Remarks by Thomas L. Friedman on the Flattening World
Union Station, Washington, DC
New York Times' columnist Thomas L. Friedman spoke at the Rising Asia, Flattening World policy forum hosted by the Progressive Policy Institute on May 19, 2005. Friedman was introduced by PPI President Will Marshall and followed by Senator Evan Bayh and a panel of experts. Below are Marshall's introduction and Friedman's remarks.
Will Marshall: As we are waiting for Senator Bayh to arrive, I want to thank you for coming. My name is Will Marshall. I am president of Progressive Policy Institute. Welcome to today's forum on Rising Asia, Flattening World: Is America Ready for Globalization 3.0? I know that everybody in time is transfixed by a really truly important topic, which is the nuclear option, but we thought we would give everybody a respite from that and set aside a couple of hours to talk about a comparatively unimportant topic of America's economic future -- and the future of our capitalism in the world.
But seriously, as all of you know, the Progressive Policy Institute has long been associated with the view that something fundamentally has changed in the world economy that challenges the world model of American capitalism that we have grown up with, and when the dot-com bubble burst back in 2000 or thereabouts, there was a quite gleeful reaction from some quarters -- skeptics of the idea that there is a new global information-driven economy. They said, well, this shows that the new economy as we thought is a mirage and that people like us who were saying that America had to change its policies to adapt to it were false prophets.
But while the global-phobes were dancing prematurely on the new economy's grave, globalization was shifting into high gear. As Tom Friedman says, we now we face globalization 3.0, a faster, more powerful version -- global competition on steroids, as he puts it -- thanks to the internet and the digitizing of everything. We have flattened the economic playing field in the world and suddenly other teams out there are sporting lots of Jose Cansecos, Mark McGwires, and Barry Bonds.
And in his new book, "The World is Flat: A Brief History of the 21st Century, " Tom brilliantly deconstructs -- as he has done before, but I think in even greater detail in this book -- the complex logic of globalization, and it's a real pleasure to welcome Tom here to our PPI forum and thank you for coming. I noticed that your book is number one on the New York Times Best Seller List, which I thought, you know, in this sort of heightened ethical, at least sensitive climate, and I think this is possibly a conflict of interest.
So I googled the Washington Post and found that Tom's book is also number one on the Washington Post Best Seller List, so you are in the clear. But in any case, all of you can do your part in keeping this book up there by buying copies, and Tom has graciously agreed to hang out around after this session ends, I hope around 11:00, to sign copies of his book.
I also want to welcome a very special guest who is coming up now, Senator Evan Bayh. Your timing is impeccable. I think as you all know, Senator Bayh is a great friend of PPI. He is the chairman of our parent organization, the mother unit, the DLC, and as a new Democrat, he has been a great champion in the United States Senate of fiscal discipline and an innovation-driven economy and expanding trade, but as somebody who represents a state with a heavy traditional manufacturing base, he has also been attuned to the shocks and dislocations that globalization brings, and he has been an advocate in the Senate for tougher enforcement of trade laws. But, Senator, thank you so much for being here today to help us parse out the implications for policy makers of the analysis that Tom is about to unfold for us.
We also want to drill down a phenomenon that I think is the biggest story of this century, which is obviously the rise of China and the opening of India. Ed Gresser at PPI, who we will hear from later, has talked about an emerging Asian Union, with China at the core, as the production platform and the peripheral nations in East Asia supplying the capital and the know-how. Already this economic glomeration is about the size of the EU but without the bureaucracy and all of the stultifying regulations, and growing a hell of a lot faster than the EU.
Almost as dramatic has been India's breakout from self-imposed isolation. Suddenly American workers find themselves competing with a 150 million well-educated, English-speaking Indians and that has triggered something of a panic. We heard it in last year's campaign -- all of the fears and angst about offshoring, and while I think there is a great deal of exaggeration there about job loss, it is true that about 30 percent of America's workers are exposed to global competition; an unprecedented slice of our economy suddenly at risk.
So there is an underlying reality there and Americans are asking themselves: are our jobs safe? Are any jobs safe? Can we compete with countries with endless reserves of cheap labor without driving our own wages and living standards down? There is a great irony here of course, which is that globalization is largely a product of the success of America's policy and leadership in the world over the last generation. After all, it was shaped by the collapse of socialism, by the open-trade policies of the '90s, but exponentially growing power of information technology and the spread of the high-speed internet.
So we are living in the world that we made and many of us seem to be having second thoughts. Protection sentiments are on the rise really in both parties, and we are talking about punitive tariffs on China and other measures reminiscent of the great scare of the '80s -- you know, of a rising Japanese economic superpower that eclipse the United States.
But, as those of you who know us know, we don't believe in economic unilateralism; it didn't work in a round world, it is not going to work in a flat world. The alternative is for America to become much more competitive. Our economic preeminence is not some kind of historical entitlement; we are going to have to work harder to sustain it. We think Americans can stay on top in this new globalization, but we have got to embrace change, we have got to be smart, flexible, adaptive, and we have to understand that this global economy is redefining nations and traditional understandings of their comparative advantage. We have got to identify what are the sources of our advantages and organize a new strategy for competing around them.
So is America ready for globalization 3.0, as Tom defines it? Well, you know, our companies are adapting, our workers are adapting, but government, as is often the case, is a lagging indicator of economic change. To be honest, I think this administration has been particularly clueless about this challenge. There is no national competitive strategy. Instead, we are pursuing a 1980's style borrow-and-spend policy when what we really need is a cut-and-invest policy.
If we were really interested in a competitive strategy rather than a one-note policy of endless rounds of tax cutting, what would we do? I know that Senator Bayh will speak to this later and so will Rob Atkinson, but let me just quickly touch on what we think are three broad rules or three broad policy directions here.
First, is to put innovation first. We have to ensure that a healthy share of the innovation in this new global economy happens in this country and that our workers have the high skills they need to claim the world's high value-added, high-wage jobs. Among other things, that means we can't relent in our demand that our school system reach much higher levels of performance and the we close the achievement gap between minority and middle-class white students.
The government has got to make strategic investments in science and technology, and knowledge-production in general, but how do we make these investments if we are broke? So obviously one of the prime imperatives here is to restore fiscal sanity and reverse the policies that have fostered over-consumption and under-savings, policies that as Lael Brainard, who will join us later, will explain have made us dangerously dependent on foreign creditors.
Second, we have to redefine our economic security. We have to replace the old industrial era safety net with new tools that workers need to manage economic risk and control their own security: portable pensions, healthcare, and scholarships for continuous learning because skill is the key to employability in this new economy.
And I think it is important to provide new opportunities for workers to become equity stakeholders in the global economy. Our goal ought to be to make every worker a capitalist. Tom has a nice name for this in his book, "Compassionate Flatism;" I call it a progressive market strategy, but the principle is very clear: that the more we ask America's workers to embrace dynamic competition with all of the risk and costs that it brings, the greater the responsibility of our government to lean against the inequalities and the disruptions that these economic changes inevitably bring.
Third, we have to defend the integrity of the world trading system, which means not only opening markets -- and you know the PPI has long been a champion of open trade policies -- but it also means enforcing the rules of global trade so that it really is not a zero-sum transaction, and we will speak to that later.
So without further ado, I want to introduce our special guests, Tom Friedman and Senator Bayh, who will speak and then we will stop and throw it open to some questions, and then I will want to bring in our expert panel who I will introduce later. But before I do that, let me also welcome Congressman Jim Moran, who happens to be my congressman. Jim, welcome.
Let me quickly introduce Tom Friedman and Senator Bayh. Tom -- no one has peered more deeply into globalization than Tom has. He has won the Pulitzer Prize three times for his work at the New York Times where he serves as foreign affairs columnist, which leads me to believe that you may been hanging out Jose Canseco and Barry Bonds.
He is the author of three previous best sellers including "The Lexus and the Olive Tree," in 1999, which was a prophetic book that had a huge impact on the Washington-policymaking community, but it was also, in my view, a very courageous book because it ran against the prevailing pessimism about globalization to try to highlight the empowering and liberating possibilities that global integration of markets bring. And his new book picks up that thread and brings us forward. It is a great read.
Tom's M.O., you know, is to tell stories that vividly capture and simply very complex realities. I live in policy land -- you know, that is the world of data and longitudinal studies, and quite frankly, there is a lot of intellectual snobbery about the shortcomings of anecdotal evidence -- but as a former journalist myself, I really think that books like Toms, which are carefully reported and show this intellectual curiosity and strong narrative gifts help create a better composite picture of this reality we are grappling with than your usual data-driven analysis.
Senator Evan Bayh, as I said before, is the chairman of the Democratic Leadership Council, and one of our inspiring leaders in the United States Senate. He was the former two-term governor of Indiana, and he is emerging as one of the senate's most thoughtful voices on national security. He sits on the Intelligence Committee and the Armed Service Committee.
And as you would expect from a new Democrat, he has been a really strong champion of fiscal sanity in Washington, pro-growth policies, and trade, but has also shown this keen interest in the competitive challenge, which as I said earlier, hits the traditional manufacturing communities such as you have in Indiana, particularly hard. So we are really happy to have Senator Bayh here to speak on this.
First, Tom, if you will take us through the flat-world thesis and, Senator Bayh, then we will hear from you and then we'll stop and throw it open for conversation.
Tom Friedman: Thanks so much. Will, thank you very much. Thank you all for coming out this morning. It is a treat to be here with Senator Bayh and Rob Atkinson, and Ed Gresser, and Will. Will is not only a friend but he has been a teacher of mine and someone I have long come to for both advice and inspiration.
Will, you did mention my book is number one on The New York Times Best-Seller List and I did have to fight my way to the top. I had Jane Fonda in front of me for two weeks -- and for two weeks my publisher insisted we were already number one. We did consider renaming the book, "Flat World, Flat Abs" in order to take her down, but fortunately, thanks to you all, we made it to number one. So thank you very much and it is a treat to be here this morning.
I am going to take 30 minutes or so just to try to go through the core logic of this book to stimulate our discussion and then I really look forward to hearing Senator Bayh and my friends from PPI. To put it in John Dean terms or Governor Dean terms, I come from the DLC wing of the Democratic Party.
So basically, to understand this book, you have to really understand the totally accidental nature of how it emerged. I became the foreign affairs columnist for The New York Times in January 1995, and between 1995 and September 11th, 2001, I oscillated between Lexus columns and olive tree columns, columns about technology, finance, and trade, and columns about traditional geopolitics and ethnic conflict in my old stomping grounds in the Middle East.
And I was really in that kind of oscillation mode, as they say, right up till September 11th. Then on September 12th, I dropped the Lexus globalization thread like a stone and went off and covered the olive tree wars. And spent the next three years really traveling almost exclusively in the Arab-Muslim world. I made one trip back to my old haunts in Silicon Valley to visit a company; some friends of mine were involved in starting up a company -- it's called Google. I did one column about Google and went back to Kabul basically.
And during those three years, I lost the thread of the globalization story. Over those three years, though, I started doing documentaries for the Discovery Channel and Discovery Times and we did one on the wall in the West Bank, we did one on roots of 9/11, and in January of 2004, about 16 months ago, we were sitting around thinking about what to do our next documentary on, and at that time, the issue of America's standing in the world -- America's low standing in the world was a hot issue and why they all hate us.
And I had this idea that to get at this issue, we should go to call centers all over the world and interview young people who spend their days imitating Americans on what they thought of America. And I thought it would make a very interesting kind of double mirror. And we were literally budgeting out that documentary with Discovery when John Kerry came out with his blast against Benedict Arnold CEOs who outsourced.
And suddenly the issue of outsourcing emerged as this huge issue in the campaign and on the cover of Business Week and Fortune and Forbes, and The Wall Street Journal, and The New York Times. So I said to Discovery, time out. Why don't we just go to Bangalore? Why don't we just go to the capital of the of the Silicon Valley of India, the capital of outsourcing, and let's do a documentary called, "The Other Side of Outsourcing," and let's look at this phenomenon from the ground up to really explain to Americans what it is all about.
And that is what we did. So on February 15th of 2004, I set off for Bangalore with my crew from the Discovery Channel. We did about 60 hours of interviews in the space of 10 or 11 days, and during the course of those interviews, I got progressively sicker and sicker, and it was not the Indian food; it was a growing sense with each interview that while I had been sleeping, while I had been off covering the 9/11 wars, something really big had happened in this globalization story and I had completely missed it.
It happened or the realization hit me somewhere between the interview with the Indian entrepreneur who wanted to do my taxes from Bangalore and the one who wanted to write my new software from Bangalore, and the one who wanted to read my X-rays from Bangalore, and the one who wanted to trace my lost luggage on Delta airlines from Bangalore -- that while I had been sleeping, something really big had happened and I couldn't explain it.
In fact, I wish I could show you the outtakes from some of the interviews; I would be sitting across with the table with someone like Jerry Raul Nascom, of the Indian High Tech Association, whose company is partly responsible for the fact that 40,000 American tax returns were done in India last year. And I would be literally saying to him after the cameras were off, Jerry, how did this happen? I missed something. Something happened; what did I miss? And it was really in an effort to answer that question that I started to set out in this book.
Now, the last interview we did, which really brought it to a head was with Non Don Nilankany, the CEO of Emphasis, which is really the Microsoft of India, and Non Don is an old friend. And we were sitting on the couch outside of his office really just preparing for the interview. And he said to me -- in the course of our conversation, he said, Tom, I have got tell you the global economic playing field is being leveled; the global economic playing field is being leveled and you Americans are not ready. Oh, I wrote that down in my little notebook: the global economic playing field is being leveled.
Well, after our interview I got back in my jeep with my Indian driver driving barefoot and we headed back to the hotel, and the whole way I kept rolling over in my head what Non Don had said: the global economic playing field is being leveled. And then it really hit me that what Non Don was saying was that the global economic playing field was being flattened. And then it hit me -- oh, my god; oh, my god; he is telling me the world is flat. He is telling me the world is flat and he is citing this as a great achievement in human development: that we have made the world flat.
Well, I went up to my room; I called my wife; I said, honey, I'm going on sabbatical immediately. I am going to write a book called, "The World is Flat." She thought I was stark raving mad. But I got home, I called the editor and publisher of The New York Times -- my editor and the publisher and basically explained to them that I have to go on leave immediately because my software is out of date; my software needs a whole new updating and I need to retool myself. If I don't go on leave immediately, I basically told them I am going to write something really stupid in The New York Times. It is a great way to get a leave, I have got to tell you.
And that is what I did and that is frankly what I have been doing, and now let me sort of quickly run through the thesis of this book. If I could ask you, if you have cell phones, beepers, pagers, pacemakers, if you could turn them off, I would greatly -- or put them on stun or whatever you want -- I would greatly appreciate it.
The first chapter of the book is called appropriately enough "While You Were Sleeping," and it begins by me noting that Christopher Columbus set sail in 1492 looking for a shorter route to India. That's where Columbus was going in 1492; he was going to India, which was the source of great riches in his day. The Muslim powers then had closed off the overland routes. He didn't want to go around the Horn of Africa, so Columbus sailed west. He had the Nina, the Pinta, the Santa Maria. He never did find India, but he called the people he bumped into Indians, and we call them that to this day. And he came home and told his wife, honey, I've accidentally discovered the world is round.
I actually set off for India 512 years later. I knew just which direction I was going. I sailed east. I had Lufthansa business class and a GPS satellite that popped up in my seat and told me where I was every mile of the way. And I came home and told my wife, honey, I've accidentally discovered the world is flat. And what the first part of the chapter really goes through are the encounters I had first in India that suggested to me this flattening process, but unlike Columbus, I kept going east. I continued on to Dalian, China, the capital of outsourcing for Japan. Yeah, Dalian, China, where today there are tens of thousands of Japanese-speaking Chinese running the back rooms of major Japanese multinationals and American multinationals formerly headquartered in Tokyo.
Let me repeat that very slowly in case you didn't hear what I said in light of the recent headlines out of China -- tens of thousands of Japanese-speaking Chinese are today running the back rooms of major Japanese multinationals. High schools and colleges in Dalian now require students to spend at least two years studying Japanese so they will be able to access these incredibly lucrative and powerful jobs.
And then I kept moving east, came to Colorado. I called JetBlue one day for a reservation. I was kind of doing research at the same time. I got a rather matronly-sounding woman on the phone as the reservationist. I asked her if they flew from Washington to Atlanta -- I was going to visit UPS. No, she said, they didn't; would I like to fly from Washington to Oakland? No, I didn't. But I did use the opportunity to ask, ma 'am, could I ask you your name? She said, sure; my name is Betty. Betty, I said, could I ask where you are right now? She said, honey, I'm in my slippers up in my bedroom looking out at the most beautiful scene of Salt Lake City, Utah because JetBlue has developed a completely home reservation system built around retirees and housewives in the Salt Lake City area. For those of you who don't know, JetBlue was founded by a devout Mormon, David Neeleman, who believes families will be held together better if spouses can work at home -- one of the parents -- and so he created an entire home reservation system for JetBlue based on housewives and retirees in Salt Lake City. So you call JetBlue, you may get Betty in her bedroom; you may get Bob in his basement; you may get Sue at the hot tub making your reservation on her wireless laptop, but that is who you are talking to.
And then I kept going east, came here to Washington; picked up the Washington Post one day, read about a new pilot project by McDonald's where now McDonald's, at certain restaurants, if you drive up to the drive-in window you are not talking to someone at that McDonald's when you order six Big Macs, six milkshakes and 18 fries for the kids. You are actually talking to a McDonald's call center in Colorado Springs, which is taking down your order and taking your picture and electronically zapping your order and your picture back to that McDonald's where a food preparer prepares your food. McDonald's discovered they save 30 seconds on each order and drive down their error rate to a significant degree.
So the world is being flattened all around us in ways that we haven't even begun to fully appreciate. And that sort of brings me to the kind of meta-argument of this book, and the meta-argument, as Will alluded to, is that there have been three great era of globalization. The first I would call globalization 1.0. That era lasted from 1492 till about 1800, 1829, which was the beginning of global arbitrage. That era shrunk the world from a size large to a size medium, and that era was built around countries globalizing. That is, you went global through your country in globalization 1.0, whether it was Spain discovering the New World, Britain colonizing India, Portugal, East Asia. The dynamic agent and most forceful agent of globalization in that era was the country.
Globalization 2.0 lasted from the early 1800s till the year 2000 -- yeah, it just ended. This era shrunk the world from size medium to size small, and the dynamic agent of globalization in this era was the company -- the multinational -- companies going global for markets and for labor. In globalization 2.0 you went global through your company. While you were sleeping -- while you were sleeping, we entered globalization 3.0, from 2000 to the present. It's shrinking the world from size small to size tiny and leveling the global economic playing field at the same time. Only, what's really new, unique and different about this era is that it's not built around countries globalizing, and it's not built exclusively around companies globalizing. What is new and really important about this era is that it's built around individuals and small groups globalizing. In globalization 3.0, individuals are both empowered and in many ways required to now locate themselves as individuals globally and to go global as individuals.
And I would also argue, pay attention to one more feature of globalization 3.0: it is not going to be built around a bunch of white, Western individuals who dominated 1.0 and 2.0. This era of globalization is going to be built around every color of the rainbow who will be able to plug and play.
So that's kind of the meta-argument of this book. Now, the second chapter of the book is really about how this happened, and it's called "The Ten Days that Flattened the World," and it's about the 10 forces, events, technologies and companies that came together to create this level playing field, and let me go through them quickly. The first date is 11/9/89. Not 9/11, 11/9. because in a wonderful cabalistic accident of dates, the Berlin Wall came down on 11/9. And the fall of the wall was a huge flattener -- I call these the 10 flatteners -- because it was critical for allowing us to conceive of, think about, and see the world as a single flat plane. You know, I daresay if we look back in the archives of PPI -- did PPI exist before '89, Will?
Mr. Marshall: '89.
Mr. Friedman: '89 -- wow, that's really interesting. But if we look back in the archives of the Senate, that Senator Bayh can speak about, we find very few people using the word "globalization." People spoke about our Eastern policy or our Western policy. They spoke about the North and the South, but no one spoke about globalization because it was very hard to see, because there was a wall in the way. The fall of the wall is what really allowed us to see and think and conceive of the world as a single flat plane.
Now, the other thing that happened, though, in 1989 -- and that's why I call this first flattener "when the walls came down and the Windows came up" -- was that the Windows operating system 3.0 shipped five months after the fall of the Berlin Wall. So not only did the Wall come down, but at the same time, we suddenly had a single universal graphical user interface to all look at the world through.
Actually, I just found -- because I was at MIT last week -- that a third thing also happened in 1989. Not only did the Wall go down, not only did the Windows go up, but the Web went around because I interviewed Tim Burners-Lee, the guy who really conceived of the World Wide Web, and he told me that it was in March 1989 that he first began his essay about the World Wide Web. So all three of those things: the Wall went down, the Web went around, and the Windows came up all in 1989 and that gave us the ability to see and think about the world for the first time as a single flat planet.
The second flattener is 8/9/95. I consider 8/9/95 one of the most important days in Western civilization. August 9th, 1995 is the day a small startup company in Mountain View, California, called Netscape went public, and Netscape going public was a hugely transformative event and flattener for three reasons. First of all, Netscape gave us the first commercial Internet browser, thanks to both its marketing genius and the ease of tools that Mark Andreesen built into the Netscape browser. We suddenly had a device to bring the Internet alive for the masses.
You know, before Netscape, the Internet was the province of scientists and basically academics, but it was the Netscape browser which allowed us to illustrate on screens all of the words, music, and data locked away in those websites that made the Internet this incredibly ubiquitous tool for grandma and grandpa, granddaughter, and grandson. So the first reason Netscape was a flattener was it made people-to-people connectivity through the Internet wider and more diverse than ever before in the history of the planet.
Second thing that Netscape gave us -- the reason it is an important flattener -- is it actually commercialized a set of open standards; transmission protocols that ensured that the Internet would not be any company's walled garden and that it would be built on open standards. You recall back then, you were on CompuServe, your wife was on AOL -- that was hard to connect between the two and Netscape helped ensure that those walls were blown down.
Third, and in many ways the most important thing Netscape did, was it triggered the dot-com boom and that triggered the dot-com bubble, and that triggered the wild, crazy, absurd, ridiculous, insane, absolutely ludicrous investment of nearly $1 trillion in fiber-optic cable in five years. And that ridiculous, absurd, insane investment of nearly a trillion dollars into fiber-optic cable in five years accidentally made Beijing, Bangalore, and Bethesda next-door neighbors.
You will recall how it happened. Netscape went public on the morning of 8/9/95. The stock was priced at $28 that morning. It opened the day at $71; it closed that day at $56, and we all looked at that -- we all looked at that and said, whoa; there is gold over them there hills, and we all went out and we bought Global Crossing, Lucent, Nortel -- come on, 'fess up; you had it -- yeah, that's right -- and JDS Uniphase. You had it in your 401(k) or your mutual fund did, and the net result of that was they took our money and they laid mile after mile of undersea and overland fiber-optic cable, and when they did, they drove down the cost of transmitting words and music, and data from Beijing to Bangalore to Bethesda to basically for free.
And if you know anything about fiber-optics, the only thing you have to know is this: it is the gift that keeps on giving because once it is in the ground, all you have to do is keep improving the switches of both ends and you get more and more capacity by lighting the fire. So that was a huge, huge flattener because it brought people to people, connectivity to an absolutely unprecedented level on the planet of the earth.
The third flattener is something that is simply called workflow. Workflow is my summary for all of the stuff and standards, all of the software and standards that connected all of that bandwidth with all of those PCs. Now, workflow is everything from Microsoft Word to Microsoft NetMeeting to the proprietary software that runs any of your businesses.
Again, we go back to PPI in the early 1990s; their membership department was running Microsoft; their bookkeeping department was running Novell. Both departments were so much more efficient because they were computerized. There was just one problem: Microsoft didn' t connect to Novell. And so whenever they got a new member and their dues came in, someone had to walk it over basically to the bookkeeping department.
Well, there was a quiet revolution basically in software in the 1990s, and that quiet revolution was that we made many, many more applications interoperable and connected to many, many other applications. And when my applications can connect with your applications, what that means is that we can all work on more stuff together.
Well, now we get to what I would call the genesis moment of the flat world because when you take that Netscape-moment flattener, people to people able to connect more cheaply, more quickly, and more efficiently than ever before in the history of the planet, and you take the workflow revolution -- more applications able to connect to more other applications than ever before, what we ended up with in the mid-1990s, mid-to-late 1990s was willy-nilly we suddenly created, without anyone planning it, a global platform for multiple forms of collaboration. Suddenly more people could collaborate on more different kinds of work in more different kinds of ways, from more different kinds of places more cheaply than ever before. That was the genesis moment of the flat world.
Now, what the next six flatteners -- I said there are 10 -- are the six new forms of collaboration that immediately sprung off that platform and have come back to flatten the world even more. I'll go through them quickly. The first of these of course is outsourcing; outsourcing is just a new form of collaboration. Now PPI can outsource if it wants its entire bookkeeping department to North Bethesda, North Dakota, or North Bangalore. Off this new platform, either one is almost equally as easy -- outsourcing, a new form of collaboration. I build each one of these around a date so that is built around Y2K.
The second is built around when China joins the World Trade Organization and this new form of collaboration is offshoring. Now I take my whole factory from Canton, Ohio, and move it to Canton, China, and embrace it into my global production system. After China joins the World Trade Organization, offshoring with this new platform goes to a whole new level.
The third new form of collaboration I simply call open sourcing. Open sourcing is a whole new form of innovation. Now we have a bunch of geeks sitting at home writing the next operating system called Linux. Linux today is 15 percent of the global OS market. Brazil just announced they are converting the entire Brazilian government to Linux, taking a huge bite out of Microsoft's business.
I mean, how would you like to be Bill Gates? Well, how would you like to be Bill Gates, that is, you dominated the global operating system market. Anytime anyone threatened you as a company, as a challenger, you undercut them on price because you had this huge cash horde and suddenly now you have got a bunch of geeks working at home for free building your main competitor, Linux. It is hard to beat free; very hard to undercut free.
Now, we know -- if you know anything about Linux, it isn't quite for free. You need to dress it up for your company, et cetera, et cetera, but it is basically being done, the initial inspiration for open source is free. Now, some people do this because they hate Microsoft; in fact, many people do it because they hate Microsoft, but many others do it because they are stimulated by the pure peer-reviewed science of it. Look at this algorithm I came up with. Look at this new patch.
I mean, you have to be part of an open source community to appreciate the pure peer-reviewed science that drives some of this. But this is a whole new flattening form of innovation. Last year we saw the emergence of Firefox. We have a mixed-age audience here but I guarantee everyone under 20 knows what Firefox is; Firefox is a new web browser. It was produced in collaboration by 19-year-olds at Stanford and a 24-year-old in New Zealand who never met each other, okay. In one month it took 5 percent of the Microsoft Explorer market; it was downloaded 10 million times the first time Firefox went up.
So open sourcing is a huge flattener, huge new form of innovation. I was just up at MIT this week looking at their open -- they put all of their courses online; they put the entire MIT curriculum online. Now what they are doing is putting lab tests online. So you can sit in Timbuktu and if you want, if you have the energy, work your way through the entire MIT course work for mechanical engineering and do the lab tests online. This is a remarkable flattening phenomenon.
The fourth new form of collaboration I simply call supply chaining. Supply chaining is what Wal-Mart does. They have designed a global supply chain down to the last atom of efficiency. So if I take an item off of the shelf in a Wal-Mart in Bethesda, another is immediately made in Xianggang, China. We're talking about supply chaining like you have never seen it before. If Wal-Mart were a country, it would be China's eighth-largest trading partner today, ahead of Canada and Australia.
My friend Yossi Sheffi, who teaches supply-chain logistics at MIT -- god, only at MIT would they have a course in supply-chain logistics that has a nice saying: Making stuff? Oh, that it is easy. Supply chain? Now that is really hard. Think about Wal-Mart. Wal-Mart is the biggest company in America today and they don't make anything. They have designed a global supply chain at a level of collaboration and efficiency that is simply unprecedented. That is what they make.
The fifth new form of collaboration I call in-sourcing; in-sourcing is what UPS does. Yeah, those people in the funny brown trucks and the funny brown shorts -- if you think all they are delivering packages, oh, you are not paying attention. There is a little hint to what UPS is really up to: it is on the side of their trucks; it simply says, "Your world synchronized." Because what UPS does now is come into your company right up to your neck, right up to headquarters and takeover your entire internal logics.
You have a Toshiba laptop, it breaks. You go to the warranty, it says call 1-800-HELP. You do that, they tell you to take your Toshiba laptop to the UPS store and send it to us, we'll fix it and have it back to you in 72-hours. Here is what you don't know: your Toshiba laptop goes from the UPS Store to the Toshiba hub at Louisville Airport in Louisville, Kentucky, where in an airline hanger, in a clean room at Louisville Airport your Toshiba is repaired by a UPS employee. It never touches Toshiba 's hands -- they have in-sourced it all to UPS.
You go to Niki.com to order the kids a pair of sneakers; guess who is on the other side of the screen: someone in funny brown shorts. They are answering your e-mail, they are picking and packing your shoes; they are shipping them to you and collecting the money. See the Papa John's Pizza truck go by? Guess who is driving: UPS because Papa Johns has in-sourced the delivery of their dough from their bakeries to their outlets with perfect timing, synchronized by UPS. In-sourcing: it' s a whole new form of collaboration. It is spreading wildly. It is a huge flattener because to take it lower and lower requires more and more shared standards.
The sixth new form of collaboration -- and the last one -- I simply call informing. Informing is what Google does. I can now inform myself; I can collaborate and my data all by myself: informing.
So now just to recap, we have the first three, they create this platform for multiple forms of collaboration. Then we have the six new forms of collaboration: outsourcing, offshoring, open sourcing, supply chaining, in-sourcing, and informing. That is nine. What is the 10th? The 10th I simply call the steroids, and the steroids are Voice over IP, wireless, and file sharing like Napster and BitTorrent. What these steroids are doing is turbo-charging all six of these new forms of collaboration so I can now do anything from anywhere with any device totally mobility.
Those are the 10 forces that flatten the world. Now, let me conclude by just going briefly over the third chapter which kind of ties all of this together, which is called the "Triple Convergence" because I basically argue that sometime around the year 2000, there were three huge convergences which really reshaped the world.
The first convergence is that all 10 of these flatteners I have described converged right around the year 2000. The outsourcing melded with the offshoring; the informing helped the in-sourcing; the open sourcing helped the supply chaining. The complementarities between all 10 of these flatteners started to converge to a tipping point right around the year 2000, and when they did, they flattened the world because the convergence of those 10 flatteners created a global, web-enabled platform for multiple forms of sharing knowledge and work irrespective of time, distance, geography, and, increasingly, even language.
When I say the world is flat what I mean is that we have created this platform. We have created a totally new platform for multiple forms of sharing knowledge and work irrespective of time, distance, geography, and, increasingly, even language that more people than ever can plug and play on. That is the first convergence.
The second convergence which we are just at the beginning of is we are learning now to adapt our habits and business processes to this new platform. We are going from a world where value is created in vertical silos of command and control, to a world where value will increasingly be created by who you connect and collaborate with horizontally. We are going from vertical to horizontal; that is a big deal, and to get the most out of this, we have to adapt our habits to this platform.
Now, there is a precedent for this in order to get the productivity out of it. Paul David, the Stanford economist wrote a famous essay about electrification, and he asked the question, why was it when electricity replaced steam engines we didn't get a productivity boost. And when you looked into it you discovered it was because to get the productivity boost out of electrification, first of all, we had to redesign factories away from tall, multi-story buildings that could accommodate tall steam pulleys, et cetera, to low-slung buildings that could accommodate small steam engines, and that meant we had to redesign factory floors and we had designed business processes around manufacturing and then we had to have new styles of managers and new consultants to come in. It was only when we changed all of these habits and practices that we got the huge productivity boost from electrification. I would argue we are in the beginning, just the beginning, of this same transformation around horizontalization.
Now, I actually learned this, I got this insight for me personally from a very personal experience. While I was writing the book last March -- a year ago March, it was -- I live in Bethesda, Maryland, as I have said. My oldest daughter goes to school in New Haven, Connecticut. For any of you who have tried getting from Bethesda, Maryland, to New Haven, Connecticut, it is a complete pain in the behind. You have to drive to BWI Airport in Baltimore, take Southwest Airlines to Hartford, and then drive one hour from Hartford to New Haven. No problem, I am a Southwest fan. I don't know how many of you have flown Southwest, but as you may know, on Southwest Airlines you do not get a reserved seat; No problem; I am a hip guy; I did the e-ticket thing. But just in case, I got to BWI Airport 95 minutes before the flight because I was going to be an A.
Well, I stuck my credit card into that Southwest e-ticket machine and out came my ticket and it said B and I said son of a -- (hits table with hand) -- this thing is fixed; this is rigged; this is worse than Las Vegas; there is no way I'm a B! I am here 95 minutes before this flight! There is no way I am a B! Oh, I was mad. I went and got my Cinnabon and stood in the back of the B line.
Well, I sat there for an hour and then they called the flight, and then I saw it, all the As seemed to be getting on carrying what looked to me like crumpled pieces of white printer paper as though they had downloaded and printed out their own barcodes and boarding passes at 12:01 a.m. the night before. Of course what I didn't realize was that thanks to that first convergence and that new platform, Southwest Airlines had just started a program where you could download and print out your own boarding pass at home at 12:01 a.m. the night before. Oh, friends, I saw that. I said, Friedman, you are so 20th century. You are so Globalization 2.0.
I mean, think about it. In Globalization 1.0, there was a ticket agent. When I moved to Washington in '89 on K Street, I would go down to the United Airlines office, I would take a number, I would stand in line, there was a physical person in front of me. In Globalization 2.0, there is an e-ticket machine. We thought that was cool. And while you were sleeping, while you were sleeping, you, the individual, became your own ticket agent in Globalization 3.0.
Or to look at it another way, while you were sleeping, Southwest Airlines made you their employee. Or to look at it another way, if you value your time staying up at 12:01 a.m. the night before, you, the individual, are now paying Southwest Airlines to be their employee. That just happened. That just happened and it's happening in a million ways in a million industries.
So next time around I will stay up until 12:01 a.m. the night before; I will download my own printing -- my own boarding pass and barcode, and I will get to BWI Airport 35 minutes before the flight, and I will capture an hour of productivity. That change in my habits to get the most out of this new platform is part of a million changes that all of us are just now beginning to do in our personal lives and businesses to get the boosts.
Finally, the third convergence is that just when we have created this new flat platform, just when the world went flat, guess what happened? 3 billion people who were out of the game walked onto the playing field called India, China, and the former Soviet Empire. And when did they arrive? Just when the playing field had been flattened; just when they could plug and play, compete, connect, and collaborate with your kids and mine more efficiently than ever before in the history of the world.
Yes, yes, I know, it's 3 billion but only 10 percent can really plug and play. Well, let's see, 10 percent of 3 billion -- zero, carry the one; that is 300 million people; that is exactly twice the size of the American workforce.
So let me simply conclude by saying that I believe this triple convergence of these flatteners with these new habits, with these people, are going to change -- are going to describe and write the brief history of the 21st century. But before I close, let me just say one thing: this huge transformation -- and, friends, I think we are going from vertical to horizontal -- I think this over time is going to change everything. I think this is going to be bigger than Gutenberg and the printing press.
Just when we reach this incredible convergence, it was completely disguised by a political perfect storm called 9/11, Enron, and the dot-com bust. 9/11 completely distracted us from the president on down to the journalist. Enron made every CEO guilty until proven innocent, and who wanted to talk to them? And the dot-com bust made some very silly people, as Will alluded to, think that globalization was over when it was just getting turbocharged. So as a result, right when we have hit what I consider to be the mother of all inflection points, nobody is talking about it.
So doing this book was like being in a science fiction movie. I have to tell you, I went around, interviewed CEOs and CTOs, and CIOs -- they are like pod people. They all know the secrets and they are doing it like crazy, thank god, but nobody has told the kids; nobody has told the kids. So we reached this incredible point, and what is going on? We just had an election where the Democrats were debating whether NAFTA was a good idea and the Republicans put duct tape over the mouth of chief White House economist Greg Mankiw when he said outsourcing makes sense, and stashed him in Dick Cheney's basement -- never to be heard from again. Has anybody seen poor Greg Mankiw?
So right when we have reached this incredible inflection point, nobody has told the kids. I wrote this book to tell at least two kids, Orly and Natalie Friedman, what world they are growing up. When I grew up in Minnesota my parents said to me, Tom, finish your food, people in China and India are starving; and what I tell my girls is, girls, finish your homework because people in China and India are starving for your job, and in a flat world, they can have it; there is no such thing as an American job.
So I will end with a little insight from the late-lamented Carly Fiorina, who actually understood all of this. Carly said to me, Tom, everything we have called the IT revolution these last 20 years -- sorry to tell you -- it's just the warm-up act. That has just been the forging, sharpening, and distribution of the tools of collaboration into this platform. What you are now about to see is the real IT revolution. So friends, fasten your seatbelts and place your seatbacks and tray tables into a fixed and upright position because the world is flat. Thank you very much.