"I liked this product so much," he said, "so I went out and bought the company." Listening to him, I thought how out of the mainstream we are in Manila.
"Charles," I responded, "when we like a product in Manila, we go out to buy the phone."
I stored this in my mind as an amusing tale until I heard Dr. Lester Thurow, professor of Management and Economics at the Massachusetts Institute of Technology, who was in Manila for a series of talks organized by Asia Society and the MIT Club. Dr. Thurow warned how vital it is for business and countries to have access to knowledge especially as we enter the third industrial revolution with the world moving from an industrial era based on natural resources into a knowledge era based on skills, education, and research and development.
"Countries need to gain control of knowledge streams to maximize their wealth just as firms seek to control knowledge streams to make themselves profitable," he said.
Dr. Thurow spoke about how innovations in the past have destroyed the very existence of business models and national economies. Chile, for example, used to be one of the richest countries in the world as the raw material source of gunpowder until a synthetic one was invented in Germany. The music industry is currently in danger of economic extinction because young people can download music from the Internet. Even the stringent anti-piracy laws have not been able to curb the onslaught against the industry. Imagine what will happen to oil-producing countries when low cost, and clean alternative energy sources are discovered?
He spoke of how governments need to change their roles from being like an airport controller who decides who can land and invest in the country, into an airfield runway builder who tries to make his runway so much better than other runways to attract as many investors from going elsewhere. Governments need to have a "clear selling proposition" supported by infrastructure and security, so that investors with technological know-how as well as access to markets will bring knowledge and technology into the economy.
The image of Japanese in suits hunting around with cameras visiting industrial sites in the United States in the ‘50s and ‘60s is long gone. Today, knowledge hunters would hit a dead-end unless information is given willingly through direct investments. Taiwan, for example, had a very clear selling proposition to make laptops and scanners cheaper and smaller. They offered direct investors the best infrastructure and working conditions to attract partnerships, and today make the major part of laptops and scanners sold worldwide.
China is aggressively following the pattern to attract direct investment with the selling proposition of a cheaper product and excellent infrastructure. Dr. Thurow points out that China, with over $500 billion in reserves actually does not need the money. Direct investors bring the knowledge and markets it lacks.
It is very important to read Dr. Thurow’s latest book called Fortune Favors the Bold. He says that globalization requires individuals and societies who are bold enough to look outside of the industrial world to become participants in the global knowledge-based economy. Some people, he says, are very rich, many are very poor and most are in the middle. Countries are not like that. There are only a few countries that are very rich, and many that are very poor. Those in the middle, he says, are either on their way to becoming very rich or very poor.
As we approach the New Year once again, it is time to reflect on whether we wish to drift come what may, or whether we should face our future boldly to develop a clear-selling proposition, acquiring and exploiting technologies and knowledge to compete in global markets. Being the holidays, aside from being the season to be jolly – it is becoming imperative for our survival to be bold.