From bricklayers to architects – lessons in development

Nov 23, 2007 Business Daily, Strategy

“The rule of the market economy,” this Communist official explained to me, “is that if somewhere has the richest human resources and the cheapest labor, of course the enterprises and the businesses will naturally go there.” In manufacturing, he pointed out, “Chinese people were first the employees and working for the foreign manufacturers, and after several years, after we have learned all the processes and steps, we can start our own firms…It is like building a building. Today, the US, you are the designers, the architects, and the developing countries are the bricklayers for the buildings. But one day I hope we will be the architects.”

Thomas Friedman, The World is Flat

Thomas Friedman is probably the world’s best-known columnist, having won 3 Pulitzer Prizes for his work on The New York Times. In 2005 he produced a humdinger of a book, The World is Flat. It’s still selling in large quantities across the globe, and can be found in pretty much every bookshop and every airport.

Friedman’s main point is that the world is different now. The sources of wealth are not mineral deposits, great locations and other gifts of nature; wealth in today’s “Globalization 3.0” world comes from brainpower, software, knowledge workers and technological breakthroughs. The global competitive landscape has been levelled: by broadband connectivity and common workflow platforms. This means that work can now be done where it is done best, not where it is constrained by geography.

The words quoted here were said to Friedman by Mayor Xia of Dalian, a Chinese port city which has become a modern outsourcing hub for the region. The mayor’s words made me almost jump up and applaud. That is indeed how progress in the capitalist world happens – and communists seem to have grasped it better than some African free-market disciples. He also made me remember that here we appoint comedians, louts and rascals as our mayors.

The mayor is giving a guide to economic development for poor countries. To paraphrase him, step by step: First, be humble enough to accept that at this point in history, certain countries have better technology, better business methods and better know-how than you do. Learn from them. Attract them to your shores, allow them to set up shop, accept low-paid employment in order to gain exposure.

Step 2 is critical: start learning! Observe keenly, and study with great concentration. Absorb and internalise. Learn what works, and what could be better.

Step 3: make it better. Take what you’ve been taught, and improve it. Samsung did this remarkably well in its memory-chip business. It started by licensing technology it did not have from an American corporation. It combined Korean Diaspora workers with its own brainpower to make the technology even better, and to construct a business model that eventually just blew the rest of the world away. The American corporation has faded into history; Samsung is a semiconductor giant, having started with nothing just a generation ago.

Step 4 is to have the gumption to strike out on your own. I spent many years working for multinationals; so did many of today’s top local business leaders who now run homegrown enterprises. When the time was right, we had the nerve to risk everything and walk away to do our own thing.

We never looked back.