Smart People Want to Drink Beer with Other Smart People

Tom Friedman writes brilliant columns. He also writes best-selling books. His best known, of course, is The World is Flat, in which he argues that the convergence of computers, rapid communications and work-flow software have leveled the playing field between industrial and emerging countries.

There’s a part of me that wants to believe this, especially when I hear Friedman speak so eloquently about his evidence.

There’s also a part of me that knows, no matter how good the technology gets, there’s something about personal contact—the ability to sit across a table or, as the title suggests, have a beer after work with a peer to discuss work issues—that video and text and email and work-flow software simply cannot replace.

So, it was with interest that I read the interview with Geoffrey Jones, the Isidor Straus Professor of Business History at the Harvard Business School, in the July-August 2008 edition of HBR. Like Friedman, Jones sounds like he knows what he’s talking about. Unlike Friedman, Jones’s explanations really resonate with me.

The key takeaways include:

1. Predictions about globalization are reliably wrong, even when the forecasters have names like Marx and Friedman. “In the nineteenth century everyone—including Karl Marx, who was enthusiastic about the benefits of the British colonization of India—assumed that globalization would spread wealth creation. And of course at the time, it didn’t. Modern economic growth burst out of Western Europe, headed toward North America and a few other places, and then largely stopped its march for a long period.”

2. We may actually be getting more concentrated. “Oddly enough, we now have technologies that should enable the fast diffusion of knowledge, yet knowledge and wealth not only remain geographically concentrated but seem to be concentrating further in a world that is much less “flat” than it was before 1914.”

3. Can I buy you a beer after work? “However powerful information technology becomes, the way knowledge and wealth disseminate and are applied depends significantly on the proximity of people. Clever bodies want to be living with other clever bodies. . .Wealth and knowledge are staying where there’s a critical mass of certain types of people and institutions. Look at financial services. Obviously, it has become more rather than less important over recent decades to be in London or New York if you want to participate.”

4. Come to Paris if you want to look marvelous. “Perceptions about country of origin also play an important inhibiting role in the diffusion of wealth. If your brilliant new brand or service is headquartered in the “wrong” place, that’s a big obstacle. I’m studying the beauty industry, and it’s clear that anyone trying to build, say, a cosmetics company other than in Paris or New York. . .faces a major credibility problem.”

5. Flat or not, the sun may be setting over the West. “I think many will say that this is when the great divergence between Western culture and China and India began to reverse. . .The wealth gap is not going to close soon—they’re not even remotely there, despite the hype. But in 100 years time? We’ll see Western preeminence as an important but temporary historical blip.”

I once had a professor say, “World history is really Oriental history—we just happen to be living through a brief Western interlude.” Hmmm. (Frankly, I also had a professor once predict the timing of the next extinction of all life on earth, which apparently happens on a somewhat regular basis. My conclusion: Sometimes it’s good just to focus on making it to the end of the month.)

Incidentally, I just finished AnnaLee Saxenian’s Regional Advantage, comparing the cultures of Route 128 and Silicon Valley through the mid-1990s. (I’ll be posting an article soon.) Arguably, Silicon Valley is the country’s finest example of smart people buying beer for other smart people. Echoing Jones, Saxenian notes that “the natural boundaries of the peninsula, a relatively narrow stretch of land hemmed in by the San Francisco Bay to the east and the mountains to the west, ensured a density of development that minimized physical distances between companies and facilitated intensive informal communications.”

Which means, I think, the geography made it easy to buy someone a beer.

Look, Silicon Valley has (and makes) some of the slickest communications technology in the world. Yet when entrepreneurs want to start certain kinds of companies—Web 2.0 being the latest, but disk drive and workstation and semiconductor before that—they put their belongings in a station wagon and drive to Mountain View or Sunnyvale.

I love Tom Friedman. I think Geoffrey Jones is right, though.

Posted by Entrepreneur Generations

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