I’ve followed Tom Friedman for a number of years now — I think he’s just about the most articulate writer about global affairs — in particular what’s been happening in the Middle East. He wrote a book a while back called The Lexus and the Olive Tree, which is where I started learning some global economic ideas like securitization of debt & such. Anyway, he’s a very smart guy, and I’d really recommend reading his bi-weekly New York Times column to every citizen.
In this book, he steps away from global politics for a bit, back towards economics, and takes a look at the globalization that’s happening in our world. His basic premise is this: Globalization 1.0 lasted from 1492 to around 1800 — "…it shrank the world from a size large to a size medium. Globalization 1.0 was about countries and muscles. That is, in Globalization 1.0 the key agent of change, the dynamic force driving the process of global integration was how much brawn…your country had and how creatively you could deploy it."
"Globalization 2.0 lasted roughly from 1800 to 2000, interrupted by the Great Depression and World Wars I and II. This era shrank the world from a size medium to a size small…the key agent of change, the dynamic force driving global integration, was multinational companies."
"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…the thing that gives it its unique character is the newfound power for individuals to collaborate and compete globally."
First he talks in the book about why this is happening — he gives 10 basic "flattening forces":
- 11/9/89 [the fall of the Berlin Wall]
- 8/9/95 [Netscape’s IPO]
- Work Flow Software [to enable collaboration across time & space]
- Open-Sourcing [to drive down the cost of software to virtually zero]
- Outsourcing [which lets companies focus on their core competencies]
- Offshoring [to enable access to a huge and inexpensive labor pool]
- Supply-Chaining [giving companies better control over their supplies]
- Insourcing [like outsourcing, but turned around a little bit]
- In-forming [Google is everywhere]
- The Steroids ["Digital, mobile, personal and virtual"]
and throughout he goes through examples, many of which are in my own backyard here in Silicon Valley. This is the first time I’ve read Friedman and felt like I was ahead of him (I always feel hopelessly behind when he talks about geopolitics) — he was explaining things about Google and Walmart.com and Indian outsourcing firms that I’ve understood for a while.
Here’s a great example that I didn’t know: through lots of data mining techniques, Walmart happens to know that when hurricanes approach, people drink more beer, and during the worst weather, people eat more pre-packaged food like PopTarts (I like the Brown Sugar ones the best, if you’re interested). So they’ve defined what they call a "hurricane mix" of products that a typical hurricane-affected store should stock. When the Walmart staff meteorologists (!) identify a potential hurricane, Walmart’s supply chain & logistics software automatically shifts the mix of products to be delivered to the affected stores to the hurricane mix. Amazing.
I had thought coming into reading the book that his main idea (the world is now flat, from a competition point of view) was going to be over-simplistic — after reading it, I find that it’s shifted my thinking and provides a useful frame for thinking about a lot of things.
The second half of the book is more about globalization and geopolitics — a great blend of things that yields some great insight from Friedman and makes the book worth reading.
Here’s what he ends with; it’s a message to his daughter who just went off to college this year:
"The world is being flattened. I didn’t start it and you can’t stop it, except at a great cost to human development and your own future. But we can manage it, for better or for worse. If it is to be for better, not for worse, then you and your generation must not live in fear of either the terrorists or of tomorrow, of either al-Qaeda or of Infosys [an Indian outsourcing firm]. You can flouish in this flat world, but it does take the right imagination and the right motivation. While your lives have been powerfully shaped by 9/11, the world needs you to be forever the generation of 11/9 [the fall of the Berlin Wall] — the generation of strategic optimists, teh generation with more dreams than memories, the generation that wakes up each morning and not only imagines taht things can be better but also acts on that imagination every day."