What China Thinks You’re Worth

This post obviously deviates from my previous posts on digital strategy, but I feel it justifies the overall theme: Marketing in a global economy. It’s also been burning on my mind for a couple weeks…

How to Speak French in China

The picture in my blog banner was taken in Carrefour on a Sunday. Carrefour is a French grocery store which became successful in China. When I first went to Carrefour in 2006, it was the best place to get imported brands, a little higher priced and moderately patroned by Chinese. In 2008 when that picture was taken, Carrefour had dramatically reorganized the store to cater better to Chinese tastes. They had gone from a Whole Foods style store to a SuperFresh.

It was still a little above the normal Chinese grocer, but focusing on fresher produce, an impressive fish market and household staples. The bakery was more “Chinese”, and catered to bulk buying of mooncakes and local candies for holidays. There were more discount signs and the ads were of happy Chinese couples. The foreign goods were pushed into a smaller section and the previous space was stocked with wine. The beauty selection was extensive, and staffed with saleswomen as in a department store. And as in the picture, the store was packed. Clearly Carrefour had figured out what was “foreign” was valued at in Chinese.

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Your Value in RMB

In international finance we briefly covered a concept called derivatives (my professor’s pet fave). Derivatives in calculus are horrible equations talking about the growth rates of growth rates. Abstract math ideas have always bugged me so I cringed hearing of financial derivatives. In finance however, they are any financial asset whose value is derived from a real asset. Mortgages are a type of derivative, and as we saw in the crisis, there can be derivatives of derivatives, which get riskier and riskier as you move away from the real asset.

In a way the economy is a derivative. There is no direct asset underlying the U.S. economy as the government stands to borrow on it or as currency exchange rates tend to fluctuate on it. The dollar is no longer backed by gold, and the government doesn’t own enough assets in land or patents to back itself up. The asset is the American people, and the promise of us continuing to innovate and pay more in taxes over forever. So how do we crawl out of this recession and become an asset worthy of the American dollar?

I chose to make references to Asia because I know Asia. I’m also a firm believer they have the right focuses: Education, self-interest, hardwork, saving, innovation. Many would agree those focuses created the strong middle class in America from the 1940s to 1960s. South Korea in the 1990s was just beginning to emerge on the world market. Their focuses were on education, hardwork, South Koreans and frugality. Samsung up until that point had been “ripping off” American innovations in technology, making the same goods cheaper and somewhat shotier.

Samsung had a great CEO at the time. He was what Jim Collins would call a “level 5 leader”. He was sick of shotty goods and copycatting and knew Samsung would never grow to compete globally without innovating. So he called together his top people and all the workers of a manufacturing plant and had them pile Samsung electronics into the middle of a field. Then he set them on fire. From that day forward he said, Samsung was going to be known as innovator, and they were going to create products that hadn’t been done before.

Its far-fetched to say a single change can take place in American culture as happened in that factory which will alter behavior substantially. It would not be a change that happened quickly. It would not be one that would be appealing, as any drastic change involving hardwork isn’t immediately. It is a necessary change though, as Warren Buffet, and Bloomberg and even the Occupiers agree with.

The change has to begin with an admission of guilt: We defaulted on the American Dream, and it’s going to take a long time to earn it back.

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