that add higher value. Only if more productive companies with higher-value-added activities replace less productive ones can middle income economies continue down the development path.”
In short, the only way for Mexico to thrive is with a strategy of reform retail that will enable it to beat China to the top, not the bottom, because China is not focused on beating Mexico as much as it is on beating America. But winning that kind of race to the top takes intangible focus and will.
You cannot maintain rising standards of living in a flattening world when you are up against competitors who are getting not only their fundamentals right but also their intangibles. China does not just want to get rich. It wants to get powerful. China doesn't just want to learn how to make GM cars. It wants to be GM and put GM out of business. Anyone who doubts that should spend time with young Chinese.
Said Luis Rubio, president of Mexico's Center of Research for Development, “The more self-confidence you have, the more it diminishes your mythologies and complexes. One of the great things about Mexico in the early 1990s was that Mexicans saw that they could do it, they could make it.” A lot of that self-confidence, though, has been lost in Mexico in recent years, because the government stopped reforming. “A lack of self-confidence leads a country to keep chewing on the past,” added Rubio. “A lack of self-confidence [in Mexico] means that everyone in the country thinks the U.S. is going to take Mexico to the cleaners.” That is why NAFTA was so important for Mexico's self-confidence. “What NAFTA accomplished was to get Mexicans to think forward and outward instead of inward and backward. [But] NAFTA was seen [by its architects] as an end more than a beginning. It was seen as the conclusion of a process of political and economic reforms.” Unfortunately, he added, “Mexico did not have a strategy for going forward.”
Will Rogers said it a long time ago: “Even if you're on the right track, you'll get run over if you just sit there.” The flatter the world gets, the faster that will happen. Mexico got itself on the right track with reform wholesale, but then, for a lot of tangible and intangible reasons, it just sat there and reform retail stalled. The more Mexico just sits there, the more it is going to get run over. And it won't be alone.
Companies and the Flat World
TEN: How Companies Cope
As I conducted interviews for this book, I kept hearing the same phrase from different business executives. It was strange; they all used it, as if they had all been talking to each other. The phrase was, “Just in the last couple of years...” Time and again, entrepreneurs and innovators from all different types of businesses, large and small, told me that “just in the last couple of years” they had been able to do things they had never dreamed possible before, or that they were being forced to do things they had never dreamed necessary before.
I am convinced that these entrepreneurs and CEOs were responding to the triple convergence. Each was figuring out a strategy for his or her company to thrive or at least survive in this new environment. Just as individuals need a strategy for coping with the flattening of the world, so too do companies. My economics tutor Paul Romer is fond of saying, “Everyone wants economic growth, but nobody wants change.” Unfortunately, you cannot have one without the other, especially when the playing field shifts as dramatically as it has since the year 2000. If you want to grow and flourish in a flat world, you better learn how to change and align yourself with it.
I am not a business writer and this is not a how-to-succeed-in-business book. What I have learned in researching this book, though, is that the companies that have managed to flourish today are the ones that best understand the triple convergence and have developed their own strategies for coping with it-as opposed to trying to resist it.
This chapter is an effort to highlight a few of their rules and strategies:
Rule #1: When the world goes flat—and you are feeling flattened—reach for a shovel and dig inside yourself. Don't try to build walls.
I learned this valuable lesson from my best friends from Minnesota, Jill and Ken Greer. Going to India gave me an inkling that the world was flat, but only when I went back to my roots and spoke to my friends from Minnesota did I realize just how flat. Some twenty-five years ago Jill and Ken (whose brother Bill I profiled earlier) started their own multimedia company, Greer & Associates, which specialized in developing commercials for TV and doing commercial photography for retail catalogs. They have built up a nice business in Minneapolis, with more than forty employees, including graphic artists and Web designers, their own studio, and a small stable of local and national clients. As a midsize firm, Greer always had to hustle for work, but over the years Ken always found a way to make a good living.
In early April 2004, Ken and Jill came to Washington to spend a weekend for my wife's fiftieth birthday. I could tell that Ken had a lot on his mind regarding his business. We took a long walk one morning in rural Virginia. I told him about the book I was writing, and he told me about how his business was doing. After a while, we realized that we were both talking about the same thing: The world had grown flat, and it had happened so fast, and had affected his business so profoundly, that he was still wrestling with how to adjust. It was clear to him that he was facing competition and pricing pressure of a type and degree that he had never faced before.
“Freelancers,” said Greer, speaking about these independent contractors as if they were a plague of locusts that suddenly had descended on his business, eating everything in sight. “We are now competing against freelancers! We never really competed against freelancers before. Our competition used to be firms of similar size and capability. We used to do similar things in somewhat different ways, and each firm was able to find a niche and make a living.” Today the dynamic is totally different, he said. “Our competition is not only those firms we always used to compete against. Now we have to deal with giant firms, who have the capability to handle small, medium, and large jobs, and also with the solo practitioners working out of their home offices, who [by making use of today's technology and software] can theoretically do the same thing that a person sitting in our office can do. What's the difference in output, from our clients' point of view, between the giant company who hires a kid designer and puts
