The World Is Flat: A Brief History of the Twenty-first Century [Hardcover]

 

 

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I'd forgotten the pleasure reading good prose brings. Friedman not only writes well, but does so on an important subject- globalization. He states, "It is now possible for more people than ever to collaborate and compete in real time with more people on more different kinds of work from more different corners of the planet and on a more equal footing than at any previous time in the history of the world."

He claims, "When the world is flat, you can innovate without having to emigrate". But, how did the world `become flat'? Friedman suggest the trigger events were the collapse of communism, the dot-com bubble resulting in overinvestment in fiber-optic telecommunications, and the subsequent out-sourcing of engineers enlisted to fix the perceived Y2K problem.

Those events created an environment where products, services, and labor are cheaper. However, the West is now losing its strong-hold on economic dominance. Depending on if viewed from the eyes of a consumer or a producer - that's either good or bad, or a combination of both.

What is more sobering is Friedman's elaboration on Bill Gates' statement, "When I compare our high schools to what I see when I'm traveling abroad, I am terrified for our work force of tomorrow. In math and science, our fourth graders are among the top students in the world. By eighth grade, they're in the middle of the pack. By 12th grade, U.S. students are scoring near the bottom of all industrialized nations. . . . The percentage of a population with a college degree is important, but so are sheer numbers. In 2001, India graduated almost a million more students from college than the United States did. China graduates twice as many students with bachelor's degrees as the U.S., and they have six times as many graduates majoring in engineering. In the international competition to have the biggest and best supply of knowledge workers, America is falling behind."

Friedman sounds the alarm with a call for diligence and fortitude - academically, politically, and economically. He sees a dangerous complacency, from Washington down through the public school system. Students are no longer motivated. "In China today, Bill Gates is Britney Spears. In America today, Britney Spears is Britney Spears -- and that is our problem."

Questions I wish Friedman had explored in further detail are:

1. When should countries do what benefits the global economy, and when should they look out for their own interests? (protectionism, tariffs, quotas, etc.)
2. What will a `flat world' mean to the world's poor? (those living in Haiti, Angola, Kazakhstan, etc.)
3. What cultural values (or absence thereof) are contributing to the West's loss of productivity, education, and excellence? (morality, truth, religion, meaning, hope?)
4. How will further globalization effect cultural distinctions? (Are we heading towards a universal melting pot?)
5. What will a `flat world' mean environmentally - particularly for those countries on the verge of an economic explosion?

An enlightening essay on the nature of the business world and how the global interconnectedness and outsourcing has leveled the playing field. Completely wrong, and based on an oversimplified and factually inaccurate premise, but well-written and enlightening. In Friedman's "flat" world, it's possible for a call center in India to take orders which then get processed by a shipping service in Indiana which forwards the order to a warehouse in Oakland that stores merchandise made from parts made in Taiwan and assembled in Malaysia. All this is written in such a way as to make the Corporate Executives of the world look like the good guys for somehow coming up with a win-win scenario whereby they bring jobs to third-world countries, at the same time saving themselves money while increasing their productivity and efficiency - a fine premise in the ideal, but hopelessly impractical on several realistic human levels.

The book is very well-written, but Friedman fails to take into account the realities surrounding the fact that in order for such a system to work with any kind of sustainability it needs to create jobs to replace the ones that have been outsourced. Friedman's answer to this is that creativity and inventiveness will take the place of the grunt-work that's been outsourced, an idea that looks good on paper but fails to consider that our society's most financially successful businesses have never invented or innovated anything, instead relying on finding new ways to produce an existing product in a way that's cheaper and faster than their nearest competitor - thus fostering an environment that's not very conducive to innovation. The developers of new technology rarely if ever are the ones to reap the majority of financial benefit from its sale. One cannot, therefore, draw any sort of connection whatsoever from the outsourcing of jobs to the creation of new ones through innovation. If anything, the opposite is true.

Friedman also fails to mention some fairly major flaws in human nature, including things like greed, laziness, and the tendency to make decisions based on emotion and loyalty rather than logic or practicality. There's also this pesky need for workers to continue to be able to support their families on ever-decreasing wages; the need to eat sort of gets in the way of his nice, neat little theory of how wonderfully global the new technology is. In Friedman's ideal world, the world's CEO's would all outsource their labor to countries where labor is cheaper and use the money they saved to create better, higher-paying jobs for all those displaced workers here stateside. Meanwhile, the third world countries would all use their new income from the influx of manufacturing jobs to improve their own standard of living. But this is oversimplified to the point of being absurd -- the CEO's are outsourcing their labor and pocketing the savings while they lay off the workers. The workers aren't going back to school to learn new, higher-paying careers (a Welder's not going to necessarily be able to go back and get a degree in Software Engineering just because that's what jobs are available anyway because he can't afford to go back and be a full-time student for 4 years while he's trying to support his family. The CEO's aren't paying for the re-education of their displaced workforce, instead they're buying homes in the Caribbean and outsourcing their HQ to the Cayman Islands so they don't have to pay taxes. Meanwhile, those third world countries are experiencing no recognizable increase in their standard of living, and they won't anytime soon -- the reason labor is so cheap in those countries is because their governments don't require employers to pay health benefits or any other kind of benefits. If employers paid for their employees to have a higher standard of living, the cost of doing business would increase no matter what country they're in. And since the sole reason corporations are outsourcing is to lower the overhead by using cheap labor, it doesn't make any sense for them to increase their cost of labor by paying for the same things they're required to pay for with American workers. Heck, we can't even get Wal-mart to pay worker's health benefits in this country, how can we expect them to pay for any such benefits in their cheap labor abroad. Really the only winners in this mess are the guys in the top echelons of the corporations, for whose often-unethical policies toward workers Mr. Friedman seems to come across more an apologist than an objective journalist.

Also, I've never heard anyone mention Bill Gates so many times and in such favorable terms in the course of a book on global economics; according to Friedman's revisionist version, it was Gates who invented the personal computer; Windows was the first and only user-friendly operating system according to this author. Case in point: there is a passage in the book that alludes to Microsoft's far-reaching vision regarding the internet and e-commerce. The truth is, Microsoft was caught completely off guard by the advancement of the Internet - Windows 3.0 had very little built-in networking capability; they had to release a special version called Windows for Workgroups when it was discovered that networks were starting to become status quo; The first release of Windows 95 had no built-in internet connectivity, and no web browser was included until Netscape came along, at which point Microsoft had to hurry up and figure out how to make their operating system work on the internet. Gates was even on record back then as saying that he didn't think the internet would ever really amount to much as far as how it would affect the way people used computers. But according to Friedman, Bill Gates was a far-reaching visionary who singlehandedly created the internet, e-commerce, and everything else we take for granted today. That should give you some idea as to the factual inaccuracies that permeate the book. For a more accurate background on the history of computers and the Internet, readers should buy a copy of In The Beginning Was The Command Line, by Neal Stephenson.

Near the end of the book, Friedman plays the 9/11 card. In a moment of wild speculation, he actually blames the terrorist attacks on the fact that the terrorists were from poor countries and were jealous of the prosperity that the Western World has had through globalization, and he puts forth the theory that if these people had had a McDonalds in their town and a couple of factories making Gap clothing, they wouldn't've become terrorists. Except that most of the terrorists were from Saudi Arabia, one of the richest countries in the world, a country that practically has a stranglehold on the world's corporate economy already. The terrorist attacks of 9/11 had nothing to do with corporate globalization and everything to do with the past 20 years of US foreign policy in the middle east. But hooray for us, we've got globalization, and if those poor terrorists over there had globalization too, maybe they wouldn't be terrorists. Puh-lease.

I have heard it said by others that Friedman's book looks at the overall "big picture" of globalization and not the individual details. However, as the saying goes, "the devil is in the details." Friedman's extoling of the virtues of globalization fails to take into account several key factors which, when considered, paint the globalization picture in an entirely different light. Clearly Friedman's vision of a flat earth won't come true until we solve the paradox of how to make humans into a race of mindless, overachieving, underpaid automatons who still somehow manage to think creatively enough to constantly invent enough new technology to create new jobs at the same rate as the old jobs are being outsourced.

Tom Friedman is a well connected journalist. His columns appear on the op-ed pages of the New York Times and his previous works LONGITUDES AND ATTITUDES and THE LEXUS AND THE OLIVE TREE are part of the "conventional wisdom" of most American decision makers. This new book, THE WORLD IS FLAT will also find its way into the "conventional wisdom." Unfortunately, it is at best a misdiagnosis of the factors that have lead to the ability to substitute labor across geographical boundaries. However, although it is as wrong as could be, many of our power elites will read or hear of this, and will base their decisions on the assumption that this book contains the truth. The reason that you should read it is that it is conventional wisdom and you are perhaps better off understanding this and how it is wrong.

Friedman's explanation is a simple one - the world has transformed from a three dimensional phenomenon, a sphere, to a two dimensional flat plane where there are no entry barriers into the labor market. So, a radiologist in Boston can be easily substituted for a radiologist in Bangalore. Oh, how it would be nice if it were this simple. But alas it is not. Friedman, I believe, is well intentioned, but he mistakenly believes that he can find the truth through anecdotes. So, his empirical evidence comes from stories of things that he does not understand instead of the use of reliable demographic and economic databases.

He believes that 10 exogenous forces can explain how "the world became flat." While doing this, he solely looks at the labor market and ignores the effects of the consumer, monetary, raw material/energy, and fixed investment markets. He cannot distinguish between a symptom and a cause. These 10 forces that he claims changed the labor markets are not causes but merely symptoms.

Friedman is a name dropper par excellence, and rubs elbows with the elite. Unfortunately for him, he cannot detect competence or incompetence. One reason that this book will not age well is that when he wrote it in 2004 he was rubbing elbows with the incompetent elites such as Carly Fiorina who botched the merger between Compaq and Hewlett Packard and Nobuyuki Idei, the incompetent chairman of Sony. He praises these folks to win their favor, but reading this in 2005, demonstrates how little he knows.

A major problem that Friedman ignores is the inability of any government to impartially referee our global economy. No country has good corporate governance laws, and the US is becoming increasing unable to protect both intellectual and physical property rights. This problem creates new barriers and instead of flattening the world, it adds new walls and new traps. Poor corporate governance promotes crony capitalism and not the meritocracy capitalism that Friedman thinks it is supporting. Just look at the disconnect between executive pay and performance as evidence that many incompetent corporate chieftains are keeping their jobs and continuing to make poor decisions. American law is ineffective, the inability to sentence Health South's Scrushy shows that Sarbanes Oxley is not working, and the inability to put Ken Lay, Michael Eisner, and Michael Ovitz in prison shows how little protection the share holders have. Things are worse in China, India, and Japan where "transparency" is not even a part of the vocabulary.

The book is filled with inconsistency. It derides the inflexibility of the European welfare state, but calls for an American safety net to protect those from globalization. He calls for the enactment of "Hillary care" but cannot explain the reason that it failed passage in 1993. He praise the Asian "rote learning" systems, but later on calls on American youth to think unconventionally. He is calling on the federal government to do contradictory things such as keep minimum wages and promote market efficiency.

America's increasing indebtedness is not given one sentence in this book. Not only are jobs being exported to Southeast Asia, but claims and control on American assets are also being transferred. Increasingly, the important capital allocations in America will be directed by foreign executives who will be even less accountable than the Bernie Ebbers and the Ken Lays.

In short, Friedman is not qualified to write on this topic, but like the incompetent overpaid executive that he hangs with, he will be over paid and over read. At best, we might be able to profit if we understand how this "conventional wisdom" is wrong and then short sell the companies whose leaders make bad decisions based on this wrong analysis.

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