4 Things Toffler Got Wrong -- And Why it Matters Today

Even the best futurologists get certain key things wrong. Looking back, their mistakes are more revealing than what they got right. They teach us above all the continuity of human experience -- and paradoxically they highlight the enormous force of the things that do change -- how incredibly strong they have been to break free of the gravitational pull of historical inertia. Let's look at the four vital things that Alvin Toffler got wrong in 1980:

The Decline of the Market Economy

Toffler believed that industrial society split apart production and consumption and turned the world into one gigantic market. "The human race has been busy constructing a worldwide exchange network -- a market -- for at least 10,000 years. In the past 300 years, ever since the Second Wave [industrialization] began, this process has roared forward at very high speed. Second Wave civilization 'marketized' the world. Today ... this process is coming to an end."

Toffler proposed that the economy consisted of two sectors. "Sector A comprises all the unpaid work done by people for themselves, their families, or their communities." Sector B was the market economy. Industrialization expanded sector B enormously, at the expense of Sector A. But this, he said, was about to change:

The enormous energies previously poured into building the world market system becomes available for other human purposes ... [there] will flow a limitless array of civilizational changes. New religions will be born. Works of art on a hitherto unimaginable scale. Fantastic scientific advances. And, above all, wholly new kinds of social and political institutions.

... third wave [post-industrial] civilization turns out to make many features -- decentralized production, appropriate scale, renewable energy, de-urbanization, work in the home, high levels of prosumption ... that actually resemble first world societies.

'Prosumption' was the word Toffler coined for the reunion of production and consumption -- as when consumers do some or all of the work of production. To some extent Toffler was observing a real trend that has continued -- for example, DIY, self-help, the extension of self-service into many industries (for example, the IKEA furniture chain, where customers select, transport, and assemble their own furniture). We can see the same trend in the recent development of "roundtables" for entrepreneurs and the marketing industry, in particular, where professionals help and learn from each other.

But Toffler was completely wrong to think these moves would occur largely outside the market mechanism, or start to supplant it.

Partly that was because he got his history wrong. He saw pre-industrial societies as largely self-sufficient -- the 'manor' would grow food that the people on the manor would themselves consume. Yet the great breakthrough, that started developing in the fourteenth century, was the end of this miserable system of feudalism, and the growth instead of what historians call 'money agriculture' -- that is, production for the market. This great innovation came from the cities that grew enormously in size, independence, and inhabitants, from the fifteenth century onward. Traders organized markets -- literally, weekly markets for meat and vegetables, in market town squares -- and encouraged those who owned land to bring their produce to market. This was the start of modern prosperity, leading to rapid acceleration in wealth, helping to trigger the process of industrialization that hugely enlarged national and world markets.

As economist Adam Smith observed in 1776, what drives the increase in wealth is specialization, and specialization is limited by the size of the market. Building a bigger market enables every region and every country -- and nowadays, every firm and every individual -- to concentrate on what they can do best. Trade creates enormous wealth, because it decreases the cost of producing an item and accelerates the development of better products through specialization and innovation.

In fact, since Toffler wrote in 1980s, we have seen an enormous expansion in the size of the market. Toffler estimated that when he wrote only a quarter of the world's inhabitations were truly in the market system. Today, with the collapse of communism and the progressive inclusion of China, India, and many other countries in the world market economy, perhaps three-quarters of the world's people are within the system. This is directly associated with economic growth and the progressive reduction of poverty in the world.

And in the leading economies -- the only ones that have experienced his "third wave" to any strong degree -- the rise of "prosumption" has enlarged rather than limited the size of the market. People who read self-help books have created an important new segment of the publishing industry. And the rise of self-help has not doomed the therapy industry -- people do it themselves and also use outside help. The rise and rise of self-service -- supermarkets, gas stations, IKEA, budget airlines, Dell -- has been associated with the rise of new corporations and a greater extension of the market, as the cost of goods and services fall.

Whenever there is innovation, the market expands yet further. Prices fall, the quality and range of goods and services increases, and consequently the market gets bigger still.

Markets are one of the main engines of progress, and not just economic progress. Increased specialization can mean increased freedom, tapping the creativity of every individual, enabling us all to create something unique and useful to other people. Without specialization and increased market size we would not have had cheap clothing, inexpensive cars, progressively lower food costs, the Beatles, the personal computer, the internet, the iPod, or Oprah.

The Decline of Cities

Toffler predicted "the shift of work from both office and factory back into the home". Consequently cities would become less important. This has been a familiar, romantic theme of futurologists for a long time. The only thing is, it never happens. More people live in cities than ever before -- and this is one of the longest running trends in history, stretching back to when we emerged from our caves.

Why does the predicted eclipse of the city never happen?

One answer is that as world markets increase, more and more people in the developing world gravitate to cities, as industry increases. Industry has always been an urban phenomenon. There might be less industry today in the rich countries, as it shifts to places with lower cost labor. But there is more in places such as China and India, and their cities are mushrooming, just as those in England did in the last 300 years.

But cities in the rich countries -- those of the post-industrial world -- are still growing too. Why is that?

It is because cities are where we learn. We learn to perfect a particular form of expertise. Why does Hollywood, a tiny area of space in the world, dominate its movie industry? Why is finance concentrated in cities such as London, New York, Frankfurt, and Tokyo? In theory, since markets are now digital, financiers could be anywhere in the world. But they concentrate, because they network, they learn from each other, and they need to be in the city. So it goes. Most of the world's aircraft are made in Seattle or Toulouse. Most high fashion comes from Milan or Paris. Most innovation in software and high-tech comes from Silicon Valley and Seattle.

Look, I prefer to live in the countryside. But wealth creation is urban. As economist Robert Hall says, a city and boom are the same thing, one in space, the other in time. And most learning still happens face to face. The city is where people meet and compound knowledge.

Dramatic Political Change

"In Second Wave societies," Toffler wrote, "voting to determine the popular will provided an important source of feedback for the ruling elites ... For a de-massified Third Wave society the feedback systems of the industrial past are entirely too crude ... Instead of seeking simpleminded yes-or-no votes, we need to identify potential trade-offs with questions like: 'If I give up my position on abortion, will you give up yours on defense spending or nuclear power?' "

Of course, this has not happened. Electoral reform has been slow, and, ironically, sometimes rejected by the voters, as when UK electors recently voted against proportional representation, which would have increased representation for minorities.

Yet this is a different kind of error by Toffler. It wasn't that he got the trend and logic wrong. There is no doubt that political parties everywhere are becoming less popular, less in touch with the general population, and that politicians are less esteemed that before. Fewer people join parties. Political opinion is more volatile, and new parties can spring up, flourish, and then decline as quickly as they grew. Our voting systems are out of joint with reality.

But that doesn't mean that change is easy or inevitable. The truth is, nobody has yet devised a better way of doing things. And it is not all the politicians' fault either. The media are making it hard for any self-respecting person, who values a degree of privacy and does not have the hide of a rhino, to enter politics and serve the people. There is unfinished business in history.

Sweeping Replacement of One World Civilization By Another

With a simplistic view that ultimately derives from Marx, Toffler made three critical assumptions. He assumed that one economic civilization replaces another. He assumed that one economic system would eventually triumph everywhere around the world. He also assumed that economics determines culture. All three assumptions are wrong -- yet it is all too easy for us to fall into the same trap.

The metaphor of one wave sweeping away another implies that each successive system, after a struggle, replaces the earlier system. Arguably that was largely the case with industrial society replacing feudal and agricultural society. But with the Second and Third Waves -- with industrial and post-industrial society -- it is far from clear that is what is happening. Within any one advanced nation -- the US or UK for example -- only part of society has so far become "post-industrial". Though the manufacturing sector is much reduced, it still exists. This is even more the case in Germany, whose successful economy is still largely industrial. And to the extent that the richest countries are post-industrial, this depends, in large part, on the 'export' of industrial tasks to the developing world -- somebody has to make the iPods and tablet computers. For sure, more and more of the value in advanced economies is in product conception, design, and branding, but products still need to be made somewhere. Also, and oddly easy to overlook, there still exists everywhere a huge government sector, still organized on "industrial" and bureaucratic lines -- the lines that the Third Wave is meant to sweep away -- and showing less imagination and creativity than ever.

Rather than think of waves, we should think of strata or layers. The feudal economy was based on land. Then there developed another tiny layer on top -- originally that of the church and universities. With the emergence of independent city states, and the proliferation of traders, craftsmen, and artisans, another layer was added, eventually paving the way for the Industrial Layer that emerged from 1760 onward. Finally, from the 1950s but especially after 1975, we have seen the emergence of the last Layer, what I call the Age of Mass Imagination, or the Personalized Economy. So now we have at least four layers -- Land, Thinkers, City Merchants, Industry, and Imagination, with new layers perched on top of the earlier ones, benefitting as well as challenging them.

But note that industry, the Second Wave, has grown enormously since Toffler wrote. He said that industrial civilization in 1979 comprises roughly a quarter of the world's population. Today that proportion (including the developed world) is well over half, and the absolute number of people touched by industry has gone up from about a billion to nearer four billion. So it is clear that the Third Wave, far from snuffing out the Second, has helped it extend.


When you think of the transition from a land-based economy everywhere in the world to one that incorporates commerce, industry, and the products of imagination, what is remarkable is how little conflict the transitions have caused. The reason is that, on the whole, the new Layers helped the old. For example, landowners have been enormously enriched by industry and by post-industrial developments, that have raised prosperity and the number of people competing for somewhere nice to live.

But, of course, conflict in the world has not stopped. Conflict arises not primarily because of new economic systems, and the wealth they bring, but because of non-economic considerations -- nationalism, tribalism, racial tension, religion, and ideology. As trade, industry, and imagination increasingly percolate into the nations of the world, we may hope that conflict will abate -- in general, developed countries no longer fight each other. But different patterns of thought and values are not going to be smoothed away by economic progress. This delusion, first promulgated by the Enlightenment thinkers of the eighteenth century, and then refined by Marx, is still held by many thinkers -- for example, enthusiasts for globalization such as Thomas Friedman. I'm all in favor of the extension of global trade and co-operation, but to expect it to bring universal peace as well as prosperity is to ask too much.