The World Is Flat

The World is Flat: A Brief History of the Twenty-First Century New York: Farrar, Straus and Giroux 2005 Thomas L. Friedman No one ever gave me directions like this on a golf course before: “Aim at either Microsoft or IBM.” I was standing on the first tee at the KGA Golf Club in downtown Bangalore, in southern India, when my playing partner pointed at two shiny glass-and-steel buildings off in the distance, just behind the first green. The Goldman Sachs building wasn’t done yet, otherwise he could have pointed that out as well and made it a threesome. HP and Texas Instruments had their offices on the back nine, along the tenth hole. That wasn’t all. The tee markers were from Epson, the printer company, and one of our caddies was wearing a hat from 3M. Outside, some of the traffic signs were also sponsored by Texas Instruments, and the Pizza Hut billboard on the way over showed a steaming pizza, under the headline “Gigabites of Taste!” No, this definitely wasn’t Kansas. It didn’t even seem like India. Was this the New World, the Old World, or the Next World? (pp. 3-4). When all of these things (explosion of technology; e-mail, search engines, proprietary software; …) suddenly came together around 2000, they “created a platform where intellectual work, intellectual capital, could be delivered from anywhere. It could be disaggregated, delivered, distributed, produced, and put back together again – and this gave a whole new degree of freedom to the way we work, especially work of an intellectual nature. And what you are seeing in Bangalore is really the culmination of all these things coming together.” (Nandan Nilekani, CEO, Infosys Technologies Limited). (pp. 6&7). The global competitive playing field was being leveled. The world was being flattened. (p. 8). Bangalore is one of the most wired places in the world. The difference, however, is that wages and rents in Bangalore are less than one-fifth what they are in Western capitals. (p. 18). UPI might still be thriving today as a wire service, which it is not, if it had been able to outsource some of its lower end business when I started as a reporter in London twenty-five years ago. “I firmly believe in the lesson of classical economists about moving work to where it can be done best, However, we must not ignore that in some cases, individual workers will not easily find new work. For them, retraining and an adequate safety net are needed.” (Tom Glocer, CEO, Reuters – a pioneer in the outsourcing of elements of the news supply chain). (pp. 16 & 19 & 20). There was no single cause (for the fall of the Berlin wall). To some degree the termites just ate away at the foundations of the Soviet Union, which were already weakened by the system’s own internal contradictions and inefficiencies; to some degree the Reagan administration’s military buildup… But if I had to point to one factor as the first among equals, it was the information revolution that began in the early-to-mid 1980’s. Totalitarian systems depend on a monopoly of information and force, and too much information started to slip through the Iron Curtain, thanks to the spread of fax machines, telephones, and other tools of modern communication. A critical mass of IBM PC’s, and the Windows operating system that brought them to life, came together in roughly this time period that the wall fell, and their diffusion put the nail in the coffin of communism, because they vastly improved horizontal communication – to the detriment of the exclusively top-down form that communism was based upon. They also greatly enhanced personal information gathering and personal empowerment. (p. 52) Thanks to the platform that emerged from the first three flatteners, we were not just able to talk with each other more, we were able to do more things together. The next six flatteners represent the new forms of collaboration which this new platform empowered… And as more and more of us learn how to collaborate in these different ways, we are flattening the world even more. (p. 81). There is no future in vanilla for most companies in a flat world. A lot of vanilla making in software and other areas is going to shift to open-source communities. For most companies, the commercial future belongs to those who know how to make the richest chocolate sauce… (p. 91). The striking thing about the intellectual commons form of open-sourcing is how quickly it has morphed into other spheres and spawned other self-organizing collaborative communities, which are flattening hierarchies in

their areas. I see this most clearly in the news professions, where bloggers, one-person online commentators, who often link to one another depending on their ideology, have created a kind of open-source newsroom. (p. 93). If everyone contributes his or her intellectual capital for free, where will the resources for new innovation come from? And won’t we end up in endless legal wrangles over which part of an innovation was made by the community for free, and meant to stay that way, and which part was added by some company for profit and has to be paid for so that the company can make money to drive further innovation? (p. 96). India could never have afforded to pay for the bandwidth to connect brainy India with high-tech America, so American shareholders paid for it. Sure, overinvestment can be good. The overinvestment in railroads turned out to be a great boon for the American economy. “But the railroad overinvestment was confined to your own country and so too were the benefits,” said Dinaker Singh (hedge fund manager on Wall Street), In the case of the digital railroads, “it was the foreigners who benefited.” India got to ride for free. (p. 105). If Americans and Europeans want to benefit from the flattening of the world and the interconnecting of all the markets and knowledge centers, they will all have to run at least as fast as the fastest lion – and I suspect that lion will be China, and I suspect that will be pretty darn fast. (p. 127). Wal-mart is the China of companies. It has so much leverage that it can grind down any supplier to the last halfpenny. And it is not at all hesitant about using its ability to play its foreign and domestic suppliers off against each other. Some of Wal-Mart’s suppliers have no doubt translated Wal-Mart’s incessant price pressure into lower wages and benefits for their employees or watched as their business moved to China, whence Wal-Mart’s supply chain pulled in $18 billion worth of goods in 2004 from five thousand Chinese suppliers. (p. 137). And now the icing on the cake, the übersteroid that makes it all mobile: wireless. Wireless is what will allow you to take everything that has been digitized, made virtual and personal, and do it from anywhere. In the early days of computing (Globalization 2.0), you worked in the office… Now we are in Globalization 3.0, where, thanks to digitization, miniaturization, virtualization, personalization, and wireless, I can be processing, collecting, or transmitting voice or data from anywhere to anywhere – as an individual or as a machine. (pp. 168 & 169). Save for a tiny minority, these 3 billion people had never been allowed to compete and collaborate before, because they lived in largely closed economies with very vertical, hierarchical political and economic structures. I am talking about the people of Chna, India, Russia, Eastern Europe, Latin America, and Central Asia… When did these 3 billion people converge with the new playing field and the new processes? Right when the field was being flattened, right when millions of them could compete and collaborate more equally, more horizontally, and with cheaper and more readily available tools than ever before. Indeed, thanks to the flattening of the world, many of these new entrants didn’t even have to leave home to participate. Thanks to the to ten flatteners, the playing field came to them. It is this triple convergence – of new players, on a new playing field, developing new processes and habits for horizontal collaboration – that I believe is the most important force shaping global politics in the early twenty-first century… The next generation of innovations will come from all over Planet Flat. (pp. 181182). You know “the IT revolution” that the business press has been touting for the last twenty years? Sorry, but that was only the prologue. The last twenty years were just about forging, sharpening, and distributing all the new tools with which to collaborate and connect. Now the real IT revolution is about to begin… “…by the main event, I mean an era in which technology will literally transform every aspect of business, every aspect of life and every aspect of society.” (Carla Fiorina, then CEO of HP). (p. 200). You have the quintessential British company, Rolls-Royce, which, though still headquartered in England, now operates through a horizontal supply chain, and its CEO, a British citizen knighted by the queen, is being courted by the chancellor of Germany to help him drum up business in Russia, because one link in the RollsRoyce supply chain happens to run through Brandenburg. Sort that out. (p. 212). When you move from a vertical (command and control) world to a much more horizontal (connect and collaborate) flat world, your boss can do his job and your job. He can be secretary of state and his own

secretary, he can give you instructions day or night. You are never out. You are are always in. Therefore, you are always on… There are a lot more conversations between bosses and staffers today that start like this: “I know that already! I googled it myself. Now what do I do about it?” Sort that out. (p. 213). There are two ways to flatten the world. One is to use our imagination to bring everyone up to the same level, and the other is to use your imagination to bring everyone down to the same level. (p. 447).

The World is Flat: A Brief History of the Twenty-First Century New York: Farrar, Straus and Giroux 2005 Thomas L. Friedman

The playing field has been leveled. The world is flat. Everyone is your competition. Everyone, everywhere in the world. The only possible path to follow is the path of creative imagination. Or else… • “Tom, the playing field is being leveled.” (Nandan Nilekani to Thomas Friedman in Bangalore). • Three great eras of globalization: 1.

From 1492 to about 1800 – Globalization 1.0. It shrank the world from a size large to a size medium. (brawn; horsepower; wind and then steam power) – Countries globalizing

2. From 1800 to about 2000 – Globalization 2.0. It shrank the world from a size medium to a size small. (multinationals) – Companies globalizing 3. From 2000 – Globalization 3.0. It shrank the world from a size small to a size tiny. – Individuals globalizing

The Ten Forces that Flattened the World 1.

11/9/89 – When the Walls Came Down and the Windows Went Up

2.

8/9/95 – When Netscape went Public

3.

Work Flow Software – Let’s do Lunch: Have your application talk to my application

4.

Open-Sourcing – Self-Organizing Collaborative Communities (e.g.: Wikipedia)

5.

Outsourcing – Y2K

6.

Offshoring – Running with Gazelles, Eating with Lions

7.

Supply Chaining – Eating Sushi in Arkansas (Have you heard of Wal-mart?)

8.

Insourcing – What the Guys in Funny Brown Shorts are Really Doing

9.

In-Forming – Google, Yahoo, MSN Web Search

10.

The Steroids – Digital, Mobile, Personal, and Virtual

• The triple convergence • new players • on a new playing field • developing new processes and habits for horizontal collaboration • The new “zippies” • “a young city or suburban resident, with a zip in his stride. Generation Z. Oozes attitude, ambition, and aspiration. Cool, confident, and creative. Seeks challenges, loves risks, and shuns fear.” • From Command and Control to Collaborate and Connect • The death of the salesman (no longer: “be liked and you will never want.”) • business without the fat – “but the fat is what gives meat its taste.” • an ever shrinking gap between America and the rest of the world • America’s “quiet crisis” 1. Dirty little secret number one: the numbers gap 2. Dirty little secret number two: the ambition gap 3. Dirty little secret number three: the education gap • Five broad categories for the age of flat 1. Leadership 2. Muscle building 3. Cushioning 4. Social activism 5. Parenting • Culture matters: Glocalization • Rules for companies: 1. Rule #1: When the world goes flat – and you are feeling flattened – reach out for a shovel and dig inside yourself. Don’t try to build walls. (learn the fact that the competition pool is now between big companies, medium companies, and free-lancers -all competing for the same business). 2. Rule #2: And the small shall act big… 3. Rule #3: And the big shall act small… 4. Rule #4: The best companies are the best collaborators… The next layers of value creation are becoming so complex that no single firm or department is going to be able to master them alone.

5. Rule #5: In a flat world, the best companies stay healthy by getting regular chest X-rays, and then selling the results to their clients. 6. Rule #6: The best companies outsource to win, not to shrink. 7. Rule #7: Outsourcing isn’t just for Benedict Arnolds. It’s also for idealists.

• Who is “missing out?” – the unflat world 1. 2. 3. 4.

The too sick (countries/parts of countries too hopeless to plug in) The too disempowered The too frustrated Too many Toyotas (the natural resource restraint)

• The Dell theory of Conflict Prevention (• A few words about Al Queda, or: the scary side of the flat world) • The most important attribute in a flat world: creative imagination • nurturing 11/9 hope in a 9/11 world.

Randy Mayeux [email protected]