A Dialogue with Atsuo Ueda: An Introduction to Peter F. Drucker(2)



The man who invented management: A face as a management thinker

Isaka:You said that Drucker was a social ecologist. But he is also known as a futurist.

Because Drucker’s predictions are so accurate, he is often introduced as the world’s best futurist. This is not true. Drucker himself denies firmly that he is a futurist. He says nobody knows the future. Even if the things that someone predicted have happened, in this world, far more important things that nobody predicted have happened so many times. So, prediction itself does not mean much.

There are only two certain things about the future, Drucker says. One is nobody knows the future. The other is the future will be different from the present.

Therefore, there are only two ways to know the future. One way is to see the consequences of what has already happened. Drucker’s so called prediction is the consequences of what has already happened. It is no more than anticipating the consequences of things that have happened.

If the population of the newborn babies decreased 300,000 last year, the number of first graders in six years cannot be the same as that of the previous year. For elementary school, unusual things will happen. Soon, in junior high, high school and college, by turns total changes will happen. Therefore, observing things that have already happened, one can see the sequence.


Every ordinary man creates the future

Translating a new book, I check the reference documents. When I translated Drucker’s “Unseen Revolution” (1976), I scanned through all the books and articles about the aging of the society with the help of an excellent reference librarian of Keidanren (Japan Federation of Economic Organizations). With my co-translator, Mr. Michio Sasaki, we read all of those reference books and articles. However, those were on welfare, health care, housing, hobbies and others for the aged. There was none on the aging society itself, neither on economics nor politics in the aging society. Just looking at the population statistics, we should have known the aging of society is around the corner. Economics and politics in the aging society must have been the concern of sociologists, economists and political scientists.

As for the collapse of the Soviet Union, in the middle of the information age, everyone should have known such system would not last long. Information from the western world was pouring into the Soviet Union and other East European countries.

Concerning the coming of the entrepreneurial society and the NPO society, Drucker announced them first and grappled with them squarely. Anybody could have seen either of those coming. Above all, the uttermost warning of Drucker has been the advent of today’s transition period, which he announced in “The Age of Discontinuity”(1969).

Even if he had quit writing after his maiden book at the age of 29, “The End of Economic Man: The Origins of Totalitarianism” (1939) and his second book at the age of 32, “The Future of Industrial Man—A Conservative Approach” (1942), and become a politician or industrialist, he would have ranked as a first-class political scientist.

In “The End of Economic Man,” Drucker saw three developments that anybody could have seen but could not see in those days. The first was Nazis Holocaust, the second, the Nazi conquest of Europe, and the third, the German-Soviet Nonagression Pact. In “The Future of Industrial Man,” Drucker announced the most important insight that many people are not aware of yet: The inevitable failure of not only of absolutism but also rationalism.

Of course, the other way to know the future is to create it by yourself. It sounds difficult but anybody can do it. If you have one baby, the population will grow by one. If you start a business, the world will change. Thus, history is made. The individual entrepreneur with vision makes history.

Isaka: Is Drucker an economist?

Nothing can be treated as external event

Is he an economist? Drucker himself also firmly denies this. Economics, treating the economy independent, put it in the center of everything. If not, it cannot be a science. Otherwise, it will at best end up as description and forecasting.

Macroeconomics, now a main branch of economics, treats the crucial factors such as knowledge, technology and psychology as external variables. It has no other choice; only by so doing, it is effected as an academic science. Drucker says he cannot do such a thing.

Saying that the increase of currency in the market boosts business, some schools recommend the increase of the money supply. They pretend to have forgotten to multiply the supply by the velocity of the circulation. Macroeconomics cannot deal with the psychology of businessmen and the consumers. Such a theory cannot be a prescription for a miracle drug. Drucker says economics will become meaningful only when the macroeconomy, the microeconomy and the global-economy are integrated into one. He expects the birth of such economics even though he does not know when.


Technology has changed the world

What changed the history of mankind, sometimes drastically, is not a political incident but the progress of technology. Starting with hunting, technologies such as irrigation, gunpowder, printing, steam engine, railroad and computers changed the history of mankind. Even stirrups via the armored knight brought about the feudal system. Gunpowder disrupted the system and led the way to the centralization of power.

Drucker says, even in the 21st century, the key is “technologists”. For developed countries to maintain today’s position, they have to keep up with technical skill, supported by theory. The Industrial Revolution that started in England owed much to toolmakers that made the steam engine possible. Misfortune of today’s developing countries is the tendency that people do not respect the using of one’s hands, the making of things. The college where I teach, which opened this year, was named “Monotsukuri Daigaku (Making Things College)” in Japanese by Takeshi Umehara, Japanese philosopher, and “Institute of Technologists” in English by Drucker, social ecologist.


Drucker knows the economy better than economists

Between the two great economists, Drucker leans more toward Schumpeter rather than Keynes. The fact that Schumpeter was a student of Drucker’s father has nothing to do with.

For reference’s sake, Drucker’s father, Adolph Drucker, after serving as a top official at the Ministry of Commerce in the Austrian government, taught economics at Vienna University. He was one of the foremost intellectuals of that era in Austria, and the founder of the Salzburg Music Festival. Later in the United States, he taught at the University of North Carolina.

By the way, the Druckers’ ancestry is Dutch. In the 17th century in Holland, the family run a printing house for Bible and religious books. “Drucker” means printer.

When Drucker was in England, he attended Keynes’ lecture. One day he became painfully aware that Keynes as well as the students there was interested in money. Drucker confirmed for himself that his own interest lies in humanity and its society.

However, interestingly enough, his articles on the economy have been read widely and influenced more than the ones written by economists. Right after Keynes’ death in 1946, Drucker wrote “Keynes: Economics as a Magical System.” It not only aroused a public response but also, up until the Keynesian school dominated the academic world and the public sector, was placed widely in collected papers of economics and in college textbooks.


The center of Drucker’s concern is humanity

First appearing in “Foreign Affairs” in 1986, Drucker’s article “The Changed World Economy” highlighted the uncoupling of the primary-products economy and the industrial economy, the uncoupling of production and employment in the manufacturing industry, and the near uncoupling of the real economy and the symbol economy. It was read and cited foremost in that year, because it raised questions on trade policy of U.S., industrial policy of Japan and the development policy of developing countries.

In the world, there are great people who should have been awarded the Nobel Prize but were not. Most of them are not in the category fields of the Prize. Drucker is one of those people. There are only six categories for the Prize: Physics, Chemistry, Medicine, Literature, Peace, and Economics. Drucker himself says he is not an economist. Then, thinking of the roll that management played in modern civilization, I believe he deserves the Prize for Peace.

Drucker is not a sociologist. A sociologist defines society as it should be. He describes himself as a social ecologist, observing society, reporting it as it is, and telling us which direction to go. His concern is human as a social being.

For the happiness of Man, the development of society is a must. The development of society today is in the hands of organizations such as industries, governments, and NPOs. Therefore, he cannot help but be concerned about whether organizations can carry out a good job, that is, whether they can be managed well.


The man who invented management

Starting from this concern, Drucker established the discipline of management and came to be called the man who invented management.

At the age of twenty-nine, two years after coming to the United State, he published his maiden work “The End of Economic Man”(1939), revealing the origin and true nature of fascism totalitarianism. It was enthusiastically praised by Winston Churchill. Being inaugurated Prime Minister after the defeat at Dunkirk, Churchill gave this book to all the graduates of the British Officers’ Candidate School. Also, being impressed with the book, the founder of Time Inc., Henry Luce offered Drucker a job as a foreign news editor. However he declined the job and kept working as a free-lance writer and a college lecturer, and published his second book, “The Future of Industrial Man” (1942), where he developed his general theory of society and the special theory for the industrial society.

After reading this book, General Motors, then the largest and the most prosperous manufacturer in the world, asked him to make a study on its structure and management by political approach. The result of an eighteen-month study became a textbook for the reconstruction of Ford and the reorganization of GE, which set the spark for a worldwide organizational reform boom. The title of the book is “Concept of the Corporation” (1946). In Japan, Toyokeizai published the translation. It also had a significant influence on Japanese corporate management.

The book changed management, economies and the world. It was the origin of management. It, however, was not accepted by General Motors itself. Drucker, highly evaluating GM’s management and organizational structure as “federal decentralization,” made several proposals such as the uncoupling of the Chevrolet division. General Motors, as the world’s top maker, thinking itself as perfect and faultless, was not happy with those proposals based on the idea that nothing made by Man can be perfect or faultless. Later, Alfred Sloan, the chairman of GM, published the great book “My Years with General Motors” (1964). But, Sloan’s book did not refer to Drucker’s at all, though they were in good relations. It was thirty or forty years after this incident that GM’s management apologized and became one of Drucker’s clients again. It was after GM’s management had gotten into trouble.

When Drucker took a job to analyze GM, he checked all the books on management and found that management had not yet been organized into a discipline. This is the root of Drucker as a father of management.


Some misunderstandings in Japan

According to Tom Peters, most management principles and methods trace back to Drucker. This is true. Those are “management strategy,” “federal decentralization,” “Management by Objectives,” “information-based organization,” “core competence,” “economic chain,” “Activity Based Costing,” “Management Balanced Scorecard,” “knowledge management” and others. They are all from Drucker. Some of them were developed fifty years ago. Some say Drucker is like Mozart because there are all kinds of motifs welling out. Drucker does not care who arranges and develops further. He is pleased just to know of those developments.

However, in Japan where Drucker’s essence is understood almost by instinct, there are some mistakes at the operational stage. Federal decentralization is the case. In GM’s federal decentralization, which was introduced in “Concept of the Corporation,” chiefs of the divisions could deny the contract which the top management had arranged with the Navy, and directly go into negotiation with it and so alter the contract. The divisions at GM had such independent power.

In Japan, however, it was practiced as a product department system. The role of headquarters in federal decentralization is not to instruct to do this, but ask, “What can we do for you?” The relationship between the head of the division and the head of the units in the divisions are the same. The work source is the customer. The work is with customers is the essence of Drucker’s management. Today Japanese companies are introducing so called company system. But the system is what Drucker taught us more than fifty years ago.

The same can be said about knowledge management. If one puts knowledge into a database and tries to share it, he only makes precious knowledge into information and degenerates it into data. All he can get is a data file, not knowledge.

Such mistakes have been made in other places. Drucker’s Management by Objectives means to take responsibility. It is Management by Objectives and Self-control. The worker himself decides his objectives, thinking through the objectives of the company and the unit to which he belongs, while discussing it with his management. The phrase itself took on a life of its own, and became a totally different idea; that was giving subordinates norms and managing them.