The Lexus and the Olive Tree

The Lexus and the Olive Tree

- Thomas L Friedman (490 pages)

·         Where did globalization come from? The cold war world (~1944 to 1987) was a world divided by fences, walls, ditches and dead ends. It was impossible to go very fast or very far in the world without running into a Berlin Wall or Iron Curtain or protective tariff or capital controls. And behind these fences and walls, countries could preserve their own unique forms of life, politics, economics and culture. Differences could remain sharp because there were walls aplenty to protect them and they were not easily penetrated. What blew away all these walls were three fundamental changes – changes in how we communicate (democratization of technology), how we invest (democratization of finance) and how we learn about the world (democratization of information). These changes came together into a whirlwind strong enough to blow off all walls of cold war and enable the world to come together as a single integrated, open plain.

·         Democratization of technology – information storage, digitization (freeze dried information)

·         Democratization of finance – Smallest investors being able to invest in markets around the world (though fund managers) and move money at will and to more efficient markets.

·         Democratization of information – www, which has made us from passive listeners (radio) or passive watchers (TV) to active participants and broadcasters (the web). No government can now deny information to people. It only has a choice to ACT on that information. Government cannot thrash life outside and make it look worse that it is. And life inside cannot be propagandized to make it look better than it is. Today everyone knows about everyone else and can ask the government why should they not be able to enjoy the life of their counterparts in other countries.

·         The internet offers the closet thing to a perfectly competitive market. In the model of perfect communication, there are no barriers to entry, no protection from failure for unprofitable firms and everyone (consumers and producers) has easy and free access to all information. Every company now needs to use the internet not just to improves its own business operations as an end in itself, but so that it will have more time, money and energy to tailor more products to more customers, because it is the tailored product and personal touch that can never be commoditized.

·         Rules of e-business:

·         1) To be successful in e-business, you have to be an e-business. You don’t just attach the internet to a wall somewhere. You have to absorb it into everything you do. Start by getting rid of all paper. No more paper. Sorry. You want to talk to me, you cant do it on paper. You have to it via email and the internet.

·         2) Make your CEO your internet Evangelist. People don’t listen to anyone but the boss.

·         3) Give everyone access to everything all the time. Let people serve themselves. Because when they can serve themselves, they will

·         4) Train and motivate your customers and employees to always go to the web.

·         In the era of globalization, it is the quality of state that matters. You need a smaller state because you want to free market to allocate capital, not the slow bloated government, but you need a faster state with bureaucrats that can regulate the free market, without either choking it or letting it get out of control. The size of the government needs to go down and the quality of government needs to go up. Because less government without better government is dangerous. You need a balance. You need a state that is strong enough and involved enough to maintain a fair playing field, to ensure that the best innovators and entrepreneurs win, but not one that is so strong and so involved that it is either picking winners or protecting losers from winners or protecting losers from external or internal competition.