The World Is Flat by guga

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									THE WORLD IS FLAT
A Brief History of the Twenty-First Century
THOMAS L. FRIEDMAN

THOMAS FRIEDMAN is the foreign affairs columnist for The New York Times. He has served as the Beirut Bureau Chief and the Israel Bureau Chief for that organization. Mr. Friedman has been awarded three Pulitzer Prizes for his articles. He is also the author of three other books: From Beirut to Jerusalem, The Lexus and the Olive Tree and Longitudes and Latitudes. Mr. Friedman is a graduate of Brandeis University and Oxford University. The Web site for this book is at www.thomaslfriedman.com.

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MAIN IDEA The availability of cheap, ubiquitous telecommunications in the early 21st century has had the effect of creating a “flat” world. In other words, no matter where a company is physically located, it can now compete for customers who may similarly located anywhere in the world. This is generating some profound changes as these technological advances cut across many national and social boundaries which were previously well established and pervasive. The driving force and engine room of this flattening process is generally labeled as “globalization”. Regardless of whether companies and countries resist change, globalization is gathering momentum. The resulting flattening of the world is making possible all kinds of complex supply chains which are based on value-added services. Products in all industries are becoming increasingly commoditized to take advantage of labor and services provided by emerging economies like China and India. The great challenge for the business world of the 21st century will be to have sufficient leadership, imagination and flexibility to adapt quickly enough to stay up with the speed of changes as they occur. These changes are inevitable and unavoidable, so it’s worth taking the time to develop a framework for how to think about this task and manage it to generate maximum benefit. “I am convinced that the flattening of the world, if it continues, will be seen in time as one of those fundamental shifts or inflection points, like Gutenberg’s invention of the printing press, the rise of the nation-state, or the Industrial Revolution. If the prospect of this flattening – and all of the pressures, dislocations, and opportunities accompanying it – makes you uneasy about the future, you are neither wrong nor alone.” – Thomas Friedman 1. Globalization 3.0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 2 Many people have become so preoccupied with the war on terror and America’s response to the terrorist attacks of 9/11 they have not noticed Globalization has already entered a new phase. To use the numbering system of the software industry, Globalization 3.0 has already arrived. It will be marked above all by the empowerment of individuals rather than organizations. 2. The ten forces which have flattened the world . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pages 2 - 4 Ten Contributing Forces 1 2 3 4 5 6 7 8 9 10 The fall of the Berlin Wall in 1989 When Netscape went public in 1995 Work flow software Open sourcing or Uploading Outsourcing Offshoring Supply chain collaboration tools Insourcing In-forming Amplifying technologies or Steroids Globalization 3.0

3. The triple convergence already underway. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 5 The impact of Globalization 3.0 has also been heightened by the fact there is, at the present time, a triple convergence taking place of three separate forces, each of which has the potential to bring about significant changes in society. Having this triple convergence come together at the same time as the ten flattening forces are moving through the economy means one thing is certain: dramatic changes lie ahead during the rest of the 21st century. 4. A framework for moving forward from here . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pages 5 - 8 The flattening world and the triple convergence will profoundly impact on the United States of America, developing countries, companies and also on geopolitics. The emergence of a level playing field which everyone in the globe can harness for their own purposes is almost certain to be a watershed event in the history of the world. Globalization 3.0 is about to free the human imagination to move to new heights and to achieve great things never before feasible. The key, however, is to spend more time focusing on what to do next and less time finding someone to blame when the changes generated are uncomfortable and disconcerting.

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Globalization 3.0

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The ten forces which have flattened the world

Many people have become so preoccupied with the war on terror and America’s response to the terrorist attacks of 9/11 they have not noticed Globalization has already entered a new phase. To use the numbering system of the software industry, Globalization 3.0 has already arrived. It will be marked above all by the empowerment of individuals rather than organizations. There have actually been three great eras of globalization: Globalization 1.0 1492 - 1800

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The fall of the Berlin Wall in 1989

Globalization 3.0

When the Berlin Wall was breached on November 9, 1989, this was a highly symbolic act. It signaled that free-market economies were the way to get ahead rather than trusting stateor centrally-controlled mechanisms. As a result of the collapse in support for Communism, every country in the world realized they had to be a democracy if they aspired to get ahead. The fall of the Berlin Wall also had other far-reaching flattening effects. Deregulation became very much in favor and bureaucratic control became something to avoid at all costs. Many more countries opened up their economies to the realities of the global marketplace. At the same time, industry after industry scrambled to develop and adopt common standards which would allow everyone to compete on a level playing field. The European Union was formed and a common currency was adopted to reduce the drag of doing business from one country to another. All of these advances came as a result of the euphoria which accompanied the fall of the Berlin Wall. In short, the fall of the Berlin Wall signaled to the world capitalism was the superior economic system, and it was time for everyone to accept that and move forward. 2 When Netscape went public in 1995 Globalization 3.0

This was the era of countries and muscle which saw the world shrink from size large to size medium. The dynamic driving force here was muscle power and the bigger the country you came from, the greater the chances you would do well in international trade. Many logistical barriers were broken down as countries started trading with each other actively and aggressively. Globalization 2.0 1800 - 2000

This phase of globalization was driven by multinational companies harnessing falling transportation costs. These companies used the steam engine, railroads, ships and then telecommunications to move goods and information from continent to continent, creating global markets. Globalization 2.0 shrunk the world from medium to small size. Succeeding in this era was a matter of being smart enough to take advantage of the opportunities which arose through collaboration. Globalization 3.0 2000 -

When the Internet and e-commerce became available in the late-1990s, the world shrunk from a size small to a size tiny. Suddenly, it became possible and feasible for individuals in one country to collaborate with people residing in other countries to create added value. A flat-world platform has emerged which almost anyone and everyone can access. This flat-world platform consists of:
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Even though the Internet had been opened up to public use in 1991, the concept of a World Wide Web – a system for creating, organizing and linking digital material – didn’t really start to gain any commercial traction until Netscape went public in 1995. Once that happened, everyone suddenly became aware there were easy-to-install and easy-to-use tools available called browsers by which non-computer-geeks could access the Internet. Netscape became the first killer application of the Internet era. The web browser was one of the most important inventions in modern history because:
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A personal computer – allowing people to create and edit their own digital materials. An internet connection often through a fiber-optic cable – which allows every individual to access the digital content created anywhere in the entire world for next to nothing. Work flow software – which enables individuals from all over the world to collaborate on the same digital material, regardless of where they are physically.
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Web browsers makes the Internet truly interoperable – you can connect no matter what type of computer you have, what type of operating system you use, where you were located, etc. The web browser is universally inclusive. Web browsers could be downloaded for free – meaning it spread like a virus and nothing could stop it. The browser is an enabling technology – the techos loved playing with the Web browser software while businesspeople got enthused about how much money they could make out of using it. This was the start of the digitization revolution. Web browsers sparked investment in the Internet industry – which subsequently drove innovation faster and faster. Eventually, countless large companies would make substantial capital investments to get a piece of this action. Web browsers, when combined with e-mail, made it possible for individuals to interact with other individuals anywhere in the world – a concept at the very heart of Globalization 3.0.

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Due to the fact Globalization 3.0 is driven by individuals, a much more diverse group of people are going to come to the fore and prosper. Previous eras of globalization were very much shaped and influenced by the powerful and affluent Western countries but Globalization 3.0 is going to be a much more level playing field. Individuals from every corner of the world are going to drive Globalization 3.0 forward. Globalization 3.0 will be more plug-and-play and egalitarian than anything which went before. “Globalization 3.0 makes it possible for so many more people to plug in and play, and you are going to see every color of the human rainbow take part.” – Thomas Friedman

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“The Netscape IPO was a clarion call to the world to wake up to the Internet. Until then, it had been the province of the early adopters and geeks.” – John Doerr, venture capitalist

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Work flow software

Globalization 3.0

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Outsourcing

Globalization 3.0

Work flow software enables the people in one office to collaborate seamlessly with the people in another office on the creation of any digital material you may care to name. It is based on an infrastructure of standardized protocols. These protocols allow a computer to talk to other computers via the Internet without any human involvement or prior agreement between the two companies. In simple terms, work flow software keeps track whenever people send documents, pictures or data from one machine to another. To give an example, if you need to go to the dentist, you can instruct your computer to make an appointment for you. Your computer will use work flow software to talk to the dentist’s computer and find a time that fits your schedule. It will then give you reminders of the appointment the week before and the day before so you remember to go. Using work flow software, companies can tap into libraries of business applications which can be purchased and used as needed rather than requiring the prior purchase of a software package. You have access to Web-based business applications which someone else upgrades and maintains. You pay only for what you actually need and use, creating customized combinations of bits of software which do all sorts of things. Work flow software will basically allow anyone anywhere to go into business for themselves without any capital outlay. Work flow software gives everyone the tools only large companies could previously afford. 4 Open sourcing or Uploading Globalization 3.0

Outsourcing – sending jobs from one country to another where wages are lower – has always been controversial and has received loads of bad publicity. Despite that, outsourcing has just exploded. The biggest beneficiary of this has been India where there is a large pool of educated people who speak English. In addition, India has been fortunate to be in the right place at the right time. When the dot-com boom was in full swing, many fiber optic cables were laid to connect India to the world. With the dot-com bust, many of the cable companies went bust, meaning the cost of using the cable which has been laid has been reduced to virtually zero. As a result, it is now commonplace for customer inquiries for American companies to be handled by knowledge workers physically located in India. In a similar vein, many x-rays taken in American hospitals are now analyzed by Indian doctors who prepare reports which are then e-mailed back to their American counterparts. Or for that matter, it isn’t unusual for a doctor at a U.S. hospital to dictate patient notes into a Dictaphone, download that at the end of the day and arrive at the office next morning with those notes already transcribed and added to the patient’s file and bill. All of these services are being performed at about one-fifth the cost of doing it in the United States. That’s a big enough difference to attract the attention of any company which is operating in a competitive environment. And once one company in an industry goes down this road, the pressure for everyone else to do the same become quite intense. 6 Offshoring Globalization 3.0

Open sourcing is community developed software – where a large company is not in control but the development and design of new software is performed by a community of users who share their efforts for free. To facilitate this happening, these people upload their work to a Web site where everyone can access it. Uploading comes in three common forms: 1. Community-developed software – where anyone who wants to do something to improve a piece of software can do so. Loads of techos love trying to prove they can build something better than Microsoft or IBM can and are so passionate they are willing to do it for free. The Apache software for Web servers and the Linux operating system software have been developed this way and still continue to evolve through the efforts of unpaid volunteers. 2. Community-uploaded content – like Wikipedia, an online and free encyclopedia. Instead of hiring writers, Wikipedia combines the journalistic efforts of volunteer contributors to come up with a searchable encyclopedia. Everyone can then access to content, make suggestions for improvement and contribute to the effort. 3. Community-shared news and commentary – as exemplified by the current publicity and appetite surrounding blogging and podcasting. A blog is like having your own personal virtual soapbox where you can write about whatever you choose without it being censured by anyone else. This authenticity is highly alluring as people assume they are getting the real scoop and not just what the corporate lawyers approve. Podcasting is the multimedia version of blogging where people produce their own audio and video files to share with others.

Outsourcing also means to take some specific but limited business function normally done in-house and pay someone else to perform that same function for you more cost effectively. Offshoring, by contrast, is when a company takes one of its factories and moves the entire operation to another country where the product can be produced the same way but for lower costs. At the present time, this often means moving production facilities to China where there are lower taxes, subsidized energy and lower health-care costs. China looms on the horizon as an economic juggernaut. The company has got a foot inside a large number of industries by offering a cheap business infrastructure which generates quite compelling economic advantages. Ultimately, however, China’s people are very entrepreneurial. They aspire to move from being contract manufacturers to doing more of the higher added-value tasks like technology development and new technology creation. The country is moving towards its openly stated goal of being world-class in a broad range of industries. Just how soon it achieves this goal remains to be seen but China has made huge strides to this end since it joined the World Trade Organization at the end of 2001. As for outsourcing, once one company in an industry starts aggressively offshoring, competitors are compelled to follow suit or risk being marginalized. In a similar vein, the competitiveness of China in seeking these collaborations must be matched by Vietnam, Thailand, Malaysia and other developing nations if they aspire to build large economies themselves. The combination of American businesses which are close to their markets collaborating with offshore manufacturing operations which are well attuned to their own markets is a highly effective arrangement which has only really become workable in the last few years.

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Supply chain collaboration tools

Globalization 3.0

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In-forming

Globalization 3.0

When a company collaborates closely with everyone in its supply chain on the basis of common computer-to-computer communication standards, impressive efficiencies can be realized which ultimately add value for everyone involved, including customers. A great example of this is Wal-Mart, the biggest retail company in the world. Wal-Mart doesn’t make anything itself. Instead, when a customer purchases an item, the cashier scans it at the checkout. That generates a signal which flows all the way back to Wal-Mart’s suppliers they need to make a replacement item to ship to Wal-Mart to keep the store stocked. Wal-Mart’s supply chain then handles all the logistics of getting that item shipped, distributed and back on the shelf in time to be available when the next customer wants to buy one. Global supply chains are very powerful tools for business. In practical terms, whoever has the most efficient supply chain will win at retail level simply because they will have the best products at the lowest possible prices from every corner of the world. Wal-Mart achieves this by replacing inventory with information. To compete, other retailers are forced to do something comparable. “In this world, a smart and fast global supply chain is becoming one of the most important ways for a company to distinguish itself from its competitors.” – Thomas Friedman 8 Insourcing Globalization 3.0

In-forming is the ability a person has to form their own personalized supply chain of information, knowledge and entertainment. At an immediate level, this may involve carrying a cell phone or personal digital assistant with Internet access allowing you to search the Google Web site for anything you need to know. In-forming is all about becoming your own researcher, editor and selector of information and knowledge. It means to set up your own personalized supply chain of information. Companies like Google, Yahoo!, Amazon.com and even TiVo (the makers of personal video recorders) are building their entire business models around making digital information searchable and deliverable on demand. They are finding rather than pushing products and services on customers, a better approach is to let customers request what they actually want and then respond with lightning quickness to what they request. In short, these companies are positioning themselves to become part of everyone’s personal information supply chain. “In-forming is empowering the formation of global communities, across all international and cultural boundaries, which is another critically important flattening function. People can now search out fellow collaborators on any subject, project or theme – particularly through portals like Yahoo! Groups. Yahoo! has about 300 million users and 4 million active groups. Those groups have 13 million unique individuals accessing them each month from all over the world.” – Thomas Friedman 10 Amplifying technologies or Steroids Globalization 3.0

Insourcing is where one company uses the specialized expertise of another company without the customer even being aware of what’s happening. Insourcing occurs when a company with specialist expertise looks deep inside the operations of another business to find ways to introduce greater efficiencies and capabilities. A great example is UPS (United Parcel Service) which has set up a center to repair Toshiba laptop computers under warranty. Customers drop their laptops off at a UPS center thinking UPS will ship them back to Toshiba and then back when they are repaired, but UPS actually makes the repairs itself, ships it back to the customer the next day and then bills Toshiba for the work done. The customer isn’t even aware who did what but they get their machine back the next day ready to go. UPS, FedEx and other package delivery firms help small companies grow by providing them with world-class logistics. They go right inside companies and analyze their manufacturing, packaging and delivery processes and then redesign them to become more efficient. If necessary, they will even finance some parts of the supply chain like collecting payments from customers for COD deliveries. Insourcing allows small companies to act big. It allows small businesses to supply customers anywhere in the world without investing in an expensive infrastructure. Insourcing also introduces more efficiencies because companies are not having the hassle of dealing with customs or shipping companies themselves, or even trying to find ways to ship items with less damage caused while in transit. Instead of worrying about distribution logistics, they leave this up to their partners. Companies can then apply more of their capital resources to funding more innovation and doing what they are good at.

New technologies are coming along all the time which have the effect of amplifying all of the other flatteners. These are metaphorically called “steroids” because they turbo charge the impact of the other flatteners in just the same way as bodybuilders use steroids to enhance the effect of exercise. In simple terms these amplifiers are taking all the forms of collaboration – outsourcing, offshoring, uploading, supply-chaining, insourcing and in-forming – and make it feasible to do each and every one of them in a digital, mobile, virtual and personalized way. Some of the key steroids are:
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Personal and handheld computers which keep on increasing their computational capabilities, storage capacities and connectivity. Instant messaging and file sharing which allows computer users to easily pool and share information. Voice over Internet protocol (VoIP) which allows people to make phone calls via the Internet. VoIP will ultimately make every business and personal phone call to anywhere in the world as cheap as a local call – that is, almost free. Videoconferencing which is now reaching critical mass as it becomes better and easier to use. Advances in computer graphics originally developed for the computer game industry but which will result in better and sharper images being available on all computers. The new generation of wireless technologies and devices which is taking mobility to new heights. More and more equipment is now being linked in real time to engineers who can diagnose faults before any disruptions actually arise.

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The triple convergence already underway

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A framework for moving forward from here

The impact of Globalization 3.0 has also been heightened by the fact there is, at the present time, a triple convergence taking place of three separate forces, each of which has the potential to bring about significant changes in society. Having this triple convergence come together at the same time as the ten flattening forces are moving through the economy means one thing is certain: dramatic changes lie ahead during the rest of the 21st century.

The Triple Convergence 1 2 3 Web-enabled global playing field New ways to collaborate The opening of populous markets Globalization 3.0

The flattening world and the triple convergence will profoundly impact on the United States of America, developing countries, companies and also on geopolitics. The emergence of a level playing field which everyone in the globe can harness for their own purposes is almost certain to be a watershed event in the history of the world. Globalization 3.0 is about to free the human imagination to move to new heights and to achieve great things never before feasible. The key, however, is to spend more time focusing on what to do next and less time finding someone to blame when the changes generated are uncomfortable and disconcerting. Globalization 3.0 will have a significant impact on the USA. The key areas of impact will be: Impact on the USA 1 2 Globalization 3.0 3 4 5 Champion of free trade The job market will be altered Everyone will need more education Proactive action will be required Political leadership will be needed

The three forces which have come together to form this triple convergence are: 1. A new business platform has been created – which is global and Web-enabled. This platform can be accessed by millions of businesses or individuals from anywhere in the world to start, grow and benefit from their own ideas. For the first time in history, people don’t need huge resources to go into business for themselves. This is making possible entirely new forms of business which have never before been attempted. 2. New ways for people and firms to collaborate horizontally have been created – so instead of waiting for a boss to set specific tasks, talented people can be self-directed about the projects they work on. This removal of the need for a hierarchy in each organization will have far-reaching benefits. Individuals will even collaborate with firms to find new and interesting ways to add more value to their business transactions. This will boost the effectiveness of almost every commercial activity. 3. About three billion people have been added to the commercial markets now in play – as China, India, Russia, Eastern Europe, Latin America and Central Asia have opened their borders and joined the free-market game. “It is this triple convergence – of new players, on a new playing field, developing new processes and habits for horizontal collaboration – that I believe is the most important force shaping global economics and politics in the early twenty-first century. Giving so many people access to all these tools of collaboration, along with the ability through search engines and the Web to access billions of pages of raw information, ensures that the next generation of innovations will come from all over Planet Flat. The scale of the global community that is soon going to be able to participate in all sorts of discovery and innovation is something the world has simply never seen before.” – Thomas Friedman “The last twenty five years in technology have just been the warm up act. Now we are going to the main event, and by that I mean an era in which technology will literally transform every aspect of business, every aspect of life and every aspect of society.” – Carly Fiorina, former CEO, Hewlett-Packard

Globalization 3.0

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Champion of free trade

The USA has always championed the cause of free-trade. With the arrival of the flat world and the impact of Globalization 3.0, there will be some who will suggest America should close its borders and concentrate on growing its domestic economy first and foremost. If the country does that, it has more to lose than it has to gain. Globalization 3.0 is going to generate increased demand for goods and services, incredible new innovations and increased prosperity across the globe, and if the United States has any hope of staying at the forefront of these developments, it needs to continue to have free trade borders and faith in its people’s abilities to create added value. Most people assume economic competition between nations is a zero-sum game – the only way to get ahead is when another nation falls behind. That’s not true. Globalization is expanding the size of the overall pie. For example, job losses are highly publicized in the United States. People worry when firms announce they are offshoring many thousands of low-end service and manufacturing jobs. Yet America’s overall unemployment rate is still around 5-percent. What is also happening is that many new jobs are being created by small companies which are forming to take advantage of the opportunities being created by Globalization 3.0. These new jobs are in such small quantities they don’t create any headlines and yet together they are sufficient to soak up much of the labor created by these vast layoffs and downsizings. Not only is the overall size of the global economic pie growing as more people have more disposable income to spend, but the pie is also becoming more complex as more new jobs and more new areas of specialization are created. Those new opportunities are important to the USA.

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Globalization 3.0

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The job market will be altered

Globalization 3.0

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Proactive action will be required

There is no question if you become unemployed, the unemployment rate is not the national average of 5.2-percent. From your perspective, it is 100-percent. However, there are some jobs which it turns out cannot be outsourced or sent off-shore. These come in three broad categories: 1. People who are special or do specialized work – meaning a Madonna or a Michael Jordan can never be outsourced or automated. 2. People who are localized and anchored – they do things which add value on the strength of their local knowledge or personalized interaction with clients. 3. People who are highly adaptable – and who are willing to make investments in reskilling themselves to move quickly from a declining industry to one on the rise. The jobs which will be generated by Globalization 3.0 will probably be based on these skills and competencies: • Collaborators who can work effectively with others. • Synthesizers who bring disparate things together. • Communicators who can simplify complex matters. • Leveragers who can combine human ideas with computers. • Adapters who will constantly learn and grow. • Engineers who build environmentally sustainable systems. • Personalizers who take plain vanilla jobs and add touches. • Localizers who take global technologies and make them work. The United States is very well positioned to generate people who have these skills and competencies because the country has: • World-class research laboratories and universities. • Well established capital markets. • A well structured legal system with intellectual property laws. • A large and vibrant domestic market to sell to. • A history of political stability based on the Constitution. • A tradition as a melting pot for different cultures. Globalization 3.0 3 Everyone will need more education

“America’s secret sauce is a mix of institutions, laws and cultural norms that produce a level of trust, innovation and collaboration that has enabled us to constantly renew our economy and raise our standard of living. There is nothing about the flat world – nothing – that Americans cannot handle, as long as we roll up our sleeves, educate our young people the right way for these times, and tend to and enrich the secrets of our sauce. So are we doing that? The answer is no.” – Thomas Friedman Although the United States has so many strengths which should be converted into competitive advantages under Globalization 3.0, it just is not yet happening. The country is effectively slipping into a “quiet crisis” which isn’t gaining much attention. While lots of enterprising people in India, China and Eastern Europe are hard at work figuring out how best to take advantage of Globalization 3.0, very few people in the United States are following suit. Instead of investing in renewable energy, science and education, everyone seems to be off shopping. The unfolding crisis is exemplified by these facts:
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The country is not generating enough scientists and engineers to replace those who were motivated to go into science by the threat of Sputnik in 1957 or the inspiration of John F. Kennedy. Many more are needed. American youth are becoming more interested in being entertained than they are in doing the hard yards to earn university degrees. Foreigners are more ambitious – they are prepared to work and don’t expect six weeks of holidays each year and all kinds of other entitlements. So much power has been given to local school boards in the United States there is now a patchwork education system in place instead of a national pipeline for future talent. U.S. education is under funded. Every year, education budgets are declining. Countries like China, in stark contrast, are pouring many trillions into increasing educational spending as an investment in the future. That’s smart. U.S. investment in broadband infrastructure lags significantly behind that of other countries. Many countries now have more broadband subscribers than the United States. The more connected a population is, the greater the amount of time and energy there is available to innovate.

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To equip people to succeed in the economic conditions created by Globalization 3.0, US educators will need to change the things they teach. In particular, there are four general themes which need to be emphasized and brought to the fore: 1. Everyone needs to learn how to learn – because in a flattened world, people will constantly need to be learning new ways to do both old and new tasks. What people know today will be out-of-date sooner than they think. 2. Passion and curiosity need to be encouraged – simply because in a flat world, everyone has more tools available with which they can follow their passions. Nobody works harder at learning than someone who is passionate about a subject or intensely curious. That needs to be encouraged. 3. Everyone needs to enhance their people skills – because in a connected world, you need to be good at managing personal relationships if you are to have any real chance at collaborating productively. 4. People need to build their own right-brain skills – so they can tackle novel challenges, forge relationships and become better at synthesizing the bigger picture rather than merely attempting to analyze a single component. American schools and universities need to figure out how to teach people these things so they can be well equipped for the demands of Globalization 3.0.

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The bottom line is the United States is currently sitting on its hands when it really should be a case of all hands to the pump. “For a country as wealthy as we are, it is amazing how little we are doing to enhance our natural competitiveness. 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 are 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.” – Dinakar Singh, hedge fund manager “The U.S. today is in a truly global environment, and those competitor countries are not only wide awake, they are running a marathon while we are running sprints. If left unchecked, this could challenge our preeminence and capacity to innovate.” – Shirley Ann Jackson, Science Advancement Association

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Globalization 3.0

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Political leadership will be needed

It’s time for Americans to stand up and respond to the challenges posed by Globalization 3.0. The challenges the flattened world presents to the United States are profound, but so too are the opportunities for moving forward into the future with confidence. In short, it’s time for America to focus on enriching its own secret sauce which will make all the difference. For that to happen:
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In addition to these key areas of impact for the United States, Globalization 3.0 will also impact in other areas as well. Three other areas of interest are: Impact on other areas 6 Globalization 3.0 7 8 Developing countries Companies Geopolitics

America’s political leaders at the national, state and local levels need to issue a clarion call to action. People need to be told what they must do to succeed in the future. The ingrained concept of lifetime employment needs to be replaced by the ideal of lifetime employability. Workers need to be given the tools they can use themselves to acquire the new skills needed under the demands of Globalization 3.0. This requires that benefits and education be made as flexible as possible, and much more portable than they are at the present time. Government run welfare programs need to be carefully and thoughtfully rejigged. What they are attempting to do – provide a safety net – is good and well worth keeping, even increasing. When the welfare system discourages people from working, that’s bad. New ideas like wage insurance need to be put in place so workers can confidently look forward rather than attempting to cling to the past. Global corporations will need to sort out what “being a responsible citizen of the world” means to them. They will have to decide whether they are prepared to employ people who work for subsistence level wages or use manufacturing processes which are environmentally damaging. They will have to figure out ways they can coordinate the millions of decisions being made each day so the corporation acts consistently and ethically at all times. That will require quite an effort, but consumer activists will be working equally hard to publicize any missteps, The parenting skills of people will need to be upgraded and a form of “tough love” encouraged. In short, parents will need to tell their kids to turn off the television or the game consoles and get to work on getting the right kind of education.

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Globalization 3.0

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Developing countries

Developing countries face some stiff challenges as they attempt to create the right environment for their people and their companies to prosper in a flat world. This will take a high degree of brutally honest introspection – something most developing countries aren’t very good at. To move forwards in the marketplace created by Globalization 3.0, developing countries first need to do the same things the developed countries have already done:
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Focus on creating the right infrastructure so as many people as possible can access the flat world platform. This means ensuring there is affordable broadband access, modern roads so goods can be transported, port facilities, etc. Provide the right educational opportunities so people, especially the young, can learn how to collaborate and innovate using the flat world platform. Introduce a sound country governance system complete with good fiscal policy and a stable system of law so people can manage their day-to-day dealings in the most productive way possible.

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“The flat world gives more people in more places the ability to pull together low-cost labor with high-power technology. We have never seen that combination before – and it alone is already a challenge to developed countries. But the Indias and Chinas are increasingly adding one more thing to low-cost labor and high-power technology: unfettered imagination – that is, high innovative and creative capacities. They will focus first on solving their own problems with cheap labor, high technology and high creativity – re-imagining their own futures. Then they will focus on ours. We must have people, lots of people, who can do the same. This is not a test.” – Thomas Friedman “I know that the world is not flat. Don’t worry. I know. I am certain, though, that the world has been shrinking and flattening for some time now, and that process has quickened dramatically in recent years. Half of the world today is directly or indirectly participating in the flattening process or feeling its effects. I think this flattening is the single most important trend in the world today.” – Thomas Friedman

Historically, top-down reforms have not worked out all that well for developing countries as there have been a long list of dictators who have used these development projects as opportunities to line their own pockets. Therefore, it does appear like change in these societies will need to bubble up from the bottom instead. When there is a well established level of demand for better education, upgraded infrastructure and regulatory institutions, commercial entities may be able to fill in some of the gaps left by the prevailing political leadership in these countries. In essence, developing countries need to remove as many friction points as possible. These friction points have impeded their ability to harness globalization in the past and will continue to do so in the future unless they are addressed. When the social will of the majority of the people is combined with some dynamic leadership, rapid gains can be realized. This really is the only way developing countries will be able to position themselves to gain the full advantages of Globalization 3.0. “Globalization 3.0, which brought to us the flattening world, is not just Globalization 2.0 intensified. It is a whole different model. It is not just about the ability of developing countries to tap into more markets or access more cheap labor. It is a difference in degree so great – the degree of low-cost interconnectivity, the degree of individual empowerment, the degree of global networks for collaboration – that it’s a difference in kind. It changes everything about who can compete and how they compete.” – Thomas Friedman

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Globalization 3.0

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Companies

Globalization 3.0

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Geopolitics

For companies which aspire to prosper under the marketplace conditions created by Globalization 3.0, there are seven rules to operate by: 1. When you feel flattened, don’t build walls but reach for the shovel instead – and dig deep inside yourself. Find your company’s real core competency, figure out what that will enable you to do in a digital world and use that to propel your business forward in a flat world. 2. Learn how to act really big – by taking advantage of all the new tools for collaboration. Get up to speed on things like supply-chaining, outsourcing, insourcing and all the steroids. Use all these tools to maximum effect. Become an international company on the strength of those tools. 3. Learn how to act really small – by providing your customers with the tools they need to act big themselves. Adapt your technologies and business processes so your customers feel like your products and services are tailored to their individual needs and preferences. Give customers a menu so they can create the experience they are willing to pay for. 4. Always keep in mind in a flat world, the best companies are the best collaborators – so master complex transactions by partnering with other firms for mutual benefit. Successive layers of value creation in a flat world will quickly become complex and require specialist know-how in technology, in marketing, in manufacturing and perhaps even in biomedicine. You won’t have all those skills and competencies in-house, so become great at collaborating with other firms. In a connected world, the best network always wins. 5. Stay healthy by regularly identifying what you’re best at – and outsourcing everything else. Long-term success in business is simple – build on your strengths as an organization and then harness world-class economies of scale everywhere else. This will secure your place in the global knowledge supply chain. 6. Outsource to win – not to shrink your workforce. This allows you to innovate faster and more cheaply even as you grow larger, gain market share and hire more people with new and different specialties. Only an organization which plans on winding up should be trying to save money by firing people. Plan on staying on the offense and leave acting defensively to everyone else. 7. Be an active social entrepreneur – at the same time as your company is a commercial success. In other words, live by the creed it’s always better to teach someone how to fish than it is to provide them with a fish meal for just one day. Have a burning desire to make a positive social impact on the world. Find practical ways to help people in developing countries get ahead. This kind of spirit will color the rest of your business operations for the better. “If you want to flourish in this flattening world, you better understand that whatever can be done will be done – and much faster than you think. The only question is whether it will be done by you or to you. Will you drive the innovation or will one of your competitors use it to drive over you?” – Thomas Friedman

Globalization 3.0 has the potential to profoundly influence international relations. This conclusion is based on some very obvious facts about the flattening forces which are presently being felt in many parts of the world:
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The availability of a low cost flat-world platform for communication is making it even easier for ideas to bubble up from the bottom in restrictive societies. For example, some have suggested a new cultural revolution may come about in China or other countries driven by network savvy podcasters working at the grass roots level rather than being orchestrated from the top. The balance of power between governments and their people is shifting and the long-term consequences are not yet apparent. When countries are an integral part of supply chains which span the world, there is less appetite for what could be termed “geopolitical adventurism”. Quite simply people who are embedded in marge supply chains on which they rely for their livelihoods are less likely to want to fight old-time wars. They have more to lose than they can possibly gain. Some commentators have feared globalization will mean every culture will start to resemble that of the United States. As Globalization 3.0 moves forward, however, what is actually happening is more and more local culture is moving to the Web, creating a far richer tapestry than would be the case if everyone adopted Americanisms. Far from being about a homogenization of cultures, the flattened world will see the globalization of a rich pallette of local cultures, art forms, styles, preferences and so forth. Different cultures will flourish in the flat world, not just one.

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At its very heart, Globalization 3.0 has provided an increasing proportion of the world with the tools they can use to set their imaginations free. The challenge is to encourage people to use these tools to collaborate productively rather than to try and destroy what has been created thus far. The United States has always stood as a shining example of a meritocracy where anyone with a dream can work to bring about its fulfillment. With the further advance of Globalization 3.0, America must continue to function as a “dream factory” and not a fortress. “This flattening process is happening at warp speed and directly or indirectly touching a lot more people on the planet at once. The faster and broader this transition to a new era, the greater the potential for disruption, as opposed to an orderly transfer of power from the old winners to the new winners. The experiences of high-tech companies in the last few decades that failed to navigate the rapid changes brought about in their marketplaces by these types of forces may be a warning to all the businesses, institutions, and nation-states that are now facing these inevitable, even predictable, changes but lack the leadership, flexibility, and imagination to adapt – not because they are not smart or aware, but because the speed of change is simply overwhelming them. And that is why the great challenge of our time will be to absorb these changes in ways that do not overwhelm people or leave them behind. None of this will be easy. But this is our task. It is inevitable and unavoidable. It is my ambition to offer a framework for how to think about this task and manage it to our maximum benefit.” – Thomas Friedman

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