Globalization

In the Ted Talk, Richard Baldwin stated that “future globalization will be about things we do, not just things we make”. What does it mean? Do you agree with him about this predicament? Any other thoughts?

Advancements in transportation and communication are key drivers of globalization. The internet, and subsequently the compounding of internet-based technological advancements, has made it possible to deliver more than physical goods to other nations. "Arbitrage drives globalization," and today, we find ourselves in a position where we can find arbitrage opportunities in not only goods but also services.

Baldwin shared that we should be both scared and excited about the future of globalization. He outlined four steps that will accelerate the next stage of globalization:

• Domestic Tele-commuting: Post-pandemic, the workplace looks different. Many employees are working from home now. Companies are seeing that this is working and have begun downsizing office space. It's only time before they use arbitrage to find discounted talent in other nations to replace their domestic workers.

• Freelancing Platforms: Websites full of web developers, graphic designers, copywriters, etc. compete to earn your business. Fiverr and UpWork are examples of freelancing platforms.

• Machine Translation: Today, it is so easy to translate language. Previously, your service worker working abroad would need to learn your company's native language to conduct business. Google Translate and other services remove this hurdle.

• Advanced Tele-commuting: Telepresence rooms allow a team to log into a virtual board room that mimics face-to-face interactions. Further, Technology that utilizes robots with a digital screen face gives the effect that a remote worker is actually in a physical office.

What's exciting about this?

Competitive people (and organizations) will find opportunities to capitalize on service arbitrage.

What's scary about this?

Those folks (and organizations) who aren't competitive may find themselves in financial distress.

Assessment:

I agree with Baldwin's assessment and believe that his instincts about the future of globalization are correct. This will lead to wealth generation for so many individuals across the globe, potentially reducing poverty and increasing overall wealth for previously suffering families and communities. The flip side of this coin is that those companies who empower that change will, unfortunately, be taking careers away from their domestic workers. This does not suggest that globalization is a zero-sum game- I do not believe in that economic theory. However, there will be an effect on those who lose jobs due to global outsourcing. From a macro view, I can see an increasing wealth gap at the local level. Companies will become more profitable, and individual contributors will have less income unless they pivot. And sadly, in my observation of human nature, I recognize that most are reactive rather than proactive, resulting in a potentially grim future for many.

What else will be different about globalization in the future? What key technologies will shape globalization 3.0 and 4.0?

Today we find ourselves exiting globalization 3.0 and on the cusp of entering globalization 4.0. In globalization 3.0, we found that trade grew to a third of the U.S. economy and over half of the world's economy. This period utilized advancements in transportation, communication, and reduced trade restrictions to drive the commerce of physical goods.

Jason Inch shared a thought-provoking concept surrounding globalization. He stated that the future of globalization would see the "convergence of all technology" and a sinofication of culture. Generally, globalization has increased cultural awareness across the world of many cultures. The prevailing culture at the moment is the American culture. He suggests that elements of Chinese culture will prevail beyond what we have seen with the U.S. in other nations. He reminds us that "world powers" are cyclical, and I tend to agree. I would have fully believed his assessment a few weeks ago, but today I am uncertain. Whether or not the world will see a sinofication of the Chinese culture will depend on how the Chinese real-estate crisis unfolds.

Globalization 4.0

The key technologies that will drive this era are artificial intelligence, 5G technology, 3D printing, e-commerce, and digital services (as explained in the previous response). Threats to globalization 4.0 will be any destruction of the infrastructure that allows these transactions to occur, namely cyberattacks. This is a considerable risk and will ultimately disrupt progress. Further, post-pandemic, we have witnessed the shortcomings of our global supply chain. I anticipate we will see more NearSourcing in the future to mitigate the risks of outsourcing the production of goods. Lastly, I must mention negative globalization. The climate crisis has led to governmental regulation across the world. However, not all countries acknowledge the crisis. Within globalization 4.0, a factor of consideration will be how trade occurs between countries with differing climate stances.