Hello, I’m Klaus Kleinfeld, I’m the chief operating officer and president of Alcoa, and I would like to make a few comments on the global marketplace for skills, how the world is changing, how it’s revolutionising, and what impact it really does have for business and communities and also all of us individuals.

Well, let me start with a quote from Henry Ford, who said, “Why is it that every time I ask for a pair of hands it comes with a head attached to it?” Obviously, this is a long long time gone and today we all have other fundamental questions round how can we basically use the full capabilities of our workforce worldwide? How can we take the passion that people show in their private lives and unleash it in the business world?

Let me give you a couple of my thoughts on that. Number one is if you just look at the fundamentals, I truly believe that intelligence is equally distributed around the world. If you share that thought, it becomes purely a mathematical model, because you see that today we have the majority of the people already today living on the planet in Asia, and not here in the Western part of the world. You’ve got 1.3 billion people living in China, about the same living in India. So it’s pretty clear that if you add education to it you have an unbelievably big amount of very smart people that you want to have working for you rather than for your competitor.

But doesn’t it amaze you that when you look at the year 2006 and you look just at one indicator, the college grads, the US has delivered 1.3 million people that left college that year, India 3.1 million, China 3.3 million. So it shows you that this is not about how the future is going to change, the future has arrived, it’s about today. And the fundamental question is how does that impact all of us that run companies, and all of us as individuals that work somewhere, and all of us as family members that have children and those that ask us what is the advice?

I think what has taken us also pretty much in the last years mentally is this idea of the world as flat. Technology has made the world flat. In reality today we work around the world almost seamlessly through the internet, through telephones, travel has become very very easy, there’s a lot of connections and it feels like this is a natural thing.

But in reality what seemed to be a natural thing is probably coming along with a couple of fundamental changes. So let me go to the blue-collar side first, and that was an area where those types of changes were probably seen first when there was a big debate around the de-industrialisation of Western countries, and interestingly this seems to continue. And you actually have labour-intense industries very often that [for example] moved away from the US to Mexico, and if you go today to Mexico you’ll see that there are industries that have moved away from Mexico to south east Asia. So it looks like it’s a travelling band almost that goes around the world and always looks for “where can we get the additional cost benefit from lower labour costs?” A very interesting and very critical development, but one that we have to accept and probably have to live with.

And on the blue-collar side let me just share an Alcoa experience with you. We have just opened a large new aluminium smelter in the south east of Iceland, and the aluminium smelter is the most modern technology and it’s a very clean technology because the energy that is used there comes from hydro energy – energy produced with water. So Iceland built a water dam for that, and a full hydro system. Do you know who the workers were that built it? The workers were coming from Mongolia. Workers from Mongolia have the highest experience in building hydro dams, because they’ve built a lot of those in China. They were very very happy to work in the Iceland environment, also because Iceland has a minimum wage regulation, so they earned more than they could have ever earned had they stayed in their home country.

So let me move on to the white-collar side, because very often people thought, well, that’s globalisation, it only affects the blue-collar side, but it does truly affect the white-collar side in the same sense. We see today that when we talk about many aspects of research and development very often it’s done behind a very fast computer-aided design machine, which you design things with and you share those with your colleagues. The colleague might sit just around the corner, but it doesn’t really matter where the colleague sits – the colleague could as well sit in India. The colleague could sit in St Petersburg, or in Siberia. The work is still the same – you can seamlessly work together. The implication of this is it doesn’t really matter where the person sits, as long as the brain is the right brain and the passion is the right thing. So, it comes with those implications. Same thing would hold true for quite a number of other white-collar jobs.

The technology also comes along with another implication, and that is that it has allowed information to flow around the world in record speed. If you make a statement in Australia, it will become common knowledge worldwide in a split second. Because the internet helps, the news media help – it will instantaneously become the world’s knowledge. That doesn’t just hold true for news. It also holds true for a lot of intellectual capital, that [in the past] back then was nicely protected partially because people just didn’t know about it. Today if we have something we want to learn about we go to the internet, we’ll read and we’ll be smarter about this subject in record time that out parents would never even have believed you could access this information.

But that gets you to another point. That gets you to the point, now what does that mean for competition? What does it mean if information, the very substance of competitive advantages for many businesses is so freely available around the world? I believe that it is not unique to one single industry, it actually holds true for most of the industries that also there the competitive dynamics have changed, and have changed in such a way that the only sustainable competitive advantage truly is the type of people you have and the way they work together. If that is so, the biggest question becomes how can you attract the best and brightest around the world? Coming from the pockets of excellence all around the world how can you retain them, how can you make yourself, your company an interesting company, the one that they’d love to continue to work at? And that has a lot of questions and obviously there’s not one single answer to it. Compensation only is one factor, there are a lot of other factors here.

And last but not least, the question is how do you make those great individuals work together as a team around the world – because they literally will be sitting around the world – and how do you develop trust in those team members that really stretches over the Atlantic, that really is strong enough to overcome time differences and override potential misunderstandings. My impression is technology can do a lot but it cannot substitute the personal relationship that has to be built, and trust only grows when you really get to know a person, in person. Once that part has happened then probably modern media, modern devices can compensate for a lot, and they do compensate for a lot. But in the early stage to build the trust and then also later on to continue to maintain the trust personal meetings will never be fully substituted.

Well, so far, so good – that’s basically my take. Thank you very much.

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