Tuesday, November 20, 2007

Book Notes: The World Is Flat (Part 1)

I've been reading Thomas Friedman's book, The World Is Flat. It's been a real eye-opener. I'm planning on breaking this review / commentary into 2 parts: 1 on the "flatteners" and 1 on how individuals can deal with the flat world.

Here are the flatteners:
#1: 11/9/89: The New Age of Creativity: When the Walls Came Down and the Windows Went Up. This is the fall of the Berlin Wall. The flattening effect was the domino effect that ended up resulting in the world embracing capitalism.

#2: 8/9/95: The New Age of Connectivity: When the Web Went Around and Netscape Went Public. The invention of the Internet and the Web set the framework and the foundation for all of us to be able to interact across the planet in an instantaneous and graceful manner.

#3: Work Flow Software: In essence, the standardization of the various formats and platforms in which we communicate over the Internet allow us to be more efficient and more effectivel. I can send you a Microsoft Word document, and you can send me an Excel Spreadsheet. We can both look at the same JPGs or work on the same software through a CVS or Subversion repository. AJAX, HTML, & XML are all in this category as well.

#4: Uploading: The vast majority of humanity has become accustomed to being the recipients of information. We read books, magazines, learn through courses, watch TV, and listen to music. The development of the web allows us to all be publishers as well. I can start a Blog (just like this one!) that the world can see. Online communities form to allow people from across the globe to share their thoughts, feelings, and expertise on a seemingly infinite range of topics and projects. The development of the Apache web server through the Open Source Software movement is a prime example of this type of community. What's more, with Open Source software, everything that goes into a full release has been peer reviewed by some of the best and brightest developers in the community. Wikipedia is another famous project that demonstrates the power of Uploading.

#5: Outsourcing: Y2K. When Y2K troubled the world, there was a clear need for a cheap and effective fix. The tech bubble had spawned the laying of lots of transcontinental fiber optic lines, and this created very fast connectivity capabilities internationally. The result was that Indian (particularly those educated through India's Institutes of Technology (IIT)) engineers came to the rescue. American companies learned to work with India's engineers; they learned that practically anything that could be digitized could be outsourced at a fraction of the cost.

#6: Offshoring: Running with Gazelles, Eating with Lions. In other words, China. China continues to reduce the cost of manufactured goods all over the world. It is important to note that the book proposes that China is not a "lose-lose" situation for American workers. From pg. 146 of the book:
According to the US Commerce Department, nearly 90 percent of the output from US-owned offshore factories is sold to foreign consumers. [This] actually stimulates American exports. There is a variety of studies indicating that every dollar a company invests overseas in an offshore factory yields additional exports for its home country, because roughly one-third of global trade today is within multinational companies.
#7: Supply-Chaining: Eating Sushi in Arkansas. Wal-Mart's supply chain is the model for this flattener. While Wal-Mart is the largest retail company in the world, it does not actually make anything- it just sells other peoples products in a remarkably efficient way. Companies must take advantage of the best producers at the lowest price (to include manufacturing as well as transportation costs) from anywhere in the world. Technology allows companies to properly forecast demand and match it with supply (ex: RFID).

#8: Insourcing: What the Guys in Funny Brows Shorts Are Really Doing. The example here is UPS, but not what I'm used to. UPS has become a company that can reach into your company's business process and take care of the logistics, allowing you to focus on what your expertise is. The example that I thought was particularly insightful was the story of Toshiba laptops- when a laptop breaks, UPS picks it up, sends it to its Louisville hub, and UPS employees who are trained by by Toshiba fix it. This is how we can have a repaired computer back to us in 3 days (1 day to get it out, 1 day to fix it, 1 day to get it back). This flattener allows small companies to act with large presence, and large companies to have their complex supply chains managed for them. In some instances, companies don't even really do much other than innovate. When an order is placed for Nike shoes on their website, UPS handles the entire transaction, from picking out the shoes in a warehouse to delivering them to your door. UPS can even take care of the billing. Wow. What an eye-opener.

#9: In-Forming. Google, Yahoo!, & MSN Web Search. This one is obvious to me. With the maturation and development of the killer-app "Search", we have practically limitless information at our fingertips. Important too is to "be good"- in today's world, your name is more and more likely to come up on searches, so anything bad you do could turn up.

#10: The Steroids. Digital, Mobile, Personal, and Virtual. All of the flatteners seem to build on each other, and these new(er) technologies are the icing on the cake. By digitizing things, we can plug them into the world (ex: look at how digital cameras have changed photography and how MP3s are changing music). By making things mobile, we can tap into the world anywhere (ex: wireless internet connectivity and cell phones). By personalizing, our preferences and tastes are known (ex: Amazon book & Netflix movie recommendations). With virtualization, location becomes even less important (ex: VOIP & VPNs).

- John

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