BizThoughts

Can money buy you happiness? The short answer: YES.

Justin Wolfers, a frequent guest blogger on Freakonomics and an Assistant Professor of Business and Public Policy at The Wharton School of the University of Pennsylvania, recently wrote a series of posts on The Economics of Happiness:

UPDATED 5/1/2008: I've added parts 5 and 6 to the list.

1. Reassessing the Easterlin Paradox
2. Are Rich Countries Happier than Poor Countries?
3. Historical Evidence
4. Are Rich People Happier than Poor People?
5. Will Raising the Incomes of All Raise the Happiness of All?
6. Delving Into Subjective Well-Being

In these posts, he provides statistical evidence that:

• Rich people are happier than poor people.
• Richer countries are happier than poorer countries.
• As countries get richer, they tend to get happier.

In this CNBC video with Wolfers and Betsey Stevenson (also an Assistant Professor of Business and Public Policy at Wharton), Wolfers explains that the survey questions included, "Did you smile a lot yesterday?" and "Did you laugh a lot, yesterday?" - which can offer more absolute measures of happiness than simply asking, "How happy are you?"

As it turns out, richer people smile and laugh more often than poorer people.

This all comes in stark contrast to the Easterlin Paradox, which postulates that relative income - the amount you make compared with others around you - is more important than absolute income. In the CNBC video, Stevenson states that relative income is still important, but it may not be as important as the Easterlin Paradox suggests.

In the NY Times article, "Maybe Money Does Buy Happiness After All", Richard Easterlin (a Professor of Economics at University of Southern California) agrees that people in richer countries are more satisfied, but isn't sure that their wealth is causing their satisfaction—their survey answers may be reflecting cultural differences and offering skewed data.

Still, the data Wolfers and Stevenson have amassed is pretty compelling. They combed through reams and reams of post-war surveys and research to come up with their conclusions. Take this chart from the 2006 General Social Survey, for instance. The survey asked: "Taken all together, how would you say things are these days?"

Looks like money is sure buying happiness for the rich here.

It's not easy being the first into a new market. Especially a market as vast and complex as China.

In Their Shoes

Let's say that you are the founder of an Internet search engine, called, um, Yahooglesoft. As a publically-traded company in a growth industry, you know that the greatest growth opportunities exist globally. So you enter China and slowly navigate its unfamiliar laws. To make things easier, you decide to open an office in Beijing. What better way to learn about this new market than to have a satellite office, right?

However, this new market has restrictions. In order to do business here, you have to comply with their regulations on information censorship. In their eyes, this is everyday life and most of its citizens don't see it as an evil. These regulations also block harmful sites such as child pornography, so they accept it.

Since information censorship runs counter to your values, this makes you uncomfortable. But several factors motivate you to adopt these regulations: the market alternatives are weak and your offering will benefit many new users, to satisfy your shareholders you need to continue growing the company, and a domestic competitor will surely enter this market if you don't. So you strive forward, ahead of your competitors.

You've also censored your search results before, in France, Germany, and your own home country the United States of America. There's already a precedent of removing certain search results based on the laws of that particular nation. China just has stricter regulations.

Since the Internet basically operates across a network of wires, the further a signal needs to traverse the wires, the longer a user has to wait for a web page. To solve this, you locate some of your web servers into China, to be closer to your Chinese users. This move puts that data under the legal jurisdiction of China, however. But it vastly improves the user experience, your product, and the enjoyment of your users.

Every so often, the local police ask you to release information about private citizens. Refusing them means blocking a police investigation and possible jail time. Not wanting jail, your employees turn over this information each time. In most cases, such investigations are to trace murderers, thieves, and other criminals.

But in one case, the information is used to incarcerate a journalist. As the founder of Yahooglesoft, you don't hear about this until it's made the headlines. You're aghast. You condemn the actions of China, yet you know your employees simply did what they were supposed to, what anyone would have done under those circumstances. There was no way they could have known about the consequences of their actions.

So if you put yourself in these shoes, and without the ability to tell the future, what would you have done in this situation?

Yahoo! and the Case of Shi Tao

Yahoo! (YHOO) was the first US-based Internet search engine to enter China. In 1999 it opened up a Beijing office and launched its Chinese-language search engine. Microsoft (MSFT) and Google (GOOG) entered the market later and enjoyed a second-mover advantage by being able to learn from Yahoo!'s actions.

In 2004, Chinese authorities discovered that a private citizen had sent an email containing what it deemed as "top state secrets" to an overseas organization using Yahoo!'s Chinese email service, according to EastSouthWestNorth's article "The Case for Shi Tao". The authorities approached the Yahoo! Hong Kong office with a judicial warrant to obtain the sender's IP information. The warrant didn't say why this information was needed, and "it is reportedly customary for e-mail service and Internet access providers to transmit information to the police about their clients when shown a court order," according to Reporters Without Borders (RSF)'s article "Information supplied by Yahoo! helped journalist Shi Tao get 10 years in prison".

In the comprehensive article "How Multinational Internet Companies assist Government Censorship in China" by Human Rights Watch, Michael Callahan, Yahoo!'s General Counsel, is quoted as saying, "When we receive a demand from law enforcement authorized under the law of the country in which we operate, we must comply." Not doing so means legal action against the company and its employees. Callahan continued: "Law enforcement agencies in China, the United States, and elsewhere typically do not explain to information technology companies or other businesses why they demand specific information regarding certain individuals."

It turned out that the data the authorities needed wasn't located in Hong Kong—it was located on servers in mainland China. Independent research from RSF confirmed this as well. So the employees of Yahoo! China did what any law-abiding citizen would do when presented with an ominous judicial warrant; they did as the warrant requested.

This led to the arrest of Shi Tao in 2004, a journalist, writer and poet. According to Wikipedia, "the Chinese authorities confiscated his computer and documents without showing any proper permit or document, and warned his family members not to talk about it with others." He was sentenced to ten years in prison.

This past Wednesday, Yahoo! co-founder Jerry Yang and Callahan testified in a hearing called by Representative Tom Lantos, chairman of the House Foreign Affairs Committee. The purpose was to determine if Callahan intentionally gave misleading testimony in February 2006 on this case. "While technologically and financially you are giants, morally you are pygmies," Lantos chided. RSF also condemned Yahoo!: "We already knew that Yahoo! collaborates enthusiastically with the Chinese regime in questions of censorship, and now we know it is a Chinese police informant as well." Even Zhao Jing (also known as "Michael Anti"), a Chinese journalist whose blog was removed from MSN Spaces by Microsoft at the request of Chinese authorities, had these scathing words: "Yahoo is a sellout. Chinese people hate Yahoo."

Yahoo! has also been implicated in the jailings of three other Chinese journalists: Lijun Jiang in 2002 (four-year imprisonment), Wang Xiaoning in 2002 (ten-year imprisonment), and Li Zhi in 2003 (eight-year imprisonment), all of whom used Yahoo!'s Chinese services.

Reaction from Chinese Bloggers

Words like "repressive regime" and "totalitarian" are used often in the Western press to describe China. Especially when it comes to censorship. But there are two sides to every story. It's easier to criticize and assign your own values to another society than it is to try and understand them.

From Zhao Jing (Michael Anti)

In a statement on his web site (and translated into English), Zhao writes:

When foreigners repeatedly use "totalitarian" to describe China, this is a deep shame for me as a Chinese person. This shame cannot ever be forgotten.

These kind of sentiments cannot be understood by foreigners. When the US Congress holds a hearing about Internet freedom in China, this is an American affair. When the US Congress proposes Internet freedom of information legislation, this is truly treating the freedom of the Chinese netizens as maids that they can dress up as they see fit.

From Angry Chinese Blogger

An article on by Angry Chinese Blogger entitled "Truth, Justice - or a near sighted attack on the Chinese way" also adds (emphasis his):

Critics have noted that, while the US administration, the private sector, and the NGO sector, will be well represented at the committee hearing, there will be no panel for representatives of the Chinese government. Leading some observers to accuse the committee of 'judging a foreign state using domestic standards' and of 'acknowledging only to two sides of a three sided confrontation'.

In a previous article, "Aiding the enemy: Congress's New Dilema", he pointed out the hypocrisy of China's critics. One of the loudest is RSF, a France-based organization that "fights against censorship and laws that undermine press freedom." Ironically, the French government once mandated Yahoo! France to remove all neo-Nazi memorabilia from its auctions. Angry Chinese Blogger writes:

While, under French law, the sale of items, promotion of ideologies, or denial of war crimes, relating to the the Nazi, is forbidden, all of these activities are protected as basic human rights under the US constitution; which guarantees freedom of expression and association, even in the case of revisionism and hate speeches.

As such, the removal of Nazi item from Yahoo's French website, under local law, could be constituted as illegal censorship under any new US laws governing complicity in overseas censorship.

RSF also publishes a Worldwide Press Freedom Index that rates every country in the world. Iceland is ranked #1, while France is #31. The US is further down the list at #48, below Nicaragua, Israel, and South Africa. China is #163.

Angry Chinese Blogger also wonders about the good-hearted intentions of the US government. In 2002, Lantos and Congressman Chris Cox proposed the creation of an "Office of Global Internet Freedom", which later materialized as the Global Internet Freedom Task Force (GIFT).

Despite the apparent benevolent intentions of the proposed body and bill, critics have however questioned whether they would really be a force for the preservation and promotion of global internet freedoms, or if they would merely be another avenue for the furtherance of US ideologies. With critics asking whether such an office would, for example, fight with equal vigor to protect websites promoting socialism in South America, as it would sites promoting US style democracy in China.

From EastSouthWestNorth

In EastSouthWestNorth's article "Yahoo! and the case of Shi Tao", the author examines the need for censorship.

Yes, there is true outrage about suppression of freedom of speech. But the answer is not to say that no censorship whatsoever shall be allowed at all. There are in fact legitimate reasons for some things to be censored (for example, child pornography is universally abhorred).

He further explains the need for some Internet censorship in the article "Hinano Mizuki: The Case for Internet Censoring in China", which argues that pornography should be censored, not just from children, but from everyone. In Western societies, nudity is generally more acceptable. Not so in many Eastern cultures. In Angry Chinese Blogger's About Me page, he writes: "I have a number of pet hates, including commercialism, cultural imperialism, and the insidious way that loose western values appear to have crept into Asian society."

EastSouthWestNorth also posted a brief in response to a number of articles from RConversation, the blog of Rebecca MacKinnon, an American journalist and assistant professor in Hong Kong. One in particular, "China censorship: Microsoft's defence", motivated EastSouthWestNorth to write:

You can condemn these companies for all you want, but in the end there has to be a practical and workable solution for them. Rejecting every single Chinese government warrant is NOT the answer, because you are in fact aiding and abetting real criminals most of the time. I personally do not see how this can be done. The change will eventually have to come from inside China about the law.

From Danwei

Dror Poleg of Danwei, a marketing manager for an international investment company in China, argues for a more free-market approach to changing China's Internet censorhip regulations in the article, "China and the Internet: It's access, stupid."

The web, with or without Tibetan rebels or the BBC, is the main driver of change in China. Concerns should focus on the fact that currently only 110 million people in China have Internet access. This comprises the world's second largest online market, but counts only for 10% of China's population.

US lawmakers should keep that in mind when approaching China. It is necessary to set ground rules for U.S. companies operating abroad, but as far as China is concerned, the imperative should be to allow access to as many people as possible. After that, when 400 million Chinese citizens are online, leave it to the market to bring down the walls.

From the New York Times

In the thorough New York Times article "Google's China Problem (and China's Google Problem)", author Clive Thompson writes about a discussion he had with Kai-Fu Lee, who founded the Microsoft Research division in Asia in 1998 and Google China in 2005.

But as Lee and I talked about how the Internet was transforming China, he offered one opinion that seemed telling: the Chinese students he meets and employs, Lee said, do not hunger for democracy. "People are actually quite free to talk about the subject," he added, meaning democracy and human rights in China. "I don't think they care that much. I think people would say: 'Hey, U.S. democracy, that's a good form of government. Chinese government, good and stable, that's a good form of government. Whatever, as long as I get to go to my favorite Web site, see my friends, live happily.'"

He also reports that the Chinese government does not hide its censorship regulations. It's well-known throughout the country that information is censored. In one example, a group of Harvard researchers presented a study on the Chinese Internet to a Chinese professor. The professor related the following story: "I talked to them and asked, 'What were your results?' They said, 'We think the Chinese government tries to control the Internet.' I just laughed. I said, 'We know that!'" Another professor added, "Chinese people have a 5,000-year view of history. You ban a Web site, and they're like: 'Oh, give it time. It'll come back.'"

The Western press often misunderstands what exactly is censored. Zhao, who has no reason to defend the Chinese government after they removed his blog, told Thompson: "If you talk every day online and criticize the government, they don't care, because it's just talk. But if you organize — even if it's just three or four people — that's what they crack down on. It's not speech; it's organizing."

If you look at China's past and history of media censorship, the Internet has already made radical changes to the Chinese culture, as Zhao tells him:

Before, he said, the party controlled every single piece of media, but then Chinese began logging onto discussion boards and setting up blogs, and it was as if a bell jar had lifted. Even if you were still too cautious to talk about politics, the mere idea that you could publicly state your opinion about anything — the weather, the local sports scene — felt like a bit of a revolution.

There is also no master blacklist of sites and words. Companies must interpret the vague regulations themselves. This confusion has lead to rampant self-censorship by Chinese ISPs to a degree probably stricter than the government intended. Thompson asked Xin Ye, founder of Sohu.com if dealing with these vague regulations was difficult. "I'll tell you this, it's not more hard than dealing with Sarbanes and Oxley," he answered. "I don't want to call it censorship. It's like in every country: they have a bias. There are taboos you can't talk about in the U.S., and everyone knows it."

The Competition Angle

As US companies face criticism and possible legal repercussions back home, Chinese competitors continue forward.

Chinese companies already have a home-field advantage of innately understanding the market. For example, according to Thompson in his NYT article, Chinese businesspeople "rarely rely on e-mail, because they find the idea of leaving messages to be socially awkward. They prefer live exchanges, which means they gravitate to mobile phones and short text messages instead." Local competitors were able to build products catering to this behavior before their US counterparts could.

As Yahoo found, these cultural nuances made the sites run by American companies feel simply foreign to Chinese users — and drove them instead to local portals designed by Chinese entrepreneurs. These sites, including Sina.com and Sohu.com, had less useful search engines, but they were full of links to chat rooms and government-approved Chinese-language news sites.

Some of the major Chinese Internet companies are:

• Baidu.com (BIDU) - the leading search engine
• Sina.com (SINA) - the leading web portal
• Sohu.com (SOHU) - another web portal
• Alibaba Group (1688.HK) - the leading B2B marketplace

Wall Street Journal's article "Yahoo's Lashing Highlights Risks Of China Market" notes that "while Yahoo and rivals like Google tried to comply with China's local laws, [doing so] ultimately backfired on them domestically."

"To be doing business in China, or anywhere else in the world, we have to comply with local law," Yang is quoted as saying in the Washington Post article "Yahoo Says It Gave China Internet Data". "I do not like the outcome of what happens with these things, but we have to follow the law." But what if by following one country's laws, you break your own country's laws?

(Ironically, the US government itself has been accused of censorship when it filed a court order urging Google to remove the anti-Scientology organization Operation Clambake from its search results.)

Radio Free Asia points out this apparent catch-22 in "Rights Group Slams Google, Yahoo! Self-Censorship In China":

Sources in Washington doubted whether any formal sanctions could be put in place to prevent companies from limiting freedom of expression in order to maximize profits, without risking charges of censorship themselves.

"The kind of regulation that would allow you to come after these guys for what they're doing could also be used to silence them, could be used to impinge on their freedom of expression," a lawyer with a Congressionally mandated organization told RFA.

This is what Angry Chinese Blogger calls an "Economic Paradox" (emphasis his):

In addition to moral issues, Congress also faces a number of stark concerns from the business community. With US companies stating bluntly that, if they refuse to comply with Chinese demands, and the requirement that all web services must be hardwired for censorship, China will simply switch to other foreign companies that are more willing to please.

Warning that, In effect, any legislation to enforce domestic constitutional standards on companies working in China could 'hand American contracts, and American jobs, to oversea competitors who are not 'burdened' by such regulations'.

He offers this quote from Sonia Arrison, the Director of Technology Studies of the Pacific Research Institute, a free-market think tank in San Francisco, CA: "If Yahoo [doesn't do] business in China, someone else will."

On top of the Chinese companies' home-field advantage, government regulations could add a significant hinderance to the success of US companies in China. "Some observers have cautioned Congress not to rush into the matter, and to be wary of producing 'knee jerk' legislation that could be counter productive, or even dangerous," adds Angry Chinese Blogger.

Which businesses could be effected? There a fair number of US companies that have been implicated in aiding the Chinese government in Internet censorship, including:

• Yahoo
• Google
• Microsoft
• Skype (EBAY) - for censoring certain keywords from their text messages
• Cisco Systems (CSCO) - for providing censorship technology
• Sun Microsystems (JAVA) - for providing censorship technology
• Nortel Networks (NT) - for providing censorship technology
• Websense (WBSN) - for providing censorship technology
• Intel (INTC) - for providing censorship technology
• IBM (IBM) - for providing censorship technology

Lessons for Businesses Going Global

Please don't get me wrong. I don't mean to make light of the deplorable imprisonment of Shi Tao or his colleagues. While I understand that the Chinese government is trying to use Internet censorship as a tool to prevent what it feels is morally reprehensible content, it's my cultural bias to believe it is abusing its authority by censoring politically different viewpoints as well.

Also, consider this sociological point of view: every time you preventing a group of people from seeing something, you'll make a few in that group want to see it even more. It's like putting a "Do not push" sign over a button and watching everyone push it. China's Internet censorship plan may actually strengthen its opposition more than it is protecting itself.

It is easy to criticize Yahoo!'s actions in hindsight, especially with a US perspective and value system. But this isn't a black-and-white case. The question shouldn't be, "Is Yahoo! good or evil?" It should be, "What can we learn from this situation?" Here's my take from the business perspective.

• Sometimes Being Second is Better

  In the early days of Internet businesses, there was (and sometimes still is) a strong belief around the value of the first-mover advantage. While there certainly are benefits to being first, there is also a high level of risk for first-movers in uncertain markets. Countries whose cultural thinking may be very different or contain complex & vague regulations, like China, are a good example. In such markets, there can be an advantage in letting the someone else take all the punches. Microsoft and Google both learned from Yahoo!'s actions and have not set up servers that contain personally-identifiable information within China, for instance.

• Be Prepared for Worst-Case Scenarios

  As Andrew Grove says, "Only the paranoid survive." While it's highly unlikely for Yahoo! to have forseen the consequences of locating their servers in China, a paranoid audit of China's regulations may have netted this worst-case scenario. This doesn't mean stalling out and taking no action; your business can't grow if you don't act. It means being prepared for & able to manage the potential risks of worst-case scenarios with any number of safeguards, including and perhaps especially legal safeguards.

  Human Rights Watch also adds this best practice:

  Human Rights Watch believes that it is likely impossible for an Internet company to avoid intentionally, negligently, or unknowingly participating in political repression when its user data is housed on computer servers physically located within the legal jurisdiction of the People's Republic of China. Thus the first step towards human rights-compliant corporate conduct in China is to store user data outside of the PRC (or for that matter, outside any country with a clear and well-documented track record of prosecuting internationally protected speech as a criminal act).

• Understand Your Customer

  This concept is as old as apple pie, and just as good. When dealing with a foreign culture, it's extremely important to understand the mentality, traditions, mannerisms, behaviors, and values of the people. This can be done with research reports, hiring international consultants, or working with a partner in the target country. According to Thompson in his NYT article, Baidu.com "invented a tool that allows people to create instant discussion groups based on popular search queries," which capitalized on their users' preference for online chatting, because it understood their users better than their US competitors.

• Understand Your Government's Role

  This one's a bit controversial and I am still debating it. Not everyone agrees that governments should get involved with business affairs (nor to its level of involvement). However, in the global marketplace, many governments are involved. Every government, to some extent, sets up trade barriers to protect local businesses, while hopefully not stifling foreign investments. In some cases, without your government's support, it can be difficult or impossible to enter a foreign market. But how do you get your government's support? Throw money at them? I'm not sure that's in the best interest of the people, though it's certainly what many companies do.

What other business lessons can be learned here?

Does your business operate internationally? Do you have teams and vendors in other countries? Does your work take you all around the globe?

If so, then hopefully you've heard of the GLOBE Study already. If not, here's a quick primer.

The GLOBE (Global Leadership and Organizational Behavior Effectiveness) Study is basically an analysis of the cultural, societal, organizational, and leadership differences between 62 different societies around the world. Conducted by the Wharton Business School of the University of Pennsylvania, its team of 170 researchers are aiming:

To determine the extent to which the practices and values of business leadership are universal (i.e., are similar globally), and the extent to which they are specific to just a few societies.

The completed study is released as a thick 848 page hardcover book called Culture, Leadership, and Organizations: The GLOBE Study of 62 Societies and sells for $130. It's a hefty book at a hefty price, but it's generally regarded as one of those "must-have" books for corporate executives in international businesses. (Thank goodness for expense accounts, huh?)

If you're familiar with the personality tests such as Myers-Briggs and Keirsey, this study is similar—except on acid. The GLOBE Study breaks down the 62 societies into:

• 9 Cultural Dimensions: performance orientation, uncertainty avoidance, humane orientation, institutional collectivism, in-group collectivism, assertiveness, gender egalitarianism, future orientation, and power distance.
• 6 Culturally-endorsed Leadership Theory Dimensions: charismatic/value based, team oriented, self-protective, participative, humane oriented, and autonomous.
• 21 Primary Leadership Dimensions: administratively competent, autocratic, autonomous, charismatic/visionary, charismatic/inspirational, charismatic/self-sacrificial, conflict inducer, decisive, diplomatic, face saver, humane orientation, integrity, malevolent, modesty, non-participative, performance oriented, procedural, self-centered, status consciousness, team collaborative, and team integrator.

A great free guide on how to read and understand the GLOBE Study is provided by Grovewell LLC. Their founder, Cornelius Grove, even provides this list of nine highlights:

1. Thirty-five personal attributes of leaders are viewed in some societies as contributing to good leadership, and in other societies as inhibiting good leadership. Among the 35 are "cunning," "provocateur," and "sensitive."
2. Charismatic leadership is often said by businesspeople to be highly effective. The GLOBE research confirms that, worldwide, "Charismatic/Value-Based" leadership is indeed effective; it also specifies the attributes of such leadership.
3. The United States emerges as the only culture in which participative leadership has a positive influence on employee performance.
4. Most managers around the world wish that their companies and supervisors would focus more heavily on high performance than actually is the case.
5. "Team Oriented" leadership is seen by business people in all cultures as moderately or highly desirable and as contributing to good leadership.
6. Managers in the Middle East were less likely than managers anywhere else to view leadership that is "Charismatic/Value-Based," "Team Oriented," and "Participative" as substantially contributing to good leadership. On average, they viewed these three characteristics as having only a mildly positive effect.
7. Concern for gender egalitarianism is positively associated with good leadership in the great majority of societies; this finding is notable because fully three-quarters of the 17,300 respondents worldwide were male.
8. "In-Group Collectivism" is the degree to which people express pride, loyalty, and cohesiveness in their organizations. Contrary to the individualistic ethic of the U.S., American managers value (desire) In-Group Collectivism to the same extent as managers in Russia, Spain, Zambia, Turkey, and Thailand.
9. Overall, the GLOBE findings suggest that leaders are seen as the embodiment of an ideal state of affairs, and thus as the society's instruments for change.

This is the first of a new series of book summaries on BizThoughts. I read a lot. For really good books, I'll occasionally take notes and write up book summaries to help me remember them (yes, I'm such a geek). Sort of like book reports in grade school, though these summaries are more like outlines. I hope the authors don't mind my publishing these.

These aren't a substitute to reading the books, of course; authors include many examples, stories, and anecdotes that support their conclusions. Reading the full book will often help with the absorption of those conclusions. Every book I summarize, I wholeheartedly encourage you to go out, buy the book, and read it yourself.

And even if you read these summaries and books, it's not like they'll truly sink in. As the old adage goes: "You will remember some of what you hear, much of what you read, more of what you see, and almost all of what you experience and fully understand." (Anyone know who originally made that quote?) So after you read the book, go out and do it for yourself.

Book: The World is Flat: A Brief History of the Twenty-first Century
Author: Thomas L. Friedman

The Ten Forces That Flattened the World

These are the ten factors describing how the world is becoming "flat" or globally interconnected, thereby allowing businesses all over the world to compete on a more equal playing field.

1. The New Age of Creativity (the fall of the Berlin Wall)

   This event "tipped the balance of power across the world toward those advocating democratic, consensual, free-market-oriented governance, and away from those advocating authoritarian rule with centrally planned economies."

2. The New Age of Connectivity (the rise of the Web)

   This event "enabled more people to communicate and interact with more other people anywhere on the planet than ever before."

3. Work Flow Software

   This force "enabled more people in more places to design, display, manage, and collaborate on business data previously handled manually," resulting in more work to be able to flow "between companies and continents faster than ever."

4. Uploading (open online collaboration and communities)

   This force gave "newfound power [to] individuals and communities to send up, out, and around their own products and ideas, often for free, rather than just passively downloading them from commercial enterprises or traditional hierarchies," thereby "reshaping the flow of creativity, innovation, political mobilization, and information gathering and dissemination."

5. Outsourcing

   This force meant "taking some specific, but limited, function that your company is doing in-house… and having another company perform that exact same function for you and then reintegrating their work back into your overall operation."

6. Offshoring

   This force meant being able to manufacture "the very same product in the very same way, only with cheaper labor, lower taxes, subsidized energy, and lower health-care costs" in another country, "then integrating it into [your] global supply chains."

7. Supply-Chaining

   This force allowed "[horizontal collaboration]—among suppliers, retailers, and customers—to create value," resulting in "the adoption of common standards between companies" and more efficient "global collaboration."

8. Insourcing

   This force allowed "small companies could suddenly see around the world" and sell their products and services globally, while large companies could "act really small" and "customize products at the last minute."

9. In-forming

   This force gave "all the world's knowledge, or even just a big chunk of it… to anyone and everyone, anytime, anywhere," resulting in "becoming your own self-directed and self-empowered researcher, editor, and selector of entertainment, without having to go to the library or the movie theater or through network television."

10. The Steriods (computers, the Internet, wireless, and personalization)

    This force, made up of specific technologies, supercharged all the other flatteners.

The Triple Convergence

These are the three factors that came together to set off the flattening of the world.

1. Convergence I

   This is the "convergence of the ten flatteners [into] a whole new platform. It is a global, Web-enabled platform for multiple forms of collaboration [that] enables individuals, groups, companies, and universities anywhere in the world to collaborate… without regard to geography, distance, time, and, in the near future, even language… —for the purposes of innovation, production, education, research, entertainment, and, alas, war-making—like no creative platform ever before."

2. Convergence II

   This is the "emergence of a large cadre of managers, innovators, business consultants, business schools, designers, IT specialists, CEOs, and workers."

3. Convergence III

   This is the creation of "horizontal collaboration and value-creation processes and habits that could take advantage of this new, flatter playing field."

The Great Sorting Out

These are the issues that will need to be resolved in the flat world.

1. Offshoring: Who is Exploiting Who?

   This is where "the world starts to flatten out and value increasingly gets created horizontally… who is on the top and who is on the bottom, who is the exploiter and who is the exploited, gets very complicated." The US workers who are out of jobs? The US customers and citizens who pay lower prices and less taxes? The Indian workers who are paid comparably low wages? The Indian workers who's comparably low wages raises their standard of living?

2. Where Do Companies Stop and Start?

   This is where "businesses define their interests and labor opportunities more globally than domestically [and than where they are headquartered]," and "the whole shareholding process demands more and more that these companies perform against global standards, opportunities, and resources."

3. From Command and Control to Collaborate and Connect

   This is where "hierarchies are not being leveled just by little people being able to act big. They are also being leveled by big people being able to act really small—in the sense that they are enabled to do many more things on their own."

4. Multiple Identity Disorder

   This is where "the tensions among our identities as consumers, employees, citizens, taxpayers, and shareholders are going to come into sharper and sharper conflict." For instance, "the Wal-Mart shareholder and shopper in us wans Wal-Mart to be [keep company profits high] and prices low." "But the Wal-Mart worker in us hates the limited benefits and low pay packages." "And the Wal-Mart citizen in us knows that because [Wal-Mart doesn't fully cover employee health care costs], the taxpayers will end up picking up the tab."

5. Who Owns What?

   This is where we need to decide whether we "build legal barriers to protect an innovator's intellectual property so he or she can reap its financial benefits and plow those profits into a new invention, [or] keep [the] walls low enough so that we encourage the sharing of intellectual property, which is required more and more to do cutting-edge innovation."

6. Death of the Salesmen

   This is where efficiency and automation is replacing human beings. "It's hard to create a human bond with e-mail and streaming Internet."

America and Free Trade

This is the idea that "even as the world gets flat, America as a whole will benefit more by sticking to the general principles of free trade, as it always has, than by trying to erect walls, which will only provoke others to do the same and impoverish us all." And "while protectionism would be counter-productive, a policy of free trade, while necessary, is not enough by itself. It must be accompanied by a focused domestic strategy aimed at upgrading the education of every American, so that he or she will be able to compete for the new jobs in the flat world."

The New Middlers

These are the job categories that will make up the new middle-class in the flat world.

1. Great Collaborators and Orchestrators

   These are jobs that "involve collaborating with others or orchestrating collaboration within and between companies, especially those employing diverse workforces from around the world."

2. The Great Synthesizers

   These are jobs that involve "putting together disparate things that you would not think of as going together."

3. The Great Explainers

   These are jobs that involve "[seeing] the complexity but [explaining] it with simplicity."

4. The Great Leveragers

   These are jobs that involve "combining the best of what computers can do with the best of what humans can do, and then constantly reintegrating the new best practices the humans are innovating back into the system to make the whole… that much more productive."

5. The Great Adapters

   These are jobs that involve being "adaptable and versatile" and "are capable not only of constantly adapting but also of constantly learning and growing."

6. The Green People

   These are jobs that involve designing and building "renewable energies and environmentally sustainable systems."

7. The Passionate Personalizers

   These are jobs that involve "pure passion… pure entertainment… [and] a creative touch that no one else thought of adding."

8. The Great Localizers

   These are jobs that involve "[understanding] the emerging global infrastructure, and then [adapting] all the new tools it offers to local needs and demands."

The Right Stuff

These are the abilities that will help individuals compete effectively in the flat world.

1. Learn How to Learn

   This is the ability to "constantly absorb, and teach yourself, new ways of doing old things or new ways of doing new things."

2. Passion and Curiosity

   This is the ability to be passionate and curious "for a job, for success, for a subject area or even a hobby," because "nobody works harder at learning than a curious kid."

3. Play Well With Others

   This is the ability to "be good at managing or interacting with other people."

4. The Right-Brain Stuff

   This is the ability to "nurture more of your right brain [(creative thought)] as well as your left [(analytical thought)]."

The Quiet Crisis

These are the six "dirty little secrets" of the US that are preventing this country from properly preparing for the flat world.

1. The Numbers Gap

   "The generation of scientists and engineers who were motivated to go into science… are reaching their retirement years and are not being replaced in the numbers that they must be if an advanced economy like that of the United States is to remain at the head of the pack."

2. The Education Gap at the Top

   "We simply are not educating, or even interesting, enough of our own young people in advanced math, science, and engineering."

3. The Ambition Gap

   "Not only is [outsourcing] cheaper and efficient, but the quality and productivity [boost] is huge" because of "our love of television and video and online games."

4. The Education Gap at the Bottom

   "If you went to an elite private school or public school in a wealthy neighborhood, you got an education that reinforced innovation and creativity, while the worst public high schools focused on just getting the kids through with the bread-and-butter basics."

5. The Funding Gap

   "Federal funding for research in physical and mathematical sciences and engineering, as a share of GDP, actually declined," and "the effects are starting to show," as other nations surpass the US in scientific research and innovations.

6. The Infrastructure Gap

   "In the first three years of the Bush Administration, the United States dropped from 4th to 13th place in the global rankings of broadband Internet usage [and] most U.S. homes can access only 'basic' broadband, among the slowest, most expensive, and least reliable in the developed world." Even worse is the US's standing in the mobile market.

What the US Should Do

These are the five actions the US should take to remain competitive in the flat world.

1. Leadership

   This is where "we need politicians who are able and willing to" "help educate and explain to people what world they are living in and what they need to do if they want to thrive in it." 'Summoning all our [nation's] strengths and skills to produce a twenty-first-century renewable energy source is George W. Bush's opportunity to be both Nison going to China and JFK going to the moon in one move."

2. Muscles

   This is where the government and companies "can guarantee you that [they] will concentrate on giving you the tools to make yourself more lifetime employable—more able to acquire the knowledge or the experience needed to be a good adapter, synthesizer, collaborator, etc."

3. Cushioning

   This is the concept of wage insurance that "would compensate you for your old specific skills, for a set period of time, while you take a new job and learn new specific skills."

4. Social Activism

   This is where global corporations must develop moral consciences because they "are going to command more power, not only to create value but also to transmit values, than any transnational institutions on the planet."

5. Parenting

   This is where "we need a new generation of parents ready to administer tough love: There comes a time when you've got to put away the Game Boys, turn off the television, shut off the iPod, and get your kids down to work."

What Developing Countries Should Do

These are the actions a developing country should take to remain competitive in the flat world.

1. Introspection

   This is where a country asks itself "to what extent is my country advancing or being left behind by the flattening of the world, and to what extent is it adapting to and taking advantage of all the new platforms for collaboration and competition?"

2. Reform Wholesale

   This is where a country "[focuses] on improving education and infrastructure and, in particular, adopting better governance [and] market-friendly macroeconomic policies [on a strategic, high level]."

3. Reform Retail

   This is where a country "[looks] at infrastructure, education, and governance and [upgrades] each one [on a tactical, detailed level], so more of your people have the tools and legal framework to innovate and collaborate at the highest levels."

4. Culture and Glocalization

   This is where a country asks itself "how outward your culture is: To what degree is it open to foreign influence and ideas? How well does it 'glocalize' [(adopt foreign ideas)]?" as well as "how inward your culture is:" "To what degree is there a sense of national solidarity and a focus on development, to what degree is there trust within the society for strangers to collaborate together, and to what degree are the elites in the country concerned with the masses and ready to invest at home?"

5. The Intangible Things

   This is where a society increases its "ability and willingness to pull together and sacrifice for the sake of economic development" as well as has "leaders with the vision to see what needs to be done in terms of development and the willingness to use power to push for change rather than to enrich themselves and preserve the status quo."

How Companies Cope

These are ways companies can remain competitive in the flat world.

1. Be Unique

   This is where companies "[dig] inside themselves to locate [their] real core competency" to avoid commoditization, which is "happening faster and faster across a whole range of industries" in the flat world.

2. And The Small Shall Act Big

   This is where companies "[take] advantage of several new forms of collaboration—supply-chaining, outsourcing, insourcing, and all the steriods—to make [their small companies] very big."

3. And The Big Shall Act Small

   This is where companies "create a platform that allows individual customers to serve themselves in their own way, at their own pace, in their own time, according to their own tastes."

4. Be Collaborative

   This is where companies "take advantage of the triple convergence to collaborate with the smartest, most efficient people you can find anywhere in the world."

5. Get Regular X-rays

   This is where companies "constantly identify and strengthen their niches and outsource the stuff that is not very differentiating."

6. Outsource to Win

   This is where companies "[outsource] to acquire knowledge talent to grow their business faster, not simply to cut costs and cut back."

7. Be Socially Responsible

   This is where companies "pioneer socially responsible outsourcing [where it's not just about] saving money they can invest somewhere else, [it's about] creating better lives for some of the poor citizens of the world."

The Unflat World

These are the issues holding the world back from becoming truly flat.

1. Too Sick

   These are people "who are too sick… whose lives are stalked everyday by HIV-AIDS, malaria, TB, and polio, and who do not even enjoy steady electricity or potable water."

2. Too Disempowered

   These are people "who don't have the tools or the skills or the infrastructure to participate in any meaningful or sustained way" with the flat world.

3. Too Frustrated

   These are people who "are threatened, frustrated, and even humiliated by this close contact [with the flat world], which, among other things, makes it very easy for people to see where they stand in the world vis-a-vis everyone else."

4. Too Many Toyotas

   This is where the flattening of the world will "set off a global struggle for natural resources and junk up, heat up, garbage up, smoke up, and devour up our little planet faster than at any time in the history of the world."

The Globalization of the Local

This is the "phenomenon that allows diaspora communities around the world to use today's global media networks to cling to their local mores, news, traditions, and friends—no matter where they are living." "It is not the global which comes and envelops us. It is the local which goes global."

The Dell Theory of Conflict Prevention

This is the theory that "no two countries that are both part of a major global supply chain, like Dell's, will ever fight a war against each other as long as both are part of the same global supply chain."