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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 
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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 
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returns。' Sonia; by the way; is working out of her house in India; with no overhead 
'for the company to pay'。 'And these others; they are really complicated; so I will 
do them myself。〃 
In 2003; some 25;000 U。S。 tax returns were done in India。 In 2004; the number was 


100;000。 In 2005; it is expected to be 400;000。 In a decade; you will assume that 
your accountant has outsourced the basic prepa

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