Geographic Balancing

I am fond of saying that what happened in the US in the second half of the 20th century will take place in much of the rest of the world in the first half of the 21st century. The end result will be vastly more geographic balance of wealth and prosperity than we had at the beginning of this millennium.

Today, in a NY Times article on Toyota (TM)’s annual profit guidance to wall street, I came across this comment by Toyota’s President Katsuaki Watanabe:

“Our profit structure has become more geographically balanced, with
growing contributions from resource-rich countries and emerging

The Times goes on to say:

Toyota, now in a dead heat with G.M. to be the world’s largest car
company, said most of its recent profit growth had come in new markets
like Brazil, China and Russia. It said the growth helped offset
sluggish sales in the United States, traditionally Toyota’s largest and
most profitable market, and other mature economies like Europe and

This is consistent with comments I heard at the hedge fund event I attended on wednesday. The BRIC countries (Brazil, Russia, India, China) and the middle east, are quickly attaining economic purchasing power parity with the United States and Western Europe.

I may have to amend the statement I started this post off with. It looks like it may not take 50 years for the balancing to occur. It’s likely to happen in the first 25 years of this century.

#VC & Technology

Comments (Archived):

  1. aweissman

    I think this trend is even more profound, in that, as Fareed Zakaria writes, “”the world has shifted from anti-Americanism to post-Americanism.” Economic balancing is one component, but I think it may also be occurring socially, academically, maybe culturally too.

    1. fredwilson

      nice quote from Zakaria. i reblogged it at

      1. aweissman

        I wrote about it a little here too — my blog is mucked up now – but some more ideas here

  2. wisaac

    Very interesting,This must have been what europe felt as the US began its reign as the global hegemon. However, europe had little choice, as it was rebuilding itself after two wide scale conflicts. I’m glad to see the bottom billion acquire wealth, but what is going to be the long term effect on the domestic economy? Its naive to assume that everyone will be equally well off or that the global equity splits evenly. I don’t see it as balancing but a reshuffling the economic deck: some will get more than others.As a side note, I have listen to everyone in the business community explain the benefits of investing into BRIC nations, but what are the downside risk of this over investment?

  3. gorecki36

    Sometimes its hard to visualize things like this and feel their importance and implications.One of the techniques that I use, is to think of the day that I will read this in the news, 25 years from now. Then I ask my self, what other things are in the news the same day, what is happening etc. to build a complete story.I was thinking about that after I read your post… I thought that when and if the BRIC countries outstrip the currently dominant members of the global economy, many of the current members of the G-6 (US, Britain, France, Japan, Germany and Italy) may not be eligible to attend these meetings.Can you imagine the day that you will read this in the news?

    1. mrclark411

      G-6 in 2030.ChinaRussiaIndiaUSADubaiBritain

      1. mrclark411

        Or, scratch Britain – put EU in its place.

  4. BillSeitz

    Yes. I think this makes the protectionist (public) attitudes of all 3 presidential candidates unrealistic/inappropriate.

    1. fredwilson

      i am not sure Obama is a protectionist inside. but he has clearly cloaked himself in that position and it won’t be easy to take off that cloak

  5. Brian

    I welcome the day where central asia and Africa are littered with sprinkler city suburbs, big box stores, and Bucca diBeppos.Life and business are not a zero sum game. Growth is good.

  6. Geoffrey Vitt

    I could not agree more with the statement about how foolish protectionist policies are. From nearly every conceivable angle (economic, national security, global goodwill, innovation, etc.) it makes little sense and only shows fear rather than determination.

  7. cortland

    The world is (getting) flat.Openess, cross-border business, exchanging culture and ideas, decentralization of power and assets, empowerment of the individual, interconnecting everyone to anything they want . These are all genies that will never go back in their bottles. BRIC is definitely a force to be reckoned with, as is the rest of the world. The bursts of information, data, technology and empowerment are happening everywhere, they’re just especially pronounced in BRIC.Fun time to be alive and see it all. Fred, of all people, has a catbird seat.

    1. fredwilson

      i don’t think i have a catbird seat. but i do try to see what’s really going on and this blog and particularly the readers who comment are the best tool i’ve got to do that

  8. gregory

    back in south india after seven weeks in s.e asia, and the wealth creation in these cultures is astounding, especially if you have visited them often over the last few decades …. it is so amazing, that i start to wonder, what is wealth really? it is almost something magicthe best comment i heard about the last century is not about wealth, or westernization, it is about the introduction of a new concept in the world, the concept of individual self-fulfillment, an entirely new thing on this planet….

  9. Rob Long

    Growth is good. Growth is what ends famines, builds schools, increases life expectancies, and powers a rise of living standards.Mostly. But growth without laws and consistent property rights sometimes end up creating disasters. The BRIC economies are rapidly diverging — Russia has potential and resources, but is crippled by a corrupt oligarchy at the top; China keeps resisting capitalism: its big banks and enterprises are government run and regulated; Brazil, on the other hand, is quickly adapting to the global capital market; and India, wow, look out. India is going to be an amazing story: one billion people lifted out of the most depressing and crushing poverty in the next 50 or so years.Fareed Zakaria is an old friend of mine — I met him freshman year in college — and he’s always been a sharp observer of the role of America in the world. His new book is great, but I think it’s being mis-interpreted as a “declinist” tract, about an America in decline. It really isn’t; it’s about the rest of the world (well, really, parts of the rest of the world; he’s optimistic about all of the BRIC economies; I’d pick only the two with consistent property rights law) and how the rising global growth means we’ll have to rethink our ideas about American-ness, invent new businesses and products to sell to a richer world, and invest more in education and technology.Rethink, invent, invest — these are good challenges to have. Optimism is the great American export. Now, finally, in some unlikely places, we’ve got some real buyers.

    1. fredwilson

      i am so with you on this.that’s why i always say the line about the last 50 yrs and the next 50 yrs. it’s not about America declining in absolute terms (although that could happen). it’s certainly about America declining in relative terms but that means others are rising and that’s a great thing.

      1. rodmitch

        This can only be true if America decelerates or stagnates, no? It may take 50 years (or 25) for these countries to get to where America is now but where will it be then?

  10. wisaac

    I disagree with notion of flatness being the great equalizer of the global society. We champion the barrier of international barriers, yet the concentration of wealth at its highest point. Even in the BRIC nations, while the standards of living are increasing, Moscow has more billionaires then NYC. How is that flat or decentralized?The world may not be a zero-sum game, but its rather a Nash equilibrium. Every nation has its place where they are sufficiently satisfied. Yet we have a new class of nations (emerging nations) wanting a bigger share. How and where do they fit into the global math?

  11. markslater

    Dubai? or UAE?5 countries and one city? American by chance?

  12. Merredith

    I agree that geographic balancing is not a zero sum game; that it may even be a Nash equilibrium. What I find interesting in the balancing of wealth, rights, and culture — and as Rob points out so aptly, optimism — is responsibility. What financial and cultural rules do we all play by – the ones we used, or the ones we need now?

  13. jackson

    Hopefully our transition from Imperial Power to average Joe won’t be as painful as that of Britain , France, or Rome…..

    1. fredwilson

      jackson, you are reading the history of great britain right now. what are some of the “painful” moments that britain went through that we may be headed for?

      1. gregory

        loss, or certainly the redefinition, of britishness is the obvious one …. the global flow is the transformation of identity, who you think you are… this is painful for many cultures, religions, regions …. and unfortunately what is replacing it is often far less human, loving, caring, coordinated with seasons and geography than what once was …. but minds free of space and time constraints can fly in ways unimaginable up til now ….

  14. CoryS

    Fred – I read the quote and sent it to a number of business leaders at my company as well. It embodies what our company is planning for which is a non-US centric world where demand is gaining traction in hard asset growth including infrastructure, housing and transportation (base of the pyramid kind of stuff).Nice to see it struck you as well. Soon enough, you’ll want to be more geographically balanced with your own personal wealth, too.

  15. mahmoud

    I second the notion that it will be a quarter of a century rather than half a century for the balancing of wealth to occur. I believe we will be seeing a hockey stick growth curve in many of these countries if and only if there is a change in their governments’ economic and trade policies. With the globalization of markets and the growth of internet adoption in these countries comes an increased level of transparency that is currently fueling the pressure for economic reform. India is a prime example of how under new government came a new economic policies that motivated and facilitated foreign investment. The talent was there just like many other countries, but it was hidden and unutilized on a global scale.UAE is another prime example. It is now a hub for any multinational corporation wishing to penetrate the middle east market because the government created a free trade zone in Dubai. Now Dubai houses the greatest number of cranes in any city in the world. Infrastructure is getting revamped to address the high scalability needs of the city and the region.It will be interesting to see how long it takes for the lid to get blown off in each country in order to give way for economic reform and how fast of a ripple effect will that have on other countries? Once that lid is blown off, I think we will see potential for other ‘Indias’ to emerge.

  16. Don Jones

    Fred,What do you think of VC investment moving overseas:…”VC investment continues to move overseas — Limited partners say they’re still wrestling with the implications of more and more venture capital activity moving abroad. The comments came during the LP panel at the recent meeting of the National Venture Capital Association. VentureBeat didn’t make it to that panel, but VentureWire was there to note some of the most interesting facts and figures. There’s definitely a lot of activity — almost 20 percent of domestic funds were deployed outside the United States in 2007, compared with 7 percent in 1998, according to Bob French of Adams Street Partners. And David York of Paul Capital predicted that within the next decade, as much as 50 percent of global venture capital activity will take place outside the United States.”

    1. fredwilson

      it’s inevitable. money flows to entrepreneurs wherever they are

  17. logistyka

    thank you, it is very intersting post !

  18. vruz

    Latin America is a more difficult game to tackle, it will take at least 15 years of intensive education programmes to get started producing the brains we’re needing to achieve China levels.As reported by The Economist: (May 3 issue)…From this graph we can tell Latin American people seem to have enough capital to get started, they work a lot, but they don’t know how to allocate capital and labour.The OLPC plan being deployed right now in (at least) Brazil and Uruguay is a good indication this may have started to happen already, but 25 years may be a bit too optimistic for these countries.Fresh minds, new people, new ideas, a lot of new brains thinking differently.I am hopeful indeed.

  19. Karen E

    I manage the marketing efforts at a very small but global architecture firm. I can’t even believe how quickly our global portfolio has grown. In 9 months it’s gone from 25% of our work to 40 or 50%. We have been pulled into huge-scale urban planning projects all over the world that are the stuff of fairly tales. We’re turning away work because we can’t hire quickly enough nor even deal with working in so many countries.

  20. coldspring

    Back in my ops days at Dell (’97 – ’01) we saw parity models that showed China/India @ cost parity in 2050 that were done in ’98, by late ’01 the models showed 2035 and the latest that I reviewed a year ago estimate 2018 – 2020. It is coming faster than we think.Headed to HK this coming week. Will look to see if they have discovered HoHos, Chia Pets and bad country music…that’ll be a sure sign.

    1. gregory

      i guarantee you will have many moments where you cannot tell what country you are in

  21. gregory

    to be mourned about, the death of the exotic

  22. Ashish Singal

    I think this is a great post and a great discussion. I feel that people who recognize the fact that globalization is inevitable and irreversible will be able to appreciate and understand much more clearly current events and future trends. Hopefully, like-minded people will also be our decision makers ;).