The World is Flat

True, maybe only 10 percent of this new 1.5 billion-strong workforce entering the global economy have the education and connectivity to collaborate and compete at a meaningful level. But that is still 150 million people, roughly the size of the entire U.S. workforce. Said Barrett, “You don't bring three billion people into the world economy overnight without huge consequences, especially from three societies [like India, China, and Russia] with rich educational heritages.”

That is exactly right. And a lot of those new workers are not just walking onto the playing field. No, this is no slow-motion triple convergence. They are jogging and even sprinting there. Because once the world has been flattened and the new forms of collaboration made available to more and more people, the winners will be those who learn the habits, processes, and skills most quickly-and there is simply nothing that guarantees it will be Americans or Western Europeans permanently leading the way. And be advised, these new players are stepping onto the playing field legacy free, meaning that many of them were so far behind they can leap right into the new technologies without having to worry about all the sunken costs of old systems. It means that they can move very fast to adopt new, state-of-the-art technologies, which is why there are already more cell phones in use in China today than there are people in the United States. Many Chinese just skipped over the landline phase. South Koreans put Americans to shame in terms of Internet usage and broadband penetration.

We tend to think of global trade and economics as something driven by the IMF, the G-8, the World Bank, the WTO, and the trade treaties forged by trade ministers. I don't want to suggest that these governmental agencies are irrelevant. They are not. But they are going to become less important. In the future globalization is going to be increasingly driven by the individuals who understand the flat world, adapt themselves quickly to its processes and technologies, and start to march forward-without any treaties or advice from the IMF. They will be every color of the rainbow and from every corner of the world.

The global economy from here forward will be shaped less by the ponderous deliberations of finance ministers and more by the spontaneous explosion of energy from the zippies. Yes, Americans grew up with the hippes in the 1960s. Thanks to the high-tech revolution, many of us became yuppies in the 1980s. Well, now let me introduce the zippies.

“The Zippies Are Here,” declared the Indian weekly magazine Outlook. Zippies are the huge cohort of Indian youth who are the first to come of age since India shifted away from socialism and dived headfirst into global trade and the information revolution by turning itself into the world's service center. Outlook called India's zippies “Liberalization's Children” and defined a zippie as a “young city or suburban resident, between 15 and 25 years of age, with a zip in the stride. Belongs to Generation Z. Can be male or female, studying or working. Oozes attitude, ambition and aspiration. Cool, confident and creative. Seeks challenges, loves risks and shuns fear.” Indian zippies feel no guilt about making money or spending it. They are, says one Indian analyst quoted by Outlook, “destination driven, not destiny driven, outward looking, not inward, upwardly mobile, not stuck-in-my-station-in-life.” With 54 percent of India under the age of twenty-five-that's 555 million people-six out of ten Indian households have at least one potential zippie. And the zippies don't just have a pent-up demand for good jobs; they want the good life.

It all happened so fast. P. V. Kannan, the CEO and cofounder of the Indian call-center company 24/7 Customer, told me that in the last decade, he went from sweating out whether he would ever get a chance to work in America to becoming one of the leading figures in the outsourcing of services from America to the rest of the world.

“I will never forget when I applied for a visa to come to the United States,” Kannan recalled. “It was March 1991.1 had gotten a B.A. in chartered accountancy from the [Indian] Institute of Chartered Accountants. I was twenty-three, and my girlfriend was twenty-five. She was also a chartered accountant. I had graduated at age twenty and had been working for the Tata Consultancy group. So was my girlfriend. And we both got job offers through a body shop [a recruiting firm specializing in importing Indian talent for companies in America] to work as programmers for IBM. So we went to the U.S. consulate in Bombay. The recruiting service was based in Bombay. In those days, there was always a very long line to get visas to the United States, and there were people who would actually sleep in the line and hold places and you could go buy their place for 20 rupees. But we went by ourselves and stood in line and we finally got in to see the man who did the interview. He was an American [consular official]. His job was to ask questions and try to figure out whether we were going to do the work and then come back to India or try to stay in America. They judge by some secret formula. We used to call it 'the lottery'-you went and stood in line and it was a life lottery, because everything was dependent on it.”

There were actually books and seminars in India devoted entirely to the subject of how to prepare for a work visa interview at the U.S. embassy. It was the only way for skilled Indian engineers really to exploit their talent. “I remember one tip was to always go professionally dressed,” said Kannan, “so [my girlfriend and I] were both in our best clothes. After the interview is over, the man doesn't tell you anything. You had to wait until the evening to know the results. But meanwhile, the whole day was hell. To distract our minds, we just walked the streets of Bombay and went shopping. We would go back and forth, 'What if I get in and you don't? What if you get in and I don't?' I can't tell you how anxious we were, because so much was riding on it. It was torture. So in the evening we go back and both of us got visas, but I got a five-year multiple entry and my girlfriend got a six-month visa. She was crying. She did not understand what it meant. 'I can only stay for six months?' I tried to explain to her that you just need to get in and then everything can be worked out.”

While many Indians still want to come to America to work and study, thanks to the triple convergence many of them can now compete at the highest levels, and be decently paid, by staying at home. In a flat world, you can innovate without having to emigrate. Said Kannan, “My daughter will never have to sweat that out.” In a flat world, he explained, “there is no one visa officer who can keep you out of the system... It's a plug-and-play world.”

One of the most dynamic pluggers and players I met in India was Rajesh Rao, founder and CEO of Dhruva Interactive, a small Indian game company based in Bangalore. If I could offer you one person who embodies the triple convergence, it is Rajesh. He and his firm show us what happens when an Indian zippie plugs into the ten flatteners.

Dhruva is located in a converted house on a quiet street in a residential neighborhood of Bangalore. When I stopped in for a visit, I found two floors of Indian game designers and artists, trained in computer graphics, working on PCs, drawing various games and animated characters for American and European clients. The artists and designers were listening to music on headphones as they worked. Occasionally, they took a break by playing a group computer game, in which all the designers could try to chase and kill one another at once on their computer screens. Dhruva has already produced some very innovative games— from a computer tennis game you can play on the screen of your cell phone to a computer pool game you can play on your PC or laptop. In 2004, it bought the rights to use Charlie Chaplin's image for mobile computer games. That's right-a start-up Indian game company today owns the Chaplin image for use in mobile computer games.

In Bangalore and in later e-mail conversations, I asked Rajesh, who is in his early thirties, to walk me through how he became a player in the global game business from Bangalore.

“The first defining moment for me dates back to the early nineties,” said Rajesh, a smallish, mustachioed figure with the ambition of a heavyweight boxer. “Having lived and worked in Europe, as a student, I was clear in my choice that I would not leave India. I wanted to do my thing from India, do something that would be globally respected and something that would make a difference in India. I started my company in Bangalore as a one-man operation on March 15, 1995. My father gave me the seed money for the bank loan that bought me a computer and a 14.4 kbp modem. I set out to do multimedia applications aimed at the education and industry sectors. By 1997, we were a five-man team. We had done some pathbreaking work in our chosen field, but we realized that this was not challenging us enough. End of Dhruva 1.0.

“In March 1997, we partnered with Intel and began the process of reinventing ourselves into a gaming company. By mid-1998, we were showing global players what we were capable of by way of both designing games and developing the outsourced portions of games designed by others. On November 26, 1998, we signed our first major game development project with Infogrames Entertainment, a French gaming company. In hindsight, I think the deal we landed was due to the pragmatism of one man in Infogrames more than anything else. We did a great job on the game, but it was never published. It was a big blow for us, but the quality of our work spoke for itself, so we survived. The most important lesson we learned: We could do it, but we had to get smart. Going for all or nothing-that is, signing up to make only a full game or nothing at all-was not sustainable. We had to look at positioning ourselves differently. End of Dhruva 2.0.”

This led to the start of Dhruva's 3.0 era-positioning Dhruva as a provider of game development services. The computer game business is already enormous, every year grossing more revenue than Hollywood, and it already had some tradition of outsourcing game characters to countries like Canada and Australia. “In March 2001, we sent out our new game demo, Saloon, to the world,” said Rajesh. “The theme was the American Wild Wild West, and the setting was a saloon in a small town after business hours, with the barman cleaning up... None of us had ever seen a real saloon before, but we researched the look and feel [of a saloon] using the Internet and Google. The choice of the theme was deliberate. We wanted potential clients in the U.S.A. and Europe to be convinced that Indians can 'get it.' The demo was a hit, it landed us a bunch of outsourced business, and we have been a successful company ever since.”

Could he have done this a decade earlier, before the world got so flat?

“Never,” said Rajesh. Several things had to come together. The first was to have enough installed bandwidth so he could e-mail game content and instructions back and forth between his own company and his American clients. The second factor, said Rajesh, was the spread of PCs for use in both business and at home, with people getting very comfortable using them in a variety of tasks. “PCs are everywhere,” he said. “The penetration is relatively decent even in India today.”

The third factor, though, was the emergence of the work flow software and Internet applications that made it possible for a Dhruva to go into business as a minimultinational from day one: Word, Outlook, NetMeeting, 3D Studio MAX. But Google is the key. “It's fantastic,” said Rajesh. “One of the things that's always an issue for our clients from the West is, 'Will you Indians be able to understand the subtle nuances of Western content?' Now, to a large extent, it was a very valid question. But the Internet has helped us to be able to aggregate different kinds of content at the touch of a button, and today if someone asks you to make something that looks like Tom and Jerry, you just say 'Google Tom & Jerry' and you've got tons and tons of pictures and information and reviews and write-ups about Tom and Jerry, which you can read and simulate.”

While people were focusing on the boom and bust of the dot-coms, Rajesh explained, the real revolution was taking place more quietly. It was the fact that all over the world, people, en masse, were starting to get comfortable with the new global infrastructure. “We are just at the beginning of being efficient in using it,” he said. “There is a lot more we can do with this infrastructure, as more and more people shift to becoming paperless in their offices and realize that distances really [do] not matter... It will supercharge all of this. It's really going to be a different world.”

Moreover, in the old days, these software programs would have been priced beyond the means of a little Indian game start-up, but not anymore, thanks in part to the open-source free software movement. Said Rajesh, “The cost of software tools would have remained where the interested parties wanted them to be if it was not for the deluge of rather efficient freeware and shareware products that sprung up in the early 2000s. Microsoft Windows, Office, 3D Studio MAX, Adobe Photoshop-each of these programs would have been priced higher than they are today if not for the many freeware/shareware programs that were comparable and compelling. The Internet brought to the table the element of choice and instant comparison that did not exist before for a little company like ours... Already we have in our gaming industry artists and designers working from home, something unimaginable a few years back, given the fact that developing games is a highly interactive process. They connect into the company's internal system over the Internet, using a secure feature called VPN [virtual private network], making their presence no different from the guy in the next cubicle.”

The Internet now makes this whole world “like one marketplace,” added Rajesh. “This infrastructure is not only going to facilitate sourcing of work to the best price, best quality, from the best place, it is also going to enable a great amount of sharing of practices and knowledge, and it's going to be 'I can learn from you and you can learn from me' like never before. It's very good for the world. The economy is going to drive integration and the integration is going to drive the economy.”

There is no reason the United States should not benefit from this trend, Rajesh insisted. What Dhruva is doing is pioneering computer gaming within Indian society. When the Indian market starts to embrace gaming as a mainstream social activity, Dhruva will already be positioned to take advantage. But by then, he argued, the market “will be so huge that there will be a lot of opportunity for content to come from outside. And, hey, the Americans are way ahead in terms of the ability to know what games can work and what won't work and in terms of being at the cutting edge of design-so this is a bilateral thing... Every perceived dollar or opportunity that is lost today [from an American point of view because of outsourcing] is actually going to come back to you times ten, once the market here is unleashed... Just remember, we are a 300-million middle class-larger than the size of your country or Europe.”

Yes, he noted, India right now has a great advantage in having a pool of educated, low-wage English speakers with a strong service etiquette in their DNA and an enterprising spirit. “So, sure, for the moment, we are leading the so-called wave of service outsourcing of various kinds of new things,” said Rajesh. “But I believe that there should be no doubt that this is just the beginning. If [Indians] think that they've got something going and there is something they can keep that's not going to go anywhere, that will be a big mistake, because we have got Eastern Europe, which is waking up, and we have got China, which is waiting to get on the services bandwagon to do various things. I mean, you can source the best product or service or capacity or competency from anywhere in the world today, because of this whole infrastructure that is being put into place. The only thing that inhibits you from doing that is your readiness to make use of this infrastructure. So as different businesses, and as different people, get more comfortable using this infrastructure, you are going to see a huge explosion. It is a matter of five to seven years and we will have a huge batch of excellent English-speaking Chinese graduates coming out of their universities. Poles and Hungarians are already very well connected, very close to Europe, and their cultures are very similar [to Western Europe's]. So today India is ahead, but it has to work very hard if it wants to keep this position. It has to never stop inventing and reinventing itself.”

The raw ambition that Rajesh and so many of his generation possess is worthy of note by Americans-a point I will elaborate on later.

“We can't relax,” said Rajesh. “I think in the case of the United States that is what happened a bit. Please look at me: I am from India. We have been at a very different level before in terms of technology and business. But once we saw we had an infrastructure which made the world a small place, we promptly tried to make the best use of it. We saw there were so many things we could do. We went ahead, and today what we are seeing is a result of that... There is no time to rest. That is gone. There are dozens of people who are doing the same thing you are doing, and they are trying to do it better. It is like water in a tray, you shake it and it will find the path of least resistance. That is what is going to happen to so many jobs-they will go to that corner of the world where there is the least resistance and the most opportunity. If there is a skilled person in Timbuktu, he will get work if he knows how to access the rest of the world, which is quite easy today. You can make a Web site and have an e-mail address and you are up and running. And if you are able to demonstrate your work, using the same infrastructure, and if people are comfortable giving work to you, and if you are diligent and clean in your transactions, then you are in business.”

Instead of complaining about outsourcing, said Rajesh, Americans and Western Europeans would “be better off thinking about how you can raise your bar and raise yourselves into doing something better. Americans have consistently led in innovation over the last century. Americans whining-we have never seen that before. People like me have learned a lot from Americans. We have learned to become a little more aggressive in the way we market ourselves, which is something we would not have done given our typical British background.”

So what is your overall message? I asked Rajesh, before leaving with my head spinning.

“My message is that what's happening now is just the tip of the iceberg... What is really necessary is for everybody to wake up to the fact that there is a fundamental shift that is happening in the way people are going to do business. And everyone is going to have to improve themselves and be able to compete. It is just going to be one global market. Look, we just made [baseball] caps for Dhruva to give away. They came from Sri Lanka.”

“Not from a factory in South Bangalore?” I asked.

“Not from South Bangalore,” said Rajesh, “even though Bangalore is one of the export hubs for garments. Among the three or four caps we got quotations for, this [Sri Lankan one] was the best in terms of quality and the right price, and we thought the finish was great.

“This is the situation you are going to see moving forward,” Rajesh concluded. “If you are seeing all this energy coming out of Indians, it's because we have been underdogs and we have that drive to kind of achieve and to get there... India is going to be a superpower and we are going to rule.”

“Rule whom?” I asked.

Rajesh laughed at his own choice of words. “It's not about ruling anybody. That's the point. There is nobody to rule anymore. It's about how you can create a great opportunity for yourself and hold on to that or keep creating new opportunities where you can thrive. I think today that rule is about efficiency, it's about collaboration and it is about competitiveness and it is about being a player. It is about staying sharp and being in the game... The world is a football field now and you've got to be sharp to be on the team which plays on that field. If you're not good enough, you're going to be sitting and watching the game. That's all.”

How Do You Say “Zippie” in Chinese?

As in Bangalore ten years ago, the best place to meet zippies in Beijing today is in the line at the consular section of the U.S. embassy. In Beijing in the summer of 2004, I discovered that the quest by Chinese students for visas to study or work in America was so intense that it had spawned dedicated Internet chat rooms, where Chinese students swapped stories about which arguments worked best with which U.S. embassy consular officials. They even gave the U.S. diplomats names like “Amazon Goddess,” “Too Tall Baldy,” and “Handsome Guy.” Just how intensely Chinese students strategize over the Internet was revealed, U.S. embassy officials told me, when one day a rookie U.S. consular official had student after student come before him with the same line that some chat room had suggested would work for getting a visa: “I want to go to America to become a famous professor.”

After hearing this all day, the U.S. official was suddenly surprised to get one student who came before him and pronounced, “My mother has an artificial limb and I want to go to America to learn how to build a better artificial limb for her.” The official was so relieved to hear a new line that he told the young man, “You know, this is the best story I've heard all day. I really salute you. I'm going to give you a visa.”

You guessed it.

The next day, a bunch of students showed up at the embassy saying they wanted a visa to go to America to learn how to build better artificial limbs for their mothers.

Talking to these U.S. embassy officials in Beijing, who are the gatekeepers for these visas, it quickly became apparent to me that they had mixed feelings about the process. On the one hand, they were pleased that so many Chinese wanted to come study and work in America. On the other hand, they wanted to warn American kids: Do you realize what is coming your way? As one U.S. embassy official in Beijing said to me, “What I see happening [in China] is what has been going on for the last several decades in the rest of Asia-the tech booms, the tremendous energy of the people. I saw it elsewhere, but now it is happening here.”

I was visiting Yale in the spring of 2004. As I was strolling through the central quad, near the statue of Elihu Yale, two Chinese-speaking tours came through, with Chinese tourists of all ages. Chinese have started to tour the world in large numbers, and as China continues to develop toward a more open society, it is quite likely that Chinese leisure tourists will alter the whole world-tourism industry.

But Chinese are not visiting Yale just to admire the ivy. Consider these statistics from Yale's admissions office. The fall 1985 class had 71 graduate and undergraduate students from China and 1 from the Soviet Union. The fall 2003 class had 297 Chinese graduate and undergraduate students and 23 Russians. Yale's total international student contingent went from 836 in the fall of 1985 to 1,775 in the fall of 2003. Applications from Chinese and Russian high school students to attend Yale as undergraduates have gone from a total of 40 Chinese for the class of 2001 to 276 for the class of 2008, and 18 Russians for the class of 2001 to 30 for the class of 2008. In 1999, Yiting Liu, a schoolgirl from Chengdu, China, got accepted to Harvard on a full scholarship. Her parents then wrote a build-your-own handbook about how they managed to prepare their daughter to get accepted to Harvard. The book, in Chinese, titled Harvard Girl Yiting Liu, offered “scientifically proven methods” to get your Chinese kid into Harvard. The book became a runaway best seller in China. By 2003 it had sold some 3 million copies and spawned more than a dozen copycat books about how to get your kid into Columbia, Oxford, or Cambridge.

While many Chinese aspire to go to Harvard and Yale, they aren't just waiting around to get into an American university. They are also trying to build their own at home. In 2004,1 was a speaker for the 150th anniversary of Washington University in St. Louis, a school noted for its strength in science and engineering. Mark Wrighton, the university's thoughtful chancellor, and I were chatting before the ceremony. He mentioned in passing that in the spring of 2001 he had been invited (along with many other foreign and American academic leaders) to Tsinghua University in Beijing, one of the finest in China, to participate in the celebration of its ninetieth anniversary. He said the invitation left him scratching his head at first: Why would any university celebrate its ninetieth anniversary-not its hundredth?

“Perhaps a Chinese tradition?” Wrighton asked himself. When he arrived at Tsinghua, though, he learned the answer. The Chinese had brought academics from all over the world to Tsinghua-more than ten thousand people attended the ceremony-in order to make the declaration “that at the one hundredth anniversary Tsinghua University would be among the world's premier universities,” Wrighton later explained to me in an e-mail. “The event involved all of the leaders of the Chinese government, from the Mayor of Beijing to the head of state. Each expressed the conviction that an investment in the university to support its development as one of the world's great universities within ten years would be a rewarding one. With Tsinghua University already regarded as one of the leading universities in China, focused on science and technology, it was evident that there is a seriousness of purpose in striving for a world leadership position in [all the areas involved] in spawning technological innovation.”

And as a result of China's drive to succeed, Microsoft chairman Bill Gates argued to me, the “ovarian lottery” has changed-as has the whole relationship between geography and talent. Thirty years ago, he said, if you had a choice between being born a genius on the outskirts of Bombay or Shanghai or being born an average person in Poughkeepsie, you would take Poughkeepsie, because your chances of thriving and living a decent life there, even with average talent, were much greater. But as the world has gone flat, Gates said, and so many people can now plug and play from anywhere, natural talent has started to trump geography.

“Now,” he said, “I would rather be a genius born in China than an average guy born in Poughkeepsie.”

That's what happens when the Berlin Wall turns into the Berlin mall and 3 billion people converge with all these new tools for collaboration. “We're going to tap into the energy and talent of five times as many people as we did before,” said Gates.

From Russia with Love

I didn't get a chance to visit Russia and interview Russian zippies for this book, but I did the next best thing. I asked my friend Thomas R. Pickering, the former U.S. ambassador to Moscow and now a top international relations executive with Boeing, to explain a new development I had heard about: that Boeing was using Russian engineers and scientists, who once worked on MiGs, to help design its next generation of passenger planes.

Pickering unraveled the story for me. Beginning in 1991, Boeing started assigning out work to Russian scientists to take advantage of their expertise in aerodynamic problems and new aviation alloys. In 1998, Boeing decided to take this a step further and open an aeronautical engineering design office in Moscow. Boeing located the office in the twelve-story Moscow tower that McDonald's built with all the rubles it made from selling Big Macs in Moscow before the end of communism— money that McDonald's had pledged not to take out of the country.

Seven years later, said Pickering, “we now have eight hundred Russian engineers and scientists working for us and we're going up to at least one thousand and maybe, over time, to fifteen hundred.” The way it works, he explained, is that Boeing contracts with different Russian aircraft companies-companies that were famous in the Cold War for making warplanes, companies with names like Ilyushin, Tupolev, and Sukhoi-and they provide the engineers-to-order for Boeing's different projects. Using French-made airplane design software, the Russian engineers collaborate with their colleagues at Boeing America -in both Seattle and Wichita, Kansas-in computer-aided airplane designs. Boeing has set up a twenty-four-hour workday. It consists of two shifts in Moscow and one shift in America. Using fiber-optic cables, advanced compression technologies, and aeronautical work flow software, “they just pass their designs back and forth from Moscow to America,” Pickering said. There are videoconferencing facilities on every floor of Boeing's Moscow office, so the engineers don't have to rely on e-mail when they have a problem to solve with their American counterparts. They can have a face-to-face conversation.

Boeing started outsourcing airplane design work to Moscow as an experiment, a sideline; but today, with a shortage of aeronautical engineers in America, it is a necessity. Boeing's ability to blend these lower-cost Russian engineers with higher-cost, more advanced American design teams is enabling Boeing to compete head-to-head with its archrival, Airbus Industries, which is subsidized by a consortium of European governments and is using Russian talent as well. A U.S. aeronautical engineer costs $120 per design hour; a Russian costs about one-third of that.