THE INVISIBLE CONTINENT

Four Strategic Imperatives of the New Economy

THE INVISIBLE CONTINENT

(Kenichi Ohmae/Harvard Business Press/ July 2000/272pages/$27.50)

국내 미출간 세계 베스트셀러(NBS) 서비스는 (주)네오넷코리아가 해외에서 저작권자와의 저작권 계약을 통해, 영미권, 일본, 중국의 경제·경영 및 정치 서적의 베스트셀러, 스테디셀러의 핵심 내용을 간략하게 정리한 요약(Summary) 정보입니다. 저작권법에 의하여 (주)네오넷코리아의 정식인가 없이 무단전재, 무단복제 및 전송을 할 수 없으며, 모든 출판권과 전송권은 저작권자에게 있음을 알려드립니다.

THE INVISIBLE CONTINENT Four Strategic Imperatives of the New Economy MAIN IDEA Throughout history, the discovery of a new continent has always created substantial opportunities to create wealth. Today, the same opportunities are arising, not because of the discovery of a new physical continent but due to the emergence of an “invisible continent” transcending physical and national boundaries. This newly emerging invisible continent is more than just solely the Internet. It has four distinct dimensions:

The interplay and interconnection of each of these four dimensions must be understood and taken into account, along with the requirements of the old economy, if long-term success in the invisible continent is to be achieved. The visible dimension of life will always exist. It will even continue to grow and improve. But its rate of growth will be dwarfed by the rate at which the other three dimensions grow. To prosper in the invisible continent in the years ahead, understanding must be translated into effective action. Only those who have an in-depth knowledge and affinity for all four dimensions will be able to move forward confidently. Each dimension has its own set of governing rules, its own set of formulae for success and its own distinctive requirements. Business and government leaders who ignore this forfeit their opportunity to stake a meaningful claim on the riches and rewards that will become available as the invisible continent grows and expands.

About of Author KENICHI OHMAE is a corporate strategist and adviser to governments worldwide. He is the author of The Mind of the Strategist, Triad Power, The Borderless World and The End of the Nation-State. Mr. Ohmae has worked previously for McKinsey & Company as a director in Japan and as chairman of Asia Pacific Operations. Mr. Ohmae is a frequent contributor to the Wall Street Journal, the New York Times and Newsweek.

-2-

Main Idea Over the past 15-years, the world has moved noticeably into the realms of a new economy which is characterized by new rules and dimensions. The central challenge of business in the 21st century is to find effective ways to integrate the old economy with the new, without losing the benefits of either. Supporting Ideas Even without realizing it, most consumers already do business everyday in the invisible continent. Specifically, they buy local products and services. They also buy products which are made with components manufactured anywhere in the world at the lowest possible prices. Often, those purchases have been researched using the Internet – a computer based information network. And finally, they invest their retirement funds in companies which enjoy soaring market valuations in anticipation of future profitabilities. All of these transactions either take place in or are strongly influenced by a business environment which does not exist on a physical map. The four key dimensions of the invisible continent are: 1. The Visible Dimension The economic activities of the “old world” or “real world” businesses. The more activity there is in other dimensions, the more consumer demand there is for the traditional locally produced products and services. 2. The Borderless Dimension The preference of consumers to buy the highest possible quality goods and services at the most competitive prices available – compelling companies to source components anywhere in the world where they can be produced efficiently. (And the ability of individuals to invest their own funds in any country they choose without restriction). 3. The Cyber Dimension The enabling technology of the Internet – a seamless combination of computers and communication technologies which can deliver information and electronic services anywhere in the world on demand. 4. The Dimension of High Multiples The unprecedented leverage – in terms of borrowing power or the equity market‟s P/E ratios – awarded by the markets to companies which are actively staking out new territory in the invisible continent. These multiples are based on anticipation of future earning power. A sound strategic approach in plotting a corporate strategy for extracting the greatest possible returns from the invisible continent is to keep in mind the old and the new economy have completely different operating rules. Specifically, the four key characteristics of the invisible continent are: 1. Information can be moved easily around the new continent, across any national or corporate boundaries. Therefore, companies cannot control their markets. Consumers control the supply

-3-

and demand chains. Savvy global producers are now acknowledging that fact – and following the lead of their consumers. The transparency of efficient markets is all pervasive. 2. The new continent is easy to enter for anyone who is prepared to abandon their old way of thinking. The barriers to entry to the invisible continent are virtually nonexistent. For the next few decades, there will be an intensive battle between those who see the Internet as being too unsafe and unreliable against those who believe the Internet will ultimately embrace all commercial transactions on the planet. 3. Any nation, company, race of people or individual can enter the invisible continent on equal competitive terms. The price of entrance is simply to adopt a new way of thinking and behavior. Wealth in the invisible continent accrues to people with different skill sets than in the physical world. Thus, marketability and rewards will flow to new segments of society. 4. The new continent is egalitarian – there is no “elite”. Thus, individual values are highly sought after and rewarded in the invisible continent. In short, staking out a claim in the invisible continent is achievable by virtually everyone on Earth. There will be possibilities and commercial dangers involved in turning that stake into a sustainable source of added value, but that should not discourage an attempt to do so. The rewards for success will be well worth the effort. Key Thoughts “In our time, it seems as if no remaining new continents are left to be discovered. The entire habitable world is known: there are no new places to settle. Yet, during the past fifteen years, civilization has changed at a planetary scale more quickly and continuously than ever before. It‟s as if some kind of new continent has been discovered – a continent without land. Just as the opening up of new worlds has changed the prevailing assumptions of the old world in the past, the discovery and exploration of the „new continent‟ is already changing attitudes and ideas about wealth creation and human endeavor.” – Kenichi Ohmae “Businesspeople recognize that, in the early days of any new continent, there is an opportunity to make a killing – if you can snap up the part of the territory that might one day, for instance, be Hollywood or Miami. As they swarm over the wealth of the new continent, however, at times they overextend themselves in risky ventures. At other times, they hold back, assuming that events out on the invisible continent will not affect them that much. They then risk being overtaken, far more rapidly than they suspect, by a new wave of voracious competitors. Even growing companies with roots in the old world, companies like General Electric and IBM, find themselves compelled to explore the new continent if they want to grow. If they remain in the old world, they can thrive only by cutting costs and laying off people.” – Kenichi Ohmae “About everyone known today as a mover and shaker of the new American economy, a shaper of the current Wall Street environment, began their enterprises sometime around fifteen years ago. The companies spawned in that era – which would become as voracious in their growth as the fictional Japanese monster, Godzilla – had no

-4-

precedents, either for the speed of their ascent or the unconventional ways in which they pursued their goals. As in the earlier industrial revolution, some people and organizations naturally adapted and shifted their ways of thinking. They were not necessarily technology lovers per se, but they represented an ongoing strain of natural residents of the new continent, people predisposed to its way of life.” – Kenichi Ohmae

Main Idea There is no “central office” for the invisible continent where decisions are made. Instead, platforms – de facto standards cobbled together by alliances and agreements – set the limits and the structure of the invisible continent. Supporting Ideas The success of the United States in exploiting Internet business opportunities has been built on the basis of control over three key platforms in the invisible continent: 1. The language platform English has become the unofficial language of the Internet, with more than 70-percent of all content stored in that language. Similarly, over 80-percent of all Internet communication takes place in English. 2. The currency platform The U.S. Dollar is almost universally used as the currency for the settlement of large transactions, despite its ongoing volatility. U.S. Dollars are also sued as a hedge against the future by consumers around the world. 3. The open market platform U.S. stock and exchange markets are completely unrestricted in their access to anyone anywhere. And at the same time, U.S. consumers have always shown a willingness to purchase the best goods and services produced anywhere. The reasons platforms work well in providing structure and order in the new continent are: ■ Platforms are open to all potential partners. For a platform to gain market share, it must treat everyone even handedly. That is, there must be a lack of favoritism, and all constituents must be treated equally if the platform is to be credible. In the invisible continent, that‟s possible solely because most of the established platforms are the creations of private corporations. Therefore, they can develop quickly, since they are not beholden to any constituents with other agendas. The current generation of platforms are very open to all potential users. ■ Platforms enable new commerce avenues. As comprehensive and powerful industry wide platforms become established, the balance of power in commercial transactions moves away from vendors towards consumers. They can use information to secure better transaction terms for themselves. In turn, consumers begin to do things that were never before possible –

-5-

for example, offering their business for competitive bidding between vendors. Thus, the emergence of a new platform in the invisible continent can have far-reaching effects that extend throughout the commercial world. ■ Platforms aim for 100% market share – but rarely achieve it. In essence, the more people that use a platform, the greater its value. Thus, the platform builder who achieves global reach within the invisible continent has optimized the value of that asset. In practice, there tends to be two viable platforms in most fields – the market leader and an alternative. Rarely will more than two platforms endure in the same field. That means latecomers are usually better off aligning themselves with existing platforms rather than attempting to establish a new platform of their own. ■ Platforms are constantly evolving and adapting. Interestingly, some of the most critical platforms needed on the invisible continent don‟t even exist yet. For example, microbilling, micropayments, the transaction facilitation system and an easy-to-use telephone/computer/television are the more obvious platforms that are still required. Many companies are in the process of building critical mass for new platforms they‟ve proposed – such as Priceline‟s commerce platform where consumers set the price and then look for vendors willing to sell at that price. That‟s the great thing about platforms – they‟re in a constant state of evolution and development. ■ Platforms can become vehicles for the community as a whole. Ultimately, platforms create communities in the invisible continent. They become a vehicle for linking people together. And the existence of established platforms stimulates novel uses and new applications by allowing people to communicate with others efficiently and productively. In short, once a platform comes into existence, it very rapidly starts getting used in ways that were never originally envisaged. In the final analysis, platforms are actually an efficient way to structure life in the invisible continent. They exist, and flourish, not because they are guided by a central planning office, but because they can provide added value to everyone involved. Key Thoughts “A company with a compelling platform, on the new continent, is like a gatekeeper to a doorway that many people will want to pass through. If you become the preferred platform of people around the world, then you have an inside track to becoming one of the powerhouse companies of the new continent.” – Kenichi Ohmae “It often has been remarked upon that there is no real governance structure to the Internet. In fact, the entire new continent, the field of human behavior that subsumes the Internet, has no one in charge. The invisible continent is an emergent system – a system that takes its own shape and sets its own direction, moment by moment. Yet, this new environment is coherent. It is not anarchistic. Things get built, bought and sold with regularity. This consistency is possible because surviving platforms are chosen by millions of users as convenient and trustworthy and can substitute for more formal kinds of governance.” – Kenichi Ohmae “It‟s one thing to understand the value of platforms, but the true test is putting that concept into practice. As with most corporate strategy issues, creating a corporate

-6-

strategy around platforms cannot be approached in a one-size-fits-all standardized way. It requires a careful assessment of the needs of your customers and your own capabilities. Since the effectiveness of your use of a platform depends on the technological capabilities of your decision-makers, it‟s vital for the CEO of your organization to also be your chief information officer. The CEO should be keenly, personally aware of the technology, and a direct user of the sort of systems that he advocates for his employees. This point was really brought home when Bill Gates announced in January of 2000 that he would step down as CEO of Microsoft and become chief systems architect.” – Kenichi Ohmae

Main Idea The economy of the invisible continent is strikingly different from that of the old world simply because the flow of wealth in the new economy has been unlinked to the movement of tangible goods or the ownership of tangible assets. In short, arbitrage and high multiples reign supreme in the invisible continent. Supporting Ideas In the new economy, arbitrage means to play off one supplier against another to bring prices down and drive quality levels upwards not through negotiation but through choice. That is, your suppliers had better give you a better deal or else you can quickly find another supplier who will. Arbitrage, in the invisible continent, comes in many different varieties, including: ■ Value chains that can be networked, removing inefficiencies and shortening the journey from producers to consumers. ■ Intermediaries who add no unique value can be eliminated completely. ■ Business operations can be located wherever the greatest cost efficiencies are available because of the availability of reliable, cost-effective electronic communication. ■ Corporations can spread their business activities out on a global basis – and pay on the results produced rather than the time spent. ■ Currency can move freely into, out of and around the invisible continent through credit card transactions. ■ Commercial transactions within the invisible continent are not subject to government oversight, trade restrictions or tariffs. ■ Professionals who add value can have their efforts multiplied many times over through the use of high quality communication technologies.

-7-

■ The pricing of services provided by professionals is no longer based on shared credentials or professional qualifications, but instead becomes based on the perceived value delivered individually to each consumer by each professional. In other words, prices become set by the consumer, not by the service provider as has traditionally been the case. ■ Many consumers in the invisible continent are finding their expenditure on the basic necessities of life is decreasing due to their ability to source better purchases. That, in turn, increases their disposable incomes, and gives them more discretionary expenditure power. ■ Jobs can be anywhere – and the highest value jobs will be those where people interface directly and efficiently with customers to provide high-quality services and contact. ■ Supply chains can be shortened dramatically – reducing from two years to two weeks the time gap between investment and product delivery. ■ Alliances can be formed and then again dissolved on an as-needed basis, allowing skilled teams to quickly assemble, fix a problem and then move on to another project. The cumulative effect of all these arbitrage opportunities of the invisible continent is that producers no longer dominate the economy – consumers do. And that, in and of itself, presents new challenges since consumers are also in the process of becoming more and more unpredictable. In the old world, a consumer-driven economy would be inflationary – since consumer demand would lead to producer shortages which, in turn, would result in higher wages and prices. On the invisible continent, however, consumers can keep inflation under control through the use of their arbitrage opportunities and width of choices available. In effect, no supplier can afford to raise prices because consumers are equipped to seek out alternative sources. The consumers of the new economy are not primarily focused on buying the things they need to survive. Instead, they want experiences and opportunities that will make their lives richer, better and more emotionally rewarding. The most successful invisible continent businesses will be those that give consumers more effective and satisfying choices. Clearly, the finances of the old world and the invisible continent are different. Arbitrage, in its many formats, is the main reason for the differences. Other reasons are scale and speed. Financial transactions based in the invisible continent can be carried out at multiples of 10- to 25-times the speed of equivalent old-world transactions. Similarly, the potential pool of participants is greater, allowing significantly larger transactions to be completed. And both the size and speed of financial transactions in the invisible continent will be amplified by currency speculation, by new banking practices, by the ability to borrow money against old world assets and inject it into new economy businesses and by the new electronic capabilities of stock markets.

-8-

Key Thoughts “Where does all this multiples-based wealth on the invisible continent really come from? Some argue that it is purely speculative wealth, without any real grounding in producing goods and services, and without any boost in productivity. But in fact, the productivity gains on the new continent are both tangible and remarkable. They do not come from the kinds of competitive strategic moves of the old world: the quality and reengineering efforts or the cost-cutting that leads to productivity gains within corporations. The productivity gains of the new continent come from the interrelationships of the network itself. They come from arbitrage. That‟s why they often seem so cruel, so unmanageable and so unfamiliar to people who are trying to protect jobs and industries.” – Kenichi Ohmae “At the end of April 1999, Priceline.com was only one year old; yet its market cap was already $24 billion, an equivalent to the fifth-largest company in Japan. Amazon.com is known for its extraordinary market capitalization and stock price, despite never having turned a profit on product sales. When the multiples are big – say, 700 times earnings, as we have seen in some of the dot.com companies – then they can buy other companies by offering their own stocks. Cisco Systems, using high multiples, has acquired literally dozens of technology companies, and is now positioned as one of the largest broad-ranged Internet equipment producers in the world. Multiples like this are signals from investors to managers, giving them new ammunition and telling them to use it to conquer the world with – or to conquer whatever they see en route to success. If a company doesn‟t make use of this ammunition, then the multiples can end up as multipliers of nothing. When the market expectation subsides, it is no longer worth much.” – Kenichi Ohmae

Main Idea Competitive advantage in the invisible continent accrues to those companies that succeed in staking out substantial new territories. Invariably, these companies have the opportunity to become the “Godzillas” of the new economy – consuming everything in their path in the pursuit of aggressive and unprecedented rates of growth. Supporting Ideas At present, the Godzillas of the invisible continent include Microsoft, Oracle, Sun Microsystems, Cisco Systems, Quantum Funds, Gateway 2000, Cable News Network, Amazon.com, eBay, Priceline, Siebel Systems, etc. The features all of these companies have in common are: ■ Clarity of business focus Almost every one of these companies has just the single product or focuses on one specific business. They resist the urge to generalize, and instead do one thing exceptionally well. They don‟t even try and control the full value chain for everything they offer, just the high added-value sections. ■ Specific territories based around their key customers

-9-

All of these companies are self-constrained. They serve only those customers they can establish a long-term relationship with, and focus on generating repeat business. And they all pay exceptionally close attention to their customers. ■ Zero-baseline organizations Godzillas build their companies from the ground up rather than trying to make legacy systems adapt to new requirements. They introduce new technologies, and attempt to exploit the opportunities available rather than modifying existing businesses. ■ Freedom of location Godzilla companies rarely have their headquarters in the large, industrial-age metropolises. Instead, they locate where they feel most comfortable – since most of their customer contact will be through the Internet or by telephone anyway. ■ Use of tailor-made marketing Industrial age companies built their business around broadcast advertising – “this product is available, so come and get it”. By contrast, Godzillas all invite their customers to help design the products and services best suited to their needs. In effect, pointcasting to niche customer subsets has superceded the broadcasting approach to marketing. ■ Web-shaped business organizations In place of traditional business hierarchies, Godzillas have product or service platforms around which the company is organized. Employees or partners network together, sharing information and resources, to create customer solutions. Low value activities are outsourced as a routine matter of operations, and the entire organization is designed around the objective of creating a satisfied (and loyal) customer. ■ Global reach and viewpoint Godzilla companies start out as multinationals rather than growing into that status. They use the Internet proactively to serve customers anywhere in the world. Thus, their thinking has never become locked into the traditional paradigm of domestic vs. foreign marketplaces. For a Godzilla, the marketplace is the entire invisible continent. ■ Growth through acquisition of partners The Godzillas of the new economy are actively using their market valuation multiples to acquire companies they have formed close working relationships and alliances with. They integrate those new companies seamlessly into their systems and platforms, creating still further opportunities to generate more added value. ■ Understanding of market volatility Godzilla companies tend to discount the oscillations of financial markets and stay focused on their customers instead. They move quickly to adapt to changes in customer needs, not analyst pronouncements. (Ironically, that discounting of the value of market comment tends to add further fuel to the growth of their P/E ratios). ■ Awareness of ongoing value destruction All of the Godzillas are keenly aware of their own mortality. They know if another platform supercedes them by more efficiently meeting actual customer needs, they‟ll be replaced. That paranoia pervades and colors everything they do.

- 10 -

With that in mind, one key question remains – Can the large companies of the present economy make the shift necessary to become future Godzillas of the invisible continent? To date, nobody has successfully. There is no unchangeable reason why it cannot be done, but the pull of an established business cannot be overstated. To make the transition from being a major player in the old economy to a Godzilla of the new economy, a company would have to unlearn what worked in the past and do things entirely differently. The more a company has to lose, the harder it becomes to do that. Key Thoughts “Some observers assume that there is a specious investment bubble at play in the markets today, since so much money is being drawn to companies that cannot possibly earn enough to justify their stock prices. Though one cannot preclude the presence of a bubble, there is good reason to have faith in the market in this case; investors currently recognize that a claim in the territory of the new continent now, if it‟s the right part of the territory and an authentic claim, could be worth billions in the future. If any given company is operating on high multiples alone, it may well be the result of a stock market bubble, and it will not exist for long. But if it is a true Godzilla company, then it has high multiples as a result of its fundamental characteristics – but not necessarily the fundamentals to which conventional old-world investors pay attention. The fundamentals of a Godzilla company represent a proven ability to take advantage of the characteristics of the invisible continent – at least the characteristics that have been discovered thus far – and to secure and expand the territory from which they can uniquely harvest their crops.”” – Kenichi Ohmae “Godzillas avoid failure by involving all their people in the fate of the company. These highly technically advanced companies are also the companies that tend to treat their people best.” – Kenichi Ohmae “While the entire continent still exists, in part, only in the minds of those who care to see it with a bit of knowledge and imagination, its shape will become clearer and sharper as we move into the labyrinth of the twenty-first-century economy.” – Kenichi Ohmae

Main Idea The performance of the United States economy in the late-1990s illustrates how powerful the invisible continent can be in driving real-world growth without creating inflation. In practice, any country which follows similar political and monetary policies can emulate that performance. Supporting Ideas In the 1980s, the United States (led by President Reagan) deregulated three critical industries: finance, transportation and telecommunications. As a result of those moves,

- 11 -

the American economy became more open and increased its responsiveness to market forces rather than government directives. And that, in turn, has led to the exceptional performance of the U.S. economy in the late-1990s. If any other country wants to emulate that success and thrive on the invisible continent, there are three necessary factors: 1. A stable, attractive currency must exist. While the U.S. Dollar is currently the predominant currency, others may come to the fore in the future. Perhaps the yen, the euro or even another entirely different currency will be preferred. Any nation that takes the time to build its currency into a stable, safe haven for investors will be a candidate. That requires deregulation of financial instruments, a low-cost infrastructure free of government drag and ready transferability of the currency. 2. Marketplaces for consumer products must be open. For consumer products, the U.S. has always operated a transparent, highly competitive marketplace. Similarly, consumers have always shown a willingness to buy whatever offers value for money, regardless of its country of production. And the only way to make money in the U.S. marketplace is by improving product performance or to lower the costs of manufacture. Any country which hopes to thrive on the invisible continent must have domestic markets that share these same characteristics – simply because that‟s also the way the global marketplace in the invisible continent will be structured and operate. 3. Participation in the cyber-economy must be encouraged. For any country, this means more than simply wiring regions with high-speed data communication bandwidth. To participate meaningfully, people need to develop specialist expertise that can be leveraged profitably on the new continent. In parallel with that, consumers should be encouraged to source as many of their own purchases online as possible – because that will make them smarter shoppers and will provide a first-hand perspective on what‟s required to deliver products and services online. All of these changes will be a leap of faith for national leaders because they will be placing their countries at the mercy of economic and technological forces beyond their direct control. That loss of sovereign control will certainly be disorienting at first. However, the long-term benefits and leverage created by the invisible continent will be substantial. In all likelihood, the political will to undertake these necessary changes will only arise as a result of: ■ A catastrophic event – like a coup d‟etat or natural disaster. ■ A growing awareness the current way of government is unsustainable. For example, consider the Asian currency crisis of 1997. Prior to that time, the major Asian countries – Japan, Singapore, South Korea, Taiwan, Malaysia, Thailand, Indonesia and China – assumed they could continue to grow by borrowing money, inviting corporate investment and contracting for large technical projects around the world. In reality, what they really needed to do was to realign their economies to the demands of the invisible continent.

- 12 -

When the currency crisis of 1997 hit them, the value of their capital investments (including real estate and stock market capitalizations) plummeted. But it was not really the work of the hedge fund managers who politicians blamed. The largest portion of the decline was caused by the high-net-worth citizens of these countries, who moved their money to the U.S. In progressively larger numbers as the value of their respective currencies declined. In essence, the Asian currency crisis was a wake-up call – that nations ignore the demands and imperatives of the invisible continent at their own peril. This point is further illustrated by the success, in recent years, of the one country that is a harbinger of the benefits of the invisible continent – Ireland. In the 1960s and 1970s, Ireland attempted to attract industrial companies with little success. Then, in the early 1990s, they started targeting the service sector. As well as removing any restrictions on trade, immigration and commercial activities, Ireland took other significant moves to align its economy with the invisible continent: ■ Ireland purchased state-of-the-art, high-speed Internet connections to the U.S., Asia and Europe. ■ A 100-acre “National Digital Park” was established as an e-commerce campus. ■ The corporate tax rate was set as a maximum of 12.5-percent – creating a stable and predictable tax regime. ■ Legislation was passed allowing digital signatures to be legally enforceable. In other words, Ireland created a national electronic hub, with the goal not of importing companies but of importing jobs that could travel across telephone lines and satellites – invisible continent style jobs. The results? By the end of the 1990s, the growth rate of Ireland‟s economy had become one of the highest in the world – exceeding 10.5-percent per year. More than 250,000 new high-paying jobs have been created in Dublin alone – one for every fourteen residents. Over 2,500 American companies have shifted all or part of their customer service processing operations to Ireland. More than 600 Irish-owned software companies have sprung into life, with another 50 to 60 starting up each year. All of which demonstrates what a country can achieve if it has a single minded approach to aligning itself with the invisible continent. Key Thoughts “There are great implications in Ireland‟s example for countries elsewhere around the globe. Success has come not by emulating traditional industrial strategy, but by leapfrogging the industrial revolution. Every developing country that wants to escape chronic poverty will have to find a similar way to leapfrog itself onto the new, cyber-enabled, invisible global continent.” – Kenichi Ohmae

Main Idea

- 13 -

In parallel with all the potential benefits of the invisible continent, there are also potential dangers. Conceivably, the next world war could be a cold war without bloodshed – fought on the invisible continent using the weapons of the dimension of high multiples. Supporting Ideas While a cold war on the invisible continent is not inevitable, chances are it may begin with such subtlety and ambiguity that people are not aware of it until they become immersed in it. An invisible continent cold war may emerge if: ■ Banks get caught up in making large investments in leveraged investments with high multiples. ■ There is a temporary surge in the new economy – forcing the value of the banks investments to soar and then plummet. ■ U.S. consumers continue to spend more than they earn in anticipation of future gains in the market value of their stock market investments. ■ Some countries with attractive demographic attributes (in terms of population, telecommunication infrastructure and English language skills) become extremely prosperous via the invisible continent while others become locked in poverty. ■ A major new currency (perhaps the euro or something else yet to appear) becomes established as the transaction currency of choice, superceding the U.S. Dollar. ■ Currency speculators wage war on each other using tools like program trading, hedging with multiples, security law violations, e-commerce oscillations, spreading viruses, disseminating false information, etc. Put all of these factors together and an all out cold war could emerge over control of the $2 trillion that passes through financial markets worldwide every day. This type of economic war would pit every country against every other country, every company against every other company and even every community against every other community. The end result would be chaos. In reality, however, this gloomy scenario will only play out if any one country attempts to monopolize the benefits of the invisible continent. And equally, a compelling alternative also exists. If the invisible continent evolves into a fully interdependent world, prosperity will spread with impressive fervor – creating vast opportunities for consumers everywhere to capture new wealth. In effect, the invisible continent hold the promise for the best accomplishments of the strongest economies in the world to be replicated on a global scale. So long as this new wealth is redistributed evenly, significant quality-of-life enhancements will occur. To achieve success in the commercial world, every company needs a vision and a strategy – a shared idea of where the company can best allocate its resources to generate results. In similar fashion, those countries that succeed in realizing the potential benefits of the invisible continent will also need a shared vision and strategy. Only those countries that develop a shared vision of their future, a sense of ownership and a realistic understanding of the challenges and potential rewards will be well

- 14 -

positioned to explore and benefit from the invisible continent. Key Thoughts “Such a cold war is not predetermined or inevitable – but it is all too plausible. Indeed, chances are that it will take place unless something deliberate is done to avoid it. The previous cold war lasted forty years, because the U.S. and the Soviet Union never directly fought. In this new cold war, that kind of stalemate would be unsustainable. There would be too many players, at too many levels of economic organization: nations, regions, companies and some individuals.” – Kenichi Ohmae “Ireland and Singapore are good examples of countries that have learned how to develop a vision and strategy. Their example also shows how smaller, more coherent countries and city-states have emerged as hubs for the cyber-age and as global financial centers.” – Kenichi Ohmae “Just as the United States forged its identity by welcoming all races, religions and cultures, the new continent must become a crucible of global contact or an e-hub: a meeting ground of residents from everywhere in the globe. Those who don‟t physically live in the United States, Europe or Japan will benefit from having the broadest possible network. In a way, we need a new group of founding fathers (or mothers) to spell out a new Treaty of Paris and Declaration. This would be equivalent to – orin many ways more important than – the creation of the U.S. It is extremely important to spell out the rules and laws of the new continent, so that it does not become a paradise for the villains.” – Kenichi Ohmae “It is no longer possible to compare one country to another economically – to say, for example, that Japan is stronger than Germany – using the established macroeconomic metrics of the old world. The gross domestic product of Japan, Germany, the United States or any other nation does not measure any significant economic factor – any factor at a level of aggregation where it can tell you how to become wealthier or more competitive, let alone how to live a good life. If you really want to compare nations, you must do it industry by industry, region by region and even company by company.” – Kenichi Ohmae “Every country is different. Yet, all of them have one thing in common: They cannot succeed as producer nations alone. If you want to bring your country to a higher standard of living and a better quality of life, you must learn not just how to produce goods that the rest of the world will want, but also how to consume goods that the rest of the world makes better and cheaper. Only if your people can obtain products and services more cheaply than you can make them at home, will your nation‟s real standard of living (its quality of life) improve. To succeed, people must be able to add intellectual value on the invisible continent‟s networks of information. To build up their consumer base, the nations of the new continent must present their people with a vision for a better life. The biggest remaining job for any government is to develop a vision for the country, to prompt and catalyze such a change and to create a legal framework within which people can enjoy life in the new continent. I know of no such nations, including the United States and the United Kingdom, that have successfully created such a vision.” – Kenichi Ohmae

- 15 -

Main Idea As the invisible continent becomes larger and more influential, there are a number of quality-of-life issues which will need to be widely debated by consumers – such as how work will be valued, what issues like democracy and education mean in the context of the new economy and so forth. The ultimate conclusion may be that consumers will recast themselves as residents of the entire world, and act accordingly. Supporting Ideas Taking some of the key issues yet to be definitively resolved in the invisible continent: ■ Rethinking the value of work In the old economy, people had a general idea how much value they were adding – and therefore priced their rewards commensurately. In the invisible continent, an open, efficient labor market will exist. Thus, workers will essentially auction their services off to the highest bidder, who in turn, will be the party that has the greatest opportunity to arbitrage those services off for more than they pay. That promises to create an open yet challenging employment marketplace. ■ Governing the invisible continent Perhaps, in the future, a broad consensus will develop that invisible continent should have some form of formal governance structure and accountability. Instead of letting the free market decide where the new economy heads, some form of leadership may be preferred. How this might be structured and administered in practice are yet to be determined. (Perhaps an ombudsman‟s role will ultimately emerge for the determination of disputes?) ■ The democratic process may be enhanced At present, people vote based on their residence. National boundaries have been formed for historical rather than practical reasons. Perhaps when everyone has access to the invisible continent, more effective forms of democracy may become available. If there is sufficient interest, these forms of “enhanced” democracy may supercede traditional systems. ■ Education will be a critical factor To participate fully in the invisible continent, education will be required. In fact, only those who are educated will be equipped to participate effectively in offering their services in the global marketplace. How youngsters of the future generations will be prepared to comprehend and then compete in the invisible continent in an even-handed way will be the focus of much attention and discussion in the years ahead. In addition, technical skills will need to be balanced by understanding of human relations and personal confidence. ■ There will be an ongoing need for self-renewal The invisible continent will empower and enrich the lives of the majority of people. There will be no “haves” and “have-nots”. Everyone will have equal access to the network, and the resources needed to succeed. And yet, for some time, there will still be instability – because it won‟t become clear what is needed to succeed or to sustain success for quite some time. Everyone will have to accept some insecurity in the years ahead.

- 16 -

In essence, individuals, institutions and corporations alike have to go through two fundamental steps to learn about the forces at work in the invisible continent: 1. Everyone has to free themselves from the legacy systems that existed in the old world. 2. Everyone has to actively prepare for life in the new continent – which may mean creating a new company which is structured and networked like the Godzillas of the new economy. It won‟t, however, just be the corporations that will be going through these dramatic changes, Countries and individuals will be traveling through the same process as well. How those changes ultimately play out, and who will ultimately succeed in living in the invisible continent, remains to be seen. Key Thoughts “The new continent still has no constitution. It only has a declaration – a declaration of interdependence. We hold this truth to be self-evident: All people are created in connection with each other. As the pace of that connection speeds up, we know each other and need each other as we never have before. Let us find a way to reflect that interdependence in our businesses, in our schools, in our governments and in the quality of our lives.” – Kenichi Ohmae “The cyber aspect of the new economy is an enigma. There is no inherent reason why the cyber dimension should yield a higher productivity. The lack of competition, and the ease with which some American companies have claimed the new territory in cyberspace has produced an illusion of „Eldorado‟ for the early pioneers. But as we are already witnessing, the building and maintenance of a successful dot.com e-commerce site is often more expensive than building a successful shopping mall in the suburbs. The privilege of easy high productivity is available only to the truly innovative early pioneers. And that is no different from the old world. However, that does not mean that most companies should stay in the old world. The economy itself is rapidly migrating into the global and cyber dimensions, and this means no matter how difficult the passage might be, every company must explore the new economic dimension with its eyes wide open.” – Kenichi Ohmae “While the total landscape of the invisible continent is yet to be explored and studied, I hope I have been able to help you develop the feel for its nature and for the forces that are shaping it. Developing this feel is a difficult task, because nobody has a well-trodden map nor guide. As the borders between the real world, the cyber-universe and mathematical space disappear, the invisible continent will exist beyond our direct sensory perception. Only those who can construct and keep in mind an ongoing conceptual model of it will understand geopolitical and economic events.” – Kenichi Ohmae

* * * [세계 베스트셀러(NBS) 서비스는 영문의 경제·경영 및 정치 서적의 베스트셀러, 스테디셀러의 핵심 내용을 간략하게 정리한 요약(Summary) 서비스입니다. 영문 서비스는 단순히 서적을 소개하거나 광고를 위한 Book Review가 아니라 세계의 베스 트셀러 도서의 핵심을 체계적으로 정리한 도서 정보로써, 이 서비스를 통해 세계의 정치·경제·문화의 흐름을 빠르게 파악할 수 있습니다. 세계 지도층이 읽는 세계 베스트셀러 도서를 가장 빠르고 효율적으로 접해보시기 바랍니다.]

- 17 -