Testimony for US House of Representatives

Committee on Education and the Workforce

Subcommittee on Oversight and Investigations

American Worker at a Crossroads Project

Prof. Thomas W. Malone
Massachusetts Institute of Technology

October 29, 1997

I'd like to talk this morning about some of the results from research my colleagues and I have done over the last decade or so at MIT, most recently as part of an MIT research initiative called "Inventing the Organizations of the 21st Century."

Much of my work has focused on how the dramatic advances in information technology are likely to affect the organizations of the future. I have become convinced by this work that one of the most important implications of these new technologies is likely to be a significant increase in the use of highly decentralized ways of organizing work.

For example, in a recent article,[1] I described why I believe that all the current talk about "empowerment" is not just a fad, but is instead a deep response to fundamental changes in the economics of decision-making. A very important kind of decentralized system is a free market, and I believe that the increasing use of information technology is making markets desirable in more situations than ever before. [2] For example, I believe it is no accident that the recent dramatic increases in the use of information and communication technologies have come at the same time as increases in outsourcing, networked organizations, virtual corporations and other forms of market-based coordination. [3]

To explore the possible consequences of these changes, we have developed scenarios of what it would be like if much of the work done by today's large firms were instead performed by large, but temporary, networks of very small companies and independent contractors.[4] This form of organization is already common in the film industry, for example, where a producer, a director, actors, photographers, and others come together for the purpose of making one movie and are then disbanded and rearranged in different combinations to make other movies. What if this form of organization were common in other industries? For example, what if this were the way we made cars or ran banks?

Some of the impediments to these new forms of organization come from today's government regulations. For example, today's tax code makes it difficult for many part time or temporary workers to be treated as independent contractors, and it makes pre-tax benefits available to employees that are not available to independent contractors.It's not at all clear to me why any public interest is being served by a tax code that favors employees over independent contractors.

In many situations, these new ways of working may have real advantages for economic efficiency and flexibility. But what about the individuals in these highly productive, flexible networks? Where will they go to satisfy the human needs that are satisfied today by large organizations? How, for instance, will they find financial security? Who will provide for their healthcare and retirement? Will they be lonely, working all day with only their customers and suppliers, but never with colleagues?

Once we began thinking about these questions, we realized that there was an obvious--but not widely appreciated--possibility for answering them. What if, rather than relying on an employer or on the government to fill these needs, individual workers joined independent organizations whose primary purpose was to provide stable "homes" as the workers moved from job to job? We call these organizations "guilds" by analogy to the craft associations of the Middle Ages.[5]

For example, the Screen Actors Guild in Hollywood already performs some of this function today. As much as 30 percent of its members' base pay goes to the Guild benefits fund, in return for which members get full health benefits, generous pensions, and numerous professional development programs.

Imagine an extended version of this where members paid a fraction of their income to the guild in the good times, in return for a guaranteed minimum income in the bad times. Of course, this is a form of unemployment insurance. But unlike with conventional unemployment insurance, your fellow guild members would have an incentive to help you find work, to help you gain the skills needed to be productive, and to exert social pressure on you if they felt you weren't trying.

These guilds could also provide places (both physical and electronic) for learning and for socializing with other guild members. And membership in a guild might give people the sense of identity that many of us get today from our positions in large organizations.

There are a number of organizations today from which guilds like these could grow: professional societies, unions, college alumni associations, temporary help agencies, religions, neighborhoods, regions, or even extended families.

This scenario about guilds illustrates the point with which I'd like to leave you: As the title of the "American Worker at a Crossroads Project" suggests, I believe we are at a historical choice point in determining the kind of world our children's children will inherit. If we make these choices based only on the models of our industrial-age past, we will almost certainly miss the true opportunities before us. In our work at MIT, we are trying to think about those choices as deeply, as creatively--and as wisely--as we possibly can. I hope this committee, and all the rest of us, can try to do the same.