The World Is Flat by Thomas L. Friedman – Book Summary

The world is flat today because the world is shrinking. And the technological changes are making it smaller every day. The new era of globalization and information technology boom is disrupting the old cultural, economic, and political models. New power dynamics are emerging. The flat world provides new growth opportunities, but it also poses new challenges for the nations and their citizens. Read a highly insightful analysis of the modern world.

What will you discover in the book:

• Evolution of a Flat World
• What caused the world to be flat?
• The unintended consequences
• The flat world and the developed nations?
• The flat world and the developing nations?
• Do’s and Don’ts of the Flat World.

 

1- The Evolution Of The World In The Era Of Globalization & IT

A new era has begun. The world is now becoming boundary-less. Forces of globalization aided by information technology are making fundamental changes in the social, political, and business models. From a command-control structure, the world is embracing a connect-collaborate mode. The walls of nationality, wealth and resource superiority are getting decimated, and a flat world has come to take its place.

In this world, we see businesses from developed nations searching for footholds in developing countries to lower costs and find new markets and the developing economies competing with each other to welcome these new opportunities. Technological changes are fuelling new engines of growth for nations. Indian IT companies are confidently contesting against the global giants, and China has become the factory of the world. Other developing countries are not far behind.

Technology has been the vital leveler of this flat world. Not just for the businesses but the people too. It has given a chance for a young woman in Asia or Africa to compete with the top students at a US university and learn at the same level as them. It is also creating opportunities for people to live a decent life in their own countries. This is a new world where equality is finally emerging.

But these changes bring new challenges in terms of layoffs and business closures. Cultural changes across the world are creating an angry and frustrated section of the population that is still clinging to the conservative world of the past. Terrorists are also able to use the same technology to collaborate and recruit from around the globe.
These adverse effects have resulted in pushback from the forces which have amalgamated themselves under the Anti-Globalisation banner. The primary challenge now is to understand and adapt to the flattening forces so that we create a balanced world.

 

2- The Evolution Of A Flat World

From the invention of the wheel to the steam engine and finally, to the internet, human progress has sustained the most with the technological improvements that bring the world closer. With each development, humans got closer, communicated quickly, and were able to spread the knowledge for mutual benefit.

By the turn of the nineteenth-century industrialization was in full force and that led to the rise of large corporations. This surge created a system of command and control which was hierarchical and centralized. This system perpetuated and remained a dominant force till the late 1980s, but a significant difference was that the large businesses had started to spread their tentacles across the world.

However, even with the rise of MNCs, there were huge disparities in the growth, and developmental levels within the world, and much of the world was far behind a small portion of the developed world. Huge barriers existed between nations, and there were large disparities in the culture and political systems of the world.

Fast forward to today, the world looks like a new place. Developing economies have started to gain importance with the BRICS considered to be the new growth engine of the world. Rapid technological progress has been made in all parts of the world. The world has become a highly connected place. The hierarchical command-control system has been replaced by a flat connect and collaborate system. Many large barriers of geography, politics, and culture are getting erased.

Large MNCs such as Amazon, Walmart, GE, or Dell have their supply chain present around the world from Japan to Brazil and from Australia to Sweden. New service-led businesses have come up, whether it be the vast outsourcing and software-led growth in India, Eastern Europe, and Russia.
There is also a considerable shift in the global work culture where even small businesses are competing with large companies, and freelancers and individuals are getting opportunities to work on large projects.

 

3- Causes That Prove The World Is Flat

In one word: technology. However, the answer is slightly more complicated. A lot of factors have contributed to the flattening of the world with technology as their bedrock. It all started with the advent of personal computers which in a sense democratized technology and brought more information to the hands of the people. This was also the time when Soviet Bloc was disintegrating, and the fall of the Berlin wall erased the political barriers in Europe. With smoother movement across borders, it became easy to collaborate and learn from each other.

Very soon the Internet proliferated, and the browser revolutionized the way people thought of the internet. New users began using the internet more creatively, and a chain of innovation started. New utilities and software to aid work started to develop, and businesses were flourishing around this development.

New standards started to emerge for bringing consistency in technological development. These standards allowed smaller businesses and individuals to collaborate in this movement. These informal collaborations also created Open Source Systems. A lot of content was now getting digitized for the world to use.

Businesses also realized the importance of becoming open and a lot of these companies took the opportunity to identify inefficient functions that can be outsourced. This created a massive IT/ITES industry in India and eastern Europe which had a broad base of technically qualified people ready to work at low prices. These services were a shot in the arm of the Indian economy.

Around the same time, the businesses in developed nations also started to move their manufacturing facilities to low-cost locations in China, South East Asia, and Central America. These offshoring opportunities helped many of these countries especially China to develop their manufacturing sector quickly and widely in the country.

Large supply chains emerged where MNCs were integrating many vendors from various countries to source their requirements efficiently. This was far more cost-effective and efficient from an economic standpoint.
These supply chains were aided by in-sourcing services provided by companies such as UPS, IBM, etc. Once they took over significant functions of the business to be executed by them, they became a part of the eco-system where close co-operation was possible.

The Dotcom boom created new businesses and services. But even as it busted, the expansion of these services has never stopped and with an increase in penetration levels across the world, companies such as Google, Yahoo, and Microsoft created an information revolution by allowing people to search and gather information even in far-flung places like Africa or Afghanistan.

Finally, the world became mobile, and it razed down many more walls and flattened the landscape where information is now widely accessible, and technology is more readily available.

We are living today in this flat world where technology has changed the way we operate, and we continuously improve the technology by using it.

 

4- The Consequences That Were Never Expected

When things change, it is favorable for some and unfavorable for others. While a flat world is mostly positive for the world, some constituents will feel the negative impact.

The employees who get laid off will have to find new employment elsewhere. Gone are the days of a guaranteed lifetime job with a decent income. Companies that are continually looking to lower their costs will get lower-cost employees in developing nations.

In low-cost destinations, many businesses are using cheap labor to avoid costs related to healthcare or retirement. Many are also not averse to the use of child labor and turn a blind eye to the malpractices conducted on their behalf.

The businesses also have to bear the brunt of competition from outside if they cannot relocate their facilities to low-cost destinations. Many new disruptions have wiped off some of the industries altogether.
There is also no check on the pollution and energy consumption in many low-cost manufacturing zones, which cut corners to remain competitive. Many companies have happily passed over the responsibilities from their hands for hefty profits. China is guzzling a massive amount of resources every year which is fuelling global inflation.

Similarly, as the Flat world significantly alters the social and cultural models across the world, one can find that a section of the population is not ready to leave the conservative culture of the past and the new changes have come as a shock for them. They are pushing back with force to save the old ways of life.

The technological advancement which has connected the world so well can also be used for cynical purposes. Terrorist groups, for example, use the internet very efficiently to create propaganda and recruit frustrated youth from across the world. Many young Muslims from Europe and America have gone to Iraq and Syria for waging a Jihad against western forces. The same techniques of collaboration and sourcing which are used by businesses to improve their operations have been used by terrorist groups who have created a supply chain that helps them to plan, fund, and orchestrate attacks.

Finally, geopolitical relationships are changing in the world. Many resource-rich nations such as Nigeria, Venezuela, and North Korea are being run by autocratic regimes that have funded their operations by selling natural resources and getting support at the international platforms from the countries in need of these resources. A case in point is the veto power used by China in favor of African nations and North Korea.

 

5- How Developed Nations Take Effect Of A Flat World

The new flat world brings new opportunities and challenges for the developed nations. On the one hand, they have found a new engine of growth and efficiency, and many large companies have been able to improve their profits significantly. There is also a severe challenge that they face from China, India, etc. who can compete on costs.

But there has been an enormous growth in innovation and idea-based businesses. Similarly, new jobs are getting created where specialized skills and value addition are required.

The main issue is the mismatch between the skills that are in demand and the quality of labor supply. There is an urgent need for creating a labor force that is either highly specialized or adaptable. Those who have specialized skills will have a stronghold on their job because the same cannot be replicated by others easily. An adaptable labor force, on the other hand, will be able to find new jobs in the economy with some amount of retraining and change.

Businesses also have to rethink their strategies in this new world because the protection they got from closed borders is not there anymore. They have to find their niche of differentiation or will have to collaborate with others to stay relevant.  

These challenges would require national policies to be reform-oriented. The leaders of these countries just have to look at the current situation to see that their dominance could be a thing of the past. There is a considerable decline in the number of students pursuing science and maths at higher levels due to which the number of engineers, doctors, and scientists is coming down in these countries. Similarly, there is a massive cut in the research and development expenditure incurred at the institutional levels.

Compare this to developing countries where the number of science and maths graduates is increasing every year, and the budgets for R&D are also going up. It will not be long before the developing countries will catch up with the developed nations and lead the world in technological and economic development.

Thus the need is for rethinking the reform process and making policies that take full advantage of the flat world. There should be specific incentives that push collaboration and inventiveness in the business.

 

6- How Developing Nations Take Effect Of A Flat World

For the developing nations, a flat world is a boon because it helps them to leapfrog to equality with developed countries. The developing countries which have embraced globalization and worked towards the development of more open economies have benefited the most from the changes that have taken place.

Huge cities are getting built in China to support the world demand for low-cost Chinese goods. The Chinese government has embraced capitalism and reaped the vast benefits of the market economy by opening its doors to the world. It has also taken significant steps to improve its soft infrastructure by putting a huge emphasis on education. India has also seen the large-scale development of software and outsourcing facilities.

A flat world helps both sides. Many large Indian companies such as Airtel, Bank of India, etc. have in fact awarded contracts to MNCs such as IBM, HP, etc. which are now managing the IT systems of these companies.

Over time new challenges are arising for developing nations. They cannot just rely on macro-level policies that embrace globalization alone. Now each of these countries is competing with other emerging nations for growth opportunities. The rising labor costs in India are pushing work to ASEAN and East European economies. China is eating away the Mexican and Egyptian lunch by supplying competitively to the USA and Europe. In fact, a large trade surplus is being created in favor of China who is providing a significant amount of goods to developing nations too.

This means that developing nations cannot rest or rely on low-cost labor in their country. They will have to become more skilled and remain competitive.

The critical point is that a lot of the population in these developing nations is still not able to capitalize on these opportunities because of the lack of infrastructure and lack of a proper regulatory environment. There is a need for developing educational and connectivity infrastructure which helps the rural population to connect with the world quickly.

To stimulate growth, these countries will have to create policies that promote entrepreneurship and innovation. Many of these countries rate low on the ease of doing business. There is a high level of corruption which is an intangible cost to the business. Economic reforms will have to deal with these issues too.

 

7- The Do’s & Don’ts Of A Flat World

Don’t Be An Ostrich:

There is no sense in trying to resist or ignore these changes because a flat world is an inevitable reality. Instead, look within and re-strategize. Find the areas of strength and work on them. For example, if you are a designer facing competition from freelancers worldwide. Access the global platforms and look for customers worldwide or increase your skills to find a niche of value addition.

 

Don’t Wait To Become Big To Perform Like Big One:

Now even the small companies can compete with big. Collaborate with smaller players in the ecosystem to compete with the big giants. Many companies have successfully done it. For example, Aramex created its proprietary tracking and support systems to compete with UPS and collaborated with many smaller logistics partners worldwide.

 

Listen To Your Consumers:

However big your business may be. Unless you integrate the customer into the process, it will always face competitive threats. Develop tools to interact with consumers.

 

Collaborate:

In a flat world, the business will have to collaborate both internally and externally. With increasing complexities in business, all companies should identify partners who excel in the areas which complement them and create synergies. Many pharmaceutical companies, for example, are collaborating with their counterparts in developing countries to improve the drug discovery process by outsourcing some parts of research and testing to them.

 

Outsource Strategically:

The main reason for outsourcing the business should not be to cut costs alone. They should also look for outsourcing partners who can bring higher levels of innovation and creativity to improve the process.

 

Conclusion Of The World Is Flat

Globalization and Technology have created a cycle of development where the social, economic, and political boundaries are fast disappearing. New channels of communication and collaboration have shifted the world from a primarily vertical world where hierarchical structures dominated to a flat world where it is effortless to collaborate and connect with other stakeholders.

A massive boom in technology has benefited the developing nations and developed nations alike where developed nation corporate profits have gone up significantly, and new infrastructure and employment growth has taken place in the developing countries.

But it has also come as a shock to those who could not adjust to it. These stakeholders who are not able to cope with the changes are pushing back against globalization. Unless the leaders take a pragmatic view of creating more access points and enablers to embrace these changes smoothly, they will remain uncompetitive and lose out to the countries which will exploit these opportunities.