Monday, January 19, 2009

Book Review: Adventures of a Bystander by Peter Drucker

(I finally ended up profiling Peter Drucker for the course. It is damn hard to profile someone and frankly, this is not my usual style. At some places, I admit, some sentences are contrived and affected. Also, it was a 2700 word essay which I have edited a bit. But despite all that, I think it is a pretty entertaining read and it is my first attempt at newspaper type writing. So ... here it is)

Adventures of a Bystander

Life and Times of Peter Drucker

Peter Drucker is widely considered the “Father of Modern Management” after the publication of the book the “Concept of Corporation” in which he predicted the rise of corporations as the dominant form of organization in the post World War II era. The book borne out of a study of GM also brought in vogue the “Management by Objectives” paradigm. With time he was credited with the predictions such as the decline of the command and control form of management - characteristic of the assembly line approach - and the rise of decentralization. He also predicted the rise of Japan as a modern power and a credible alternative to US. Some of his predictions which came in for criticism such as his assertion that top management pay should never be more than 20 times that of rank and file appear to bear significance in the light of recent events in the financial services world. Interestingly, Drucker predicted the decline of the R&D system in the US characterized by the creation of a number of PhDs, post-doctorates and the competitive research grant process. There is little data to support that prediction and the American R&D system continues to be the most envied in the world.

Given his phenomenal predictive power and status as a thinker ahead of his time, the objective of this essay is to glean insights from his autobiography “The Adventures of a Bystander” to explain his subsequent success in life.

The context under which Drucker grew up is vastly different from ours. He grew up at a time when formal degrees were optional. When Drucker was researching on GM in the early 1940s, he got access to biographies of everyone of the senior management easily except one. He figured they were hiding something about him and when quizzed it turned out that the person in question had possessed a PhD. Apparently everyone else had risen from the level of clerk or mechanic and it was considered de rigeur to rise to a top position without “manly” experience! Drucker’s career involved a lot of transitions which would be hard to imagine today. After finishing high school, his first big job was with the Daily Frankfurter General Anzeiger. There he rose quickly upto the post of senior editor, partly due to the fact that a whole generation had been wiped out due to the First World War. He did a part time doctorate in Law while at Franfurt. Increasingly repulsed by the rise of Nazism he decided to move to London. There he found a job with a merchant bank. This experience helped him financially but more importantly it earned him some good connections, but after some time, he decided to move to the United States. His first shot to fame came with the publication of the book “The End of Economic Man” in which he alerted the American audience to Hitler’s Final Solution.

He brought out his next book while a faculty at a place called Sarah Lawrence. In the book “The Future of Industrial Man” he recognized the increasing role of corporations. After joining the faculty at Bennington University he was looking to write an indepth analysis of a company – from the organizational structure to the operations. When he approached industry, he was rebuffed by suspicious executives. His break came when GM approached him to do a book. The book “The Concept of the Corporation” laid the foundations for management as a modern discipline. It also made him a consultant to many top businesses, launching a separate career for Drucker.

Some themes emerge from this. It is no doubt that Drucker’s growth was characterized by the written word. However, he was not a writer of fiction. The interesting thing is that Drucker’s interest lay in human affairs, how humans behaved in the structure of institutions that are imposed upon them. However, that neither fits economic theory nor does it fit political theory. So unknowingly, he ended up creating his niche – management – which did alienate him from both the fields. It is tempting to speculate on why he thought the way he did. Drucker grew up in a Europe that was still debating on how society should be organized. Young men were still pre-occupied with debates over the superior ideology – Communism, Socialism, Fabianism etc. Therefore, when Drucker came to America and looked at American society, the notion of the corporate as an alternative to these ideologies would have occurred. However, to develop into the formal system that he eventually managed, required ability.

The title of the book itself is an insight into a defining characteristic of Drucker – that of the detached observer, questioning, pondering but rarely judging. The chapters in the book are named after people who shaped his life at various stages of his development. Drucker narrates his story through their influence on him. These influential personalities range from his grandmother, to friends of his parents, to men of fame such as Henry Luce (The publishing moghul who founded Time and Fortune) and Alfred Sloan (The CEO of GM for more than 30 years)

What is surprising is that even at a young age Drucker shows an emotional sophistication far beyond his years. While describing the bizarre antics of his grandmother who was the source of many family jokes, Drucker alone is able to go beyond the mocking and perceive the underlying value system that led her to function in that way. On reflecting about it, he realizes that much of her “goofiness” was due to her stubborn insistence on following an outdated value system in a world that was in a state of flux. However, the fact that it was outdated did not mean it was wrong or funny. On the contrary he suspected a deep wisdom and grace behind that value system that people of his own generation lacked and sorely needed.

There is a pattern to the people he admires. Drucker shows a tendency to admire strong and independent personalities. His heroes are eccentric, strong willed, acerbic, rebellious but always genuine and honest to the point of hurting themselves. He speaks of Dr. Hermann Schwarzwald, a prodigious civil servant known to his family. Hermann or Hemme as he is referred to was a crippled Jew with a bitter tongue, who rose to stratospheric heights in the closeted Austrian bureaucracy. Hemme was also incredibly eccentric. Drucker tells an interesting story. Being a Jew, crossing a certain threshold in the services required a discrete conversion to Catholicism. Hemme steadfastly refused even after a letter from the Emperor. But Hemme’s genius was undeniable; hence the requirement was removed expressly for him. After he got the post he crusaded that Jews must come to the post only after ridding themselves of the Jewish spirit! (Hemme considered himself a Confucian!) Drucker accepts these seeming contradictions but again manages to go deeper into a person’s psychology. He argues that Hemme’s behavior was entirely consistent. He rejected the Emporer’s request because it just discriminatory. On the other hand, Hemme himself disapproved of some cherished Jewish values! This aspect is crucial to understanding his success as a management thinker. Ultimately, beyond all the fancy analytical tools developed today, business is about human beings – aspirations, needs, emotions. Going beyond the superficial and understanding the unstated and contradictory human yearnings is key to understanding management and this is precisely what Drucker took out of his experiences.

As mentioned earlier, he looks for models from various spheres of life and is open to learn from anyone who fits this mode. One of Drucker’s earliest jobs was at a merchant bank in London. There he met Ernest Freedberg, an old fashioned private banker who enjoyed nothing more than a good deal, yet maintained the highest ethical and professional standards. There was an incident when Drucker had to check a claim of 80,000 pounds (in 1920s) against his firm. He found that his firm was indeed on the wrong and wrangled a deal for paying damages upto 50,000 pounds. On getting back, Freedberg quizzed him on his actual estimation of the liabilities. When Drucker admitted that the firm was indeed morally responsible for the 80,000 pounds, Freedberg phoned the firm, apologized for the mistake and offered to pay the full sum as damages.

Freedberg also brought Drucker in contact with some remarkable personalities. Drucker speaks of Uncle Henry, owner of a retail chain in the United States, whose lessons on human behavior and business ethics profoundly shaped Drucker’s sensibilities. There is a story of how retail chain owners across the region found that store clerks were pilfering merchandise. While other store owners brough security agencies, Uncle Henry figured there was something wrong with the compensation system and changed that to deal with the problem. Such thinking is of course common place in management today and one can speculate that Drucker learnt these lessons from such personalities. However, Uncle Henry never went to a school all his life. There is also a Dutchman called Willem Parboom whose abilities to spot deals and implement them was genius. Drucker speaks of how Parboom approached the Austrian minister when a crucial industry was going down and offered to restructure the ailing industry, which he did with great aplomb! Parboom too never had any formal education, but he possessed a quick mind and enormous drive.

It is no doubt that exposure to such strong personalities at a formative age shaped Drucker’s character extensively. What is amazing is his extraordinary access to such people. Is that an accident? On the hand, Drucker appears to have unfailingly impressed every employer he worked for. On a number of occasions he was chosen as an envoy or a representative by his ex-employers. Even factoring for modesty, Drucker does not come across as an academic prodigy. Definitely his family’s standing did provide the introduction, but Drucker appears to have built upon it with great success. It is hard to ascertain what exactly that quality was that helped Drucker to gain his employer’s confidence.

One theme that comes up repeatedly in the book is that of learning relevant lessons from history. In this respect Drucker is uniquely gifted in that he possesses a wide reading. His understanding of history and context is genius. For example, even as a young man barely twenty, Drucker gets into an argument with a law student over what can be called the “Great Man Theory”. The law student (who was later to become Henry Kissinger’s mentor) contends that foreign policy is supreme and hence requires a great man at the helm. Drucker counters with the following remark by Benjamin Disraeli. Disraeli commenting on Bismarck’s diplomatic triumph in the Congress of Berlin says that*:

“Poor Germany; Bismarck is old and cannot last long. And then they will try to fill the giant’s shoes with a lieutenant of Marines who will either be timid and not dare do anything or [he would be] so besotted as to believe he can play Bismarck. Either way Germany will be lost”.

From this, he points out that every great foreign minister be it Bismarck, Richelieu (France) or Metternich (Austro-Hungary), though celebrated in their times, sowed the seeds of the decline of their countries simply because their successors could not match up to their brilliance.

I am of the following opinion. Some skills of life can be taught. Arithmetic, writing, bookkeeping can be mastered by diligence, hard work and a set of good learning tools. Some other things like conflict resolution, attitude towards failure and success, attitude towards money arise from the surroundings viz. parents, relatives and peers. Based on this one can feebly speculate on the source of his intuition.

Peter Drucker was born into the lap of education and intellect. Born to a family of civil servants in Vienna, Drucker was surrounded by personalities of immense gifts. His father was a senior civil servant in first the Austro Hungary empire, then in the Austrian Republic. His mother was one of the earliest women graduates in Vienna, passing the exam for the university at a time few women attended university. Drucker narrates of an incident when his mother was the only woman sitting in on Freud’s lectures which consisted of many references that may embarrass a woman. It was undoubtedly an elite progressive environment that he grew up in.

Drucker also grew up in a Vienna where Freud and Jung were discussed on dinner tables. In these conversations, the scientific method was dissected to bits. This was also a time of extreme ferment in the world of Physics. Drucker speaks of a conversation in his house between Oskar Morgenstern and a professor of psychology by name Karl Buehler. Oskar Morgenstern later was to lay the foundations of game theory in a seminal work with Von Neumann. It was this upbringing that gave him the depth to formalize a very fuzzy field such as management.

From such a background, one would expect superior academic and intellectual qualities. It is hence not surprising to see Drucker’s predisposition to intellectual pursuits. Also his brother became a doctor. However, it is interesting that Drucker chose this path and his brother chose the professional path. This gives rise to the age old debate between nurture and nature. While it is of no doubt that being in an intellectually stimulating environment ensured intellectual interests, it does not explain why some people choose to employ their gifts in one field and some in others.

In the preceding paragraphs we saw some aspects of Drucker’s personal development that could have contributed to his success. However, the real question of interest is: If we speculate some reasons could be the secret of his success, will mimicking them ensure success? Can every child growing up in an elite progressive intellectual environment become a Drucker? One can say that children growing up in such an environment are likely to do better simply because we would expect that such an upbringing emphasizes professional discipline. But what about the other Druckers all of whom were in the academic world but yet did not reach this fame? Peter Drucker undoubtedly possesses an intuition that is superior. How does one develop wisdom and intuition? Is it then a by- product of your environment?

In my opinion, the fundamental values that helped Drucker were curiosity and ability to deal with multiple viewpoints. He speaks of personalities very different from himself. Yet, Drucker was able to not only tolerate the difference; he was able to look at the good points. These are lessons every manager must learn. Interestingly, a mind interested in many things can also be accused as one lacking focus, and it is one that he admits in the book. Also, Drucker seems more interested in the moral than the details of the story, and his characters are too perfect and heroic. At times Drucker has been criticized on his interpretation of data. However, what remains is that his unrelenting questioning, polished by a sophisticated upbringing made him uniquely suited for a role such as an advisor or consultant.


*Pg 154, Adventures of a Bystander, Allied Publishers Pvt Limited, First Indian Reprint 1980

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