Thomas Friedman made an interesting argument in his book The World Is Flat: in a globalized world, historical and geographic divisions are becoming increasingly irrelevant.

Through my experiences, however, I think the opposite is happening — in a globalized world where people from different cultures interact with each other, historical and geographic divisions are increasingly visible and relevant.  In order to make better decisions in a globalized world, local knowledge becomes more valuable than ever before!

Let me illustrate my point with a recent example.  A couple of weeks ago, I was at a social event in New York.  One participant, apparently working in the finance industry, made an observation and he said, “Everyone I spoke with told me that the Maotai (茅台) tastes terribly bad.  No one in China drinks it.”

(Maotai is one of the most well-known liquor brands in China and it is used in most business networking occasions.)

My jaws almost dropped to the floor.  My head rang loud with the following questions, but I could not ask anyone of them, trying to not spoil the party.

• Have you ever traveled to China before?  When was your last trip?
• Have you tasted Maotai yourself?
• Have you stepped into a Chinese restaurant during dinner time and counted the number of Maotai bottles on the dinner tables?

Today, goods can be manufactured in one country and consumed in another; civil aviation allows individuals to travel very far at a very affordable cost; social media connects people from all corners of the world across culture and language lines.

However, beneath the surface, the world is still spiky!  Many companies have had great successes in foreign markets, but some have failed dramatically.  In my earlier blog post in February 2016, “What does Uber gain by entering China?”, I pointed it out that, for various reasons, few American tech companies have been able to succeed in China in a sustainable way.  Moreover, many investors have made huge returns in international markets, but some have had “sour grapes” experiences.  I know many instances where investors inadvertently offended their counter-parties in local host countries, resulting in themselves being socially blacklisted from investing in the countries.

Why these kinds of things keep happening?  I think it was caused by the lack of local knowledge.

Without exposures, people can only understand events through the lens of their own culture.  A Chinese person who has never exposed himself to American culture can only understand an American person by measuring that American person’s behaviors from a Chinese perspective. For example, if the American person does not show a high degree of obedience to her schoolteachers, upon seeing it, the Chinese person will judge the American person as a bad student (because obeying teachers is a big thing in China).

People can only think in the languages they truly master.  If an American person can only speak English, that American person can only think in English. The boundary of English words and all the meanings they can represent is the de facto boundary of that person’s breadth of thoughts.  People think in the words they know.  Similarly, if a Chinese person does not speak English at all, she will not be able to understand what “honor code” is: even today, “honor code” does not have a standard translation in Chinese — because “honor code” does not have an exact equivalent in Chinese culture.

People can only relate to new things by making comparisons to old things that they are familiar with.  If an American person travels to China often, he will understand that email is not the dominant way of communication — WeChat is.  He will also understand that WeChat is not “China’s Facebook.”  If a person has not seen or used WeChat before, it is almost impossible for that person to understand what WeChat is — because there is no comparable app in the West.

So, “local knowledge” matters.  “Local knowledge” makes people more informed and opens their minds to new information.  It helps people overcome information asymmetry and reduce the various biases they might otherwise carry.  Ultimately, “local knowledge” allows decision makers to make better decisions.

So, what can we do to acquire “local knowledge?”  Here are some ideas:

• Spend time with people who have very different backgrounds
• Travel to countries where language and culture are different
• Learn to speak a different language
• Download new apps
• Try new things

In 1842, when China and the United Kingdom signed the Treaty of Nanking (which ceased Hong Kong to Britain), many top-level decision makers in China’s imperial court did not even know about the existence of “England.”  Shocked by their countrymen’s lack of exposures, scholar-official Lin Zexu (林则徐) and scholar Wei Yuan (魏源) urged all Chinese people to “open your eyes to see the world” (开眼看世界).

I think the same message is still relevant today.  The world is still not as flat as we thought.  And hopefully, by acquiring local knowledge, people will toast to their expanded knowledge with a small cup of Maotai.