In 2007, nGenera Insight began writing about what we call “hothouse innovators”—a new breed of global enterprises in Asia, South America, and Eastern Europe that are being built under fertile conditions for accelerated growth, including: A vast pool of low-cost, and increasingly highly-skilled labor; a rapidly growing group of wage-earning domestic customers with few preexisting expectations or brand loyalties; active government involvement in the private sector; and greenfield IT infrastructures that lack legacy complexities.  By exploiting these conditions, global hothouse innovators are developing business models that allow them to move up the value chain, compete with firms in mature markets, and threaten the profit structure of incumbents in almost every industry.

The Economist article touches on all of these elements, but expands the argument by introducing additional factors worth discussing. Specifically:

• Superior positioning for M&A: Rapid growth has made resulted in cash-rich enterprises with access to highly-developed, public and private capital markets. Additionally, large conglomerates benefit from consolidated ownership which helps diversify risk and increase flexibility. The combination of these two forces is allowing large emerging market companies to use M&A not only to reduce cost or achieve economies of scale (which they have in many cases), but rather as a way to acquire name brand recognition, skilled workers, and global distribution channels.
• “Frugal” innovation: We tend to think of innovation as “more bells as whistles,” but this mentality is base on the notion that consumers are going to shell-out more money to get the latest-and-greatest gadgets. In contrast, hothouse innovators are dealing with a population with highly-constrained budgets. In many cases, innovation is aimed at the bottom of the pyramid and focused not on growing wallet-share but rather turning non-consumers into first-time consumers. With low margins, the emphasis is on volume and utility; “new and improved” really means “simpler and cheaper,” as well as “tough and easy-to-use.”
• New Western investment: Think of it as fertilizer for the hothouse. Companies like Cisco, General Electric, Microsoft and many others are investing heavily in emerging markets, and China and India specifically. As The Economist report notes, “Companies in the Fortune 500 list have 98 R&D facilities in China and 63 in India.”

To understand how truly competitive some of these emerging companies are, it helps to study some leading examples. Consider the following, pulled from nGenera’s previous research on the subject:

• Foxconn: Taiwan’s Foxconn, a once lowly parts manufacturer, is challenging the traditional value chain model by designing and assembling entire products¾often leveraging new innovations and intellectual property to achieve this. In 2007, Foxconn earned $2.6 billion on $38 billion of revenue; its top five competitors combined lost $1.6 billion on sales of $57 billion. Foxconn’s success was bolstered by a record high 81,820 patent applications in 2007; 49,007 of which were granted. By comparison, IBM – the leader in US patent applications –at the time held approximately 40,000 active patents worldwide (out of over 2 million granted since 1974).
• ICICI Bank: In less than 10 years, and from a standing start, India’s ICICI Bank ICICI has become India’s second largest retail bank, leading in every retail product market that it targets. Using e-lobbies and customer self-service, it drives over 70% of its transaction volume through electronic channels in a country where Internet and mobile phone penetration are below five percent. The company’s IT systems—which are generally based on servers instead of mainframes—are free from complex legacy issues and cost less than one-tenth of developed-country benchmarks. Moreover, the bank operates on 90-day business plans and established its UK subsidiary in only 65 days.
• Tencent: Although few people outside of China have heard of it, Tencent QQ, China’s premier integrated platform for social networking, media, and mobile gaming currently boasts 400 million active users (the same as Facebook) and 2009 annual revenues of over USD $1.8 billion (more than double the between $600 and $700 million 2009 revenue estimated for Facebook). Perhaps the most remarkable figure around Tencent’s financial model is that over 75 percent of revenues stem from value-added services (paid for by users), not advertising. The company’s virtual currency, Q-Coin, which is used to purchase products (such as shows, online “pets,” games, and music) has become so widely accepted that it is also being used to purchase physical goods from other online retailers.

But opportunity is not without risk. These waters be uncharted and filled with pirates. As The Economist notes:

“These markets are among the toughest in the world. Distribution systems can be hopeless. Income streams can be unpredictable. Pollution can be lung-searing. Governments can be infuriating, sometimes meddling and sometimes failing to provide basic services. Pirating can squeeze profit margins. And poverty is ubiquitous. The islands of success are surrounded by a sea of problems, which have defeated some doughty companies. […] This combination of challenges and opportunities is producing a fizzing cocktail of creativity. Because so many consumers are poor, companies have to go for volume. But because piracy is so commonplace, they also have to keep upgrading their products.”

What this means is that not only are emerging market companies benefiting from hothouse conditions, but they are also operating in markets that pose fairly substantial barriers to entry for Western firms. At a macro level, what we’re seeing is not only a new wave of innovation, but also a global redistribution of wealth. The Economist says, “The emerging world is enjoying the most spectacular growth in history. Its share of global GDP (at purchasing-power parity) increased from 36% in 1980 to 45% in 2008 and looks set to grow to 51% in 2014.” Another source, Worldmapper, provides a visual representation of how this might play out:

World wealth: 1990 to 2015
(map area shows relative wealth)

So, is the West doomed? Not by a long shot. But, we probably have a lot to learn from what’s going on in emerging markets. Established companies have to rethink innovation in a way that focuses equally on features and branding, as well as cost, simplicity, volume, distribution, durability, and accessibility. Enterprises can also develop strategies for open innovation that broaden the scope for disruptive ideas and increase the potential for high-yield opportunities.

6. The world needs better governments.

Some governments in Central America and Africa are just holding on and many are dysfunctional.  But governability is becoming an issue for G20 countries as well.  One leader said the US is on the brink of being “ungovernable.”  One Chinese executive responded thusly when asked to defend his country’s lack of democracy:  “So we should adopt the American system where lobbyists run everything and nothing happens?”

Democracy was still seen as an unstoppable force but in many regions of the world it is becoming stalled, and in some cases losing ground.  Basic democratic institutions are at risk and in danger of failing part due to the economic crisis in poor countries.  The best predictor of democratic survival is per capita income.  In some countries portions of the government have been captured by interest groups. Other non-democratic countries are proving competitively stable and economically healthy.  And the current economic crisis shows that national governments and domestic regulation are inadequate to deal with the challenges of the global economy.   There is also danger of protectionism and isolationism.

7. It turns out the internet DOES change everything

The much-discredited phrase from the dotcom period is not just geek speak.  The Internet and Social Networks were central to many of the discussions here.  The digital age seems to be coming of age.  I participated with CEOs of most of the important social networks in a session called The Power of Social Networks. It got a lot of buzz at Davos.  A few minutes into it the session we solicited questions from Facebook.  6,000 questions appeared in first 2 minutes.

The growing consensus is that new business models are emerging in every industry and throughout society.  I’ve argued that social networking is becoming social production and that a new mode of production is emerging – changing not only how we make software or encyclopedias but physical goods like motorcycles.

Most leaders love that a web company – Google –  is taking on China. The circumstantial evidence that the China-based hacking of Google was conducted by authorities looking for information about activists was the straw that broke the camel’s back.  Talking to Google execs I’m convinced they not going to back down.

8. Girls, women and gender. A sea change is underway.

There was lots of buzz about women’s emerging purchasing power, known as the Power of the Purse.  The expected worldwide increase of women’s income by 2013 is $5.1 trillion, which is greater than China’s expected growth of $3 trillion for the same period.

Deep interest in the so-called Girl Effect, i.e., investing in girls offers the biggest ROI in the developing world.  In African countries female illiteracy is almost a third higher than that of men.  But every year of schooling increases a girl’s future earnings by 20 percent.  And by earning more and influencing how dollars are spent, women would acquire a stronger voice in all aspects of their lives.

Although women are becoming stronger financially, they are still very weak politically.  Countries should be more aggressive in finding female candidates for public office, and look outside the regular channels. But increased financial and political power brings responsibility. Woman could be key in refocusing our political and economic efforts away from consumerism.

9.  We need new measures of progress

There is growing agreement that GDPs and GNPs are flawed tools for measuring the health of country, and we should instead emphasize the idea of Gross National Well-Being or something similar.  Just as some companies have moved to “triple-bottom line” reporting for their impact on society, many economists argue that GDPs and GNPs measure activities that are detrimental to society and ignore activities that are beneficial.

A pandemic will increase drug sales and visits to doctors, thereby driving up GNP.  Volunteer work or work in the home is not recognized as contributing to GNP.

There is no lack of research and creativity on this issue, as some governments and academics have developed a wide array of yardsticks to more accurately capture how well and healthily a country is growing.  The key now is to have these new tools recognized as legitimate and encourage their widespread adoption.

10. A new big idea.  The Global Commons.

Like a park in a village we need new global parks in the global village. Some of the global commons areas are well-recognized, such as our atmosphere, oceans and space, but there are less obvious areas that exist, or should be created, such as know-how concerning sustainability

Conventional wisdom says you should control and protect proprietary resources and innovations – especially intellectual property – through patents, copyright and trademarks. If someone infringes your IP, summon the lawyers out to do battle.  That’s often the wrong approach.  Contributing to “the commons” is not altruism; it’s the best way to build vibrant business ecosystems that harness a shared foundation of technology and knowledge to accelerate growth and innovation.

A good private sector example is when more than a dozen pharmaceutical firms abandoned their proprietary R&D projects to support open collaborations such as the SNP (single nucleotide polymorphisms) Consortium and the Alliance for Cellular Signaling.  Both projects aggregate genetic information culled from biomedical research in publicly accessible databases. They also use their shared infrastructures to harness resources and insights from the for-profit and not-for-profit research worlds. These efforts are speeding the industry toward fundamental breakthroughs in molecular biology – breakthroughs that promise an era of personalized medicine and treatments for intractable disorders. Nobody gives up their potential patent rights over new end products, and by sharing some basic intellectual property the companies bring products to market more quickly.

One overarching theme at the conference is the confidence that young people have such great potential. Obviously we have a lot of work ahead of us if we don’t want to pass on a deeply damaged planet to our children.  At the final session at Davos, we heard from six inspiring young people on stage on their hopes and ambitions.  There were more than a few tears in the audience.

1. The state of the world is not good.

The theme of Davos was Rethink, Redesign, Rebuild, which may sound a bit grandiose to some people. I doubt many attendees think this now. The world clearly needs fixing.

Figures cited at the Forum show we’re a long way from being out of the woods on the global recession. Jobs are and will continue to be a huge issue. It is estimated the unemployment in the word jumped by 50 million during the recession, and the working poor increased by 200 million.

But the financial meltdown and recession are arguably symptoms of a bigger systemic crises and deep institutional failures. There is growing recognition that many of the organizations and institutions that have served us well for decades, even centuries, are no longer able. Many of the pillars of economic and social life have come to the end of their life cycle. In 2009, the American auto industry — the epitome of the industrial economy — collapsed. The upheaval is now spreading to other sectors — from the universities and science, to entertainment and media, to government and democracy. The continuing collapse of many newspapers in the United States is a storm warning.

Many other serious problems loom. Lack of access to fresh water is a catastrophe for humanity, as 2.8 billion (or 44%) of the world’s population already live in high water stress areas, increasing to 3.9 billion by 2030. In a world of growing capacity, global poverty is getting worse. Ten children die of hunger every minute and a third of the world’s population fester in slums. Almost everyone, especially the scientists at Davos is deeply troubled by climate change. We need to reinvent out energy grids, transportation systems and reindustrialize the planet. And we’re running out of time.

As Bill Clinton said to a few of us at a cocktail party, “The world is too unequal, unstable, and unsustainable.”

2. Everywhere there are new collaborative models emerging to solve global problems

Our systems of global cooperation are not rising to the many challenges we face. The global warming conference in Copenhagen has become a metaphor for failure.

I believe the Forum itself is an example of the global multi-stakeholder cooperation that is picking up where nation states and formal institutions left off.

The global humanitarian response to the Haitian earthquake is showing us what is possible. The 7.0 magnitude earthquake not being just a Caribbean island crisis, but a world crisis. Millions of people and thousands of institutions have responded in non-traditional ways. They are donating their time, money, goods and services. Charitable organizations such as the Red Cross received donation of tens of millions of dollars within days by using new technologies such as texting, Twitter, Facebook and YouTube. Social media has become the pre-eminent tool to connect people around the world, and help empower people become active participants in relief efforts.

There are 100 million people on Facebook Causes – the biggest application on Facebook. These are not just people talking to each other. They are now organizing activities in the physical world. I heard of dozens of examples at Davos.

3. There is a profound rethinking of the financial services industry and its role in society.

French President Nicolas Sarkozy put it well: “The banker’s job is not to speculate, it is to analyse credit risk, assess the capacity of borrowers to repay their loans and finance growth of the economy. If financial capitalism went so wrong, it was, first and foremost, because many banks were no longer doing their job. Why take the risk of lending to entrepreneurs when it is so easy to earn money by speculating on the markets? Why lend only to those who can repay the loan when it is so easy to shift the risks off the balance sheet?”

The mood at Davos was widespread: Banks need to be reined in, the sooner the better. US banking executives used to be the stars of Davos. Now they are a low-key, humble and dour looking group. Last year at Davos everyone was in a degree of shock. This year, a better term would be “fed up.” Fed up with banks that are “too big to fail,” with government bailouts, with the human costs of this crisis and with an industry that basically got out of control. For some CEOs the crisis warrants a critical re-evaluation of market capitalism.

4. Executive pay, especially for bankers, needs fixing.

There was a very strong sentiment that the issue of exorbitant executive compensation needs to be corrected. The biggest targets of discussions were bankers and other architects of the financial crisis. Many heavily damaged their own firms, some to the point of bankruptcy, paralyzed the commercial credit market for tens of thousands of companies, and today are not able or willing to loan money to entrepreneurs. To set aside $billions for bonuses just after they had been bailed out by the government was viewed by almost everyone as unconscionable. Even those banks that didn’t need a bailout cannot justify 8 digit compensation packages.

5. Sustainability is an idea whose time has come. Business is moving from talk to action.

As one executive put it: “It’s no longer about the Green Economy; it’s about the Economy.” Sustainability is the central issue many businesses face.

A few short years ago, sustainability was buried in a company’s PR department and it was primarily a matter of spin. But then governments began forcing certain reporting and behaviors, and the corporate issue became compliance. Then sustainability became a matter of competitiveness and cost reduction, by capturing efficiencies such as reducing waste and energy use. CEOs everywhere at Davos said we’ve now arrived at the point where sustainability must be integrated into the business strategy — what is a business, and how it does it operate and relate to the rest of the world.

We’ll see if they walk the talk.

I’ll post themes 6 – 10 tomorrow.

With the conspicuous exception of global warming, Harper acknowledged that many challenges face the world, but told delegates that the two most appropriate arenas for discussion and decision making are the G8 and the G20.  He described the latter as “the world’s premier forum for economic cooperation.” And each country should be guided by “enlightened self-interest” and a better “attitude.”

But the mood in Davos is that the planet is facing urgent, complicated, 21^st century problems, and we need to craft 21^st century systems to develop the answers. We should involve all of our planet’s best talent in the solution-seeking process, including the private sector, civil society and individual citizens.

Doubtless Harper placed emphasis on the G8 and G20 because this year’s meetings will occur in Canada and he is the Chair. But that doesn’t mean he should be indifferent to the enormous contributions that could be made by others, or closed to the exciting new approaches to solving global problems.

Following last year’s World Economic Forum at Davos, many delegates went on to participate in the Forum’s Global Redesign Initiative in meetings around the world. The Initiative brought together diverse stakeholders to develop fresh solutions to the many challenges facing our small and fragile planet.  Much of this year’s Forum was devoted to discussing the proposals developed by the Initiative.

The Initiative itself was driven by the belief of Forum members that our international collaborative processes are tired and too constrained to meet current needs.  In Davos, the failed Copenhagen global-warming conference was frequently cited by delegates as a metaphor for the inadequacy of existing processes. To be sure, no one is suggesting that nation states do not need to sit down and hammer out accords. But many Davos delegates believe that such meetings, while necessary, are by themselves insufficient to grapple with the thorny issues confronting us.

Davos delegates feel all issues on the global agenda should be addressed in a systemic, integrated and strategic way, and are frustrated many government leaders aren’t embracing this view.

Had Harper come a day earlier, he would have heard French President Nicolas Sarkozy deliver a withering critique of how the planet’s issues are managed today. “From the moment we accepted the idea that the market was always right and that no other opposing factors need be taken into account, globalization skidded out of control,” Sarkozy said. Many systems in the world, including capitalism, were in serious need of reform.  “Each of us must hold the conviction that the world of tomorrow cannot be the same as the world of yesterday.”  A text of Sarkozy’s remarks can be seen here.

While Harper promotes the notion of enlightened self-interest, that got us nowhere in Copenhagen.  . And the irony of Harper’s remarks is that many here think one country with needing a better “attitude” on climate change is Canada. And it is an uphill battle for Canada to turn around its reputation as “the dirty old man of the climate world.”

In fact Harper further damaged Canada’s reputation on this issue, and undermined his approach to global cooperation in a panel discussion after his speech. When questioned about Canada’s position he said that countries needed to take into account the economic costs of being green.  To be sure Canada, as an energy producer has more complex issues than European countries. But some in the audience were disturbed by the remark.

Liberal MP Scott Brison said to me that Prime Minister Harper was “the only leader at Davos who didn’t understand the opportunities for economic growth and jobs in becoming a green nation. Environmental laggards will become economic laggards in the emerging global carbon-constrained green economy.”

Yes the G8 and G20 meetings will be important and they may even make some progress on climate change.  But today there are collaborations involving millions of people, along with governments, private companies and civil society organizations that are actually doing something about climate change. Government leaders need to listen to fresh thinking about how to harness this power, rather than relying on old approaches that have the world stalled.

Wikipedia goes to great lengths on it’s NPOV (Neutral Point of View) policy page to explain how and when an article can be considered “neutral:”

The neutral point of view is a means of dealing with conflicting verifiable perspectives on a topic as evidenced by reliable sources. The policy requires that where multiple or conflicting perspectives exist within a topic each should be presented fairly. None of the views should be given undue weight or asserted as being judged as “the truth”, in order that the various significant published viewpoints are made accessible to the reader, not just the most popular one.

This sounds great, but I’m concerned that the Wiki system as a whole might have considerable bias built-in. First, consider what Wikipedia is. It’s the “free encyclopedia that anyone can edit,” but not anyone does — instead, most prefer just to read (it’s the 7th most visited site online). Just as visiting the site is an opt-in process, so is editing it; the community that creates and polices content is very much self-selecting. This is where I think the problem arises.Something is only neutral within the context of its community. That is, an issue is neutral (in my mind at least) when it exists perfectly balanced between the centres of gravity of two or more conflicting views. Given that the population of people who edit Wikipedia is necessarily drawn from the people who read Wikipedia — but also have the inclination, be it technological or ideological, to edit the site — there is the concern that the editing community has a different makeup with regards to their opinions on issues than the reader community, and the world at large.

Wikipedia attempts to address this by saying that in order for something to be cited as a reference, it needs to refer to a reliable source — one that has a reputation for fact checking and integrity. There are two problems with this:

1. “Reliable sources” have bias built in too. Al Jazeera is reliable to one subset of people, FOX News is reliable to another. Fans of either source would be offended to hear that the other is placed on the same level as their own.
2. The community gets to decide what sources are reliable (because who else is there to, Wikipedia is a community based effort).

The first problem doesn’t have any easy solutions; individual bloggers may be telling the truth with every word they write, but until they have a sufficient following and track record, there’s not really any reliable metric to decide if what they’re saying is admissible. Wikipedians could do research to bolster one-off claims found on blogs, but this practice would be awfully close to original research, something the site strives to avoid.

The second problem is simultaneously easy and hard to solve. The more people edit Wikipedia, the more accurate the alignment of “neutral” to the Wikipedians and “neutral” to everyone else becomes (unless of course people with a specific agenda flood into the site en-masse to try and shake things up). But this is counterbalanced with the issue of getting people involved. Not everyone wants to edit Wikipedia, and not everyone who wants to knows how.

Interestingly, I read this result as meaning that Wikipedia is consistent from first to last. In principle, the more people edit Wikipedia, the better it gets; similarly, the more people edit Wikipedia, the more its version of neutrality becomes one that reflects the world at large. It’s a fantastic resource, and if we want it to continue to improve, at some point, we’re all going to have to get involved.

(A special thank you to my friends Danielle, Eve, and Josh, with whom I had the conversation that resulted in this post. Also of note is that XKCD, did, in some measure, address this long before we did.)

“The lesson that capitalist countries needed to combine the efficiency of markets with the broader values of community … did not come to them easily. It took the calamitous collapse of the Victorian era of globalization — into worldwide war, followed by extreme left wing revolution in Russia, extreme right wing revolution in Italy and Germany, militarism in Japan, the Great Depression, unprecedented financial volatility and the shriveling up of world trade.”

The quote is from John Gerard Ruggie, Director of the Center for Business and Government at Harvard University. His point, which he originally made in 1982, is nicely summarized in a lecture Ruggie gave at the LSE in 2002 (see transcript). He talked about why a new era of globalization requires a new social contract, suggesting that unregulated free markets could spawn another series of cataclysmic events if adequate social and environmental protections were not somehow embedded in the global economy.

Apart from making the obvious point that history repeats itself, what’s fascinating to me is that if one starts counting from the end of the Cold War our recent spell of global free market capitalism really only survived a couple of decades before crashing down around us. Even more fascinating will be to see what kind of new political orders emerge as a result.

I believe in Ruggie’s general principle that the efficiency of markets must be combined with the values of community to sustain a viable global society. I am no longer convinced that the institutions that established the historic social bargains that underpinned post-WWII prosperity (i.e., national governments, business associations, and organized labour) are the rights ones to help rebuild the global economy and fashion a new form of sustainable governance.

Although society appears to lack serious alternatives (unless you believe that the G20 is a serious alternative), I do believe two things: 1) that markets abhor a vacuum and 2) that governmental inertia will be the mother of invention. In other words, the fumbling efforts on the part of governments and international organizations to impose regulations on unregulated global markets will help stimulate the creation of new governance models and I won’t be surprised if many of the new innovations are driven by political entrepreneurs acting outside of the traditional realm of government. The unfortunate reality may be that things will need to get a whole lot worse before mainstream society recognizes the flaws inherent in our current arrangements and invests in building these new institutions.

Some of the issues that challenge today’s regulators include the sclerotic pace of rulemaking, increasing international interdependency, the lack of transparency in industry and government, the corrosive influence of “junk science” and money and an insufficient capacity for oversight.

After dismantling or circumscribing centralized regulatory agencies in the 1980s and 1990s, I think many governments will find they are ill equipped to deal with these challenges. In most sectors, deregulation was a cue for regulated industries to start designing and enforcing their own regulations. Decentralized rulemaking was intended to help make regulation more responsive to the needs of industries that were evolving quickly and becoming increasingly global in scope. Governments were to be the “regulators of last resort”—stepping in only after self-regulation was deemed to have failed. But in practice most instances of pure self-regulation have deficiencies and governments (for the most part) have proven unable or unwilling to take swift action when market failures became evident.

The upshot: without transparency, oversight and accountability, self-regulation is clearly inadequate. At the same time, the speed, interdependency and complexity of today’s world makes a return to centralized rulemaking and enforcement increasingly implausible. All this makes me think that the kinds of organizational innovations that make the Linux community, twitter and wikipedia remarkable could help regulators address some their challenges.

The big opportunity initially may be to foster greater citizen or stakeholder participation in monitoring and enforcing regulations that already exist. Naturalists and recreational users could be enlisted to help document abuses on public lands, just as individuals and organizations around the world are able to bring human rights abuses to global attention using new channels like YouTube or Winess’s Hub.

But citizens and other stakeholders could also help design and promulgate new rules, particularly where there are gaps in existing legislation. The consumer advocacy movements that currently police the social and environmental performance of industry are a good example. More governments could eventually sanction initiatives like these, while insisting on mandatory corporate sustainability reporting and other forms of transparency would bolster the efforts of citizen monitors.

The technological foundation – including RFID, satellite imagery, cheap personal video recorders and other Internet-connected devices – already exists to distribute the power and authority for designing and enforcing regulations to a broader network of participants. And I think that in the right niches and within certain communities of interest there is ample desire on the part of citizens to play a role in enforcing the rules they care about. I’m not sure that same enthusiasm exists within government and industry, which is why my preliminary research suggests that most new forms of participatory regulation are emerging completely outside traditional regulatory bodies.

I’ll be following up this post with a series of nascent examples. If participatory regulation is of interest to you or if you know of other examples, I would love to hear about it.

Like many observers of the international scene, I find it frustrating to watch international organizations like the United Nations fail to shake-off the sclerosis and bureaucratic inertia that have marred attempts to get anywhere near meeting the millennium development goals by 2015. As my colleague rightly pointed out, there was so much optimism surrounding the Rio Earth Summit in 1992–a time when the United Nations had a much more positive public profile and, seemingly at least, the clout to make things happen. No more.

Described by my colleague as “closed and insular,” the UN is quickly losing its convening power and ultimately its relevance in addressing the global challenges that matter. Its power and authority have been usurped; by the US’s unilateralism on one hand, and by a multitude of more nimble and innovative stakeholder networks that have emerged to fill the leadership void—networks that compete with the UN and other international organizations for attention, loyalty and funds. If there was ever a time when the UN needed to embrace open source principles, this is it.

To be fair to the many good people who work hard for the UN, they are hardly operating in a benign environment. Eight years of neo-conservative attacks and unfavorable news media coverage have denigrated its image and perhaps even eroded its confidence. It’s also fair to say that making consensus decisions with 192 members on the board of directors is hardly a walk in the park, particularly when some of those board members are not very sympathetic to your cause.

Perhaps, in the final analysis, it won’t matter if the UN cedes leadership to new global “organizations” and networks so long as someone can get the job done. But my sense is that the job will not get done without the involvement of an international body that represents the world’s national governments. So in the spirit of renewing the United Nations, I’m offering up the following five six ideas for starters:

1. Hold a series of large-scale digital conversations (along the lines of Habitat Jam) on the each of the millennium development goals (MDG) to help develop new ideas, restore confidence, and engage the public. Set up an Ideastorm for each MDG to continue the dialog.
2. Start building a virtual citizen assembly with representatives from each country. I don’t see this as a “world parliament” as others have suggested, but as more of watch dog whose principle responsibility would be to hold agencies within the United Nations system accountable. See Campaign for the Establishment of a United Nations Parliamentary Assembly, for example (thanks Tony for the link).
3. Develop a transparency toolkit and encourage social entrepreneurs to build new web-based applications to help track progress (or lack of progress) towards the MDGs, much the way the United Kingdom and the District of Columbia have done with their mash-up contests.
4. Stop producing stale policy documents and white papers and start leveraging rich, interactive media to carry-out the UN’s education and advocacy work.
5. Establish an international clearinghouse of sorts that would help foster greater coordination and knowledge sharing between the multitude of international organizations, aid agencies, NGOs, charities and social entrepreneurs that are engaged in international development efforts.
6. Experiment with InnoCentive and other talent marketplaces to help bolster the problem-solving capacity of UN agencies. Solution Exchange in India was developed by a local UN agency and could serve as a model for a broader collaboration platform.

United Nations 2.0 may sound far-fetched, but as my colleague aptly put it “he who cautions every step covers little ground.” Please add your own ideas in the comments section.

The issue is not the individual. The issue is human kind as an intelligent system. We’ve been living for 4 million years. What keeps us together? Communication.

Innovations are powerful mechanism to change input output mechanisms. There is a universal mechanism of communication where by superior innovations become part of standard procedure. It took 4 million years to get us to 20 million people. 8,000 BC. Up to that point we were hunters and collectors.

When Christ was born, there were 200 million people. 4.5 billion people born with last 35 years. Soon 10 billion. This super organism — human kind — always creates new technologies and capabilities.

Artificial intelligence is nothing compared to human intelligence. Small groups in power can use machines (IT) to be disruptive to progress. So governance is a key issue.

People solve problems with brains. But then why do we have so many problems. The boomerang effect — rebounds. We are are winners, but we win to kill ourselves. We solve problems and then we use computers to create even bigger problems. Eg. we keep people alive to enable them to produce more people — leading to a supra-exponential explosion in the number of people, average consumption, average use of energy by humans. All our successes make the situation worse. Club of Rome communicated this 40 years in a statement “Limits to Growth.” Another publication about limits to resourced based growth but not brains. We need to dematerialize. Unlimited brain growth.

Eg: if we could have a climate neutral energy source we can have 20 billion people living on earth.

Humans in the past didn’t notice innovations. They didn’t live long enough.

We are at a critical point in human history. The breakthrough of a new theory is when the last Nobel laureate of the old theory dies.

Implementation of solution takes a long time. For example a new energy source will take 50 years to really take hold.

So enormous dilemmas about the increase in growth and requirements for dramatic increases in resources.

Agriculture is the most important part of our lives. We don’t notice it because it’s such a small part of the job market. Industrial society produced way more food than the agricultural society. Knowledge society creates the biggest industrial output ever… And also the highest agricultural output. (I like this three economies thing — each one being subsumed by the previous).

Cows have a greater collective weight than humans. They need an unbelievable about of food and water. Take into account all the water (including indirect) to make a breakfast and its 4,000 leaders.

Climate change needs to be addressed from the perspective of human kind, not the nation state because it is a collective problem. Governments and States need to change. We need global governance.

Prisoner’s Dilemma — a badly regulated situation whereby humans are incented to do the wrong thing.

Property rights are another huge issue.

Psychologists say…

Who’s the problem — China or the US? China just getting caught up. History of colonization in the world and also history of uneven contracts.

The future of the super organism human kind is unclear — because it’s not clear if we can create the governance conditions (collaborative systems) that can bring about the potential of all humans. IT should help. It’s possible in theory to have peace with nature. But to get there we need a governance structure that can limit our collective activities when they get in conflict with the last of physics.

We need to stop externalizing costs in the global economy. We have a free ride at the cost of nature. The climate issue is a consequence of that.

The only way to avoid a catastrophe is to start now to give us the 50 years to implement new solutions as they come. If we fail the world will collapse in an economic and other ways. Or we’ll see the Brazilization of the world (two tier society… Most people will not use cars or computers, but a handful will). Coercive existence…

But this competition between 200 nation states, we have a chaotic incentive structure, with the prisoner’s dilemma reigning, we’re headed for disaster.

IT and the web is the key to this. The tool to create the digital nervous system of human kind. Humans and machines combined…part of intelligence resides with humans and part with the machines… Web 2.0 — millions of people collaborating as never before.

Al Gore is the best advocate. His book the Assault on Reason is an historic piece.

The website is filled with research papers, news, and reports highlighting what innovative governments, businesses, and educators can do to empower the people. It also breaks them down into a variety of case studies like Debate Europe where European citizens can share their opinions, concerns and ideas on the future of the European Union. The French National Commission of Public Debate (CNDP) has an innovative site that allows citizens to debate on infrastructure projects in France. Chunceon, Korea citizens have direct web access to the Mayor’s office to submit ideas and then receive feedback on them. Seeing case studies like these can really help allowing people to interpret and to better understand the opportunities available to their countries, states, provinces, and small towns. They even have some of our own Anthony Williams’ stuff in there.

As I went through the website I discovered that the information has been posted for a while now but a large portion hasn’t even been viewed.

The old saying, “knowledge is power” comes to mind. The United Nation’s purpose is to bring the people of the world together to make it a better place to live. Ken Leebow wrote an interesting comment on my blog post a few months back suggesting that, education is the most effective way to protect us. It was in regards to protecting children from pornography, but the benefits of knowledge are universal; protection, innovation, empowerment.

The great power of web 1.0 was transparency and access to incredible amounts of information…the power to inform. Now we have web 2.0 that, if used effectively, can connect people, ideas, and resources…..the power to innovate and execute.

I have mixed emotions about finding this site. I am excited at finding the incredible resource but disheartened that the important information is just sitting there untouched.

It seems to me that the United Nations Website would be a pretty important one to take advantage of. Are there other “goldmines” out there like this that are stagnant? How have you seen websites like this one take off? Finally, people can view the information but then what can they do with information like this?

The growth of China’s online community has been acknowledged by many within the Chinese Communist Party, including the country’s most powerful leader, Hu Jintao. In mid-June he took part in an online web-chat at the People’s Daily website that marked the first time a senior party official publicly engaged with internet users. While commentators noted that “there was no real substance to the online conversation,” it has since been referred to as symbolic of the central governments acknowledgement of the internet as an important source of public information and public opinion.

This would seem to auger the path towards democratization that many have hoped the Internet would catalyze in China and elsewhere in the world. But whereas the growth of China’s online population may indeed force the government to listen into a new medium, whether it forces change is another question. Remember, it’s been nearly 20 years since the June 4th incident and change has been, as Mao predicted, “like crossing a river, feeling for the pebbles one at a time.”

And so as China has transformed itself into a capitalist autocracy, whether its evolution includes our liberal notion of democracy is up for debate. This week’s edition of the New Yorker carries a great article on China’s “new generation (of) neocon nationalists” and the role they’ll play in determining China’s future. Author Evan Osnos notes that the Internet is being used successfully as a meeting place for a generation of tech-savvy ‘angry youth’ who view the country’s sovereignty on internal and external affairs as trumping the promise of a liberal democracy. Chinese nationalism is, according to them, on the upswing thanks to the Internet and tools that allow them to network with, and transmit information to, like-minded Chinese who see democracy as but one more attempt by the outside world to influence China’s internal progress. One of those interviewed states “Chinese people have begun to think, one part is the good life, another part is democracy. If democracy can really give you the good life, that’s good. But, without democracy, if we can still have the good life why should we choose democracy.”

As I wrote back in January, the rise of the Net and its ability to engage citizens is equally applicable to globalist or nationalist schools of thought. While on one hand it has, and will continue, to break down the barriers of distance and standards that exist between nations and people, it holds an equal ability to reinforce those very walls by those who see what’s beyond them as threatening to the sovereignty and future of their nations. And given the unequal distribution of the proceeds of globalization (whether that be measured by the impact on a US auto-worker or an African farmer), and mankind’s predisposition to protect those closest to them, I can’t help but think that we’ll never quite reach Nicholas Negroponte’s prophecy that one day the Nation would “evaporate like a mothball…from solid to gas directly…wherein there will be no more room for nationalism than there is smallpox.”

Instead, I’m much more inclined to think that we’re headed back to the city state models of Ancient Greece and Northern Italy where the confluence of local interests and priorities with a knowledge economy that can accommodate rural locations could well yield a new form of local/national government and a much richer form of democracy and participation.

This week’s edition of the Wikinomics Report Card will focus on General Motors Corporation (GM). In case you missed my first report card about Major League Baseball, you can find it here. Like last week, I will be evaluating GM on the Wikinomics principles of being open, peering, sharing, and acting globally.

Company Background: GM was founded in 1908 and is the world’s largest automaker and leader in global sales for the last 77 calendar years. It manufactures cars and trucks in 35 different countries under the brands Chevrolet, Buick, Cadillac, Pontiac, and many more. Under the strength of Alfred Sloan’s revolutionary corporate structure and leadership, GM was once one of the world’s most profitable companies peaking in the early 80’s with a U.S. market share of 45%. However, the legacy costs and complex accounting systems associated with the Sloan era have hindered GM’s efforts to create a more lean manufacturing process. Stiff foreign competition from companies like Toyota and poor strategic decisions like focusing on SUVs and light trucks in a rising fuel market has led GM to one of its weakest points in its history. Yesterday, its stock reached a 53-year low after Goldman Sachs changed it status to “sell”. GM is hoping that it can weather this storm long enough to introduce its new line of alternative energy vehicles like the Chevy Volt and reclaim some of its former glory.

Being Open: Traditionally, GM has been a very closed organization. Even internally, its different brands acted with a silo mentality. In the Alfred Sloan era, GM used espionage tactics to quell union uprisings and in the mid 20^th century, GM was blamed for killing American public transportation in the Great American Streetcar Scandal. In the 1990’s GM was accused of killing the electric car so that it could sell its high margin SUVs and trucks. GM had a fully functional electric car with the EV1, but scrapped the program entirely in 2003. Despite an offer of $1.9 million for the 78 EV1s already produced and a waiting list of customers, GM stripped the car of its recyclables and crushed them. However, in recent years, GM has made great strides in opening up. GM’s chairman and CEO Rich Wagoner admitted that the worst decision of his tenure was “axing the EV1 electric-car program and not putting the right resources into hybrids. It didn’t affect profitability, but it did affect image”. GM’s R&D chief Larry Burns said that “if we could turn back the hands of time, we could have had the Chevy Volt 10 years earlier.” Admitting this mistake is a big step in being open and acting with integrity in the new era. GM has started by being very public and transparent about its production plans for the Chevy Volt. Also, GM is one of the few car companies to have higher executives and “Car Czar” Bob Lutz blog on a regular basis. GM continues to act more openly, it should be able to repair its damaged reputation.

Grade: D+

Peering: Although peer production of automobiles is very difficult with today’s technology, GM has been able to leverage peering very well in its marketing efforts. From our paper on the 8 Net Gen Norms:

Net Geners are also helping develop advertising campaigns. GM invited consumers to a newly built Web site that offered video clips and simple editing tools they could use to create ads for the Chevy Tahoe SUV. The site gained online fame after environmentalists hijacked the site’s tools to build and post ads on the site condemning the Tahoe as an eco-unfriendly gas-guzzler. GM didn’t take ads down, which caused even more online buzz. Some pundits said GM was being foolhardy, but the numbers proved otherwise. The Web site quickly attracted more than 620,000 visitors, two-thirds of whom went on to visit Chevy.com. For three weeks running, the new site funneled more people to the Chevy site than either Google or Yahoo. Most importantly, sales of the Tahoe soared.

This hugely successful campaign generated a lot of buzz for GM at a very minimal cost. With GM’s negative operating margins, cutting down advertising expenses through peering could greatly reduce costs and improve the bottom line.

Grade: B+

Sharing: GM has done a great job involving itself in joint ventures and collaborative efforts over the last few years. GM is the majority stakeholder in the Korean automaker Daewoo, and has collaborated with many of the world’s auto manufacturers. This includes product, powertrain and purchasing collaborations with Suzuki Motor Corp. and Isuzu Motors Ltd. of Japan, advanced technology collaborations with Toyota Corporation and BMW AG of Germany and vehicle manufacturing ventures with several of the world’s automakers including Toyota, Suzuki, Shanghai Automotive Industry Corp. of China, AvtoVAZ of Russia, Renault SA of France, and most recently, UzAvtosanoa of Uzbekistan.

More importantly, GM has decided to outsource its battery development for its future cars like the Chevy Volt whereas Toyota has decided to develop their battery technology internally. Toyota’s closed attitude and lack of collaboration could eventually lead to a technology gap between itself and GM. While Toyota has profited from selling its superior hybrid software and technology, they may lose out to GM in the future if they remain on this path.

Grade: A-

Acting Globally: GM’s ceo Rich Wagoner expects that 75% of its car sales will be outside the U.S. within a decade. GM is the largest overseas automaker in China and is GM’s second largest market after the United States. After growing sales by 27% each year for 5 years, the GM’s China sales grew 19% last year. This success is largely due to the success of their joint venture between them and Shanghai Automotive. GM is building a new research centre in Shanghai focused on hybrid technology. This is GM’s first venture that is completely separate from Shanghai Automotive. The announcement coincided with the Chinese Government’s powerful National Development and Reform Commission disclosing that it would provide subsidies to alternative fuel vehicles under certain conditions. One major condition was that critical parts must be manufactured in China. While Toyota assembles its cars in China, the critical parts are manufactured and shipped from Japan. This should give GM a big head start in selling hybrid vehicles in China. If GM can repeat its success in China in other emerging markets, it may be able to keep up with Toyota’s sales in the future.

Grade: A-

Overall Verdict: GM is in a very deep hole right now. They are losing around $2 billion a month, and even the new initiatives outlined above won’t act as a quick fix. However, they are building quality cars once again, and seem to be making a lot of great moves. Since the stock is at a 53 year low, this (more like a year from now) may not be a bad time to invest in some GM stock. If the Chevy Volt goes into production on schedule in 2010, high gas prices should propel its sales, and more importantly GM’s corporate image. If 10 years from now, 75% of GM’s sales come from outside the U.S., and its legacy cost issues are solved, they could reclaim the crown from Toyota.

Overall Grade: B

What are your thoughts? Could you see yourself driving the Chevy Volt (above) in 2010?

After a long day of work, you plop down on the couch after dinner and turn on the television. Your myTV channel pops up and you begin to scan your customized start channel, which shows you what shows have recorded on your DVR, what shows on network TV you might like based on your recent viewing habits as well as what your social network is watching, the top UGC clips of the day from YouTube and other video sharing sites, as well as a robust search engine that will allow you to find and download virtually any TV show or movie every published, at costs ranging from free to $19.99 per download. Furthermore, with a couple clicks on this page through your remote, you can send content to your wireless device or your car’s hard drive over your home network – a virtual digital content consumption utopia.

The reality, however, is something much different, despite all the technologies needed for this vision being well established and available. A relatively recent article (editor’s note: November 2007) in Business Week has titled I Want My iTV is an excellent read on the forces at play in the royal rumble of media consumption. The article focuses on the battle for the living room, and it highlights how the promise of the convergence of TV and the Internet is long overdue yet continues to be hampered (in the US in particular) by the various stakeholders in the value chain each trying to protect their business and avoid being disintermediated by new technologies or business models.

The author correctly notes that lean-back technologies like DVR and Sling have changed the way in which we watch traditional TV – both time and place can be shifted. Simultaneously, lean-forward technologies like YouTube and other video sharing sites have brought to light the potential long tail impact of UGC and short-form clips, while Move Networks allow us to consume long-form content with amazing picture quality and reliability on our PCs. Nevertheless, the article’s author wants to watch what he wants when he wants it from his couch and points out the present limitations of the living room, particularly around the area of search and discovery of content on demand.

This is a particularly timely problem, and one that startups and industry incumbents are trying to tackle. Furthermore, virtually every player in the value chain is not only trying to protect their current position, but leverage new technologies, viewing behavior, and business models, to expand their sphere of influence and control. Apple is one of the better examples of a company that has capitalized on new technologies and behaviors, and the huge success of its iTunes-iPod-iPhone-AppleTV hardware/software combination has more than one major player feeling Apple has grown too powerful, culminating with NBC Universal’s Jeff Zucker’s comments that Apple has “destroyed the music business” and the removal of NBC content from iTunes and the launch of Hulu.com.

The jury is still out on whether IP video is a good or bad thing for broadcast TV, which compiles the hesitancy for big companies to make major commitments one way or another. The music industry faced a similar problem with Napster, and Viacom’s billion dollar lawsuit against GoogTube is oddly reminiscent of simpler, static web page days. Only this time, there is no doubt about the future of the Internet and its role in our lives.

A recent paper by Wharton economist Joel Waldfogel titled “‘Lost on the Web: Does Web Distribution Stimulate or Depress Television Viewing?” tries to measure the effects of online TV clips, both authorized and unauthorized, on television viewing between 2005 and 2007, using a survey of viewers’ tendencies. The study compares 287 young people on the University of Pennsylvania campus and ultimately finds that time spent viewing programming on the Internet – 4 hours per week – far exceeds the reduction in weekly traditional TV viewing of about 25 minutes. Overall time spent on network-controlled viewing (TV plus network websites) increased by 1.5 hours per week, indicating video clips on the Internet likely increase awareness of a show thereby encouraging more viewers to watch the show in its entirety when it airs on a network. However, in many respects, this study is already outdated, considering the new models launched by Hulu.com and abc.com have yet to be broadly studied by economists or researchers.

In order to harness the power of the Internet in the living room throughout the consumption of digital media, whether it’s focused on search and discovery or social networking, to be successful the players involved must embrace the principles of Wikinomics: openness, peering, sharing, and acting globally.

Openness: This is a significant challenge given TV’s history as a closed, walled garden system. Nothing says the cable and satellite companies have to give up the garden viewing experience, however they do need to tear down the wall and open this up to web-based content, broader user preferences and eventually third party application development within the garden (e.g. Facebook). If the cable and satellite companies do not move in this direction, it will open the door for a third party appliance like AppleTV, next-generation DVR or Sling, or video gaming console to do so.

Peering: Peer to peer assisted distribution models – if done correctly and with DRM in mind – can help reduce the expenses related to content delivery and consumption for the service proviers as well as the consumers. P2P can be contained to certain geographies or neighborhoods, or one’s social network in order to sharing like-minded content.

Sharing: The prospect of fusing social networking elements into the TV experience has already launched such companies as Joost and Veoh, as it is believed that some of the most engaging and useful features of Web 2.0 like social rating and ranking can be directly applied to watching TV. Nothing says this has to be done on your PC only, although to take place in the living room, it does require a healthy degree of openness (see above) as well as solving some user interface issues caused by the remote control.

Acting Globally: The delivery of studio content, both domestic and foreign, over broadband networks coupled with the on-demand content acquisition consumer mentality, radically changes the economic models for syndication currently used. Additionally, with half the world “flat” as Thomas Friedman has explained, along with place-shifting TV technology, the global media consumer will want to watch more and more international content, if available, and content that was previously considered domestic will quickly find new international audiences.

Cellular phones did not reduce the demand to talk on the phone and by all accounts increased our total talk time. However, the introduction of cell phones caused an erosion of the land-line phone business (along with the death of the pay phone business) as many consumers realized they only need a cell phone. IP video does not reduce the demand for watching short- or long-form content, and as Waldfogel’s study suggests, increases total video consumption time, although in the not-so-distant future, some of us may start to realize the only thing we need from the cable company is broadband service. Stay tuned.

Joshua Beil is the Director of Social Media & Technology at a publicly traded telecommunications company and cofounder of Skywave Broadband, a wireless ISP operating in Honolulu. Josh was named one of Pacific Business News’ “Forty Under 40″ in 2006 and in 2005, he was named a High Tech Leader by the Pacific Technology Foundation. He has been the primary author of numerous industry research reports on the market for small business Web hosting and Internet infrastructure services, holding research analyst positions at Tier 1 Research and IDC. His personal blog is www.beilblog.com and he can be reached at jhbeil@gmail.com.

According to this article, a group of students as part of one of their courses have decided to lodge a complaint stating that Facebook commits 22 violations of Canadian privacy law.

From the article:

They allege Facebook fails to inform members about how their personal information is disclosed to third parties for advertising and other profit-making activities, and also that it doesn’t get permission from users to do so.

The students drew up the complaint after analyzing the company’s policies and practices as part of a clinic course during the winter term.

Clinic director Philippa Lawson says the group focused on Facebook – which boasts more than seven million Canadian members – because it appeals to young teens who may not realize the risks of exposing personal information online.

It brings up some important issues, including the question of jurisdiction. Given the global nature of the Internet, is Zuckerberg required to adhere to laws in every jurisdiction that has access to the Intrawebs? What if Facebook responds to the legal action by declining access from Canadian ISPs. In that case, has the greater good been served.

Many years ago, I interviewed Jay Walker, the founder of Priceline. He told me that he had no plans to bring Priceline to Canada because he thought that French language laws were too draconian. Globalization, people….just sayin’.

“With the help of a GPS device and DHL, I have drawn a self portrait on our planet. My pen was a briefcase containing the GPS device, being sent around the world. the paths the briefcase took around the globe became the strokes of the drawing.”

Providing further detail, the site then goes on to provide the exact date the briefcase was given to DHL, how long it took, where it finally ended up, and how the information from the journey was downloaded to his computer to make the diagram. Finally, a picture of the delivery notes from the journey are shown at the end. Seems fairly unambiguous, non?

Well it turns out that’s not exactly what happened (which I’m sure someone will someday tell me is part of the art that I just don’t “get”). Erik posted a little update on his site today:

… I think it’s possible to realize the project for real, but due to my extremely limited budget… that was not possible. Therefore, I have realized the idea in fictional way. So, to be clear:

• This is a fictional work
• DHL did not transport the GPS at any time.
• DHL has kindly allowed me to film parts of their facilities and distribution.
• This is a personal graduation project.

So yeah – not quite the same thing, and it let’s just say “realized in a fictional way” is quite a generous way to describe what appears to have happened here. Thanks to AlexS for the heads up.

At first glance, one might simply be impressed by the “single line” self portrait that Erik Nordenanker created – but it’s how it was created that truly makes this a unique piece of art. As reported in Gizmodo, what Erik did was place a GPS device in a briefcase and mail it, via DHS and with precise travel instructions – it is the path the device took that created the drawing you see above. You can find all the details, including the particulars of the travel plan, here. If there is such a thing as the opposite of an art critic I am probably it, but it certainly seems like a relevant piece of work in this age of globalization – right down to the quite wasteful consumption that enabled the “drawing” to be created .

The project will find and capture in film, photography, music and text 100 individuals who represent the global population, proportionate to annual global surveys and statistics. This World Portrait will be used to make an introduction between the peoples of the earth and to facilitate a greater understanding of the diversity and the commonalities among us.   

Looking through the stats of the people who would be part of the ‘ideal’ 100, it’s interesting to compare the world you would picture in 100 people to the actual 100.  I’d love to see the same idea applied to one of the world’s many global firms.  Take a look at some of the stats after the jump to see how different your image of the global 100 is to the actual. 

Gender

• 50 would be female
• 50 would be male 

First Languages 

• 17 would speak Chinese
• 8 would speak Hindustani
• 8 would speak English
• 7 would speak Spanish
• 4 would speak Arabic
• 4 would speak Russian
• 3 would speak Bengali
• 2 would speak Malay-Indonesian
• 2 would speak French
• 45 would speak other languages (this one suprised me) 

Drinking Water

• 83 would have access to safe drinking water
• 17 would use unimproved water  
• 50 would live in poverty  

Religion

• 31 would be Christian
• 21 would be Muslim
• 14 would be Hindu
• 6 would be Buddhist
• 12 would believe in other religions
• 16 would not be religious or identify themselves as being aligned with a particular faith 

Technology

• 34 would be cell phone subscribers
• 17 would be active internet users
• 1 would own a computer 

 A few more. 

The review in the Times, “Wonder Bread and Curry: Mingling Cultures, Conflicted Hearts,” speaks of immigrant children in the US and “the generational process of Americanization.” I can’t say anything good or bad about the book itself, having not read it, but the entire notion struck me as quaint. The idea of cultural awkwardness among Indian immigrant children in the US – the embarrassment of bringing a curry sandwich to school instead of PB&J – is sooo 1985. Having grown up in a predominantly Anglo-Saxon city myself (I was always one of two or three minorities in my class in grade school), I can sympathize with the author’s plight. However, reading through the book description, I couldn’t help but think that the whole idea of Indian-born parents wanting the American Dream for their children is becoming somewhat dated.

From the book review:

“Jhumpa Lahiri’s characters tend to be immigrants from India and their American-reared children, exiles who straddle two countries, two cultures, and belong to neither: too used to freedom to accept the rituals and conventions of home, and yet too steeped in tradition to embrace American mores fully. These Indian-born parents want the American Dream for their children — name-brand schools, a prestigious job, a roomy house in the suburbs — but they are cautious about the pitfalls of life in this alien land, and isolated by their difficulties with language and customs.”

Perhaps I’m biased by a multi-cultural, Canadian outlook, but looking at trends in youth demographics and global innovation, it seems as though the new challenge could very well be a generational process of Indianization or Chinaization, and not Americanization. The Net Gen, unlike previous generations, is a relatively culturally-sensitive (if not culturally-curious) one. Bollywood-inspired films are making their way to Hollywood, travel abroad programs are growing in popularity, and curry is making its way into pub menus and supermarket aisles. What’s more, the new global youth culture may very well come from countries such as India and China – the Net Gen demographic in these areas combined is almost 10-times larger than the entire Net Gen population of North America.

Image Source: Bride & Prejudice movie, 2004

On an economic level, we see an advancement in innovation in developing countries that is bolstered by “hothouse” conditions, such as low-cost, and increasingly high-skilled labor; local wage-earning customers; active government involvement in the private sector; and greenfield technology infrastructures. This creates fertile ground for economic growth, meaning global firms no longer have to base operations around North American headquarters. Combine this with a generation of disenfranchised immigrants that came to North America with hopes of a better life, but in fact left engineering jobs and PhDs to become cab drivers and burger flippers (pardon the stereotype). Increasingly, I wonder how much incentive is left for families to emigrate away from rising economy countries to come to an uncertain economic future in the US.

When we take all of this together, it seems as though “the Dream” is increasingly an un-American one. The Net Gen isn’t expressly interested in having two kids, a dog, and a house in the suburbs – at least that hasn’t been my experience. And so, the next generation of immigrant “exiles” that straddle two cultures could in fact be American children trying to accustom themselves to naan and biryanni lunches, bhangra music, and Hindi language communication – or maybe it’s Mandarin, C-pop, and chopsticks.

The idea behind Worldsourcing is really the dawn of the truly global enterprise. Global enterprises operate on a truly global scale; operate with porous corporate boundaries (interacting with “outside” partners in much the same collaborative way that “internal” departments work together); and bring that global approach to all functions (not just manufacturing and customer service). Let’s look at each in more detail:

* Truly global scale. Worldsourcing companies have no single corporate headquarters, which means their senior management teams are often culturally, and physically, dispersed throughout the globe. This gives them a much deeper insight into the challenges and opportunities of globalization than their “multi¬national” brethren.

* Porous corporate boundaries. Worldsourcing companies have porous corporate boundaries – meaning they manage a portfolio of “internal” (same owner) and “external” (different owners) resources in most aspects of their work. This is why we call them truly global enterprises, and not just corporations. The very best cul¬ti¬vate the same kinds of trust-based, highly-collaborative relationships with their partners that they have with internal colleagues – a far cry from the SLA-driven, contractual relationships that often characterize “strategic” outsourcing relationships.

* Across all business functions. While some business leaders have managed global scale and porous relationships in one or two key functions (e.g., manufacturing and software development), Worldsourcing companies take this approach across all business functions – including marketing, product development, sales and customer service. For instance, a product development team based in India may work with a marketing team based in the Netherlands to create new value propositions for sale in markets from South Africa to Japan. This brings global creativity to bear where it matters most: not just in cost-reduction areas such as manufacturing, but in the core functions of business success – innovation and customer relationships.

Lenovo is a great role model in this new world. Another leader worthy of careful attention is Arcelor-Mittal (see this article from The Economist). More traditional “global corporations” such as GE, Coke and Procter & Gamble, deserve mention – but most of these are more truly multi-nationals than global enterprises. They still generally have a strong headquarters, often in America; they still rely preferentially on internal (owned) resources; and they still treat marketing and product development from a central hub.

The other companies that merit attention are the truly global professional services firms, arguably the first truly global organizations. Most notable among these are McKinsey, Accenture and Goldman Sachs, for their true “one global firm” organization and business models. But again, these firms have had little or no success with porous enterprise boundaries; rather, they keep most functions in-house.

Unlikely and politically unpalatable as that may seem, global medical tourism is a $20 billion industry, expected to grow to 40 million cross-border trips by 2010. In the US, 750,000 Americans went abroad for some type in treatment in 2007, and by 2012 that number is expected to top 6 million.  Evidently, there are questions about standards but Joint Commission International , a US not-for-profit that accredits American hospitals, has accredited over 140 international hospitals (based on US standards) and expects the number to grow to almost 300 over the next three years.

For host countries, this is big business. For example, according to the Jordanian Ministry of Health incoming medical tourism attracts 120,000 patients a year, and generates between $650 million and $700 million annually. For a country whose total GDP (PPP) comes in at approximately $27billion and total exports at just $5 billion, medical tourism thus represents a pretty significant, and growing, share of the country’s income.

Moreover, for countries such as the US developing country healthcare hosts represent massive potential savings. The Journal of Financial Planning estimates that savings may range from 50 to 95 percent of the U.S. cost.

Here are some examples from the National Centre on Policy Analysis:

• Apollo Hospital in New Delhi, India, charges $4,000 for cardiac surgery, compared to about $30,000 in the United States.
• Hospitals in Singapore charge $18,000 and hospitals in India charge only $12,000 for a knee replacement that runs $30,000 in the United States.
• A rhinoplasty (nose reconstruction) procedure that costs only $850 in India would cost $4,500 in the United States.

Given those cost savings, should government run healthcare outsource expensive procedures and focus their budgets on what they do best, and most efficiently? Sounds a bit like a basic Ricardo-esque gains-from-trade analysis. And perhaps this is the next frontier of globalization: a world where government budgets are divvied up on a per capita basis and citizens shop the world for the best deal on government services…. global government anyone?

But… it’s kind of hard to believe, isn’t it? It sure seems like there has been an extraordinary amount of downward wage pressure (and associated jobs losses) in the U.S. job market, so the argument doesn’t pass the all-important smell test for many. Moreover, wouldn’t common sense indicate that as free trade expands, wages for lower-skilled workers would go down (and inequality would go up) in rich countries, holding all else equal? You know, when wage differentials can be 20-fold or higher between countries, while capital and technology differences between the same countries continue to shrink?

Well it turns out the smell test might be right after all. One of the economists mentioned above (Krugman) is working on a paper called Trade and Wages, Reconsidered, in preperation for the Spring meeting of the Brookings Panel of Economic Activity. He’s posted the VERY preliminary draft online in order to get some early feedback… and what he has said so far is quite interesting. To quote Krugman precisely, here are two paragraphs from the paper – one from the intro, and one from the conclusion:

Nonetheless, the analysis presented here indicates that the rapid rise in manufactures imports from developing countries probably is, indeed, a force for growing inequality, and that factor content calculations suggesting otherwise are missing the essence of what is happening.

How can we quantify the actual effect of rising trade on wages? The answer, given the current state of the data, is that we can’t. As I’ve said, it’s likely that the rapid growth of trade since the early 1990s has had significant distributional effects. To put numbers to these effects, however, we need a much better understanding of the increasingly fine-grained nature of international specialization and trade.

I find this conclusion extremely refreshing. Recently I’ve plowed through a whole pile of economic research on the trade and wage debate, and each time it said there was minimal-to-no effect on wages and inequality it just didn’t sit right. While all the complicated equations and calculations looked good, something was missing. To summarize what this “something” was, I will quote Krugman again:

What really comes through from the analysis here, however, is the extent to which the changing nature of world trade has outpaced our ability to engage in secure quantitative analysis—even though this paper sets to one side the growth in service outsourcing, which has created so much anxiety in recent years. Plain old trade in physical goods has become remarkably exotic.

It’s a big problem for a lot of the empirical economic research, as it’s currently done - the world is changing too fast to rely on it for certain things. By the time you have the data you need, it might be too old to be relevent (or even worse, it can be turned on a “consensus” that is very misleading).

The trade and wages debate looks like one place such a problem has popped up, and once the traditional “empirical support” erodes it will be interesting to see how things like the Global Plant Floor evolve – do you think Obama and Clinton might be interested in Krugman’s thoughts as they argue over who would pull out of NAFTA first?

you can purchase a virtual QQ pet (pet penguin) and bring him online to meet friends, you can even buy clothes for him and get him educated.

So what do they do? I think the more appropriate question is what they don’t do. They have instant messaging (IM), mail, a social network capability – Q zone, multiplayer gaming capability with QQ games, a web portal QQ.com, C2C shopping, and virtual products such as QQ Show, QQ Pet, QQ Game, and QQ Music/Radio/Live all of which you can purchase with their virtual currency Q-Coin. The interesting thing about Q-Coin, is that the use of this virtual currency has become so popular that a black market has developed around this ‘currency’ and the Chinese government has become concerned that the Q-Coin will undermine the actual value of China’s real currency the RMB (the Yuan).

The best thing about QQ is that it acts as an integrated platform – a sort of one stop shop for consumers’ online needs – from communications, media, entertainment, mobile gaming, and social networking. All of their value-added products / services are integrated into their IM service – by far QQ’s most popular feature with 715.3 million registered accounts and 288.7 million active user accounts. But Chinese users are using the internet differently than say, their North American counterparts. Where we would never dream to pay extra for something like an IM service, or to dress and educate a virtual pet online or to pay for extra storage, memory and photo space QQ has premium paid services where 17.7 million users are paying for their Internet Value-added- Services (IVAS) such as Q-Zone (social network), QQ pets and online gaming. They also have 10.3 million subscriptions for their Mobile value added services (MVAS).
Out of QQ’s total 140.8 million USD revenues, IVAS accounted for 67.9% of total revenues and MVAS accounted for 18.3%.

Imagine that, a company that has almost as many active users as the population of the United States… and we’ve never even heard of them before.

The Economist’s article The Challengers takes a look at the new multinational companies that are evolving in the emerging markets. From the perspective that the Ford-Jaguar-Tata story brings, to the data on Developing countries cross-border M&A, it’s a fascinating study of how the world is changing right now.

CIO.com has a nice little article on how Sun Microsystems is leveraging Second Life to facilitate internal collaboration and social interaction.  The best quote provided in the mini-interview is: Up until now, Sun, like most companies, has used audio conferencing. We’ve used a little bit of video conferencing too, but a lot people working at home don’t have video because that’s their personal space. So we mostly use audio conferences. The problem with this is we’re not getting the social interaction and the informal brainstorming you’d get in person. We figured [we] can create a virtual world where you can begin to re-create that social interaction, and then we could really create a wonderful place to bounce ideas off each other, both as a group or just between two people.

We’ve talked about the potential for RFID tags (and related technologies) to bring about a lot of positive changes in business and society, while also creating some major concerns in terms of privacy (etc.). Think about both sides when you read this story about Ministers in Britain planning to implant RFID tags in prisoners.

While a lot of people in Western nations are focused on the rise of India and China as major exporters, one of the more interesting trends to watch is there trade with each other. This article in the Times of India sums up the situation nicely, and it will be interesting to see how India reacts.

The fact that confidence in many major financial institutions is going into the tank won’t surprise too many people in Second Life. To quote: “As of January 22, 2008, it will be prohibited to offer interest of any direct return on an investment (whether in Linden dollars or other currency) from any object, such as an ATM, located in Second Life, without proof of an applicable government registration statement or financial institution charter,” Linden Lab wrote on its blog Tuesday. “We’re implementing this policy after reviewing resident complaints, banking activities and the law, and we’re doing it to protect our residents and the integrity of our economy.”

The NY Times has a great article on “bruising Senate fight” over the Patent Reform Act of 2007. The quick version is that big firms are increasingly antsy about patent trolls and excessive leverage being given to small patent holders, while the “little guys” are worried about the big firms using their heft to trounce them.

Finally, Fred Vogestein has a great story in Wired entitled The Untold Story: How the iPhone blew up the Wireless Industry.

An increasingly globalized world brings the need for people to understand each other in order to travel, do business and learn. However, as I have written before, the internet is not yet particularly friendly to speakers of languages outside of English, Chinese and maybe Spanish. Although millions of people are learning English, it seems that the bots are going to learn a lot faster. The technology has come a long way since its inception in the 50s. A freely translatable internet would go a long way in bridging the digital divide.