For the past couple of decades we have been talking about the evolution to a new, Internet-based digital economy. This transformation keeps gathering speed, as we transition from the connected economy of PCs, browsers and web servers to our increasingly hyperconnected economy of smart mobile devices, cloud computing and broadband wireless networks.
Everyone pretty much agrees that there is a transformation of historical proportions underway, propelling us from the industrial society of the past two centuries to an information society that's in the process of being defined. But there is less agreement on the impact of this emerging digital economy on our personal behaviors and attitudes, on our communities and institutions and on political and economic events around the globe.
The key changes brought about by the digital economy are succinctly summarized by Mark Stahlman in this recently published blog, Digital Economics 101. Stahlman, an IT strategist and financial analyst, is co-founder of TMT Strategies, a research company focused on the impact of digital technologies on the economy and society. I have known and worked with him for over twenty years, and serve as an advisor to TMT Strategies.
According to Stahlman, four major trends characterize the transition to this 21st century digital economy: globalism-to-localism, wants-to-needs, specialization-to-DIY (do-it-yourself), and institutionalism-to-personalism. I’d like to devote the bulk of my comments to the first of these trends, - “From global expansion and world-unifying ambitions (globalism) to local concerns and direct involvement (localism),” - as it is arguably the one requiring most clarification.
Isn’t the hyperconnected, digital economy a byproduct of both the IT revolution and the forces of globalization? Shouldn’t this first trend be called localism-to-globalism rather than the other way around? Aren’t successful enterprise becoming globally integrated? Isn’t the world becoming increasingly flat?
Stahlman very purposely uses the term globalism, not globalization, in describing this trend. While the two terms sound similar, they are in fact quite different and often opposites.
As defined in Wikipedia, globalization refers primarily to the process of business and economic integration that has resulted from advances in digital technologies and the rise of the Internet. It has enabled companies to integrate their business processes, information and workforce around the world, in search of lower costs and higher productivity as well as new markets for their products and services.
In The World is Flat, Tom Friedman writes primarily about the technology driven forces of globalization, which have enabled India, China and many other countries to become part of the global supply chain for manufacturing and services. These forces of globalization are significantly restructuring the world’s economy, with an explosion of wealth and middle class workers in emerging economies, and slow growth and prolonged high unemployment in the more advanced economies.
Globalism is different. It usually refers to placing the interests of the entire planet above those of individual countries. It is grounded in the belief that “we share one fragile planet the survival of which requires mutual respect and careful treatment of the earth and of all its people.” Globalism is the underlying philosophy behind the United Nations, the Trilateral Commission and similar organizations aiming to facilitate international cooperation. But, as Harvard Professor Joseph Nye observes in Globalism versus Globalization:
“[It] is important to note that globalism does not imply universality. After all, the connections that make up the networks to define globalism may be more strongly felt in some parts of the world than in others. . . . Since globalism does not imply universality and given that globalization refers to dynamic changes, it is not surprising that globalization implies neither equity - nor homogenization. In fact, it is equally likely to amplify differences - or at least make people more aware of them.”
Our technologies enable us to find and collaborate with people with whom we share common interests around the world. But, at the same time, they are also sharpening our differences. Rather than globalists, we are becoming increasingly localists or tribal, as Stahlman writes:
“While it was once commonplace to think about being a "citizen of the world" or even aspire to be a "jet-setter," these cosmopolitan attitudes have been fading over the past decades. Nowadays, we are more likely to define our own "tribes" based on common affinities, which, to be sure, often involve people from around the world. . . Cohesion among these self-defined groups is already a powerful social force. Engagement by these groups in local affairs is already having significant political ramifications.”
Tom Friedman commented on this globalism-to-localism trend in a recent OpEd, Two Worlds Cracking Up: “In Europe, the supranational project did not work, and now, to a degree, Europe is falling back into individual states. In the Arab world, the national project did not work, so some of the Arab states are falling back onto sects, tribes, regions and clans.” I would that that our increasingly polarized US society represents a third such example. It is getting harder to get much done at the national level. And it seems as if angry, tribal groups are the loudest voices framing our national conversations.
Let me briefly comment on the next three trends: “From mass-media funded by wants-based advertising (push) to interactive communications driven by personal needs (pull); From relying on others to perform specialized jobs (specialization) to taking on these tasks ourselves (do-it-yourself); and From pushing moral and social responsibilities onto others (institutionalism) to assuming these responsibilities ourselves (personalism).”
They all share in common the overall trend toward individual and community empowerment, whether as consumers, workers or citizens. A number of studies have observed that as business competition intensifies, customers have been gaining market power, and they are using that power to find the best positive deals. Similarly, the compensation for talented employees continues to rise as companies compete to attract and retain them. The balance of power has been shifting from companies to increasingly well-informed consumers and well-educated workers. At the same time, governments and other powerful hierarchic institutions are being challenged by grassroots, self-organized citizens.
These well connected individuals are being empowered by the knowledge flows made possible by digital technologies. Increased transparency helps people make better informed decisions. Social collaboration levels the asymmetry between individuals and large institutions. But, this same hyperconnectivity is also driving volatility and polarization in economic, social and political arenas.
Towards the end of his blog, Mark Stahlman nicely brings together these various trends as he writes:
“Digital technology uniquely enables individuals to recast their relationships with others around them, with the world, and even with themselves. Digital technology compels action and interaction, replacing the passivity of the remote control with keyboards and screens. In comparison to a world dominated by television, we are literally putting our "digits" (i.e. fingers) to work into our mediated lives. This personal involvement tends to collapse abstract universals to what we can experience directly, encouraging more hands-on initiatives, which can only occur "locally" and which require us to be increasingly responsible for our own actions”