Pankaj Ghemawat

There are books full of thought provoking ideas that are, nonetheless, rather a pain to read. This is one of those. The heart of what made this something of a slog was the way that the many detailed discussions of the data and models felt more like a list than a narrative. That said, the core ideas were worthwhile, and I'll focus on those for the rest of the review.

The thesis of World 3.0 is that we tend to look at the world in fixed ways that aren't particularly useful anymore. The World 3.0 view is a contrast to those other ways and, while I wouldn't say it's completely novel, it's interesting to see the practical implications as worked out by Ghemawat.

World 0.0 was the world of small clans. World 1.0 was the world of large scale, strong, mostly independent political entities (e.g., nations). World 2.0 is the "flat earth" view of globalization. World 3.0 is different from these. Note that while you can look at the past and see one or another of these views as representative, the important part is that they're really more perspectives on how people and nations interact rather than hard and fast descriptions of history.

In the World 3.0 view, the world is globally interconnected, but people, groups, and nations are culturally, administratively, geographically, and economically rooted (CAGE framework). Distance matters. National borders are not impermeable walls nor are we one global society. Economically -- and much of this book talks about economics -- this rooted view yields the idea that market integration is inevitable but regulation necessary. The form that globalization and its regulation takes will be influenced by the CAGE factors of distance.

Despite the many assumptions that we're in a World 2.0 world, Ghemawat points out that there is actually much less integration between nations than one would expect in a flat world, and that that integration varies among the cultural, administrative, geographic, and cultural distances between nations. In other words, a World 3.0 view is useful because it seems to better match observed reality.

I'll give an example of how World 3.0 thinking might influence policy. We tend to think of combating climate change as something that's done either as a purely national initiative or something that needs to be done with the whole global community. The World 3.0 view would instead encourage countries that are close to each other along the CAGE dimensions to form coalitions and strategies based on their shared factors -- shared physical environment, shared regulatory environment, shared standard of living, shared attitudes toward the environment.

Much of the book is a discussion of the various failure modes of global market integration without regulation. This is a critique of both the World 2.0 view -- which often sees regulation as problematic -- and the World 1.0 view -- which often denies the reality of global integration. One of the most useful aspects of this discussion is the ABC model of balancing the benefits of openness against its risks. Instead of having hard boundaries to protect national economies, rely on a combination of alarms, breakers, and cushions. Alarms give warning of problems by monitoring changes in key metrics. Breakers are mechanisms for limiting the exposure of one part of the system to problems in other parts (think circuit breakers). Cushions are backup resources and plans that soften the blow when problems do occur. If you are involved with running technical systems at a large scale, these techniques will likely seem familiar, but such an SRE mindset, as I think of it, is rarely applied to economic activity.

By thinking of each individual and each country as rooted but connected, the World 3.0 view helps find the balance between the isolationism of a view that focuses too much on nations and the cultural indifference of a completely open world. At the same time, it requires much more nuanced analysis of problems to find solutions -- there is no one-size-fits-all answer. Given that the world is a complicated place, that lack of simplicity is probably a good thing.… (mehr)

Since the publication of The World is Flat in 2005, Thomas Friedman has emerged as the leading guru on what we are told is a new globalized world. In over 500 pages of unsourced anecdotes and recounted conversations, Friedman drives home his thesis that technology has created an unprecedented (flat) state of affairs, in which business and capital move around the world, unimpeded by distance and national borders. But is it all really so simple? Not according to professor of global strategy Pankaj Ghemawat, who has little time for Friedman’s book or method. In a revealing footnote, Ghemawat writes, “Friedman’s book is hard to engage with directly, since its 450-plus pages contain no tables, charts, footnotes, or list of references.”

Redefining Global Strategy is divided into two main parts. Part 1 is devoted principally to an exposition of the significance of the author’s thesis that “the current state of the world is one of semiglobalization: levels of cross-border integration are generally increasing and, in many instances, setting new records, but fall far short of complete integration and will continue to do so for decades.” The implication of a semiglobalized world is that there is no textbook for managing global operations. As it has ever been, international business entails added risk, and managers and entrepreneurs have to be able to think strategically, beginning with the question of whether they should globalize at all.

Having demonstrated how cultural, administrative, geographic, and economic differences still matter, Part 2 focuses on what Ghemawat calls the AAA strategies for global value creation:

Adaptation strategies that adjust to differences across countries.
Aggregation strategies that overcome differences across countries.
Arbitrage strategies that exploit differences across countries.

The final chapter of Redefining Global Strategy summarizes and recaps the main themes of the book. Ghemawat emphasizes that doing business internationally requires a strategy, and strategy involves hard analysis—not “playing pinball to the headlines” or reacting to “global bogeymen that don’t have a scientific basis.” The book concludes with a five-step process to help managers begin the process of competitive analysis and strategy formulation in global operations.

Redefining Global Strategy is not a quick read. The author’s intended audience is business leaders and entrepreneurs whose decisions have consequences and therefore are in need of a serious and authoritative consideration of the subject. To decision-makers who prefer to take Thomas Friedman and others like him as guides to the future, Ghemawat has this warning: “Buying into this version of an integrated world—or worse, using it as a basis for policymaking—is not only unproductive. It is dangerous.”1

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1Pankaj Ghemawat, “Why the World Isn’t Flat,” Foreign Policy no. 159 (March 2007): 60.

Published in Regent University Library Link, October 2010
http://librarylink.regent.edu/?p=576… (mehr)