Thomas Friedman's Brief History of the 21st Century
New York, April 4, 2005
RICHARD HOLBROOKE: My name is Richard Holbrooke, and I am the Chairman, and I am just thrilled to see all of you here tonight. We have a great, great honor tonight. Tom Friedman, whom you obviously know or you wouldn’t be here, one of America’s greatest journalists, the only person who has ever won the Pulitzer Prize three times, is going to unveil for us, one day ahead of the official unveiling - sort of like a soft opening in a hotel - [LAUGHTER] his extraordinary new book, The World is Flat, which is sure to be a tremendous best-seller. And then, afterwards, we will have comments by Joe Stiglitz and Shashi Tharoor. I want to welcome you, especially Mr. Secretary General and men, for joining us on short notice. The Secretary General is here under one condition, he doesn’t have to say anything. [LAUGHTER] He is just here to hear Tom’s thesis, which is of such great importance. We owe this evening to Lynn de Rothschild, my dear friend for many years, and one of the Asia Society’s most important supporters, who conceived of this project, talked Tom into doing his pre-opening, first-ever discussion of the book with us tonight. And I want to ask Lynn to come up here, and introduce the speakers. Thank you very much for coming. [APPLAUSE]
LYNN de ROTHSCHILD: Thank you, Richard. I am really very thrilled to be able to have helped with this event. I think the world of the Asia Society. And in reading The World is Flat, I decided to go to the Internet and see what the Asia Society says about itself. And it defines its mandate very simply, as “to build bridges of understanding between Americans and Asians.” Well, when you read Tom’s book, you will see that we are in the sweet spot of what this organization is all about. And I also feel that we are really very fortunate to be here tonight, because in a way this is the first official debate of the “new” debate that Tom is creating in The World is Flat.
Tom puts international relations and international development in a new context, not defined by nations and institutions, but by individuals and technology. And because this world is gonna pivot so much on America and Asia, this is really the place to start the debate. And I regret to say that, although Dr. Amartya Sen deeply wanted to be here, his mother is ill in India, so he had to stay with her. And he sends his regrets, and we send him our prayers. Not as a replacement per se, but more as a reflection of this rich city we live in, we are honored to have Joe and Shashi as discussants for Tom’s book tonight. Our agenda is that Tom will speak, then Shashi and Joe will respond. Tom will then answer their comments, and open everything up to questions. And Richard Holbrooke will close us. You have all been given bios of all the speakers. So all I did, was I went to the Internet to see what else is there, in the spirit of The World is Flat. [LAUGHTER] In the case of just [LAUGHTER] Joe Stiglitz, I pulled up his CV. And I want you to know, it is 51 pages. [LAUGHTER] 42 pages, in small print, a list of articles and papers. Two full pages of books. So, if you ever wonder why you didn’t win a Nobel Prize - [LAUGHTER] read what Joe [LAUGHTER] has done.
And in the case of Shashi, I went to the Internet, and found that he has a Web site named after himself. [LAUGHTER] So he is a great policy wonk, historian, biographer of Nehru, author of eight books. And since 1978, a U.N. diplomat. Most currently, the Undersecretary General, for Communications and Public Information. And most important for tonight, there is no one more knowledgeable and thoughtful about the politics, culture and future of India, which is so important, and relevant to the thesis of The World is Flat. When it comes to Tom, when you go to the Internet, and you “Google” in “Thomas Friedman of The New York Times,” there are 874,000 [LAUGHTER] pages. And The New York Times advertisement.
But with three best-sellers and three Pulitzer Prizes, we really don’t need the Internet to tell us about Tom. His writing has been so persuasive for so many years, that Tom is really a kind of icon in America and abroad. What Tom writes really does matter, and he has earned that stature through hard work, integrity, and most incredible modesty that allows him to listen. From the Internet, I will freshly read you a section of the Book Review from The Washington Post. It says, “Like its predecessor, The Lexus in the Olive Tree, this book showcases Friedman’s gift for lucid dissections of obtuse economic phenomenon. His teacher’s head, his preacher’s heart, his genius for trend spotting, with no real idea how the 21st century’s history will unfold, but this terrifically stimulating book will certainly inspire readers to start thinking it all through.” We are honored to be the first participants in the official debate he started. And I invite Tom to the podium. [APPLAUSE]
THOMAS L. FRIEDMAN: Thank you very much. Thank you. Lynn, thank you so much for that very generous introduction. And Richard, thank you. Secretary General and Ms. Annan, I am honored that you are here this evening. We were sorry that Dr. Sen couldn’t be here when Lynn informed me that he couldn’t, because of the illness of his mother, I informed Lynn “that I don’t speak without an Indian Nobel Prize winner on the stage.” [LAUGHTER] And she said, “No problem. We’ll get Shashi Stiglitz.” [LAUGHTER]
And so, I really just want to thank Joe and Shashi for coming here, because I am very eager to get their feedback on this. Let me dive right in and tell you simply how this book emerged, and a basic scheme of the argument. As those of you who have read my column know, that I have been The New York Times foreign affairs columnist since 1995. And my columns, you know, basically revolve between Lexus and the Olive Tree. I had an interest in globalization and technology, and obviously the issues of the Middle East. And I was really focused around those issues, weaving back and forth between the two, until September 11th, 2001. And on the morning of September 12th, I dropped the whole issue of globalization, and went off and covered the 9/11 wars for three years. I did one story about globalization in those three years. I went out to Silicon Valley on one trip in 2002, I believe it was. Some friends of mine were involved in the start-up. A little company called “Google.” They said it could be really interesting.
I went out, I did one story about Google, and went back to Kabul, basically. And that was kind of the mindset I was in, until 13 months ago, when in February of 2004, I had been doing documentaries for the Discovery Channel and Discovery Times Channel, and we had done on “the Wall in Israel,” one on “the roots of 9/11.” And we were thinking what to do the third one on. And this was, as I say, right in the heart of the primary season. And the thought we had was, well, this issue of people’s perceptions of America and the world were very hot. And I thought, “Wouldn’t it be fun if we went around the world to call centers, and interviewed young people who spent their days imitating Americans, on what they thought of America?” And as we were costing that out and budgeting out that idea, suddenly Senator Kerry issues his famous blast against “Benedict Arnold executives,” and the whole issue of outsourcing just exploded. And I said, “You know, I would really like to take a break from the 9/11 wars. Why don’t we go to Bangalore? We’ll just go to one place. And we’ll look at the world. And we’ll look at this outsourcing story, entirely from the Indian perspective.” And we called the documentary, The Other Side of Outsourcing.
I had been to Bangalore once before, and I had friends there. And so I was looking forward to going back. We went out to Bangalore on February 15th of 2004. We did 60 hours of interviews in two weeks. And as I, you know, said in the book, I was just blown away. And with each interview and with each passing day I was in Bangalore, frankly I got sicker and sicker. And it was not the food. It was a sense I had, as a journalist, that while I had been sleeping, while I had been off covering the 9/11 wars, something really big had happened in this globalization drama. And I had really missed it. And it all really came to a head the last day we were in Bangaloree. The last interview we did was with Nandan Nilekani, the CEO of Infosys. And we were sitting outside Nandan’s office. And the crew was setting up. And Nandan and I were talking on his couch. And Nandan said, “Tom, I have got to tell you. The playing field is being leveled. And you Americans are not ready.” Well, I wrote that down in my notebook, and I thought about that a lot. We did the interview. And then, on the ride back to my hotel, as I bounded along in our minibus with my Indian driver driving barefoot, I kept looking at my notebook, “the playing field is being leveled.” And I thought about that, all the way back to the hotel. “And what was Nandan telling me? It seemed to me he was telling me,” I thought to myself, “that the playing field is being flattened. Oh my God, he is telling me, the world is flat.” And he is citing this, as a huge advance for civilization.
Well, I went back to the hotel, I called my wife, I said, “I gotta go on leave immediately. I have got to write a book, called The World is Flat.” She thought I was nuts. I came back and called the publisher of The New York Times, Mr. Sulzberger, and told him the same thing. Because I had a deep, deep sense that the framework that I had been using to think about globalization and world affairs badly needed updating. And that is really the context of this book. Let me quickly go through the high points of the argument. The first chapter of the book is called While You Were Sleeping. And it’s really autobiographical. It begins as, “As noted in the Times yesterday with me noting that Christopher Columbus set sail in 1492, looking for a shorter route to India. That’s where Columbus was going. He went west. He had the Nina, the Pinta, the Santa Maria. He never did find India, but he called the people he met ‘Indians,’ and we still call them that, to this day. And he came home and reported to his wife, ‘Honey, I have accidentally discovered, the world is round.’ I set off for India, 512 years later. I went east. I knew just which direction I was going. I had Lufthansa business class, and GPS satellite that popped up in my seat. And I came home and reported to my wife, ‘Honey, I have accidentally discovered, the world is flat.’ ”
And what the first chapter really does, is I start at India, but then keep moving east; from India to Japan, from Japan to Delhi in China, which is becoming the outsourcing capital of China, where you have thousands of Japanese speaking Chinese, doing the backroom operations now for most of the major global multinationals. And then, across the United States, where there was the McDonald’s. I don’t know how many of you know, but there are many McDonald’s now, where you go to the drive-in window, you order your three hamburgers and four milkshakes and three fries for your kids. You are actually speaking to someone in Colorado. And they are taking down your order. Actually, also taking your picture. And zapping your order and your picture, to the person inside that McDonald’s, where they will fill that order for you. McDonald’s discovered they save 30 seconds on each order by doing this, and their error rate is radically reduced. Or you call Jet Blue to make a reservation. You may get Betty on the phone. I got Betty. And after I tried to make my reservation, I said, “Betty, where are you?” And Betty said, that she was up in her bedroom in her slippers and nightgown, because Jet Blue, as you may know, has a home reservation system. They have no reservationists, other than a group of basically retired employees and housewives, in Salt Lake City. The founder of Jet Blue is David Neeleman, who is a Mormon. And he has basically installed this in bedrooms, throughout Salt Lake City. So I kinda go through all of my “flattening” experiences right up to my own home in Bethesda. The argument I am making at the end of the first chapter, is the following. That I would argue, there have been three great era of globalization.
The first, I would simply call “Globalization 1.0.” It lasted from 1492 ‘til about 1825. That was really the beginning of “global arbitrage.” And I would argue that era metaphorically shrunk the world from a “size large” to a “size medium.” But I would argue that the dynamic force striving globalization in that era tended to be governments and countries - whether it was Spain exploring the new world, or Britain taking over India, the Portuguese in East Asia. You went global through your country, in “Globalization 1.0.” I would argue “Globalization 2.0,” from the early 1800s ‘til 2000, shrunk the world from “size medium” to “size small.” And that era was spearheaded by companies globalizing for markets and labor. And the essential argument of this book is that, while I was sleeping, I don’t know about you, we actually entered “Globalization 3.0.” And it came together around the year 2000. And it is shrinking the world, from a “size small” to a “size tiny,” and “flattening the competitive playing field” at the same time. But what is unique about this era of globalization is that, the “new” new dynamic of this era, is that this year of globalization is not built around countries, and not built entirely around companies. That the dynamic element of this era of globalization is individuals and small groups. And be advised - it ain’t gonna be a bunch of White Western individuals. It’s gonna be individuals of every color of the rainbow, who will be able to “plug and play” on this “flat playing field.”
Now, the second chapter of the book, which is a third of the book, and really preoccupied so much of my time, ‘cause it required me to go back to school, is basically called The Ten Days that Flattened the World. And it’s about the ten forces, political events and technologies that converged, I would argue, around the year 2000, to give us this “level playing field,” this “flattened playing field.” The first, I’ll go through them quickly, is 11/9. Not 9/11, but 11/9. In a wonderful Kabalistic accident of dates, you may know the Berlin Wall came down on 11/9, November 9th, 1989. And the fall of the Berlin Wall is my first - I call these The 10 Flatteners. It’s the “first flattener,” because as long as the Berlin Wall was up - . I have never done a Lexis/Nexis search of this. But I would dare say, before 1989, very few people used the word “globalization.” I am sure it was used, but not in the way we do it today. Because there was literally a wall in the way. There was a wall in the way physically, in terms of trade and commerce.
But there was a wall also in the way, perceptually. And the fall of the Wall was hugely important. Before when the Wall was there, you could have an “Eastern policy,” or a “Western policy.” But once the Wall was gone - and this is something actually Amartya talks about in the book - we could begin to think of the world, as a “single space,” not only economically, but politically. This “flattener,” this “first flattener,” is called When the Walls Went Down, and the Windows Went Up. Because in a wonderful accident, on top of accidents, the Windows operating system shipped six months after the fall of the Berlin Wall, giving us not only a “flat playing field,” but a single “graphical user interface,” to look at the world through. That’s the “first flattener.” The “second flattener” is 8/9/95, I consider to be one of the most important days in our lifetime. 8/9/95 is the day Netscape went public. It’s the day of the Netscape IPO. And Netscape going public, did three hugely important things. The first thing it did, was give us the Internet, because it was really the Internet browser, which allowed us to actually display words and music and data, to render what was in all those “ww, you know, Web sites,” and display it on a screen, which really brought the Internet alive for Grandma and for other grandchild. And so the “Netscape browser” really gave us the “Internet,” in the popular way we have it today. The second thing that Netscape did was, Netscape commercialized - . This gets a little more technical. But a set of “open standards,” “transmission protocols,” which ensured that “no company would dominate the Internet.” Now, this was very, very important. You may recall, before Netscape, your wife was on Compuserve, you were on AOL. Very difficult to communicate. You could do it, but it was a real pain. What Netscape did, was basically commercialized a set of “open standards” that truly made the Internet interoperable.
The third thing the Netscape IPO did, of course, was give us the “dot-com boom,” which gave us the “dot-com bubble,” which gave us the accidental overinvestment of a trillion dollars of fiber-optic cable - in a space of five years. What that “trillion dollars of fiber-optic cable” accidentally did, without anyone realizing it, was make Bangalore and Beijing and the Bronx next door neighbors. Thanks to overinvestment and wild speculation by companies by the name of Lucent and Global Crossing, we basically accidentally wired the whole world, driving down the cost of transmitting data and voice to basically free. That was what the Netscape moment represented.
In sum, what the Netscape moment did, was bring people to people, conductivity, to a whole new level. Suddenly, people could connect with people, from more different places, in more different ways, on more different days, than ever before, in the history of this planet. And that just happened, at the end of the 1990s. Remember when Bill Clinton was president, no one you knew had e-mail. The third date, the third event, is something I simply summarize as “work flow,” “work flow software.” And “work flow” is really, all the stuff and standards, that connected all those PCs with all that bandwidth, basically; all that fiber-optic cable. And the reason “work flow” was so important, is again, go back to the early 1990s. Hey, it was great that the Asia Society had computers, and people became more productive when they had computers. But what we all forget is that, Asia Society’s purchasing department, it ran on Novell. And its inventory department, it ran on Microsoft Windows. And they couldn’t communicate. So people were much more productive within their departments, thanks to computers and software. But what really needed to happen, for people to become really productive, was for applications to connect with applications. That any one software, run on anyone’s computer, anywhere in the world, be able to seamlessly and virtually connect, with anyone else’s computer and software, anywhere else in the world.
Applications, had to connect, with applications. And again, that just reached a critical mass, at the end of the 1990s. Suddenly, my application, no matter what I was doing, whether it was home banking, or home investment, or home film developing and sending you the pictures, all of my applications - thanks to all of these new protocols and digital pipes and things like middleware - could connect with your applications. What I argue basically, is that when you put the Netscape moment, with the 11/9 moment, with the “work flow” moment. When suddenly people, can connect with other people, like never before. And applications, can connect with applications, like never before. That was the genesis moment, of “the flat world.” Because what that did, was give us a global platform, for collaboration. Because when I can communicate with anyone anywhere, and I can have applications that connect with their applications anywhere, suddenly more people can collaborate, on more different kinds of projects, in more different kinds of ways, on more different kinds of days, than ever before, in the history of this planet. And that was the platform, for “the flattening of the world.” Now, that’s just the first three. What the next six “flatteners” are, are the new forms of collaboration, that sprung off this platform.
The first, of course, is the one most notorious, is “outsourcing.” Because when “people to people” and “application to application” can connect, I can “source” any function in my company, whether it’s looking for lost luggage, or writing new software, I can source it anywhere from North Dakota, to Bangalore, India, to Beijing, China. So “outsourcing” basically is the first new form of “collaboration.” I go into much greater detail in all of these in the book, but I’ll go through them quickly. The second new form of “collaboration,” is “open sourcing.” Suddenly, a bunch of geeks sitting at home - working in basically “open forum chat rooms,” for a lack of a better way to describe it - are writing the next great operating system, called Linux - or have written the world’s main Web server, the one I profiled in my book, Apache. Apache was the Web server that brings you to your Web sites - that if you go into Amazon, that Amazon is built on - is Apache. Apache was the product of a group of geeks sitting at home - for the pure science of it - writing in Web server for free. Now, how would you like to be Bill Gates? And your whole business model all these years, was “anybody who challenges you, you are gonna undercut them on price.” Suddenly your main competitor - Linux now is 15 percent of the operating system market - your main competitor is selling your product for free. This is a very different business model. A whole new form of “collaboration” made possible by this platform.
The third new form of “collaboration” - this is really new, but I would argue it’s reaching a new stage - is simply “offshoring.” Now, I take my factory, from Canton, Ohio, and I move it to Canton, China. We are all familiar with this. I build that section around China joining the World Trade Organization, which I would argue took “offshoring” to a whole new level. The fourth new form of “collaboration” I call “supply chaining.” This is built around Walmart. Um. As you all know, if Walmart were a country, it would be America’s eighth largest trading partner today. And basically, what Sam Walton did was, bring “supply chaining,” down to the last atom of efficiency. Where, if you take an item off the shelf in Bentonville, Arkansas, another one is made immediately in Shenzen, China. “Supply chaining.” The fifth new form of “collaboration” I call “in-sourcing.” This is built around UPS. Now, we are all familiar with the UPS trucks, the funny brown trucks with the funny little people in the funny brown shorts, delivering funny brown packages. If you think that’s what UPS is doing, you are not paying attention. UPS does something called “in-sourcing.” What they do, is come into your company, and take over your entire basically logistical operation, right up to the neck of your company.
So you have a Toshiba laptop. Your Toshiba laptop breaks. You look at the warranty. It says, “Call 1-800-HELP-TOSHIBA.” You call 1-800-HELP-TOSHIBA, they tell you, “Take your machine to the UPS Store, and send it to us here at Toshiba.” What you don’t know, is your machine, when you deliver it to the UPS Store, goes from the UPS Store, to UPS’ global hub, which is in Louisville, Kentucky, at Louisville Airport. And your Toshiba laptop is now repaired by a UPS employee, at a hangar, in Louisville Airport, in a clean room and a white smock. It never touches Toshiba. You want to get your kids a new pair of sneakers. You go on Nike.com. UPS picks up the phone. UPS responds to you. UPS picks and packs the shoes. UPS delivers them, bills them, and basically hands the money over to Nike. See the Papa John’s pizza truck going by? Don’t check who is driving. It’s someone in “funny brown shorts, and funny brown pants.” This is “in-sourcing.” It’s a whole new business. It’s being done by UPS, and FedEx. It’s an incredible “flattener,” for what it does in terms of streamlining basically the logistics globally. That’s the fifth. The sixth flattener I simply call “informing.” “Informing” is my name for Google, Yahoo, Microsoft search. Because I can now “collaborate” and mine my own data - as Lynn did, in preparing this talk. I don’t need to go to the library. I don’t have a research assistant.
I had no research assistant for this book. My “research assistant” was a person called “Google.” And basically, I call this form of “collaboration” “informing.” So now we have the first three that create the platform for “collaboration.” We have the six new forms of “collaboration” - “outsourcing,” “open sourcing,” “offshoring,” “supply chaining,” “in-sourcing,” and “informing.” That’s nine. The tenth flattener, I simply call, the “steroids.” And “steroids” are Voice Over IP, and Wireless. And what these “steroids” are doing, basically, is turbo-charging all six of these new forms of “collaboration,” so I can now do them, from anywhere, with anyone, with any device. That is the second chapter of the book. As I say, it’s about a third of the book. The third chapter - and I’ll close, you know, shortly after this - is really the core thesis of the book. And it’s called The Triple Convergence. And the basic argument I am making, is that sometime around the turn of the millennium, right around the year 2000, all ten of these “flatteners” started to converge. And in economic terms, the “complementarities” between them, all started to really work together, at a tipping point. The “outsourcing,” drove the “supply chaining.” The “informing” drove the “open sourcing.” And they all basically “converged.” And, I would argue, that is “the flattening of the world” - that we are just at the beginning of now.
But that first convergence - the convergence of all ten of these “flatteners,” which are now used in multiple ways, by individuals and companies - is really “the flattening of the world.” It has created a Web-enabled platform, for multiple forms of “sharing of knowledge and work,” that is irrespective of distance, of time, and increasingly, even language. That is “the flattening of the world.” But that’s just the first convergence. The second convergence is that we are all having to learn - and I think we are at, again, just at the beginning of this - to what I would call “horizontalize” ourselves. That just as, you know, Paul David wrote about “electricification.” Why, after electricity was first invented, we didn’t really get the productivity gains from electricity. It was because people had to really adjust the architecture of buildings, the architecture of factories, and their own habits, to get the best out of this new technology. The same is going on today. We are all having to learn, how to “horizontalize” ourselves, and go from a world where value is created, in vertical silos primarily, by “command and control” - to a world where value will increasingly be created, by “connect and collaborate.”
Now, the example I give in the book, is a true life example. Shashi and my kids both, I am proud to say, go to Yale. Only I live in Bethesda, and he lives in New York City. And the problem from getting from Bethesda to New Haven, is a complete pain in the behind. [LAUGHTER] OK? You have to go to BWI Airport in Baltimore, fly Southwest Airlines to Hartford, and then drive from Hartford to New Haven. Now, last spring I was going to visit my daughter. I had two bags of spring clothes to take to her. I wanted to, you know, basically get in and out, you know, as quickly as I could. And I don’t know if any of you have flown Southwest Airlines, but as you know - you don’t look like a Southwest crowd. But [LAUGHTER] as you know, on Southwest Airlines, you don’t have assigned seats, you just get a ticket that says “A,” “B,” or “C.” You do not want to be a “C” on Southwest Airlines. You do not want to be a “B.” And if you are carrying a bunch of stuff for your daughter, and you want room above the seat, and not be stuck in the middle. I am a hip guy. I did the “E ticket” thing. I had my secretary get an “E ticket.” I got to BWI Airport 95 minutes before the flight. Stuck my credit card into the Southwest machine. And out came my ticket. And it said, “B.” I said, “Son of a - . [CLAPS] This thing is fixed. This is rigged. [CLAPS] This is worse than Las Vegas. [CLAPS] I am here 95 minutes before this flight. [CLAPS] There is no way I am a ‘B.’ ” [LAUGHTER] I went and got my Cinnabon, and stewed in the back of the “B” line. [LAUGHTER] Well, an hour later, they called the flight, and then I saw it. All the “A’s” were getting on, carrying what looked to me like - plain old white home printer paper. Where it looked to me like, they had actually printed out, their boarding passes, and the bar code. And they were getting on the plane, with those. Well, of course, what I didn’t know was, Southwest Airlines, using a combination of the Internet and “work flow,” had completely “flattened” itself, so that its customers, at 12:01 A.M. the night before, could go online, download, not just their reservation, but their whole boarding pass, and bar code, print it out at home, and show up at the airport. Oh, I looked at that, and I said, “Friedman, you are so 20th century. [LAUGHTER] You are so Globalization 2.0.” [LAUGHTER]
You know, Globalization 1.0, there was a ticket agent. In Globalization 2.0, there was an “E ticket” machine. We thought that was really cool. And while you were sleeping, you became the gate agent. [LAUGHTER] That’s what the “convergence” allowed. It allowed Southwest Airlines to make you their employee. And if you value your time, you are paying Southwest Airlines, to be their employee. That was the second “convergence.” It is, that we are all starting to learn - and we are just at the beginning of this - to “horizontalize” ourselves.
The final convergence - I said, this is a “triple convergence” - is that this “flattening,” which all came together, I would argue, in the late ‘90s - happened to coincide with three billion people, who are out of the game, walking onto the playing field. And when do they walk out onto the playing field - just when it’s been “flattened.” When they can “connect and collaborate,” “plug and play,” with your kids in mind, more equally, than ever before, in the history of this planet.
Oh, I have no illusions. Maybe only five percent of them have the access the skills - today - to “plug and play.” Of course, that’s 150 million people - that’s exactly the size of our work force. And a lot of ‘em, are gonna “plug and play” really fast, ‘cause they are not stuck with Legacy systems like we are. They are going right after - and collaborating with - the latest technology. The simple thesis of this book, is that this “triple convergence” of these technologies, creating this “flat field,” with these new business processes of “horizontalization,” with these three billion new people walking onto the field, is going to basically define - or has defined at least - the brief history of the 21st century. Now, another thing happened that converge, while this convergence was happening.
And I argue in the book, this really masked what was going on. It was a political “perfect storm.” And this political “perfect storm” was called Enron, 9/11, and the dot-com bust. I think one of the huge analytical mistakes that some people made at the end of the dot-com boom, was to think that the “dot-com bust,” meant the end of globalization. It has actually meant exactly the opposite. What happened was, everyone’s sources of capital shrunk - particularly venture capitalists. And so what every venture capitalist has done, is say, “Let’s see. We only have 50 million to invest, instead of 5 million. Do you remember Rajib and Sonya who were here, doing the boom? That they went back to Chennai? Do you think somebody could get them on the phone?”
Basically, what the “flat world” allowed, right when the “dot-com bust” happened, was globalization became turbo-charged - as every company and every innovator, looked to take advantage of this new platform, in order to drive down cost, and drive up innovation. And that’s really what happened. The second thing I said, is Enron. What Enron did, was make all business executives “radioactive,” or “guilty until proven innocent.” And as a result, even the Bush administration - this slavishly, you know, pro-business administration or pro, you know, tax-cutting administration - doesn’t want to talk about business, or be seen with business people, or talk about competition. It’s quite amazing. I talked to people in Silicon Valley, about the Bush administration, and business and competition. And of course, 9/11 made us all focus - mostly myself - on something other than this globalization story. As a result, basically - right when we have reached what I would argue is a really - .
It’s an overused word, but I think it’s appropriate here. An incredibly important inflection point. One I make a very big claim for. One that is gonna move the world, from increasingly “vertical” to increasingly “horizontal.” And that’s gonna change everything. Right when we reached that point - nobody wants to tell the kids. Nobody is talking about it. We had just had an election campaign, where the Democrats were debating whether NAFTA was a good idea. And the Republicans, put duct tape over Greg Mancew’s mouth, the chief White House economist, when he said, “Outsourcing actually could make a lot of sense.” And they stashed him, in Dick Cheney’s basement. [LAUGHTER]
OK? So right when we have reached, I would argue, an incredibly important inflection point, which I call “the flattening” - nobody is basically talking about it. Well, here I agree with the late lamented Carly Fiorina and what Carly has been saying, for the last couple of years - is that, “Everything we called the IT revolution, these last 20 years? Sorry. Just the warm-up act. That was just the creation, forging and sharpening of the tools of collaboration. What you are not about to see, ladies and gentlemen, is the real IT revolution. Because the world, is flat.” Now, let me simply make three very quick closing comments, before I turn it over to Joe and Shashi. Be advised, I have a chapter. Well, the next whole section of the book, is about What This Means for America. And the brief argument there is that, I believe the challenge of “flatism,” over time, will be as big and important and ready to challenge our society, as the challenge of Communism. The chapter, the whole section is called, This is Not a Test. And if we don’t have as comprehensive a response to that, then I think we are in serious trouble. Then I go on basically, to look at how this affects companies, countries and individuals. I do have a chapter that’s very important to me. It’s called The Unflat World, in which I make very clear, “Don’t worry. I know the world is not flat. Don’t worry. And not only do I know that it’s not flat, I know that the vast, vast majority of people on the planet, are still yet to be able to ‘connect and collaborate.’ ”
And I basically, in that chapter, go through what I think are the main communities, who are not able to “play” in this world. I still think, it’s the job of the analyst to define when he sees a critical mass of new trends coming together, to define those trends. And that’s why I have used this term, The World is Flat. I use it obviously, with great literary license. I think it is gonna be the biggest and most important trend shaping economics and geopolitics coming forward. But don’t worry. I understand that the world is not flat. And that millions and billions of people, are not able yet to “connect and collaborate.” I break that chapter up into four groups. The first I call the “too sick,” which obviously are all those communities around the world, in the grips of HIV/AIDS, malaria, tuberculosis and other disease, who are simply “too sick” to take part. And I talk about basically, “collaboration” as it applies to them. The second group I call the “too disabled.” These are, in many cases, I like to think of rural India, rural China.
These are people who are more “half flat,” in the sense that they have been to Bangalore, they have been to _____ . They have actually seen some of the “upside” of this world. They want it, but they do not have the tools. They do not have the tools of governance, the economics - the simple tools, to basically enable them to take part. And I basically talk about, what that means, and how we can think about getting them these tools. The third group I call the “too frustrated.” And that is the Arab Muslim world. One of the things that happens when the world goes “flat,” is you get your humiliation fiber-optically. You get it at 56K, right in the face. You see just where the caravan is, and just where you are. And you cannot understand 9/11, without understanding the role of humiliation, and the degree to which it was intensified, by the “flattening of the world.”
The fourth basically sort of “unflattener” which is what the chapter is about, is simply called “too many Toyotas.” When three billion people walk onto the “flat world,” and the Indian dream and the Chinese dream is the same as the American dream, where it’s a house, a car, a toaster and a microwave. If we don’t find an alternative source of energy, we are either gonna burn up this planet, or we are gonna find ourselves in a war with China and India, over natural resources. The last chapter of the book is simply called 11/9 or 9/11. And the simple argument I make here is that, when the world goes “flat,” all the tools of “collaboration” are increasingly going to be commoditized. There is only one thing that doesn’t get commoditized, and that’s imagination. It’s what people do with those tools.
I note in this chapter, that in February of 1999, by another accident of history, two people started airlines - from scratch. One was David Neeleman. He started Jet Blue. Raised the capital, raised the venture capital. Outsourced the pilot training, to schools around America. Outsourced the reservation system, to housewives in Salt Lake City. Then the exact same month, we know from the 9/11 Report, someone else started an airline. His name was Osama bin Laden. He outsourced the pilot training, to schools, flight schools, in Florida. He outsourced the planning, to Khalid Sheik Muhammad. He outsourced the financing, to a banker in the United Arab Emirates. Both airlines were designed to fly into New York City - one into JFK, the other into Lower Manhattan. 11/9 and 9/11 to me represent the two competing forms of imagination in the world today. After all, on November 9th, 1989, or in that November ’89 period, someone in Hungary, said “Imagine. Imagine if we let all these East Germans coming into Hungary, go out through Austria. We could bring down, the whole Berlin Wall.” Somebody had, that conversation.
And in Kandahar, in February 1999, someone had a different conversation.” They said, “Imagine, if we could hit the Twin Towers, between the 94th and 98th floor. We could bring them down.” So how people imagine, is gonna become a hugely important strategic issue in the “flat world.” When so many people have access to the tools of “collaboration and connectivity.” And what the last chapter is really about, is my own sort of way of thinking about - “How do we get more people, to have the opportunity, and the inspiration, to have a positive imagination?” Thank you very much. [APPLAUSE]