I need to jot something down that I plan to build upon later, but I believe that there are some significant people who've caught the trend and are signaling movement. We need to pay attention.
I got my Wired magazine yesterday and in it, frequent smart-guy contributor and author, Daniel Pink, interviews NY Times columnist, Thomas Friedman. Mr. Friedman just released a new book, The World is Flat: A Brief History of the Twenty-First Century. Friedman, who recognizes the trend of globalization, argues that the lifestyle of opulent America is threatened by India and China. In short (and I'm paraphrasing big time), the service industry in America, can be quickly and cheaply exported to these countries. Or other countries. "Leveling the playing field" is the term that Friedman uses; hence, the world is flattening. Geography, distance, and language matter less and less. This isn't about outsourcing. It's about competition.
Friedman tells his children, "Finish your homework. People in China are straving for your job." He says this a bit tongue-in-cheek, but the implication is real. Bill Gates, who critiqued Tom's book in a day long personal session, said this: "Twenty years ago, would you rather have been a B-student in Poughkeepsie or a genius in Shanghai? Twenty years ago, you'd rather be a B-student in Poughkeepsie. Today? Not even close. You'd much prefer to be the genius in Shanghai because you can now export your talents anywhere in the world."
Now, let's take a high tech worker in a high-dollar residential area in the US who is reading this book and processing it. She says this:
There's a working assumption that globalization is overall a good thing. That's not so bad, but it seems that Friedman looks for every opportunity to sell it. He is already trying to make the case that even though outsourcing is moving jobs out of the US at an accelerating pace, it's all gonna be fine:She then continues her thinking...
"I firmly believe in the lesson of classical economists about moving work to where it can be done best. ...Work gets done where it can be done most effectively and efficiently. That ultimately helps the New Londons, New Bedfords and New Yorks of this world even more than it helps the Bangalores and Shenzhens. It helps because it frees up people and capital to do different, more sophisticated work, and it helps because it gives an opportunity to produce the end product more cheaply, benefiting customers even as it helps the corporations. ... India's growing economy is creating a demand for many more American goods and services. What goes around comes around." p.20 - 24
Wouldn't that be nice? This is the argument/religion of economics and the argument of the pro-globalization folks. Work should go to the lowest cost producer. That's efficiency. That drives the economy. There are some negatives in these low cost working conditions and for the environment (work goes where environmental regulation is least), but hey?Here's a successful entrepreneur, and she's seriously pondering the question in the long term: where should I live to maintain my lifestyle?
I have an MBA so I know this drill. I like the drill to an extent. But I live here in the US. I was born here and was planning to die here [Ed. - Note the past tense...] But this whole leveling of the international playing field thing could be a problem for us high-living Americans. We are talking about the hollowing out of the American economy here.
I live in Mill Valley, California. One of the most expensive places on earth to live. Real estate is astronomical here. Labor costs are about as high as anywhere. There are places in the US that have a cost of living that is half of what it is here. Does my Mill Valley location help me economically? Not as much as it used to when I had a local business. Now I compete with software solutions that are made anywhere not just local consultants who have cost structures similar to mine.
Longer term, I may have to consider moving to a place where it won't cost me so much to live so that I will be able to compete with low cost providers.
Now my question: could it be that housing values, 10 years from now, will deflate in the pursuit to find more affordable housing due to global competition? If we have to compete globally, and we do, then expenses must be trimmed, so it makes sense. Here's a scenario: what happens if the California housing market crashes? What if it happens elsewhere in America? How does that change the retirement plans of boomers at the time that they start retiring?
Just wondering out loud...