Is Localization the Next Globalization?
So I've been thinking a lot about localization lately - of services,
production, creativity, etc. I'm beginning to develop a theory that
business models that embrace localization or at a minimum, distributed
localization, will prove out as winners in the next stage of economic
growth. [This theory is entirely a layman's theory, based upon my
observations and readings]
The primary drivers I see in the development of this trend are the end of cheap oil (transportation, agriculture & climate/carbon), the gradual equalization of labor (costs and skillsets) and the explosion of communications and knowledge sharing capabilities.
1) The end of cheap oil: cheap oil has fueled everything from the rise of suburbia to the rise of plastic to the over dependence upon commodity crops by agriculture in the US. But the era of cheap oil is grinding to an end despite the fact that prices have dropped precipitously with the current downturn. Global warming concerns are combining with growing demand from "developing" nations to make demands competitive with supply and increase the need for alternative energy sources. At the same time, global food production has reached a turning point wherein the policies of oil fueled cheap calories are meeting resistance in both "developed" and "developing nations. All of these pieces are conspiring / will conspire to make the cost benefit ratio supporting the transportation of non-specialty resources to distant markets less and less viable.
2) The gradual equalization of labor: the trend started by outsourcing is rapidly forcing a complete change in the way that we think about distributed labor. As economies mature, the cost advantages in outsourcing production labor to "developing" economies are disappearing. Not only are workers demanding greater wages in "developing" economies, but they are also seeking to localize the management of said production by starting small business and companies as an alternative to working directly for multi-nationals. The multi-nationals are encouraging this for obvious reasons as such localization continues to ensure their supply while reducing their risk (in the short term.) Their long term risk of course is that the local companies will begin competing directly with them in the open market if not multi-nationally, than locally and regionally.
3)The explosion of communications and knowledge sharing capabilities: this trend has not only enable the outsourcing of production, but the outsourcing of service industry as well. But furthermore, it has enabled the formation of teams that are not location specific, that are tied by common goals and projects rather than location. The explosion of social communication tools (aka social networks) has further accelerated this movement, allowing for the connection of people around common ideas and goals while letting them live in locations that provide the personal contact they desire (whether family, community or career.) People to people contact continues to be enabled across greater distances and gaps both physical and cultural, changing the way companies and teams and communities operate and thrive.
The final undercurrent to all of this is a human need for connection and recognition. Connection with the providers of our products, with the people we work with, with people with like minds, etc. Connection with those we eat with, those that provide our food, those that we get products from. Recognition for our actions, recognition for our labor recognition for our creativity. Globalization, both physical and virtual, has opened our eyes to potential, and the more it progresses, the more people will be connected to that potential, and the more will strive for it. Often times they will find their opportunties to be greater within a community, whether local or distributed.
I think that over the next period, specialty products, creative capital and raw materials will drive trade. Commodity finished products will localize. Agriculture will localize. Systems and Knowledge management will likely become even more distributed, and there will be a "global economy" formed by the trade of information rather than the trade of cheap goods. Again - this is all just a very "young" theory in my mind, but one that I'm forming several business concepts around and that I see success and potential in already.
A few inspirations:
Experience Matters Blog, David Armano - Coming Full Circle: Humanity Is The New Technology
NYTimes Magazine, Michael Pollan - Farmer In Chief
The primary drivers I see in the development of this trend are the end of cheap oil (transportation, agriculture & climate/carbon), the gradual equalization of labor (costs and skillsets) and the explosion of communications and knowledge sharing capabilities.
1) The end of cheap oil: cheap oil has fueled everything from the rise of suburbia to the rise of plastic to the over dependence upon commodity crops by agriculture in the US. But the era of cheap oil is grinding to an end despite the fact that prices have dropped precipitously with the current downturn. Global warming concerns are combining with growing demand from "developing" nations to make demands competitive with supply and increase the need for alternative energy sources. At the same time, global food production has reached a turning point wherein the policies of oil fueled cheap calories are meeting resistance in both "developed" and "developing nations. All of these pieces are conspiring / will conspire to make the cost benefit ratio supporting the transportation of non-specialty resources to distant markets less and less viable.
2) The gradual equalization of labor: the trend started by outsourcing is rapidly forcing a complete change in the way that we think about distributed labor. As economies mature, the cost advantages in outsourcing production labor to "developing" economies are disappearing. Not only are workers demanding greater wages in "developing" economies, but they are also seeking to localize the management of said production by starting small business and companies as an alternative to working directly for multi-nationals. The multi-nationals are encouraging this for obvious reasons as such localization continues to ensure their supply while reducing their risk (in the short term.) Their long term risk of course is that the local companies will begin competing directly with them in the open market if not multi-nationally, than locally and regionally.
3)The explosion of communications and knowledge sharing capabilities: this trend has not only enable the outsourcing of production, but the outsourcing of service industry as well. But furthermore, it has enabled the formation of teams that are not location specific, that are tied by common goals and projects rather than location. The explosion of social communication tools (aka social networks) has further accelerated this movement, allowing for the connection of people around common ideas and goals while letting them live in locations that provide the personal contact they desire (whether family, community or career.) People to people contact continues to be enabled across greater distances and gaps both physical and cultural, changing the way companies and teams and communities operate and thrive.
The final undercurrent to all of this is a human need for connection and recognition. Connection with the providers of our products, with the people we work with, with people with like minds, etc. Connection with those we eat with, those that provide our food, those that we get products from. Recognition for our actions, recognition for our labor recognition for our creativity. Globalization, both physical and virtual, has opened our eyes to potential, and the more it progresses, the more people will be connected to that potential, and the more will strive for it. Often times they will find their opportunties to be greater within a community, whether local or distributed.
I think that over the next period, specialty products, creative capital and raw materials will drive trade. Commodity finished products will localize. Agriculture will localize. Systems and Knowledge management will likely become even more distributed, and there will be a "global economy" formed by the trade of information rather than the trade of cheap goods. Again - this is all just a very "young" theory in my mind, but one that I'm forming several business concepts around and that I see success and potential in already.
A few inspirations:
Experience Matters Blog, David Armano - Coming Full Circle: Humanity Is The New Technology
NYTimes Magazine, Michael Pollan - Farmer In Chief
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