 I'm Salvatore Bobonis and I'd like to take you inside the Pacific Network Technosystem to understand how the rise of Kalachina is changing globalization and shaping the millennial world system. Let's start with globalization. The economic globalization of the last 40 years has now come to an end. We have reached globalization max. Whether you look at trade flows, trade as a percentage of global GDP, the blue line on the left axis, or foreign direct investment, the red line on the right axis, economic globalization has reached maturity. The world is not de-globalizing, it's not becoming less global, but the process of globalization has now matured. It's come to an end. We live in a fully globalized world. Today, anything, practically speaking, can be made anywhere in the world. Global production networks are always shifting around and they're still optimizing for maximum efficiency. They'll never come to a perfect stand still, but the radical system change of the last 40 years is now complete. We no longer live in a world of 200 national economies. We live in a world of one single global economy. That economy is dominated by global value chains that have focused profits at the peak nodes of global production networks, the peak nodes which are the brand owners, the global brand owners, because globalization has created a single global market for globally branded products. For example, today, if you think bicycles, you think giant. Giant is the giant of the bicycle industry. It's the brand to beat not just in Taiwan or in the United States or in Europe, but everywhere in the world. But what happens when a bicycle is no longer a thing you buy, but a thing you use? When a bike is something you use, not something you own, the relevant brand is no longer the bicycle. The relevant brand is the app you use to rent it. The 20th century economy of things focused on the production of hardware, and we're used to thinking of the top brands of global value chains being brands of things, whether that's computer hardware or hardware like a bicycle or a piece of clothing, an actual physical hard piece of thing you could buy. Over time, the software, and by that I don't just mean computer software, but the design elements, the quality and character of things became more valuable than the things themselves. But now, in the 21st century, in the post-globalization era, since 2008, brand value is shifting into connectivity, creating what I call the network of the 21st century. We've moved from hardware, the thing, to software, the characteristics of the thing, into network, connecting people to the thing. In fact, I'd like to define this new word, network. Network is a production system that generates value by connecting people and or things. If you want to have examples of network, network is a loose category of technologies that includes social networks, search engines, online marketplaces, entertainment platforms, e-payments providers, sharing apps, ride hailing services. You can even think of multiplayer computer games as being a form of network. The value isn't in the game, the value is in the connections. It's in who's playing it. Software is transforming conventional brands into little more than OEMs, original equipment manufacturers. Think of Giant, the bicycle company. It started out as an OEM for branded bicycle companies like Schwinn. When you went to a store, you bought a Schwinn, but in fact the bicycle, the hardware, was made by Giant. Later, Giant climbed up the value chain to become the world's most successful branded bicycle manufacturer. It clawed its way up from being just a thing to being a quality, to being from hardware to software. But today, Giant is once again becoming an OEM. It's being reduced down the value chain because today, you don't go in China at least to buy a bicycle. Instead, you get on an OFO and you know who makes your OFO? Giant makes the OFO. But it doesn't say Giant on it, it says OFO on it. What you're doing is renting a bicycle using the OFO app. You're connecting with the bicycle instead of actually buying one. MoBike's top supplier makes this even clearer. You know who makes the bicycles for MoBike? It's right there on the slide. It's Foxconn. Foxconn, the ultimate OEM. The people who make iPhones also make bicycles for MoBike under contract. They're an OEM bicycle manufacturer for MoBike, the network company. This is happening in field after field. For example, self-driving autonomous vehicles may soon turn the lights of Volkswagen into OEMs for DD. I mean, right now, if you want to get a DD, you order a car and someone driving their own car shows up. DD instead, however, is pushing its premium service, where instead of getting someone driving their own car, you get someone driving a DD. Very soon, with the Volkswagen DD partnership that's rumored to be coming forward, when you order a DD, an autonomous Volkswagen will simply show up. Today, it's a Volkswagen. Tomorrow, a DD may partner with someone else. The point is that you're not buying a Volkswagen, you're ordering a DD. The relevant brand when you get the car is not the manufacturer, not the hardware, it is the network that you order the car through. Network companies are rapidly reshaping value chains around their own brands in all sorts of industries, starting with mobility, DD, Uber, Lyft, AutoNavi, but Apple, Google, even General Motors, is getting into the self-driving taxi market because GM has recognized that in the future, it won't be able to sell a GM. In the future, it'll have to sell a mobility service, and so it's trying to become an alternative to Uber. In entertainment, the big movie studios and the TV networks are all disappearing, they're not disappearing, but they're becoming much less important because the relevant brand you buy is not the movie, the relevant brand is Netflix, Amazon, Google, YouTube, Instagram, that is, you're getting your entertainment content from a network provider who simply carries the content. In shopping, of course, it's Amazon, eBay, Alibaba, JD, you name it. Even in food service, the real big trend in metropolitan areas right now is that you don't order food from a restaurant, you order food from Uber Eats, which has a restaurant make it for you. Let's put this in perspective, in 2018, the top five global brands do not produce things, they connect people. Apple, Google, Microsoft, Facebook, Amazon, they are not hardware companies, they're not even software companies, they are network companies. And if you disagree with that, take a look at Apple. Digital phones from a purely technical perspective are essentially no different from top of the line Huawei phones. Many people even say that Huawei phones have superior components, you might get a better camera, a better screen, a better processor for the same money as the Apple. Why do people pay the extra money for the Apple? Partly, it's for the software, that is, the design incorporated into Apple, but more and more it's to be part of the Apple ecosystem. You don't get the App Store unless you're on Apple. Netware has replaced trade as the main driver of global economic integration. Between 1968 and 2008, global trade was really driving forward globalization. I could go even all the way back to 1492 and say that since the 15th century, trade has been driving globalization. The Atlantic was the center of the global economy as trade between the old world and the new world and sadly Africa for slaves drove forward economic globalization and economic development. That 500 year process of the development of the global economy around Atlantic trade is now at an end. Atlantic trade still exists, there's still lots of stuff going across the Atlantic, but the real money is not made in loading up container ships and sending them from New York to Hamburg. The real money is made in online apps, connecting people and things across the internet in the network economy. That's the globalization of the future. And if the Atlantic was the past, clearly the Pacific is the future. All of the world's leading network companies are based around the Pacific basin and California's Silicon Valley is the spiritual and economic hub of the entire global network economy. I mean Apple, Google, Facebook, Uber, Airbnb, you name it, they're all in Silicon Valley. China's emerging network champions go to Silicon Valley to raise money and to recruit talent. Seattle hosts a secondary node around Amazon and Microsoft and in China, Shenzhen, Shanghai and Beijing are emerging as network centers as well. Look, if you put together America's West Coast and China's East Coast, you have an integrated technological ecosystem, a techno system that I like to call Kalachina. This integrated network technosystem is dramatically reinforcing the global economic centrality of the United States. Network externalities ensure that people, companies and entire countries would rather join Kalachina, join the Pacific network technosystem than compete against it. It's difficult to name a single global network company that is not based either in the US West Coast or China East Coast. Alternative systems exist but they're isolated, they're local, they're marginalized. The global network economy is the Kalachina economy. And as a result, the Pacific basin has replaced the Atlantic as the core of a new world system. We've moved from the modern world system of the 20th century into the millennial world system of the 21st. And that transition is about more than just names. In the modern world system, markets were the locus of the economy. They're where the action was at. Companies produced goods to sell on a world market and consumers went to that world market to buy goods. The market was where exchange where economic activity occurred. Well today, that economic activity is increasingly focused on networks. You don't go to the market to buy a bike, you go to the network app to rent a bike. Same for a car, same for services, same for movies, it doesn't matter. Increasingly, the entire global economy is being focused more and more around network applications instead of around global markets. And that's the transition from the old modern world economy to a postmodern millennial world economy. The Pacific network technosystem makes this millennial world system a distinctively American world system. Look, I think it's clear that network is the leading industry of the 21st century. Manufacturing is super advanced. It's very important, but manufacturing is secondary. Places like Germany, Japan, South Korea, Taiwan, places that you might think of as super technological leaders in manufacturing are not leaders in network. And that makes them secondary to the new world economy of the millennial world system because the network firms are consolidating in and around Kalachite. No matter how advanced the phone you buy, what you want is the app store, not the Foxconn phone. Network externalities, the advantages that people get by joining a big network instead of starting their own little network, strongly reinforce US centrality in this new millennial world system. What's more, and perhaps most importantly, the individualism, the spirit of individualism that's built into the very DNA of the internet ensures that people can opt into the millennial world system, even when their governments opt out. Look, you can go to a gig programming site and you can find a programmer from Russia or from Belarus or from Egypt. It doesn't matter how repressive the government, how anti-American it may be, you can still hire someone who will come work for you from that country. They can opt in. They can get on the Apple app store. They can get on the Google Play Store. They can watch movies on YouTube. If they can't get into them, they can get a VPN and get in under the radar screen. People will join the network technosystem even when their countries don't want them to. As a result, the United States is certain to continue as the peak power, the most important place, the central location of the world system for the foreseeable future. Thanks for listening. I'm Salvatore Rabonis. You can find out more about me at my website at salvatorerabonis.com where you can also sign up for my monthly Global Asian newsletter. Thanks for listening.