Volume 29 - January 2010

By: Interview by Scott Briscoe, CAE

The changing face of the global community offers opportunities for U.S. associations and their members, according to Newsweek International's Fareed Zakaria. Is your association ready to lead the way?

Fareed Zakaria is a journalist with a rare gift: He's able to synthesize what he sees around the globe, find deeper meaning, and explain that meaning simply and powerfully. You see this on his CNN show, Fareed Zakaria GPS, in his role as editor of Newsweek International, and in his books, most recently The Post-American World. And right now, Zakaria sees a number of trends that both led to the current economic crisis and are shaping a new world order that's very different from what we've been used to since the end of the Cold War.

Before his keynote address at ASAE & The Center's 2009 Annual Meeting & Exposition, Associations Now interviewed Zakaria about what these global trends mean for associations.

Associations Now: What are the major forces that are effecting change throughout the world?

Fareed Zakaria: The single most important force that is effecting change throughout the world right now is a kind of diffusion of knowledge.

For decades and decades, really for centuries, countries have been trying to figure out, what is the way to be successful? What is the way to raise living standards? Get economic growth? Companies have been trying to figure out how you operate within a global economy, but there were all kinds of constraints. There were political constraints and ideological constraints. Companies operate with various substantial constraints in terms of closed national economies, and over the last 15 years many of these constraints have been lifted. And so countries are finding that they can participate in a global economy and that reality … is profoundly altering the world, so that if you look at the number of countries that were growing at four percent per year 30 years ago it would be something like 25, maybe 30. In 2004, 2005, 2006, 2007, that number was over a hundred. In 2006 and 2007, it was 124.

So what you see happen is a lot more countries, a lot more people, a lot more companies all over the world figuring out how to thrive in an increasingly global economy.

The great disease of modern times is that we find it very difficult to impose any short-term pain for long-term gain.

What effect does this change have on individuals?

People are becoming aware of the fact that they can plug into this new global economy, plug into this new global society, and that diffusion of knowledge, that fact that people now have a kind of awareness of how to succeed, is very profound. At the end of the day, ideas are the only thing that matters, and if you've got the right ideas everything else begins to fall into place.

Now let me put some caveats in. Does this mean that everyone is going to do fantastically? No, there are of course winners and losers. Some people do these things well, some people do them badly. Does it mean that there won't be economic crises and panics? No. Human beings are greedy and stupid and they make mistakes, but the broad trend that I am describing is a very powerful trend that is a kind of world historical trend, and it is likely to continue despite the current economic climate.

Serving the Bottom Third

Associations Now: While much of the world has shaken a lot of the constraints that hold economies back, much of the continent of Africa does not have governments stable enough to enable the country to join the global economic community. If I'm an idea person in this region, what can I do? Fareed Zakaria: You are absolutely right. It's important to remember that while we have had enormous progress in the last 20 years—an estimated 500 million people have been lifted out of poverty around the world—there's still two billion people who live on a dollar a day around the world. There's still a lot of poverty. There are a lot of people trapped in countries which do not get it or where the regimes are so dysfunctional, so broken, so corrupt that these ideas that I'm talking about don't even penetrate. There is an economist, Paul Collier, who wrote a book called The Bottom Billion, and it's really about the billion people who are trapped in countries like this, about 50 countries around the world where nothing really is working. Those countries have now become the most difficult ones basically for two sets of reasons. One is incapacity and the other is a kind of corruption, rapaciousness, of the elite. If you are in those countries, alas, your options are limited. They're better than they were in the past, because you can personally hook into the global economy. Your company can sometimes hook into the global economy, more difficult, but fundamentally what you have to do is work for change in those societies. Is there a role for trade associations and professional organizations in such an environment, or should these organizations be hands off until the region begins to stabilize?    No, no. Warren Buffet says, "When everybody is greedy, you should be fearful, and when everybody is fearful, you should be greedy." So when you look at those countries that make you fearful, you've got to remember that this represents an opportunity. The opportunity is that even in pretty tough African countries there are engineers, there are doctors, there are lawyers, and they are actually very hungry to connect to the outside world, and they're very hungry to, in some way, be part of a broader project. Now there's an issue of how to do it, the costs of doing it. Always in these situations, it's probably better to tie in with a local group, with local expertise, with local talent, but the fundamental choice of getting more involved in these countries, I think, has to be based on a vision of the future which says that 30 years from now, if I hadn't started these small steps, we simply would not be able to be a global player. We would not be here. I'll give you an example. Hank Greenberg, who built AIG into the biggest insurance company in the world, once said to me that everybody thinks that AIG, which is huge in China, became huge just in some kind of natural process. In reality, he told me he made about 70 visits to China over 30 years, starting from the early 1980s when China was still basically quasi-Maoist, and he slowly built expertise, confidence. You build trust on the other side, and for a while it doesn't pay off. But then it seems like it was inevitable. Now, not all of it is going to work out. There might be some hits and misses. But you've got to fundamentally say to yourself, "I see I'm in a different world, and it's worth exploring, at the very least, these options."

How are traditional companies changing as a result of these forces, as a result of the diffusion of knowledge?

If you look at a company like General Electric, it's a perfect example. General Electric was the icon of what it meant to be a great American corporation and [thought of itself as] a great multinational. But what it meant by that was it went to countries around the world and set up mini versions of GE, because the feeling was General Electric does everything best. How on Earth could [they] partner with some local or do something that would inherently compromise their quality?

About 10 years ago, [CEO] Jeff Immelt realizes that the problem is the natives have gotten very good at capitalism and they are doing things that are interesting and innovative, and a lot of them don't want to work for GE, or [they] are working at local replicas of GE or versions of GE but with very important twists that understand local markets. And for all those kinds of reasons, GE basically reversed an entrenched corporate decision-making process and went to the exact opposite.

Now GE does partner with locals. It partners with local companies, does joint ventures, does collaborations. And many of these are actually not with the leading blue-chip companies; it's often with the upstart, with the one where there's a lot of energy and talent.

So what's the lesson for U.S. companies?

One, first of all, is to stop thinking of themselves as multinational because they have foreign offices. That's not multinational.

What you really need to do is move from thinking of yourself as being multinational to being global, and being global really means figuring out where you can do things best and who can do them best, and how do you tie in, and how do you partner, and how do you associate and collaborate with people like that. … You recognize that in a sense it's a much more horizontal world than a vertical world.

The second is to recognize that human talent is now so widely dispersed that, if you have a very strong concentration of talent coming just out of one country, you're probably at a competitive disadvantage [because] you don't know enough about the rest of the world. This is still a huge problem for American companies.

You look at companies that think of themselves as genuinely global, that have 50 percent of their profits coming from the rest of the world, and ask them, how many members of their boards are foreigners? How many members of their senior management, top 20 people, are foreigners? You'll find that it's not 50 percent by a long shot.

You mentioned Jeff Immelt and his ability to adapt at GE. How do leaders in general need to be thinking differently in this environment?

I think probably the most important thing for a leader is to be aware of this wider world. Part of what makes you a great leader is to know the organization you are trying to lead, which is very important, but there is an additional quality in a world that is moving so fast, which is understanding the outside environment. That has tended to be minimized in the past, particularly in America, because we were the 800-pound gorilla.

Knowing America was enough. Now I think you must have a much better sense of the external environment. It doesn't come easily to Americans. We are an insular people. I don't mean that as a huge criticism: This is a large continental nation, two vast oceans separating it [from the rest of the world], two benign neighbors, and the American market is vast. So it is easy to be insular, but it is deadly in the long run, because you will not be able to survive, as most of the top American corporations have learned. You've got to figure out how your organization can thrive in a world in which 124 countries are growing at four percent a year or more, and that's the great challenge.

What is the role of trade associations and professional societies in this environment?

I think there are two elements to it. One is that they're going to have to realize that if they want to be truly serving their members' needs, they need to recognize that their members are going to need to operate on a global platform and their members are going to have global concerns—and these concerns may involve issues that come up because of the E.U., issues that come up because of India, China, issues that come up because of dealing in Latin America—and they're just going to have to get better versed in those issues in a way that they are versed in the arcana of legislative battles on Capitol Hill in Washington.

The second part is, as a trade association, you also face exactly the challenge that I was describing for American corporations. Do you want to be the leading trade organization in the world? Thirty years ago the American trade organization of anything was the leading trade organization in the world because we were the largest economy in the world and everybody else just didn't count.

That's what's going to change, and the good news is American companies still have a head start. We are still the single largest bloc within the world economy, but there's a lot of other pieces to this puzzle, and the most important thing trade organizations must try to leverage is not the raw power of the fact that they are an American trade organization. Rather, it is their agenda-setting ability. This is a metaphor for us all, not only as a country, as companies, but as trade associations.

It's got to be brains, not bigness, that we use to leverage, and we can do that because, in fact, it is a positive to be agenda setting. It is a positive to have the skill, the intelligence, the marketing savvy, if you will, to present an agenda that can interest and engage people around the world. If we can do that, we become a catalyst. We retain the kind of leadership that the United States has had.

What is your best piece of advice for someone leading an organization who wants to make a difference in the lives of the people that are involved in that organization?

I would say, in general, the great disease of modern times is that we find it very difficult to impose any short-term pain for long-term gain. And so if you are trying to do something that is genuine and lasting, actually don't do the thing that every marketing slogan and every business school will tell you: Listen to your customers.

It's not that I want you to not listen to your customers. What I mean is, recognize that there is a trade-off between the short term and the long term, and if you have to do something that you genuinely believe is good for the long term, that's what's going to make a lasting difference.

The easy stuff is pandering to people, but what really causes change in the long run is stuff that is hard, is unsettling. It causes a certain amount of drama but in the long run has the lasting effect and changes people's lives.

I think about it even in terms of the courses I took in college. I hated having tough professors, but the ones who I remember now and the ones who I learned from were usually the hard asses, the people who challenge you and force you to confront things rather than find an easy way out.

Fareed Zakaria is the editor of Newsweek International and the author of The Post-American World. He can be reached at www.fareedzakaria.com.

Scott Briscoe is the editor-in-chief, new and social media, for ASAE & The Center, and former editor-in-chief of Associations Now. Email: sbriscoe@asaecenter.org