A few days ago, President-elect Trump put forward the idea of a new border tax on imports produced outside the US. Meanwhile, the buzz of uncertainty about what Brexit will mean for global trade agreements continues, and President Xi Jinping is in Davos signaling the transition to a more globally-oriented China. His participation in the World Economic Forum follows China’s $140B investment in the “one road, one belt” high-speed train route, which will connect China even more closely with Europe. Global commerce is changing like never before.
Some are talking about this trend as “peak globalization” or peak trade; that after this, globalization will begin to decline. This is nonsense. The world has become increasingly globalized over the last 4,000 years, and modern technologies like the internet, blockchain and digital commerce are connecting us even further: the genie is out of the bottle and it will be very hard to put it back in. Consumers today are shopping and “sourcing” directly from many different countries, empowered by technology. If anything, globalization has become more personal, more connected, and more embedded in our lives.
While some believe the solution to the uprising populism around the globe is more isolation and de-globalization to keep jobs local, we have another answer right in front of us: technology. The world will continue to become increasingly globalized because technology has created three things the world has never seen: smarter local production, a new creator economy, and digital platforms.
10 years ago, the unit price of producing 1,000,0000 shoes was 100x cheaper than producing 1,000 shoes. Today, with new advanced production methods, robotics, and additive manufacturing, the variable costs of producing a small batch of shoes are roughly the same as a large one. In other words, we can produce goods along the timeline we need and where we need it. This is already creating a new generation of “small” manufacturers across many communities in the West and elsewhere.
At the same time, technology is empowering a whole new generation of creators and companies on platforms like Kickstarter to build and design new products with new financing models that are friendlier to local economies. While technology led the first wave of mass industrialization and mass globalization, it also holds the keys to creating more sustainable globalization through locally distributed production, recycling of materials and empowering a creator economy. The democratization of knowledge and commerce via the internet and other technology has empowered creators everywhere to not only craft their goods but distribute them around the globe.
Finally, digital platforms have sprouted up everywhere and will only continue to grow, with more and more participants on both the buyer and seller sides. The services offered on these platforms leapfrog our former definition of tit-for-tat value: these services are becoming so ingrained in many peoples’ lives, their value becomes more than the sum of their parts. I predict this will only continue to grow.
The theme for Davos this year is responsive and responsible leadership. Leading responsibly is not just a job for politicians, but also business leaders. This is core to Tradeshift’s mission and why we chose to participate in Davos—to create more open, accessible and sustainable supply chains and to engage in the discussion on how we shape the future of business commerce for the better.
This will require a reset in how we think about crafting both policies and technology, not just focusing on one dimension—cost reduction—but instead how we can create value for society as a whole. This won’t be easy as we need to challenge the existing corporate paradigm for how to run supply chains. The good news is that many companies have already begun this journey.
We’re looking forward to the coming days in Davos and participating in discussions around how more responsible leadership can drive better business commerce.
It matters how we see the world. Yes, it’s changing, but change is a time of opportunity as well as challenge. For the majority of people the world is only getting better, and when it comes to education, health, wealth and opportunities, technology can accelerate these positives and mitigate negatives.
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