Archives for July 2012

Globalization and The Olympics (Part II)

As mentioned in our previous post (Globalization & the Olympics (Part I),  the Olympics, as well as sports in general, are a zero-sum-game. In contrast, and most fortunately, the globalization phenomena is not. Thus, in the globalization socio-economic phenomena at large, the possibilities are virtually unlimited. This rarely recognized, virtuous characteristic of globalization has to do with the fact that global society’s unsatisfied needs, by themselves signal the right course of action to follow. The signals of the road to follow are of a very varied nature, being the price mechanism one of the most important ones.

This course of action concept is a universal one, and as such, applicable to any human level: individual, corporate or nation. The course of action to follow is constantly signaled by huge opportunities in a myriad of activities in every area: from the glittering-headline-grabbing high-tech area, to less glamorous yet indispensable activities for human well-being (from lodging and restaurants, to taking care of children, the elderly, and gardening, among hundreds of activities). This is why so many nations in all corners of the planet (companies and individuals too) have not only adapted, but have been handsomely profiting from globalization. Those individuals, companies and nations, have made the right reading about what’s going on and where, and diligently have prepared themselves for those opportunities. Beyond the profitable areas of endeavor detected, being permanently prepared to learn new approaches, with an open, flexible mind, is the most valuable asset anyone can have, at the three levels previously mentioned. In that respect, in my book, GLOBALIZATION, numerous successful examples are provided.

In a nutshell, there are a few very important points to highlight when making the comparison between the Olympics and globalization:

  • Like in the Olympics, in globalization the most adequate mindset is the one that better suits competition: adequate prior training, high spirits, effective teamwork, and so on.
  • Like in the Olympics, globalization has to be a very orderly process, with clear cut rules, widely known by all participants. Big problems can be avoided if this aspect is adequately observed.
  • Like in the Olympics, the fundamental spirit behind globalization must be a joyful one, of gratitude to be able to access the global market, provided that the adequate preparatory work has been done appropriately.
  • Unlike in the Olympics,  given that globalization is not of a zero-sum-game nature, there is room for everyone, provided that major impediments to improve competitiveness are removed. Prejudice, fear and ignorance are usually behind the huge and very common impediments to raise competition in most places on Earth. In short, the key word of the successful globalization game is competitiveness.

In early July, from the 4th to the 16th of July, the 53d edition of the International Mathematical Olympiadtook place in Mar del Plata, Argentina. There were 548 contestants from 100 nations. This competition is for students younger than 20, not yet enrolled in universities. This annual event, that initiated in 1959 with only 7 countries in competition, was practically unmentioned in most media. Granted, a math olympics is not as glamorous as the sports Olympics. Nonetheless, knowledge and organization, in all shapes and forms is what successful competition in the global arena is all about. Unquestionably, there is plenty of room for improvement in the global society mindset, in order to better capitalize the many opportunities available for the organized, hard working teams, be it at the company or country levels.


The Olympics are an excellent manifestation of mankind’s high spirits. They are also, in many respects, a splendid testimonial and an unsurpassable role model for the globalization process at large.

Globalization and The Olympics (Part I)

Every four years, during two weeks and a half, the entire world –figuratively speaking– takes a breather to see and learn about high-performance athletes competing with the best-of-the best, in search of  new olympic –and world– records setting and all sort of sports feats.

High-performance sports, by nature, must be global in order to make meaningful comparisons. Every athlete’s dream is to stand out around the world. Hence, the global nature of sports in general and particularly of the olympics is beyond any doubt.

Sports are a near perfect example of human social activity at its best. Very few human endeavors are as universally extended as sports. Global sports is one of the few human activities where virtually everybody agrees on; that is, in the fundamental spirit behind it: open competition, open benchmarking, with widely communicated instantaneous results.

To a great degree, sports exemplify much of the best of the human spirit: teamwork, management by objectives, persistence, emotional equanimity, discipline, and so on. Very few human endeavors, if any other at all, personifies so well the noble spirit behind well understood competition. Naturally, among contenders, it is very pleasant to result a winner, particularly if that is in the top spot in any sports discipline. However, it is of great importance to also learn how to be a dignified loser, like in life in general. The top spots are just a handle. Not everybody is going to win; in fact, the majority will end up losing.

There is another rarely analyzed angle about global sports: the legal structure behind the sponsor organizations, be it the olympics (the International Olympic Committee –IOC) or soccer’s World Cup (the FIFA). For practical purposes, the nature of the sponsoring organizations in global sports are those of a private foundation, where there are no owners behind it. The amount of economic resources managed and deployed is enormous; revenues for tickets, advertising and transmission rights are in the billions, with a lot of entrepreneurship behind sports’ global competition. Hence, the paramount importance of observing the highest moral standards, and adhering to the best corporate governance practices. Yet, this is a relatively unexplored territory, that deserves deep research and some punctual lucid suggestions for improvement. To whom are the top decision makers of global sports organizations like the IOC and FIFA accountable to?

It is evident that there cannot be profit sharing among the non-existent shareholders; despite it, when dishonesty shows up, there are multiple –immoral– ways to gain enormous personal benefit if some top official is willing to. Full transparency and accountability to the worldwide society that finance those extraordinary endeavors must be sought after. The inevitable conflicts of interest can result in horrible situations -as have already occurred in the past– which cloud the otherwise one of the finest endeavors of mankind.

How the Olympics helps (or even hinders) globalization efforts? From my standpoint, the Olympics are a near-perfect example of globalization at its best.

  • First, globalization in sports is an uncontroversial multicentury-old reality, with increased visibility due to contemporary instantaneous and virtually omnipresent communication means.
  • Second, as in any other human effort, not exempt with occasional controversies, the rules of the game are understood to near perfection by everybody.
  • Third, global sports are so embedded in the human mindset, that they are considered an indispensable part of human activity; nobody would ever think otherwise.
  • Fourth, given the three previous points, global sports is an excellent equalizer –at the very least from the equal opportunities perspective–, an excellent role model for globalization, in its wider conception. Global sports are a bright spot in human activity and thus an appropriate reminder to people all over the planet about the multiple benefits that well conducted globalization represents for mankind. Like everything else in life, if not appropriately done, any human endeavor can lead to conflict and even worse outcomes.
Part II of this post elaborates on the Olympics under the light of competitiveness and knowledge, two of the basic pillars of successful globalization.

In my book, GLOBALIZATION, there is a subsection (in Section One) devoted to Globalization in sports.

 

 

Outsourcing: Opportunities, Myths and Realities

Outsourcing is a very widespread practice, with unknown boundaries.  In that respect, the US is a leading nation, as in many other areas.

A constructive and realistic way to visualize jobs displacement by outsourcing is as an opportunity to upgrade skills and remuneration. History and experience unmistakably show that, in the long run, excessive emotional attachment to personal working habits does not pay well. An open, flexible mind, with a strong desire to learn new skills, is the best preparation of them all, for the hyper-competitive global economy.

As a general rule, those jobs transferred abroad do not come back. What does come back in return is a great opportunity for better, higher paying jobs that, logically, require higher skills. After all, that’s the essence of having the privilege of living in a developed nation.

As a counterbalance of the outsourcing of jobs, lies the inevitability of all developing nations, with no exception, to permanently have to resort to developed nations to acquire sophisticated and specialized goods and services. At the end of the day, at the consumer level, outsourcing is a true win/win situation for everybody.  At the jobs level it is also a win/win situation; however, in the short run, job displacement creates a painful situation, no matter how we approach it. It is a process of creative destruction.

Outsourcing, as an inseparable offspring of globalization, is not a socioeconomic phenomena that can be reversed in a beneficial way for both sides of the equation. There is a great deal of value added to global society by its mere existence. Granted, outsourcing usually is also a very disruptive and painful process because of the jobs dislocation it creates on one side of the deal; every reasonable effort to avoid or minimize that disruption/pain has to be done.

How much latitude is there really for managing outsourcing?

Most of the time, there is a false debate about outsourcing, because, in the final analysis, there is only so much any government can do to effectively counterbalance it. Most fortunately, however, there is plenty of room to gain sizeable benefits from outsourcing by preparing society for this inevitable phenomena. When outsourcing, there is a disparity in time between the preparation (retraining) a developed society needs, and the job displacement it creates; retraining usually takes a long time, if done appropriately, while job displacement is usually an immediate process.

There are five basic principles that provide the conceptual foundation to a proper understanding of the topic:

  • Competitive (comparative) advantages

  • Creative destruction (arbitrage of opportunities)

  • Constructive Use of Our Differences

  • Resistance to Change

  • The price mechanism

Understandably,  as a fact of life … as an undeniable reality, not all nations are endowed with identical resources, both natural and human ones:

  1. On one extreme of the spectrum, stand the most affluent countries, nations with high levels of technological development, with high living standards for their population, meaning high labor costs.

  1. At the other extreme, the many and poor underdeveloped nations, with negligible technological advancement, yet with abundant cheap, unskilled labor.

In between those extremes, there are all sorts of possible combinations, to different degrees.

In an increasingly globalized society, like the one we have been experiencing in recent decades, companies and entrepreneurs have been rediscovering the gigantic benefits to be reaped from this noticeable contrast in resources among nations. I emphasize rediscovering, because throughout the ages, mankind has always, and rightly so, been taking advantage of those differences … that’s what globalization is all about. In fact, in essence, that is the foundation of international trade as well as all sort of exchanges in services too. In Economics, it’s called a competitive (comparative) advantage.

Scientists, scholars, professionals, and business people in all nations on Earth are constantly in search of a solid, lasting competitive advantage … that’s what competition is essentially all about.

The only valid and lasting way to progress is by intelligently applying each and every competitive advantage at reach; in other words, by making a constructive use of our differences, as individuals, as corporations, and as nations.

The price mechanism, in turn, provides vital and dynamic information to guide planning and decision making. The role of the price mechanism in a free society cannot be overstated. Unquestionably, the greatest social function the price mechanism provides in a free economy is signaling where to exploit the large price discrepancies (arbitrage) by benefiting consumers through high quality and less expensive products and services.

How can a developed nation like the US protect its citizens from the negative and very disruptive/painful effects of outsourcing?

 

“Creativity is intelligence having fun”

–Albert Einstein

If adequately handled, outsourcing can and must turn out to be a blessing in disguise, by presenting a huge opportunity to significantly improve the skills of developed country’s population, creating a most welcome virtuous circle: new needs, new higher paid jobs, demanding higher skills (the mere essence of being a developed nation).

There are abundant testimonials of wealthy nations, with very high labor costs, that are very successful in managing, to their advantage, the outsourcing phenomena: Germany, Netherlands, the Scandinavian countries, Switzerland, Singapore, South Korea, Taiwan, Israel, the Czech Republic, and Chile, among others. To a high degree, the US is also a very good example of it. The ingenuity and resourcefulness of the American labor force is well established. Along those lines, the US is a leader in many high paying jobs, high-level activities; among others: high-tech in general, IT (including software), aerospace, engineering, entertainment, consulting and publishing.

Thus, high labor costs by themselves are a correct reflection of affluence and competitiveness. Alas, the dynamic nature of the world economy does not guarantee anything forever. It is extremely important to always be ready, with the appropriate constructive attitude, to learn and become better by the day in our daily professional endeavors. That’s the only infallible formula to successfully cope with globalization and everything associated to it, like outsourcing.

At the corporate and individual levels, there are also a myriad of testimonials of success stories. The path for success in the global village is clear and well established.

There is not –nor will there ever be– a single country with competitive advantages across the whole spectrum … that’s a virtual impossibility. Hence, if appropriately handled, both the global economy and outsourcing leave plenty of room for everyone, provided that the right flexible and dynamic attitude is ever present and honored.

Dinosaurs did not adapt to new, changing circumstances on our planet. As a result, they disappeared from the face of Earth. Metaphorically, that’s a telling story of how we all must collectively strive to avoid prolonging unnecessarily the pain that the job-displacement/retraining process implies.


To be, or not to be? The Lula Conundrum

 

A few days ago, Lula Da Silva –the former president of Brazil, the 8th largest economy on earth, between Russia and the UK–  inexplicably, openly, and unmistakably endorsed Hugo Chávez’s nth campaign for the presidency of Venezuela.

Lula declared:

“Chávez can count on me, can count on the PT (Partido dos Trabalhadores – Brazilian Workers Party, Lula’s party), can count on the left’s solidarity, and of every Latin American: your victory will be our victory.”

“… under Chávez leadership the Venezuelan people have achieved extraordinary accomplishments … that need to be preserved and consolidated”.

His endorsement is truly incomprehensible for five reasons:

1. Lula ended a bright 8-year term (including one reelection) in December 2010 as president of Brazil.

2. Lula’s astonishing success as president of Brazil was based on a highly pragmatic approach to politics and a very commendable evolution to what seemed to be a true statesman (analysis of Lula’s profile and transformation story in my recently released book, Globalization).

3. Although Lula’s beginnings –in fact most of his career before becoming president– were decisively on the left –even extreme left–, as president he was wise enough to reconcile Brazilians’ conflicting interests across the whole political spectrum.

4. Chávez’s track record as president of Venezuela has been deplorable. Indeed, it is very difficult to achieve a worse performance than Chávez’s presidency:

a) The standard of living has deteriorated in an alarming way.
b) Population liberties have been increasingly lost.
c) Chávez has been reforming the Venezuelan constitution to allow him a virtual dictatorship.
d) The government is full of cronies.
e) PDVSA –the old oil state monopoly– has been consistently decreasing its production.
f) Chávez unsuccessfully tried a coup d’état against the Democratic Action government of President Carlos Andrés Pérez’s government in 1992.

5. And finally, Lula had no need whatsoever to do so.

By all means, is Lula trying to reposition himself politically? And if so, towards what end?

It is indeed very sorrowful to see a man of the former political stature of Lula’s, fall from grace in such a sad and puzzling manner.

Peter Higgs, the Subatomic Particle, and the Scottish Connection

Two months ago, on May 4, we posted an article titled ¨The Scottish Connection: ¨Adam Smith, Charles Darwin and Andrew Carnegie”.

A view of the Large Hadron Collider) in its tunnel at CERN near Geneva, Switzerland.

Today, at a press conference in Geneva it was announced:

Scientists at Europe’s CERN research centre have found a new subatomic particle, a basic building block of the universe, which appears to be the boson imagined and named half a century ago by theoretical physicist Peter Higgs…

Two independent studies of data produced by smashing proton particles together at CERN’s Large Hadron Collider produced a convergent near-certainty on the existence of the new particle. (Reuters).

Very remarkably, Dr. Peter Higgs (83), an England native, the physicist who provided the theoretical foundation (essentially a mathematical approach) upon which this recent experiment is based, is currently an Emeritus professor of the University of Edinburgh. Dr. Higgs conducted in Edinburgh (in the early 60s) most of the research leading to the work in the Large Hadron Collider that has experimentally established the existence of a Higgs-like boson.

Most scientists agree that Higgs particle is the last undiscovered piece of the Standard Model that describes the fundamental composition of the universe. The model is to physics what the theory of evolution is to biology. For that reason, some commentators have labeled the Higgs boson as the “God particle”, for its role in turning the Big Bang into a living universe.

Another monumental contribution to mankind stemming from Scotland!


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