March 31, 2008. Shanghai Campus -- CEIBS and IESE jointly hosted an Executive Forum featuring internationally renowned writer Professor Pankaj Ghemawat. The evening event, held on the occasion of IESE's 50th anniversary, attracted a packed house of 200 students and alumni of CEIBS and IESE, as well as business executives and members of the media.
The event opened with opening remarks from CEIBS Executive President Pedro Nueno, Dean Rolf D. Cremer and Co-Dean Zhang Weijiong. IESE Dean Jordi Canals then spoke on "IESE Turns Fifty: The Next 50 years," sharing highlights of the school's development during its first five decades. Dean Canals stressed the important role played by Prof. Pedro Nueno in the development and expansion of IESE over the past 20 years and in expanding the cooperation between CEIBS and IESE since the latter was founded in 1994. Dean Canals also stressed the importance of IESE's General Management Programs worldwide, particularly in developing markets including Africa.
Dean Canals next introduced keynote speaker Professor Pankaj Ghemawat. In 1991, Prof. Ghemawat became youngest-ever tenured professor at the Harvard Business School (HBS); today, he splits his time between teaching Business Administration at HBS and teaching Global Strategy at IESE. Outside of academia, he was a consultant at McKinsey & Co and is a frequent writer for The Wall Street Journal and The New York Times. One of his bestselling Harvard Business Review articles won the McKinsey Award for the best article published in 2005. He has been featured in Harvard Business School's Faculty Seminar Series: "Great Ideas from Business Thought Leaders."
IESE Dean Jordi Canals delivered a speach
During his presentation at the CEIBS/IESE event, Prof. Ghemawat sought to “clear the table” by debunking commonly accepted notions of globalization. His thesis, he told audience members, would be to prove that the world today is not now, and will not be in the next few decades, fully globalized and free of borders. Among the data points presented under the header "Globaloney," Prof. Ghemawat showed that the current total amount of Foreign Direct Investment worldwide is now just 12% -- a slight rise over the single-digit rates prior to 2005. In addition, the total percentage of phone calls made internationally worldwide is just 2%, the ratio of immigrants to native populations in nations worldwide is 3%, the amount of stock investments made internationally is 15%, and the global trade-to-GDP rate is 30%. Prof. Ghemawat then contrasted these actual numbers with the results of extensive surveys showing what educated audience members expect these percentages to be. Overall, expectations in these measures of globalization were generally 2 to 3 times higher than actual figures.
Professor Pankaj Ghemawat
At this stage in his talk, Prof. Ghemawat said, audience members usually comment that they are surprised by his data but still feel that the world is rapidly moving toward globalization. In fact, he stated, some measures of internationalization are actually reducing. In terms of immigration, for example, a larger percent of the world population immigrated in 1910 than do today. Meanwhile in terms of international trade, he said that even in a highly optimistic scenario, global trade as a percentage of GDP could only reach a modest 35% by 2030 -- a figure that hardly constitutes a "borderless world," he said.
Why is the world less globalized -- or less "flat" -- than educated people expect? Prof. Ghemawat answered this by introducing a "CAGE" matrix showing the four factors of cultural distance, administrative distance, geographic distance, and economic distance. His own research has shown that various types of commonalities significantly impact trade between nations. For example, two countries with a shared language generally have 42% more trade than two nations without a shared language, while those with a history of being colonized by the same nation had nearly 200% increase in trade volume versus nations without such a shared history. His conclusion: "The notion that borders don't matter is grossly at variance with the data."
Prof. Ghemawat then listed several reasons why audiences worldwide now tend to believe the world to be more globalized than it is, including: lack of data, the tendency to believe what one hopes or fears, social pressure, media hype and "techno trance" -- the over-emphasis on the importance of technology.
The professor went on to stress that, in fact, "culture and politics are going to be with us for some time to come," and that it is "irresponsible to exaggerate how integrated the world really is so far." The talk sparked a lively Q&A by audience members.
