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A Tribute to Peter Drucker By STEVE FORBES
November 15, 2005; Page A22
What made Peter Drucker, who died last Friday just shy of his 96th birthday, the most influential management guru of the modern era? Mr. Drucker's genius for extraordinarily farsighted insights came from a combination of intense curiosity, right principles and deep understanding of the perfections and imperfections of human nature. He never went stale intellectually, which is why business journalists, executives, entrepreneurs, leaders of nonprofit institutions, students and the occasionally wise politician eagerly sought to pick his brains right up to the time he died. * * *What helped make Mr. Drucker so insightful was a profound understanding of economics, an understanding that still eludes most economists today. Not for him was the notion of "macroeconomics," of seeing the economy as something of a machine that can achieve steady, stable growth. To him, traditional economic notions of "equilibrium" or Keynesian ideas of "aggregate demand" were nonsense. Innovation, constant change, and turmoil were the true constants of a progressing economy. No surprise that the economist fellow-Austrian (at least by birth) Joseph Schumpeter was Mr. Drucker's hero. In 1983, at the centennial of both Schumpeter and the then-legendary John Maynard Keynes, Mr. Drucker wrote in Forbes that Schumpeter's centenary birthday would hardly be noticed. Yet "Schumpeter it is who will shape the thinking and inform the questions on economic theory and economy policy for the rest of this century, if not for the next 30 or 50 years." Today Schumpeter's emphasis on the crucial importance of entrepreneurship and "creative destruction" are now commonplaces. ![[Words of Wisdom]](http://online.wsj.com/public/resources/images/it_writing09142004171604.gif){kind=small} WORDS OF WISDOM
Read samples of Peter Drucker's insights into management1 and selected writings 2 for The Wall Street Journal. As Mr. Drucker wrote over two decades ago, "The economy is forever going to change and is biological rather than mechanistic in nature. The innovator is the true subject of economics. Entrepreneurs that move resources from old and obsolescent to new and more productive employments are the very essence of economics and certainly of a modern economy. Innovation makes obsolete yesterday's capital earnings and capital investment. The more an economy progresses the more capital formation -- profits -- will it therefore need." These two men saw profits as a moral imperative, a genuine "cost" in the cost of staying in business because "Nothing is predictable except that today's profitable business will become tomorrow's white elephant." B.C. Forbes, our company's founder, who came to this country 100 years ago with little education and even less money, liked to say that you learn more about a company's prospects from observing its "head knocker" (what he called CEOs) than you will from its balance sheet. Mr. Drucker spent a lifetime hammering home the point that people are key. For instance, a leader who looks at workers as a cost instead of a resource is fatally flawed. No surprise he long recognized the importance of entrepreneurs: "All great change in business has come from outside the firm, not from inside." Mr. Drucker's ability to prophesy -- almost always correctly -- was uncanny. All of this is why he could come up with innovations that now seem commonplace, such as management by objective. He continued to admonish executives to carve out time to think and make careful decisions, to focus on one or two tasks, to delegate to others what you can't do well yourself. That's why, for example, Mr. Drucker remained a one-man shop, a soloist; he could easily have founded a large consulting firm and gotten immensely rich. But that would have gone against his profoundest instincts. He was at his best as a teacher -- gathering information, gaining insights and then getting others to gain understanding. Schumpeter believed asking the right questions was more important than the answers. Mr. Drucker agreed -- to a point, anyway. Decades ago, Mr. Drucker foresaw the rise of "knowledge workers." After World War II, he realized the far-reaching consequences of the GI Bill of Rights, which enabled millions of veterans to go to college, thus leading him to predict long before computer chips and the Internet that "knowledge workers" would replace manual workers. Mr. Drucker also prophesied the breakdown of the traditional, thoroughly integrated, hierarchal industrial corporation. In the 1950s, he predicted the rise of Japan as a major economy, an astonishing insight when many experts thought the country would forever be a nation of small farmers and manufacturers of cheap, shoddy goods. He also saw Japan's subsequent troubles -- an aging population and lack of vigorous entrepreneurship and worker flexibility. Mr. Drucker long ago warned of the consequences of the rise of corporate and government pension funds, and the impact these vast accumulations of money -- and thus power -- would have on corporate governance, years before anyone had heard of Calpers. He also warned of a backlash from the extraordinary rise in CEO pay. "In the next economic downturn," he told Forbes readers nearly a decade ago, "there will be an outbreak of bitterness and contempt for these super corporate chieftains who pay themselves millions. In every major economic downturn in U.S. history, the villains have been the heroes during the preceding book." Mr. Drucker also told us to expect enormous changes that will come in higher education, thanks to the rise of satellites and the Internet. "Thirty years from now big universities will be relics. Universities won't survive. It is as large a change as when we first got the printed book." He believed "High school graduates should work for at least five years before going on to college." It will be news to most college presidents and a lot of alumni that "higher education is in deep crisis. Colleges won't survive as residential institutions. Today's buildings are hopelessly unsuited and totally unneeded." All this from a life-long academic. He brooked no nonsense about some of the topics that obsess Chicken Little today. Outsourcing? He told Fortune in 2002 that "We import two to three times as many jobs as we export. Wage costs are of primary importance for very few industries. The industries that are losing jobs out of the U.S. are the more backward industries." He never tired of pointing out the huge advantage the U.S. has over Europe and Japan and other countries with American workers' flexibility, not only for changing jobs but physically moving from one area to another to pursue opportunities. In fact, outsourcing is a necessity, Mr. Drucker said. Companies should have others do what is not their prime task. Outsourcing is not so much about cost cutting ("illusory") as it is about improving the quality of work that others can do better than you: "You should outsource everything for which there is no career track that can lead to senior management." * * *How higher education is managed did not impress Mr. Drucker; but what did is our continuing education system, whether in community colleges or by computers. Also: "Our most important education system is in the employees' own organization." That is where most Americans learn the most. Mr. Drucker also came up with the admonition of pursuing your opportunities and cutting your losses: "A critical question for leaders is 'When do you stop pouring resources into things that have achieved their purpose?'" As he repeatedly told Pastor Rick Warren, founder of the 15,000 member Saddleback Community Church in Lake Forest, Calif., and who has helped start another 60 churches around the world, "Don't tell me what you are doing, Rick, tell me what you stopped doing." Until his last breath, Mr. Drucker himself never stopped doing and doing. Mr. Forbes is president & CEO of Forbes, Inc. and editor-in-chief of Forbes magazine. | ||||||
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