October 04, 2006

Money Matters

Flat World

Columbus may have been the world's greatest entrepreneur: He set out not knowing where he was going, didn't know where he was when he got there … and did it all on someone else's dime. He succeeded in proving that the world is round, but six centuries later author Thomas Friedman gives us reason to believe that the world is rapidly being flattened.

In his fascinating book The World is Flat, Friedman lays out his version of the history of the 21st century. He sees us as being in the middle of a disruptive, dislocating technological revolution that is changing the world in profound ways . . . at warp speed.

Outsourcing takes on a whole new meaning according to Friedman. It is not about factories turning out products formerly made by American labor. It is about leveling the playing field by connecting together all the knowledge centers of the world in a collaborative process to innovate, build businesses, produce useful products and services, and raise the level of prosperity and innovation on a global scale.

But outsourcing is not simply jobs displaced across national borders. Friedman gives examples of how outsourcing is everywhere, permeating our entire economic and cultural fabric. For example, pull into a McDonald's off I-55 in Missouri and the voice speaking to you at the drive-in order window is not in the store, not even in the state, but hundreds of miles away in a call center.

The enterprising owner has figured out that by using one call center for a number of his franchises he can speed up the ordering and delivery process, allowing more cars to be served at a more efficient cost.

Call a JetBlue reservation number and you are likely to be speaking to a housewife in Salt Lake City, working from her home. JetBlue CEO, David Neeleman, calls it "home-sourcing." His airline employs over 400 agents, all working at home where they are 30 percent more productive, happier, more loyal, and have a lower attrition rate.

But it is on a global scale that outsourcing is contributing to the flattening of the world as knowledge and resources are being placed in the hands of the many, rather than the few, as was the case 20 years ago. As governments, businesses, and people communicate and interact, we are seeing the emergence of completely new social, political, and business models.

Friedman attributes this flattening process to 10 key events, the first being the tearing down of the Berlin Wall. As he so aptly puts it, "when the walls came down and the windows went up," the balance of power in the world tipped toward democracy with consensual, free-market-oriented governance, and away from those advocating authoritarian rule with centrally planned economies. He wryly notes that communism was a great system for making people equally poor while capitalism makes people unequally rich.

What's important is that this event allowed people with huge potential to climb up the ladder of personal success and "be all that they can be."

Nowhere is that more in evidence than in India, where the riches Columbus sought are rapidly being generated, albeit in a far different fashion than he envisioned.

When the British turned over their former colony to self-rule, Prime Minister Nehru looked north to communist Russia for guidance on running his country and economy. For years India struggled with a managed economy. By 1991, running out of hard currency, leaders opened the economy and turned to a more capitalistic model. Three years later their economy was growing at seven percent and an economic tiger was unleashed.

Today, India's economy is soaring due to technological innovation and services. According to a Business Week article, by year 2050 they will own 17% of the world's economy, next to a projected 26% for the U.S.

This has largely come about through the tech boom that has made possible sharing knowledge and communication on a worldwide level with people hungry to work hard and succeed.

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