Friday, September 22, 2006

Anyone, Anything, Anywhere
By THOMAS L. FRIEDMAN

Montevideo, Uruguay

The New Yorker once ran a cartoon by Peter Steiner of two dogs, with one sitting at a computer keyboard saying to the other, “On the Internet, nobody knows you’re a dog.”
Nobody also knows you’re Uruguay.
A tiny country of three million people, wedged between Brazil and Argentina, Uruguay has come from nowhere to partner with India’s biggest technology company, Tata Consultancy Services, to create in just four years one of the largest outsourcing operations in Latin America.
Yes, when Tata’s Indian employees in Mumbai are asleep, its 650 Uruguayan engineers and programmers now pick up the work and help run the computers and backroom operations for the likes of American Express, Procter & Gamble and some major U.S. banks — all from Montevideo.
How did this happen? One of the most interesting features of this era of globalization is how any entrepreneur — with the right imagination, Internet bandwidth and a small amount of capital — can assemble a global company by matching workers and customers from anywhere to do anything for anyone. Maybe the most important rule in today’s increasingly flat world is this: Whatever can be done, will be done — because so many people now have access to the tools of innovation and connectivity. The only question is: Will it be done by you or to you?
Gabriel Rozman decided it was going to be done by him. A retired partner from Ernst & Young who was raised in Uruguay, he hatched the idea of partnering with Tata to make Montevideo a global outsourcing hub. He did not have a single client or employee when he approached Tata. He had just two things: a gut instinct that Uruguay’s quality education system had produced plenty of good, low-cost engineers and a gut desire to do something good for Uruguay — the country that gave his Hungarian parents sanctuary from Hitler.
Four years later, TCS Iberoamerica can’t hire workers fast enough. When I visited its head office, people were working on computers in hallways and stairwells. (Mr. Rozman also oversees 1,300 employees in Brazil and 1,200 in Chile.) It turns out that many multinationals like the idea of spreading out their risks and not having all their outsourcing done from India — especially after one big U.S. bank nearly had to shut down last year when a flood in Mumbai paralyzed its India data center the same day a hurricane paralyzed its Florida operation. And there is no risk of nuclear war with Pakistan here.
“When I first approached this big U.S. bank to outsource some of its services to Montevideo, instead of India,” recalled Mr. Rozman, “the guy I was speaking with said, ‘I don’t even know where Montevideo is.’ So I said to him, ‘That’s the point!’ ”
Another factor, added Mr. Rozman, was that multinationals that were depending on Indian firms alone to run their backrooms 24 hours a day were getting the third team for eight hours, since the best Indian engineers didn’t want to work the late-night shift — the heart of America’s day. By creating an outsourcing center in Montevideo, Tata could offer its clients its best Indian engineers during India’s day (America’s night) and its best Uruguayan engineers during America’s day (India’s night).
Most employees here are Uruguayans, but there are also lots of Indians sent over by Tata. It produces both a culture shock — Montevideo doesn’t even have an Indian restaurant — and a cultural cacophony.
The firm runs on strict Tata principles, as if it were in Mumbai, so to see Uruguayans pretending to be Indians serving Americans is quite a scene. Said Rosina Marmion, 27, an Uruguayan manager, “Our customers expect us to behave like Indians — to react the same way.”
Also, Latin culture, unlike Indian, is very nonhierarchical. “The Indians were not used to someone who says ‘no,’ ” explained Ricardo Zengin, 34, a systems analyst. But eventually, “they understand that you are not saying it to challenge their authority but because you think it can be done better another way. ... In Latin culture, everything involves a discussion.”
Uruguayans tell a joke about themselves that goes: If you get diagnosed with a terminal illness, move to Uruguay immediately because everything happens 20 years later here.
In outsourcing, though, Uruguay has leapt ahead of its neighbors by being the first to understand what could be done — that in today’s world having an Indian company led by a Hungarian-Uruguayan servicing American banks with Montevidean engineers managed by Indian technologists who have learned to eat Uruguayan veggie is just the new normal.

Sunday, September 17, 2006

Is Chemistry Destiny?
By
DAVID BROOKS

Over the past several weeks, I’ve found I can change the conversation at any social gathering by mentioning Louann Brizendine’s book, “The Female Brain.” Brizendine is a neuropsychiatrist and the founder of the Women’s and Teen Girls’ Mood and Hormone Clinic in San Francisco. She’s written a breezy — maybe too breezy — summary of hundreds of studies on the neurological differences between men and women.
All human beings, she writes, start out with a brain that looks female. But around the eighth week in the womb, testosterone surges through male brains, killing cells in some regions (communications) and growing cells in others (sex and aggression).
By the time they are three months old, girls are, on average, much better at making eye contact with other people and picking up information from faces. During play, girls look back at their mothers, on average, 10 to 20 times more than boys, to check for emotional signals. Girls can also, on average, hear a broader range of sounds in the human voice, and can better discern changes in tone.
Later, girls are much more likely to use sentences that begin with “Let’s ...” while playing: Let’s do this or Let’s do that. They are more likely to take turns. Brizendine argues that of course culture and environment powerfully shape behavior, but brain structure and chemistry incline girls to pursue certain goals: “To forge connection, to create community, and to organize and orchestrate a girl’s world so that she’s at the center of it.”
During adolescence, the female brain is washed in estrogen. Female teenagers, in general, experience an intense desire for social connection, which releases near-orgasmic rushes of oxytocin in the brain. They are, on average, more sensitive to stress (by age 15, girls are twice as likely to suffer from depression). The male brain, meanwhile, is producing 10 times more testosterone than the female brain, meaning the male sex drive is, on average, much greater.
Brizendine then describes waves of hormonal activity as women age. Female brains vary with the seasons of life much more than male brains. During menopause, for example, estrogen levels drop. Personalities can change as some women derive less pleasure from nurturing and more from independence. Women initiate 65 percent of divorces after age 50.
These sorts of stark sex differences were once highly controversial, and not fit for polite conversation. And some feminists still argue that talking about biological differences between the sexes is akin to talking about biological differences between the races. But Brizendine’s feminist bona fides are unquestionable. And in my mostly liberal urban circle — and among this book’s reviewers — almost everybody takes big biological differences as a matter of course.
Without too much debate or even awareness, there has been a gigantic shift in how people think human behavior is formed.
Consider all the theories put forward to explain personality. Freud argued that early family experiences relating to defecation and genital stimulation created unconscious states that influenced behavior through life. In the 1950’s, the common view was that humans begin as nearly blank slates and that behavior is learned through stimulus and response. Over the ages, thinkers have argued that humans are divided between passion and reason, or between the angelic and the demonic.
But now the prevailing view is that brain patterns were established during the millenniums when humans were hunters and gatherers, and we live with the consequences.
Now, it is generally believed, our behavior is powerfully influenced by genes and hormones. Our temperaments are shaped by whether we happened to be born with the right mix of chemicals.
Consciousness has come to be seen as this relatively weak driver, riding atop an organ, the brain, it scarcely understands. When we read that male voles with longer vasopressin genes are more likely to remain monogamous, it seems plausible that so fundamental a quality could be tied to some discrete bit of biology.
This shift in how we see human behavior is bound to have huge effects. Freudianism encouraged people to think about destroying inhibitions. This new understanding both validates ancient stereotypes about the sexes, and fuzzes up moral judgments about human responsibility (biology inclines individuals toward certain virtues and vices).
Once radicals dreamed of new ways of living, but now happiness seems to consist of living in harmony with the patterns that nature and evolution laid down long, long ago.

Saturday, September 16, 2006

Capitalism With a Heart
By JOHN TIERNEY

Compassionate conservatism has been an expensive bust in Washington. But an intriguing alternative is emerging around the country: compassionate capitalism.
Tycoons have traditionally discovered their inner saint only after exorcising the inner capitalist. Carnegie, Ford and Gates made their money and then gave it away. But Google’s young founders are already taking on poverty, disease and global warming, and they’re not just dispensing cash. They’ve set up their philanthropy as a for-profit organization.
To many liberals, this sounds dangerously oxymoronic. How can philanthropy be profitable? A robber baron is supposed to cleanse his hands by donating his lucre to a foundation run by enlightened beings untainted by commerce (except for the dividends going into their trust funds).
This new Google venture also makes conservatives suspicious. It sounds like the “corporate social responsibility” mantra used by executives trying to be hip — and impress young trophy wives’ friends — by financing politically correct boondoggles with shareholders’ money.
But to a new generation of entrepreneurs, there’s no conflict between capitalism and compassion. Google’s philanthropy is the logical extension of a doing-well-by-doing-good strategy followed by companies like Ben and Jerry’s, Starbucks and REI. The movement’s philosopher is John Mackey, the co-founder of Whole Foods.
Mackey is a passionate environmentalist, an advocate of animal rights, a promoter of sustainable development — and a self-proclaimed libertarian. Call him a bleeding-heart libertarian. He wants to spread the free-market gospel, but he sees an obstacle.
“Corporations are lifting billions of people out of poverty,” he says. “Why are they so hated?”
Mackey’s answer is that capitalism has a branding problem: its practitioners are experts at marketing everything except their own system. They justify corporate philanthropy, like donating to the United Way, not because it’s virtuous but because it buys public good will and thus contributes to the company’s bottom line. To hard-core free-marketeers, the corporation’s only mission is to generate profits for shareholders.
To Mackey, that’s too narrow a vision. He thinks that socially conscious companies like Whole Foods have flourished because their founders, employees and customers want a corporation to have grander goals than enriching shareholders. Mackey defines his company’s mission as improving the health and well-being of everyone on the planet. Before taking the company public, he told investors that he was going to devote 5 percent of the profits to philanthropy, so they can’t complain now that he’s robbing them.
Nor can Google’s shareholders, because its founders also warned investors of their philanthropic plans. As Katie Hafner reported in The Times, they’ve given $1 billion in seed money to Google.org, and set up the philanthropy as a for-profit organization so it can work with venture capitalists, start companies and use any profits to finance further endeavors. One of its first projects is developing a car that gets 100 miles per gallon.
It’s smart of Google’s founders to try using capitalist tools to save the planet; the market’s discipline should keep their philanthropy from backing too many lost causes. Still, whatever Google.org accomplishes, I’d bet that it will pale next to the social good accomplished by Google.com.
The company’s founders may not have set out to help humanity with their search engine, but they have enriched countless lives by spreading ideas and connecting people. Maybe they’re also smart enough to come up with a way to save gasoline, but what do they know about cars that Toyota doesn’t?
If you read Adam Smith’s famous passage about the invisible hand causing capitalists to unwittingly serve the public interest, you might conclude that Google’s founders are better off investing their time and money in improving their core business. As Smith wrote, “I have never known much good done by those who affected to trade for the public good.”
But I don’t think Smith would have any problem with Google.org. He also realized that humans are motivated by more than self-interest. He wrote a long book on moral sentiments. If compassionate capitalism is a more appealing brand, if Google and Whole Foods are using philanthropy to strengthen the invisible hand, even Smith would say they’re doing good.

Thursday, September 07, 2006

The Populist Myths on Income Inequality
By
DAVID BROOKS

There are two schools of thought on income inequality. Members of the first school — populist politicians and a few economists — say the key issue is economic power.
The haves exercise more power over the have-nots. As a result, corporate profits soar, while wages stagnate. Money-drenched politicians push through shareholder-friendly trade deals that outsource American jobs while job insecurity skyrockets. C.E.O.’s get absurd salaries while the 99 percent of earners enjoy few benefits from productivity gains. Unions are weakened while manufacturing wages tumble and the middle class suffers.
In short, populists argue, the market is broken. The rules are rigged. The reigning ideology in Washington must be upended. Unions must be revived. Globalization needs to be reorganized.
The problem with this narrative is that it doesn’t really fit the facts. First, workers over all are not getting a smaller slice of the pie. Wages and benefits have made up roughly the same share of G.D.P. for 50 years. Second, offshore outsourcing is not decimating employment. According to the Bureau of Labor Statistics, outsourcing is responsible for 1.9 percent of layoffs, and the efficiencies it produces create more jobs at better wages than the ones destroyed.
Third, jobs are not more insecure. Workers are just as likely to hold a job for 20 years as they were in 1969. Fourth, workers are not stuck in dead-end jobs. Social mobility is roughly where it was a generation ago.
Fifth, declining unionization has not been the driving force behind inequality. David Card of the University of California, Berkeley, has estimated that de-unionization explains between 10 and 20 percent of the rise in inequality, and that effect was probably strongest decades ago. These days the working class is not falling behind the middle or upper-middle class. Instead, the big rise in inequality is within the office parks, among people who were never unionized. Middle managers are falling behind top executives.
The populists, who usually live in university towns, paint a portrait of unrelieved misery that badly distorts reality. It’s true that middle-class wages are lagging, but as Stephen Rose points out in The American Prospect, over the past 25 years the share of working-age adults in households making over $100,000 has risen by 13 percent while the share of households making less than $75,000 has dropped by 14 percent — after adjusting for inflation. The median household income of people in their prime working years (25-59) is $63,000. More than half of Americans have no credit card debt, and half of those who do owe less than $2,200.
Workers continue to see their wages rise as they age. The typical male worker with some college but no degree has seen his income rise from $34,000 in 2000 to about $40,000 today.
Members of the second and much more persuasive school of thought on inequality say the key issue is skills. Lawrence Katz, formerly of the Clinton administration, now of Harvard, puts it this way: Across many nations, the market increasingly rewards people with high social and customer-service skills.
A contractor who can work with customers, design kitchens and organize jobs may earn five times as much as one of his workers who has identical cabinetry skills. An office worker who is creative, charismatic and really good in fast-changing interactive settings now gets paid much more than a disciplined middle manager who excels at routine tasks.
Katz describes a polarized economy. Wages are rising in the bottom quartile for workers who provide personal services. The middle is lagging. The real rewards are going to the top 10 percent, especially to those relative few who have the skills to transform organizations from the top.
In other words, the market isn’t broken; the meritocracy is working almost too well. It’s rewarding people based on individual talents. Higher education pays off because it provides technical knowledge and because it screens out people who are not organized, self-motivated and socially adept. But even among people with identical education levels, inequality is widening as the economy favors certain abilities.
In short, government policy is not driving inequality and wage stagnation. But government hasn’t done much to effectively address the problem either, even though per-capita education spending has more than quadrupled since 1950. What’s needed is not a populist revolt, which would make everything worse, but a second generation of human capital policies, designed for people as they actually are, to help them get the intangible skills the economy rewards.
What would a set of second-generation human capital policies look like? I’ll come back to that in a few days.

Sunday, September 03, 2006

The Jagged World
By DAVID BROOKS

I don’t know about you, but while the events of the past five years haven’t really changed the patterns of my everyday life, they’ve certainly transformed the way I see the world.
I used to see the world as a landscape of rolling hills. There were different nations, tribes and societies, but the slopes connecting those groups were gradual and hospitable. It seemed relatively easy to travel from society to society, to understand and commune with one another.
Globalization seemed to be driving events, the integration of markets, communications and people. It seemed to be creating, with fits and starts, globalized individuals, who had one foot in a particular culture and another foot in a shared flow of movies, music, products and ideas.
I spent much of the 1990’s (that most deceptive decade) abroad — in Europe, the former Soviet Union and the Middle East. People everywhere seemed to want the same things: to live in normal societies, to be free, to give their children better lives.
Now it seems that was an oversimplified view of human nature. It’s true people everywhere want to satisfy their desires, but they also require moral systems that will restrain and give shape to their desires. It’s true people everywhere love their children, but they also require respect and recognition and they will sacrifice their own lives, and even their children’s lives, in wars for status. It’s true people everywhere hate oppression, but they also require identity, and human beings build identities by collectively hating groups that represent what they are not.
All these other parts of human nature impel people to become tribal. People form groups to realize their need for status, moral order and identity. The differences between these groups can be vast and irreconcilable.
Now my mental image of the landscape of humanity is not made up of rolling hills. It’s filled with chasms, crevices, jagged cliffs and dark forests. The wildernesses between groups seem stark and perilous.
People who live in societies where authority is united — as under Islam — are really different from people who live in societies where authority is divided. People in honor societies — where someone will kill his sister because she has become polluted by rape — are different from people in societies where people are judged by individual intentions. People who live in societies where the past dominates the present are different from people who live in societies where the future dominates the present.
Samuel Huntington once looked at the vast differences between groups and theorized that humanity is riven into different civilizations. That’s close but not quite right. Today’s divisions aren’t permanent. Instead, groups are constantly being formed and revised in a process of Schumpeterian creative destruction.
Yesterday’s high-tech entrepreneurs look like pikers compared to the social entrepreneurs of today. Islamist entrepreneurs have quickly built the world’s most vibrant and destructive movement by combining old teachings, invented traditions, imagined purities and new technologies. The five most important people in the Arab world, according to a recent survey, are the leaders of Hezbollah, Iran, Hamas, Al Qaeda and the Muslim Brotherhood. Microsoft’s market conquest is nothing compared to that.
Other and more benign groups are being created as well: Pentecostal sects, MoveOn.org, Hugo Chávez populists and whatever groups are invisibly forming among left-behind peasants in India and China.
The chief driver of events right now is not only globalization — the integration of economies and peoples. It’s also the contest among cultures over the power of consecration — the power to define what is right and wrong. Rising hegemons like Iran (and the U.S.) see themselves not only as nations but also as moral movements.
Since 9/11, the U.S. has had little success in influencing distant groups. Americans blew the postwar administration of Iraq because they assumed they were liberating a nation sort of like their own. And yet I can’t seem to renounce my own group, which is America. It would feel like cultural suicide to repress the central truths of my society, that all human beings are endowed with inalienable rights and democracy is the most just and effective form of government.
The hard lesson of the last five years — that we live in a jagged world filled with starkly different and contesting groups — makes democracy promotion more difficult but more necessary. Only democratic habits will prevent the inevitable clash of the tribes from turning into a war of nuclear annihilation.