The “Galapagos” effect

Image by Juska Wendland via Flickr

We all know everything about Japan is different. During the trade wars between U.S. and Japan –oh, nostalgia! how long ago was that??– the Japanese used to say that Japanese snow was different, so they couldn’t import U.S-made skis and Japanese intestines were different, so they couldn’t possibly digest U.S. beef steaks, even though they were far cheaper that cuts grown in Kobe or Niigata.

Today’s NY Times accurately illustrates the PROBLEM with this “isolationist” mentality. While Japanese cellphones are WAY ahead of their European and American competitors — you can use a Japanese keitai to buy a soda at the convenience store, pay your utility bill, or get through a subway turnstile — none of the Japanese manufacturers are big global players. That’s because the Japanese cellphone system is not compatible with the GSM and CDMA networks used in the rest of the world

For many years, the Japanese market was big and robust enough to capture the necessary demand the chipmakers and handset operators needed to capture profits.  Now Japan is stagnant, and getting older…but Japanese cellphone makers can’t get the economies of scale to make them big players in China, Europe or the U.S.

The Japanese have lots of gadgets and innovations on their phones,but these aren’t exportable to the rest of the world. Thus the new term –I had not heard it before — of the “Galapagos effect.” If you are isolated long enough from outside forces, like species on the Galapagos island, you evolve and are transformed into a new species, unlike those visible anyplace else… Does that ultimately doom your viability? Or simply condemn you to a life on the margins?

So in the end…this is an object lesson in the benefits of free trade. If you learn to compete globally, you can also succeed locally. But as long as you believe you are “unique” and “different,” and choose not to commune with others, the lack of integration will someday come back to bite you.