The World is Flat

The World Is Flat 3.0: A Brief History of the Twenty-first Century

The flattening of the world refers to the increasing ability to collaborate and compete on a global scale.
10 Forces that Flattened the World
  1. The Fall of the Berlin Wall
    • Economies around the world started opening up and started leaning towards capitalism
  2. Web Browsers
    • Created an easy way for people to navigate the Internet
    • Belief that the demand for internet-based products and services would be unlimited resulted in massive over-investment in fiber optic cables
    • The over-investment in fiber optic cables dramatically reduced data transport costs
    • People wanted compatibility resulting in standards allowing greater interactivity
  3. Work Flow Software
    • Things are now done through a global supply chain, even service work
    • PC and email were the first big break through
    • AJAX provided easier access to web-based tools making it easier to run a business
    • Small businesses could now use tools previously available only to large companies
  4. Uploading
    • Increased ability for individuals to author content
    • Served as a creative outlet
    • Community developed software (open source) created a lot of free software
    • Wikipedia (community developed answers)
    • Blogging resulted in increased reporting and intelligence gathering
  5. Outsourcing and Y2K
    • Preparing computers for Y2K was a big tedious job
    • Companies outsourced to India because it had the workforce to handle it
    • Developed a relationship resulting in new forms of collaboration
    • Indian programmers started getting more respect and started working up the value chain
    • IT budgets of a lot of companies were cut during the dot-com bust
    • Outsourcing became very attractive as Indian programmers were cheaper, but hungrier
  6. Off Shoring
    • Outsourcing is moving a specific function
    • Off shoring is doing something the same way, but in a new location for taxes, labor, and other cost savings
    • China became an attractive manufacturing platform
    • Had major impact on many company supply chains and cost dynamics
    • China has been shifting from low-grade products to high-grade, high-tech
    • Results in cheaper prices to US Consumers
    • Companies do this not only for lower costs, but access to foreign markets
    • Helps stimulate American exports
  7. Supply-Chaining
    • Increasing efficiencies in logistics and supply-chain management
    • It is easy to reverse engineer products, but not duplicate operations
    • Wal-mart is a hyper-efficient supply chain with very advanced systems for tracking and monitoring inventory
    • Increasingly complex, global supply chain requires global optimization taking into account reliability and cost
  8. Insourcing
    • UPS getting into logistics and becoming integrated with its customers’ supply-chains
    • They repair Toshiba computers, deliver ingredients for Papa Johns, and route orders for Nike
    • Helps small companies act big who can’t afford to build a global supply chain
  9. Informing
    • Google has created the ability for almost anyone to access any kind of information
    • More efficiency and can become experts in fields quicker
  10. Digital, Mobile, Personal, Virtual
    • Increasing wireless connectivity and storage space of devices will greatly enhance ability to collaborate, communicate, and share
    • Objects may increasingly become connected and intelligent
    • Algorithms may help monitor and analyze in real-time
The Triple Convergence
  1. 10 flatteners starting to work together and creating flatter global playing field
    • Network effect: Certain things become more valuable with the availability and adoption of other things
  2.  Trend of moving to horizontal value creation
    • Organizations previously run through command-and-control
    • Shifting to collaboration
    • Companies are collaborating to combine skills and create new technologies
    • “Virtual Companies” can be created based on specific needs of clients
  3. China, India, and Eastern Europe joining the global work force
    • In 2000, 1.5 billion new workers joined the global work force.
    • Even if 10% have the education and connectivity to plug in, 150 million is equal to the entire US workforce
    • Some of these areas have very high work ethic and very hungry
    • Work will increasingly be sourced based on quality and price
Implications for America
  • Free-trade theory of comparative advantage states that if each nation specializes in producing good where they have a cost advantage and trade then there will be overall benefit for everyone
  • As the global pie grows, there will more complex jobs and specialties
  • Low-skilled workers will have to improve their education and skills to compete with low-skilled workers abroad.
  • Human needs are infinite. Infinite industries can be created. Wants today become needs tomorrow.
  • Idea-based workers will do well in this economy
Untouchable Jobs
  • There are tradeable good and non-tradeable good
  • Jobs that can’t be outsourced or automated currently fall into three categories
    • Specialized – So special cannot be traded. e.g. JK Rowling, Michael Jordan
    • Localized – requires local knowledge or face-to-face contact. Can be high-end, vocational, or low-end
    • Non-tradeable – These are jobs will increasingly become traded e.g. accounting, data entry, etc.
  • Skills that are valued in the flat world :
    • Good collaborators given the global nature of things
    • Synthesizers who can put together disparate information and integrate functions
    • Explainers who can simplify advance concepts
    • Leveragers who understand things from end-to-end that have a wide base of knowledge and skills
    • Adapters who constantly learn and apply skills to a widening scope of situations
    • Green people who understand renewable energy and environmentally sustainable systems
    • People that can connect with others
    • People that understand math as it is finding wider applications in all fields
    • Localizers who understand global infrastructure tools an can adapt the tools for local needs and demands
  • We are now competing against the everyone in the emerging world
  • There must be an emphasis on learning how to learn as things become outdated increasingly fast
  • Current school system was designed to produce boxed positions in corporate organization charts (Wide at bottom, narrow at top)
  • In past, left brain (linear, logical, analytical) help succeed, but now right (artistry, empathy, big picture) increasingly important
  • Nurture right brain by focusing on things you naturally like to do. People rarely like to do accounting on their free time.
  • Passion and curiosity are better than IQ
The Quiet Crisis
  • Wealth in the new age will require the right infrastructure, education programs, and governance.
  • People say we have advantage in creativity, but need solid understanding of things before you can invent beyond them.
  • Creativity can be trained and China is focusing on its weaknesses
  • The US has serious gaps:
  • Numbers Gap
    • NASA is having difficulty hiring
    • Number of math and engineering jobs are growing, but citizens prepared for those jobs are not
    • Other countries are investing in science and engineering education at higher rates than the US
    • The quality may not be as good, but they have much more people and are quickly catching up
  • Education Gap at the Top
    • Kids want to do things that are fun
    • Don’t want to slog through the basics and fundamentals
    • Literacy levels are decreasing as more kids spend time watching tv or on the internet
  • Ambition Gap
    • Someone from abroad may not only be cheaper, but more motivated
    • Many Americans have sense of entitlement and feel they are qualified for high paying jobs
  • Education Gap at the Bottom
    • Education is run at the local level
    • Increasing segregation with suburbs
    • Rich areas have taxes to spend a lot while poor areas don’t
    • Schools are not serving as agents of social mobility
    • This was less important in the past due to mass production jobs, but now these are getting automated or outsourced
  • Funding Gap
    • Federal funding for physical and mathematical sciences and engineering declined 37% between 1970 and 2004
    • % of scientific papers published by Americans declining
  • Infrastructure Gap
    • US only industrialized state without an explicit national policy for promoting broadband
    • Good connectivity critical for advancing productivity and innovation
What Must be Done
  • Long-term opportunities and challenges are very great
  • Must focus on building strong individuals
  • Compassionate flatism – government must embrace globalization and reconfigure to give more Americans the outlook, education, skills and safety net to compete
  • Leadership
    • Politicians need to explain to the people what kind of world they are living in
    • People can’t deal with problems if unaware of gaps
  • Muscles
    • Individuals will be more responsible for their own career and economic security
    • Increased equity ownership linked to higher productivity
    • Focus on increased education to increase skills and decrease pool of low-skilled workers
    • Allow the best people to come to our country
  • Cushions
    • Social security or wage insurance are good things
    • if you don’t provide cushion, may result in political backlash driving policies that erect walls lowering everyone’s standard of living
  • Parenting
    • Get rid of entitlement. Just because we dominated in the past doesn’t mean we will in the future
    • Not just about skills but building character
    • Push beyond comfort zone, do right thing, be ready to suffer short-term pain
    • India and China are coming after what we are doing, we must create the future
What Developing Countries Must Do
  • Must engage in brutal honesty and see where it stands in comparison to other countries
  • Development is a voluntary process
  • Wholesale reforms were the adoption of market friendly policies typically decided at the top
  • New world will require retail reforms
    • Improving infrastructure, education, and governance
    • Giving people tools and legal framework to innovate and collaborate
    • Making the starting, running, adjusting, and closing of a business easier
    • Simplify, deregulate, use the internet for regulation fulfillment
    • Enhance property rights
    • Reduce court involvement in business matters
    • Make reform a continuous process
  • E.g. Ireland is now the second richest country in Europe (per Capita GDP) and has adopted many of these changes. Many companies have located substantial operations there
  • Culture is very important in being able to adapt
  • Each country needs to choose the right speed, but more liberalization will likely lead to more economic growth
How Companies Cope with the Flat World
  • What can be done will be done
  • The small will act big
  • Best companies will increasingly collaborate
  • Best companies will focus on its differentiating factor
  • Outsource to grow and acquire new knowledge not shrink
  • Doing business right and ethically will become increasingly important
  • Will not build walls but be very collaborative
  • If it’s not happening, it’s because you’re not doing it
  • Small groups can have a loud voice
  • Companies will be increasingly judged based on their actions
  • Consumers can now react and voice opinions to companies
  • Microfinance started small
  • Company moving data entry to Cambodia raised standard of living for people there
Constant Connection
  • Increasingly disconnected in real world
  • So much interruption disruptive to productivity
  • Very addictive
  • Anything can be said about us
  • Important to learn how to filter truths and untruths
  • Must be aware and careful since there is a permanent record of what we’re doing online
  • Fewer chances in a flat world
The Unflat World
  • While the world is shrinking, there are certain areas that are not
  • Too Sick
    • Many in Africa live in terrible conditions e.g. Malaria, HIV
    • Tragic death sentence of disease
    • Huge pool of potential that is going to waste
  • Too Disempowered
    • Some people don’t have the tools to benefit from the flat world
    • Money is earmarked to help
    • Need to get local governance to help
    • Help the poor by getting them the tools and institutions to help themselves
  • Too Frustrated
    • Many in the Arab world are frustrated with having no outlet for their potential and their rigid governments.
    • Arab world doesn’t want change, but wants power, which is hard to do
    • Humiliation is a stronger force than poverty
    • Extremist enjoy some passive support because they want to see US hit in the face
  • Too Many Toyotas
    • As million in India and China enter the middle class, growing demand for energy consuming things
    • We need to consume less, but have to understand that we lost our ability to lecture because of our past actions
    • We have to set an example and focus on green technologies that make the cost profile attractive
Dell Theory of Conflict Preservation
  • Dell sources and assembles its computers through a network of hundreds of companies and many countries
  • Interconnectedness is a greater restraint on geopolitical adventurism
  • Two countries that are both part of major global supply chains are less likely to fight with each other
  • They are focused on increasing their standard of living not territory
  • Customers have multiple options, countries must maintain political stability for self-preservation
  • The forces discussed in this book can be used for creative and destructive purposes like 9/11
  • Must cultivate positive imaginations
  • America is special because it exports hope and optimism and the dream that there can be a better tomorrow
  • Make the world a better place by changing people’s context
  • Create an environment where people can be validated and fulfill their potential
  • “Son, when a Muslim grows up in India and he sees a man living in a big mansion high on the hill, he says, ‘Father, one day, I will be that man’ And when a Muslim grows up in Pakistan and sees a man living in a big mansion high on the hill, he says, ‘Father, one day I will kill that man.'”
  • When there is a pathway to get rich, people will strive for it. People want to be part of the world, not destroy it
  • The world has become more dangerous but we can’t let fear paralyze us. Must become good global citizens.
  • Americans must learn to work harder and become smarter to get our share
  • Creative imagination is the most important attribute in the future
  • “the world needs you to be forever the generation of 11/9 [Fall of Berlin Wall] -the generation of strategic optimists, the generation with more dreams than memories, the generation that wakes up each morning and not only imagines that things can be better but also acts on that imagination every day.”

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