The world has become a very small place. Today we can e-mail someone halfway around the world, call him to let him know we need a quick response, conduct final discussions through instant messaging, text-message over a final comment, then fax over the signed contract, all as simply as doing business with the fellow down the street. And when the initial prototype is ready for review, our supplier in Bangalore can FedEx it to us and we'll have it the next morning. Instantaneous communications push the idea of global investing in many ways large and small, but the main thrust of modern telecommunications is that our fear of things foreign dies out quickly in the glare of familiarity and habit.

Everyone's a capitalist. For those of us who were already in midcareer when the Soviet Union collapsed in 1989, it seemed as though one day half the economies in the world were centrally managed and the next day none of them were. That's an exaggeration, of course—witness Cuba, Venezuela, parts of the Middle East and sub-Saharan Africa, and even China, to a larger extent than its boosters want to acknowledge. But it is certainly true that the demise of the Soviet Union caused—if only by example—most of the world to turn to free market economies of one kind or another. As a result, the world is a more stable, more friendly, more understandable, and more investable place than it ever was before.

It's harder and harder to tell a U.S. company from a foreign company. Coca-Cola is headquartered in Atlanta, but it gets far more than half its revenue, and even more of its profits, from non-U.S. operations. Is Coke an American or foreign company? When Lenovo acquired IBM's personal computer business, it was headquartered in Beijing. Lenovo is incorporated in Hong Kong and its stock is listed there. But its CEO is based in Singapore, its Chairman is based in Raleigh, North Carolina, its CFO is in Hong Kong, its human resources head is in Seattle, and global marketing is managed out of India. An increasing number of U.S. companies have decided to reincorporate in an offshore jurisdiction to escape what they view as noncompetitive U.S. regulatory practices. Foreign or domestic? Indeed, there seems to be an increasing push for one worldwide accounting standard, making domicile distinctions not just increasingly irrelevant but almost prehistoric. Finally, many companies in the United States and elsewhere, regardless of where their sales and profits come from, have integrated their design, manufacturing, and distribution processes worldwide. And these are not just the global multinationals, but so-called “platform” companies everywhere.

Many foreign economies seem to be better managed than the U.S. economy. In the bad old days, international investing in general, and emerging markets investing in particular, was only for investors with very strong stomachs. Many foreign economies were abysmally managed, local juridical systems were highly suspect, and currencies were widely manipulated. But today, having apparently learned their lessons, a remarkable number of foreign economies are well managed and robust, evidencing smaller budget deficits, lower trade deficits, and even more stable currencies than in the United States.

Foreign companies are now as well managed as American companies. The world is a very competitive place, and foreign companies that may once have sought senior corporate executives only from among the nomenklatura have long since wised up. Cultural differences still exist in the corporate world, but it would be very difficult to say with assurance that the United States has any decided advantage in the quality of our corporate leadership—if only because American management practices have been so widely emulated.

The quality of foreign markets has improved substantially. Given that I am talking about the buying and selling of securities, the efficiency, honesty, cost, transparency, liquidity, and legal protections of foreign stock markets are obviously of central importance. And here the news is mostly good. No foreign bourse can rival the New York Stock Exchange in these metrics, but many come close and all have improved—and continue to improve. Even in the emerging countries, stock markets are fairer and more rational than ever before, and in the developed economies there is now little to complain of.

The BRICs² really matter. In the old days, outside the United States there was Europe and a few emerging economies. Europe was mired in a quasi-socialist quagmire and the emerging economies were mainly good places to lose lots of money. Today, though, Europe has made great strides and, as noted above, many emerging countries could teach the United States a thing or two about managing an economy. But the real story is one that didn't even exist a decade ago: Brazil, India, and China (Russia is more problematic) are gigantic and hugely productive societies that are not merely emerging from long backwardness but may one day replace the United States as the world's largest economy. Investors who aren't exposed to these and other rapidly emerging economies simply have their heads in the sand.

The world is growing faster than the United States. The U.S. economy, despite its gargantuan size, often seems to have the vibrancy, the resilience, and a variety of growth characteristics that make it look more like an emerging market than like, say, Western Europe. But on the whole, the non-Western world is growing much faster than we are, and with that sort of growth come many and varied opportunities for investors.

Home-country bias incurs serious opportunity costs. As noted above, more than half the global equity market capitalization lies outside the United States. Ignoring more than half the opportunity set in a game as competitive as that of investing simply makes no sense. In addition, of course, stock valuations outside the United States are often more attractive than those in the United States. And although investors normally attempt to access these valuations by changing their U.S./non-U.S. allocation, some commentators point out that that is a clumsy approach by comparison with the “real-time asset allocation” available to global investors.