The Creativity the Asian Miracle Lacks

13 Jun

The Next Asian Miracle Will Not Be Asian What could be worse, the Asian Miracle is waning. or that the United States is succeeding by means I would rather it wasn’t? Yikes, isn’t there some good news somewhere on this planet!

For the past five years or so, the idea had become commonplace that the United States was losing the race for global competitiveness. In my own book, The Emerging Markets Century, I wrote about how the rise of China and India was shifting the competitive edge and how some emerging multinationals (from Samsung Electronics in South Korea to Embraer in Brazil) were becoming world-class companies. All of that remains true; emerging markets remain the place to be for the next decade at least. But, interestingly, the creative, competitive response I had expected seems to be coming even faster than I had thought. In fact, the United States may be doing better than we thought, and China and other rising powers may not be doing quite as well as believed.

We have all come to assume that the developed world lost itsdrive or “will to win,” ceding manufacturing to emerging markets. China and India built impressive manufacturing platforms or back-office strengths based on a belated unleashing of private-sector initiative, low labor costs, and impressive investment in infrastructure. China and others gained a near monopoly on making cheap goods cheaply. Consumers in the United States began to feel that China had won the battle for shelf space in Walmart. American infrastructure fell way behind in building a 21st-century network of roads, rails, bridges, pipelines, airports, and communications technology. Political antagonism combined with the budget and debt crises had placed the onus on “expense cutting” instead of rebuilding infrastructure to remain export-competitive and promote manufacturing. America’s traditional brands had lost some of their luster: No longer was General Motors the pride of global automaking; iPhones were neat, but made in China. Meanwhile, India’s Tata Corp. bought iconic brands like Jaguar, Land Rover, and Tetley Tea. China’s Geely bought Volvo, while Lenovo purchased IBM’s computer division. In South Korea, Samsung and Hyundai became major players; in Taiwan, HTC came from nowhere to be a recognized and respected brand name. To cap it all off, it seemed an irreversible trend: The United States had missed the boat in becoming a “green” leader in a more environmentally conscious world as it ceded ground to mass production in China and innovation in Europe.

But as I saw on my travels, the story is beginning to change. I now believe the despair and fear felt by many in the United States is misplaced. In fact, there are early signs that the United States may be regaining some of its lost competitiveness in manufacturing and that China is losing some ground, especially against other emerging markets.

Antoine Van Agtmael, an investment “guru” – good work if you can get it – highlights five reasons, why the United States is competitive again. One, shale gas – gee, more fossil fuels that run out and kill people and critters! Two, wages are rising in emerging markets – ok, win-win. Three, geezers galore – say goodbye to the gains in #2! Four, smartphones – bully for Apple, but has anyone heard about the new fad, talking without an expensive telecoms connection! Right, it’ll never catch on! Five, smarter competition – Fighting!

Factoids:

  • Unit labor costs in the United States, according to OECD data, have declined from 100 to 88 since 1995, better than anywhere in the developed world except Sweden (80). For comparison, Spain (135) and Italy (120) are much higher. That’s good news for U.S. global competitiveness. (Yay, let’s win this race to the bottom!)
  • The savings rate will drop, and entitlements (now unfunded liabilities) will increase. According to some Chinese economists, the Chinese economy won’t be able to grow more than 6 to 7 percent by the end of this decade without collapsing under the burden of these unfunded liabilities.
  • Within five years, several billion people will be “addicted” to smartphones — emailing, browsing, taking photos and videos, making video calls, using myriad apps, streaming, and playing games.
  • Apple, Qualcomm, Google, Amazon, Facebook, YouTube, Twitter, and Bloomberg are just some examples of new “brands” and of companies at the leading edge of innovation which did not exist or were tiny a decade ago. Today’s world could not live without their inventions, used by millions around the world and which are constantly imitated.

Pause a second to consider the political plight of immigration reform in the States and the prospect for a generation “addicted” to everything. And then, consider, charitably, a positive reason why the American economy is coming back – creativity.

One of the things, and I don’t think I did a good enough job of making this clear in the book, but the most creative people ask all sorts of silly, naive sorts of questions. They’ve got vast social networks. There’s one study by Martin Ruef, a sociologist now at Princeton U., who tracked 760 graduates of the Stanford Business School and to make a long story short, what he found was those who have more diverse social networks were three times more innovative; and he measured innovation by patents, trademarks, and revenue from those patents and trademarks. And those with predictable social networks. And so, these were computer scientists who spent time with biologists and ballerinas and so on, and so I made a very concerted effort in my own life to just ask lots of questions. To just spend time with strangers, people who think differently, who speak different languages, use different acronyms, different assumptions, different politicians. Ask them questions, because they’ll tell me the most interesting stuff.

There’s much more in the podcast with Jonah Lehrer – Steve Jobs, Eli Lilly, the sports industry, self-control as the key to success, Bob Dylan, W.H. Auden, and bacon-infused bourbon Old-Fashioned’s – but fostering an atmosphere of serendipity where smart people can brainstorm without someone cracking the whip or fixating on targets is the road to prosperity.

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