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Joe Bower is the Baker Foundation Professor of Business Administration at Harvard Business School. He is an expert on corporate strategy, organization, and leadership, and has devoted much of his[…]

Even though China and India are expected to have as much as 40 percent of the world’s GDP by midcentury, incomes in those countries will still be one-third of those in developed nations.

Question: What are some possible threats to future business rnprosperity?

Joe Bower: Our research project involved rntalking with a number of business leaders and showing them some of the rnscenarios developed by the World Bank for the long-term future and rnasking them what they thought it meant for business leaders.  And I’m inrn the middle of finishing with some colleagues a book that we hope will rnbe a fantastic answer to your question.  But basically, what we can see rnis that the way things are playing out is very uncomfortable.  The rnfuture could involve substantial breakdowns so that the people who were rninvolved in our research were very concerned about capital markets long rnbefore the crisis.  They saw the volatility, they saw the extent to rnwhich the capital markets were drifting away from their function of rnserving industrial markets and were simply trading systems, and they rnwere very concerned about it’s implication. When you look at any set of rnforecasts, what you see is growing in equality of income within rncountries and then across countries really bad.  So that even though rnChina and India, by say 2050 or 2040 are expected to have together as rnmuch as say 40 percent of the world's GDP, the people in those countriesrn will still have incomes that are, like, a third of those in developed rnnations, on average.

And the averages are a problem because evenrn if you look at those nations, what you see are... the poor are coming rnup, but we’re getting staggering – somebody said China now has 62 rnbillionaires, something like that.  Well, that kind of inequality is rnvery rough in an age where television makes everything visible to rneveryone... on their cell phones.  So, inequality then leads to rnmigration.  That can be highly destabilizing. And so we see, for rnexample, in Europe, a population that’s shrinking because of age, rnWestern Europe, and what do the voters want?  The voters want more rnbenefits, they want lower taxes, they want shorter working weeks, and rnthey want no immigration.  So, what we’re looking at is... we’re moving rntowards a something that’s going to break down.

And so what is rnthe role of business leaders?  The role of business leaders is, as a rncommunity globally, to recognize these problems and to start making a rndifference and interestingly, there are companies that are doing just rnthat.  A few are based in the United States, more outside.

Question:rn What are some examples of companies making a difference?

Joern Bower: If you look at... China Mobile is getting most of it’s rngrowth these days by bringing cell phones to essentially a million rnvillages, they’re getting down to the village level.  They’ve built a rndistribution system that’s amazing.  With those cell phones, they can rnnow provide market information to what are essentially farmers.  They’rern going to probably, if the government will let them, provide banking forrn that.  So, it’s a business that’s a solution.  If these people are rnpoor, bring them into the market system.  And we’re seeing if people rndon’t have homes, find a way to help them build homes, that’s what Cemexrn is doing.  And figure out how to distribute to that level and finance rnit.

Then if you look at something like IBM, IBM has put the rnheadquarters of it’s market facing activities for emerging markets in rnShanghai—not in Armonk—and they’re working to provide the information rnsystems so that those companies who are trying to do that can do it.  rnThat’s where the future of the market is.  Essentially the business rnversion of that nightmare that I was describing is: Do you want to spendrn your life fighting for the one-third of the market that’s well rndeveloped and in which every company in the world is present and rnfighting, or do you want to be a leader developing the two-thirds of thern world’s market that has no competition?  So, that’s taking that big rnproblem that I described and saying, “Well, wait a minute, that’s a hugern opportunity.”  And that I think is what’s before us.  We either developrn that opportunity or face some very, very uncomfortable problem. 

Recorded April 1, 2010