Arbitraging Cultures for Economic Advantage

Trading opportunities exist when there is a difference in the value of a particular commodity between two individuals, corporations or markets. The trader simply buys at the lower value and sells at the higher. Taking advantage of a price difference between two or more markets is known as arbitrage. But price differences do not only occur in financial currency. There are also intangible currencies of trade such as quality relationships and cultural intelligence, that yield significant value when you know how to use them in arbitrage.

Financial arbitrage has become harder in an economy where information is instantly diffused around the globe. When I worked in commodity trading years ago, global commodity information was not as easily available as it is today. When we spotted a difference in value between two markets we had to physically buy shiploads of commodities, take risk, transport them across the world and deliver them to buyers weeks later at a price less than they could have done it themselves. We made our profit not only from having information about price and availability that the buyers and sellers did not. Our profit margin was created also out of the deep relationships we had with sellers and shippers. These relationships enabled us to trade at more favorable terms than the buyers could have. Building relationships with commodity suppliers and shippers was our most important investment in reinforcing our global competitive advantage and enabling us to profitably arbitrage price differences. We used an intangible -- quality relationships -- to grow our margins. In our digital age the opportunity to arbitrage is as great and as important as ever provided we think beyond price-related data and financial currency only.

We must consider intangible currencies such as relationships and cultural intelligence as additional tools for arbitrage. Imagine that you are sourcing a commodity or product in an emerging market for supply to an American corporation. The chances are that for your American customer the tangible offering (quality, price, delivery reliability etc) will be paramount. In the emerging market from which you are sourcing, the intangibles of trust, relationship and respect might be as important as the commercial dimensions of the deal. It is conceivable then that by investing time and effort into the quality of relationships in the emerging market, you could source the commodity at a better price or on better terms than your customer or competitors could. The difference between the price at which you source and the price at which you sell, is your margin. In this example, you will have used trust, relationship and respect as part of your purchasing currency; a currency that is cheap in your American market but valuable in your sourcing market. You will have arbitraged cultural difference for mutual advantage. This is a much more valuable way to look at cultural intelligence than learning about the customs and behavioral nuances of different nationalities. Frankly, if you hand your business-card to a Japanese executive using one hand instead of using two - as they do in Japan, the executive will think no less of you. He or she knows you are from a different culture and doesn't expect you to mimic their behavior.

What is important is to understand what values are core to the cultures in which you do business, and how to honor those values at all times. The chances are those values are universally true and would in no way compromise your own values. It is more a difference of emphasis than of values. Even within the USA the differences in values between cultures in significant. In New York time is often valued more than courtesy, so small talk at the start of a business call or meeting is considered disrespectful (of the other person's time). To many people from other parts of the country, the South and the Midwest for example, courtesy is more important than time or even money. So launching straight into a business conversation without some social preliminaries could be considered disrespectful. These are the cultural differences that it is important to understand.

Is it then necessary to learn the cultural priorities of every single culture with which you interact? Not really. In Lead By Greatness (both the book and the workshops) we have pioneered a global language that enables you to build cultural advantage in any society or with any individual irrespective of their specific culture, and convert it into economic value. The methodology we teach has been developed over 20 years of research, doing business and developing leaders and strategies for corporations in some 25 different countries. It synthesizes universal principles of human values and cutting edge strategic thinking. Deep cultural intelligence increases leadership effectiveness to deliver results in a global, hyper-competitive economy.    

Share this post