MAGAZINE DESK
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It's a Flat World, After All
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By THOMAS L. FRIEDMAN
(NYT)
5165
words
Published: April 3, 2005
In 1492 Christopher Columbus set sail for India, going west. He had the
Nina, the Pinta and the Santa Maria. He never did find India, but he
called the people he met ''Indians'' and came home and reported to his
king and queen: ''The world is round.'' I set off for India 512 years
later. I knew just which direction I was going. I went east. I had
Lufthansa business class, and I came home and reported only to my wife
and only in a whisper: ''The world is flat.''
And therein lies a tale of technology and geoeconomics that is
fundamentally reshaping our lives -- much, much more quickly than many
people realize. It all happened while we were sleeping, or rather while
we were focused on 9/11, the dot-com bust and Enron -- which even
prompted some to wonder whether globalization was over. Actually, just
the opposite was true, which is why it's time to wake up and prepare
ourselves for this flat world, because others already are, and there is
no time to waste.
I wish I could say I saw it all coming. Alas, I encountered the
flattening of the world quite by accident. It was in late February of
last year, and I was visiting the Indian high-tech capital, Bangalore,
working on a documentary for the Discovery Times channel about
outsourcing. In short order, I interviewed Indian entrepreneurs who
wanted to prepare my taxes from Bangalore, read my X-rays from
Bangalore, trace my lost luggage from Bangalore and write my new
software from Bangalore. The longer I was there, the more upset I
became -- upset at the realization that while I had been off covering
the 9/11 wars, globalization had entered a whole new phase, and I had
missed it. I guess the eureka moment came on a visit to the campus of
Infosys Technologies, one of the crown jewels of the Indian outsourcing
and software industry. Nandan Nilekani, the Infosys C.E.O., was showing
me his global video-conference room, pointing with pride to a wall-size
flat-screen TV, which he said was the biggest in Asia. Infosys, he
explained, could hold a virtual meeting of the key players from its
entire global supply chain for any project at any time on that
supersize screen. So its American designers could be on the screen
speaking with their Indian software writers and their Asian
manufacturers all at once. That's what globalization is all about
today, Nilekani said. Above the screen there were eight clocks that
pretty well summed up the Infosys workday: 24/7/365. The clocks were
labeled U.S. West, U.S. East, G.M.T., India, Singapore, Hong Kong,
Japan, Australia.
''Outsourcing is just one dimension of a much more fundamental
thing happening today in the world,'' Nilekani explained. ''What
happened over the last years is that there was a massive investment in
technology, especially in the bubble era, when hundreds of millions of
dollars were invested in putting broadband connectivity around the
world, undersea cables, all those things.'' At the same time, he added,
computers became cheaper and dispersed all over the world, and there
was an explosion of e-mail software, search engines like Google and
proprietary software that can chop up any piece of work and send one
part to Boston, one part to Bangalore and one part to Beijing, making
it easy for anyone to do remote development. When all of these things
suddenly came together around 2000, Nilekani said, 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 do work, especially work of
an intellectual nature. And what you are seeing in Bangalore today is
really the culmination of all these things coming together.''
At one point, summing up the implications of all this,
Nilekani uttered a phrase that rang in my ear. He said to me, ''Tom,
the playing field is being leveled.'' He meant that countries like
India were now able to compete equally for global knowledge work as
never before -- and that America had better get ready for this. As I
left the Infosys campus that evening and bounced along the potholed
road back to Bangalore, I kept chewing on that phrase: ''The playing
field is being leveled.''
''What Nandan is saying,'' I thought, ''is that the playing
field is being flattened. Flattened? Flattened? My God, he's telling me
the world is flat!''
Here I was in Bangalore -- more than 500 years after Columbus
sailed over the horizon, looking for a shorter route to India using the
rudimentary navigational technologies of his day, and returned safely
to prove definitively that the world was round -- and one of India's
smartest engineers, trained at his country's top technical institute
and backed by the most modern technologies of his day, was telling me
that the world was flat, as flat as that screen on which he can host a
meeting of his whole global supply chain. Even more interesting, he was
citing this development as a new milestone in human progress and a
great opportunity for India and the world -- the fact that we had made
our world flat! This has been building for a long time. Globalization 1.0
(1492 to 1800) shrank the world from a size large to a size medium, and
the dynamic force in that era was countries globalizing for resources
and imperial conquest. Globalization 2.0 (1800 to 2000) shrank the
world from a size medium to a size small, and it was spearheaded by
companies globalizing for markets and labor. Globalization 3.0 (which
started around 2000) is shrinking the world from a size small to a size
tiny and flattening the playing field at the same time. And while the
dynamic force in Globalization 1.0 was countries globalizing and the
dynamic force in Globalization 2.0 was companies globalizing, the
dynamic force in Globalization 3.0 -- the thing that gives it its
unique character -- is individuals and small groups globalizing.
Individuals must, and can, now ask: where do I fit into the global
competition and opportunities of the day, and how can I, on my own,
collaborate with others globally? But Globalization 3.0 not only
differs from the previous eras in how it is shrinking and flattening
the world and in how it is empowering individuals. It is also different
in that Globalization 1.0 and 2.0 were driven primarily by European and
American companies and countries. But going forward, this will be less
and less true. Globalization 3.0 is not only going to be driven more by
individuals but also by a much more diverse -- non-Western, nonwhite --
group of individuals. In Globalization 3.0, you are going to see every
color of the human rainbow take part.
''Today, the most profound thing to me is the fact that a
14-year-old in Romania or Bangalore or the Soviet Union or Vietnam has
all the information, all the tools, all the software easily available
to apply knowledge however they want,'' said Marc Andreessen, a
co-founder of Netscape and creator of the first commercial Internet
browser. ''That is why I am sure the next Napster is going to come out
of left field. As bioscience becomes more computational and less about
wet labs and as all the genomic data becomes easily available on the
Internet, at some point you will be able to design vaccines on your
laptop.''
Andreessen is touching on the most exciting part of
Globalization 3.0 and the flattening of the world: the fact that we are
now in the process of connecting all the knowledge pools in the world
together. We've tasted some of the downsides of that in the way that
Osama bin Laden has connected terrorist knowledge pools together
through his Qaeda network, not to mention the work of teenage hackers
spinning off more and more lethal computer viruses that affect us all.
But the upside is that by connecting all these knowledge pools we are
on the cusp of an incredible new era of innovation, an era that will be
driven from left field and right field, from West and East and from
North and South. Only 30 years ago, if you had a choice of being born a
B student in Boston or a genius in Bangalore or Beijing, you probably
would have chosen Boston, because a genius in Beijing or Bangalore
could not really take advantage of his or her talent. They could not
plug and play globally. Not anymore. Not when the world is flat, and
anyone with smarts, access to Google and a cheap wireless laptop can
join the innovation fray.
When the world is flat, you can innovate without having to
emigrate. This is going to get interesting. We are about to see
creative destruction on steroids.
How did the world get flattened, and how did it happen so fast?
It was a result of 10 events and forces that all came together
during the 1990's and converged right around the year 2000. Let me go
through them briefly. The first event was 11/9. That's right -- not
9/11, but 11/9. Nov. 9, 1989, is the day the Berlin Wall came down,
which was critically important because it allowed us to think of the
world as a single space. ''The Berlin Wall was not only a symbol of
keeping people inside Germany; it was a way of preventing a kind of
global view of our future,'' the Nobel Prize-winning economist Amartya
Sen said. And the wall went down just as the windows went up -- the
breakthrough Microsoft Windows 3.0 operating system, which helped to
flatten the playing field even more by creating a global computer
interface, shipped six months after the wall fell.
The second key date was 8/9. Aug. 9, 1995, is the day Netscape
went public, which did two important things. First, it brought the
Internet alive by giving us the browser to display images and data
stored on Web sites. Second, the Netscape stock offering triggered the
dot-com boom, which triggered the dot-com bubble, which triggered the
massive overinvestment of billions of dollars in fiber-optic
telecommunications cable. That overinvestment, by companies like Global
Crossing, resulted in the willy-nilly creation of a global
undersea-underground fiber network, which in turn drove down the cost
of transmitting voices, data and images to practically zero, which in
turn accidentally made Boston, Bangalore and Beijing next-door
neighbors overnight. In sum, what the Netscape revolution did was bring
people-to-people connectivity to a whole new level. Suddenly more
people could connect with more other people from more different places
in more different ways than ever before. No country accidentally benefited more from the Netscape
moment than India. ''India had no resources and no infrastructure,''
said Dinakar Singh, one of the most respected hedge-fund managers on
Wall Street, whose parents earned doctoral degrees in biochemistry from
the University of Delhi before emigrating to America. ''It produced
people with quality and by quantity. But many of them rotted on the
docks of India like vegetables. Only a relative few could get on ships
and get out. Not anymore, because we built this ocean crosser, called
fiber-optic cable. For decades you had to leave India to be a
professional. Now you can plug into the world from India. You don't
have to go to Yale and go to work for Goldman Sachs.'' India could
never have afforded to pay for the bandwidth to connect brainy India
with high-tech America, so American shareholders paid for it. Yes,
crazy 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,'' Singh said. In the case of the digital railroads,
''it was the foreigners who benefited.'' India got a free ride.
The first time this became apparent was when thousands of
Indian engineers were enlisted to fix the Y2K -- the year 2000 --
computer bugs for companies from all over the world. (Y2K should be a
national holiday in India. Call it ''Indian Interdependence Day,'' says
Michael Mandelbaum, a foreign-policy analyst at Johns Hopkins.) The
fact that the Y2K work could be outsourced to Indians was made possible
by the first two flatteners, along with a third, which I call
''workflow.'' Workflow is shorthand for all the software applications,
standards and electronic transmission pipes, like middleware, that
connected all those computers and fiber-optic cable. To put it another
way, if the Netscape moment connected people to people like never
before, what the workflow revolution did was connect applications to
applications so that people all over the world could work together in
manipulating and shaping words, data and images on computers like never
before. Indeed, this breakthrough in people-to-people and
application-to-application connectivity produced, in short order, six
more flatteners -- six new ways in which individuals and companies
could collaborate on work and share knowledge. One was ''outsourcing.''
When my software applications could connect seamlessly with all of your
applications, it meant that all kinds of work -- from accounting to
software-writing -- could be digitized, disaggregated and shifted to
any place in the world where it could be done better and cheaper. The
second was ''offshoring.'' I send my whole factory from Canton, Ohio,
to Canton, China. The third was ''open-sourcing.'' I write the next
operating system, Linux, using engineers collaborating together online
and working for free. The fourth was ''insourcing.'' I let a company
like UPS come inside my company and take over my whole logistics
operation -- everything from filling my orders online to delivering my
goods to repairing them for customers when they break. (People have no
idea what UPS really does today. You'd be amazed!). The fifth was
''supply-chaining.'' This is Wal-Mart's specialty. I create a global
supply chain down to the last atom of efficiency so that if I sell an
item in Arkansas, another is immediately made in China. (If Wal-Mart
were a country, it would be China's eighth-largest trading partner.)
The last new form of collaboration I call ''informing'' -- this is
Google, Yahoo and MSN Search, which now allow anyone to collaborate
with, and mine, unlimited data all by themselves.
So the first three flatteners created the new platform for
collaboration, and the next six are the new forms of collaboration that
flattened the world even more. The 10th flattener I call ''the
steroids,'' and these are wireless access and voice over Internet
protocol (VoIP). What the steroids do is turbocharge all these new
forms of collaboration, so you can now do any one of them, from
anywhere, with any device.
The world got flat when all 10 of these flatteners converged
around the year 2000. This created a global, Web-enabled playing field
that allows for multiple forms of collaboration on research and work in
real time, without regard to geography, distance or, in the near
future, even language. ''It is the creation of this platform, with
these unique attributes, that is the truly important sustainable
breakthrough that made what you call the flattening of the world
possible,'' said Craig Mundie, the chief technical officer of
Microsoft.
No, not everyone has access yet to this platform, but it is
open now to more people in more places on more days in more ways than
anything like it in history. Wherever you look today -- whether it is
the world of journalism, with bloggers bringing down Dan Rather; the
world of software, with the Linux code writers working in online forums
for free to challenge Microsoft; or the world of business, where Indian
and Chinese innovators are competing against and working with some of
the most advanced Western multinationals -- hierarchies are being
flattened and value is being created less and less within vertical
silos and more and more through horizontal collaboration within
companies, between companies and among individuals. Do you recall ''the IT revolution'' that the business press
has been pushing for the last 20 years? Sorry to tell you this, but
that was just the prologue. The last 20 years were about forging,
sharpening and distributing all the new tools to collaborate and
connect. Now the real information revolution is about to begin as all
the complementarities among these collaborative tools start to
converge. One of those who first called this moment by its real name
was Carly Fiorina, the former Hewlett-Packard C.E.O., who in 2004 began
to declare in her public speeches that the dot-com boom and bust were
just ''the end of the beginning.'' The last 25 years in technology,
Fiorina said, have just been ''the warm-up act.'' Now we are going into
the main event, she said, ''and by the main event, I mean an era in
which technology will truly transform every aspect of business, of
government, of society, of life.''
As if this flattening wasn't enough, another convergence
coincidentally occurred during the 1990's that was equally important.
Some three billion people who were out of the game walked, and often
ran, onto the playing field. I am talking about the people of China,
India, Russia, Eastern Europe, Latin America and Central Asia. Their
economies and political systems all opened up during the course of the
1990's so that their people were increasingly free to join the free
market. And when did these three billion people converge with the new
playing field and the new business processes? Right when it was being
flattened, right when millions of them could compete and collaborate
more equally, more horizontally and with cheaper and more readily
available tools. 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 10 flatteners, the playing field came to them!
It is this convergence -- of new players, on a new playing
field, developing new processes for horizontal collaboration -- that I
believe is the most important force shaping global economics and
politics in the early 21st century. Sure, not all three billion can
collaborate and compete. In fact, for most people the world is not yet
flat at all. But even if we're talking about only 10 percent, that's
300 million people -- about twice the size of the American work force.
And be advised: the Indians and Chinese are not racing us to the
bottom. They are racing us to the top. What China's leaders really want
is that the next generation of underwear and airplane wings not just be
''made in China'' but also be ''designed in China.'' And that is where
things are heading. So in 30 years we will have gone from ''sold in
China'' to ''made in China'' to ''designed in China'' to ''dreamed up
in China'' -- or from China as collaborator with the worldwide
manufacturers on nothing to China as a low-cost, high-quality,
hyperefficient collaborator with worldwide manufacturers on everything.
Ditto India. Said Craig Barrett, the C.E.O. of Intel, ''You don't bring
three billion people into the world economy overnight without huge
consequences, especially from three societies'' -- like India, China
and Russia -- ''with rich educational heritages.''
That is why there is nothing that guarantees that Americans or
Western Europeans will continue leading the way. These new players are
stepping onto the playing field legacy free, meaning that many of them
were so far behind that they can leap right into the new technologies
without having to worry about all the sunken costs of old systems. It
means that they can move very fast to adopt new, state-of-the-art
technologies, which is why there are already more cellphones in use in
China today than there are people in America.
If you want to appreciate the sort of challenge we are facing,
let me share with you two conversations. One was with some of the
Microsoft officials who were involved in setting up Microsoft's
research center in Beijing, Microsoft Research Asia, which opened in
1998 -- after Microsoft sent teams to Chinese universities to
administer I.Q. tests in order to recruit the best brains from China's
1.3 billion people. Out of the 2,000 top Chinese engineering and
science students tested, Microsoft hired 20. They have a saying at
Microsoft about their Asia center, which captures the intensity of
competition it takes to win a job there and explains why it is already
the most productive research team at Microsoft: ''Remember, in China,
when you are one in a million, there are 1,300 other people just like
you.''
The other is a conversation I had with Rajesh Rao, a young
Indian entrepreneur who started an electronic-game company from
Bangalore, which today owns the rights to Charlie Chaplin's image for
mobile computer games. ''We can't relax,'' Rao said. ''I think in the
case of the United States that is what happened a bit. Please look at
me: I am from India. We have been at a very different level before in
terms of technology and business. But once we saw we had an
infrastructure that made the world a small place, we promptly tried to
make the best use of it. We saw there were so many things we could do.
We went ahead, and today what we are seeing is a result of that. There
is no time to rest. That is gone. There are dozens of people who are
doing the same thing you are doing, and they are trying to do it
better. It is like water in a tray: you shake it, and it will find the
path of least resistance. That is what is going to happen to so many
jobs -- they will go to that corner of the world where there is the
least resistance and the most opportunity. If there is a skilled person
in Timbuktu, he will get work if he knows how to access the rest of the
world, which is quite easy today. You can make a Web site and have an
e-mail address and you are up and running. And if you are able to
demonstrate your work, using the same infrastructure, and if people are
comfortable giving work to you and if you are diligent and clean in
your transactions, then you are in business.'' Instead of complaining about outsourcing, Rao said, Americans
and Western Europeans would ''be better off thinking about how you can
raise your bar and raise yourselves into doing something better.
Americans have consistently led in innovation over the last century.
Americans whining -- we have never seen that before.''
Rao is right. And it is time we got focused. As a person who
grew up during the cold war, I'll always remember driving down the
highway and listening to the radio, when suddenly the music would stop
and a grim-voiced announcer would come on the air and say: ''This is a
test. This station is conducting a test of the Emergency Broadcast
System.'' And then there would be a 20-second high-pitched siren sound.
Fortunately, we never had to live through a moment in the cold war when
the announcer came on and said, ''This is a not a test.''
That, however, is exactly what I want to say here: ''This is not a test.''
The long-term opportunities and challenges that the flattening
of the world puts before the United States are profound. Therefore, our
ability to get by doing things the way we've been doing them -- which
is to say not always enriching our secret sauce -- will not suffice any
more. ''For a country as wealthy we are, it is amazing how little we
are doing to enhance our natural competitiveness,'' says Dinakar Singh,
the Indian-American hedge-fund manager. ''We are in a world that has a
system that now allows convergence among many billions of people, and
we had better step back and figure out what it means. It would be a
nice coincidence if all the things that were true before were still
true now, but there are quite a few things you actually need to do
differently. You need to have a much more thoughtful national
discussion.'' If this moment has any parallel in recent American history,
it is the height of the cold war, around 1957, when the Soviet Union
leapt ahead of America in the space race by putting up the Sputnik
satellite. The main challenge then came from those who wanted to put up
walls; the main challenge to America today comes from the fact that all
the walls are being taken down and many other people can now compete
and collaborate with us much more directly. The main challenge in that
world was from those practicing extreme Communism, namely Russia, China
and North Korea. The main challenge to America today is from those
practicing extreme capitalism, namely China, India and South Korea. The
main objective in that era was building a strong state, and the main
objective in this era is building strong individuals.
Meeting the challenges of flatism requires as comprehensive,
energetic and focused a response as did meeting the challenge of
Communism. It requires a president who can summon the nation to work
harder, get smarter, attract more young women and men to science and
engineering and build the broadband infrastructure, portable pensions
and health care that will help every American become more employable in
an age in which no one can guarantee you lifetime employment.
We have been slow to rise to the challenge of flatism, in
contrast to Communism, maybe because flatism doesn't involve ICBM
missiles aimed at our cities. Indeed, the hot line, which used to
connect the Kremlin with the White House, has been replaced by the help
line, which connects everyone in America to call centers in Bangalore.
While the other end of the hot line might have had Leonid Brezhnev
threatening nuclear war, the other end of the help line just has a soft
voice eager to help you sort out your AOL bill or collaborate with you
on a new piece of software. No, that voice has none of the menace of
Nikita Khrushchev pounding a shoe on the table at the United Nations,
and it has none of the sinister snarl of the bad guys in ''From Russia
With Love.'' No, that voice on the help line just has a friendly Indian
lilt that masks any sense of threat or challenge. It simply says:
''Hello, my name is Rajiv. Can I help you?''
No, Rajiv, actually you can't. When it comes to responding to
the challenges of the flat world, there is no help line we can call. We
have to dig into ourselves. We in America have all the basic economic
and educational tools to do that. But we have not been improving those
tools as much as we should. That is why we are in what Shirley Ann
Jackson, the 2004 president of the American Association for the
Advancement of Science and president of Rensselaer Polytechnic
Institute, calls a ''quiet crisis'' -- one that is slowly eating away
at America's scientific and engineering base. ''If left unchecked,'' said Jackson, the first
African-American woman to earn a Ph.D. in physics from M.I.T., ''this
could challenge our pre-eminence and capacity to innovate.'' And it is
our ability to constantly innovate new products, services and companies
that has been the source of America's horn of plenty and steadily
widening middle class for the last two centuries. This quiet crisis is
a product of three gaps now plaguing American society. The first is an
''ambition gap.'' Compared with the young, energetic Indians and
Chinese, too many Americans have gotten too lazy. As David Rothkopf, a
former official in the Clinton Commerce Department, puts it, ''The real
entitlement we need to get rid of is our sense of entitlement.''
Second, we have a serious numbers gap building. We are not producing
enough engineers and scientists. We used to make up for that by
importing them from India and China, but in a flat world, where people
can now stay home and compete with us, and in a post-9/11 world, where
we are insanely keeping out many of the first-round intellectual draft
choices in the world for exaggerated security reasons, we can no longer
cover the gap. That's a key reason companies are looking abroad. The
numbers are not here. And finally we are developing an education gap.
Here is the dirty little secret that no C.E.O. wants to tell you: they
are not just outsourcing to save on salary. They are doing it because
they can often get better-skilled and more productive people than their
American workers. These are some of the reasons that Bill Gates, the Microsoft
chairman, warned the governors' conference in a Feb. 26 speech that
American high-school education is ''obsolete.'' As Gates put it: ''When
I compare our high schools to what I see when I'm traveling abroad, I
am terrified for our work force of tomorrow. In math and science, our
fourth graders are among the top students in the world. By eighth
grade, they're in the middle of the pack. By 12th grade, U.S. students
are scoring near the bottom of all industrialized nations. . . . The
percentage of a population with a college degree is important, but so
are sheer numbers. In 2001, India graduated almost a million more
students from college than the United States did. China graduates twice
as many students with bachelor's degrees as the U.S., and they have six
times as many graduates majoring in engineering. In the international
competition to have the biggest and best supply of knowledge workers,
America is falling behind.''
We need to get going immediately. It takes 15 years to train a
good engineer, because, ladies and gentlemen, this really is rocket
science. So parents, throw away the Game Boy, turn off the television
and get your kids to work. There is no sugar-coating this: in a flat
world, every individual is going to have to run a little faster if he
or she wants to advance his or her standard of living. When I was
growing up, my parents used to say to me, ''Tom, finish your dinner --
people in China are starving.'' But after sailing to the edges of the
flat world for a year, I am now telling my own daughters, ''Girls,
finish your homework -- people in China and India are starving for your
jobs.'' I repeat, this is not a test. This is the beginning of a
crisis that won't remain quiet for long. And as the Stanford economist
Paul Romer so rightly says, ''A crisis is a terrible thing to waste.''
Drawing (Drawing by Selcuk Demirel)
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