Innovation, Disruption, and Progress: What Do Vaccines, Software, and Shipping Containers Have in Common?

You never know where the next shipping container will come from.

This August 9 Bill Gates dispatch on the multi-modal shipping revolution is a must read, which begins with this:

In the second half of the twentieth century, an innovation came along that would transform the way the world did business. At first, some people wrote it off as a fad. Others kept at it, convinced that it was going to have a huge impact. Some of the companies that made big bets on this tool were very successful, while others ended up going under. Ultimately, it helped accelerate the globalization that had already been under way for centuries.

I’m not talking about software. I’m talking about the shipping industry, and in particular an innovation you might not have thought much about: the shipping container. It is the subject of an excellent book I read this summer called The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger, by a former Economist editor named Marc Levinson. The Box is mostly about globalization, but there is also a larger story here that touches on business and philanthropy more broadly.

For centuries, cargo ships were loaded and unloaded by hand, one crate at a time. Each crate might have a different destination, which made the whole process slow and expensive. In 1956, a trucking magnate named Malcolm McLean had a clever idea: Instead of unloading a trailer’s worth of crates onto a ship, why not put the whole trailer on the ship?

It was the beginning of a revolution in the way goods move around the world. Shipping lines ordered bigger and bigger ships to accommodate the aluminum boxes that soon became the standard container. Port cities from New York to Singapore raced to modernize their facilities to accommodate the larger ships.

Do read Bill's complete review, then read The Box!

 

Globalization: slowed but not stopped

25 March 2009: a short but optimistic essay by George Mason economist Tyler Cowen:

Despite the financial crisis, the world remains closely tied together, whether culturally or economically. You can see this in the foods you eat, the people you see in the shopping mall, your equity portfolio, and the stamps in your passport. The internet gives you immediate connections to virtually anywhere. you wish.

Plenty of Cassandras are warning that the days of globalization are over or have slowed down. And indeed there are some troubling signs. From 1998 to 2007 the dollar value of international trade rose by 150 percent but now it is shrinking rapidly and perhaps the clock is turning back to the 1990s.

Still, unless the world sees a major war or pandemic, this is more likely a bump in the road than an end to globalization. Yes there will be temporary slowdowns but there also will be periods of catch-up and acceleration as well. Most of the major processes favoring globalization are already in place.

Globalization consists of trade, investment, and migration, plus the notion of general influence through norms and other informal channels. One of the most important (yet neglected) insights of economics is that trade, investment, and migration can all, under various conditions, substitute for each other. So if trade is cut off, investment can flow or labor can move from one country to another. If Toyota cannot ship more cars to the American market, the company will open up a plant in Kentucky. Or if Mexicans are not allowed to cross the border, more American capital and goods will flow to Mexico; American businesses in any case wish to hire Mexicans and also to sell to them. Globalization will stop only if trade, investment, and migration across borders all are halted and that would take a truly major negative event, far worse than the ongoing financial crisis.

Let’s look at how the current trends – which again are already in place – are likely to play themselves out.

[…]

The greatest danger to globalization today is the possibility of an economic crack-up in China. The country has grown at miraculous rates for many years in an unprecedented fashion. No country has gone from poverty to wealth without having significant volatility along the way. The Chinese financial system is of unclear quality, commercial practices in the country lack transparency, and so much of what goes on there is “subprime,” so to speak. If the Chinese economy were to crack up, capital flows would slow down, trade would be hurt, other Asian economies would be damaged, and the reverberations would be felt around the world. The United States would face a capital crisis in funding its growing government debt.

I’m not predicting that outcome, but if you are looking to identify the vulnerable point in today’s globalizing world, you’ll find it in the very large country – China – that had resisted globalization for so very long.

Continue reading here.

Education Arbitrage

From Chicago Boyz:

I think this is the coolest thing I’ve seen to hit the slow as morass world of education. Jonathan coined the phrase in response: “education arbitrage.” What a fantastic idea.

I agree – unlimited tutoring hours from an experienced Indian teacher for $100/month. Another example of globalization making life better for the not-rich. I can’t wait to see the teachers’ unions position on this one. Definitely read the whole thing.

India & US, nuclear expansion that's good for the world

India is the new China in the eyes of the Bush administration, which has promised to help this once-slumbering Asian giant develop into one of the world’s five or six major economic and political powers. That undertaking has instilled a new sense of security in the Indian capital and erased long-standing tensions.

Jim Hoagland is in New Delhi, interviewing Prime Minister Manmohan Singh.

…The former firebrand of the Non-Aligned Movement has chosen this moment to forge a close partnership with Washington and to speak up positively about American power in world affairs.

“This lack of nuclear cooperation is the last remaining cobweb from our old relationship, and we can now sweep it aside,” Prime Minister Manmohan Singh said with an expressive wave of his hand. “There are no other barriers to a more productive, more durable relationship with the United States. The potential is enormous for our two nations.”

Feeney interviews Tom Barnett on "After Words"

Have you already read Tom Barnett’s “The Pentagon’s New Map“, and the recently released “Blueprint for Action: A Future Worth Creating“? If not, I think you’ll find this one hour video interview by Rep. Tom Feeney on “After Words” very worthwhile.

It’s unusual for TV interviews because Rep. Feeney has actually read the books. More unusual, he allows Barnett to explain his work.

Background for those who’ve not been following Barnett. Esquire editors wrote the following in the issue where they published Barnett’s first “popular” essay on the Core and the Gap, and how “Disconnectedness defines danger”:

FROM THE CONTRIBUTORS’ PAGE (p. 56):

Shortly after we wrote about military strategist THOMAS BARNETT in last December’s Best and Brightest issue, he gave the Esquire staff a presentation on his theory of war and globalization, just as he regularly does for government leaders as an adviser to the Department of Defense. We’ll never read the news the same way again. This month, Barnett delivers the same briefing to you in “The Pentagon’s New Map (page 174), in which he maps out America’s recent military encounters and predicts future ones based on patterns of global economic development. “We’re at a time period not unlike after World War II,” says Barnett, who is also a professor at the Naval War College in Newport, Rhode Island. “We’re trying to ask the same great questions, like: How can a superpower today influence history for the better? We established this overarching ideology for so long that allowed us to justify anything, and that ideology was containment. In some ways, what I’m trying to argue is a new sort of containment—a containment of the new bad places and the desire to shrink them.”

FROM THE EDITOR’S LETTER (p. 58):

[excerpted]

But there is one truly special story in this issue—one that you’ll find in no other magazine. If you remember our December issue, the one we called the Best and Brightest, which was about people on the cutting edge, doing work that will improve our country and our world, you might remember Thomas Barnett. Tom Barnett is a war strategist. He puts the world—especially the parts of the world where terrorism and unrest are brewing—into context. He does this for the Secretary of Defense, and he draws conclusions about how best to avert or engage conflicts—and thus how to keep our country secure.

On page 174, Barnett has annotated the world. More specifically, the world’s hot spots and the likelihood of war in each of those places. For the first time, someone with a position in the government explains what we’re really undertaking when we go to war in Iraq. It’s not just about disarmament. Rather, the United States is redrawing the map of the region, we are shrinking the Gap (to use Barnett’s term), we are changing the course of history by adopting a good-offense-is-the-best-defense strategy.

This is an entirely unprecedented look inside the thinking that will guide our defense strategy over the next five to ten years. It’s a fantastic and challenging story. In November, Barnett came and presented his philosophy of global conflict to our staff. It was amazing and kind of breathtaking. It made each of us feel as though we had a slightly better grip on some of the most frightening issues ever to face our country and the world. I hope it has the same effect on you, making your life a little better.

—David Granger

David Ignatius on "The Pentagon's New Map": Winning a War For the Disconnected

I missed this Ignatius column from last December, but today came across a reference to the op-ed while reading Tom Barnett’s new “Blueprint for Action : A Future Worth Creating”. Regular readers already know that I think “The Pentagon’s New Map” made a very important contribution to geopolitical strategy. More on Blueprint for Action after I finish the book. Ignatius wrote:

It hasn’t been reviewed by the New York Times or The Post, and it’s little known outside the military. But the red-hot book among the nation’s admirals and generals this holiday season is a work of strategy by Thomas P.M. Barnett called “The Pentagon’s New Map.”

Imagine a combination of Tom Friedman on globalization and Karl von Clausewitz on war and you begin to get an idea of where Barnett is coming from. His book tries to rethink strategy for a post-Cold War, post-Sept. 11 world caught between order and anarchy, self-satisfaction and rage, prosperity and ruin.

Barnett’s central thesis is that today’s world is divided into two categories: the “Functioning Core” of nations connected to the global economy and prospering as never before, and the “Non-Integrating Gap” of nations disconnected from the matrix of wealth and progress and therefore spinning toward chaos. Most of America’s military interventions in recent years have been in the Gap, notes Barnett, but we have failed to understand that we face a common enemy there. . .

Barnett doesn’t see America’s role as a neo-imperialist global centurion. Instead, he argues, the U.S. goal must be to promote “rule sets” that are shared by Core and Gap alike. “All we can offer is choice, the connectivity to escape isolation, and the safety within which freedom finds practical expression,” he writes. “None of this can be imposed, only offered. Globalization does not come with a ruler, but with rules.”

Barnett has been tinkering with these ideas since the late 1990s, but they came into focus, not surprisingly, after Sept. 11, 2001. Three months later, he was giving the first versions of a briefing that has now been heard by hundreds of senior military officers. His concepts have spread so fast among the military brass that when I was in Bahrain two weeks ago, I heard a Barnett-style briefing from the commander of U.S. naval forces in the Persian Gulf, Vice Adm. David Nichols. He outlined a strategy of encouraging countries in the Middle East to move toward “connected” economies, orderly “rule sets” and democratic political reform.

A continuing puzzle (to me) is why Barnett’s work is so often discussed in the context of military strategy. The applications there are clear, but the strategy is in no way purely a “military strategy”. My take is the genesis of the Core/Gap concept was Barnett’s role in the Cantor Fitzgerald Economic Security Exercises. Very sadly, the Cantor Fitzgerald principals who initiated that study-series perished in the 9/11 World Trade Center attacks. Otherwise we might be hearing more commentary from the Wall Street community.

That Barnett’s thesis is compelling derives from a sound understanding of the economics that drive globalization – and the simple desires of families to improve their lives.

Barnett’s website and blog are a remarkable resource.