Transcript of Flattening World Challenges Imagination

Nayan Chanda: We are pleased to have in our studios Thomas L. Friedman, the foreign affairs columnist of “The New York Times.” Welcome back, Tom.

Thomas Friedman: Great to be here, great to be here at my favorite website, globalization.

Chanda: I was wondering if you could tell me about the new version of your book “The World is Flat.”

Friedman: I’m coming out with the 3.0 edition which will be out in August, it will be paperback finally, and I’ve added I would say three major sections: first I redid a chapter on kind of rules for business operating in the flat world and I really built it on what I consider now to be the iron rule of the flat world. And the iron business rule of the flat world that applies to more than just business I would argue is this . . . Because when the world gets this flat, when so many people have this much productivity, and this many distributive tools of innovation and collaboration, if you have an idea, Nayan, promise me you’ll do it, because someone in Slovenia will. Because there’s too much education, too much knowledge, too much connectivity and too much distributive tools of innovation – too much in inverted commas, I think it’s wonderful – that whatever can be done, will be done.

And then what I do is actually give a whole set of examples of the incredible mix ‘em match ‘em combinations that people are creating out of nowhere to create global companies. I give you one example I cite: South Sioux City, Nebraska. I talk about a company out there that imports the machine from Korea that make pre-fab walls along with the insulation, that makes the insulation in the walls together. Evidently there’s a great efficiency in that. They then sell this machine to Kuwait. Well that in itself is interesting, they import them, they add some doodads, they sell them to Kuwait. But, I asked them, how do you communicate with the Kuwaitis? Very interesting, in South Sioux City, Nebraska there’s an Indian tribe called the Winnebago Indians. The Winnebago Indians have a casino, as many American-Indian tribes do, called Winnevegas. Winnevegas Casino spun off all kinds of cash. So the Winnebago Indians used some of the cash to start a development company, partly to provide employment for young Indians. One of the things they started was an ad agency. The ad agency of the Winnebago Indians writes the Arabic brochures, getting an Arabic speaker obviously to help them, for the South Sioux City, Nebraska, company to import the machine from Korea to add the doodads in South Sioux City to export it to Kuwait. That’s someone who understands, Nayan, that whatever can be done will be done.

Chanda: It is not just anything that could be done online, it is actually real matter.

Friedman: Exactly, it’s both atoms and electrons and digits basically. And so you’ve …, I’ve got a lot of examples. I talk about the Indian outsourcing company Satyam, one of the big Indian outsourcing companies, which has begun a program through its foundation actually where maybe a major American company like GE outsources work to Satyam, Satyam now outsources part of that work to Indian villages. Because they discovered that there’s an end of that work which is relatively simply but that can be very high value added for an Indian villager, there’s enough educated personnel now in an Indian village, as you know, can be 5,000 people, and enough technology that the outsourcee can become the outsourcer. So what’s actually going on in the world, Nayan, and I think, I’m not sure economists have fully captured this, is that there’s the incredible very individual mix-‘em match-‘em combinations that people starting as individuals or small groups are doing. And I think it’s actually driving the global economy and a lot more small business than people realize.

Chanda: People talk about globalization as corporate driven, but what you are telling me is that it is driven by a lot of people, individuals and small companies.

Friedman: Exactly, and one of the lines I have in the updated version of the book is that we tend to think about competition as competition between countries or competition between companies. Now what I’m actually saying is that when the world is flat, the biggest competition is between you and your imagination. It’s really between you and your, because, if whatever can be done will be done, the biggest competition is between you and your imagination. So imagine, what can I do? And the idea that it’s all multinational, that it’s all big corporate, well that is going on, but the other is going on just as well.

Chanda: Because laying the infrastructure through which these transactions take place requires a lot of investment, is where the multinationals come in.

Friedman: That’s where they come in, and in this world, have no doubt, the big can act really big and really small, you know. There’s a wonderful, I added actually an ad for UBS, you know, bank, my stockbroker’s at UBS. I was calling him on the phone one day, and I was put on hold, and there’s the loop of an ad going over and over and it says, I think I’ve got this right, “UBS: our offices are everywhere and right next to you.” And it’s this idea that they can operate globally but also really micro-locally, and serve you as an individual. And so the big can act really small, but the small can act really big. And both are happening.

Chanda: Now, in the image you present, is that it is really growing and becoming more intensified and yet judging by what we read in the American press, there is a growing concern that this is going to lead to more and more job loss. And recently “The Wall Street Journal” had a piece in which it quotes Alan Blinder, the former Clinton economic advisor, as saying that up to 40 million jobs, American jobs, are going to be lost because of outsourcing. And that is a pretty important piece of news in an election year. So how do you see this panning out?

Friedman: Well I think Alan is on to something. Alan is someone who, in my experience and in my conversations with him, has understood the implications of the flat world as well as any, if not better than any other economist. And he’s understood that when this much work can be made fungible, digitized, that it will go wherever it can go. It’ll be like water, it’ll find its natural, most productive and efficient point, and that’s the flat world. And I think what Alan has contributed to the discussion is actually a very careful analysis of every job and even slices of different jobs, whether it’s lawyering or financial services or design, and saying “this slice, now, is so digitizable, it’s transferable” and that means if it can be done, it will be done.

Chanda: He has analyzed 815 categories of jobs.

Friedman: I think it’s very interesting what he has done and I would urge people to look at that.

Chanda: So the question then is, what does one do to cope with this possible job loss, especially the middle class or educated class, which is new in America, blue-collar jobs have been lost since the 1970s, but this is something new.

Friedman: The key thing is to know what world you’re living in. And one of the things I’ve done in the updated version of the book… is what I call the new middle. We know what the old middle-class jobs were. A lot of those were blue-collar jobs, but what are going to be the new middle jobs? I think there are new middle jobs. And I actually created a category, a list of nine, they’re broad categories, they aren’t, you know, architect for Novell software, but broad categories that really people should think about as they think about the job market. And I think if you can fit into one of those categories, you’re going to be fine. Now, at both ends, there are jobs that are going to be fixed. At one end are people who are really special and specialized: Michael Jordan, J.K. Rowling, your brain surgeon, no problem, they’re safe. They’re not going to be outsourced or digitized. At the other end are people who are localized and anchored: your butcher, your baker, your candlestick maker, this camera-man here until they get a robotic camera, so they’re all fine.

But in between, there are a lot of jobs which are going to sort of come in and out of what I would say the middle class. And, as you think about them, you want to try to be in one of these categories. I’ll go through very quickly, I don’t know if I can remember all nine off the top of my head, but great collaborators, people who can collaborate over 24/7. Great leveragers, people who can leverage technology so that one person can do the job of 20 rather than 20 doing the job of one. Great localizers, people who can take the power of the flat world and create a local small business out of it – the eBay entrepreneur or the sports bar owner that suddenly discovered he can have 25 big-screen TVs in his bar and have curling from Sweden and figure-skating from Japan, doesn’t have to have just NFL Monday Night Football. Great, this is going to be your salvation, Nayan, and hopefully mine, great explainers, because when the world gets this complex, whether you’re a manager, a teacher, a professor, or a real estate agent who can do modeling, there’s going to be huge, huge demand for people who can explain. Great adapters – people who are simply good at adapting to whatever new, I build all these around individuals, new technologies that come along. Another category, math lovers. Math is going to be so important because in a world where everything’s digitized, that means everything’s been reduced whether it’s words, photos, data, spreadsheets, to ones and zeroes. Well if it’s all in ones and zeroes what does that mean? It’s all analyzable by algorithms, and that’s why, of course, Google is just an algorithm, so many advertising campaigns, marketing campaigns, will be built on math now, rather than intuition necessarily of someone. So there’s going to be huge great opportunities in math. One other category I call passionate personalizers. If you can bring a passionate personal touch to any new middle job, it won’t be outsourced or digitized. I build that around a guy who sells lemonade outside Camden Yards, Baltimore’s stadium. And he doesn’t just sell the lemonade, he does a jig, he does a dance, he sings a song, stands on his head, high-fives you, I always notice at the end of the game, Nayan, he’s got a wad of tips ten times thicker than anyone else in the stadium, because he took a vanilla job selling lemonade at Camden Yards, which is water, sugar, with a lemon floating in it – it doesn’t get any more vanilla than that – and he put a personal passionate touch on it. Another category, Nayan, anything green. Tell your kids, anything green. Because when the world is flat and 3 billion new consumers walk onto the flat world all with their own version of the American dream – a house, a car, a toaster, a microwave, a refrigerator, if we don’t find a cleaner, greener way to power their aspirations, we’re going to burn up, heat up, choke up the planet faster than even Al Gore predicts. What does that mean? It means green design, green consulting, green manufacturing, green science, is going to have a huge new middle opportunity.

Chanda: That’s one area where perhaps globalization actually comes to help create new jobs, because this global concern about climate change is creating the condition where priorities are given to the climate aspect of any venture, and this opens the possibility for innovation and new jobs that didn’t exist before.

Friedman: Well you’re always on to things, Nayan, you’re always right on the cutting edge. So I’ve just finished a magazine piece for the NYT which is going to be out April 15 called “Green is the new red white and blue,” and we’ve got a documentary version of it coming out on the Discovery Channel on April 21st, Saturday night at 9pm, and one of the points I make is exactly that, and you know what I build it around, the story? I build it around GE Transportation. GE Transportation sounds like a bland name, it’s a company located in Erie, Pennsylvania, middle of the American Rust-Belt. Erie, Pennsylvania, Nayan, has a trade surplus with Mexico and China. You say, how can that be? Middle of the Rust Belt; these are blue-collar jobs, how is that? You know what GE Transportation makes? It makes choo-choo trains, it makes locomotives. But GE Transportation sells locomotives to a railroad country called China, even though China has a locomotive product that is 30 percent cheaper because of its cheap labor. How is that? Because GE’s is so energy efficient on a total operating-cost basis, it can out-compete the cheap labor Chinese. Now, if you go to GE Transportation, what their manager will tell you is that it looks like a dilapidated old factory. Inside, he says, we’re a knowledge camp. Because green now becomes a value, the only way that you can get green is by applying enormous amounts of knowledge. What do we have, what is our value-added? We can apply not cheap labor, but knowledge to things. And when green becomes a new value, the ability for us to apply knowledge to it becomes a huge competitive advantage. And that’s what people need to understand.

Chanda: The other aspect of globalization, which is that globalization is actually making people far more aware of the issues of climate change than it would be otherwise possible. In fact the story that you recounted is something that is perhaps worth telling our audience.

Friedman: There’s actually two things that globalization … well three things: One is that the flat world is bringing 3 billion more people from low-impact environmental lifestyles to high-impact environmental lifestyles, as they buy cars, refrigerators and microwaves, so that is intensifying climate change, from China, from India, from Brazil. That’s going on one track. But another thing that’s happening is that people are also becoming aware it’s one world. It’s not that China’s my backyard, the EPA, the American Environmental Protection Agency, has concluded that 25 percent of the polluting matter in the air above Los Angeles on some days comes from Asia, comes from factories in China or desertification and sandstorms kicked up in Asia and brought over by atmospheric winds. But the last thing that’s going on is that the world gets this flat. Social activists, environmentalists, who want to bring pressure on bad actors, now have enormous leverage to do so. And that is the story of TXU, the Texas power company that said we’re going to build more coal-fired power plants, that we’re going to build eleven, in your face, pal, and I’ve got the governor of Texas, Rick Perry, who’s approved it. That’s what TXU did. Well, it turns out that Kohlberg Kravis Roberts, a big buyout firm, and TPG, another buyout firm, decided they were going to buy TXU. And they put $45 billion on the table basically, $32 billion and about $13 billion in debt assumption, and the whole deal was held up, the whole deal was held up, Nayan, by two people who had no money on the table. Environmental Defense and the Natural Resources Defense Council, who are brought in by the buyers…

Chanda: These are NGOs…

Friedman: These are NGOs, environmental NGOs who are brought in by the buyer who said I don’t want to buy this company because you environmentalists have been using the internet to run a campaign against them and we don’t want the trouble. So we want to buy this company, and they had an almost marathon, an almost day-long negotiation, at the Mandarin Hotel in San Francisco to sort out the whole deal, and the people whose approval made the deal possible were the only two people who had no money on the table – the two environmentalists.

Chanda: But they had the power of the internet behind them.

Friedman: The power of the flat world and the internet that they could leverage and the buyers did not want to take on that power.

Chanda: The same thing is happening for instance with Starbucks. Starbucks is a different company today than it was ten years ago.

Friedman: Wal-Mart the same thing.

Chanda: They’re responding to…

Friedman: And that’s one of the new chapters that I actually have in the book. The chapter’s called “If it’s not happening, it’s because you’re not doing it.” And it’s really addressed to young people, it’s about social entrepreneurship and activists, and it’s basically saying, look, when the world’s this flat, you care about an issue, whether it’s helping the poor or stopping genocide in Darfur, well if it’s not happening, it’s because you’re not doing it. Because you can do it. You could be organizing a website, you could be organizing a web campaign, you could be tapping a global constituency and mobilizing it for your cause, if you do it, if you’ve got merit on your side and can make a compelling argument. So if it’s not happening, it’s because you’re not doing it. And the chapter’s built around a bunch of examples. I’ve got one other new chapter which is called “What happens when we all have dogs’ hearing?” And what it’s about is in some ways the flip side; it’s about a world where all these individuals are blogging, podcasting, YouTubing, creating their own content, as individuals, and search is getting more perfect at the same time-Google, Technorati.com. Now what happens, Nayan, in a world where everyone’s creating their own content over here and search is getting more perfect over here. What it means is, I can go to Google now and I can put in “Nayan Chanda” and hit “I’m feeling lucky.” And I can see everything written about you. I can see everything blogged about you on Technorati.com. What does that mean, Nayan? What it means is, we can all now hear everything whispered about us. What does that mean? We all have dogs’ hearing. And the social implications of that are going to be, I think, profound, so I’ve written a chapter on that as well.

Chanda: That is something that is going to come as the internet spreads. Right now, about 100 million, about a billion people are connected, out of 6 billion. So it’s still one-sixth of the world that’s connected. And as the internet spreads, the dogs’ hearing impact…

Friedman: Is getting more and more. You’re going to be able to hear everything whispered about you.

Chanda: The other question, though, Tom, is you mentioned Darfur. Darfur is the kind of tragedy, which it looks like the world cannot do anything about it. And now what is going on in Zimbabwe. So, how, as an international observer of long standing, how do you see these two countries getting away with murder, how is it possible in this flat planet?

Friedman: Literally they’re getting away with murder. And in some ways it’s a part of the flat world, in some not, when in the case of Sudan, it has this resource called oil. China, I think, is the biggest shareholder in the national Sudan oil company, or one of them. And Sudan hides behind and uses that, the threat of cutting off these oil contracts, or just the leverage it enjoys from that in order to buy itself protection. And then you have all these sovereignty issues, oh my God, you know, so it seems to me this is one of those cases where Africa should be taking the lead and is not. And should be basically saying to Mugabe, you’re out of the club. What you are doing to abuse your people, what you, Sudanese government, are allowing by way of mass murder in your borders, simply puts you out of the club, and there is no free pass because of sovereignty. I think it’s got to start with Africa doing that. Lord knows, if Africa did that the whole world would pile in, but if Africa’s not ready to do that, if it’s ready to do the opposite-South Africa’s been protecting Mugabe, we know that, and the Arab world has been protecting Sudan and prevented a UN mandate. And yes, we, the US, could fly in troops and conceivably stop this genocide, but given what’s going on in Iraq now, that’s not likely to happen.

Chanda: The US’s ability to act in the world has been greatly circumscribed. If you remember, when Colin Powell called what’s going on in Sudan as genocide, nothing happened. In older times, when the US pronounces that a country is performing genocide, that would have a huge impact.

Friedman: Look what’s going on today as we speak: 15 British sailors have been abducted. Iran claims they strayed into Iranian territorial waters, and were snatched by the Revolutionary Guards and are in Tehran, maybe it will be resolved, maybe not. But this has gone on for a week now. And what really strikes me about watching that story, there’s two things: One is, Nayan, if I ever get abducted, please don’t call the EU to help me out, okay? Here’s Great Britain, I mean, they’re a member of the EU, and why are they fighting this alone. I mean, to me, in 24 hours, the EU should have had a high-level meeting that would have said to Tehran, either let these guys go or we’re going to end all, we’re going to ban, we’ll freeze all economic relations or all diplomatic relations with you. That’s number one. I mean, either the EU feels the Iranians are right, that the Brits strayed into their waters, either the EU believes Iran over Great Britain, or they don’t care about piracy, but it can only be one or the other. So please, don’t call the EU if I get in trouble. Call somebody else. And the other point I would like to make, though, is that on top of that, I don’t think a lot of this would be happening if America weren’t so weak and enfeebled now. What you’re seeing is the impact, you know, all the Europeans, by the way, they always care about the rule of law, multilateralism, where’s that in this case, where’s the multilateral response to what Iran is doing? But I’m afraid part of it also is the fact that the Europeans are also always worried about too much American power, now you’re going to see a world with too little American power.

Chanda: And that really is something that’s very worrisome.

Friedman: That’s very worrisome.

Chanda: Because it’s a unipolar world and that one power is feeling hobbled which is basically an invitation to the rogues.

Friedman: And the rogues are more empowered than ever because the price of oil. And so it’s a very bad equation that the good guys, and I think we are the good guys, are more weakened than ever, because of how we’ve gotten hobbled in Iraq, and the bad guys are stronger than ever for the wrong reasons, not because they’re making microchips but because they’re sucking oil out of the ground. And that’s not healthy.

Chanda: But the only thing perhaps looking to the future is that oil is one day going to run dry.

Friedman: Well looking to the future, there’s two things, one people can be hopeful for: One is a rising India that can be more assertive, because India is a democracy, and it does share our values, and I would like to see India become more of a stakeholder, more of a voice in managing the international system with us, I would welcome that. And I would say the same of China. China talks about its peaceful rise – rise to do what? Where are you when Iran abducts 15 British soldiers in international waters, or at least Britain’s claim? Are you slamming your fist on the table saying let’s have a Security Council meeting? Are you lecturing Iran? We alone can’t be the stakeholders of the international system. We need other of the big responsible powers to do that as well. And that’s not happening right now.

Chanda: I think the question of China is a really critical one because China on the one hand is clearly a major player in the world in all senses except in a political role. China is shrinking away from taking any political role.

Friedman: That’s right. They’re big everywhere except in taking responsibility.

Chanda: And so how do you get China to do that is a big challenge for the western democracies.

Friedman: If you do a graph about China – here’s the graph of exports, here’s the graph of imports, here’s the graph of resources it’s looking to extract around the world, and here’s the graph of China’s taking responsibility for the international system.

Chanda: And if you think, maybe, just before we end, the situation in the Middle East-the Saudi king’s comment that American presence in Iraq is illegal has been quite a striking departure from the past. How do you explain this?

Friedman: Well, you know, he did make that comment at the same time the Saudis restated their peace overture to Israel, and my guess is he was balancing his books with his own constituency, on the one hand, making the peace overture to Israel, again renewing the 2002 overture, and at the same time slamming the Americans on Iraq. That’s my guess, I don’t know. But Nayan, it underlines a real point for me, and why I’ve come to the point in my own writing on Iraq where I believe we do need to set a date to leave. Because right now, everyone around Iraq has choices except us: The Sunnis can cooperate with us or not, depends. The Shiites, we can cooperate or not. The Saudis, we can tell you, “You can’t leave,” but in public, your occupation is illegal. We are everybody’s protector and everybody’s target. We’re everybody’s protector and everybody’s target, and that is a situation that is intolerable. And the only way to flip that is to say, “Here’s the date, we’re leaving, you want to work with us, we want to work with you, you don’t, now we have a choice – because you will have to pay unequivocally the impact of us leaving.”

Chanda: So you would give a date in order to push people to a realization that Americans are actually serious.

Friedman: That we’re leaving. And I know there are bad guys who will applaud, yeah, we won, but there are a lot of other people who are going to have to recalculate all their positions. Because right now everyone’s assuming that we’re just going to hold up the bag. And when we do that, we allow everyone to pay retail, I’m sorry, we allow everyone to pay wholesale for their position. You want your position, you’re going to have to pay retail for it now, because we’re going. So we’re not going to be subsidizing the difference between wholesale and retail.

Chanda: So what would be your sort of date?

Friedman: A year, eight months, I said everyone home for Christmas two months ago. Now obviously we will need to leave troops on the borders of Iraq, we’ll have to create safe zones, we have a moral responsibility to Iraqis who have worked with us, but the more you read the news from Iraq, the more obvious it is that this is a civil war, and it’s a civil war at that early stage where both sides think they can win. And we, therefore, rather than being seen as the broker, are seen by both sides as the obstacle to their victory. So rather than being seen as the broker who can actually manage the deal, we’re seen by both sides – if only the Americans would get out of the way, we could have it all. And when you’re in that situation, tragically, unfortunately, you have to just basically let people find the balance of power. But I don’t think we can just walk out of Iraq. I think we need to get out of the way of that conflict, though, and say look if you guys want to fight it out, go ahead, if not, we’ll be happy to draw the borders. But we do have to create safe zones, we do have to give Iraqis green cards, we do have the moral obligation to not be the sponsors of a genocide there.

Chanda: The US presidential election is in November 2008. So that almost gives a deadline…

Friedman: Absolutely, that’s it. What I worry about is that Bush has an exit strategy for himself but not for the country. And what I believe Bush is trying to do is to get Iraq at a low enough level of violence where he can turn it over to the next president without looking morally irresponsible. Iraq is not going to be solved in 18 months, surge or no surge. It’s not even going to be self-sustaining, and this is if everything went well. But Bush wants to get down to that level where he can turn it over and not have to say I presided over the failure with helicopters leaving the embassy. And I don’t think we have enough people there to do that. I don’t think you’re going to have anything approaching self-sustaining, I don’t know what’s going to happen, but I’m dubious, let’s put it that way, that this is going to work. I hope it does, I hope he’s right, but I think that’s his game, because if we come to election day 2008 or post-election, and Iraq is burning like it is today and he just leaves it to the next person, that will be a damnable act, so he’s got to decide beforehand. I think the country’s going to decide, most importantly, what I’m looking to decide, Nayan, is the Republican Party. They will make the decision, the Republicans running for office are not going to…but you know, we have to hope for the best. What’s going on in Iraq is tragic, and the people that are winning are the most anti-modern, anti-democratic…

Chanda: Nihilists.

Friedman: Nihilists, these are nothing but nihilists, and that’s what breaks my heart, someone who really hoped this would work, that we could collaborate with Iraqis to implant a foundation of democracy in that part of the world, which I still think is so important, but we are up against nihilism there, Nayan, which takes your breath away. I was reading the paper coming up this morning: People are loading ambulances and blowing themselves up. People loading food trucks with dynamite and blowing themselves up as people gather around to get food, people blowing up schools, universities, this is nihilism like we have never seen, like I certainly have never seen, I should say, in any other context.

Chanda: This is indeed the gravest moment in modern history.

Friedman: Because if this breaks out…it is also a tremendous challenge for the Muslim world. While I was reading the paper while coming up here today I saw there was a suicide bomb in Pakistan, so this is spreading now, it’s spreading as a way to solve problems. You have a problem with someone? Suicide bomb them. And what’s so problematic about that, Nayan, is that suicide bombing is very hard to defend against, and because it’s so hard to defend against, because every person is a potential bomber, you’re a potential bomber, the cameraman is a potential bomber, when that’s the case, that’s the end of open society. Because if everyone’s a potential bomb, then everyone else has to be a potential policeman. And that is a huge threat to open societies.

Chanda: Well, Tom Friedman, thank you very much for your thoughts.

Friedman: My pleasure, Nayan, great to be here with you again.

Chanda: Thank you.