Location and R&D

Location as it relates to research and development increasingly matters - although you can't ignore talent in other places.  Find out why and how this affects BlackBerry (aka CrackBerry) maker - Research In Motion.

 

Aleem Kanji

The Outsourcing of Consumer Services

(posted by David) Steve Lohr's piece, Hello India? I Need Help With My Math, in the NY Times (sub rq'd) uncovers the evolution of outsourcing as consumer services (often considered non-exportable) such as tutoring, tax and legal services, and personal valets are now available at much lower costs than local providers.

From the article,

The second wave, according to some entrepreneurs, venture capitalists and offshoring veterans, will be the globalization of consumer services. People like Ms. Yamaki and Mr. Tham, they predict, are the early customers in a market that will one day include millions of households in the United States and other nations.

They foresee an array of potential services beyond tutoring and personal assistance like health and nutrition coaching, personal tax and legal advice, help with hobbies and cooking, learning new languages and skills and more. Such services, they say, will be offered for affordable monthly fees or piecework rates.

From Farmer to Landscape Worker?

The latest report from the International Labour Organization, Key Indicators of the Labour Market (KILM) includes this little gem (h/t Peter S Magnusson who mentioned it on his blog):

In recent years agriculture has lost its place as the main sector of employment and has been replaced by the services sector, which in 2006 constituted 42.0 per cent of world employment compared to 36.1 per cent for agriculture. As for the industry sector, it represented 21.9 per cent of total employment, which is almost unchanged from ten years ago. Although textbook theory suggests that economic development entails a structural transformation with a shift away from agriculture to the industry sector, this no longer seems to be reflected in reality. Instead of moving into high-productivity jobs in the industry sector, people are moving directly into the services sector, which consists of both high- and low-productivity jobs.

Therefore, it is unclear if the sectoral shift goes hand in hand with productivity increases and thereby a better utilization of the workforce. Agriculture is still the main sector of employment in the world’s poorest regions. Two-thirds of workers in sub-Saharan Africa and almost half of workers in South Asia and South-East Asia & the Pacific are in agriculture. (Box 4b on page 6 of KILM04)

However, the world has, for the first time ever, more people working in something other than gathering, raising, or providing food.  The fact that they are going from farming to giving manicures and manicuring lawns and asking "do you want fries with that?" might give you reason for pause.  But, many of the ILO "service" occupations are ones that we include in the Creative Class so it's not all doom and gloom.  In fact, the worldwide stagnation of "industrial" employment is an equally interesting finding.  Clearly, productivity increases have impacted industry in the same way as agriculture -- we are making more with less or at least making more with the same.

posted by Kevin Stolarick

Globalization and US Cities

My old friend, Don Holbrook, outlines the challenges globalization brings for US cities and economic development, here (hat tip: Kevin Stolarick).

Blame the Workers

The Wall Street Journal (sub req) quotes a Big Three executive:

"We need to eliminate most, if not all...like 80%" of the gap, says a senior automotive executive involved in labor planning. "It has to be gone by the end of the contract, or doing business in the United States is unsustainable." All three domestic auto makers "will move investment in plants and people outside the country" if they don't bring U.S. labor costs in line with those of Toyota and the other foreign auto makers, the executive said.

How do they get away with this BS. This guy shouldn't be managing a 7-11. The Big Three are not failing because of labor costs. They are failing because their product is crap. The problem is the worst management since the US steel industry - whiners, cry-babies and incompetents.  They keep churning out stuff no one wants. The SUVs which were carrying them have now collapsed and they are being crushed with the move to more fuel efficient cars and hybrids. This is one of the greatest stories in gross mismanagement in world industrial history. It is hard to imagine how anyone could squander the kind of lead and assets they had, but they did. It boggles the mind, actually. When Martin Kenney and I studied Japanese investment in the auto industry during the 1980s and 1990s we were shocked and appalled by what we saw. Factories in total disrepair.  Crap everywhere. Workers treated like sub-humans. Read Rivethead sometime if you have a chance. So were the Japanese. They never even imagined the US auto and related industries could be in the shape they were in.  When in doubt remember this:  Those Camrys and Accords that are tearing up the US market? No, they're not made in Japan or some low labor cost country. They're made right smack here in the US, using American workers. And Japanese and German workers are not exactly cheap labor. It's not American workers that are the problem- it's management.

Harnessing Global Talent

SAP CEO Henning Kagermann has a global talent strategy for the spiky world. Have a look at this interview in the New York Times.

A decade or so ago, we did nearly 100 percent in Germany. Now, it’s two-thirds in Germany and one-third outside. Palo Alto was the first, and we now have about 1,400 engineers in Silicon Valley. Today, we have about 3,000 engineers in India, about 1,000 in China and 900 in Israel. There are other engineering centers around the world, but those are the big four.

More after the jump.

Globalization, demography and real estate

A recent report from the Urban Land Institute and Columbia University's Milstein Center for Real Estate examines what globalization and demographic trends mean for the world's real estate markets.  Download the report here.

The world's wealth is very spiky

The recent UN report on the global distribution of wealth has gotten a lot of media attention, focussed mainly on the startling fact that just 2% of the world's population account for more than half of all wealth; the top 10 percent own more than 85%.

Overlooked however is the extreme geographic concentration of that wealth.  "Almost all of the world's richest individuals live in North America, Europe, and rich Asia-Pacfiic countries," the study finds, which account for more than 90% of all global wealth.   37% of the world's richest 1% live in the US, 27% in Japan, most of the rest in Europe.

The study finds that  wealth is "more unequally distributed than income across countries. High income countries tend to have a bigger share of wealth than of GDP."

I can only imagine how this distribution looks within countries - how tall the world's richest regional peaks are?

Full study is here

Download the powerpoint

Press release

Creative Bay Area

Here's an oped by Jim Wunderman, president and CEO of the Bay Area Council, a federation of the CEOs of hundreds of the largest employers in the Bay Area in today's San Jose Mercury News.

"We suddenly live in a truly global world  ... the Bay Area Council released a survey in which 36 percent of the region's CEOs said their company now actively participates in the global marketplace, buying or selling goods or services. Among small companies with one to 49 workers, an astonishing 26 percent said they are now 'global.'"

"Our region's companies are rapidly "going global,'' but our laws, policies and infrastructure are not keeping pace... Other regions -- such as Shanghai, London, Sydney, Bangalore and even South Florida -- ... are making big changes to maximize the benefits that their region and their companies accrue from the economic change. Their gain could be the Bay Area's loss as companies either move to, expand in or get their start in regions more friendly to global economic competition."

"To respond, the Bay Area Council -- and the hundreds of employers we represent -- proposes that our region focus on a three-part vision:"

"First, attract the creative class. Innovative, knowledge-based workers choose to live in areas with a high quality of life, which also offer superior educational opportunities -- both for themselves and their children."

"Second, fuel the innovation pipeline. Economically successful regions in the future will be defined by distinctive public and private research facilities, a solid supply of risk capital to finance ideas generated at research facilities, and a deep pool of business management talent to run companies founded on these ideas."

"Third, improve trade capacity. The greater the global connectivity, the greater the benefit in the global economic competition. This includes physical trade through airports and seaports, as well as electronic trades of information over fiber-optic lines and wireless systems."

The rest is here.

Also have a look at the Bay Area Council's report, Bay Area 3.0: Global Competitiveness Initiative (hat tip: David Miller). 

Global talent, venture capital and entrepreneurship

Check out UC-Berkeley's Annalee Saxenian new report on the global mobility of engineers, international flows of venture capital, entrepreneurship in India and China and "brain circulation. Download Saxenian_WIDER_2006.pdf