In our service economy, brains, not brawn, rule


Consider two headlines from Oct. 18, 1993. The first, in the Financial Times of London, declared that, due to low productivity, 400,000 European automobile parts workers stood to lose their jobs in the next few years.

The second, in USA Today, reported on the Golden State Warriors' offer to pay 20-year-old Chris Webber, who had yet to log a minute on a professional basketball court, $74.4 million for his services over the next 15 years.

Odd thing is, the headlines make perfect sense.

It's a new economy, and many people haven't gotten used to it. "A helluva world," they exclaim, "where almost a half-million 'real men' get canned, and some near-teen-ager gets rich."

Helluva world or not, it's our world. Even the manufacturing- minded Japanese concede that the likes of entertainment and tourism are key industries of the future -- and company after Japanese company is throwing big yen at creativity training.

Yesterday's parasites are today's champs. Yesterday's champs are today's parasites. It's about that simple.

We've long heaped scorn on service workers. Architects? Accountants? Advertising folks? Entertainers? Pro athletes? They were the periphery, living off the honest sweat of the laboring masses who tilled our soil, assembled our cars, slaved in our dreary textile mills.

Now it's the lumpy-object folks (steel workers, et al.) who are the bit players in the drama of the service-knowledge economy.

We fight it! Crusty Lee Iacocca labels the entire service sector a bunch of burger flippers.

A German executive, who heads a renowned machine-tool firm, warned me (in 1991, before the German economy's warts were exposed) that Americans put far too much faith in the soft stuff. I reminded him that about half his research and development folks were now software programmers, up from only 10 percent just a few years ago. "Hmmm," he responded.

Two-thirds of Madonna's revenue comes from overseas, and the U.S. service sector as a whole may soon rack up a $100 billion positive trade balance. (Got that, Lee?)

"As the architect of Japan's industrial future," the Financial Times said in mid-June, "the [Japanese] Ministry of International Trade and Industry is increasingly convinced that added value will come not from manufacturing but intellectual activity, such as software."

Speaking xenophobically, too bad that MITI is on to it. The U.S. productivity edge in software and services is obscene -- and it can't last.

But can you really build an economy on MTV, Nike and other soft stuff?

Of course. It's the service sector that's driving the software-telecommunications-multimedia mega-industry, not vice versa.

The big banks (and other financial-service powerhouses, such as American Express) were among the first to go global; their insatiable appetite for telecommunication networks and information-processing power has been an enormous goad to the entire information industry.

And don't forget the flicks. Ed McCracken, CEO of

workstation-software superstar Silicon Graphics, says the Department of Defense used to be his lead customer; now it's Hollywood.

Want to find the action in the new economy? Try Skywalker Ranch, north of San Francisco, home to LucasFilm. Or Multimedia Gulch, a once-decrepit string of San Francisco warehouses -- where slightly unhinged designers are feverishly inventing the economy of 2005.

For me it all came home to roost with the news that Nintendo will soon give us (that is, our 11-year-olds) a game player, for just $250, with more information-processing capacity than the Pentagon's biggest supercomputer had a scant 15 years ago.

Bob Buckman runs a chemical company, called Buckman Labs. A manufacturer? Sure, some goo eventually changes hands.

But Buckman's core competence, he says, is an electronic network that allows his 1,200 people in 70 countries to bring their intellectual resources to bear, almost instantaneously, on any customer problem.

So, too, Great Britain's $6 billion Trafalgar House, the world's third-largest engineering and construction firm.

Its global network, which includes customers and subcontractors, has (thanks to the timely sharing of work in process) cut construction rework costs, the bane of the industry, from 10 percent to 1 percent of contract value.

Likewise, a mining boom in Australia is spurred by new geophysical software that allows firms to find once-elusive ore deposits.

Yes, some brave souls still climb the steel superstructures to put the beams in place on a Trafalgar House construction job. And skilled operators still work the supershovels that chew up the earth in Australia's ore pits.

But make no mistake -- they are the parasites.

The center of the economy, even in construction and mining, is the nerds in back rooms exercising intellectual muscle, to use yesterday's inapt metaphor -- thus igniting an unprecedented, if strange, global boom.

Tom Peters' column is distributed by the Tribune Media Service Inc., 720 N. Orange Ave., Orlando, Fla. 32801; (407) 420-8200.

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