Box 9.2 Alternative Views of Timing of Transition Between Economic Eras

We have entered the knowledge economy.

—Brooks Manville and Nathaniel Foote, McKinsey and Company

Intellectual capital matters as we are leaving the industrial age and entering the information age.

—Thomas Stewart, Fortune

For several decades the world's best-known forecasters of societal change have predicted the emergence of a new economy in which brainpower, not machine power, is the critical resource. But the future has already turned into the present, and the era of knowledge has arrived.

—''The Learning Organization," Economist Intelligence Unit

Many people have made the argument that world economies did not collapse when we went from the agricultural to the industrial era because there was a self-correcting mechanism during the transition phase. At the same time that labor was moving out of agricultural activities, there were new businesses, enterprises, and domains of human effort created in the industrial age that picked up this labor. As a result, there were no massive discontinuities in the work force. We do not know whether this will also be true of the next transition. We could, in fact, have some massive discontinuities in the work force in the United States and globally. We will not understand what is needed in the way of policy, and what is needed in the way of intervention to deal with those issues, unless we have a better understanding of the pace of change we are facing.

To understand the implications a little better, I would like to back up a bit and say a few words about the industrial era in order to encapsulate a few thoughts about the knowledge era. One of the implications of the numbers and the information in Box 9.3 is that during most of the industrial age companies had to be located somewhere. They had a natural home. If you look at the industries that the Japanese Ministry of International Trade and Industry (MITI) put in its Vision for the Decade in 1990 (Box 9.4), all of them are what Lester Thurow refers to in his latest book (The Future of Capitalism, 1996) as brainpower industries. One of the attributes of brainpower industries is that they do not have a natural home. These industries, and the winners in these industries, can reside anywhere that someone has the capability to mobilize the brainpower required to be a winner in them.

Today, economists (as well as the World Bank, which has published some statistics on this subject) estimate that human capital accounts for more than half of all of the wealth in the United States and other economically advanced nations. However, the difference between today and the future is that during the era of natural resources,

Box 9.3 Aspects of the Industrial Era in Contrast with Those Anticipated in the Knowledge Era

Of the 12 largest industrial firms in the U.S. on January 1, 1990 . . .

  • 10 of the 12 were natural resource companies.
  • Only 1 of these companies—GE—is alive today.


  • Those countries with natural resources were rich, and those without were destined to be poor.
  • For most of the industrial age, companies had natural homes where they had to be located.

SOURCE: Lester Thurow, The Future of Capitalism.

The National Academies of Sciences, Engineering, and Medicine
500 Fifth St. N.W. | Washington, D.C. 20001

Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement