Transcript The World is Flat Thomas L. Friedman Introduction 3 eras of Globalization • 1492 - 1800 Columbus and the new world 1.0 • 1800

The World is Flat
Thomas L. Friedman
Introduction
3 eras of Globalization
• 1492 - 1800 Columbus and the new world 1.0
• 1800 – 2000 world shrank from medium to small 2.0
• 2000 - ? Small to tiny…. 3.0
 Flat world, convergence of PC, fiber optics,
and work flow software
 Occurred around 2000
 3.0 differs from earlier eras
Introduction
1.0, 2.0 driven by European, US individuals
and business
3.0 non-western, non-white, diverse group
MphasiS Indian accountants able to do
outsourced accounting work from any US
state and govt. CPA firms send work
2003 - 25,000 US tax returns
2004 – 100,000
2005 – 400,000 done in India!
Virtual Tax Room software developed
Introduction
What will stay in US?
“the accountant who wants to stay in
business will be the one who focuses on
creative, complex strategies, like tax
avoidance or tax sheltering, managing
customer relationships”
70,000 accounting grads starting at
$100/month
In 10 years Indians will be doing a lot of
what is now done in the US
Introduction
Advances in compression technology, CAT
scans transmitted to India using Internet
Some medium hospitals in US radiologists
outsource reading CAT scans to doctors in
India and Australia
Reuters has 2300 journalists, 197 bureaus
provides breaking news (earnings etc)
hired 6 reporters in Bangalore, for flash
headlines, tables
They have technical and financial skills
Introduction
A company releases its earnings to
Reuters, Dow Jones, Bloomberg; race to be
first
Wages and rents in Bangalore less than
1/5th Western capitals
2004 Reuters 300 employees; goal: 1500
Analyst in Bangalore earns $15,000
$80,000 in NY, London
Off-shoring
1960’s in New London (CT), parents worked
at Electric Boat, Navy Yard, Coast Guard
Skills went out of use; region changed; mill
towns saw mills close
Change is hard; but change is natural
Current hot debate about off-shoring similar
to debate at Electric Boat 50 years ago
Work goes where it can be done effectively
and efficiently
Off-shoring
24/7 Call Center in Bangalore
– 2500 work phones selling credit cards,etc
– Tracing lost luggage
– Computer help desks
– Calls transferred by satellite, fiber optic
– Dell, Microsoft as customers
Children starting salaries higher than
parents retiring income
Employees keep US time
245,000 Indians answering phones
Off-shoring
24/7: 4000 employees in S. India
– $200/month for 6 months
– $300-400 after that + transportation, meals, life
insurance, medical coverage for family
– Total cost closer to $600 – 700/month
Employees are trained to sound American, learn
local shows and weather etc…
24/7 runs MS Windows, on PCs with Intel chips,
phones from Lucent, A/C by Carrier, and bottled
water from Coca-Cola.
90% 24/7 shares owned by US investors
US lost some jobs, exports TO India from 2.5 to 5
billion in 2003
Off-Shoring
225 Texas Instruments US patents to Indian
operation
Bangalore is developing high speed
broadband wireless technology
Because of time difference, while US
sleeps, they work, ready in the morning
Off-shoring
Japan outsourcing low-end jobs to Chinese
(who speak Japanese)
Japan once colonized China
China is focused on leading the world, and
will take all the work the Japanese
outsource
Dalian is the locus of outsourcing
Japanese hire 3 Chinese software
engineers for one Japanese
2800 Japanese Cos in China
Off-shoring
Dalian has 22 Universities, 200,000
students
> 50% engineering or science grads
They spend a year studying Japanese or
English
Japan moved R&D, software development
here, US Cos also exploring Dalian
Their English not as good as India, but they
pick from a larger pool
Off-shoring
Neeleman, Jetblue CEO started ‘homesourcing’
400 reservations agents working from home
2004, Friedman in Baghdad
– Soldier monitoring images from a laptop
– US Drone over Iraqi village feeding images to
laptop
– Drone flown by expert in Las Vegas
– Images viewed by: marines, US Command
(Tampa), Central Command HQ (Qatar),
Pentagon, and CIA
– Technology flattened the hierarchy; battlefield
leveled
Changes
Forrester Research projecting over 3 million
service and professional jobs would move
out of the US by 2015
Interstate Highway 55 in Cape Girardeau,
MO
– drive through lane of a McDonald’s taking
orders, is not even in the restaurant or even in
this state
– The order taker is in a call center Colorado
Springs, 900 miles away
Changes
McD’s Mo: software cuts order time by > 30
seconds, to one minute 5 seconds, less
than half of the average two minutes and 36
sec for all McD
This Drive-through now handles 260 cars
per hour
More Changes
Namitha in Cochin, India, starts her day
before 4:30 a.m.
– 7000 miles away near Chicago, 14 year-old
John sits at his computer ready for his hourlong geometry lesson - E-tutoring
– Namitha works for Growing Stars
– 1000s of Indian teachers coach US. students in
math, science or English for about $20/hour
instead of $400 in the U S
Friedman considers changes as
fundamental as Gutenberg’s Printing Press
How the World became Flat
1. Flattener 1. 11/9/89 Berlin Wall
2. 8/9/95 – connectivity; web, Netscape
3. Work flow software
4. Uploading
5. Outsourcing
6. Off-shoring
7. Supply chaining
8. Insourcing
9. In-forming
10. The steroids
The triple convergence
Flattener 1: The Wall comes down
Communism makes people equally poor,
Capitalism makes people unequally rich
Berlin wall collapse ripple effect reaches
India
1991 India out of hard currency, PM opened
economy
Trade controls abolished, 3 % growth 1994
7 % growth
World appears more seamless
Flattener 1
Amartya Sen (Nobel Economist): “Berlin wall
not only kept people inside East Germany, it
prevented a global view of the future… we
could not think of the world as a whole.”
“Women’s freedom, which promotes literacy,
tends to reduce fertility, child mortality,
increase employment opportunities for
women, …”
Flattener 1
Wall collapse allowed adoption of common
standards
Common standards create flatter, more level
playing field
Paved way for European Union, Euro
Cause of collapse not clear
– Information revolution began in 1980s
– Totalitarian systems had monopoly on information and
force
– Ordinary people could access computing
– Rise in Windows, Apples, fall of Wall, set flattening in
motion
Flattener 1
PCs made content in digital form
One person with a typewriter vs with a PC
Gave individuals power to
create/disseminate information
Windows translated into 38 languages; PC
in their own language
Emails through ISPs
No way to stop digital representation of
everything – and a global exchange
Flattener 1
“Breakthrough constrained by architectural
limits… missing infrastructure” Mundie, MS
Exec
Internet not yet emerged
Bin Laden, Reagan saw Soviets as “evil
empire”
Bin Laden saw US as evil too; his
alternative to market capitalism – political
Islam
Many in Muslim lands thought they brought
the Wall down through religious zeal