Thursday, December 10, 2009

1st Book Review - 2010 MBA India Trip

THE POST-AMERICAN WORLD
Author: Fareed Zakaria
Subject of the book
There is such polarization today in reporting foreign affairs, that it’s hard to tell the difference between truth and fiction.  The last administration of the United States took some of the most extreme nationalistic positions of any president in our history and created a heightened level of tension around the world, perhaps equaled only by the Cuban missile crisis in 1962. In my view, this was because of a lack of appreciation and knowledge of world history. Fareed’s book, rather than trying to incite nationalistic or jingoistic feelings from the reader, seeks to educate from a careful examination of the historical facts in the interplay between the United States and the rest of the world.  He discusses the events that he believes allowed the rise and caused the fall of different civilizations and ultimately focuses on two of the most vibrant countries currently in the running as a major player in the modern world, China and India.  He charts the course they will most likely take in their rise as an ever greater economic force, and addresses what strengths and traits the United States have that could be utilized to maintain or even improve its current status.  This book is not about the fall of the United States as a world economic and foreign policy powerhouse, it’s about the inevitable “Rise of the Rest”.
Who is the book for ?
This book will most likely find favor with people interested in understanding what triggers countries to act or react as they do with respect to major events.  If the reader is of the neo-con persuasion, they might be disturbed with some of Fareed’s conclusions and extrapolations, but if they are more of a moderate, they will appreciate the fair and balanced view that Fareed takes.  In the first Chapter titled “The Cup Runneth Over” Fareed opines that the level of “wars” in the world has continued to decrease up to the present with the levels now being the lowest since the 1950’s. He believes that the common perception only belies this because you see it every day on the news, minutes after it happens. The other reason is because of the scaremongers on TV and newspapers taking every opportunity to fan the flames of an event to elicit a maximum reaction from the public.   Because economic situations are a primary reason for allowing the support for wars, an improvement in a country’s economic status will decrease the likelihood of a war breaking out.  With the increased stability of the majority of the economic systems in the world and the quicker corrections allowed through improved technology, he believes that the world in general has become a safer place, now, than in the past.  If you want to gain an idea of where opportunities and threats may lay in the world of the future this book may shed some light on the subject.
Wt are the best Attributes?
My favorite aspect of the book was a review of early the history of China.  Although I have been to many of the Pacific Rim countries courtesy of the United States Navy, there was no effort to give sailor a historical narrative prior to arriving in port.  I was particularly interested learning about the Chinese Admiral Zheng in the 1400’s sailing in larger fleets, and better more technologically advanced ships than Columbus had.  One has to think what would have happened if China had maintained its focus on world trade rather than crawl back within a shell for the next 600 years.  This withdrawing of the Chinese expeditions probably allowed and encouraged the creation of the chartered trading company’s of the world and in fact most likely were the key to the origins of our present day corporations.
Another aspect of the book that I enjoyed was the role that geography played in the formation of China.  With the prevalent geological feature of being a landscape of flatlands, it made the job of an army general much easier. There were few mountain passes to impede an army’s advance across the country.   Once a ruler became established, there were few places for a populace to escape to.  This flatland topography also became one of the reasons the Great Wall was built.  There weren’t wasn’t any other way to keep the Mongols out.  
Overall, it was interesting to see the heights of technological feats that had been reached in both India and China but were then lost or forgotten.  This is truly a shame.
What was lacking?
The areas of discussion that  I feel were given the least attention, and that deserved a much larger part in Fareed’s equation for the post American world, were sustainability issues.  The entire paradigm of economic rules might change sooner than some might think because of major climate  events on the earth catching up to us. Fareed gives only a few paragraphs over four pages to the issue of global climate change.  Regardless of whether you think it’s Anthropogenic or not, enough data is freely available to convince me that it’s happening.  What will matter is how the world and more specifically the BRIC countries react to the situation.  In an article by Seth Borenstein writing Associated Press article (click here), he quotes the UN climate chief Yvo de Bor saying that $10 billion to $12 billion a year is needed from developed countries through 2012 to “kick-start” things.  To me this sounds like chickenfeed relative to the events occurring.  With the global average sea level rise of between 0.6 and 2 feet (click here) there will be massive human tragedy unless plans are made to combat the effects.  Just a few of the more notable effects as a result of the rise are  an inundation of low coastal areas, an increased intrusion of salt water into fresh water aquifers, an increase in disease and pests that result in the 1 or 2 degree rise in the temperature, a move northward required for wheat and grain production.  These changes will change the cozy state of mind current civilizations have and will force the world to adapt or to disappear.   
Summation
I think this book has a lot to offer.  I learned quite a bit about what the logic might be behind India’s and China’s plans for the future.  I believe that as they both grow, they both will base their economies on the western theme, but with a different flavor, where they keep their cultural underpinnings.
I already see the effects of both countries branching out and becoming integrated with the western world.  The way China has been dealing with its environmental problems is particularly encouraging.  They have become a world leader in the production of Photovoltaic Solar Panels and have in the past month in Copenhagen, committed to a significant decrease in emissions of 40-50% of GHG per GDP by 2020. They appear to believe that the world needs to start acting proactively to solve problems rather than to wait around with their head stuck in the sand.  India’s strength is the diversity of cultures and the determination of its people.  They, probably more than any other country, need to be aware of the impact that their industry has on it people and their environment.  If they don’t acknowledge and address these problems now, they will become most likely become mired in political upheaval as its population becomes more and more disenchanted with the direction its leaders are taking them.
Every country has to build upon its strengths and work on their weaknesses.  We all have them.  The requirement is to look at the world and see the opportunities and threats and create a thoughtful strategy to take advantage of the opportunities and to combat the threats.  In the business world, the first step in developing a long range strategic plan is to do a SWOT Analysis (Strength-Weakness -Opportunity-Threat).  If all countries did this with the knowledge that the Earth is small and has limited resources, and that their country is a partner with every other country, we would be better off.  This is what I believe the message Fareed Zakaria was ultimately trying to convey in his book.


Friday, November 27, 2009

Who's outsourcing to who?

     If you've ever observed the former CNN commentator Lou Dobb's views on the offshore  outsourcing issue, you'd get the idea that the U.S. was going down the tubes because of offshore outsourcing.  He has even called business leaders who use offshore outsourcing "Benedict Arnold CEO's"
     I think there's a lot of emotion involved in discussions on offshore outsourcing that cloud the discussion. Instead of trying to gain a real understanding of the impact of global outsourcing and  focusing on a strategy to combat the real  threats,  there are calls for more tariffs, taxes and laws against the practice.
     Why is offshore outsourcing considered bad? On a macro scale, outsourcing is good for the economy. Customers and investors drive businesses, and customers demand lower prices and investors demand higher profits. In order to lower their costs, companies outsource non-core activities and tasks to places where they can get the most value for their money. That's the upside.  The downside is that factories that don't adapt advanced manufacturing techniques or outsource themselves will be less competitive, less profitable and may be more likely to fail, then people lose jobs.
     I think the question should be, How can the U.S maintain and increase it's global competitiveness and maintain a low unemployment rate while still outsourcing ? 
     The U.S. is the acknowledged leader in many ways.  In spite of the economic catastrophe that we are in the midst of, the U.S. is still the safest place to invest.  The U.S. is known for the quality of it's educational institutions and it's pace of Innovation.  It is also the acknowledged leader in Information Technology and Biotechnology.   The US is also a huge consumer of goods. This the framework that the U.S. must work within to maintain and increase it's presence in the world economy.
      To maximize a company's profitability, they should focus on their core competency's.  What do they do best?  Where is the most value added?  Keep those skills and activities at home, but outsource where it makes sense.   Companies in India are presently outsourcing to the US on a greater and greater scale following the same reasoning.  The Indian Plug-in EV company Reva is collaborating with the New York automotive parts company to build a plant in New York. The Indian IT company Wipro is finding a greater value added by having software written in the U.S. rather than in India.... Why?  If the contract is U.S. defense related it may be a requirement.  If it's a new concept or interface that's being developed and if it's being targeted for the U.S. market, it's more efficient to have it done in the U.S. than in India.
     I recently attended an MIT sponsored forum in Santa Barbara that discussed the issue of turning research and innovation into a greater economic advantage. I enjoyed and got the most out of a presentation by William Jeffrey, CEO of Hughes Research Lab.  He was the first speaker and set the stage for the rest of the speakers.  He had gathered data and presented charts to show the realities of the state of pure research vs commercial development in the US.  His summation essentially was that we need to have a shared vision in this country of the importance of spending money on pure research and then have the motivation to transfer the innovations resulting from this to products that we need.  He compared and contrasted the "old" serial method of development, publishing, then "casting it out"  to see if anyone liked it enough to commercialize it, to a more focused NRC "Tire Track Model" method where you try to match up applications while innovating and removing the time lags inherent in the "old" methodology.
     In summary,  I believe if we refine our method of turning research into products, focus on our strengths like education, innovation IT and biotechnology, and outsource where it makes sense, the U.S. can maintain and increase our economic advantage over the rest of the globe.