Trading tasks

The Economist looks at a model of International Trade

Ricardo illustrated his insights with the example of Portuguese wine trading for English cloth. But some trade theorists think this metaphor will no longer do. Indeed, two of them—Gene Grossman and Esteban Rossi-Hansberg, of Princeton University—published a paper* last year subtitled “It's not wine for cloth anymore”.

Ricardo, it seems, did only half the job. He described the first of two “great unbundlings”—as Richard Baldwin, of the Graduate Institute of International Studies in Geneva, has put it in a recent guide†. Trade in wine, cloth and other goods allows production to be distanced from consumption. Countries do not need to grow grapes to enjoy the fruit of the vine; thanks to trade, they can transform cloth into wine instead.

But in Ricardo's world, a country must still take care of all of the separate tasks required to finish the goods it makes. In a country of pinmakers, to take Adam Smith's seminal example, someone must still cut, draw and straighten the wire; fashion and affix the head; then whiten and sheath the finished product, if any pins are to be made at all.

In the second great unbundling, production is spliced and diced into separate fragments that can be spread around the globe. Pin-whitening is done in one country; wire-cutting in another. Some theorists call this the “vertical disintegration of production across borders”. Thankfully, Messrs Grossman and Rossi-Hansberg have a more felicitous phrase: “trade in tasks”.

and continues

The new breed of models paint globalisation with a much finer brush. (It is high-resolution globalisation, Mr Baldwin says.) International competition plays out not just at the level of the industry, or even the firm, but right down at the level of individual tasks—assembly, packaging, data entry—that cut across whole sectors of the economy. Moreover, in a break with most traditional models, the new theories do not take the tradability of things as a given. For Messrs Grossman and Rossi-Hansberg, the ease of trading a particular task is a matter of degree not kind; and it is a variable, not a constant. Hence tasks that seem safe from foreign competition today may not be so tomorrow. Finally, the tradability of a task might bear no relation to the amount of skill it requires.

thanks to Creativity Exchange

Comparing GDP

Carl Størmer writes:

When seeing Norway's GDP in the context of this map, one realizes why Norway often is one of the last countries U.S. companies consider when expanding to Europe.

Norway might be an unattractive market when considering expansion because the market is so small and as a result there is little domestic competition. This has enabled local players to build monopolies or duopolies with substantial entry-barriers in many industries. Furthermore, the government has sheltered the domestic market against international competition by adding a hefty import tax and inconvenient delivery methods on goods purchased outside the country, rendering international online merchants at a disadvantage when competing on price and convenience.

On the flip side, if you manage to establish your business here, you can overcharge your customers and get away with horrendous customer service. The average Norwegian customer is not used to good service and competitive prices. Online merchants are slow. Recently it took four weeks before I received a book shipped to me from a local merchant. On a recent trip I recently purchased shoes for our kids in the U.S. The selection was superior, and the price: 1/4th of what the local Norwegian merchant was charging.

On the other hand, we have managed to build world-leading clusters in energy (oil, hydro) and shipping. We have inexpensive good, engineers and one of the most advanced markets in the world for mobile content (i.e. ring-tones etc.), and we are six hours ahead of the U.S. East-Cost, making us a good place to farm out work; you leave instructions at 6pm EST and have the work finished at your desk in Manhattan the next morning at 9am. This would give a Norwegian developer or project worker ample time to finish a good days work.

Creative Think adds this explanation of the graphic

It's an "economic production equivalence" map. The country whose name is inside of each state has a GDP that is approximately the same as the state in which it is placed. For example, California and France have approximately the same GDP.

global business etiquette

Escape from Cubicle Nation writes on
How not to be a cultural knucklehead in a global business world

In presentations and meetings:

1. Don't use baseball analogies when talking to a global audience. People around the world certainly know what baseball is. But it is not nearly as prevalent as football (aka "soccer") in most countries of the world. So if you are going to use a sports analogy, use one that most of your audience can relate to. I have felt very annoyed when hearing an executive address a global audience and use metaphors like "hitting it out of the park," or "throwing a curve ball." The rub is not that the global audience will not understand, but that the executive did not take the time to think of a metaphor that is universally applicable.
2. Stay away from "country insider" metaphors and analogies. My favorite is when a presenter talks about a business idea and says something like "but that is just Motherhood and apple pie." If you are American, you will nod your head in agreement since you know that this means that the concept is wholesome and prevalent. But if you are not American, you may scratch your head and wonder how mothers and pies relate to business.
3. Speak clearly and enunciate. You don't have to slow down until you sound like a kindergarten teacher, just make sure you enunciate your words. This will benefit not only your audience members who speak English as a second language, but everyone else as well. A tip: if you smile while you talk, your words will come out clearer.
4. Accompany your talk with written notes. I have experienced the agony and ecstasy of operating in another language. The first time I walked into my all-French language Swiss classroom as a high school exchange student , I felt like my brain was turned on hyper-speed. I tried to grasp philosophy, chemistry, history and calculus in French, and my head almost exploded. Even a person very fluent in English as a second language will have to work extra hard to make sure he understands what you are saying in a presentation. So provide written notes as backup which will allow your non-native speakers to fully grasp the materials, and review them after the meeting.
5. Avoid potentially offensive metaphors. I once attended a meeting which included Native American participants. Another non-Native participant said to illustrate his point: "We have too many Indians and not enough chiefs." His face did turn three shades of red once he realized that it was offensive to those in attendance. It is best to banish these kinds of metaphors from your vocabulary, as frankly they are unbecoming in any context.
6. Plan for a level of interaction appropriate for the culture of your audience. The first time I taught a class in Europe, I felt like I was a comedian playing a really hostile comedy club. I tend to be a very interactive presenter, and frequently ask the participants questions. Each question dropped like a lead weight in the room, and I was met by cool stares. At the break, I checked in with a colleague, and was told that for this group in Amsterdam (with participants from England, France, Germany, Holland and Switzerland), large group presentations were often more formal, and people would often not speak up until they got in smaller groups. They looked to the instructor to be well-prepared and knowledgeable, not to act as a talk show host.
7. Ask people what they prefer to be called before you introduce them. Americans have the wonderful quality of making friends quickly and using informal terms with each other. But you might want to ask Prince Charles how he prefers to be referred to, before introducing him as "My Main Man Chuck."
8. Include social events that meet the needs of all global participants. A favorite pastime after many American and European business meetings is to go drinking. Some of your participants may not drink alcohol for personal or religious reasons. Some will feel fine going to a bar and drinking a non-alcoholic beverage, while others may feel very uncomfortable. So try to schedule a mixture of activities that will meet the needs of all participants.

In electronic communication:

* Include your time zone in your email signature in the form of "GMT +/-" Here in the U.S., we are used to using time zones such as Pacific, Mountain, Central and Eastern. But outside the U.S., not everyone is as familiar with which states fall in which time zone.
A handy global measure is to use the Greenwich Mean Time (GMT) as a standard. In 1884, an international conference agreed to adopt the Meridian of Greenwich, England as the starting point for reckoning longitude and to divide the world into 24 time zones of 15 degree longitude each. (Amazing how the center of the earth happened to fall in Europe, huh? The after-effects of colonialism is another topic for another day.) So if you live in Arizona like I do, my time zone is GMT-7. If you live in Tokyo, your time zone is GMT+9. This can make scheduling global meetings much easier. (I have a handy "World Time Zone" map to decipher GMT times from Streetwise Maps.)
* Include a salutation. Email culture in general tends to be shorter and less formal than traditional written communication. But many cultures have a more formal written protocol than in typical email style. So the first time you approach a new business partner in Japan, make sure you don't say "Hey Jim -- read that you are doing interesting things with green technology. Call me and let's discuss. -Joe" A more appropriate greeting might be "Dear Mr. Tanaka," or even better, "Dear Tanaka-San."

thanks to Seth Godin

Welcome

Welcome to my blog about the global economy for travelers, ex-patriots, international students, and anyone else interested in how the world works.