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The World is Flat

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

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The World is Flat

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  1. The World is Flat Thomas L. Friedman

  2. 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

  3. 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

  4. 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

  5. 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

  6. 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

  7. 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

  8. 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

  9. 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

  10. 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

  11. 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

  12. 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

  13. 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

  14. 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

  15. 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

  16. 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 hour- long 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

  17. How the World became Flat • Flattener 1. 11/9/89 Berlin Wall • 8/9/95 – connectivity; web, Netscape • Work flow software • Uploading • Outsourcing • Off-shoring • Supply chaining • Insourcing • In-forming • The steroids The triple convergence

  18. 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

  19. 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, …”

  20. 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

  21. 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

  22. 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

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