Chapter 13 Chapter 4 Great Rectification (1)

As the world begins to shift from a vertical value creation model (command and control) to an increasingly horizontal value creation model (connection and cooperation), when we dispel the "walls, ceilings, and floors" at the same time, people immediately find that they are facing many challenges. Diverse and complex changes.But these changes don't just affect the way businesses operate.Change affects many things: how individuals, groups, and companies are organized, how companies and groups rise and fall, how individuals fulfill their different roles as consumers, employees, shareholders, and citizens, how people perceive their political status, and how governments What management role to play in this change.None of this will happen overnight, but over time, the various roles, habits, political positions, and management practices we are used to in a round world have had to deeply adjust to flat times.In short, with the triple confluence around 2000, we will experience what I have named "the great sorting out".

Me and Michael, a famous political theorist at Harvard University.Sandel (Michael J. Sandel) began to consider the issue of the big rectification after talking.I was taken aback by what Sandel said. He said that the process of flattening the world I described was actually first mentioned in the Communist Manifesto by Marx and Engels in 1848, but the world we see today is shrinking, flattening and flattening. The situation in Marx's year was different in degree.Marx emphasized the same historical trend in his treatise on capitalism, technology and capital to remove all obstacles, borders, frictions and restrictions in the path of global business development.

Sandel explained: "The world will become a global market without national borders - Marx was one of the first figures to foresee this. In the Communist Manifesto, he described capitalism as the dissolution of all feudal, The power of religious and national entities, thought it would lead to a global civilization ruled by market forces. Marx believed that the emergence of capitalism was inevitable and desirable because once capitalism removed ethnic and religious barriers, the struggle between capital and labor would come to the fore, and the workers of the world would unite against oppression, Stripped of patriotism and religion, they recognize their exploitation and rise up against it. "Indeed, when I read The Communist Manifesto today, I am amazed to find how sharply Marx characterized the factors that flattened the world during the Industrial Revolution, and how he foresaw the ways in which these factors kept flattening the world .In the "Communist Manifesto", Marx and Engels wrote: All fixed ancient relationships and their corresponding ancient and respected concepts and opinions have been eliminated, and all newly formed relationships will not wait until they are fixed. Obsolete. Everything that is fixed has evaporated, everything that is sacred has been profaned. At last people have to look at their position in life and their relationship with each other with sober eyes.

The need to constantly expand the outlets for their products drives the bourgeoisie across the globe.It has to settle everywhere, start businesses everywhere, and make connections everywhere. The bourgeoisie, by opening up the world market, has made production and consumption in all countries worldwide.No matter how much the reactionaries lament, the bourgeoisie has dug up the national foundation under the feet of industry.Ancient national industries have been wiped out, and are being wiped out every day.They are displaced by new industries, the establishment of which has become a matter of vital importance to all civilized peoples; these industries no longer process raw materials of their own, but from remote regions; their Products are not only for domestic consumption, but also for consumption all over the world.The old needs, which are satisfied by the products of the country, are replaced by new ones, which are to be satisfied by the products of very distant countries and regions.The previous state of self-sufficiency and self-defense among local and nationalities has been replaced by mutual contacts and interdependence in all aspects of various nationalities.

This is true of material production, and so is spiritual production.The spiritual products of the nations became common property.National one-sidedness and narrowness became more and more impossible, and a world literature was formed from the many national and local literatures. The bourgeoisie, owing to the rapid improvement of all means of production and the great convenience of communication, has drawn all nations, even the most barbaric, into civilization.The low prices of its commodities are the artillery with which it destroys all Great Walls and conquers the most stubborn xenophobia of barbarians.It compels all nations—if they do not want to perish—to adopt the bourgeois mode of production; it compels them to introduce among themselves what is called civilization, that is, to become bourgeois.In a word, he creates for himself a world in his own image.

Every time I read this passage, I shake my head in amazement at what Marx said in 1848.Referring to the Communist Manifesto, Sandel said to me: "What you are saying is very similar to what Marx predicted. What you are saying is that the development of information technology allows companies to remove inefficiencies and frictions from the market and operations. ...that's your definition of 'flat', but a flat, frictionless world is a double-edged sword. Like you say, it might be good for global business, or like Marx said In that way, it is beneficial to the proletarian revolution. However, it may also pose a threat to some distinctive places and associations. From the embryonic stage of capitalism, people have imagined the world as a perfect market-free from local protectionism , laws, language and cultural differences, and ideological differences. But the imaginary beauty is always broken by reality. This world is full of places that create friction and inefficiency, although some inefficiencies should be avoided and eliminated as much as possible. Yes, but some sources of inefficiency are highly valued institutions, habits, cultures and traditions that reflect non-market values ​​such as social cohesion, religious beliefs and national honor. If global markets and new communication technologies erase These differences, and we risk losing something that really matters. That's why the debate about capitalism has revolved from the beginning about which frictions, barriers, and borders are just sources of futility and inefficiency, and which are the ones we should try to protect The roots of identity and attribute. From the telegraph to the web, each new communication technology promises to reduce the distance between people, increase access to information, and bring us closer to a fully efficient, frictionless global marketplace. And, Each time the question is pressed with urgency: How much should we reduce inefficiencies? How much should we protect values ​​that global markets cannot provide? Some sources of friction do deserve protection, especially With the global economy already threatening its existence.' Of course, the greatest source of friction has been the nation-state, with its well-defined borders and laws. Nation-states have traditionally provided the "walls, ceiling and floor" that organize our lives ". Are borders a source of friction that we should hope to retain or could retain in the flat world?

What about the legal barriers that limit the free flow of information, intellectual property and capital? — such as copyright, worker protections, minimum wages.In a triple confluence, the factors that flatten the world remove the more frictions and barriers they give to nation-states, specific cultures, values, national identities, democratic traditions, and binding contracts that have provided protection and buffers for workers and groups in the past the greater the challenge. What should we keep in order to collaborate more easily? Certainly the "walls, ceilings and floors" that make up our economic and political life will not suddenly disappear everywhere at the same rate.But they are disappearing.Some people find it enjoyable and liberating—they have the opportunity to grow taller, expand, dig, or build in any direction with a whole new set of tools.Others feel free with reduced anxiety, can't find support, can't find their place, and have nothing to protect them from distractions.Some feel completely liberated, while others are completely disoriented.Anthropologists and historians tell us that rapid social change, even in one direction, creates a high degree of instability.What does the future hold for a society that has changed so dramatically in 3 dimensions?No one can tell.This creates stress for people.Old boundaries—walls, ceilings, and floors—have broken down, but we don't know for sure what will replace them.But we know all too well: we're still human, and humans need walls, ceilings, and floors—we need consent, copyright protection, and voting.

Advocates of the open-source movement will tell you: "The Web" New norms will be established.In some cases, this is true.For example, the eBay community is a virtual market without walls, ceilings, or floors. It still adopts a set of normative systems, rewarding individuals with a star for honest transactions, providing users with opportunities for information feedback, and making everyone s transaction history becomes transparent to everyone in the community, resulting in a framework that encourages good behavior that proliferates from the community and is maintained at all times.But when advocates of the open source movement say that "the web" can always be relied upon to establish new norms, this is a bit of a stretch.After all, Al Qaeda is a network, and the values ​​he promotes rarely promote peace, tranquility, and a unified world.The Internet is also capable of spreading gossip at an unprecedented rate and not always correcting it immediately.Think back to what Wikipedia spread about Old John.The poison emanating from John Seigenthaler Sr.'s participation in the assassination.The rumor that Jews were warned not to go to work at the World Trade Center on the morning of September 11th, this big lie started somewhere in the Muslim world and spread like wildfire on the internet with countless stories unmasking it None of the reports could eradicate the rumor.I believe this is largely due to the diversity of the online community.I suspect that the network that spreads the rumor — that Jews were warned not to go to work on September 11th — is a highly homogeneous network, mostly made up of like-minded people who want others to believe the lies they spread, and Publish your opinion in a context where no other opinion exists.In a flat world, this is true for many networks.

Thus, the "ceiling, wall and floor" that defines us in the future will be in a hybrid mode.That is, traditional nations, governments, corporations, and news organizations must work with emerging networks, virtual communities, and corporations to gradually formulate new norms and new boundaries for operating in a flat world.This will be part of a shake-up that will surely be at the forefront of political debate among nation-states, between networks, and within the flat world.Below are some illustrative examples. India vs. Indiana: Who's Exploiting Who Prof. Sandel believes that what I call "collaboration" may be seen by others as just a fancy name for being able to hire cheap labor in India.If you look at this issue from an American perspective, it is true.But if you look at this issue from the perspective recognized by India, these forms of cooperation and outsourcing will be seen as a manifestation of the empowerment of people in developing countries.They can develop, use and benefit from their own wisdom, which is often wasted before the world goes flat.If you look at it from an American perspective, you might conclude that the frictions, barriers, and values ​​that limit outsourcing should be preserved, or even strengthened.But from the Indian point of view, all these barriers and friction factors should be removed, they believe that in order to maintain fairness, justice and fulfill their own aspirations.

In this flat world, one person's economic freedom could mean another's unemployment. Let's look at what happened in the real world: In 2003, the state of Indiana called for bids to upgrade the state's computer system for processing unemployment compensation.Guess who won in the end? Tata America International - the branch of India's Tata Consultancy Services in the United States.Offer from Tata Corporation ($15.2 million) That's $8.1 million less than the closest offer, made by New York-based consultancies Deloitte and Accenture. No business in Indiana bid because the project was too big for them.

In other words, a consulting firm in India was licensed to serve Indiana's Department of Unemployment. Indiana has also outsourced sectors that can compensate for the adverse effects of outsourcing to residents of the state.Tata plans to send about 65 employees to the Indiana government, where they will be joined by 18 other state workers.Tata also said it will employ some local subcontractors, but most of the workers will still come from India. The Indianapolis Star reported on June 25, 2004, that the computer upgrades, once complete, "will speed up the processing of unemployment benefits in the state, save on postage costs and reduce caused disputes". You can probably guess how the story ends.The report said: "Governor Frank Bannon's deputy signed the politically sensitive 4-year contract, and then the Democratic governor died on September 13, 2003." But when the content of the contract was made public, Republicans used it as a tool to attack Democrats in the general election.This problem became increasingly serious later, succeeding Frank.Democrat Joe Bannon as governor. Kernan ordered the contract to be canceled and laws made to prevent this from happening again.He also ordered that the contract be broken down into smaller contracts so that Indiana companies could afford it, which, while beneficial to local companies, was costly and inefficient for the state.The report also said the Indiana government paid Tata $993,000 for eight weeks of work, during which time Tata trained 45 software programmers for Indiana.Alan, the state's commissioner for workforce development."The company is easy to work with," Degner said. I now have a simple question: who is the exploiter and who is the exploited in this India-Indiana story?The US arm of an Indian consulting firm suggested saving the state's taxpayers $8.1 million by upgrading its computers, hiring locals as well as Indian employees.The deal would benefit the Indian company, and it would benefit some Indiana tech workers, as well as the tax savings for state residents to hire more staff elsewhere, build more new school buildings and more.However, the entire contract was destroyed by free-trade Republicans after it was signed by pro-labor Democrats. Let's clear our minds! In the old world, value was usually created vertically from the top down in a single enterprise, and it was easy to see who was up and who was down, who was the exploiter or the exploited.But when the world starts to flatten and value creation becomes increasingly horizontal (individuals have more capabilities through multiple forms of cooperation), who is on top and who is below, and who is the exploiter or the exploited, becomes very complicated.Some old political philosophies no longer apply.In the past, Indians could not find suitable jobs in India after receiving their education in the best technology colleges in the country, which are also among the top in the world. Those high-level intellectuals who did not go abroad to find opportunities had to drive taxis at home. Cars make a living, are they "exploited"?Are these engineers being exploited now when they join the largest consulting firm in India, get paid quite well in the local area, and can make full use of their technology in the flat world?Or are these Indian engineers exploiting the people of Indiana, or are the people of Indiana exploiting these cheap Indian engineers, when they are charging much less than US consulting firms?Can anyone tell me who is exploiting whom in this story? Which side will the traditional "Left" take?Side with skilled workers in developing countries who are trying to use their hard-won talents in developed countries, while paying decent wages?Or do you side with politicians who want to put jobs in the hands of voters in their state, even though they charge more?Which side will the traditional right be on? On the side of those who want to outsource to reduce financial costs, or those who would rather provide taxes and keep jobs locally?If you were against globalization because it hurt people in developing countries, which side would you be on?India or Indiana? The dispute between India and Indiana illustrates how hard it is to draw a line between the interests of two groups that had never previously thought they would be connected, let alone cooperate.But they wake up and suddenly find that in a flat world where work relationships are increasingly horizontal partnerships, they not only connect and collaborate, but desperately need a social contract to manage their relationship. The more important thing is: whether we are talking about management science, political science or production and R&D, many players and processes will have to be closely related to "levelling".Everything needs to be straightened out nicely. Where does the company go from here? In this flat world, just as the relationship between the different workers must be straightened out, so too the relationship between the company and the community.What values ​​are the company influenced by, and whose interests do they defend and respect?Obviously, in a flat world, multinational corporations strive to find opportunities and utilize global resources globally, and make themselves more adaptable to a flat world.In the past, a country relied on its most successful companies to achieve global hegemony to establish its economic status or world status.What will happen when business entities increasingly seek interests and job opportunities globally, and when equity activities increasingly require these companies to have global goals, seek opportunities and leverage resources around the world?The interests and needs of these companies are increasingly disconnected from the countries in which they are headquartered.It used to be said that General Motors embodies American values.But today, people will say: "Dell embodies the values ​​of Malaysia, China, Ireland, India and other countries." Today's HP has 150,000 employees in more than 170 countries.It is not only the world's largest high-tech consumer goods company, but also the largest IT company in Europe, Russia, the Middle East and South Africa.Even though HP is headquartered in Palo Alto, can it still be called an American company if most of its employees and customers are outside the United States?A company simply cannot survive if all its activities are carried out in only one country, even if that country is as big as the United States.So what is keeping the nation-state and its citizens up at night now is how to deal with corporations that are not bound by nation-states.To whom will they be loyal? Hedge fund manager Di Naka."It's good that American companies are doing well, but it's also because they adjusted to the flat world, outsourcing as much production as possible to the cheapest and most efficient suppliers," Singh said. If Dell Every part of the product is produced in the coastal areas of China and then sold to the coastal areas of the United States. Dell will definitely benefit from this, and American consumers will benefit, but it is unclear whether American workers will benefit. "So Dell wants the world to be flatter, with fewer frictions and barriers, and so do many other companies.Outsourcing allows them to produce in the lowest-cost, most efficient markets and sell in the most lucrative ones.There is almost nothing bad for capital in the era of Globalization 3.0.Capitalists only need to spend money to buy ideas, hire the world's best quality and cheap labor for research, development, production and sales, and then they can sit back and relax.Dell stock, shareholders, consumers, and Nasdaq all benefited. All things related to capital are doing well.But only some workers and communities in the United States will benefit. Other workers and communities will feel the pain of a flattened world. From the very beginning when multinational corporations search for labor and markets around the world, their interests have always extended beyond the nation-state where they are headquartered.But in today's flat world, differences in degree lead to differences in kind. Companies have never had so much freedom, never encountered so little resistance, to assign research and development tasks, and produce low-end and high-end products, but I don't know how this will affect companies' long-term relationships with their home countries. Clear. Let's look at this example: On December 7, 2004, IBM announced that it would sell its personal computer (PC) business to China's Lenovo Group, which will become the world's third largest PC manufacturer, with an annual revenue of about 12 billion Dollar. IBM will also acquire an 18.9% stake in Lenovo Group, and the two will establish a strategic alliance in PC sales, financing and global services.The new group forming a strategic alliance will set its global headquarters in New York, but its main production bases will be in Beijing and Raleigh (the capital of North Carolina), its research and development centers will be in China, the United States, and Japan, and its sales outlets will be Worldwide.The integrated Lenovo Group will be IBM's preferred PC supplier, and IBM will also become the new Lenovo's preferred supplier in terms of service and financing. Are you still reading?About 10,000 employees will transfer from IBM to work for Lenovo, which was founded in 1984 and was the first company in China to introduce the idea of ​​a home computer.Since 1997, Lenovo has been the number one PC brand in China.The media revealed the list of senior executives of the new company: "Yang Yuanqing - Chairman of the Board (former CEO of Lenovo Group); Steve Ward - Chief Executive Officer (former Senior Vice President and General Manager of IBM Personal Computer); Fran O'Sullivan - Chief Operating Officer (formerly Head of IBM's Personal Computer Division); Ma Xuezheng - Chief Financial Officer (formerly Chief Financial Officer of Lenovo)." Let's talk about horizontal value creation: The new PC company is still Chinese-owned, headquartered in New York, with factories in Beijing and Raleigh, its chairman and CFO are Chinese, its CEO and The chief operating officer is an American, and the company will be listed in Hong Kong.Would you call it an American company or a Chinese company? Which country does Lenovo belong to, or does it just see itself as a business floating on a flat world? This question was also foreseen in media reports: "Where will Lenovo be headquartered?" The answer he provided was: "As a global enterprise, the new Lenovo will be geographically dispersed, with personnel and physical assets spread across the All over the world." Let's clear our minds. The hard truth is that management, shareholders, and investors mostly don't care where the profits come from, and they don't care that jobs are created there, but they do want the company to continue.Politicians are under pressure to find ways to increase local employment, and residents—whether they are Americans, Europeans, or Indians—want good jobs to stay in their own country. “We are now a global R&D company,” the CEO of a large European multinational told me. For his shareholders and investors, this is indeed very big news.He is in contact with the brightest minds from all over the world. Although these people are not necessarily in China, they will definitely save him money.He told me privately: "But this will definitely have an impact on our domestic employment in the end-maybe not this year, but it will definitely appear in 5 to 15 years. At the beginning, you may also talk to the government about how to preserve employment opportunities for the country. , but after a long time you have to consider the interests of shareholders first.” That said: if I could hire 5 good researchers in China or India for the price of 1 in US or Europe, I would choose the latter, and in the long run our own country would lose a part of its technology Base.The only way to align the interests of corporations with their goals is to have truly smart citizens who can not only claim their own share of the larger global pie, but also create new ones. "We're so used to high incomes that now we really have to earn that money on our own," the chief executive said. But today, even identifying a company's home country is becoming increasingly difficult.Rolls-Royce executive John.Sir Ross once told me: "We have a big business in Germany. We are the largest employer in the high-tech sector in Brandenburg. I recently had dinner with German Chancellor Schröder and he said to me: "You are A German company, why don't you accompany me on my next trip to Russia? 'The purpose of Schroeder's trip is to solicit business for German companies in Russia.He recognized that although our headquarters are in London, our business revolves around creating value in Germany, which is constructive for German-Russian relations. "Although Rolls-Royce is headquartered in the UK, it operates through a horizontal global supply chain. The CEO of the company is a citizen of the British Empire who was knighted by the Queen of England, but was invited by the German Chancellor to visit Russia together. All this All because a link in Rolls-Royce's supply chain happened to pass through Brandenburg. My friend Glenn.Fukushima is an American of Japanese descent.His father, also an American of Japanese descent, was stationed in Japan with the U.S. Army, so Glenn was born there in 1949 in a U.S. military hospital.He graduated from Stanford University and Harvard University, and finally in 1985, he became the director of the Office of the US Trade Representative (USTR) in charge of Japanese affairs from a lawyer, and then became the director of Japan and China affairs in the Office of the US Trade Representative (USTR) assistant, representing the United States in difficult trade negotiations with the two Asian "giants." He came to Tokyo in 1990 and subsequently held a series of senior executive positions at AT&T and other US multinational corporations. In 1997, he was elected by his fellow Americans as president of the American Chamber of Commerce in Japan, a voluntary work that brought him great prestige in a foreign land. I was passing through Tokyo in September 2005 and had breakfast with him as usual at his corner table at the Okura Hotel.I asked him about his work, and he surprised me by saying that he was working on a new job: he had just become a member of the European consortium Airbus. President of Japan Operations Division.He now manages the Japanese business of the European Crown Diamond Manufacturing Company, helping the company try to beat the American Crown Diamond Manufacturing Company, Boeing, to sell airliners to Japan, the country of his ancestral home. "When I joined Airbus, the U.S. embassy here informed me that I would no longer be allowed to participate in the monthly meeting of the U.S. Chamber of Commerce Council in Japan with the U.S. ambassador," said Mr. Fukushima, then a member of the chamber's board of directors. Long, who is hosting the Chamber's 50th anniversary event.Not surprisingly, embassy staff would not want someone representing a major European industrial conglomerate to be assisted by the U.S. embassy, ​​perhaps to the detriment of one of the largest U.S. industrial companies competing with it.And Mr. Fukushima believes, "I am trying some new things. They reflect the characteristics of the times and do not obey the pure idea of ​​​​national division."There is no longer a correlation between the nationality of a multinational executive's executives, the location of a company's headquarters and the markets that top executives focus on, he said.By the way, some parts of each new Boeing 787 will be manufactured in Japan, and many other components will be manufactured in Europe.Whether it is a European aircraft - "Airbus", or an American aircraft - Boeing, it will use all parts and designs from the flat world.