The World Is Flat by Thomas L. Friedman

April 13, 2008 at 11:30 pm 1 comment

The platform for delivering content from anywhere to anywhere is what The World is Flat is all about. This book provides an understanding of how the world has become so small, in essence flat, and what the implications of this are for countries, companies, and individuals.

Part I: Waking up to Globalization 3.0

  • Globalization 1.0 (1492-1800): Columbus opens trade between the Old World and the New; shrinks the world’s size from large to medium.
  • Globalization 2.0 (1800-2000): Multinationals, led by the expansion of Dutch and English joint-stock companies, and then by the Industrial Revolution shrink the world from medium to small. Integration is first powered by decreasing transportation costs and then falling telecommunication costs.
  • Globalization 3.0 (around the year 2000-): This is not only the world shrinking from small to tiny, but also flattens the playing field as individuals, rather than countries or companies, collaborate and compete globally. It is driven by a diverse spectrum of non-Western people of color rather than by white Europe and America.

Because of the automation of everything, the gains in productivity promise to be staggering for those who can absorb the technology. And more people than ever before are going to have access. The convergence of 10 major flattening forces will create new social, political, and business model.

Flatteners

  1. 11/9/89: Not only did the fall of the Berlin Wall unleash forces that ultimately liberate the captive populations of the Soviet Union, it tipped the balance of power, worldwide, toward those advocating democratic, consensual, free-market-oriented governance. The period from this date until the mid-1990s was the age of “My machine and I can now talk to each other, better and faster, so that I can do more tasks. Moreover, my machine and I can talk better and faster to a few friends, and some other people in my company, so that we can become more productive.” True seamless global communication isn’t here yet, but on the horizon.
  2. 8/9/95: Netscape goes public and the world is never the same. The PC-Windows phase begets the Netscape email-browsing phase – begets the reality that “My machine and I can interact (i.e. email) with anyone, anywhere, on any machine, and my machine and I can interact (can browse) with anybody’s Web site on the Internet. This lays the foundation for #3.
  3. Work Flow Software: It didn’t take long before everyone wanted to do more than just browse and transmit email, instant message, send pictures, and listen to music over the Net. They also wanted to create, sell, and buy goods and services, keep track of inventories, read X-rays – and they wanted it ubiquitous. However, for this to happen, the flattening process had to go up another level: new application software was needed. The development of XML, a data description language, and SOAP, its related transport protocol, allowed digitized data to be exchanged between diverse software programs so that the data could be shaped, designed, manipulated, edited, reedited, stored, published, and transported and it didn’t matter where the individuals were or what computing devices the were connecting through. The new global platform had empowered entirely new forms of collaboration, which constitute the next six flatteners.
  4. Open-Sourcing: The open-source movement involves thousands of people, worldwide, coming together online to collaborate in writing everything from their own software and operating systems to dictionaries and recipes. Apache, a shareware program for Web server technology, is a prime example. Its collaborators set out to solve a common problem – Web serving – and discovered that collaborating for free in this open-source manner was the best way to assemble the best brains for the task. Apache, which powers about two-thirds of the Web sites in the world, is one of the most successful open-source tools available. Determining that is engineers could no better than this ad-hoc initiative, IBM threw out its own technology and decided to incorporate Apache into its own new Web server product, Websphere. The free software movement is another increasingly popular form of self-organized cooperation, in that it relies on open-source collaboration to help produce the best software possible, for free distribution.
  5. Outsourcing: During the late 1990s the Y2K computer issues became the Y2K crisis! And, India, with all its technies, from all those IITs (Indian Institutes of Technology), private colleges, and computer schools, was the one place in the world with enough software engineers to do it. The initiative became a tremendous flattener. Using fiber-optic-connected workstations, any service, call center, business support operation, or knowledge work, which could be digitized, could also be outsourced globally to the cheapest, smartest, or most efficient provider. This discover made Indian IT providers greatly respected, and outsourcing from the US to India exploded.
  6. Offshoring: Beginning in the 1980s, many investors, who knew how to operate in China, began to realize that, though they could not effectively sell many things to that market at the time, they could use China’s labor pool to make things and sell them abroad. And so it became that the only way companies could compete was taking advantage of China’s low-cost, high-quality platform. In 2001, China formally joined the WTO, agreeing to adhere to international law and standard business practices. A process has been created in which countries now scramble to see who can give companies the best subsidies tax breaks, and education incentives, in addition to the cheapest labor. This has been great for the consumer.
  7. Supply-Chaining: When a Wal-Mart cashier scans and item for purchase, a signal is transmitted across the Wal-Mart network to the supplier’s factory (whether in Maine or coastal China). A replacement item is manufactured and then shipped back to the originating Wal-Mart store, via the Wal-Mart supply chain, and the whole cycle starts all over. Wal-Mart’s ability to orchestrate this “symphony” on a global scale – moving 2.3 billion general merchandise cartons annually along its supply chain – is the most telling example of supply-chaining. Supply-chaining, a method of collaborating horizontally among suppliers, retailers, and customers to create value, is both enabled by the world’s flattening and a hugely important flattener in its own right.
  8. Insourcing: If an individual owns a Toshiba laptop, which breaks while under warranty, Toshiba will advise the customer to drop the laptop off at a UPS store to be shipped for repair. However, UPS does not deliver the laptop to Toshiba, but actually has it sown Toshiba-certified repair personnel fix the computer in a UPS-run workshop, dedicated to computer/printer repairs. With this process, UPS is not just delivering packages anymore – it’s coming right inside a business. This new form of deep collaboration and horizontal value creation is a unique new flattener. When a huge conglomerate can get packages delivered or goods repaired quickly anywhere in the world, it can act really small. And, when small businesses, or individuals working at home, can act big, the competitive playing field is leveled even more.
  9. In-forming:In-forming is “the individual’s personal analog to open-sourcing, outsourcing, insourcing, supply-chaining, and offshoring.” It is the ability to build and deploy one’s own personal information-knowledge-entertainment supply chain. It’s about “self-collaboration” – becoming one’s own self-directed, self-empowered researcher, editor, and selector of said information, knowledge, and entertainment without having to go to the library, the cinema, or watch network television. And, it’s about searching for knowledge and like-minded people and communities. Google shows how hungry people are for this form of collaboration with the number of daily searches is processes. Never before have so many people had the ability to find so much information on their own, about so many things, and about so many people. Google CEO Eric Schmidt say, “[If the flattening of the world means anything, it means] there is no discrimination in accessing knowledge.” The flatter the world become, the more transparent and available ordinary people become. In a flat world, no one can run and no one can hide.
  10. the Steroids: Friedman calls certain new technology steroids because they amplify and turbocharge all other flatteners. All steroids are going to amplify and further empower all the other forms of colaboration: Open-source innovations should become more open; Outsourcing will be enhanced because it will be so much easier to collaborate; Supply-chaining will be enhanced because headquarters will be able to connect in real time with everyone; Insourcing will be enhanced because every driver carrying his or her own PDa, will be capable of interacting with a company’s warehouses and every customer; and In-forming will be enhanced via every individua’s ability to manage his or her own knowledge supply chain.

Friedman contends that the most important force shaping global economics and politics in the early 21st century is a convergence of new players, on a new playing field, developing new processes ands kills for horizontal collaboration.

Unfortunately, this convergence has been obscured by another convergence. First, because many people equated the dot-com boom with globalization, when the bust came, and so many dot-coms imploded, the assumption was that globalization was imploding as well. “This was pure foolishness,” says Friedman, who believes, unequivocally, that the bust actually drove globalization into “hypermode” by forcing companies to outsource and offshore more and more functions in order to save scarce capital. In other word, the dot-com bust was a key factor in laying the foundation for Globalization 3.0

And then everything came to a half with 9/11, subsequent Afghanistan and Iraq invasions, Enron, Tyco, and WorldComm corporate scandals. Thus, the world’s flattening and reshaping were not part of the public discourse in the U.S. or Europe.

Part II: Globalization 3.0 – The Great Sorting Out

The world’s movement from what was primarily a vertical value-creation model to what is increasingly becoming a horizontal model, has affected everything. Friedman views flat and frictionless as a mixed blessing. It may be good for global business. But, it may also pose a threat to the distinctive places and communities that give people their identities and locate them in the world.

In the flat world, one person’s economic liberation could be another’s unemployment. The author contends that there is almost nothing about Globalization 3.0 that is not good for capital. If Dell can build all of its computer components in coastal China, and then sell them in the U.S., Dell benefits. Its stock does well, its shareholders do well, its American customers do well, and the Nasdaq does well; however it is difficult to say that American labor does well.

Essentially, management, shareholders, and investors, whose primary concern is sustainability, are largely indifferent about where their profits are found or even where employment is created.

As the world becomes flatter and flatter, the more it will need a system of global governance that keeps up with all the new legal and illegal forms of collaboration. “Who owns what?” is sure to emerge as one of the most contentious political/geopolitical questions of the century, especially if more and more American firms begin to feel ripped off by more and more Chinese enterprises, taking advantage of the newly flattened world.

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Entry filed under: History.

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1 Comment Add your own

  • 1. concerned citizen  |  April 23, 2008 at 9:06 am

    Two books to read, which offer a counterperspective to Friedman’s “The World is Flat.”

    The Harvard Professor, Pankaj Ghemawat’s latest book, “Redefining Global Strategy,” is more academically inclined. I read an article of his published in the journal, “Foreign Policy”, where he argues that the world is, at best, only semi-globalized. His argument being that Cultural, Administrative, Geographic and Economic aspects of a nation come in the way of total globalization from taking place and cites examples of the same.

    The other small, but interesting book, is by Aronica and Ramdoo, “The World is Flat? A Critical Analysis of Thomas Friedman’s New York Times Bestseller.” It is a small book compared to the 600 page tome by Friedman, and aimed at the common man and students alike. As popular as the book may be, some reviewers assert that by what it leaves out, Friedman’s book is dangerous. The authors point to the fact that there isn’t a single table or data footnote in Friedman’s entire book. “Globalization is the greatest reorganization of the world since the Industrial Revolution,” says Aronica. Aronica and Ramdoo conclude by listing over twenty action items that point the way forward, and they provide a comprehensive, yet concise, framework for understanding the critical issues of globalization.

    You may want to see http://www.mkpress.com/flat
    and watch http://www.mkpress.com/flatoverview.html
    for an interesting counterperspective on Friedman’s
    “The World is Flat”.

    Also a really interesting 6 min wake-up call: Shift Happens! http://www.mkpress.com/ShiftExtreme.html

    There is also a companion book listed: Extreme Competition: Innovation and the Great 21st Century Business Reformation
    http://www.mkpress.com/extreme
    http://www.mkpress.com/Extreme11minWMV.html

    Reply

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