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did not go to college. My sister has a master's degree in economics, and my daughter

is at the University of Chicago. We have done all this in living memory, but we have

been willing to change . . . You have to have a strong culture, but also the openness

to adapt and adopt from others. The cultural exclu-sivists have a real disadvantage.

Think about it, think about the time when the emperor in China threw out the British

ambassador. Who did it hurt? It hurt the Chinese. Exclusivity is a dangerous thing."

Openness is critical, added Rao, "because you start tending to respect people for

their talent and abilities. When you are chatting with another developer in another

part of the world, you don't know what his or her color is. You are dealing with people

on the basis of talent-not race or ethnicity-and that changes, subtly, over time your

whole view of human beings, if you are in this talent-based and performance-based

world rather than the background-based world."

This helps explain why so many Muslim countries have been struggling as the world

goes flat. For complicated cultural and historical reasons, many of them do not

glocalize well, although there are plenty of

exceptions-namely, Turkey, Lebanon, Bahrain, Dubai, Indonesia, and Malaysia. All of

these latter countries, though, tend to be the more secular Muslim nations. In a world

where the single greatest advantage a culture can have is the ability to foster

adaptability and adoptability, the Muslim world today is dominated by a religious

clergy that literally bans ijtihad, reinterpretation of the principles of Islam in

light of current circumstances.

Think about the whole mind-set of bin Ladenism. It is to "purge" Saudi Arabia of all

foreigners and foreign influences. That is exactly the opposite of glocalizing and

collaborating. Tribal culture and thinking still dominate in many Arab countries,

and the tribal mind-set is also anathema to collaboration. What is the motto of the

tribalist? "Me and my brother against my cousin; me, my brother, and my cousin against

the outsider." And what is the motto of the globalists, those who build collaborative

supply chains? "Me and my brother and my cousin, three friends from childhood, four

people in Australia, two in Beijing, six in Bangalore, three from Germany, and four

people we've met only over the Internet all make up a single global supply chain."

In the flat world, the division of labor is steadily becoming more and more complex,

with a lot more people interacting with a lot of other people they don't know and

may never meet. If you want to have a modern complex division of labor, you have to

be able to put more trust in strangers.

In the Arab-Muslim world, argues David Landes, certain cultural attitudes have in

many ways become a barrier to development, particularly the tendency to still treat

women as a source of danger or pollution to be cut off from the public space and denied

entry into economic activities. When a culture believes that, it loses a large portion

of potential productivity of the society. A system that privileges the men from birth

on, Landes also argues, simply because they are male, and gives them power over their

sisters and other female members of society, is bad for the men. It builds in them

a sense of entitlement that discourages what it takes to improve, to advance, and

to achieve. This sort of discrimination, he notes, is not something limited to the

Arab Middle East, of course. Indeed, strains of it are found in different degrees

all around the world, even in so-called advanced industrial societies.

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The Arab-Muslim world's resistance to glocalization is something that some liberal

Arab commentators are now focusing on. Consider a May 5, 2004, article in the Saudi

English-language daily Arab News by liberal Saudi journalist Raid Qusti, titled "How

Long Before the First Step?"

"Terrorist incidents in Saudi Arabia are more or less becoming everyday news. Every

time I hope and pray that it ends, it only seems to get worse," Qusti wrote. "One

explanation to why all of this is happening was brought up by the editor in chief

of Al-Riyadh newspaper, Turki Al-Sudairi, on a program about determining the roots

of the terrorist acts. He said that the people carrying out these attacks shared the

ideology of the Juhaiman movement that seized the Grand Mosque in the seventies. They

had an ideology of accusing others of being infidels and giving themselves a free

hand to kill them, be it Westerners-who, according to them, ought to be kicked out

of the Arabian Peninsula-or the Muslim believer who does not follow their path. They

disappeared in the eighties and nineties from the public eye and have again emerged

with their destructive ideology. The question Al-Sudairi forgot to bring up was: What

are we Saudis going to do about it? If we as a nation decline to look at the root

causes, as we have for the past two decades, it will only be a matter of time before

another group of people with the same ideology spring up. Have we helped create these

monsters? Our education system, which does not stress tolerance of other faiths-let

alone tolerance of followers of other Islamic schools of thought-is one thing that

needs to be re-evaluated from top to bottom. Saudi culture itself and the fact that

the majority of us do not accept other lifestyles and impose our own on other people

is another. And the fact that from fourth to 12th grade we do not teach our children

that there are other civilizations in the world and that we are part of the global

community and only stress the Islamic empires over and over is also worth

re-evaluating."

It is simply too easily forgotten that when it comes to economic activities, one of

the greatest virtues a country or community can have is a culture of tolerance. When

tolerance is the norm, everyone flourishes- because tolerance breeds trust, and trust

is the foundation of innovation and entrepreneurship. Increase the level of trust

in any group, company, or society, and only good things happen. "China began its

astounding

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commercial and industrial takeoff only when Mao Zedong's odiously intolerant form

of communism was scrapped in favor of what might be called totalitarian

laissez-faire," wrote British historian Paul Johnson in a June 21, 2004, essay in

Forbes. "India is another example. It is the nature of the Hindu religion to be

tolerant and, in its own curious way, permissive . . . When left to themselves, Indians

(like the Chinese) always prosper as a community. Take the case of Uganda's Indian

population, which was expelled by the horrific dictator Idi Amin and received into

the tolerant society of Britain. There are now more millionaires in this group than

in any other recent immigrant community in Britain. They are a striking example of

how far hard work, strong family bonds and devotion to education can carry a people

who have been stripped of all their worldly assets." Islam, down through the years,

has thrived when it fostered a culture of tolerance, as in Moorish Spain. But in its

modern form, in too many cases Islam has been captured and interpreted by spiritual

leaders who do not embrace a culture of tolerance, change, or innovation, and that,

Johnson noted, surelyhas contributed to lagging economic growth in many Muslim lands.

Here we come again to the coefficient of flatness. Countries without natural resources

are much more likely, through human evolution, to develop the habits of openness to

new ideas, because it is the only way they can survive and advance.

The good news, though, is that not only does culture matter, but culture can change.

Cultures are not wired into our human DNA. They are a product of the context-geography,

education level, leadership, and historical experience-of any society. As those

change, so too can culture. Japan and Germany went from highly militarized societies

to highlypacifist and staunchly democratic societies in the last fifty years. Bahrain

was one of the first Arab countries to discover oil. It was the first Arab country

to run out of oil. And it was the first Arab country in the Arab Gulf to hold an election

for parliament where women could run and vote. China during the Cultural Revolution

seemed like a nation in the grip of a culture of ideological madness. China today

is a synonym for pragmatism. Muslim Spain was one of the most tolerant societies in

the history of the world. Muslim Saudi Arabia today is one of the most in

tolerant. Muslim Spain was a trading and merchant culture where people had to live

by their wits and therefore learned to live well with others; Saudi Arabia today can

get by just selling oil. Yet right next to Saudi Arabia sits Dubai, an Arab city-state

that has used its petrodollars to build the trading, tourist, service, and computing

center of the Arab Gulf. Dubai is one of the most tolerant, cosmopolitan places in

the world, with, it often seems, more sushi bars and golf courses than mosques-and

tourists don't even need a visa. So yes, culture matters, but culture is nested in

contexts, not genes, and as those contexts, and local leaders, change and adapt, so

too can culture.

The Intangible Things

You can tell a lot by just comparing skylines. Like many Indian Americans, Dinakar

Singh, the hedge fund manager, regularly goes back to India to visit family. In the

winter of 2004, he went back to New Delhi for a visit. When I saw him a few months

later, he told me about the moment when he realized why India's economy, as a whole,

still had not taken off as much as it should have-outside of the high-tech sector.

"I was on the sixth floor of a hotel in New Delhi," he recalled, "and when I looked

out the window I could see for miles. How come? Because you do not have assured power

in Delhi for elevators, so there are not many tall buildings." No sensible investor

would want to build a tall building in a city where the power could go out at any

moment and you might have to walk up twenty flights of stairs. The result is more

urban sprawl and an inefficient use of space. I told Singh that his story reminded

me of a trip I had just taken to Dalian, China. I had been to Dalian in 1998, and

when I went back in 2004,1 did not recognize the city. There were so many new buildings,

including modern glass-and-steel towers, that I began to question whether I had

actually visited there in 1998. Then I added another recollection. I went to school

in Cairo in the summer of 1974. The three most prominent buildings in the city then

were the Nile Hilton, the Cairo Tower, and the Egyptian TV build

ing. Thirty years later, in 2004, they are still the most prominent buildings there;

the Cairo skyline has barely changed. Whenever I go back to Cairo, I know exactly

where I am. I visited Mexico City shortly before Dalian, where I had not visited in

five years. I found it much cleaner than I had remembered, thanks to a citywide

campaign by the mayor. There were also a few new buildings up, but not as many as

I expected after a decade of NAFTA. Inside the buildings, though, I found my Mexican

friends a little depressed. They told me that Mexico had lost its groove-it just

wasn't growing like it had been, and people's self-confidence was waning.

So in Delhi, you can see forever. In Cairo, the skyline seems forever the same. In

China, if you miss visiting a city for a year, it's like you haven't been there in

forever. And in Mexico City, just when Mexicans thought they had turned the corner

forever, they ran smack into China, coming the other way and running much faster.

What explains these differences? We know the basic formula for economic

success-reform wholesale, followed by reform retail, plus good governance, education,

infrastructure, and the ability to glocalize. What we don't know, though, and what

I would bottle and sell if I did, is the answer to the question of why one country

gets its act together to do all these things in a sustained manner and why another

one doesn't. Why does one country's skyline change overnight and another's doesn't

change over half a century? The only answer I have been able to find is something

that cannot be defined: I call it the intangible things. These are primarily two

qualities: a society's ability and willingness to pull together and sacrifice for

the sake of economic development and the presence in a society of leaders with the

vision to see what needs to be done in terms of development and the willingness to

use power to push for change rather than to enrich themselves and preserve the status

quo. Some countries (such as Korea and Taiwan) seem to be able to focus their energies

on the priority of economic development, and others (such as Egypt and Syria) get

distracted by ideology or local feuds. Some countries have leaders who use their time

in office to try to drive modernization rather than personally enrich themselves.

And some countries simply have venal elites, who use their time in office to line

their pockets

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and then invest those riches in Swiss real estate. Why India had leaders who built

institutes of technology and Pakistan had leaders who did not is a product of history,

geography, and culture that I can only summarize as one of those intangible things.

But even though these intangibles are not easily measured, they really do matter.

The best way I know to illustrate this is by comparing Mexico and China. Mexico, on

paper, seemed perfectly positioned to thrive in a flat world. It was right next door

to the biggest, most powerful economy in the world. It signed a free-trade agreement

with the United States and Canada in the 1990s and was poised to be a springboard

to Latin America for both these huge economies. And it had a valuable natural resource

in oil, which accountedfor more than a third ofgovernment income. China, by contrast,

was thousands of miles away, burdened by overpopulation, with few natural resources,