March of medicine; The hard way back

If something happens to this organization this structure of talent it can be replaced only with difficulty. If new tasks are to be undertaken it is the enlargement of this structure that causes concern. In keeping with past experience the problem of supply at the margin what we should expect a card power to this organisation and it does. We must notice first of all that the new locus of power is not with individuals. It is a jewel of our corporate lockers. This fact. As well they as suggested by the very theme this colloquium of this discussion that you're having during these weeks encounters resistance.

The first in the implicit instinct lying behind of discussion that you're engaged on here these days is that this position of the individual may be difficult may be causing problems. This is related in turn to the fact that the individual in our culture has far more formal standing that any association of individuals. An individual has it among other things a presumption of accomplishment. A group a committee has a presumption of inaction. Individuals individuals have so it's a cliche that corporations are soulless. The entrepreneur or the individual entrepreneur are individualistic restless. A man with vision guile courage has been the Economist only hero the great business organization evokes no

similar affection. The members of my profession and one could extend the point and Leslie admission to heaven that is individually owned by families it is not clear that the top management even of an enterprise with an excellent corporate image can yet go in as a group. This is part of the mystique of the individual. And I find myself as I contemplated my task here with a very difficult problem in pursuit of the truth that I must now assert the superiority of the group over the individual at least for important technical tasks. You see I face a rather dismal prospect. Yet it is a necessary task. Modern economic organisation and the relation of the individual to modern economic organisation can

only be understood as an effort notably a successful effort to synthesize by organization a personality that is technically superior for its purposes to a natural person. With the additional advantage of immortality to. The need for this synthetic personality doesn't take it very deeply into any introspective task it begins with the fact that in modern industry a large number of decisions and allat decisions that are important require information possessed by more than one man. All important decisions draw on the specialized technical or scientific knowledge and the accumulated information or experience or on the artistic or intuitive reaction of several or many persons.

The final decision will be informed only as it draws. Oh man whose information is about. And there is the further important requirement of this information as it is entered must be properly weighed to assess its relevance and its viability. I must be in other words a mechanism for drawing on the information of numerous individuals. And there must be a mechanism for measuring the importance and testing the reliability of what each has to offer. Let's need to ride on the information of numerous individuals arise first then the technological requirements of modern industry. These are not always in a large and sophisticated. A man of moderate genius

could quite conceivably provide himself with a knowledge of the various branches of metallurgy and chemistry and of engineering program and production management quality control labor relations styling and merchandising which are involved in the development of a modern market. But even moderate genius is in high need and predictable supply. And to keep abreast of all of the relevant branches of science engineering art related to a modern automobile would be to say the least time consuming. The solution that allows that the use of a far more common talent and with far greater predictability of resolve is to have men who are properly qualified or experienced in each limited area of specialized knowledge. And this specialization must always remind himself in modern industry it goes very far.

I was struck when I first began working out some of these ideas nearly 20 years ago more than 20 years ago and the days when I was running running price controls I hope that after way to the general price regulation there are a very large number of things that it didn't fit. And so we had to get out special regulation an extraordinary number of these were for an arcane commodities the existence of which I had actually been aware that one of the things food division came up with one day that aren't fitting the general regulation and fit it so we got a hold of clients and asked them to send their pickle specialist to go to work on a special regulation set the price. Man came up very nice man very able man who worked three or four days and then came in with the head of the food division to say that he needed help that he was primarily a sweet pickle man. Oh yeah.

The information of the specialist is then combined for the design and production of the product. The case of the automobile the vehicle is a common for the common public impression here and one that is not the scariest by scientists engineers and less than modern scientific engineering and industrial achievement. The work of a new and quite remarkable race of individuals. This is pure vanity or art or modern industrial achievement the result of a new race of geniuses. There would be no flights to the moon and very few of the law saying their real accomplishment is in taking ordinary men in a farming them narrowly but deeply and then devising an organization which combines their knowledge with that of other similarly

specialized but equally ordinary man highly predictable performer. The second factor requiring the combination of specialized talents your eyes from the large scale employment of capital in combination with the technology that I just mentioned. This makes it imperative that there be planning and accompanying control of environment. The market is in remarkable degree an intellectually demanding institution the Illinois farmer need not anticipate his requirement for fertilizer pesticides or even machine parts. The market stocks them and supplies them off at a common price the cost is the same for the Hellenized farmer of intelligence and the Wisconsin farmer who under medical examination shows daylight and either air.

There there need be for either of these producers. There need be no sales strategy. The market takes all of the product at the ruling price and takes it off much of the appeal of the market. Indeed some of my economist colleagues at least as been the way it seems to simplify life. Once one abandons the market however changes the extensive use of capital with advanced technology greatly reduces its scope and power. Large amounts of capital must be committed to production it will seem sensible to protect that capital from market fluctuations and the market does not stock or reliably supply complicated artifacts or talent. The manufacture of missiles

space vehicles or modern transport aircraft must for sea and ensure his requirements for specialized talent specialized labor for arcane materials and far various intricate components for none of these can the market be counted upon this to supply as it as they can be counted upon to supply farm implements. And there is no open market. I think this is fortunate. There is no open market for missiles in space the walls can be solved. Everything depends on the care with which contracts are sought and nurtured in Washington. The same world in any lesser degree for the maker of them will be all processed foods and modern charges. This too must forsee requirements and it must manage the market for its products. Are such planning cell like technology

is dealt with own made by highly qualified man a man who can forsee a need and ensure the supply of production requirements relate to an appropriate price strategy. See that customers are suitably persuaded to buy what is made available and at yet higher levels of technology and complexity. I see that the state is suitably instructed as to what it needs. The technology and planning. These are the two twin legs. Thus combine to require the extensive combination and testing of talent or the information of various kinds of talent. I might say by just by way of a digression here that much of this is accomplished in practice by the very simple process of men talking with each other. One can do very much worse to think of a business organization as a complex committees and management consists in recruiting and

assigning the right Committee and intervening on occasion to force a decision and either announcing a decision or carrying it as a datum for a larger decision by the next higher committee. And it shouldn't be suppose either that this is an inefficient arrangement. A committee allows man to pool information under circumstances that are also of immediate probing and discussion to assess the relevance and reliability of the information that is offered by that individual load. Therefore these talk or the simple uncertainty revealed in this process as in no other way there is out there are no doubt a considerable stimulus to mental effort in this group association. Men who believe themselves deeply engaged in private thought are usually doing nothing a top committees are condemned by those who are caught by the cliche that I mentioned a few minutes ago. The cliche that

individual effort is superior to a group effort and by those whose suspicions are aroused by the fact that for many people group effort is more congenial and pleasant than lonely struggle and it's going damned by those who do not see that the process of the extract and especially of testing information has necessarily a somewhat under record. People who do not see that they conducted meetings usually decide something that has already been decided before. And a group activity of the star is also opened by those who fail to see the highly paid man when sitting around a table as a committee are not necessarily wasting more time in the area that each would waste by himself. This is the nature then of the decision making in the modern enterprise

and you see at each stage it is there a strong forces that drive these decisions in to your form. Now I want to argue that this group decision making is something that extends deeply into the enterprise. It goes far beyond the small group that we commonly designate as the top management power in fact is not closely related to position in the hierarchy of the business organisation. We always carry in our minds an implicit organization chart. We must not be imagined. Hope that this group decision making and its tendency to move into the organisation is confined to technology and to space mechanics. In our day even simple products are made are marketed by highly sophisticated methods. To Power

passes in to organisation for purposes of pedagogy I have frequently illustrated these matters by reference to a technically complicated product which unaccountably neither General Electric nor Westinghouse has yet placed on the market. I am fond of this product and I must be forgiven for recurring to it here tonight. There's nothing original about my description of this product as a product or standard performance except that it does on the surface of the toast and darker carbon one of a selection of standard messages or designs. For the elegant hostess a monogram would be available possibly even a coat of arms. There would be at breakfast and appropriate devotional message from the works of the Reverend Billy Graham. For the pathologic are worried there would be an aphorism

urging vigilance from J Edgar Hoover. Oh A. Modern economist an artist there would be a purely abstract design. In the restaurant version they would sell advertising or urge the peaceful integration of public eating places. Conceivably this is a vision that could come from the president of General Electric but the orderly proliferation of such ideas is the established function of much more lonely men who are charged specifically with new product development. At an early stage in the development of this toaster specialise in style design and no doubt philosophy art and spelling would have to be accorded a

responsible role. No one in a position to authorize the product would do so without a judgement on how the problem of design and inscription was to be sought and at what cost and advance fighting would be written in advance adverse findings would be are written only with caution. Action would be contingent on the work of specialists in market testing and analysis would determine whether And by what means the toaster could be sold and of varying quality they would function as part of a team that would also include merchandising advertising and data relations manager. No adverse decision of this group would be or Nor given the notoriety that attaches to missed opportunity. What if they are above the station it will be evident that nearly our power and initiative development rejection approval is in fact exercised deep down in the company. So here we see two great trends that have converged in consequence of

advanced technology how to capitalise production and a capacity through planning to command earnings for the use of the firm. Capital has become comparatively abundant and the imperatives of technology and planning have moved the power of decision from the individual to the group and have moved this power deeply into the organization. What then have been the consequences. I would suggest that the consequences have been severed. The most important following follows from the one that I just mentioned that power has passed to and down into the modern large enterprise. I would conclude that it is past their irrevocably the disenfranchisement of the stockholder the owner is a permanent bat and the owner will never again and a

large corporation have power except perhaps in the very occasional case one that is doing badly and the large enterprise the planning here discussing the control of environment makes this the popular legend to the contrary. A very rare thing. Power has also passed from those who supply loanable funds. Watch the names of the great bankers Jay Cook the elder Morgan Andrew Mellon who are part of the American folklore. Oh I forgot to mention him here in Illinois. Today. There is no banker whose name is out is known outside of the financial community and very few whose name is known to that fame in the modern financial world requires the exceptional case of massive a lot larceny always a part that a bank or collect modern

art have Japanese wrestlers perform in the lobby are that he staged ping pong contests out in the street. Those are enterprises of the Chase Manhattan Bank as described in this last annual report as part passes down into the enterprise. The authority and the eminence and the power over the individual of those who had the enterprise. Well so the class and this also has happened. Never again will the average informed person know the name of the current head of the Ford Motor Company. Or the standard. These men like others will henceforth have to produce their driving licenses by check and this also reflects the reality which is that their can that their

control or control now or not does not rest with them as it did in the days of Henry the Fort Henry the First as it did in the days of civil Lavery as it did in the days of John D Rockefeller. It is collegiate. I would suggest that the power of the unions is also almost certainly the client. Their position to rest on a factor of production that is comparatively abundant and which suffers from its competition with abundant capital and sophisticated technology that relatives and in recent years absolute decline in trade union membership in the industrial sector of the economy there are some increases in the government sector. It is I should suggest related to the decline in the number of production workers. And this in turn is the result of capital substitution based on the capital abundance that I have been talking about. So the union shares with the vintage capitalist and the decline of

capital. That engineers scientists technicians within the business enterprise are already laying claim to eminence and influence which results from this shift will also surely be evident increasingly. This is the type of individual who will move in to the senior posts the president or board chairman who had as his principal qualification his closely as on with the financial community is already probably an anachronism. He is being replaced by a man whose skills are related to organization or are related to the services to ARGAN ization such as recruitment information systems and the other requisites of effective group action. I think these new men probably handicap in the political environment is the order capitalist entrepreneur was not by this commitment to group behavior but this handicap is not taught and it is replaced by

another type of group association which is the source I think and almost 90 percent of the great proportion of modern influence as regards the state and that is the interchangeability of technical personnel and the order lapping action of technical personnel of the corporation and the state in the tasks of the state. A joint action that is associated with the development of weapons contracts space activities so forth and so on real power is not exercised by the Bobby Bakers of the world. And this is not the mechanism by which power is brought to bear on the state. Real power is brought to bear by an extension of the same collegial action that we're talking about. And as a practical man of faith a station a group of men in shirtsleeves sitting around a table covered with blueprints.

I think there are some further consequences. We should all say that in the future very few people very few men will work as individuals. They will work as teams. And again this encounters the mystique of the individual. And again this change will be very graphic. I'm not a toff sure that it is but we have seen is The Passage of Power from the owner which was a hard exercise of authority. There's a much more subtle exercise of authority of men working together and I thought sure that this is a less civilized manifestation and less consistent with the dignity of the individual. There are further consequences that I would like to mention. One of them

concerns institutions such as this celebrating its 100th anniversary. It is silly to suppose that the current expansion in educational enrollment and resources is the result of a New Age of Enlightenment. It is the result of pressures generated by the new relationships between the factors of production and the strategic role of these groups of qualified men. As the scarcity of capital in Victorian times led men to large in the virtues and the frugality and saving. So now the scarcity of trained talent is leading us to a similar emphasis on the value of education. The problem of the individual in the modern industrial enterprise and the authority to which he is subject is a very important one. It was a very wise choice of the topic for these discussions. It's already been which individuals are subject like Sex in the same Victorian setting in the last century has been a subject which has

long been shunned and like sex. There is both American interest and treating it with candy. But there I think the similarity is while I want to imagine that the fundamental manifestations of Sexual Behavior have a certain constancy over time. That of the economic power in relation to the individual must be approached with an assumption of change in the last 200 years we have passed an age where the Florida over the individual in the society was exercised by the owner of the land through the age where it was exercised in a much higher authoritarian fashion by the owner of capital on what capital stand upon or. Through. Possibly also that of the manager so that of the modern Colegio organisation. More technical and planning decisions must be widely dispersed through very large organisations. We're not prepared to accept the fact of such

change. We will understand very very little of the position of the person the individual and modern economic society. Thank you very much. Thank you. I'm the owner. You have been listening to John Kenneth Galbraith professor of economics at Harvard University. He spoke on individual and organization in the industrial state at the first session of the University of Illinois Centennial symposium. The next program in this series will feature the discussion of Mr. Galbraith lecture. He will answer questions from visiting professors faculty members at the University of Illinois and students. Man and the multitude is a feature presentation AAB the University of Illinois radio service. This program was distributed by a national educational radio. This is the national educational radio network.