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« Back to The Truth about the Flat World, Part One main page    Transcript for: The Truth about the Flat World, Part OneTHINK TANK WITH BEN WATTENBERG#1317 FRIEDMAN, Pt. 1 FEED DATE: June 23, 2005 Thomas Friedman Opening Billboard: Funding for Think Tank is provided by... (Pfizer) At Pfizer, we’re spending over five billion dollars looking for the cures of the future. We have 12,000 scientists and health experts who firmly believe the only thing incurable is our passion. Pfizer, life is our life’s work. Additional funding is provided by the Bernard and Irene Schwartz Foundation, the Smith Richardson Foundation, and the Lynde and Harry Bradley Foundation. MR. WATTENBERG: Hello, I’m Ben Wattenberg. It looks like globalization is here to stay. Rapid advances in telecommunications and falling trade barriers have linked national economies and may even be helping to shift authoritarian regimes toward openness. But globalization has exposed Americans to competition from former sleeping giants like China and India, and perhaps brought terrorism to our front steps. What is the future of globalization? Can it be a force for peace? Does America have what it takes to compete? To find out, Think Tank is joined this week by Thomas Friedman, Pulitzer Prize-winning New York Times foreign affairs columnist and author of 'The World is Flat: A Brief History of the 21st Century.' The Topic Before the House: the truth about the flat world, part one, this Week on Think Tank. MR. WATTENBERG: Tom Friedman, Pulitzer Prize-winner, New York Times columnist, welcome to Think Tank. MR. FRIEDMAN: Great to be here, Ben. MR. WATTENBERG: It’s a very interesting book, The World is Flat. It’s a great title. Tell me, in a nutshell, give me the theme of it and I’ll interrupt periodically. MR. FRIEDMAN: Well, basically, Ben, I wasn’t planning to write this book. It’s not like I had been thinking about it for ten years. I went off to India about fifteen months ago, sixteen months ago... MR. WATTENBERG: That would be when? What year? MR. FRIEDMAN: In February of 2004. MR. WATTENBERG: Yep. MR. FRIEDMAN: To do a documentary for the Discovery Channel and Discovery Times about outsourcing. And while I was there, somewhere between my interview with the Indian entrepreneur who wanted to do my taxes from Bangalore, and the one who wanted to write my new software from Bangalore... MR. WATTENBERG: Now, did you live in Bethesda and your taxes were being done in Bangalore, India? MR. FRIEDMAN: He was offering to do that. MR. WATTENBERG: Right. Right. MR. FRIEDMAN: And others wanted to read my x-rays from Bangalore or trace my lost luggage on Delta Airlines from Bangalore. MR. WATTENBERG: Right. MR. FRIEDMAN: Between all those appeals and offers, I realized that while I had been sleeping, while I had been off covering... MR. WATTENBERG: The war. MR. FRIEDMAN: ... kind of the 911 world... MR. WATTENBERG: Which I want to talk about. MR. FRIEDMAN: I – I had missed something very big in this globalization story. And that people were offering to do things, Ben, that I didn’t understand how they could do it. And I literally would be interviewing them. I was on the side of the camera you are now... MR. WATTENBERG: Right. MR. FRIEDMAN: And Jerry Rao, the head of NASSCOM, the Indian high tech association, would be saying, 'I want to do your taxes from here.' And I would be saying, 'Jerry, what did I miss? I missed something. How can you be offering to do that?' MR. WATTENBERG: Which you call... MR. FRIEDMAN: And so basically this book was... MR. WATTENBERG: Which you call the flattening of the world. MR. FRIEDMAN: Right. Exactly. And this book was really an attempt to answer that question. I’m pointing to a process, this flattening process, that I think we’re just at the beginning of. I say later on in the book I know the whole world isn’t flat... MR. WATTENBERG: Right. MR. FRIEDMAN: But I think that this trend is the most important thing happening in the world today. And to me it’s not about a snapshot, Ben. It’s not just about taking a snapshot and saying 'oh, two tenths of one percent of India'. It’s about the pace and it’s about the trajectory, as John Hagel points out in his new book. If – you know – people will tell you, 'Tom, come on. You go two miles out of Bangalore and you’re back a thousand years.' MR. WATTENBERG: Yes. MR. FRIEDMAN: That’s true. And you know what, Ben? Three years ago when I – or five years ago when I first went there, if you went two blocks... MR. WATTENBERG: Yes. MR. FRIEDMAN: ... out of the center of Bangalore, you know... MR. WATTENBERG: It still is in a lot of those... I mean. MR. FRIEDMAN: So it’s - the trend, you know, is clearly toward this flattening process... MR. WATTENBERG: Alright. MR. FRIEDMAN: ...and people are taking advantage of it. MR. WATTENBERG: Again, just to put some scale on it, I looked up some numbers. Per capita income in China is $970 a year; in India it’s $470 a year. Growing very rapidly, you say. In the U.S. it’s $35,000 a year. And even in Mexico it’s $5,000 a year, so this is – we’re fifty times wealthier. MR. FRIEDMAN: Right. Right. MR. WATTENBERG: I mean, so when you say in fifteen or twenty years they’re going to be catching up or they’re going to be caught... they’re not going to be caught up. It’s a long process. MR. FRIEDMAN: Well, well, let’s just look at those figures a little bit. Yes, India has a billion, fifty million people so divided over that the per capita income is, as you say, about a little under a thousand dollars a person. But at the center, if you actually broke down the statistics, there are three hundred million Indians in the middle class... MR. WATTENBERG: Right. MR. FRIEDMAN: ...or what they defined as middle class, who have a much higher standard of living than that and going much higher every day. And numbers here really matter. Let’s assume the same number of Indians are geniuses as Americans. Same percentage. That five out of every one hundred Indians is a genius and five out of every one hundred Americans is a genius, okay. Well, sheer numbers matter. That means as the world flattens out, they’re going to have a lot more geniuses to be able to plug and play than we will. MR. WATTENBERG: But tell me what you mean again by – or you say the world is flat. MR. FRIEDMAN: Right. MR. WATTENBERG: Why isn’t it round? And I know you come back at the very end of the book and say it really is round. MR. FRIEDMAN: Right. Here’s what I mean. What I mean is that let’s say you were one of those Indian geniuses. Well let’s – let me go back to an example that Bill Gates gives in the book. Thirty years ago if you had a choice of being born a B student in Bethesda, Maryland, where I live, or a genius in Beijing, what would you have chosen thirty years ago? No question. You would want to be a B student in Bethesda. Your life chances as a B student in Bethesda were so much greater than a genius in Bangalore or Beijing because you were trapped in crazy socialist systems and in China in a cultural revolution. When the world is flat, Ben, you do not want to be a B student in Bethesda because every genius in Beijing and Bangalore can now, with this new flat platform, bring their skills to the world market. Or better yet, have the world market come to them. You can now innovate without having to emigrate. That’s a big deal. MR. WATTENBERG: Yes, but you still have a great deal of emigration. And I know some people are going back because of all the things you say, and you’ve written about it very eloquently. You have this open, truly democratic country which China does not have. MR. FRIEDMAN: In the case of India you have this truly democratic... MR. WATTENBERG: India you have - with a lot of the problems that democracy brings – but I don’t think – my own view, if I had to bet between poorer India and richer China, I’d bet on the democracy, on India long term. I mean, I don’t know that it’s going to happen but that – has any country that has not been democratic over an extended period of time really made it? MR. FRIEDMAN: Hard to think of one, and I would agree. I’m a big India fan. MR. WATTENBERG: I know. MR. FRIEDMAN: But here we are in... MR. WATTENBERG: I am, too. MR. FRIEDMAN: ... yes. In the short run - India I think is a miracle. A billion people. Free and fair elections for fifty years. Speaking multiple languages with multi, you know, ethnic backgrounds. So it, with all the corruption and problems, is still a miracle. But the fact is in the short run, Ben, China’s institutions work better. China’s infrastructure works better. China is more focused, and China, because of maybe the Mandarin tradition, has been better at consistently promoting people on merit in many cases than India has. In the short run that’s what I’d say. MR. WATTENBERG: Yes. But you know, China - in part because of its one-child family, in part because of female infanticide - they are facing - aside from any problems about democracy - they are going to be facing in the years to come a pension and a healthcare system that’s going to make like what we’re going through here in the United States look like a tea party. MR. FRIEDMAN: I can imagine. MR. WATTENBERG: And, I mean, people are writing about that there’ll be these hundreds of millions of men with no civilizing influence of women and the possibility of civil wars, and so I mean, what is – how do you come out on that? MR. FRIEDMAN: That’s why I simply say – that’s why I’m a bull on China in the short run, but I’m a bull on India in the long run. I’m for the – I put my money on the tortoise here; not the hare. MR. WATTENBERG: So we agree. I mean, India’s big problem as you describe it in the book, or a lot of it, is this massive corruption. MR. FRIEDMAN: Right. And institutions that don’t work. So they’re getting the benefits today of globalization, okay. India, in 1991, had a hundred million dollars in the bank. But today India has probably about a hundred and twenty billion dollars in reserve. That’s the good news. But here’s the bad news. When they send a hundred thousand rupees now from the central government to a village near Bangalore to upgrade their infrastructure or their schools or their water supply, by the time it gets to that village sometimes it’s only ten thousand rupees. So many hands have taken a bite along the way. So until you deal with that problem, you’re never going to be able to build the infrastructure India needs to get, I think, to that next level. MR. WATTENBERG: Is there anything in this outsourcing movement that can be called – and it always is - it’s called unfair. Not fair to Americans to outsource these jobs. You buy any of that? MR. FRIEDMAN: Well, you know, I mean, outsourcing is you know, is simply a form of trade. It’s a trade in services now instead of goods. And I happen to believe trade is good. I believe that countries that over time have freer and freer trade and more and more people competing on a global basis do better economically. And so that’s really what I believe. So I believe outsourcing is basically a good thing for our country as a whole. MR. WATTENBERG: And you also say in the book that this interconnected world makes war less possible. MR. FRIEDMAN: Less likely. MR. WATTENBERG: You know, people are not terribly, terribly rational. And you did have some statistics on it: in 1938 and 1939, huge amounts of trade between, say Germany and England or Germany and France. MR. FRIEDMAN: Yes. MR. WATTENBERG: And the next thing you know they were goose-stepping. I mean, it’s... well, you explain why it’s harder but not impossible. MR. FRIEDMAN: Well, yes. And I say, I’m really actually making an argument about international relations, okay. That’s the argu – my argument is that there are way too many people, first of all, who analyze international relations purely in classic geopolitical terms, okay. And all I’m saying is when the President and the Vice President, or the Prime Minister of China, sit down and think about Taiwan, believe me, they’re not just thinking about historical claims to Taiwan; they’re not just thinking about how many ships and aircraft carriers they have. They’re thinking about the fact that Taiwan has opened over 50,000 factories in China. They’re thinking about the fact that their sons are partners in semiconductor factories with Chinese. So all I’m saying is you got to bring both factors. It’s not just about traditional geopolitics. It’s also about international economics if you want to understand people’s behavior. Otherwise, why hasn’t China invaded Taiwan already, okay? Geopolitics is one reason, but maybe geo-economics is another. Now, people always cite these trade statistics from the ’30s, you know, whatnot. My whole point about globalization is it ain’t just about trade, okay. It’s about a whole platform of technologies that is the internet, okay; innovative possibilities, okay; financial flows and trade. And all I’m saying, all I’m saying is that when you are embedded in a global supply chain today, like China is vis-à-vis Taiwan – what I call my Dell theory of conflict prevention – then you’re going to think three or four times before you go to war. You may still go to war, but here’s one thing I guarantee: the price you’ll pay will be much, much higher. MR. WATTENBERG: Now you recount – maybe you would for our viewers – an interesting situation when the India-Pakistan thing heated up, what India’s customers were telling the Indian government and their suppliers. MR. FRIEDMAN: As I tell the story in the book, I was at Wipro, which is one of the premier Indian technology outsourcing companies, during one of the nuclear flare ups there between Indian and Pakistan. And Vajpayee, the Indian – then Indian Prime Minister – had used the 'n' word, the 'nuclear' word, freaked everybody out. We actually issued a travel advisory. We told – people forget; we told all Americans to leave India. We thought there was a real possibility of a nuclear clash. Well, what happened was one of Wipro’s biggest American clients sent them a telegram that said we are looking for an alternative to you. You do not want us to be looking for an alternative to you. We don’t want to be looking for an alternative to you, okay, so you better do something about it. And basically the Indian Confederation of Industry and the high tech association made clear to the central government through various means... MR. WATTENBERG: You better lay off ’cause the whole thing goes crash... MR. FRIEDMAN: That - obviously not, don’t roll over for Pakistan; we understand if Pakistan, you know, or terrorists from Kashmir attack the Indian parliamen -, India’s going to do whatever India’s going to do. MR. WATTENBERG: I understand. MR. FRIEDMAN: No – no. But basically the message was, 'do you guys understand what world we’re living in? We are managing the backrooms of major American and global multinational... MR. WATTENBERG: In other words, when you press one, menu; press two, you are talking often to – and sometime you can tell and sometime you can’t - you’re talking to somebody in India. MR. FRIEDMAN: Yes, but Ben, this is much deeper than that. We’re doing their research, okay. We’re handling their human resources. MR. WATTENBERG: We, meaning the Indian... MR. FRIEDMAN: The Indian companies. Yes. So these global companies are not amused when they pick up the paper and read a travel alert that their executives can’t even go to India, you know, to talk about the next problem without defying the State Department. So you can’t – if you’re – the level of intimacy – this isn’t I ship you bananas, okay, and you ship me shoes. MR. WATTENBERG: Right. MR. FRIEDMAN: Okay. I’m not talking about that. I’m talking about, I’m managing your backroom. I’m basically intimately involved in every business process of your company. MR. WATTENBERG: But are also doing independent research? MR. FRIEDMAN: Oh, cutting edge research. And so the point is simply, does this mean that India and Pakistan can’t go to war because... No. Absolutely not. All I’m saying is that the restraints – the restraints are much greater than I sell you bananas and you sell me shoes, because see, if I lose my place – if American Express or General Electric says, 'You know what? You guys – you’re too dangerous. You’re going to go – you’re going to fight a war one of these days. We don’t want to be exposed from you. We’re pulling out.' You know what that’s like, Ben? That’s like pouring cement down an oil well. ’Cause that business doesn’t come back. I don’t start selling you bananas and shoes after that. They’ll go somewhere else. MR. WATTENBERG: Again, to try to put something in perspective, I mean, people say, 'Gee, nothing will be manufactured in the United States.' The last time I looked, which is a couple years ago, the actual number of manufacturing jobs in America has not declined. The proportion of manufacturing to service and other jobs. So we’re still going to have a lot of manufacturing jobs. MR. FRIEDMAN: No question. I’ve got a statistic in the book, I don’t know the number offhand, that we still manufacture, you know, a significant amount of stuff that we consume, you know. I don’t remember what the exact figure is but we’re going to do the higher and higher end. Maybe the raw finishing is going to be done in China and the precision finishing will be done here. Now, you know, maybe over time that will all, you know, move down the road. That’s the history of economic development. You know, 90% of Americans worked in agriculture 150 years ago. MR. WATTENBERG: Right. MR. FRIEDMAN: Today 2% do. So it’s a constant evolution. And the key is to constantly upgrading our skills and our own education so we can do more and more complex tasks that have more and more value added, that bring more and more productivity and therefore higher and higher wages. MR. WATTENBERG: You use the phrase, 'quiet-crisis' – is one word - phrase you use, and what is the ’triple convergence?’ You’ve got a lot of... MR. FRIEDMAN: Right. MR. WATTENBERG: ... things... MR. FRIEDMAN: I intend to invent my own language. MR. WATTENBERG: No. That’s great. I do, too. MR. FRIEDMAN: You have to sometimes. MR. WATTENBERG: It makes for a very readable book. MR. FRIEDMAN: The ’quiet-crisis’ is a term coined by Shirley Ann Jackson, who’s President of Rensselaer Polytechnic, one of the oldest engineering and technical schools in America. MR. WATTENBERG: Up near Albany, New York. MR. FRIEDMAN: Up in the northeast. And Shirley Jackson, in fact, was the first African-American woman to earn a PhD in physics from MIT. She was head of the Nuclear Regulatory Commission in the Clinton Administration. MR. WATTENBERG: Right. MR. FRIEDMAN: Well, her argument is that a generation of scientists and engineers are really spurred to go into science and engineering like her thanks to basically the sputnik launch and the Kennedy 'let’s put a man on the moon' challenge to Americans. That generation is retiring now; in some cases dying off. We never really filled in the numbers, okay, that we needed for that generation. What we did instead was import. We drafted the first round intellectual draft choices from around the world from India and China. We brought them here and they filled in the gap. MR. WATTENBERG: But has... MR. FRIEDMAN: Let me just finish. And in our schools we didn’t also get enough young people to go into science and engineering, but with these foreigners filled in, okay, is what happened. Now, the quiet-crisis is the fact that the world went flat so these foreigners don’t have to come anymore. Some are going home. And post 9/11, we’re telling them to stay home for security reasons and the result of that is we got a little gap opening up. And the result of that gap is – I interviewed Craig Barrett, the head of Intel, the other day. He said, 'Look Tom, we at Intel' – you’re talking about the cutting edge American company today – 'We could thrive as a company going forward without ever hiring another American. That’s not our desire', he said. 'That’s not our intention. But if we don’t find the talent here, we will go wherever we can to find it.' And in a flat world, Intel or Motorola or General Electric can do just that and that’s what they’re doing. MR. WATTENBERG: Hasn’t it been true for a long time – I mean, even in the 1920s and ’30s, Einstein came here and Enrico Fermi came here; Hans Bethe came here. I mean... MR. FRIEDMAN: Whole generations. MR. WATTENBERG: Whole generations of scientists have – and you say America’s a great meeting place. They come here. I mean, I had heard stories of – when before Japan tanked that Japanese would come here for a three-year tour and the women... MR. FRIEDMAN: Europeans. MR. WATTENBERG: ... and the women, particularly, where in Japan they have to walk three steps behind the men... MR. FRIEDMAN: That’s right. That’s right. MR. WATTENBERG: ... said, 'Hey, this is a great place to live. I don’t have to walk three steps behind anybody.' MR. FRIEDMAN: Absolutely. MR. WATTENBERG: So they tend to... MR. FRIEDMAN: I think it’s still a great place. MR. WATTENBERG: ... they tend to stay. MR. FRIEDMAN: Yes. I think it’s still a great place. Look, if you opened every American embassy’s visa line, you know, to any engineer who wanted to come, I think many would still want to come. But not as many as before. Because, look; they’re Indians. They want to live in their own culture, too. And they see enormous opportunity back home. MR. WATTENBERG: Okay. Now, what is the ’triple convergence’? MR. FRIEDMAN: The triple convergence is really the sort of the core thesis of the book. I – basically the second chapter of the book is about the ten forces that came together to create this flattened playing field. And the first convergence is how they’ve all come together basically to give us this web-enabled, global platform for multiple forms of sharing knowledge and work. That’s my definition of the flattening of the world. That’s the first convergence. The second convergence is that we’re all learning to horizontalize ourselves. We’re all learning to collaborate now with this flat platform in wholly new ways, because value was created largely in vertical silos of command and control. And now value’s being created in horizontal ways by who you connect and collaborate with. So we’re changing our habits. And the third convergence is that right when we flatten the world, three billion people who are out of the game walked onto the playing field: called India, China and the former Soviet empire. And it’s the convergence of these three billion people with these new business practices and habits with these ten flatteners that gave us this flat world that is, I argue, the brief history of the 21st century. MR. WATTENBERG: You say that America is doing things wrong. MR. FRIEDMAN: Well, I think first of all we have an education gap. MR. WATTENBERG: Right. MR. FRIEDMAN: You just look at all the comparison tests of science and math between our K-12 students and the rest of the world and we’re falling farther and farther behind. By fourth grade we’re ahead. By eighth grade we’re even. By twelfth grade we’re behind almost all the other OECD countries. That’s very, very troubling. We have – therefore we have a skill – we have a numbers gap. We don’t – we aren’t producing the numbers of engineers at the high end, men and women, that we need, alright, for the Intels of America. And thirdly, we have an ambition gap. You know, we’re – we’ve been – we’re like the third generation of a wealthy family. You know, first generation the entrepreneurs – they make the money; second generation, you know, they maintain it; third generation, we get a little fat, dumb and lazy. If you want to understand America today, in my view, think about the U.S. Olympic basketball team at the last Olympics. You know, first we send our college students. The rest of the world finally caught up with them. Then we sent our pros, you know. Then we send – now we – and the world caught up with them, and now we send our pros and they get the bronze medal. Well, bronze; that’s okay, I guess, Ben. What goes after bronze? MR. WATTENBERG: Well... and you say the third – the third big problem is numbers; that we don’t educate enough science... MR. FRIEDMAN: It’s numbers, it’s ambition, okay, and it’s raw education. MR. WATTENBERG: On the numbers thing, one of the things – one of the course majors or curriculum majors that you see a big increase is in MBAs, Master of Business Education. Why would it be so terrible if your daughters – I know you have two daughters – if one of them becomes not a scientist or a mathematician, but runs a company and hires mathematicians and scientists? MR. FRIEDMAN: Well, that wouldn’t be bad. MR. WATTENBERG: Or becomes a doctor and treats them? MR. FRIEDMAN: Right. Right. There’s a need for all of that. But you know what? Where innovation happens, Ben, really matters. The fact that Google was invented here, okay. Look at the jobs that spun off for, you know, that area of Silicon Valley. The engineers, the mathematicians that are being hired, the salaries, the stock options they’re getting, how that’s driving the local economy. Well, yes; it’d be good if my daughter were an MBA and Google were invented in Shanghai and she was able to run the American subsidiary of Google and she could do okay. MR. WATTENBERG: Right. MR. FRIEDMAN: But as a community, as a society, we would be doing less well. MR. WATTENBERG: Tom Friedman, thanks for joining us on Think Tank. And thank you. Please, join us for a future episode where we will continue our discussion with Tom Friedman. And of course, remember to send us your comments via email. We think it makes our program better. For Think Tank, I’m Ben Wattenberg. ANNOUNCER: We at Think Tank depend on your views to make our show better. 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