Video Transcript: CAGE Framework for International Trade

Jennifer Crumpton - Welcome to starter TV. I'm Jennifer Crumpton, and today  I'm talking with Pankaj Gemavat. He's the author of world 3.0 global prosperity  and how to achieve it. And he's a global Professor of Management at NYU Stern School of Business, as well as IESE in Barcelona. Thank you so much for being  here with us today from across the ocean. I'm really interested in what role  mentors have played in developing the successful career, and who have been  some of your mentors?  

Pankaj Gemavat - Yeah, I think that if you're born in a small town in India to get  far in life, you really need a family environment that supports, encourages  learning. My father is a university professor. My mother was the first woman in  her very traditional family to go to college. And so I think it really started with our  parents pushing us to excel academically. Because with different parents, things would have turned out very, very differently. And then, of course, beyond that,  my teachers, and there have been many teachers, because I've had many years of formal education, so I can think of my Sanskrit teacher in medium school,  who was particularly instrumental in sensitizing me to the humanities, which we  had very little exposure to in India otherwise. But probably the teachers who had the biggest impact on me were my three thesis advisors at Harvard, Richard  Caves, Michael Porter, Michael Spence, who are all very well known in the  business world, and I could not imagine, you know, what life would have been  like if I hadn't had this all star cast of thesis advisors to provide not just direct,  almost immediate feedback, but really enormous levels of inspiration.  

Jennifer Crumpton - How are you globalizing management education? And why is this such a critical thing?  

Pankaj Gemavat - Well, globalization of management education seems to be  critical because if you look at large companies, they tend to be relatively  globalized. If you look at small companies, most of them have aspirations to  become more global, and yet, if you look at what the business schools actually  do to train people to work in these companies, I'm not the only person who  thinks that they actually do very little to teach people how to manage outside  their native countries. So in fact, we're currently engaged in a joint project with  Sam Palmisano. Used to be the chairman of IBM Sam's very worked up about  this issue, and so we've joined forces and are actually working on a global  scholars platform, a program to help disseminate some of this content. So I  regard the critical challenge here as trying to figure out how we do more to  globalize management education than the two most frequently employed  devices, which is get a lot of interesting people together and then take them to  some interesting places. And you know that is useful, but if that's all we do,  we're just a specialized branch of the travel and hospitality sector, and there has

to be some classroom content, something specifiable in the curriculum that  helps undergird and inform these trips abroad, the study away periods, et  cetera. And unfortunately, most business schools, especially in the US, do not  have anything like required material on globalization at the micro level in their  curricula.  

Jennifer Crumpton - Wow. So you've developed a type of curriculum that they  can use in the classroom, as well as abroad.  

Pankaj Gemavat - Yeah, I've been involved in trying to develop materials for this for some time now. I was originally involved in a task force that the AACSB set  up on the globalization of management education. AACSB is the biggest  accreditation body for business schools, and so it was a committee of 13  people, 12 deans and me. And since I had more spare time than most of the  deans, the chair, Bob Bruner, who's the Dean at Darden and I basically, were  the ones who did a fair amount of the drafting, along with the help of the  AACSB, and I was quite sort of struck by the fact that a very disparate group of  business school deans were all willing to endorse the chapter I wrote under my  own name on the very small topic of what business school should teach  students about globalization and how. Wow. So the AACSB report led to the  development of some materials, a course on a disc that we that the AACSB has  been distributing to all its accredited institutions, a suggestion from the AACSB,  although it's not yet at least an accreditation requirement that schools consider  offering something like this, if not exactly this type of course, and then, since  inertia tends to be high in the academic sector, as well as many other sectors,  I've been involved in some discussions with them again recently about how we  try and take this to the next level by trying to develop some digitized material  that would be more like a one two day seminar teaching the teachers how to  teach globalization.  

Jennifer Crumpton - I guess that's important too  

Pankaj Gemavat - well. You know, given the dearth of qualified people to teach  globalization, and this country is actually much more fortunate in this respect,  than the parts of the world where there's been a lot of growth in business  schools recently. So if you look at countries like China or India, the last time I  looked, India was supposed to have 3000 business schools. There are definitely not 3000 people in India qualified to teach globalization of business to all those  students, and yet they need to learn something about this stuff. So I think part of it is we're trying to, sort of, you know, induce schools that do have their own  faculty resources to at least consider adding some of this material to what they  currently do. But I think in emerging economies like India, Mexico, Philippines 

and China, to name four of the biggest concentrations of business schools in the world. Outside the advanced economies, clearly, there's a sort of even more  important role for trying to use technology to substitute for some of the  deficiencies that are going to take decades to overcome in terms of training  people to teach this stuff and actually getting them down the learning curve to  the point where they can develop their own materials entirely along the lines that they consider appropriate. What we try and do is provide a little bit of a  framework that can be customized to the needs of different regions. And so the  idea is we can provide a bit of a conceptual structure, some general purpose  teaching materials, but I suspect that what you want to teach students about  globalization in India is a little bit different from what you want to teach students  in the United States about globalization. And so right now, what we have is a  customizable framework for thinking about how you design such a course. 

Jennifer Crumpton - What do you think is the biggest skills gap we're facing in  the US, and what should we be doing about that?  

Pankaj Gemavat - Well, clearly, you know, education, equality of opportunity.  Much on people's minds. I think when I think of the skills gaps in the US, I sort of parse it according to the vowels in the English, in the Roman alphabet, A, e, i, o, u, and each of those captures a facet of what I think needs to happen. The A  stands for apprenticeship. I think that there's an emerging consensus that one of the respects in which the US lags, for instance, countries like Germany, is in the  absence of programs that really do add significant skills at a vocational level.  And so are but are a bit of a departure from the traditional high school, college  et cetera sequence, with many people not going from high school to college.  The hope is that at least for some of those people, apprenticeships are going to  make sense and are going to help them be much better prepared for integration  with the workforce. And there's some truly striking statistics on the values, value  of apprenticeship. I think there was a recent study that concluded something like a $250,000 lifetime gain for an apprentice and a social return on these kinds of  investments of the order of 30 or 40% if I remember the numbers correctly, so,  apprenticeship is one obvious area where there needs to be improvement.  Second, e, in a, e, i, o, u stands for early education, in my mind, because we  have this paradox of the US clearly dominates the world in terms of leading  universities, and yet, when we look at primary and middle school education in  particular, or when we look at the PISA tests and see where the US ranks, there  is clearly the US is well behind many other advanced countries or countries that  until. Recently were considered emerging like South Korea, and it's a little bit  hard to imagine some of the broader social issues that have triggered this  debate about a skills gap being resolved if we're leaving so many people behind, the people who are never going to benefit from expensive and high quality 

university education and who are stuck with the worst aspects in a comparative  sense of the American educational system from the very beginning, from the  very beginning. So that strikes me as another important priority, the I in this  vowel sequence is immigration. And while immigration is a contentious topic, not just in this country. I spend half my time in Europe, and it's at least as  contentious in Europe as it is in the United States. The point is that, you know, at least a number of countries have adopted points based immigration systems as  a way of addressing specific gaps that they have in terms of skills. And, you  know, these are countries that generally are pretty thoughtful about what they  do. Singapore comes to mind. I think the Canadians have such a system, and it  clearly would make sense for the US, something that's even acknowledged by  people who are generally very hostile to immigration into the US to have, for  instance, more of the foreign students who come and attend great American  universities to make it easier, rather than harder, for them to stay on in this  country. So I think that immigration, unlike early education, which is a grassroots will have, will take a while to sort of actually affect, given some of the constraints that surround the educational system in this country, the unions, et cetera. I think immigration is something that clearly, in terms of skilled immigration, I think that  there is significantly less political resistance, and it's a much more feasible  alternative. The O in the vowel sequence stands for optimism. And I think it's  important to remember that while there are these issues around lack of  apprenticeships, weaknesses in early education, sort of hard to explain  elements of the immigration system that the US is actually operating at a 5.5%  unemployment rate is growing significantly more robustly than West Europe.  And I make this point about optimism, because when I talk to young people  today, for instance, my daughter, who's a junior at Wellesley College, she and  her friends seem way more concerned about how employable they're going to  be, and you know what they're going to find when they get out there, than we  ever were when I was an undergraduate at a liberal arts college also in Boston,  Massachusetts, where we, frankly, didn't spend much time back in the 1970s  thinking about these issues. So on the one hand, as a parent, I feel I'm glad that  my daughter is thinking ahead to what she wants to do with her life. I do worry a  little bit that, you know, to the extent that extreme pessimism settles in some of  the best elements of a liberal arts education. Again, another distinctive thing of  the US educational system are going to get watered down in crazy frenzy of pre  professionalism. And so I think you know the basic model, get a broad education focus on something deep, but have a broad enough base that you're able to  execute some changes in the course of your career. Is probably the model I'd  recommend, but it's a model that seems very risky to people who are really very  worried about what the job prospects look like. So one can overdo the gloom  and doom in a way that induces young people to make the wrong choices, at  least in my opinion. And finally, the U in A E I O U is universality. And again, this 

goes back to the big debate about social equality, et cetera. And without insisting on equality of outcomes, in terms of equality of opportunities, I think it should be  fairly non controversial that there are significant groups that have been  systematically left behind for various historical reasons, and that focusing or  concentrating some efforts there is going to yield more in the level of aggregate  social benefits than distributing the same amount of financial support, et cetera,  very evenly but thinly across the entire population. So when I think of the  enormous gains that occurred when women joined the workforce in greater  numbers, that. To me, is the best testament to sort of the unlocked potential of  the groups. And I think this unfortunately still affects women, women to a  significant extent, but they're also clearly ethnic minorities that are not on this  alleged escalator of social progress.  

Jennifer Crumpton - What do you envision for the future of American  education? 

Pankaj Gemavat - So let me talk about something that I haven't gotten into yet,  which is that even though universities are excellent and that is the brightest spot in the US educational system, in comparative perspective, there is inevitably  rising concern about the costs of college education, and there are, on the one  hand, I'm an academic, so I kind of understand where some of this money goes  and why it's not all just people taking long vacations or being Molly coddled, et  cetera. But that said, very few industries in general, manage to increase their  prices faster than the rate of inflation without suffering some long term  consequences. And unfortunately, you know, education and you know, I guess,  the health care sector, and you know, smaller sectors like funeral services come  to mind as the only industries that have seen this kind of behavior. So there is a  crisis of affordability, and US higher education. It's something that with all the  questions now around student debt, with all the shenanigans that some of the  for profit universities practiced in terms of relying on loans from the government  to send students through programs that were never really going to help their  employability. It's an issue that I think is front and center on the minds of not just  people who look at the educational sector from outside, but university presidents around this country. And I think I have a article coming out in the California  Management Review special issue on education, where the other people are  such worthies as the president of Stanford, the president the ex president of  Yale, et cetera. My own pitch in this is that if we take the cost issues seriously,  we cannot afford to assume that willingness to pay is going or ability to pay is  going to continue to rise at these rates. So we really do need to think more  effectively about how we use technology to curtail some of these costs. And so  one of the things that I personally tried to do to sort of figure out what the  possibilities are is I just actually started offering a MOOC, one of these massive 

open online courses on the Coursera platform, to try and figure out, okay, are  MOOCs the answer? My own experience suggests that they're not. But my own  experience suggests that the challenge of incorporating technology into what we do in universities is very critical, and to simply say that MOOCs are not up to the job misses out on the many mixing and matching opportunities that exist in  terms of the flipped classroom, in terms of reserving classroom time, which is  truly a scarce commodity for stuff that really is best done face to face, but having the kind of transmission of lectures, et cetera, largely being technology enabled  as a way of freeing up time for what's really important to get together to talk  about, while also trying to help contain some of the costs and ideally also  improving the effectiveness of the educational experience. So I've taught most  of my life at schools that favor the case method that's always a highly interactive experience, and the hope is that the students learn quite a bit from that active  engagement. I'm also struck by how many business schools still rely basically  on pure lecture methods. Everything we know about learning suggests that  passive learning is not nearly as effective as active learning, and technology can be used much more effectively to engage students. So it's not just a cost issue,  it's also the benefits delivered to the students and to society, ultimately, through  technology, that I think is probably the biggest issue facing us, higher education,  given the cost escalation  

Jennifer Crumpton - in your book, world 3.0 you say that the world is not as  globalized as we tend to think that it is. Why is that and why is this important to  know?  

Pankaj Gemavat - this conclusion of, you know, what I neutrally refer to as  global, owning this tendency to overstate how globalized the world is, this was a  bit of a surprise to me when I encountered it. What actually happened was, I'm a big believer in using simple data rather than pure assertion to try and advance  the discussion. So I started collecting some data on how globalized various  activities that could either take place within or across national borders actually  were. So things like, for instance, telephone calls. So what percentage of all the  telephone calling minutes in the world last year, would you say were accounted  for by international phone calls? Say, plain old telephone service and Skype?  Turns out the answer is, if you just look at plain old telephone service, it's about  2% if you look at Skype, brings the total up, impressively, to about four, four and  a half percent. And yet, when I present these data to students, executives, huge  disbelief. What are your sources? Et cetera. So that got me thinking, huh, if they don't believe the data, what do they believe? Then I started, and this is what I  generally do to start my courses out with, I have students guess values which  they have no which they probably have no prior exposure to, just as a way of  sort of pointing out to them that their intuitions are somewhat mismatched with 

reality. So on the phone call question, I often get answers 30, 40, sometimes as  high as 60% I'm an economist. I'm used to error terms, but when I see an error  of 1,000% that's the sort of thing that would give even an economist pause in  terms of what's going on and so why it matters is, well, first of all, it's a good way of unfreezing people's intuitions that they know everything about globalization, if  you can sort of start them Kurt Lewin's old, you know, unfreeze change and then refreeze aphorism about how you change how People think so. It's a great way  of getting past this shell that people wear around themselves, because  everybody thinks that they encounter so much globalization in their lives that  they just sort of understand it intuitively. No need to look at the data, no need to  sort of, you know, really read any of the analyzes. The reason why it matters per se is from the MOOC that I offered on Coursera. We actually have a large  database and have been running some analyzes. So it turns out that people are  much more prone to believe various statements about globalization being bad if  they have overestimates of how globalized the world is, and similarly, they're  much more inclined to agree with dubious propositions about global strategy if  they have inflated assumptions about how globalized the world is. So an  example of each of those on the public policy side, think of immigration basically in all advanced countries, if you ask people what percentage of the population is first generation born elsewhere, moved to the US, first generation immigrants,  you typically get answers that are two to four times the actual levels, and it's It's  hard to see how this is helpful, as opposed to hurtful to having a reasoned  debate about immigration. So in Europe, for the six major European countries,  the German Marshall Fund did a study recently average immigrant percentages  in these countries, 8% average guesses, 24% this obviously contributes to a  sense of there is this tsunami that's threatening to wreck everything we hold  near and dear. We got to stop it before it stops us. So you get people much  more concerned about a set of public policy issues than if they had somewhat  more calibrated and generally lower assessments of how much stuff is sloshing  across borders in the first place. On the business side, what our data suggests  is that if you have inflated intuitions about how globalized the world is, you're  also much more likely to agree with such at least within the field of international  business what are treated as highly dubious propositions like globalization  means competing exactly the same way everywhere around the world. This  hurts profits, because countries still are quite separated, as these low levels of  cross border flows indicate. It also creates social ill will, because this is how you  get these strategies of bigger and blander which lead people to worry, you know, are the multinationals displacing our culture? Is the world going to look like? You know, is all food eventually going to be fast food, served by three, probably US,  fast food chains, et cetera. And so. Both from a profit making perspective and  from a diplomacy public relations perspective, it would be good for businesses  not to think that the best form of competing globally is to do exactly the same 

thing everywhere. And what our data suggests is that people who have  overestimates of how globalized the world is are also the people who are most  likely to agree with notions like complete standardization, ubiquity,  statelessness, all kinds of things that actually turn out to be quite  counterproductive when you're really developing a global strategy.  

Jennifer Crumpton - In the book, you talk about several different types of  players in all of this who can help to make integration better a positive  experience. Who are those players and what are some of the things that we can do? 

Pankaj Gemavat - I think that there are a whole range of different actors that  have some influence on what happens in this regard, governments stand out as  the most obvious layers, and when governments stoke fear about globalization,  which they do tend to do, they're doing themselves and their citizens a great  disservice. So in fact, I started writing my world 3.0 book, because there was six fold increase in rice prices back in 2007-2008 and the then French President  Sarkozy in particular, railed against the speculators and said, what we have to  do is shut, you know, globalization down, because, you know, this kind of thing  is just the result of too much globalization. So I went back and just looked at  some simple numbers. Turns out that less than 5% of world rice production is  traded internationally. It's not quite clear that reducing that 5% to two to 3% is  going to reduce volatility. It seems much more likely to increase it. And so the  people who were really cheering when Sarkozy made his comments were the  commodity traders I know were saying, oh, boy, more volatility. This would be  great if we actually did this. So governments have a huge influence. And in  some sense, given how important governments are at setting the rules of the  playing field, et cetera, at a minimum, you know, try to avoid doing  counterproductive things, even if you sense that, you know, domestic popular  resistance to things like immigration might not allow you to move in the right  direction or make further progress in the desired direction just yet, at least, Avoid doing things that take us backward, which Sarkozy's statements about  international rice prices strike me as a pretty good example of second  businesses. And I've already talked about this, so I won't repeat myself, but  businesses that are more sensitive to differences between countries are likely to make more money and also foster more good will or less ill will than businesses  that don't the educational sector has a critical role to perform, because one of  the things that we do find from our quantitative analysis Is that global only tends  to decline with educational levels, but that's a very rough correlation. Clearly, the content of what that education is probably also matters. And in this regard, this  is one of the things that I'm most concerned about, because most of the  psychologists I know suggest that by the time we get students in for master's 

programs, it's already a little bit late in the day to be trying to shape their  worldviews. So in some sense, we need to be pushing this, not just into  colleges, but into high schools. And actually, I had my first high school teaching  experience just out of curiosity two years ago, because I wondered if any of  these ideas could be explained to people seniors in high school. Because it  seems really, really important to reach people at that level of development if  you're trying to affect attitudinal change, I think that journalists have a huge  responsibility. There's a tendency in journalism to depict things in black and  white, and some people are just uncritically for globalization and therefore lack  credibility. Some people are uncritically against it and therefore invade against  the idea that it could yield anything positive. And probably the most disturbing  thing to me in that regard, that can be quantified is if you actually look, it's not  just the shortfalls of our educational system. If you look at the extent of news  coverage, coverage of international news on US, TV, US, print media, even  online, same thing in the UK. It's actually decreased over the last few decades.  AIDS, so the journalists need to step up as well. And then finally, ultimately, it's  hard to, you know, imagine good things happening unless at least some  individuals take some personal responsibility. So there's this famous hypothesis  in cycle social psychology, the Allport contact hypothesis, which is that when  people have more contact with people unlike themselves, they're likely to think  more favorably of them than if they have no contact whatsoever. And so I think,  and this is one of the things that I tell my students. This is what I was telling my  students at stern on the first day of the MBA program. Ultimately, others can do  only so much to help ease the way for globalization. Some of what has to  happen is internal to people and has to be managed by themselves. So ask  yourself what you're going to do during your two years in the MBA program and  one of the world's most, if not the most, globally connected city, not just to  explore what's in New York City, but also to take advantage of all the  connections that New York City has with the rest of the world, in order to reach a little bit farther, think a little bit differently, talk to strangers, doing a range of  different things. I had Anthony Appiah, who's a philosopher of cosmopolitanism,  talked to my undergraduate students at NYU. And you know, Anthony, who's  thought very deeply about these issues, when asked this question, stroked his  chin and said, Well, try and watch at least one film with subtitles every month,  even something like that could make a huge difference.  

Jennifer Crumpton - What does world 3.0 look like? What's the vision?  

Pankaj Gemavat - Well, I think of world 3.0 as not the vision, but the reality. So I was going chronologically, world 1.0 I think of as the extreme view that national  borders are so impermeable that we can basically ignore the little bit of stuff that  somehow manages to float across them. And that's probably not a good way of 

thinking about the world today. World 2.0 is the opposite extreme. National  borders have faded away to such an extent that we can just ignore them and  and pretend that the world is one giant country, and this is The World is Flat  view world 3.0 is, to me, the sensible middle ground that recognizes that  international interactions are neither so negligible that they can entirely, entirely  be ignored, nor so pervasive that you know, they've managed to overshadow  borders and all the other differences that still divide us world 3.0 is the world we  live in, in which international Interactions matter, but border effects are still very,  very large. And it's only in this world that a lot of the current policy initiatives that  people are talking about, like, say, the Trans Pacific Partnership makes sense,  because if the world were already fully integrated, why would we be thinking  about doing new trade deals or anything else to change the status quo? And so  world 3.0 is, to me, not just a realistic depiction of where we are, but one that  leaves open the possibility of some useful action to improve our own situation in  a way that neither the extreme of everything is utterly balkanized into individual  countries, nor the extreme of we're already one giant country really suggests  useful steps for action to improve things.  

Jennifer Crumpton - This is Sardar TV. I'm Jennifer Crumpton. Thanks so much  for joining us today, and we'll see you next time.