The Silent War: Inside the Global Business Battles Shaping America's Future. - book reviews

Washington Monthly, April, 1989 by Tom Peters

* The Silent War: Inside the Global Business Battle Shaping America's Business Future. Ira Magaziner, Mark Patinkin. Random House, $19.95.

The Silent War is arriving on the shelves at the same time as Jim Fallows's More Like Us: Making America Great Again.** Reporter Fallows one-upped the experts in 1981 with National Defense, which may well be the best book so far on America's crushing problems with defense management. Now he one-ups the anthropologists and sociologists, and perhaps the economists as well. Fallows's thesis: America's real talent lies in disorder and vitality.

"This can't be the moral"

Reading Magaziner and Patinkin is exhausting. The authors are tireless globe trotters, reporting from Korea, Japan, Germany, France, Sweden, Singapore, Ireland, Louisville, and Providence, Rhode Island. Each of the nine case studies, which form the core of the book, are based, it seems, on scores of trips and hundreds of interviews.

The studies track three distinct problems-competing with low-wage countries, competing with developed countries, and developing future technologies. They look at microwaves in Korea, computers in Singapore, tool-and-dye in Germany, optical wave guides in Japan, even ball-point pens in Rhode Island.

Many of the examples are striking. There is Korea's Samsung, which despite entering the microwave oven business just 10 years ago-when Japan was far ahead and the U.S. was still in the race-is now a $40 billion firm. Shut off from the relevant technology by the wary Japanese, the key to Samsung's rise was getting it instead from American companies.

And there's General Electric's attempt to make new refrigerator compressors competitive with those produced by the Japanese. GE went from scorn for, to despair over, its foreign counterparts, before finally opening a successful plant in rural Tennessee where displaced workers eager to retrain voluntarily undertook 50,000 hours of instruction in the newly required skills.

Or consider Corning Glass, which made a go of its foray into optical wave gu ides-an improved instrument for transmitting radar, radio waves, or phone calls-even though the U.S. government chose not to support the technology. The company ended up with big sales in Japan, the industry leader. The key was Corning's willingness to tailor its products to local markets.

The strength of The Silent War is the rich, highly believable reporting. The charge sheet against America's biggest outfits (the only ones considered in this book), while familiar, is correct and bears repeating: We remain all too complacent vis-a-vis our overseas competitors. We don't do much competitive analysis in general, and none when it comes to foreign competition. Magaziner and Patinkin report the frightful truth that at the height of its battle in refrigerator compressor technology, not one GE refrigeration engineer ever visited the Far East-and this was not 1955 or 1965, but the early 1980s. GE had some 30 engineers working on microwave ovens, while one Japanese competitor had 280. We are not obsessed with keeping the skills of our workers up to date, as our competitors are. And we are all too willing to chuck it all and go overseas. Corning's persistence in wave guides, or GE's in refrigeration, are rare exceptions.

When it comes to recommendations, the authors may be diving off the deep end in implying that government support in the exact style of Japan, Korea, or Germany is the key ingredient to success in the newly globalized economy. For example, they are maddeningly imprecise about how such support in the U.S. would cause our corporations to be more disposed toward exporting.

Furthermore, a person from Mars skimming this book might guess that the United States, which can apparently do nothing right, had a per capita income of about six cents and that U.S. productivity was a tiny fraction of Japan's. In fact, our per capita purchasing power remains far above Japan's; our overall productivity is still way ahead as well.

The reader from Mars would also conclude that the Japanese Ministry of International Trade and Industry (MITI) had made no mistakes in choosing which industries and companies to support or neglect. But numerous observers, such as Gilder and leading Japanese consultant Kenichi Ohmae, contend that MITI's role has been highly overrated. Former federal budget director Charles Schultze put this view succinctly in an interview in Harper's magazine a few years"I don't think MITI really has 'much to do with Japan's success. . . . People seem to think that without an industrial policy, most of Japan's huge investment would have gone into industries like plastic toys, souvenirs, fisheries and kites. Well, it wouldn't have. It would have been invested pretty much where it has been."

Magaziner and Patinkin also seem to think the continued growth of our service industries is a de facto case for decline, even though service industry technology spending per employee is higher than manufacturing spending; what's more, service industries now drive most advanced manufacturing product development. For Coming, the turning point in optical wave guides was a big order by a sophisticated, entrepreneurial American service firm-MCI.