The Future of Small
Globalization and Cowboys
When we were growing up, our mothers and fathers taught us many
lessons that were true - one of which is that the earth is
round. It was easy to believe and understand. We could see
pictures from outer space and every class room had a globe. We
in turn, taught our children that...
The World Is Round... Or Is It?
At first, humans believed the world was flat, because everything
they saw was flat. If the world was round, one would most
certainly fall off. Then, after Columbus and Magellan, man
learned the world is round, and this information was handed down
through the generations. While we believe the world is round,
should we really be teaching our children this?
And Now, We Find The World Is Flat Again.
Thomas Friedman, a globalization expert, writes in his new book
"The World Is Flat: A Brief History of the Twenty-First Century"
that world is no longer round. Here is why.
We Be Smart, Ain't We?
It used to be that America was smart and other countries
(especially third world countries) quite frankly we not so
smart. A high school drop-out on welfare would earn more money
than almost anyone else in the world. Overseas labor was cheap,
but it was too far away.
Now countries like China and India produce more engineers per
year than America. Our "advantage" over these countries is
Cheap Labor Is Now One Day Away
There are two ends to the income spectrum. First, there are over
2.5 billion people living in China, India and Indonesia. This is
about 41% of the world's population. The vast majority of these
people have an average per capita income in the $1,000 - $4,000
range. At the other end are the countries like the U.S., Japan,
Germany, France, Canada and the UK. This group totals over 500
million people and, depending on the country, has an average
income in excess of $11,500.
Geography is becoming less of an issue as we can either put a
document in an overnight delivery pouch and have it seamlessly
delivered anywhere in the world for less than $30, or we can
wire funds to an overseas bank in minutes. Ships carrying
container trucks flow from Asia as easily as we drive from the
suburbs to downtown. This is further demonstrated by looking at
Wal-mart. It has over 6,000 suppliers. Of those 6,000 suppliers,
5,000 are in China.
How a Flat World Impacts Your Mortgage Business
A flat world means that your mortgage business is open game to
competition. The same way in which call centers, engineering
projects, IRS tax preparation and living trust documents have
been out-sourced to offshore companies indicates it is only a
matter of time before foreign corporations come into the
mortgage market by establishing a domestic presence, while doing
all the processing out of, say, India. It is hard for a mortgage
owner who pays a receptionist $14,000 - $20,000 a year to
compete when the ENTIRE staffing costs of an overseas mortgage
entity can be subsidized for the same amount.
Of course the U.S. branch office of an overseas company will
employ a facade of Americans as the "in-office" salespeople. But
all of the processing work (and probably customer service) will
be handled by more cost effective labor alternatives.
Small Mortgage Companies Will Be Hurt Most
Due to economies of scale, smaller mortgage companies will likely be the first
to feel the impact of globalization. Historically, highly fragmented mom-and-pop
businesses like donut stores (Dunkin Donuts) and corner markets (7-11) were
consolidated or franchised into more efficient business identities. And we have
witnessed the constant consumption of small local banks firms merging with and
being consumed by larger regional banks.
The economies of scale coupled with the inexpensive cost of overseas labor will
cause small mortgage companies to fall by the wayside. Yes... this could mean
I know, I know... I can hear you now. You are saying, "I have customers who have
been with me for years, they will never leave me." These were the dying last
words uttered by small hardware store owners as Home Depot swooped into their
town. Are there small hardware stores left? Sure, but not very many, and their
owners are not earning as much.
Do you really believe customers will buy from you if there is a significant
price differential? When was the last time most people paid attention (when they
bought their cell phone) as to where it was made? They didn't. Price was the
primary consideration when purchasing this commodity.
Like it or not, the mortgage industry has moved from a customer based service to
a commodity of interest rates.
How A Flat World Impacts Your Children.
Your children will be impacted as well. First, if you have ever envisioned
handing your company over to your grown children when you retire, there just
might not be much left to give them. Second, assuming your child wants to become
an engineer, they will no longer be competing with only U.S. students to get a
good education. Your child is also now competing with international children who
are attending college and becoming engineers in overseas countries. American
companies looking to hire engineers have the option of hiring a $30,000+ freshly
graduated U.S. college student or a $10,000 experienced engineer from China or
"Mama, 'Do' Let Your Babies Grow Up To Be Cowboys"
So what jobs are safe for your children? According to Friedman, jobs that
require a physical presence, such as: physicians, car mechanics, grocery
workers, coaches, negotiators and the like. Teachers as well, until distant
learning and tele-classes cause them to fall to the globalization wave.
There is a country song that says, "Mama, don't let your babies grow up to be
cowboys." But because being a cowboy requires an actual physical presence with
the cows, it could be a safe job... until even more countries grow their own
cattle and export meat to the U.S.
Web site: www.mortgagepromote.com