From the March 1999 issue of Entrepreneur

In ancient times, prophets foretold the future. In modern times, management gurus predict trends--in business, that is. But few forecasters have had the influence of husband-and-wife futurists Alvin and Heidi Toffler.

In 1970, the pair sent shock waves around the world with their prophetic international megaseller Future Shock (Random House). It foresaw an increasingly consumerist society worldwide in which everything would be disposable, leading to difficult cultural changes including the disintegration of family relationships and the erosion of faith in government and big business, while the masses would be empowered by personal computers. The Tofflers forecasted the end of the hegemony of the three television networks by what was then termed the EVR [electronic video recorder] (now VCR) and cable TV--indeed, Ted Turner credited the Tofflers with giving him the idea for CNN. The duo predicted everything from commercial cloning and the dissolution of the Soviet Union to the breakup of AT&T and the trend toward working from home.

The Tofflers followed their first book with bestsellers The Third Wave (William Morrow) and PowerShift (Bantam Books), and participated in studies on everything from education to war. They've been invited to confer with world leaders, from Presidents Reagan and Bush to Mikhail Gorbachev, Indira Gandhi and China's reform party leader, Zhao Ziyang. In 1995, then House Speaker Newt Gingrich put their latest book, Creating a New Civilization (Turner Publishing), on the required-reading list for fellow representatives, along with the Declaration of Independence and The Federalist papers.

Although the Tofflers say projecting the future can't be based simply on current trends and that any number of chance elements make a variety of futures possible, for three decades the world has listened to their predictions. We asked them to peer into their crystal ball and give us a reading on the first few decades of the new millennium.

Entrepreneur:What are the fundamental differences between a Second Wave society, which we're in now, and a Third Wave society, which you say we're moving toward?

Alvin Toffler: The Second Wave society is industrial and based on mass production, mass distribution, mass consumption, mass education, mass media, mass recreation and entertainment, and weapons of mass destruction. You combine those things with standardization, centralization, concentration and synchronization, and you wind up with a style of organization we call bureaucracy.

In the Third Wave civilization we're moving toward, the primary factor of production is knowledge. We're customizing not only products but also services, markets and the media. The entire system becomes more diversified, complex and fast-changing.

Heidi Toffler: The industrial model is based on economies of scale: The more units that are produced, the cheaper they cost. With CAD/CAM [computer aided design/computer aided manufacturing], it became possible to produce one-of-a-kind variations at almost zero extra cost. In a way, we're returning to the First Wave, when artisans produced items one at a time, but now we can do it with high tech. Now you can go on the Internet and feed in your measurements and have clothing made just for you. Labor, land and capital are being replaced by information as the basis of the economy.

Entrepreneur:What is the mindset business owners need to have to succeed during the transition?

Heidi: Expect the unexpected, and look for constant change.

Alvin: Demassification is the best friend of entrepreneurs today. Consultants and writers who tell entrepreneurs what the trends are going to be generally do so by extrapolating from what has already happened. But we're living in a revolutionary moment, so trends are often upset. They discontinue, explode or even reverse themselves. Trend projection is the weakest way to find out what could happen. It doesn't tell you about countertrends or why things are happening. We use sophisticated models of social change that [evaluate] the interaction of political, social environmental and other factors with business--factors most economists and even many entrepreneurs ignore.

Entrepreneur:What industries will flourish during the next decades?

Alvin: Computers and everything related to them, obviously, since this will be an exploding, if extremely competitive, field for a long time to come.

Biotechnology is another. No one believed us when we talked about cloning animals and possibly humans, and we now know the pharmaceutical companies and a lot of biotechnology [firms] are working furiously in this direction. This will impact our health-care system.

Heidi: The flaw in straight-line projections for health-care costs is that they don't account for cures developed biogenetically, which could cause costs to decline. I think an area where there will be tremendous growth is home health care and elder care in general, as well as services beyond health needs, from walking dogs to mowing lawns--services which individuals or microcompanies could provide.

Alvin: Education is another field where you can expect a vast number of entrepreneurial opportunities for niche ideas on how to encourage better learning. The current factory system is going to crack, no matter how strong the teachers unions, bureaucracies and some parents resist, because it is so out of sync with what the emerging economy and society will require.

Another sector where there should be many opportunities is in the environmental area. We have real problems and must develop ways to cope. And you don't have to be a big corporation to participate.

Heidi: I would also point to opportunities for local delivery. The Internet will demand alternatives to the current system [of product delivery].

Alvin: I was just in Japan at a multibillion-dollar company that started out as a small service firm and now has a hundred different small businesses. They're very creative in finding extremely small niches. While I was there, they bought 16,000 small trucks for $3,500 each, so you can see that a delivery service using something like that would be very feasible.

Entrepreneur:What can the government do to encourage the emergence of the new economy?

Alvin: The accounting and tax system needs to be changed from the current one that favors high capital investments--buying big machines that are depreciated over a long period of time--while providing no recognition when you buy brains. The current system doesn't help small businesses or information-intensive businesses. Your computer is obsolete long before it's been depreciated.

Entrepreneur:How can entrepreneurs help bring about those changes?

Alvin: You need to bring together information-intensive companies to confront the problems faced by small business in the emerging economy. The Net is a great tool. You can get data to support your position and invite others with similar problems to join you.

Entrepreneur:What do you see happening in Japan and China?

Alvin: Japan is divided between those who want to focus on Asia and those who recognize that their economy is global. This administration made a big mistake by focusing our foreign policy relations with Japan almost exclusively on trade. We ourselves have undermined the pro-American Liberal Democratic Party (LDP). We pressured the Japanese to open their borders to Toys "R" Us and chain stores, threatening the livelihood of the 70 percent of the Japanese economy that is small business and a primary support for the LDP.

Japan has to completely rethink its political system, which is very feudalistic--barons who gather money for their followers.

Entrepreneur:What about Mexico?

Heidi: We supported NAFTA, and if it works out, the theory is that it will be good for both [the United States and Mexico].

Alvin: We've argued that our biggest national security problem is Mexico. There are tremendous fissures in that society, with near-guerrilla warfare in some areas and a government so corrupt, it's threatened with being taken over by drug lords. If Mexico explodes, the violence is likely to spill over into our Southwest, possibly fomented by other countries for anti-American reasons. We need to be less provincial and help build a decent Mexican economy for our own good.

Entrepreneur:What is your outlook for energy?

Heidi: At one time, there were strong incentives provided by the government and utilities for using solar power. Now it seems we're back to waiting until a crisis occurs because we have so much coal, oil and gas.

Alvin: We haven't yet seen the benefits of electrical deregulation [or the emergence of] consumers who will push for choice--what I call a more informed electricate.

Entrepreneur:What are you working on now?

Alvin: We're helping build a multimedia company called FutureNet. We decided not to come out with a book in 2000. We want to let the chaos settle down, so we probably won't [write a book] until the following year.

Entrepreneur:You're referring to the Y2K crisis?

Alvin: Among other things. As Kevin Kelly [executive editor of Wired magazine] said: "It will be a disaster but not Armageddon." Probably like a couple of Hurricane Andrews.

Heidi: It's a perfect illustration of man's inability to think ahead. But coming out with a book a year later than some might expect doesn't make much difference when you're always 10 or 20 years too early.


Scott S. Smith writes about business issues for a variety of publications, including Investor's Business Daily.