Beer Now - Pop Tarts Later

Last night I finished one of the most engrossing books I have read in a very long time.  The book is The World is Flat - A Brief History of the Twenty-First Century by Thomas L. Friedman.  In a nutshell, it is the story of globalization from the breaching of the Berlin Wall in 1989 until early 2005.  And nothing has happened in the past five years that contradicts his central arguments - indeed, quite the contrary.

The title of the book is clever way of describing how various technological innovations and business practices have affected the developed and much of the developing world in the post Cold War era.  The first part of the book identifies ten "flatteners" that have driven globalization.  The first is the end of the Cold War.  Other "flatteners" are the development of the internet, outsourcing, supply-chaining, and digital telecommunications.

The central point of the book is that the "flat" world has allowed new players - particularly China and India - to participate in the world economy in ways previously unimaginable.   Mr. Friedman argues that barring catastrophe either natural or man made this process will continue and even accelerate.  And if you think low wages in the developing world are the beginning and end of the story, think again. 

Mr. Friedman further posits that if the United States doesn't address a number of fundamental structural issues - a largely second-rate public primary and secondary educational system being at the top of the list - then we will not only find ourselves in relative economic decline compared to the likes of China and India; but will likely experience a real decline in living standards.

This could all be deadly dull, of course, but it is not.  Every point is illustrated by personal experience or the experiences of an international cast of journalists, business people and others intimately familiar with the economic upheaval of the past several decades.  The stories of how particular companies have used the emerging technologies to gain a competitive edge are interesting and frequently amusing.

For example, the discussion of the development of world-wide supply chains uses Wal-Mart as the poster child.  Purchase an item at Wal-Mart, and a factory in coastal China (or somewhere else) is immediately directed to build another one.  Pretty amazing; but also pretty obvious.  However the same system provides the company with other less obvious competitive advantages.

During hurricanes, Wal-Mart officials told me, Wal-Mart knows that people eat more things like Pop-Tarts - easy-to-store, nonperishable items - and that their stores also sell a lot of kids' games that don't require electricity, and can substitute for TV.  It also knows that when hurricanes are coming, people tend to drink more beer.  So the minute Wal-Mart's meteorologists tell headquarters a hurricane is bearing down on Florida, its supply chain automatically adjusts to a hurricane mix in the Florida stores - more beer early, more Pop-Tarts later.

Regarding the likelihood that America will rise to the challenges posed by globalization, the author is ultimately agnostic.  It's not that we don't have the ABILITY to address these issues; it's a question of whether or not we have the WILL.

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Lucky for us, we were the only economy standing after World War II, and we had no serious competition for forty years.  That gave us a huge head of steam but also a huge sense of entitlement and complacency - not to mention a certain  tendency in recent years to extol consumption over hard work, investment, and long-term thinking.  When we got hit with 9/11 it was a once-in-a-generation opportunity to summon the nation to sacrifice, to address some of its pressing fiscal, energy, science, and education shortfalls - all the things we had let slide.  But our president did not summon us to sacrifice.  He summoned us to go shopping.

Throughout the book, Mr. Friedman asks various folks when they first recognized that the world was "flat".  Some interesting replies.  If Mr. Friedman asked me, I know exactly what I'd say.  "I had just got back from a long walk through Cambridge, MA and was talking with Mr. Dieter Ortmann, Global Head Quality Management, Novartis Pharma AG..."

I highly recommend the book!