environmental improvements – Pollution from industrial waste and municipal sewage has plummeted – Substantial improvements in water quality coast to coast – Since 1970 aggregate emissions of the 6 principal pollutants have been cut 48% – 45% of paper used in U. S. is recycled, as are 62. 6 B AL cans • Social improvements – America is less racist, less sexist, and more aware of the contributions of earlier immigrants from all over the world – American supermarkets are filled with food from all over the world that are enjoyed by shoppers of every origin © 2007 Wealth Generation

The bad news • Contradictions and conflicts everywhere: – Anti-abortion riots and Viagra commercials; free markets with monopolies, tariffs, and subsidies favoring U. S. firms – Americans are provincial, uninterested in other cultures, and bad at languages. Yet, we are pro globalization? • More conflicts: – Plug-in/plug-out jobs, glitter and hype, speed, commercialism, rotten schools, broken healthcare versus longer life, more speed, perfect landing on Mars, info overload, surplus complexity, reduced racism, hyper-diets, hyper-kids. • Outsiders don’t know what to make of America. They can’t understand our evolution. (I say, when they find out we don’t know either, we’re really in trouble). © 2007 Wealth Generation

Can we avoid a meltdown? • • 31% of U. S. children live in single or no parent homes 50% marriage failures consistently over decades 30% of people over 65 live alone (epidemic loneliness) $400 B/yr, $7, 000/student, yet 60% of high school students can’t read and 33% can’t do carpenter math • $4, 499/person for worst healthcare… 47 M not covered • 78% of nation’s 15, 000 publicly traded companies could not pass accounting audits. • Pensions under funded everywhere… our financial system dependent on foreign creditors, Social Security… © 2007 Wealth Generation

Innovative business solutions Preventing an implosion requires transformation of organizations and institutions of all sizes. Examples: – – – A car wash that sells books in California Amazon. com: a bookstore without a store e. Bay auctions where customers do the auctioning IBM transformed itself to a service company Kodak… from film to digital photography Best Buy… from low volume, high margin business to high volume, low margin – Medtronic: 2/3 of 2007 revenue from products < 2 yrs old © 2007 Wealth Generation

Innovative institutional solutions If the giant AT&T of 1984 can be transformed, any institution can be transformed. Examples: – Transform industrial-age schools to ones that emphasize curiosity, thought, creativity, individuality, and initiative – Creating the Department of Homeland Security was a false transformation. It cannot compete with hit and run terrorist cells coordinated over the Internet. – In 1994 Chief William Bratton transformed the NYPD from catching criminals to proactive crime prevention. – World Bank and IMF transformed for micro lending © 2007 Wealth Generation

India, China, and Asia in general have adopted “twin tracks” • Leaders all over Asia know they can’t conquer poverty with low-wage sweatshops alone. Manufacturing, back office, and call-center jobs are understood as baby steps toward a new future. • Already industrialized, the communist Chinese embraced the Tofflers’ Third Wave in 1983. • Small villages all through Asia are being wired to increase access to knowledge • India is 15 years behind China, but has 3 advantages: – Closeness to the English language – Less export dependent and vulnerable to currency risks – Less authoritarian than China © 2007 Wealth Generation

China has focused on time, space, and knowledge for a long time • Chinese Officials knew that to accomplish in decades what took others centuries, they needed to focus on “deep” fundamentals: – They aggressively pursued a twin-track strategy to compress time. – They extended their global reach through expanded trade and relations – With 465, 000 new engineers and scientists a year, China has routinely studied, imitated, improved, and redesigned products all through the 1990 s to improve their ability to innovate and grow their own economy. • We must understand what’s really happening in China. Whatever it is, it will radically reallocate global wealth. A Ground-Eye View of the Chinese Economy © 2007 Wealth Generation

China’s march to super power • China no longer thinks of itself as an Asian power. It is aggressively expanding its global trade, which often undercuts U. S. power and authority. • By the end of 2003, China had launched 3, 400 businesses in 139 countries, has become the 3 rd largest trading nation, 5 th largest provider of foreign investment (more than Japan), owns $175 B in U. S. bonds, is investing all over South America from Brazil to Cuba, $20 B in Argentina alone. • China is believed to have $1 T in debt holdings Dollars for Sale Iraq Through China’s Lens Iraqis to Pay China $100 M for Weapons… © 2007 Wealth Generation

Japan’s next bamboo ring • Japan’s dependence on exports as a way to pay for its imports made Japan a super efficient exporting nation*. But it is way behind in domestic sectors. • It’s rigid social structure desynchronizes internal and external economics, family life, its professions, and the marketplace. • Japan is still using only ½ of its brainpower. Women account for only 10% of managers… 46% U. S. , 30% Europe • Entrepreneurs are 1/100 in Japan versus 1/10 in U. S. * Motivation is everything. See The Legacy of Sputnik © 2007 Wealth Generation

Near perfect in mfg – not so good in business, legal, and financial services • Japan leads in many fields of science and technology like fuel cells, alternate energies, all kinds of robots, research into artificial blood, glycobiology, digital electronics, game devices. • The Japanese government invested $900 M in nanotechnology research in 2004, more than all of Europe combined. • But advanced economies depend on advanced services, and Japan has been slow to apply computers, IT, new business models, and management concepts to its service sector. • Manufacturing and services are way out of sync. (Japan imported $456 B more in services than it exported from 1995 to 2003). In Japan, Stagnation Wins Again © 2007 Wealth Generation

U. S. and E. U. are growing apart… • The rise of China has thrown a giant rock into the pool of currencies, trade, and long standing alliances. • Our alliance hit an all time low in 2005 when EU planned to sell arms to China • Steeped in industrial thinking and doctrine, EU fails all three deep fundamentals: – Time: EU unresponsive to flexible work hours and places – Space: bigger is not always better… small firms do better – Knowledge: there’s a huge disconnect between what Europeans say and do. Only Siemens is in the I. T. top ten. © 2007 Wealth Generation

Tomorrow belongs to those who care about their futures • … and are willing to do something about it. • American government and culture have no vision • Management guru’s say, things are moving too fast for strategy. They say people and firms need agility. But agility is reactionary. It subordinates people, firms, and countries to someone else’s plan or to chance. • Individuals have to develop talents, as well as skills, and to do so must be supported by an empowering culture like Management by Enlightenment and Archetypal Complements. © 2007 Wealth Generation

Race to the top or bottom? • Depends on who’s racing. Mfg jobs are in a race-to-thebottom when assembly line workers are interchangeable. For example, NAFTA (1993) created 3, 500 maquiladora factories and 1. 4 million jobs by 2000. Those factories have now lost 300, 000 jobs to China, $0. 60/hour to $2. 20/hour in Mexico. • But in knowledge-based economies, talent and spirit are more important than lower costs. So nations that cultivate talent, as well as skills, are in a race-to-the-top. • Often unsaid is that if the U. S. & other developed nations don’t create newer and more sophisticated industries, they will be unable to sustain their middle-classes. Hundreds of millions will become enslaved to a new global elite. © 2007 Wealth Generation

Summary • Successful nations focus on deep fundamentals – including time, space, and knowledge – to accelerate economic growth and revolutionary wealth. • We must honor the roles of prosumers who subsidize the paid economy and provide us with quality of life. • We must cultivate innovation in businesses and institutions to avoid undermining our successes. • The Tofflers say that revolutionary wealth, driven by 3 rd Wave knowledge, puts economics back in its place as part of a larger system of wealth creation supported by culture, religion, and morality. © 2007 Wealth Generation

Epilogue • Living at the dawn of this century, we are, for better or worse, participants in the design of a new civilization with a revolutionary wealth system at its core. • Will this process come to fruition? Or will it come to an ignominious demise taking millions down with it? The Tofflers say, simply, be optimistic. Nothing stopped the Industrial Revolution – not wars, peace, pestilence, or famine. Nothing will stop revolutionary wealth. • But they are not grounded in ancient wisdom. They don’t realize that unless individuals live and work within an enlightened morality, we will regress… and in an age of terrorism and WMD, we will destroy ourselves. © 2007 Wealth Generation

Thank you for your time and interest.