58 pages • 1 hour read
Thomas L. FriedmanThe Lexus and the Olive Tree
Nonfiction | Book | Adult | Published in 1997A modern alternative to SparkNotes and CliffsNotes, SuperSummary offers high-quality Study Guides with detailed chapter summaries and analysis of major themes, characters, and more.
Key Figures
Thomas Friedman
Thomas L. Friedman is the author of The Lexus and the Olive Tree, and his experiences give support to his analysis of globalization. A lifelong journalist, Friedman began his career covering the Lebanese civil war in 1979 before working for the New York Times. At the New York Times, he covered the 1982 Israeli invasion of Lebanon before returning to America to cover the George HW Bush and Bill Clinton White Houses. From 1994 until the present, he has been an op-ed columnist for the Times, where he travels the world as a foreign affairs columnist, writing about globalization, economics, and foreign policy. He has published several other books, notably From Beirut to Jerusalem, which covers his time reporting on the middle east, and The World Is Flat, which also covers the impact of globalization.
Friedman centers himself in The Lexus and the Olive Tree, drawing on his insights gained from travelling around the world and engaging in conversations with global, political, and economic elites. Much of his arguments are supported by these anecdotes and conversations. At the same time, Friedman attempts to provide a ground-level perspective by recounting conversations with service-sector employees in the countries he visits, such as taxi drivers. In essence, Friedman argues that his unique experiences in travelling around the world and meeting its most powerful people has given him a unique understanding of how the new global system works, and what countries, companies, and people need to do to survive within this system.
Friedman also uses numerous metaphors and analogies to tell simple stories about how globalization works. Examples used in this book are the herd metaphor for international investors and the computer metaphor for countries and companies. While his style has been praised by some for its accessibility, he has been criticized by others for his over-use of mixed metaphors and analogies, his optimism and self-confidence, and his friendliness to those who hold power.
The Electronic Herd
The figure of the electronic herd is the most important within the book. Friedman argues that the members of the herd are the drivers of the globalization system, brought it into existence, and make it function. The analogy of the herd comes from Friedman’s description of globalization as a vast, fast plain in contrast to the walled-off, slow world. Friedman uses the herd to refer to the innumerable individual investors (large and small) who make global investment decisions with their money. He uses the herd metaphor specifically because, while the herd is made up of countless individuals, it still tends to move together because all of these individual investors and companies are responding to the same information and same economic incentives. He also refers to it as a herd, because it can rapidly stampede in and out of countries who are involved into globalization, which produces great economic growth or an economic crisis, respectively.
While Friedman admits that the herd can make mistakes in the short-term, over the medium and long-term it will always respond to economic incentives by rewarding countries and companies that engage in good economic governance by putting on the golden straitjacket. Taken together, all of these individual investors making individual decisions is what makes globalization work.
The herd is broken down into two broad categories, reflecting the distinction in economics between Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI). The “long-horn cattle” engage in FDI by making long-term investments that entail a form of control over the business invested in; these are often multi-national companies. In contrast, “short-horn cattle” are those investors who engage in FPI by making shorter-term investments in a country by purchasing financial instruments (such as stocks or bonds) abroad.
Given that the electronic herd is the most central concept to Friedman’s arguments, he also makes several prescriptions about how countries, companies, and individuals can best harness the power of the herd. He acknowledges the potential destructive power of the stampeding herd, but concludes that opening your country or business to the herd is a win-win scenario. Access to the herd allows you to grow faster and larger than you would have before, while also forcing your country or company to undertake necessary economic and political reforms. The herd simply responds to economic incentives and is only concerned with profit, but the side effects have been the three democratizations, the fast world, the golden straitjacket, and globalization.
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