Professionally, the recognition that the world was flat was unnerving because I realized that this flattening had been taking place while I was sleeping, and I had missed it. I wasn't really sleeping, but I was otherwise engaged. Before 9/11,1 was focused on tracking globalization and exploring the tension between the "Lexus" forces of economic integration and the "Olive Tree" forces of identity and nationalism-hence my 1999 book, The Lexus and the Olive Tree. But after 9/11, the olive tree wars became all9 consuming for me. I spent almost all my time traveling in the Arab and Muslim worlds. During those years I lost the trail of globalization. I found that trail again on my journey to Bangalore in February 2004. Once I did,
I realized that something really important had happened while I was fixated on the olive groves of Kabul and Baghdad. Globalization had gone to a whole new level. If you put The Lexus and the Olive Tree and this book together, the broad historical argument you end up with is that that there have been three great eras of globalization.
The first lasted from 1492-when Columbus set sail, opening trade between the Old World and the New World-until around 1800.1 would call this era Globalization 1.0. It shrank the world from a size large to a size medium. Globalization 1.0 was about countries
and muscles. That is, in Globalization 1.0 the key agent of change, the dynamic force driving the process of global integration was how much brawn-how much muscle, how much horsepower, wind power, or, later, steam power-your country had and how creatively you could deploy it. In this era, countries and governments (often inspired by religion or imperialism or a combination of both) led the way in breaking down walls and knitting the world together, driving global integration. In Globalization 1.0, the primary questions were: Where does my country fit into global competition and opportunities? How can I go global and collaborate with others through my country?
The second great era, Globalization 2.0, lasted roughly from 1800to 2000, interrupted by the Great Depression and World Wars I and II. This era shrank the world from a size medium to a size small. In Globalization 2.0, the key agent of change, the dynamic force driving global integration, was multinational companies. These multinationals went global for markets and labor, spearheaded first by the expansion of the Dutch and English joint-stock companies and the Industrial Revolution. In the first half of this era, global integration was powered by falling transportation costs, thanks to the steam engine and the railroad, and in the second half by falling telecommunication costs-thanks to the diffusion of the telegraph, telephones, the PC, satellites, fiber-optic cable, and the early version of the World Wide Web. It was during this era that we really saw the birth and maturation of a global economy, in the sense that there was enough movement
of goods and information from continent to continent for there to be a global market, with global arbitrage in products and labor. The dynamic forces behind this era of globalization were breakthroughs in hardware-from steamships and railroads in the beginning to telephones and mainframe computers toward the end. And the big questions
in this era were: Where does my company fit into the global economy? How does it take advantage of the opportunities? How can I go global and collaborate with others through my company? The Lexus and the Olive Tree was primarily about the climax of
this era, an era when the walls started falling all around the world, and integration,
and the backlash to it, went to a whole new level. But even as the walls fell, there
were still a lot of barriers to seamless global integration. Remember, when Bill
Clinton was elected president in 1992, virtually no one outside of government and
the academy had e-mail, and when I was writing The Lexus and the Olive Tree in 1998,
the Internet and e-commerce were just taking off.
Well, they took off-along with a lot of other things that came together while I was
sleeping. And that is why I argue in this book that around the year 2000 we entered
a whole new era: Globalization 3.0. Globalization 3.0 is shrinking the world from
a size small to a size tiny and flattening the playing field at the same time. And
while the dynamic force in Globalization 1.0 was countries globalizing and thedynamic
force in Globalization 2.0 was companies globalizing, the dynamic force in
Globalization 3.0-the thing that gives it its unique character-is the newfound power
for individuals to collaborate and compete globally. And the lever that is enabling
individuals and groups to go global so easily and so seamlessly is not horsepower,
and not hardware, but software- all sorts of new applications-in conjunction with
the creation of a global fiber-optic network that has made us all next-door neighbors.
Individuals must, and can, now ask, Where do I fit into the global competition and
opportunities of the day, and how can I, on my own, collaborate with others globally?
But Globalization 3.0 not only differs from the previous eras in how it is shrinking
and flattening the world and in how it is empowering indi

viduals. It is different in that Globalization 1.0 and 2.0 were driven primarily by
European and American individuals and businesses. Even though China actually had the
biggest economy in the world in the eighteenth century, it was Western countries,
companies, and explorers who were doing most of the globalizing and shaping of the
system. But going forward, this will be less and less true. Because it is flattening
and shrinking the world, Globalization 3.0 is going to be more and more driven not
only by individuals but also by a much more diverse -non-Western, non-white-group
of individuals. Individuals from every corner of the flat world are being empowered.
Globalization 3.0 makes it possible for so many more people to plug and play, and
you are going to see every color of the human rainbow take part.
(While this empowerment of individuals to act globally is the most important new
feature of Globalization 3.0, companies-large and small-have been newly empowered
in this era as well. I discuss both in detail later in the book.)
Needless to say, I had only the vaguest appreciation of all this as I left Nandan's
office that day in Bangalore. But as I sat contemplating these changes on the balcony
of my hotel room that evening, I did know one thing: I wanted to drop everything and
write a book that would enable me to understand how this flattening process happened
and what its implications might be for countries, companies, and individuals. So I
picked up the phone and called my wife, Ann, and told her, "I am going to write a
book calledThe World Is Flat." She was both amused and curious-well, maybe more amused than curious! Eventually, I was able to bring her around, and I hope I will be able
to do the same with you, dear reader. Let me start by taking you back to the beginning
of myjourney to India, and other points east, and share with you some of the encounters
that led me to conclude the world was no longer round-but flat.
Jaithirth "Jerry" Rao was one of the first people I met in Bangalore-
and I hadn't been with him for more than a few minutes at the Leela
Palace hotel before he told me that he could handle my tax returns and
any other accounting needs I had-from Bangalore. No thanks, I de12
murred, I already have an accountant in Chicago. Jerry just smiled. He was too polite
to say it-that he may already be my accountant, or rather my accountant's accountant,
thanks to the explosion in the outsourcing of tax preparation.
"This is happening as we speak," said Rao, a native of Mumbai, formerly Bombay, whose
Indian firm, MphasiS, has a team of Indian accountants able to do outsourced
accounting work from any state in America and the federal government. "We have tied
up with several small and medium-sized CPA firms in America."
"You mean like my accountant?" I asked. "Yes, like your accountant," said Rao with
a smile. Rao's company has pioneered a work flow software program with a standardized
format that makes the outsourcing of tax returns cheap and easy. The whole process
starts, Jerry explained, with an accountant in the United States scanning my last
year's tax returns, plus my W-2, W-4, 1099, bonuses, and stock
statements-everything-into a computer server, which is physically located in
California or Texas. "Now your accountant, if he is going to have your taxes done
overseas, knows that you would prefer not to have your surname be known or your Social
Security number known [to someone outside the country], so he can choose to suppress
that information," said Rao. "The accountants in India call up all the raw information
directly from the server in America [using a password], and they complete your tax
returns, with you remaining anonymous. All the data stays in the U.S. to comply with
privacy regulations. . . We take data protection and privacy very seriously. The
accountant in India can see the data on his screen, but he cannot take a download
of it or print it out-our program does not allow it. The most he could do would be
to try to memorize it, if he had some ill intention. The accountants are not allowed
to even take a paper and pen into the room when they are working on the returns."
I was intrigued at just how advanced this form of service outsourcing had become. "We are doing several thousand returns," said Rao. What's more, "Your CPA in America need not even be in their office. They can be sitting on a beach in California and e-mail us and say, 'Jerrv> you are really good at doing New York State returns, so you do Tom's returns. And Sonia, you and your team in Delhi do the Washington and Florida