A question of scale

posted 01 March 2007

Today I had a long chat, rather too early in the morning, with a surprisingly pleasant man from Ernst & Young about how taxes work in the US and how to avoid getting double-taxed as I move between continents. Worrying about this kind of thing makes me feel worryingly grown-up. Luckily, I have no assets and no savings, so my tax situation is very simple. Yay! Fiscal irresponsibility pays off!

Getting a bank account has been one of the most incredibly painful parts of the move. I made the huge, huge error of attempting to get a bank account via the Citibank Global Executive Banking program that came with my moving package. It was terrible. They open an account in New York, process it in Florida, and despite the fact that it's all the same bank in name, dealing with Citibank branches on the West coast is like dealing with a totally different bank. It took 3 working weeks to open the account, when they finally opened it the PIN they sent me didn't work in my ATM card, they won't give me a credit card because they think I live outside the US even though they have my address in San Francisco, and they don't return my calls.

Not that HSBC were any better, frankly. HSBC were my bank in the UK: they already know who I am, and they're a global bank, so it should be easy to set up an account for me in the US, right? Wrong. You have to fill in a boatload of forms, and then somehow it manages to take them 20 working days to open an account at their own bank. This would be inconvenient enough were it not for the thoroughly useless clerk who handled my application with them, who forgot to submit the forms and outright lied about how long the process would take, promising the end of the week rather than 20 working days.

There's a broader principle at work here, which is that globalization runs into scalability problems. As an organization grows, increased scale means you get benefits from increased buying power, mass production, and lower overheads as a percentage of total revenue. But as the organization grows, the complexity of systems needed to maintain an organization of that size grows, and not linearly -- when you grow by acquisition, as many companies do, the integration of systems from completely different companies often means the complexity curve is closer to exponential.

Eventually, acquiring any more companies will begin to increase your overhead, as the complexity of integrating yet another different system causes cascades of changes across the company. Large multinationals like HSBC and Citibank are already beginning to run into this. The reason Citibank on the West coast is like a totally different bank is because until 2002 it was: Citigroup acquired California Federal Bank. The systems haven't been integrated fully, so it really is a different bank, it just uses the same brand. This is why it takes 4 working days for a Citibank cheque deposited in a Citibank branch to turn up in a Citibank bank account.

This is why I don't get so worried about globalization. Humanity is a lot more resistant to homogenization than we think. McDonald's has to serve salads in the UK and can't serve beef in India. Multinationals that ship their call centres to India discover that cultural and linguistic problems cause customer satisfaction rates to plummet. Coca-Cola has to change its recipe in every nation it goes to. Globalization is self-limiting.