Peter F. Drucker symposia continuing question-and-answer session on changes in business, finance and financial institutions, interest, banking, middle class consumption, American vs. Japanese industry, the importance of government to U.S. prosperity, education, and the state of U.S. society today
Dean of the Stern School of Business at NYU, Dick Rust, begins the symposia discussing the topic of the morning’s lecture and introducing Peter F. Drucker, who recounts his experience on the topic of changes in business. He declares that a financial supermarket has not occurred; instead, what has happened is that financial streams have been resegmenting, and the old definition of finance has been rendered obsolete and no longer works. He goes on to state that there is a continual pronounced shift away from interest being the basic way to pay for money, to other ways, which are combinations of interest and fees. The biggest financial question that executives will face is probably the future of the retail market, which has enlarged more than anyone could have conceived of twenty years ago. It is not, however, where most financial institutions look for it--it is not among the rich, and the profile is 55+ with 70% women. Drucker calls them the affluent middle class--people who have basically led a very modest and frugal lifestyle, and, in late middle age, will not change their lifestyle. He states that the biggest final question is the capital structure of tomorrow, specifically of the medium-sized company. There are limited partnerships in the finance world, and there is no way in which they can be taken over. Building all kinds of structures that finance themselves differently will be the result of the unbelievable amount of money that is available, and there remain hindrances to financing a big company through financing its individual parts. Increasingly, looking to top management, especially of very large companies, will be key to understanding how one manages one’s capital structure for competition. Drucker observes that such topics are the kinds emerging in European discourse that are up for grabs, and that every single government is pushing for national solutions to the questions raised by these concerns. The next five to ten years will be the crucial time for answering these questions. He goes on to contend that the banking system is going to move everywhere toward fee-based operation, and augurs that the long period of ascendancy of the common stock is over and will not come back, simply because there are so many other ways of financing a business today. Local banks must therefore think through whether they want to be the nucleus of a regional bank or they want to be specialists. Additionally, people need to think through how they get paid for what, because old methods of payment/compensation simply do not work anymore or are becoming frail at the edges. Finance, he concludes, will increasingly be concerned in dealing with information, rather than money, because money is too plentiful to be anything but a commodity. The product will, therefore, increasingly be information. Drucker then takes a question from the audience on the Japanese system of business, and argues that the interests of industry and the industry of government no longer move together in Japanese society. On the American front, he states that there are three very big problems confronting the economy, namely, the focus on consumption and opposition to capital formation; the U.S. accounting system, which is obsolete; and major international trade blocks. Drucker goes on to respond to a question concerning the Japanese dealing with consumerism, and whether their cost of capital will begin to rise and they will become more like the U.S. in time. He states that, on the contrary, the Japanese will get more Japanese, but in a different way, and that the cost of capital will not go up. The Japanese plan fosters bigness and monopoly, and this trend is not going to change. In replying to the next question, Ducker states how one of the real surprises in the last three years is the fact that in America, the Keynesian belief has been disproven. With unions present, the U.S. is at a very critical point in learning how to continue its financial and business prosperity. He goes on to note that, basically, the U.S. government policy has been the greatest engine of business. The U.S. has always had the fewest impediments to small and medium-sized businesses, and argues that the splintering of the banking system has been a great advantage in that respect. In business relationships, banks, Drucker says, are essentially always more interested in the development of a business than its profitability. Drucker then notes that his best book has been a distinct failure, and that, in the long run, the takeover boom will facilitate a reconsideration of what investment is for. There are two legal positions that the courts have always interpreted as narrowly as possible, that is, the labor contract and the role of the trustee. He moves on to address a comment on how to change the educational system as a means of impacting change and adopting a new theory of commerce, stating that he is more hopeful on education than most people are because there has been a return to parental interest in schools. Drucker proceeds to note that there is a very serious middle management crisis in America--middle managers have lost their presence in top management. He concludes responding to a question on the supposed link between youth and successful industry, stating that, industrially, Sweden is the most aggressively industrialized nation, in spite of its older population, and that assumptions suggesting nations with younger populations are more thriving is not substantiated by the evidence. Drucker concludes the question-and-answer session observing that fields and sectors in America have not become more conservative. The U.S. has, on the contrary, become a venturesome society.
Drucker, Peter F. (Peter Ferdinand), 1909-2005 New York University New York University. Graduate School of Business Administration Change Supermarkets--Finance Interest Fees, Professional Middle class Middle managers Middle age Partnership Management Banks and banking Stock exchanges Money Information Information revolution Japanese Japan--Economic policy Government policy Consumption (Economics) Accounting International trade Monopolies Keynes, John Maynard, 1883-1946 Business United States. Supreme Court Rust, Dick Resegmentation Affluent people Affluent middle class Capital structure Capital formation
Source
Original recording, April 14, 1988; Drucker Archives; Box 68
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