At home, it's not just profits that matter

Guy Dollé, the embattled chief of the European steelmaker Arcelor, may have been wrong to resist Lakshmi Mittal's takeover attempt. But his opposition to the bid contained a kernel of truth: National ownership really does matter.

It is easy these days to see corporations as the new countries - as vast, ubiquitous entities that make political borders irrelevant. Exxon Mobil's revenues now exceed the total economic output of Saudi Arabia or of Indonesia. Foreign investors care less about where a stock comes from than the return it offers.

Dollé dissented from this widening consensus - but for the wrong reason. He argued the case of national ownership in the outdated language of protectionism. A "company of Indians," as he called Mittal Steel, would not run European steel mills the way Europeans would.

Moreover, only those with local understanding, he suggested, would be able to extract the most economic value from Arcelor's mills. Comments like Dollé's fuel a common perception among the global business elite that all arguments for national ownership are merely protectionist throwbacks.

On the contrary, my work on developing-world corporations, with Krishna Palepu at Harvard, demonstrates that companies rooted in a particular country are more likely than footloose multinationals to make a nation's problems their own.

Indeed, national ownership matters for a reason that Dollé ignored: Companies identified strongly with a particular country more often find it in their interest to invest in public goods for the country - from roads to universities to national branding campaigns.

And because they do so precisely out of economic self-interest, this alternative case for national ownership is about creating more efficiency - not less.

Examples abound. Infosys, the Indian software giant, is a major driver of India's economic success. But it is also hostage to what the larger economy achieves. Thus it has invested considerably to promote Brand India, for example, by sponsoring the "India Everywhere" campaign at the World Economic Forum in Davos, touting Indian democracy and Bollywood. It is hard to imagine IBM, active though it is in India, underwriting that kind of campaign.

For Infosys, the India story is part of its founders' ethic. Westerners' opinions of India will rub off on how they see Infosys - value that would be lost on IBM. Similarly, whether Bangalore has a world-class airport matters to Infosys, but not as much to IBM.

In Thomas Friedman's "flat world," it does not matter whether IBM goes east to employ a thousand software engineers for its clients or Infosys goes west to find clients to employ the same number of people in India. But it cannot be argued that India should be indifferent to the two.

Developing-world companies also have to invest in infrastructure whose paucity constrains them, even if that investment benefits others substantially.

More than a decade ago, Compañía de Teléfonos de Chile (CTC), the Chilean phone company, was the first Latin Amercian company to raise capital on a U.S. stock exchange. This brought it, and Chile, into direct contact with sophisticated financial intermediaries on Wall Street, and catalyzed the development of Chilean capital markets, today among Latin America's best.

A global phone company doing business in Chile would not have had to care as much about Chilean markets.

Schools and universities are a key part of institutional infrastructure. Today, Koc and Sabanci are responsible for impressive universities in Turkey. The availability of educated talent in Turkey matters more to these companies than it might to a European corporation operating in Turkey.

Over the long run, the most important proving ground for emerging-market firms may be the vast, rural hinterlands of the developing world.

Much of the world consists of poor village dwellers, as in India, where they constitute two-thirds of a billion-plus population. Corporations are on the frontlines of catering to the less-fortunate. But it is usually indigenous entrepreneurs, rather than multinationals, who realize that the rural poor constitute an emerging market inside an emerging market.

Commercial interventions in rural areas often spur further development which, in turn, is more likely to benefit local entrepreneurs than multinationals.

ITC has introduced an electronic platform to facilitate rural commerce in India. This platform creates an environment of transparency in the village, spurring markets for agricultural produce, in turn raising the productivity of entire villages.

Indigenous companies are better positioned to capitalize on the broad opportunities that result. ICICI, India's leading private-sector bank, has identified rural financial services as its next big opportunity. As ICICI executive Nachiket Mor told one newspaper, "We can't simply go there and say, 'I'm a financier; I don't know anything else.' If you don't know anything else, the customer is going to give you the residual of whatever happened to his life. If he's not able to sell his sugar cane, if he's not able to sell his grain, if he's not able to get good value for his milk, he suffers and - you know what? - you suffer."

So, in order to collect on its loans, ICICI has resolved to solve the farmer's problems rather than merely mitigate their impact through erudite risk management. With the amount of local knowledge needed, and the patience before seeing returns, it's no wonder multinational banks will think twice about venturing this far afield. And it would be right for them to exercise caution.

Similarly, in China, Ningbo Bird was faster off the block in selling cellphones to rural dwellers than was Motorola, and Wahaha beats Coke and Pepsi in the villages.

The cost structure of multinationals and their need to get the quickest and highest returns available at present makes it much less attractive to them than to indigenous entities to venture outside the major metropolitan areas.

Corporate nationality has important practical implications. The Mittal-Arcelor affair is only the most prominent case of a multinational rooted in emerging markets bidding for a Western firm.

When protectionists claim that corporate nationality matters, their duplicitous motives should not mar their overall point, which is correct: that where companies come from really does count.

And instead of rejecting them on those grounds, the West should embrace the Infosyses of the world as the world's last best hope for solving developing countries' chronic afflictions.

(Tarun Khanna is Jorge Paulo Lemann Professor at the Harvard Business School.)

The Riddle of Job Interviews

It's the latest twist in hiring techniques -- asking brainteaser questions on obscure subjects to test for mental agility. Be prepared!

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You're on your way to that all-important job interview, and this time you're prepared. You found the company's home page on the Web and checked Nexis for the latest news. You've rehearsed your answers to the questions they're bound to ask: Why do you want this job? Where do you see yourself in five years?

Those are the wrong questions. Sorry, you're not prepared.

Blame it on Microsoft. Ever since Microsoft made headlines for its unconventional approach to interviewing (key question: How many gas stations are there in the United States?), more and more companies are looking for that certain approach that will uncover just the right quality of mind.

To help you really prepare, here are some brainbusters that are making the rounds in the world of knowledge work.

Say your interview is at Goldman Sachs. The problem (1) is likely to involve eight balls, one of which is slightly heavier than the others. You have a two-armed scale, which you are allowed to use only twice. Your challenge: find the ball that's heavier. Another typical Goldman Sachs brainteaser (2) is to ask you to calculate the number of degrees between the hour hand and the minute hand of a clock (nondigital) that reads 3:15.

At Smith Barney, the problem (3) involves water instead of balls. You have two containers, one holds five gallons, the other holds three. You can have as much water as you want. Your task: measure exactly four gallons of water into the five-gallon container.

Bankers Trust offers this familiar puzzle (4) : You wake up one morning and there's been a power outage. You know you have 12 black socks and 8 blue ones. How many socks do you need to pull out before you've got a match?

Another Wall Street puzzle (5) involves the truthtellers and the liars. It goes like this: You're trying to get to Truthtown. You come to a fork in the road. One road leads to Truthtown (where everyone tells the truth), the other to Liartown (where everyone lies). At the fork is a man from one of those towns -- but which one? You get to ask him one question to discover the way. What's the question?

One management consulting firm asks (6) why manhole covers are round. Another asks
(7) how many barbers there are in Chicago.

The National Economic Research Association (NERA) goes straight to the economic hypothetical cases -- but watch out for the twist. Its question (8) : The government is building a highway through your neighborhood and you're forced to sell your home. How do you arrive at your asking price? One firm that finances large public works projects asks (9) how many cubes are at the center of a Rubik's Cube.

But based on our research, the one group you want to look out for are the mergers and acquisitions boutiques. There, be prepared for a question that is downright bizarre. For example, at Rothchild Inc., they are likely to ask you to solve this problem (10) : You are in solitary confinement. It is Friday afternoon and you absolutely must have a cigarette. The only person who can give you one is the guard outside your cell. What do you do?

Remember, the job is riding on your answer!

Answers (in order):

1. Put three balls on each side of the scale. If the arms are equal, you know the heavy ball is one of the two remaining. If the arms are unequal, take the three balls on the heavier side, pick two and weigh them against each other.
2. The hour hand will have moved one-fourth of an hour; therefore there will be 7.5 degrees between the two hands.
3. Fill up the three-gallon container and pour it into the five-gallon container. Do it again -- and there will be one gallon left in the three-gallon container. Empty the five, pour in the one, fill the three again and pour it into the five-gallon container -- and you've got four.
4. To get matching socks, you need to pick three -- there are only two colors, after all.
5. To find the way to Truthtown, simply ask the man, "Which way is your hometown?" Then go whichever way he points: if he's from Liartown, he'll point to Truthtown and if he's from Truthtown, well, you get it.
6. Manhole covers are round so that they can't fall into the manhole.
7. Obviously no one expects you to tell them the precise number of barbers in Chicago; they want to hear you go through a line of thinking. The variables you'll want to consider are the population of Chicago and the percentage that's male; the number of haircuts the average male has per year divided by the number of days in the year, taking into account the number of days per year barbershops are open; and the number of haircuts an average barber can give per day. By the way, there are 550 barber shops in Chicago; 6,273 active barbers in Illinois; with 66% of the state's population, Chicago has roughly 4,140 barbers.
8. To get a job at NERA, calculate the price of your home using conventional valuation methods -- but remember to throw in the value you attach to your memories for however long you've lived there.
9. There is only one cube at the center of a Rubik's Cube.
10. To get the guard to give you a cigarette (and this really is the preferred answer to this question), threaten to kill yourself by smashing your head against the wall of your cell. That gives you leverage with the guard -- he'd be tied up doing paperwork about your suicide, so he'd miss weekend time with his family (it's Friday afternoon, remember?) -- so he'll give you a cigarette.