The Drucker Lectures: Essential Lessons on Management, Society and Economy

Index

Introduction

You can picture him perched on the edge of a classroom table, peering through thick glasses at the students who hang on his every word. His baritone voice washes over the room, his Austrian accent as thick as a Sachertorte.

He doesn’t refer to any written notes. But every now and again, his eyes roll back in his head and he pauses, almost like a computer downloading a store of information, before returning to his point and underscoring it with a new set of facts and figures.

His protean mind meanders from topic to topic—a discussion on cost accounting bleeding into a riff on Mesopotamian city-states before he veers into a lesson on the history of higher education or health care. But, somehow, he magically ties it all together in the end. In his hands, discursiveness becomes a fine art. And he delivers the entire talk with charm and humor and a genial style that, as one pupil has put it, recasts the chilly lecture hall to the size and comfort of a living room.

Peter Drucker, widely hailed as the greatest management thinker of all time, is best known for the 39 books he wrote. Among them are such classics as Concept of the Corporation (1946); The Practice of Management (1954); The Effective Executive (1967); Management: Tasks, Responsibilities, Practices (1973); Innovation and Entrepreneurship (1985); and Management Challenges for the 21st Century (1999).

But those who had the pleasure of attending a Drucker lecture, before he died in 2005 just shy of his ninety-sixth birthday, got to see another side of him. Featuring lectures from the dawn of the television age straight through to the Internet age, from World War II to the aftermath of September 11, 2001, from the ascent into office of Chiang Kai-shek to the emergence of China as a global economic power, this book is designed to provide a taste of what that was like.

Drucker can be humble and self-deprecating in his comments, variously conceding: I don’t even know where to begin and I know I don’t make sense. But mostly he is authoritative, speaking in absolutes. Not one government program since 1950 has worked, he declares in a 1991 address at the Economic Club of Washington.

He can be shockingly bold. For example, in a 2001 lecture, Drucker goes so far as to call W. Edwards Deming, the quality guru, totally obsolete. He can also push too far, suggesting in a 1997 speech on the changing world economy that it is anybody’s guess whether there will be a united Canada in 10 years.

Many of these lectures are notable for their erudition; an offhand reference to an eighteenth-century politician or a nineteenth-century novelist is not uncommon. At the same time, Drucker was never one to lose his head in the clouds. Will you please be terribly nuts-and-bolts-focused in your questions, he requests at the end of a lecture at New York University in 1981, because we have dealt in the stratosphere much too long.

Those acquainted with Drucker’s oeuvre will find many familiar themes here: managing oneself, the value of volunteering, the need for every organization to focus on performance and results. At times, he’d use his lectures to test out ideas that would later find their way into print—the classroom serving as a kind of petri dish for his prose.

If there is a single subject that threads through this book it is one that Drucker spent the last half-century of his career contemplating: the historic shift from manufacturing to knowledge work. In these lectures, Drucker explores the implications of engaging our brains, instead of our brawn, from a variety of angles. He starts in 1957, where his remarks to an international management conference contain one of his earliest known references to people who work by knowledge.

Yet there are also plenty of fresh insights—and more than a few surprises—to be found in these pages, even for the most diehard Drucker devotee. As a speaker, Drucker tends to be a bit less formal than in his writing. He is also apt to personalize his lectures, leavening his oratory with stories about his wife, Doris, his children, and his grandchildren. The shape of the audience can also make things interesting. It is one thing, for instance, for Drucker to hold forth on the vital importance of nonprofits. But this topic gets a new twist when he contextualizes his thinking for a group of Japanese.

Perhaps what makes this collection most remarkable, though, is the sheer span of time that it covers—a testament to Drucker’s long and extraordinarily productive life. I have attempted to give a glimpse into the evolution of Drucker’s philosophy by offering brief commentary at the beginning of each section of this book, which is divided by decade.

The first lecture here is from 1943, when Drucker was being billed in promotional materials as stimulating and highly informative but also as someone with his feet on the ground, capable of communicating in terms that the average businessman can understand and appreciate. The last lecture, when those exact same traits were still very much on display (even though Drucker’s own hearing was then failing), came 60 years later, in 2003.

I selected these two talks, along with 31 others in between, with the help of Bridget Lawlor, the talented archivist at Claremont Graduate University’s Drucker Institute. We looked, specifically, for lectures that hadn’t been published before, at least not in book form. I then edited each one for clarity and readability. I have also tried to minimize the overlap among the lectures in this book; you should hear a few faint echoes, but no outright redundancies.

A handful of the lectures were given from behind a lectern, where Drucker left a polished text to draw from. But most were pulled from transcripts of videotapes of Drucker speaking more casually in the classroom, and with these I have taken considerably more liberties—cutting an immense amount of verbiage, moving pieces around, and composing new transitions. This was major surgery, not a minor cosmetic job, and these lectures are best thought of as adapted from rather than simply excerpted from.

Purists may grumble about this approach. But anyone who wants to see the originals is welcome to visit Claremont to do so. In the meantime, I have tried my best to make this collection accessible and enjoyable while abiding by a standard that Drucker believed should be the first responsibility of every manager but is sound advice for any editor, as well: Above all, do no harm.

Rick Wartzman

Claremont, Calif.

The DRUCKER LECTURES

Knowledge has to be improved, challenged, and increased constantly, or it vanishes.

—Peter F. Drucker

PART I

1940s

By the time the 1940s rolled around, many of the seminal events that would shape Peter Drucker’s core philosophy had already unfolded. Most notably, the Nazis—who burned and banned some of Drucker’s earliest writings—had swept across Europe, prompting the Austrian native to leave for England in 1933 and then immigrate to the United States in 1937. In between, while attending a Cambridge University lecture by economist John Maynard Keynes, he had an epiphany: I suddenly realized that Keynes and all the brilliant economic students in the room were interested in the behavior of commodities while I was interested in the behavior of people. In 1939, Drucker wrote The End of Economic Man, exploring the rise of fascism on the continent he’d left behind. In 1942, he published The Future of Industrial Man. At its heart was the notion that the modern corporation had to justify its power and authority, while providing the individual with dignity, meaning, and status—bedrock beliefs that would infuse Drucker’s writing for the next six decades. By dissecting the inner workings of a single enterprise, Drucker’s work took on a new cast in 1946 with the release of Concept of the Corporation. The book examined General Motors not just as a business but also as a social entity that existed in the context of the broader community. Not everyone was impressed with this deep analysis of organization and management—topics that seemed to fall into a netherworld between politics and economics and that heretofore were largely unexplored. One reviewer expressed the hope that Drucker would now devote his considerable talents to a more respectable subject. Thankfully, Drucker declined.

1

How Is Human Existence Possible?

1943

There has never been a century of Western history so far removed from an awareness of the tragic as that which bequeathed to us two world wars. It has trained all of us to suppress the tragic, to shut our eyes to it, to deny its existence.

Not quite 200 years ago—in 1755 to be exact—the death of 15,000 men in the Lisbon earthquake was enough to bring down the structure of traditional Christian belief in Europe. The contemporaries could not make sense of it. They could not reconcile this horror with the concept of an all-merciful God. And they could not see any answer to a catastrophe of such magnitude. Now, we daily learn of slaughter and destruction of vastly greater numbers, of whole peoples being starved or exterminated, of whole cities being leveled overnight. And it is far more difficult to explain these man-made catastrophes in terms of our nineteenth-century rationality than it was for the eighteenth century to explain the earthquake of Lisbon in the terms of the rationality of eighteenth-century Christianity. Yet I do not think that those contemporary catastrophes have shaken the optimism of these thousands of committees that are dedicated to the belief that permanent peace and prosperity will inevitably issue from this war. Sure, they are aware of the facts and are duly outraged by them. But they refuse to see them as catastrophes.

Yet however successful the nineteenth century was in suppressing the tragic in order to make possible human existence exclusively in time, there is one fact which could not be suppressed, one fact that remains outside of time: death. It is the one fact that cannot be made general but remains unique, the one fact that cannot be socialized but remains individual. The nineteenth century made every effort to strip death of its individual, unique, and qualitative aspect. It made death an incident in vital statistics, measurable quantitatively, predictable according to the natural laws of probability. It tried to get around death by organizing away its consequences. This is the meaning of life insurance, which promises to take the consequences out of death. Life insurance is perhaps the most representative institution of nineteenth-century metaphysics; for its promise to spread the risks shows most clearly the nature of this attempt to make death an incident in human life, instead of its termination.

It was the nineteenth century that invented Spiritualism with its attempt to control life after death by mechanical means. Yet death persists. Society might make death taboo, might lay down the rule that it is bad manners to speak of death, might substitute hygienic cremation for those horribly public funerals, and might call gravediggers morticians. The learned Professor [Ernst] Haeckel [the German naturalist] might hint broadly that Darwinian biology is just about to make us live permanently; but he did not make good his promise. And as long as death persists, man remains with one pole of his existence outside of society and outside of time.

As long as death persists, the optimistic concept of life, the belief that eternity can be reached through time, and that the individual can fulfill himself in society can therefore have only one outcome: despair. There must come a point in the life of every man when he suddenly finds himself facing death. And at this point he is all alone; he is all individual. If he is lost, his existence becomes meaningless. [Danish philosopher and theologian Soren] Kierkegaard, who first diagnosed the phenomenon and predicted where it would lead to, called it the despair at not willing to be an individual. Superficially the individual can recover from this encounter with the problem of existence in eternity. He may even forget it for a while. But he can never regain his confidence in his existence in society: Basically he remains in despair.

Society must thus attempt to make it possible for man to die if it wants him to be able to live exclusively in society. There is only one way in which society can do that: by making individual life itself meaningless. If you are nothing but a leaf on the tree, a cell in the body of society, then your death is not really a death; it is only a part of the life of the whole. You can hardly even talk of death; you better call it a process of collective regeneration. But then, of course, your life is not real life, either; it is just a functional process within the life of the whole, devoid of any meaning except in terms of the whole.

Thus you can see what Kierkegaard saw clearly a hundred years ago: that the optimism of a creed that proclaims human existence as existence in society must lead straight to despair, and that the despair leads straight to totalitarianism. And you can also see that the essence of the totalitarian creed is not how to live, but how to die. To make death bearable, individual life has to be made worthless and meaningless. The optimistic creed that starts out by making life in this world mean everything leads straight to the Nazi glorification of self-immolation as the only act in which man can meaningfully exist. Despair becomes the essence of life itself.

The nineteenth century thus reached the very point the pagan world had reached in the age of Euripides or in that of the late Roman Empire. And like antiquity, it tried to find a way out by escaping into the purely ethical, by escaping into virtue as the essence of human existence. Ethical Culture and that brand of liberal Protestantism that sees in Jesus the best man ever lived, the Golden Rule and Kant’s Categorical Imperative, the satisfaction of service—those and other formulations of an ethical concept of life became as familiar in the nineteenth century as most of them had been in antiquity. And they failed to provide a basis for human existence as much as they had failed 2,000 years ago. In its noblest adherents the ethical concept leads to a stoic resignation, which gives courage and steadfastness but does not give meaning either to life or to death. And its futility is shown by its reliance upon suicide as the ultimate remedy—though to the stoic, death is the end of everything and of all existence. Kierkegaard rightly considered this position to be one of even greater despair than the optimistic one; he calls it the despair at willing to be an individual.

In most cases, however, the ethical position does not lead to anything as noble and as consistent as the Stoic philosophy. Normally it is nothing but sugarcoating on the pill of totalitarianism. Or the ethical position becomes pure sentimentalism—the position of those who believe that evil can be abolished, harmony be established by the spreading of sweetness, light, and goodwill.

And in all cases the ethical position is bound to degenerate into our pure relativism. For if virtue is to be found in man, everything that is accepted by man must be virtue. Thus a position that starts out—as did Rousseau and Kant 175 years ago—to establish man-made ethical absolutes must end in John Dewey and in the complete denial of the possibility of an ethical position. This way, there is no escape from despair.

Is it then our conclusion that human existence cannot be an existence in tragedy and despair? If so, then the sages of the East are right who see in the destruction of the self, in the submersion of man into the Nirvana, the nothingness, the only answer.

Nothing could be further from Kierkegaard. For Kierkegaard has an answer. Human existence is possible as existence not in despair, as existence not in tragedy—it is possible as existence in faith. The opposite of Sin—to use the traditional term for existence purely in society—is not virtue; it is faith.

Faith is the belief that in God the impossible is possible, that in Him time and eternity are one, that both life and death are meaningful. In my favorite among Kierkegaard’s books, a little volume called Fear and Trembling[published in 1843], Kierkegaard raises the question: What is it that distinguishes Abraham’s willingness to sacrifice his son, Isaac, from ordinary murder?

If the distinction would be that Abraham never intended to go through with the sacrifice but intended all the time only to make a show of his obedience to God, then Abraham indeed would not have been a murderer, but he would have been something more despicable: a fraud and a cheat. If he had not loved Isaac but had been indifferent, he would have been willing to be a murderer. But Abraham was a holy man, and God’s command was for him an absolute command to be executed without reservation. And we are told that he loved Isaac more than himself. But Abraham had faith. He believed that in God the impossible would become possible, that he could execute God’s order and yet retain Isaac.

If you looked into this little volume on Fear and Trembling, you may have seen from the introduction of the translator that it deals symbolically with Kierkegaard’s innermost secret, his great and tragic love. When he talks of himself, then he talks of Abraham. But this meaning as a symbolic autobiography is only incidental. The true, the universal meaning is that human existence is possible, only possible, in faith. In faith, the individual becomes the universal, ceases to be isolated, becomes meaningful and absolute; hence in faith there is a true ethic. And in faith existence in society becomes meaningful too as existence in true charity.

This faith is not what today so often is called a mystical experience—something that can apparently be induced by the proper breathing exercises, by fasting, by narcotic drugs or by prolonged exposure to Bach with closed eyes and closed ears. It is something that can be attained only through despair, through tragedy, through long, painful, and ceaseless struggle. It is not irrational, sentimental, emotional, or spontaneous. It comes as the result of serious thinking and learning, of rigid discipline, of complete sobriety, absolute will. It is something few can attain; but all can—and should—search for it.

This is as far as I can go. If you want to go further, if you want to know about the nature of religious experience, about the way to it, about faith itself, you have to read Kierkegaard. Even so, you may say that I have tried to lead you further than I know the road myself. You may reproach me for trying to make Kierkegaard accept society as real and meaningful whereas he actually repudiated it. You may even say that I have failed in relating faith to existence in society. All these complaints would be justified, but I would not be very much disturbed by them—at least not as far as the purpose of this talk is concerned. For all I wanted to show you is the possibility that we have a philosophy that enables men to die. Do not underestimate the strength of such a philosophy. For in a time of great sorrow and catastrophe such as we have to live through, it is a great thing to be able to die. But it is not enough. Kierkegaard too enables men to die; but his faith also enables them to live.

From a lecture delivered at Bennington College, where Drucker had joined the faculty in 1942.

2

The Myth of the State

1947

The word myth is a very queer word. If you look it up in the dictionary, you will find it defined as a tale, a fabrication, usually invoking the supernatural to explain natural phenomena. This definition is literally correct, or at least as correct as a dictionary definition can hope to be. You can test it for yourself; just see how neatly it fits the myth of the state we’re going to talk about tonight.

And yet the rhetorical emphasis on the definition and its propagandistic aim are the exact opposite of what we today usually mean when we talk about the myth. What the standard definition conveys is that myth is a silly superstition, an old wives’ tale. At best, it is tolerated as a harmless flight of fancy, as an ornament, a glittering trinket for children or for the leisure hours of the tired businessman. At worst, it is condemned as the invention of unscrupulous quacks—greedy priests, power-hungry demagogues, ruthless capitalists—who use it to frighten the gullible, uneducated, and stupid into submission and tribute.

Now, I am not saying that myth cannot be abused or misused—in fact, in talking about the myth of the state the main questions are precisely: What is the proper, the right use of the myth? And what is demagogic, obscurantist, tyrannical misuse? But when we use the term myth, we are nevertheless not talking about a superstition or an old wives’ tale. We talk about something that is real, rational, and true: the symbolical expression of an experience common to all men.

The radical change in the connotation of the term means a radical change in basic philosophical concepts and beliefs and, above all, in the concept of human nature. It’s a shift from a philosophy that sees man as reason, with the rest of his being—body, emotion, experience—either as an illusion or a weakness, to a philosophical position which again attempts to see all of man, that is, to see a being.

The myth, as even the extreme eighteenth-century rationalists saw, deals with experience. It deals with what we know, not with what we can deduce or prove. Experience is not reason; it is experience. To the Cartesian rationalist and to his successor, the German idealist philosopher, reality, truth, and validity existed only in reason, and reason could only be applied to what was in reason to begin with. There was no bridge from the truth of reason to the illusions and phantasma of experience. Experience was not just nonrational; it was irrational. And the myth was worse: It was a lie.

Every myth attempts to present