We are entering, techno-boosters breathlessly proclaim, a "third industrial revolution," that of the "knowledge-based" or "new" economy. Unlike revolutions one and two--the steam engine and then the electric power tools that liberated us from dependence on muscle labor--this time it is the human mind, somehow magnified by dazzling new gadgets and software, that is supposed to generate economic value: Knowledge workers will make heaps of money manipulating data, engineers will create massively automated systems of unprecedented productivity and, meanwhile, scientists will control the structure of matter and even of life itself for our benefit. By contrast, ownership of property and industrial capital are losing their traditional roles as sources of wealth. From the explosion in high-tech stock values to the relentless pace of "development" in computer and telecommunications technologies, self-appointed "smart" observers (for example, the Wired magazine crowd) are quick to point out the signs of this revolution everywhere. The only drawback to this glorious new era, we are informed, is the unavoidable suffering that economic change brings to "redundant" factory workers and middle managers. It's all about "creative destruction," the unavoidable prerequisite to the creation of new wealth.
For all its seductive hype--and the cult status of Wired illustrates how extolling the third industrial revolution has become a cottage industry in itself--this vision remains controversial and unproven. In Building Wealth, MIT economist Lester Thurow wants to examine it all by applying a formula he has honed to perfection in previous bestsellers: He articulates, and to a degree analyzes, trends that we find confusing and frightening, tying them together in coherent form. Only this time, while swallowing the fashionable rhetoric of info-revolution whole, he plays a kind of booster who also wants to be a critic. With one foot anchored in the camp of those who fret about the direction of American capitalism, myself included, Thurow paints a disturbing picture of widening income gaps, declining real wages and the disappearance of traditional career paths. However, barely able to contain his enthusiasm for the enormous fortunes being amassed in the name of high technology, Thurow also yearns to run with the techno-boosters, as symbolized by the "glittering eye" atop the "wealth pyramid" on the back of the dollar bill. Thurow repeatedly points out in awe that the net worth of Bill Gates, now approaching $100 billion, equals the combined wealth of the bottom 40 percent of the American population. "Wealth," Thurow writes, "is the only game to play if you want to prove your mettle.... If you do not play there, by definition you are second rate." Thus Thurow's other foot is marching briskly forward. The result is an awkward book that tries to do too many things at one time.
Thurow is at his worst as a techno-booster pundit. Except for some vague references to the growing importance of knowledge in wealth creation, he never clearly defines what is new about the so-called knowledge-based economy. Is it the systematic application of science to business problems? The emergence of new technologies? Or sheer computing power? Rather than address these questions, Thurow presents a series of faintly illustrative anecdotes, such as the use of seismographic tests in the search for oil, which have replaced the old-style wildcatters who simply drilled holes. This leaves a huge gap at the core of the book, allowing Thurow to avoid legitimate questions about whether the revolution exists as of yet (it doesn't) or whether the Panglossian visions of the Wired crowd simply conceal traditional, extremely conservative economic views (they do). Aggravating this problem are the thirteen "New Rules" of his subtitle, which fail almost comically to add to the text. For example, Rule One states: "No one has ever become very rich by saving their money. The rich see opportunities to work and invest in situations where large disequilibriums exist." Such observations, which in my opinion are beneath Thurow's dignity and talent, are sprinkled abruptly throughout the book as if some editor added them to mimic the banality of the Seven Habits of Highly Effective People.
It would have been far more useful for Thurow to step back and ask whether this booster rhetoric is premature or if it is even "revolutionary." For starters, the personal computer, which is the principal pillar of the "new" economy, is not living up to expectations. Though faster and more powerful PCs appear every few months, in spite of a recent uptick in productivity statistics so far they have failed to enhance average worker productivity in significant or sustainable, measurable ways. This means either (1) we cannot effectively use the faster chips, larger memories and "more sophisticated" software or (2) these improvements function less well than claimed. Despite the fact that I am working on my fourth PC, for example, I do not find that it operates appreciably better than the first one I bought, in 1986: I find myself still irritated by breakdowns (the machines are more complex, thus more fragile); by useless "corrections" to my operations and the constant expectations of cosmetic re-edits (prettier, but content-neutral). The bugs in these specious add-ons, I believe, cancel out most productivity gains in attributes like computer clock speed. But I needed each new PC to connect--to be "compatible"--with my colleagues and editors, and so we continue to scramble on the treadmill of continuous upgrades. It is, in a sense, a self-reinforcing scam: You constantly find yourself buying new software and hardware, which operate, "improve" and appear in suspiciously close concert.
Furthermore, the industries that techno-boosters celebrate are built on far shakier ground than is often acknowledged. Almost all of those hot new Internet companies remain stubbornly unprofitable, some disastrously so; while Amazon.com's sales revenues are expanding at a healthy clip, its losses are growing twice as fast, and may top $500 million in 1999. In other words, the more Amazon.com sells, the deeper it falls into the red. Of course, as trailblazing e-commerce companies, it is possible that they have some novel business model in mind and that we should sit tight. But it is more likely that the phenomenal leaps in the stock prices of Internet companies are the ephemeral result of investor speculation--a bubble waiting to burst. The biotechnology industry is similar: While there are a handful of profitable companies, the overwhelming majority of them simply can't design products that work much better than traditional pharmaceutical or agricultural brands. In defense of these industries, techno-boosters invariably argue that it is too early to judge (or "accurately measure") these results and that extremely high failure rates are typical of "embryonic" industries. Which is precisely my point.