Excerpt from The Lexus and The Olive Tree by Thomas Friedman, plus links to reviews, author biography & more

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The Lexus and The Olive Tree

by Thomas Friedman

The Lexus and The Olive Tree by Thomas Friedman
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  • First Published:
    Apr 1999, 416 pages
    Paperback:
    Apr 2000, 255 pages

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Once a country makes the leap into the system of globalization, its elites begin to internalize this perspective of integration, and always try to locate themselves in a global context. I was visiting Amman, Jordan, in the summer of 1998 and having coffee at the Inter-Continental Hotel with my friend Rami Khouri, the leading political columnist in Jordan. We sat down and I asked him what was new. The first thing he said to me was: "Jordan was just added to CNN's worldwide weather highlights." What Rami was saying was that it is important for Jordan to know that those institutions which think globally believe it is now worth knowing what the weather is like in Amman. It makes Jordanians feel more important and holds out the hope that they will be enriched by having more tourists or global investors visiting. The day after seeing Rami I happen to go to Israel and meet with Jacob Frenkel, then governor of Israel's Central Bank and a University of Chicago-trained economist. Frenkel remarked that he too was going through a perspective change: "Before, when one talked about macroeconomics, we started by looking at the local markets, local financial system and the interrelationship between them, and then, as an afterthought, we looked at the international economy. There was a feeling that what we do is primarily our own business and then there are some outlets where we will sell abroad. Now we reverse the perspective. Let's not ask what markets we should export to, after having decided what to produce; rather let's first study the global framework within which we operate and then decide what to produce. It changes your whole perspective."

While the defining measurement of the Cold War was weight--particularly the throw weight of missiles--the defining measurement of the globalization system is speed--speed of commerce, travel, communication and innovation. The Cold War was about Einstein's mass-energy equation, e = mc2. Globalization is about Moore's Law, which states that the computing power of silicon chips will double every eighteen to twenty-four months. In the Cold War, the most frequently asked question was: "How big is your missile?" In globalization, the most frequently asked question is: "How fast is your modem?"

If the defining economists of the Cold War system were Karl Marx and John Maynard Keynes, who each in his own way wanted to tame capitalism, the defining economists of the globalization system are Joseph Schumpeter and former Intel CEO Andy Grove, who prefer to unleash capitalism. Schumpeter, a former Austrian Minister of Finance and Harvard Business School professor, expressed the view in his classic work, Capitalism, Socialism and Democracy, that the essence of capitalism is the process of "creative destruction"--the perpetual cycle of destroying the old and less efficient product or service and replacing it with new, more efficient ones. Andy Grove took Schumpeter's insight that "only the paranoid survive" for the title of his book on life in Silicon Valley, and made it in many ways the business model of globalization capitalism. Grove helped to popularize the view that dramatic, industry-transforming innovations are taking place today faster and faster. Thanks to these technological breakthroughs, the speed by which your latest invention can be made obsolete or turned into a commodity is now lightning quick. Therefore, only the paranoid, only those who are constantly looking over their shoulders to see who is creating something new that will destroy them and then staying just one step ahead of them, will survive. Those countries that are most willing to let capitalism quickly destroy inefficient companies, so that money can be freed up and directed to more innovative ones, will thrive in the era of globalization. Those which rely on their governments to protect them from such creative destruction will fall behind in this era.

Copyright & copy; 1999 Thomas Friedman

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