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Monday, July 18, 2005

The World is Flat

I just finished a book about globalization. I thought I would summarize the author’s basic understanding of globalization. I will have more about this book in later posts.

The World is Flat: A Brief History of the Twenty-First Century

Thomas L. Friedman analyzes the key factors that are driving the global economy and politics. In the first half of the book he identifies ten factors he believes are “flattening” the world. Then he suggests three ways these factors are converging to reshape the world. In the second half of the book, he analyzes how this will impact America, developing countries, corporations and geopolitics.


1. 11/9/89 When the Walls Came Down and the Windows Went Up

The Berlin wall came down on 11/9, marking the end of competition between free markets and global communism. Borders were opened. People, goods, and capital were freed to flow over a much greater portion of the world.

Six months later, Windows 3.0 was released allowing people to access computer technology through a graphic interface. Anyone could learn to use a computer without knowing programming languages.

2. 8/9/95 When Netscape Went Public

Netscape developed the first full-scale mass distributed web-browser and went public on 8/9/95. Until the web-browser, one had to learn cryptic Unix code to access information on the internet. The web-browser made seamless the storage and retrieval of information on the internet.

3. Work Flow Software

There was a time when a business might have customer service using one computer application, manufacturing another, and distribution yet another. Often these applications could not interface with each other. Work flow software came along and created a seamless integration of applications and computers.

4. Open-Sourcing. Self-Organizing Collaborative Communities

Microsoft, Netscape, Oracle, Sun and IBM, (to name a few) spent millions of dollars developing Web server software. Who won out? Not these folks. University of Illinois’ National Center for Supercomputing Applications (NCSA) was the place where the initial software code written for today’s Web environment came from. As the NCSA became overwhelmed with internet growth, an online community of computer “geeks” collaboratively wrote patches and made improvements. The software was free for anyone to take and modify as along as they acknowledged the underlying NCSA contribution and shared any improvements with the rest of the community. This made the technology open and available to anyone with programming knowledge and insured an ever improving Web environment.

5. Outsourcing Y2K

India had developed some of the best technical schools in the world the last half of the 20th Century, but because of a socialist bureaucratic economy there were never enough technical jobs. Only a small minority of technicians could manage to go to the US or Europe for jobs. Most of these MIT equivalent trained professionals were resigned to whatever work they could find, which was usually way below their skill level.

A decade ago, a worldwide concern developed about computer software that registered dates as two, rather than four, digits. It was feared that on 1/1/2000, that computers would read the day as 1/1/1900, and thereby cause massive computer failures. Fixing these problems was a massive undertaking requiring an army of technicians.

Meantime, fiber-optic cable had been laid around the world in anticipation of a dot.com bonanza and India could now connect to US computers by hi-speed internet. When the dot.com bubble burst millions of miles of cable was sitting virtually unused and available for virtually nothing.

US corporations who had been skittish about doing business with Indians before changed their tune. With the new technology and a cheap reservoir of technicians, the Indians were the best hope. The venture worked. The experience was highly profitable and effective for everyone. An ever expanding effort has been made ever since to take advantage of untapped human resources in areas like programming, technical support, customer service, and back-room activities in any number of industries.

6. Offshoring.

China joined the World Trade Organization on December 11, 2001, which meant they were obligated to follow the standards of other nations in trade. Because of an enormous untapped cheap labor pool, corporations have been willing to move large numbers of labor intensive manufacturing operations to China. (This is different from outsourcing where a corporation may “outsource” one function of their operations to another location.)

7. Supply-Chaining.

Wal-Mart is one of the biggest and best examples of a company that has worked to create as friction free and environment as it can from extracting raw materials to placing a product in a customer’s hands. Because of there purchasing volume they virtually dictate price and quality standards. They compel seamless integration into their supply chain and thus with each other. Their competing suppliers and direct competitors are compelled to meet Wal-Mart standards in order to compete. This story is repeated across a number of industries.

8. Insourcing.

UPS used to just deliver packages. Now they do things like laptop computer repair at their distribution hubs and logistics for Papa John’s Pizza. The help even a small company have a big presence anywhere in the world. No need to create a supply chain because UPS will be that for you. Even large corporations find the global shipping and logistics issues to complex and have invited UPS and similar companies into their back offices to run certain aspects of their businesses.

9. In-forming.

Google, Yahoo!, MSN Web Search, and the like are the way to creating a world where anyone with access to a computer can find out anything anyplace. Search engines allow for information to be queried in ways that are only limited by the imagination of the inquirer.

10. The Steroids. Digital, Mobile, Personal, and Virtual

Digital, mobile, and personal devices have made access to information and communication more accessible than ever before. Even in relatively underdeveloped regions with undependable power, there are devices that can access satellite delivered data. Virtual meetings allow people half a planet apart have the experience of being in the same room.


Convergence I

The combination of the ten factors led to iterative and accelerating development of new technologies and collaboration without regard to geography, distance, time, and increasingly language.

Convergence II

The reshaping of business practices and cultures that facilitate and maximize the use of the new technologies and collaborations.

Convergence III

The incorporation of the half of the planet that is still largely untouched by the “flattening” of the world. Thereby, tapping even more creativity and innovation.


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