This interview was occasioned by the award of a business book-of-the-year prize to Thomas Friedman's The World Is Flat from the Financial Times (UK) and Goldman Sachs. -- The World Is Flat, which has led best-seller lists during much of 2005, is a triumphal defense of globalization as the inevitable result of a "triple convergence" of forces: "a global, Web-enabled playing field . . . development of new ways to collaborate, . . . and the opening up of the societies of China, India, Russia, Eastern Europe, Latin America, and Central Asia" (Friedman, The World Is Flat: A Brief History of the Twenty-First Century [Farrar, Straus & Giroux, 2005], pp. 177-82). -- Friedman turns a blind eye to the increasing power of multinational corporations. -- In his rosy view, globalization is increasingly driven by individuals empowered by new possibilities. -- (He also has a realistic side: "I know the world is not flat," he says on p. 375.) -- Friedman's Achilles' heel is his blind commitment to Ricardos theory of comparative advantage, the theoretical underpinning justifying globalization as an economic project, which he regards as revealed truth. -- While he acknowledges there is currently intense debate over the status of this theory, he dismisses the evidence that the theory is no longer adequate: "Ricardo is still right" (p. 227). -- On this point, we admit that we have doubts. -- Another weakness of the book: Friedman has little to say about the consequences of impending Peak Oil, which renders precarious the complex supply chains based on value-added services, with products in all industries increasingly leveraged through competitive commoditization and the use of labor and services in emerging markets like India and China. -- And the rapidly increasing inequalities produced by globalization are the source of a host of evils. -- The genius of Friedman's position (and one of the reasons it has won the business-book-of-the-year award from the Financial Times) is that it fosters a climate conducive to corporate profit-making while also appealing to the deep-seated American commitment to the gospel of Horatio Alger. -- One of the secrets of its popular appeal is its stern "challenge" to Americans (especially young people) to get back to basics: ambition, the work ethic, and education, especially in science and engineering. -- In his interview with the Financial Times, all of the characteristics just mentioned are in evidence....
Business book of the year
By Andrew Hill
Financial Times (UK)
November 24, 2005
Thomas Friedman's book The World is Flat, a rumbustious account of the challenges and opportunities presented by globalization, was this week named winner of the inaugural Financial Times and Goldman Sachs Business Book of the Year Award.
Andrew Hill, the FT's Financial Editor, interviewed him about the evolution of his ideas since publication of the book, his perhaps inadvertent role as a management guru for the 21st century, and his plans for the future. This is an edited transcript of the interview.
Andrew Hill: Have you become more optimistic or more pessimistic about the implications of globalization since The World Is Flat was published?
Thomas Friedman: It's a good question. You catch me in Dallas. I'm at EDS, Ross Perot's old company, where I'm working on an updated version of the book. I'm going to produce sometime this spring a completely updated and expanded edition of the book because the whole subject is alive. So as soon as I finished this edition, I kept on writing and reporting.
Let me give you a tiny example. Three weeks ago, in the first week of November, the audio version of this book was the number one selling podcast album on Apple's iTunes, ahead of all kinds of rock and roll, rap, and whatever. That got me enormous juice with my teenage daughters. But what's really interesting is that when I started this book in March 2004, podcasting didn't exist. So here's a format that has emerged -- which I think is going to be a monster -- which didn't exist when I started this book. It wasn't like I started this book in 2000 or 1999: I started it in 2004. I finished it in December 2004 and podcasting didn't exist. Now the audio version of this book is number one selling podcast album for one day on Apple iTunes. And what's even more sort of interesting to me is: Who invented podcasting? Nobody. It was a kind of emerging application that just kind of emerged from the network. I really have come to appreciate more and more that the flat world is really a platform -- a global, web-enabled platform for multiple forms of sharing knowledge, work, innovation, and entertainment.
Wealth is going to go in the future to those countries, those companies, those individuals, those universities, those communities who get three things right. The infrastructure that connect with this platform, the education to innovate off this platform, so they can get the most out of it, and the government to kind of manage the flow between your community, your institution, your society, and this platform, that could be everything from tax policy to innovation, to law and order. What I believe more than ever is that this "flat world," this platform really is coming together: it's going to be the center of everything. That's the good news.
What I believe also, more than ever, is that this platform is a friend of Infosys [the Indian information technology company] as much as it's a friend of al-Qaeda -- that the bad guys are using this platform more than ever. All the reports that I read of rioting in France stressed how the different rioters were using instant messaging, SMS, the internet, to deploy people and we're seeing these really flat global supply chains for emerging forms of terrorism, where somebody in Jordan copies something done in Sharm El Sheikh and so on.
AH: It sounds to me as though you feel there's been a balanced evolution in the implications of globalization since the book has been published, including lots of new developments that have increased people's "connectedness."
TF: Exactly, and one of the points of this book is that globalization does two things. It allows the big to act really small. So it allows that big company to tailor things, customize things just for you. And it allows the small to act very big. That can be the small individual who starts a website and now can have a global network of customers and suppliers. But it also lets the small individual who wants to start a riot in France or create mayhem in Bali to do so. That's why the last chapter of the book is "11/9 versus 9/11." When you have this platform that so empowers individuals, what people imagine really matters. Whether it's the imagination of 11/9 -- the day the Berlin Wall came down -- or 9/11, the day the Twin Towers came down, I think is going to present more and more of a challenge to open societies.
AH: You write at one point in the book that you don't consider yourself to be a business writer. The *FT* and Goldman Sachs have named *The World Is Flat* business book of the year. And a number of our judges pointed out that they had already picked up the book themselves at companies that they were visiting or seen it on managers' desks. The book presents a very grand vision of what's happening in globalization, but are there in fact specific lessons that companies can draw from it? Is it the kind of book that people should pick up and say "I'm going to learn three things from this," or is it the kind of book whose conclusions should just sit at the back of business people's minds and inform their decisions?
TF: In a sense, you're asking "To what extent is the book saying 'how to' and to what extent is it saying 'what is.'" I wasn't trying to write a "how to" book and I don't see myself as the author of "Ten ways to profitability" or anything like that. It started on a personal level for me. I went to India and I went to Bangalore and I would see things -- everything from people tracing their lost luggage on Delta Airlines, people reading X-rays and doing tax returns from Americans from Bangalore. I was seeing things that I didn't understand, quite honestly; these were things that clearly had gone beyond the scope of my last book on globalization, The Lexus and the Olive Tree. When I, whose job is to explain things to readers of the New York Times, see things that I can't explain to myself, then I know I've got a problem, and I really felt a sense of crisis. At the end of filming the documentary that I talk about at the beginning of the book, I asked myself, "How did this happen? What did I miss? What is the underlying platform here that I don't understand?" That's really what triggered the book. So, at one level, the book is the journey I took trying to answer that question. I hope that in answering that question for myself, I provide a way for average people to answer it, people who are, I think, vexed by some of the same issues, but also people in the business world.
The reaction to the book falls into two broad areas. I've got tons of mail from educators about just the issue I've raised: the challenge posed to how we raise our kids, how we teach them, how we educate them in a world where so many more educated kids are going to be able to compete with your kids and mine. That's a big part of what drives the book. Parents have said to me, "My daughter is studying Chinese -- she's going to be okay, right?" And I say, "Well, not exactly. There is no magic elixir here." The concern that my kids aren't going to live as well as I do, when I was sure that I was going to live better than my parents, is a real undertow, at least in America and I think in Western developed countries. That is one issue that's driven the book.
The other area that specifically applies to business is simply how to think about what this flat-world platform means for how we innovate and how we collaborate. I'm here at EDS in Dallas because what I'm focused on right now is trying to understand who is going to be in "the new middle class." In the flat world, as I say in the book, everyone wants to be an "untouchable" -- someone whose job cannot be outsourced. In the book I talk about two categories of untouchables. The people who are specialists -- Michael Jordan, Madonna, your cardiac surgeon: they're not going to be outsourced or automated. Then there are people who are really localized -- your dentist, the guy who collects the garbage, the nurse at the clinic, the chef, the waiter. They're also not going to be outsourced. But in between are more and more jobs that are either going to be subject to some degree, if not in totality, to automation and outsourcing. Those were the jobs of the middle class. They were both blue-collar jobs and white-collar jobs. So the question I'm asking myself now -- which is implicit in this edition of the book and which I'm going to drive even more in the next -- is What will be the new middle? Who will be the new middle class, what will be the new middle class jobs in a flat world? What I'm doing is working backwards. So I come to EDS and I say, "Who are you hiring, who has jobs here?" I look at all these people with jobs and ask "Who are these people, what do they do?" Then I work backwards and go to universities and say: "To what extent are you changing your curriculum and education to train people for these jobs of the new middle?" That's where the first group I talk about -- people worried about education -- meet the business side.
So I don't pretend this is a "how to" book and that if you read it there's going to be ten things you're going to pick up to take down to the shop floor. But I am convinced that if you read it you'll understand what world you're living in, both as a parent and as a business executive or entrepreneur -- and I think that has value.
AH: Lloyd Blankfein [president and chief operating officer of Goldman Sachs], one of the book award judges, said during the shortlist judging session that your book made him feel he had to take his children out of school in America and put them into school in China or India. The question, if you're a teacher or indeed a manager on a shorter timescale, is: "The world is changing so quickly -- how should I adapt my strategy? Can I possibly afford to take a bet on the future, if it is changing that quickly? Isn't it safer to stand back and wait and see if I can ride the wave?"
TF: Well, some would say that there were some big computer companies who said that about search. And that wave -- in the form of Google -- came along so far that they completely missed it and are playing catch-up. I have a friend of mine who likes to say that when the world is flat, you're always in beta -- that is, you're constantly testing out new ideas. Here at EDS, they manage the computer systems of a lot of different companies around the world. So who are the new engineers they're hiring? They're not just people who can leverage technology. The machine can do a lot more things, and they can do the really high-order tasks. But they are people who are well-trained in the business not only of EDS but in the business of EDS's customers. They can not only solve problems when they come up, they can actually design new solutions on the fly: that's how this company creates value. Because more and more businesses now are part of supply chains, you have to be able to design solutions not only for your customer, so his business works well, but, because the world is flat, to design solutions for your customer's customers -- and that's really where a lot of the best jobs are going to go. The principle behind that is an ability to think horizontally, to connect this with that and produce a third thing. That's really the common denominator in a lot of these new jobs. It's being able to, say, take computer science and biology to be a "bio-medical engineer". It's being able to connect computer science and communication to be manager of digital content for the BBC or CNN. It's really the ability to synthesize different things.
I'm not a business reporter but I started out as a business reporter at the *Times*. I have a certain basic knowledge of business and finance and economics. I also have a certain basic knowledge of technology and a basic knowledge of ethnic conflicts from my time in the Middle East, and a basic knowledge of, say, foreign policy from my time covering the State Department. And my value add is not in any one of those particular, it is in synthesizing them -- in this case in the form of this book. I'm not going to brag here but this is what I do: I'm trying to synthesize these different things to provide a level of insight that I couldn't provide if I just had one of them.
AH: Isn't the corollary of everything being in test mode, beta mode, that we need to brace ourselves for more frequent failure? Particularly in developed countries, are we sufficiently well prepared for that possibility of failure?
TF: At the New York Times, we started this thing called Times Select. We're now charging for content of certain parts of the paper, including the columnists. I was very ambivalent when this came up. On the one hand, I understand the world my newspaper is operating in and I want them to make money. And I understand we're caught between kind of a paper platform and a digital platform. But at the same time, I also knew that once we did this it was surely going to limit the scope and reach of all the columnists. But I basically said to myself [and] told anyone at the paper that asked me, "We've got to try it, we've got to kind of jump into this pool to see what happens. This is a complete beta innovation. You can test this out and do focus groups as much as you want but you're never going to know until you try it." And this is a perfect example of a media company, caught between these two platforms, really taking a gamble a leap in hopes that we'll find dry land on the other side, that will sustain the business of the newspaper of the future.
AH: But you and Paul Krugman and Maureen Dowd and other New York Times columnists, whether that gamble succeeds or fails, will always have a franchise you can play on. I'm wondering about the impact on graduates coming out of universities in France or Germany or the United States and thinking to themselves, "I want to succeed but am I prepared to fail?"
TF: It's a good point and I think it's really true. Again I'll just go back. I didn't know what was going to happen with this book. I'm a foreign affairs columnist. I'm thrilled I won the business book award. This book is part business, part geo-politics, part technology. The best advice I ever got as a columnist was from one of my predecessors, Tom Wicker, who said, "Don't be afraid to be wrong otherwise you'll never be right. You'll never be ahead of the pack." And I think that's really true in business today even more. You want to reduce the chance of failure and you don't want to bet the firm on any one thing.
I think there are two skills that you really, really need in a flat world. One is the ability to learn how to learn -- that's really, really important because it's really not what you know, it's how you learn, because what you know today will be out of date tomorrow. So therefore how you learn, the ability to learn how to learn, to absorb and adopt new skills is really important. The second thing is an idea that comes from the guy whose book I cited in today's FT as my favourite business book, Dan Pink. It's a book called A Whole New Mind. Dan basically argues you've got your left brain, you've got your right brain. In your left brain, there's all the kind of low repetitive kind of stuff. Your right brain is the creative, empathetic, storytelling, innovative side. And Dan's basic argument in my words is that when the world gets flat, everything on the left side of your brain is going to get automated or outsourced. It's going to be a right brain world. Therefore, how you both nurture your own right brain and nurture the right brain of your employees as an employer, or your students as a government, how you nurture the really intangible, creative, personalized things you bring to any job -- that's really where the value is going. Those old mass-production jobs, those are going to be automated and outsourced more and more.
AH: You have a whole chapter about how serious the challenges of globalization are, called "This is not a test." Business people may feel, after reading the book, "I've only really got one shot to get this right and if I don't I'm going to be swamped by this new world."
TF: I disagree with you on that, Andrew. Look at the piece that appeared in the FT just two days ago on Web 2.0. I thought it was a really good piece. Let me give you an example. I was in Shanghai three weeks ago. I interviewed the guy who now has the mostly popular podcasting site in China and this guy built his entire podcast site basically from free software. He went in six months from zero to 100,000 subscribers, just got a little venture capital from America. So, what is that about? On this platform, you can innovate so much more cheaply and this, of course, is both what's scary to big companies -- the FT article mentioned Microsoft. But also what is really exciting is that big companies can find ways to encourage and incentivize their people to do that. At Google, they have what they call "Google time," where basically you have 10 or 20 per cent of your time where you can just work on your own thing. This platform has on it so much free software that I can start things so much more cheaply. That's what's so cool about it, you don't need this huge amount of capital any more.
I think that's one thing the business leader can take from this. Given the amount of free software, the low cost of fiber optic transmission, the low cost of computing power and storage -- man, you can do so many "beta" things. If you have the employees, you can incentivize them to do that. That's why I say we're in this phase of innovation on steroids. The next great breakthrough in medicine, as Marc Andreesen says in a book, could come from a 17-year-old in Romania who downloads the human genome on their cellphone iPod. That's what I find really exciting about this new world and it's one of the things that I think the anti-globalization crowd doesn't understand. And it's why people in China and India, so many of them are excited about this.
AH: Do companies, in the U.S. in particular have such an advantage over the developing world that the gap will never be narrowed between developing and developed countries?
TF: I think you're absolutely right that they do have an advantage but I think the gap can be narrowed. I don't think it's inevitable, but it can be narrowed and it is being narrowed. A lot of our advantage, I do feel this even more so now, is in intangible things. It's intellectual property laws, it's in research universities that are very free and so people spin off all kinds of ideas. It's in venture capital, very sophisticated. We can take those ideas, like at Google, and turn them into products and public companies very quickly. I think China and India -- let's talk about the two biggest -- they will get that, but right now they're about a good 10 to 15 years behind. Something that's very important and is a key link in this is venture capital: having both the transparent markets but also the people who understand and can work at the interface between research universities and public markets. It sounds easy, but it actually turns out to be a lot more difficult than it sounds. That's really important. So it's those kinds of advantages. But, in 20 years, when the next generation of both business and political leaders in China will have been trained in America or the U.K. or somewhere in continental Europe -- then I think that will change.
AH: Perhaps at that point the gap or the distinction between the developed and the developing doesn't matter in any case, because of the crossover between the two.
TF: Sir John Rose of Rolls-Royce said something to me -- it's not in the book but it'll be in the update. He said, "You know, I think we're going move from developing, developed, and under-developed countries to a category of smart, smarter, and smartest countries and smart, smarter, and smartest communities," because you could have an under-developed country with a really smart community like a Bangalore or a Chennai or a Hyderabad.
AH: Who will end up doing the menial tasks that can't be automated?
TF: We still are going to need people to wait on tables, to clean dishes, to do physical work, and we're still going to need plumbers and electricians. The challenge for any society, it seems to me, is when you educate more people and you move them up into the knowledge world where they can get some of the more complex tasks, you also shrink the pool of people. You shrink the pool of plumbers and you shrink the pool of people who collect garbage and of nannies, and when you do that you raise their wages. So a plumber in New York City might cost you $100 an hour -- that's a good thing. I'm glad plumbers can make $100 an hour and I hope people who collect the garbage will make $25 an hour. As long as we keep educating more people and moving them up the knowledge ladder, we actually shrink the pool at the lower end of the knowledge spectrum. The danger is, if you don't do that and you expand the pool at the lower end then their wages go down and that becomes socially divisive. The middle class is so important to the foundation of every democracy. To me one of the real big political questions is, Who will be the new middle class? Because if we go from a bell jar kind of economy with a big middle class to a barbell economy where you have a big top and a big bottom and not much in the middle, that will have real implications for democracy.
AH: How has this book changed you? I know you are in great demand from companies to talk to companies about the implications of this. Are you comfortable, even though you say in the book that you are not a business writer, becoming a management guru, a Tom Peters of the 21st century, or is that not what you want to do?
TF: No it's not, and it's not really how I either see myself or present myself. I'm a kind of IR person -- international relations. I'm still Tom Friedman, foreign affairs columnist. Hey, I'm thrilled this is a business book award and I'm thrilled that people in the business community value it. But I wrote this book so I would have a lens on how to understand the world and so I could be a foreign affairs columnist. What I discovered though and I learned this with *Lexus and the Olive Tree* is that if you don't understand these kinds of systems, if you don't understand what companies are doing, what platform they're working on, you're not only missing the business world, you're also missing the terrorism world. I'd like to think this book could win the best book on terrorism award -- you know what I mean? I think it's only if you understand the platform the underlying platform -- that business is working off, that educators are working off and that Osama bin Laden is working off -- it's the only way you're going to be a good foreign affairs columnist.
So I do not see myself as a management guru. I'm glad if people in that community use it. But I know people in the intelligence world are using it. I know people in our armed forces are using it. I really saw myself as writing a book on foreign policy. What is the new platform that foreign policy is on? To understand that platform though you've got to understand the technology of it, you've got to understand the economics of it and you also have to understand who is driving it forward, because it's not static. If I believe this platform is the center of everything, but I also believe it's not static, then I darn well better come down to EDS and General Motors and IBM and Microsoft and Google, and understand where they're going, because these are the guys who are driving the platform forward. So I'm always befuddled when critics say, "Oh, Friedman's made corporate CEOs the main actors in this drama of global affairs." I haven't made them the main actor of global affairs; they are the actors driving the platform forward and it is the platform, this flat-world platform, on which people can innovate, create, work, collaborate. Which I think is more international relations than anything else.
AH: I want to take you up on your "Dell Theory of Conflict Prevention," which I realize is partly tongue in cheek. Your point is that two countries that are part of a global supply chain will never fight a war against each other . . .
TF: Or, if they do, the price they will pay will be 10 times what they gain from being part of it. The second half of that theory is important.
AH: Yes, the second half is obviously true. I just wonder whether it's the other way round. Clearly a company like Dell has chosen to source its materials from countries that are less likely to be involved in conflict -- so have you not got the cart before the horse on that point?
TF: I would argue that in the case of China, Taiwan, I've got the sequence is right. Michael Dell went into China knowing that in some ways the straits of Taiwan were the most dangerous place in the world. He was ready to make his bet that China would understand the Dell theory. He even says in the book, he's had conversations with them about just that. Dell took a chance and, in doing so, embedded China in the supply chain. But it isn't as though Dell just put it out there and then is indifferent to that factory. He's in an ongoing dialogue with the Chinese. He has confidence that they understand the implications of it and, if they don't, he's always ready to explain it to them.
AH: Do you expect to be able to take a break after doing the next edition or will you forever be condemned to write about globalization now?
TF: It's been suggested to me that we actually turn the book into an open source product. Just put it up on the web like a Wikipedia and let people add to it. That may be what I'll do down the road. There's a lot of intellectual property issues around it, sure. But it's something I'm thinking about: actually to make it a totally flat book and completely open source and let people, after I get done with this edition, just write the next edition.
AH: I guess that Allen Lane and Farrar Straus [Giroux, publishers of the book] might have something to say about that. . . .
TF: [laughing] "And, when I asked him, Friedman just laughed. . . ."
AH: Thanks very much for talking about it.