THE WORLD IS FLAT
A Brief History of the Twenty-First Century
Thomas L. Friedman
Friedman is a Pulitzer prize-winning foreign affairs correspondent for The New York Times. The global economic playing field is being leveled by a number of factors: hence “the world is flat.” This is a follow-up to his highly popular book on global economics, The Lexus and the Olive Tree. I found it brimming with information and ideas illustrated by fascinating stories and anecdotes. While it covers a surprisingly broad range of topics it is an economic perspective and the world is bigger than economics.
Massive investment in technology, cheaper computers worldwide, and an explosion of digitizing software, has created a platform where intellectual work can be done and delivered anywhere in the world. Knowledge centers are connected in a single global network. Any activity that can be digitized, automated, and moved [and parts of nearly everything can be] will be. Everyone is now competing for the same work. The driving forces are multinational companies. (6-9)
India has 70,000 accounting grads starting at $100/month every year. (14) Wages and rents in Bangalore are less than 1/5 of Western capitals. (18) 245,000 Indians answer phones from all over the world in high-wage, high-prestige jobs. (24) Smaller hospitals are shipping CAT scan images to radiologists abroad for interpretation. (16) In order to reduce the cost of market research Wall Street investment firms have outsourced much of it to places like Bangalore. (29)
Benefits go both ways. While the U.S. has lost service jobs to India, exports from American-based companies to India have grown. (28)
China’s economy is growing dramatically. (34) A Communist official in China said, “First we will have our young people employed by the foreigners, and then we will start our own companies.” (36)
JetBlue has 400 reservation agents working from their homes (homesourcing) in Salt Lake City. (37) Costs are lower and productivity is much higher. 23.5 million Americans (16% of U.S. work force) work at home. (38)
“This flattening process is happening at warp speed and directly or indirectly touching a lot more people on the planet at once.” This book offers a framework for how to manage this phenomenon to our benefit. (46-7)
Forces that Flattened the World [Friedman lists ten.]
11/9/89 Fall of the Berlin Wall. “It tipped the balance of power across the world toward those advocating democratic, consensual, free-market-oriented governance.” “Economies would be governed from the ground up, by the interests, demands, and aspirations of the people, rather than from the top down, by the interests of some narrow ruling clique.” (49) “It also allowed us to think about the world...as a seamless whole.” (51)
8/9/95. Netscape went public. Internet browsing and email were the new killer apps (applications) that allowed data to be stored and retrieved anywhere. The first web site was put up in 1991. (56) “Digitization is that magic process by which words, music, data, films, files, and pictures are turned into bits and bytes—combinations of 1s and 0s—that can be manipulated on a computer screen, stored on a microprocessor, or transmitted over satellites and fiber-optic lines.” (64)
Self-organizing collaborative communities are writing software. “Thousands of people around the world coming together online to collaborate in writing everything from their own software to their own operating systems....” Shared, constantly improved by its users, and made available for free to anyone. (82) It makes available for free many tools that millions worldwide do not have to buy to use and with which they can challenge hierarchical structures. (102-3)
“Bloggers, one-person online commentators, who often link to one another depending on their ideology, have created a kind of open-source newsroom.” “A tiny group of relatively obscure news bloggers were able to blow the whistle that exposed the bogus documents used by CBS News’s Dan Rather in his infamous report about President George W. Bush’s Air National Guard service....” (93)
A Wiki is a web site that allows users to directly edit any web page on their own. (94) There are wiki dictionaries, encyclopedias, textbooks, etc. (95)
The key event triggering massive outsourcing was Y2K. India had many capable people with few jobs. America needed many software engineers to adjust the internal clocks of their computers. The work was outsourced to Indian engineers. After the dotcom bubble burst, companies had to reduce costs and the Indian companies had the experience and credibility.
“Offshoring...is when a company takes one of its factories that it is operating in Canton, Ohio, and moves the whole factory offshore to Canton, China.” (114) On 12/11/01 China joined the World Trade Organization, agreeing to follow global rules governing imports, exports, and foreign investments. (114) China created a whole new level of offshoring.
“Because China can amass so many low-wage workers at the unskilled, semiskilled, and skilled levels, because it has such a voracious appetite for factory, equipment, and knowledge jobs to keep its people employed, and because it has such a massive an burgeoning consumer market, it has become an unparalleled zone for offshoring.” (116-17) “China’s real long-term strategy is to outrace America and the E. U. countries to the top, and the Chinese are off to a good start. China’s leaders are much more focused than many of their Western counterparts on how to train their young people in the math, science, and computer skills required for success in the flat world....”(118) However, China will not be truly flat until they have political reform. (126)
Offshoring is also coming to America because foreigners want access to American markets and labor. (123)
Supply-Chaining is a method of collaborating horizontally—among suppliers, retailers, and customers—to create value. “As consumers, we love supply chains, because they deliver us all sorts of goods...at lower and lower prices.” However, they also expose us to higher pressures to cut costs, wages and benefits. (129)
Insourcing. UPS is not just delivering packages but synchronizing global supply chains for both large and small companies. (Their airline is the 11th largest in the world!) (142) “UPS comes inside a lot of companies now and takes over their branded vehicles to assure on-time delivery.” (143) UPS engineers come right inside your company; analyze its manufacturing, packaging, and delivery processes; and then design, redesign, and manage your whole global supply chain.” “There are companies today...that never touch their own products anymore.” (144)
In-Forming. Web-searching. Individuals can find information about anything. Search engines are the equalizer of knowledge. (150-52) “Live your life honestly, because whatever you do, whatever mistakes you make, will be searchable one day.” (158)
More new technologies—digital , mobile, personal, virtual—amplify the other flatteners. Storage is growing exponentially. File sharing (a la Napster) is increasing in sophistication. Multipurpose laptops, cell phones, and handheld personal organizers. Voice over Internet protocol services (like Skype), Videoconferencing. Wireless. (163-67)
The Triple Convergence
1. About 2000, all 10 flatteners started to work together.
2. This new playing field merged with new ways of doing business.
3. A new group of several billion people from China, India, and the Soviet Empire joined the playing field. (175)
“The big spurts in productivity come when a new technology is combined with new ways of doing business.” (177)
The triple convergence “is the most important force shaping global economics and politics in the early twenty-first century.” (182)
In 1985 the global world consisted of North America, Western Europe, Japan, and chunks of Latin America and other countries, about 2.5 billion people. After the Berlin Wall fell, another 1.5 billion people joined them. (182)
“Natural talent has started to trump geography.” (194) Chinese undergraduates at Yale: 40 in class of 2001. 276 in class of 2008. (193) Boeing has 800 Russian engineers and scientists (on their way to 1500) collaborating on computer-aided airplane design. Russian engineers have outsourced elements of their work to Hindustan Aeronautics in Bangalore. (195-6)
When the world moves from a vertical model to an increasingly horizontal model everything is affected. (200) Flattening squeezes out the inefficiencies. That may threaten “the distinctive places and communities that give us our bearings, that locate us in the world.” “Some of those “inefficiencies” are the institutions, habits, cultures, and traditions that people cherish precisely because they reflect nonmarket values....”(204, per Michael Sandel)
We are moving from command and control to collaborate and connect. “The boss can do his job and your job.” “He can give you instructions day or night. So you are never out. You are always in. Therefore, you are always on.” (213) “The tensions among our identities as consumers, employees, citizens, taxpayers, and shareholders are going to come into sharper and sharper conflict.” (214)
“The Wal-Mart shopper in all of us wants the lowest price possible....” “But the Wal-Mart worker in us hates the benefits and pay packages.... And the Wal-Mart citizen in us knows that because Wal-Mart...doesn’t cover all its employees with health care, some of them will just go to the emergency ward...and the taxpayers will end up picking up the tab.” (215)
You should assume that anything (not just CDs and movies) can be counterfeited quickly and sold without royalties to the inventor. (217) “Who owns what?” is sure to be a contentious political and geopolitical question in a flat world. (218)
“The flattening process relentlessly trims the fat out of business and life, but...fat is what gives life taste and texture.” (220) “The consumer in me wants lower phone bills, but the human being in me also wants to speak to an operator when I call 411.” (221)
How will it affect America?
“Even as the world gets flat, America as a whole will benefit more by sticking to the basic principles of free trade, as it always has, than by trying to erect walls.” (227) Idea-based workers do well in globalization. (230)
Tell your kids, “You have to constantly upgrade your skills.” (237) Become an “untouchable,” in one of 4 categories: be special, specialized (not fungible), anchored (requires to face-to-face contact in a fixed location), or really adaptable (constantly acquiring new skills). (Fungible work is work that can be digitized and transferred to lower-wage locations.) (238)
“There is something about post-World War II America that reminds me of the classic wealthy family that by the third generation starts to squander its wealth. The members of the first generation are nose-to-the-grindstone innovators; the second generation holds it all together; then their kids come along and get fat, dumb, and lazy and slowly squander it all.” (252)
“The truth is, we are in a crisis now, but it is a crisis that is unfolding very slowly and very quietly.” It involves the steady erosion of America’s scientific and engineering base. (252-3)
Three gaps exist: numbers (not enough people in the sciences), ambition (poor work ethic), and education. Jobs sent abroad save 75% on wages but gain 100% in productivity! Immigrants are always hungry. “American 15-year olds are below the international average when it comes to applying math skills to real-life tasks.” (252-72)
“The flattening of the world is going to be hugely disrupting to both traditional and developed societies. The weak will fall farther behind faster.” (279) “...much political stability is built on economic stability, and economic stability is not going to be a feature of the flat world.” (280)
Developing Countries. What sort of policies do developing countries need to undertake to thrive? China has passed up Mexico in exports to the U.S. (310) Open markets are the only sustainable vehicle for growing a nation out of poverty. (314)
China 1990 – 375 Million living on less than $1/day
2001 – 212 million
1990 – 227 million
2001 – 313 million (315)
“Every region of the world has its strengths and weaknesses, and all are in need of reform retail to some degree.” (317) “Countries grow out of poverty not only when they manage their fiscal and monetary policies responsibly from above, i.e. reform wholesale. They grow out of poverty when they also create an environment below that makes it very easy for their people to start businesses, raise capital, and become entrepreneurs, and when they subject their people to at least some competition from beyond....” (318)
“The jobs are going to go where the best-educated workforce is with the most competitive infrastructure and environment for creativity and supportive government. It is inevitable.” (323, quoting John Chambers)
One cannot analyze a country’s economic performance without reference to culture. A key factor “is the degree to which it has internalized the values of hard work, thrift, honesty, patience, and tenacity, as well as the degree to which it is open to change....” (324) How open is your culture to foreign influences and ideas? To what degree is there trust within the society? Is the country concerned with the masses or indifferent to their own poor? (325)
You must have openness to adapt and adopt from others. This explains why so many Muslim countries have been struggling as the world goes flat. “...the Muslim world today is dominated by a religious clergy that literally bans ijtihad, reinterpretation of the principles of Islam in light of current circumstances. Think about the whole mind-set of bin Ladensim. It is to ‘purge’ Saudi Arabia of all foreigners and foreign influences.” (326)
“A system that privileges the men from birth on, Landes also argues, simply because they are male, and gives them power over their sisters and other female members of society, is bad for the men. It builds in them a sense of entitlement that discourages what it takes to improve, to advance, and to achieve.” (326)
Some Intangibles: Ability to pull together. Leaders with a vision who will push for change rather than enrich themselves. Valuing education. (330-32).
Dig inside yourself. You have to be the very best, the most creative thinker. You have to offer something totally unique. (344) Take quick advantage of all the new tools for collaboration to reach farther, faster, wider, and deeper. (345) Collaborate with your customers, allowing them to serve themselves and enabling them to act really big. Do more through collaboration within and between companies. “One of the core competencies of the business today is partnering.” (355) Constantly identify and strengthen your niches and outsource the other stuff to increase knowledge jobs and creative processes.
Hundreds of millions have been left behind in the flattening process. This chapter deals with how things could go wrong, the biggest forces impeding the process and what to do about it. (375) In many ways the line is the line of hope. 3 billion are caught in a trap of no hope and therefore have no chance of making it into the middle class. Either they are too sick and poor or their local governments are too broken for them to believe they can make it. (376-79)
The flat world puts different societies and cultures in much greater direct contact with one another. Some are threatened, frustrated, and even humiliated by this contact, which makes it very clear where they stand in the world. “All of this helps to explain the emergence of one of the most dangerous unflattening forces today—the suicide bombers of al-Qaeda...” (392)
A lot of anger is bubbling over from the Muslim world and particularly the Arab-Muslim world. Many live under authoritarian governments that deprive their people of a voice in their future and deprive millions of opportunities to achieve their potential. (392) Increasingly these young people are being dominated by, and defined by, religious militants and extremists, who give vent to the frustrations in that part of the world by simply lashing out. (393)
The 9/11 hijackers were not fundamentalists but adherents of an extreme, violent political cult. They were well-educated children of privilege. (395) “They converted Islam into a political ideology, a religious totalitarianism.” The profile of the classic revolutionary is deracinated, middle class, shaped in part by exile. “For them Islamism is the new universal revolutionary creed....” (396)
Between 1980 and 1999, Arab countries produced 171 international patents. South Korea alone registered 16,328 patents. (398) “...many Muslims want both stagnation and power: they want a return to the perfection of the seventh century and to dominate the twenty-first, as they believe is the birthright of their doctrine....” “People grow angry when faced with an intractable dilemma; they lash out.” The word ‘humiliation’ always comes up very quickly. (399) “There is a feeling of hopelessness among the Muslim countries and their people. This humiliation is key.” “Humiliation is the most underestimated force in international relations and in human relations.” (400)
“Arab regimes...have been very passive in countering them [Islamo-Leninists] with a modern, progressive interpretation of Islam. This is because almost all of these Arab-Muslim leaders are illegitimate themselves.” (402) There is passive support among the population because “too many good decent people there feel the same frustration and tinge of humiliation....” Re 9/11, “many Arabs and Muslims were celebrating the idea of putting a fist in America’s face—and they were quietly applauding the men who did it.” (403)
Another barrier to the flat world will be an energy shortage—or even energy wars—when a few billion people all begin to get cars and refrigerators, etc. There are 1000 new cars on the streets of Beijing every month! (407) China is now the second largest importer of oil in the world. Finding oil and preventing Taiwan from becoming independent dominates their foreign policy. (409)
If we do nothing about alternative energy sources “we will be strengthening the very worst political systems in the world—like Sudan, Iran, and Saudi Arabia.” (411)
An all out world-shaking war would destroy the collaboration and supply chains. But these global supply chains are a restraint on “geopolitical adventurism.” (420) “Any sort of war or prolonged political upheaval in East Asia or China would have a massive chilling effect on the investment there and on all the progress that has been made there.” (421, according to Michael Dell) “They know there is a big economic pot at the end of the rainbow and they are really after it.” (403, quoting Glenn Neland, V.P. for Dell) China and Tawain are deeply embedded in several supply chains for computers and consumer electronics. This will affect war decisions just like it did in the India-Pakistan standoff. In many cases there is more to be gained economically than geo-politically. (428)
“The most vexing geopolitical problem for flat-world countries” is that globalization also works for al-Quaeda. (429) “It has helped to solidify a revival of Muslim identity and solidarity....” (430) “It enables the small to act big, and...it enables small acts—the killing of just a few people—to have big effects.” (431) “The Internet is an enormously useful tool for the dissemination of propaganda, conspiracy theories, and plain old untruths....” (432) It is “more likely to transmit irrationality than rationality because irrationality is more emotionally loaded, it requires less knowledge, it explains more to people, it goes down easier.” (432, quoting Yaron Ezrahi) “There may be nothing more dangerous today than a failed state with broadband capability.” (435)
“We can live with a lot. We lived through 9/11. But we cannot live with nuclear terrorism. That would unflatten the world permanently.” (436) The only strategy is to limit the supply of fissile material, to get much more serious about collecting it and putting it away. (437)
Friedman’s rabbi said the flat world reminded him of the Tower of Babel! The heresy was an effort to build a tower to the heavens so they could become God. (438)
Technology cannot keep us safe. We have to find ways to nurture a hopeful, life-affirming, tolerant imagination in those who would destroy the world....” (447)
Nothing has contributed more to retarding the emergence of a democratic context in places like Venezuela, Nigeria, Saudi Arabia, and Iran than the curse of oil. As long as the monarchs and dictators who run these oil states can get rich by drilling their natural resources—as opposed to drilling the natural talents and energy of their people—they can stay in office forever.” (460) “Give ma $10-a-barrel oil, and I will give you political and economic reform from Moscow to Riyadh to Iran. If America and its allies will not collaborate in bringing down the price of crude oil, their aspirations for reform in all these areas will be stillborn.” (462)
“It is imperative that we be the best global citizens that we can be—because in a flat world, if you don’t visit a bad neighborhood, it might visit you. And it is imperative that while we remain vigilant to the new threats, we do not let them paralyze us. Most of all, though, it is imperative that we nurture more people with the imaginations of Abraham George and Fadi Ghandour.” (entrepreneurs from poor backgrounds, 468).
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