Great Throughts Treasury

This site is dedicated to the memory of Dr. Alan William Smolowe who gave birth to the creation of this database.

Pankaj Ghemawat

Indian Economist, Global Strategist, Speaker and Author

"Economic data simply don?t support the view that we live in a flat, connected world, even if we are technologically connected with everyone, everywhere, all of the time. Data show that most types of economic activity that could be carried out across national borders are actually still concentrated domestically. For example, take foreign investment. Of all the capital being invested around the world, how much would you think is foreign direct investment by companies outside of their home countries? 25%, maybe? More, if you?ve heard the globaloney about ?investment knowing no boundaries?? The fact is, the ratio was less than 9% in 2009 and, while it may be pushed higher by merger waves, has never reached 20%."

"Does the paucity of Indians at the top of non-Indian Fortune Global 500 corporations mean that the late C. K. Prahalad?s assertion that ?Growing up in India is an extraordinary preparation for management? was wrong? Not necessarily. Indians have indeed gone out and achieved great managerial success abroad. The proportion of Silicon Valley tech startups led by Indians has risen from 7% in the 1980s and 1990s to at least 13% and by some estimates more than 25% (even though Indians make up less than 1% of the US population). One estimate pegged the annual income of the Indian diaspora at about one-third of India?s GDP, with much of that coming from Silicon Valley."

"Globalization is an option not an imperative. Or, why the world is not flat."

"Belief that this flat world is upon us, or is imminent, is one of few points that unite pro-globalization and anti- globalization forces. Pro-globalizers tend to cheer this vision of complete integration. Anti-globalizers consider it a grave threat. Both groups have a flawed perception of the world we live in and the degree to which globalization has shaped it. In fact, data indicate that most people consistently overestimate current levels of cross-border integration and similarly underestimate the impact that distances and differences still have in keeping countries apart. Immigration, for example, is a contentious issue on multiple continents. Yet only 3 percent of the world?s people actually live outside the country in which they were born, and only 2 percent of university students study outside their homelands."

"India is not as globally connected as our politicians would like us to believe."

"It's useful to ask ourselves, ?Just how global are we?? before we think about where we go from here."

"No matter how you slice the numbers, the bulk of the flow of goods and services is domestic, not international, and will remain so for the foreseeable future. Even the international flows that do take place are constrained geographically. Not only are international migration, telephone calls, trade and direct investment small in comparison with domestic counterparts, but more than 50 percent of international flows in these categories are contained within distinct continental regions."

"The real myth is not the success of Indians abroad but rather that the world?s largest firms are so global that their national origins no longer influence who they select for CEO. Only 13% of the Fortune Global 500 companies are led by CEOs who hail from outside the country where the firm?s headquarters is located. Also, the foreign countries where Indian CEOs do lead Fortune Global 500 firms are illustrative of how openness to foreign CEOs varies widely from country to country. European firms, on average, are the most likely to have foreign CEOs. U.S. firms lie in between European and Japanese firms."

"Most managers ? 88 percent in a recent online survey I conducted ? think of global expansion as an imperative rather than an option to be evaluated. At one level, this can be seen as yet another outlet for expansionary energies once one starts to think of multiple markets rather than just a single one. But at another level, one can argue that expansionary excesses distinguish how most people think about global strategy ? as strategy for a company operating in multiple countries ? from how they think about corporate strategy for a company operating in multiple lines of business. Cross-border expansion commands wider support and is conceived as optimally proceeding farther than cross-business expansion. For example, 64 percent of the respondents in my survey agreed that ?The truly global company should aim to compete in all major markets,? whereas there is no comparable presumption in terms of competing in all major lines of business (not within most advanced, open economies, at least)."

"Research shows that living abroad expands your mental horizons and increases your creativity. However, merely traveling abroad doesn?t produce this benefit. Executives report that it takes at least three months to become immersed in a place and appreciate how the culture, politics and history of a region affect business there."

"Trade intensity -- measured in terms of exports as a proportion of GDP -- has reached an unprecedented level of about 20 percent. But 20 is still much closer to 0 than to 100. And recent trends aren?t all positive. The intercontinental share of Internet traffic is decreasing, for reasons ranging from surging peer-to-peer traffic, which tends to be relatively localized, to the development of new switching hubs outside the U.S. (reducing the American role as the global switching hub)."

"We?re not at the endpoint of globalization but somewhere near the starting line."

"We tend to believe whatever we most desire or fear. For businesspeople, there is the big draw of unbounded profits in a borderless world. And for many others, there are deep seated fears that globalization might be exploitative, harmful to our cherished cultures, dangerous for the natural environment, and so on. In reality, both of these perspectives are misguided. Increasing cross-border integration offers the potential for huge economic and other gains, but not through the development of stateless corporations that sell the same things to everyone, everywhere. And most of the prevalent fears about globalization are also overblown, or otherwise amenable to mitigation."

"What about the much-vaunted flow of information throughout our hyper-connected world? Only 2 percent of telephone calls are international, and less than 18 percent of Internet traffic crosses national borders. Based on a popularity survey of online news sites in 30 countries, most users get all but a tiny portion -- roughly 5 percent -- of their news from domestic sources. According to the Pew Research Center, only 20 percent of U.S. news coverage across all types of media focuses on international issues, and almost half of that concerns the U.S.?s own foreign affairs. Exports provide the most visible face of globalization, yet even they comprise a smaller proportion of the economy than many believe, accounting -- without double counting products that cross a border multiple times -- for about 20 percent of world gross domestic product. Finally, consider capital, which is presumed to respect no boundaries. Foreign direct investment makes up only 9 percent of all fixed investment globally. Roughly 15 percent to 20 percent of venture capital is deployed outside the investing fund?s home country, and equity investors have only 20 percent of their stock holdings abroad."