Why Global Talent Matters to You
WHETHER YOU ARE A STUDENT, a CEO, a programmer, an Uber driver, or a government official, and whether you live in Atlanta or Zagreb, the story of global talent is important for you and will, in many ways, shape your future.
Talented people have an impact on all aspects of our lives, from those who are inventing the next versions of our smartphones to those researching how to extend life. Some lead large companies, others craft effective government policy, and yet others teach and research. The collective power of global talent took us from horses in the nineteenth century to space shuttles in the twentieth century; from an average global life expectancy of thirty-one years in 1900 to seventy-two years today; from disease-ridden cities to powerful and safe metropolises. We certainly also got a lot of things wrong along the way, ranging from atomic bombs to malware, but even so, the progress has been substantial.
This talent moves around a lot. The teams at Apple or Siemens or the London School of Economics draw people from far and wide, accomplishing more together than they ever could in isolation. Much of the innovative power unleashed during the twentieth century came from global talent flowing to where it could be most productive and to where it had the capacity to realize its potential to change the world. Global talent has been an enormous boon to the United States and other destinations favored by high-skilled immigrants.
In the pages ahead, we explore why global talent flows matter so much, from superstar scientists to white-collar workers. There are many parts worthy of celebration, but also many parts to critique. We explore big advances in technology and some amazing start-ups, but we also see older IT workers who have lost their jobs. We study the rise of talent clusters that allow for great collaboration, but we observe many people on the outside looking in, angrily. The deep discontent that many feel toward today’s economy and expanding inequality is being increasingly directed at global talent.
Sometimes discontent becomes rage. A recent issue of Bloomberg Businessweek had the horrible cover story “Murder in Olathe: The Shooting of Two Indian-Born Engineers Reverberates beyond Kansas.”1 The story describes how Olathe, Kansas, population 130,000, has recently fostered a strong tech community that includes Garmin, a large and successful manufacturer of GPS devices. Many immigrant tech workers have moved to Olathe and contributed to this local development. Tragically, on February 22, 2017, a fifty-one-year-old white male, enraged and yelling, “Get out of my country!” shot and killed one Indian engineer who worked for Garmin and injured another. Parallel incidents have occurred elsewhere in America, a gruesome witness to the anti-immigrant backlash that is under way in many advanced countries.
While we shudder at the terrible incident in Olathe, the same issue of the magazine was filled with many other examples of global talent, some highlighting its virtues, others bemoaning its vices. Although this magazine was not a special issue on the topic, it spoke to many ways skilled immigration influences our lives:
• In the Global Economics section, the lead story is “As Venezuela Implodes, Its Young Professionals Flee for a Chance in the U.S.” The collapsed economy is leading to a substantial brain drain to America as skilled workers look for meaningful employment.
• The next article is “Cyprus’ Passport to Growth: Selling EU Citizenship.” A staggering 25 percent of Cyprus’s gross domestic product (GDP) now comes from sales of its citizenship, which includes a European Union passport, to wealthy Russian immigrants. While this example depicts an extreme case, most countries have similar programs that offer residency to those rich enough and willing to spend.
• A bit farther down in the Technology section is an article entitled “Carmakers Are Having a Hard Time Selling Tech Talent on Detroit.” As software becomes a critical input for car manufacturers, access to top talent has become a “CEO issue” rather than just an “HR issue,” according to the report. The skills for running yesterday’s automobile company are different from those that produce world-class software for driverless cars, and traditional companies are racing to compete.
• A later story is scary for my line of work: “A Trump Slump at U.S. B-schools, as Foreign Students Head Elsewhere.” Fiery political rhetoric and uncertain future job prospects are reducing foreign applicants to U.S. professional schools. One MBA student in Toronto candidly notes: “Of course you want to be at Stanford or Columbia, but you have to place your bets. . . . Top talent is going to go where it is welcome.”
• The last article is entitled “How Did I Get Here? Dara Khosrowshahi’s Long Trip from Iranian Refugee to Expedia CEO.” A quote from Khosrowshahi, who three months later became CEO of Uber: “What some Americans don’t appreciate is how strong the brand of the American dream is around the world. I’m an example of how powerful that product is. And now, our president is trying to pull it away from people of a certain origin and religious belief. I find that very sad and very much against what our founders set out to build.”
These stories highlight how the global distribution of talent affects the strength of our companies, the social fabric of our communities, and much beyond. If we truly understood this talent’s power and consequences, nations would have “war rooms” focused solely on harnessing its power. What makes global talent flows so important today?
A Simple Foundation
This book builds on three simple propositions, the first of which is that talent is the world’s most precious resource. Other candidates for this title, like water or oil, deserve consideration, but the power of human talent and how it is utilized is the most important. Some of our best talent, after all, is cracking the desalination of ocean water and cost-efficient solar power to replace fossil fuels. This importance of talent has to some degree always been true, ranging from the clever spark who invented the wheel to the military geniuses who won major wars. Yet for much of human history, fertile farmland, masses of labor, and heavy machinery were as important to national success. Today, the knowledge economy vaults talented individuals to the center of economic performance and the achievement of global prosperity.
The second proposition is that talent as a resource is quite movable, unlike a harbor or a coal mine. A nonstop flight from Boston to Hong Kong takes just sixteen hours, and business managers today can visit three continents in a single week. This is different from a few decades ago, when travelers eagerly recounted for years that rare trip to Africa or Japan. This mobility is also unprecedented in terms of the needed inputs for business success. Much of the economic activity at the start of the twentieth century centered on the waterways that were essential for commerce. Talent, however, can cluster anywhere, with Silicon Valley barely a spot on the map fifty years ago. In today’s digital era, the control and execution of work itself is also becoming movable, such as the logistics of a harbor being managed from afar.
The final proposition is that talent is significantly shaped by the environment that surrounds it. A recent film depicts the rare genius of Srinivasa Ramanujan, a boy born in India in 1887, who achieved astounding mathematical insights without formal training before being discovered by leading European academics. We all stand in awe of self-taught minds like Ramanujan, but the development and utilization of talent works very differently. Families around the world sacrifice deeply to send their children to the very best schools in advanced economies, and the ability to put talent to work increasingly depends on interacting with other skilled minds. Ramanujan himself moved to England to collaborate on frontier research with the leading mathematician G. H. Hardy.
Our Focus on Skills
If these three propositions—talent’s primacy, its mobility, and its dependence on its environment—are even roughly correct, then global talent flows are of central importance to every nation, business, and person.
This book focuses on high-skilled immigration, and principally those migrations that are employment based, such as when Apple hires Chinese programmers and brings them to Cupertino. This applies to a minority of U.S. inflows, with most immigrants instead entering for family-based objectives, such as reuniting parents with their children who have already immigrated. Employment-based immigration is of most immediate consequence in many skilled sectors of the economy, but talent can enter through any category and build up over generations—this is the “American story,” in fact.
Why, then, focus on high-skilled individuals? First, the processes and policies governing these admissions are quite different from those covering family reunification or refugee objectives. Firms and universities take on prominent roles, and the organization of work in talented industries produces distinct economic outcomes. Moreover, the consequences of global talent flows are different for businesses and society than general migration. An easy example is U.S. inequality, where grappling with illegal immigration would muddle our inquiry into how high-skilled immigrants have an impact on U.S. earnings.
A second rationale is the politics of high-skilled immigration reform. National polls show Americans have three times more support for the immigration of “high-skilled workers” than they do for “low-skilled workers.”2 As voters think about immigration differently depending on skill level, we will focus all our bandwidth on high-skilled inflows, and this book’s policy recommendations will be exclusive to that group. But we are skipping ahead at this point, and need to commence with how global talent flows got started.
The Roots of Global Talent Flows
The first five chapters describe the global flows of skilled people, bringing together why individuals want to move, how they are employed in their new locations, and who are the gatekeepers governing their admissions.
Chapter 1 describes the landscape of global talent flows. Talented people come from many countries, especially China and India in recent years, but they consistently prioritize a few places. America has long been the preferred destination for many skilled people. The United States continues to hold a staggering “trade surplus” for talent exchanges, but its special position is weakening with time. We examine what prompts talented individuals to move halfway around the world, including the higher earnings possible in advanced economies and refuge from crises like the one under way in Venezuela.
The fact that so many talented people congregate in just a few spots seems straightforward, but how is it sustainable? If we placed much of the world’s oil into Silicon Valley, we would expect its local price to plummet dramatically—yet the abundance of internet entrepreneurs does not diminish the Valley’s draw for future talent. What makes this resource and the knowledge economy different? Chapter 2 introduces us to the economics of talent clusters, in which many skilled individuals work in sectors of the economy where their productivity is increased mainly by collocating with other talented workers (e.g., Hollywood actors versus your local dentist). This process allows a growing cluster of talent to become the most productive place to work, thereby encouraging even further migration. After all, where do the world’s aspiring actors and actresses want to go?
These outcomes differ from those of lower-skilled immigration, where an abundance of labor reduces the attractiveness to future migrants because of capped local work opportunities. In fact, the largest brake on the talent-clustering process typically emerges from ridiculously high home prices and costs of living, which allows for smaller cities like Olathe to develop a tech presence, too. Detroit’s struggles also highlight how traditional companies can find it hard to compete with the powerful interactions that talent clusters generate. Detroit was built to harness an enormous scale beneficial for automobile production, combining huge factories with an army of assembly-line workers. The skills for running these traditional businesses are different from those that produce world-class software for driverless cars, which scares Motor City. Ford fired its CEO in 2017 for moving too slowly in the race toward the driverless car, which finds Detroit’s giants suddenly competing against Google and Uber.
Indeed, the influence of global talent flows is most pronounced in the U.S. tech sector, the subject of Chapter 3. Immigrants account for about a quarter of U.S. patents and entrepreneurship, and more than half of America’s PhD workforce in science and engineering is foreign born. These shares have grown substantially since the 1970s, particularly with the sharp rise of Chinese and Indian immigration. A deep dive into the American tech sector uncovers why these skills and occupations align so well with global talent flows. It also shows how immigrants are reshaping the geography of innovation in America—one in every eleven U.S. patents is developed today by a Chinese or Indian inventor living in the San Francisco Bay Area.
The immigration of talented people is constrained by national regulations, and Chapter 4 describes how countries vary substantially in their openness to immigrants and the methods used to select candidates. Following Canada’s example, many advanced countries built points-based systems that score potential immigrants on dimensions like education and language fluency. This approach positions the government as the primary gatekeeper, and it helps encourage diversity and select long-term talent. But a points-based approach also struggles with selecting immigrants who can fulfill critical job opportunities, leading many countries to instead delegate significant responsibilities for the selection of skilled immigrants to two other gatekeepers: firms and universities.
In contrast to Canada, in the United States companies are a central gatekeeper for talent admissions. Firms directly select high-skilled immigrants whom they want to employ, most notably by obtaining an H-1B visa for the worker. This delegation means that incoming talent is guaranteed to match with a job. But this approach also has an important consequence—the self-interested motivations that firms have when selecting new employees, good or bad, become implicitly the nation’s policy toward migration of skilled workers. Some firms use immigration to unlock growth and innovation by gaining access to scarce skills, whereas others seek to minimize labor costs or to offshore work from America. Consequently, the benefits of innovation and job creation happen alongside the painful replacement of older IT workers to boost profits. We will explore the complex relationship of firms and talent flows and why some lobbyists refer to the limits on H-1B admissions as “America’s national suicide.”
Chapter 5 shows how universities are the second gatekeeper, as the education pathway produces the foreign graduates who firms recruit. Schools are often the entry point to advanced economies for talented people, who seek both great educations and future job opportunities, a link that the “Trump Slump for B-Schools” story highlights. Indeed, the American education sector is gigantic, and the rising inflows of international students are limiting the ability of graduates to obtain work visas. This desire by universities for foreign students shows little sign of abating, however, as they provide critical funding (international students often pay full fare) as well as the researchers who staff laboratories. Indeed, the way firms and universities shape American talent inflows is not the subject of arcane policy making but is central to how worldwide talent is allocated and the gains and losses that accrue to society.
The Consequences of Global Talent Flows
The second half of the book turns to the consequences of global talent flows for businesses and societies at large. Chapter 6 begins with talent clusters and firms. The perspective that business leaders take on global talent is deeply intertwined with the large technological advances confronting their industries. To succeed in the knowledge economy, top organizations must anticipate and identify emerging ideas, access global talent to develop and refine insights, and push the applications to all parts of vast organizations. This is a demanding set of tasks, with CEOs globally rethinking past organization charts and long-range planning documents, recognizing that the future of work must be managed differently from the past.
Top of mind for many bosses is how to access leading talent clusters, from Los Angeles to London to Shanghai, as it is easiest to catch breakthrough concepts if you are nearby when they are born. These centers foster the global start-ups that are disrupting industries as diverse as hotels, taxis, communication, and finance. More MBA students today dream of starting the next Square or Spotify than of becoming the CEO of HSBC or Walmart, which was not true a decade ago. Global integration, rapid technology cycles, and better tools for coordination are pushing incumbent firms deep into these clusters, ranging from shiny new headquarters to small innovation labs. In traditional industries, personnel choices often followed corporate strategy; now, access to talent dictates many of the strategic options available to a company.
Maintaining a corporate presence in leading talent clusters is but one of the many challenges that companies face. Even as General Electric moves its headquarters to Boston, most of its employees are elsewhere, including a majority outside of America. Chapter 7 describes these human resource challenges. Building and empowering global employee bases requires choices about which language to speak internally and how to implement collaborative team structures. Companies today also obsess about talent outside of their organization. Under mantras like “open innovation,” leading firms are building platforms to reach external capabilities and ideas all around the world. Terms like “virtual access” and “porous boundaries” are more than just business buzz, as even the largest companies recognize that many people outside of their organization are working on the same ideas that they are.
Chapter 8 describes how these business linkages are accelerating the international diffusion of technologies and remaking business models. Distance matters for how quickly ideas spread, but networks and people flows matter even more. As talented people move back and forth between countries, they often transport important insights with them. This can be as simple as a graduating student who takes home a new product concept for the family business, or as complex as Rocket Internet, a large company that replicates e-commerce ideas globally and spans more than one hundred countries. Many skilled individuals further affect talent-sending countries without leaving their new homes by arranging business contacts or sharing technical insights. Thus, while global talent flows concentrate new innovations in leading talent clusters, they also act as centrifugal forces that spread the benefits back out.
These cross-border actions of businesses and migrating talent determine whether talent-sending countries experience a brain drain when their best and brightest go abroad. The economics of talent clusters have the important consequence that global talent flows are not a zero-sum game for the world. Placing talented people in environments that best utilize their skills fosters global growth, with the potential to make everybody better off. Outmigration can even benefit a talent-sending country if the overseas workers provide their home country with special insights and business linkages. The prospect of immigration also encourages students to make deep investments, which can aid talent-sending countries as many young people eyeing international opportunities never actually leave.
China and India are leading contributors of global talent, and their integration with advanced economies boosts their rapid development. The huge populations of these two countries, as well as the other nations that benefit through cross-border exchanges, suggest that global talent flows benefit a majority of people in the emerging world. Unfortunately, for many small and remote countries, the numbers don’t add up, as the economic incentives for making the beneficial business linkages and similar connections are too small. These countries suffer when their talent leaves for foreign opportunities. Although talent flows raise global living standards, there are winners and losers among talent-sending countries.
If talent flows are not zero-sum in nature, should we worry about where talent locates in the advanced world? Of course we should! Consider an Indian choosing between migrating to the United States for work at Oracle or to Germany for a job at SAP, increasing her earnings substantially in either country. The nonzero-sum nature of talent flows means that it is feasible for the immigrant to benefit India sufficiently from the United States or Germany to make up for her departure. But which country she selects clearly matters for where she pays taxes, buys a home, or even commits a crime. Oracle and SAP certainly want the skilled employee, and it may even have an impact on future product-market competition between them. Global talent flows have the capacity to make the world, in aggregate, a better place while still being the subject of fierce rivalry.
But what about the broader societies of talent-receiving countries? Many citizens of the United States and countries throughout Europe are questioning whether global talent flows help them or just enrich those who are already wealthy. While globalization boosts national prosperity, the rising economic tide does not lift all boats equally. It even sinks some. Chapter 9 describes how global talent is mostly a bystander in some of the technological and competitive forces that press heavily upon middle-class workers. Yet skilled migration catalyzes the offshoring of IT services, hurting older tech workers, and global talent contributes to the rise of “superstar firms” that achieve tremendous success but employ small numbers of people. Facebook is among the world’s ten most valuable companies and relies heavily on immigrant talent, but it employs only 2 percent of the workers that General Motors did during its heyday.
This tension is now bubbling over—from localized protests within talent clusters like San Francisco to widespread anger at regional economic differences that propelled Brexit and President Trump’s election victory. The murder in Olathe is but one particularly tragic manifestation of a social and political outrage that is increasingly channeled toward immigrants. So, where do we go from here?
A Path Forward
The world has given the United States an exceptional gift, and the country has, in turn, been remarkably open since its founding. The U.S. is a magnet for talent, but its leadership position is fragile. Looking to the century ahead, demographic and economic trends suggest that the U.S. will lose some of the lopsided position it currently enjoys. By 2030, projections hold that nine out of ten young college graduates will live outside of the U.S.
America can remain the global talent leader despite these head winds, but it faces a critical test of leadership and requires a new approach. U.S. immigration policy has been dragging the country down for some time, and the uncertainty recently unleashed by anti-immigrant rhetoric further erodes trust.
This book’s concluding chapter outlines how America can craft a better set of immigration policies for the twenty-first century and its knowledge economy. Immediate objectives are to ensure that America’s scarce visas are allocated to the most promising talent, to better align the country’s immigration pathways and alleviate bottlenecks like school-to-work transitions, and to build more flexibility where the current system is quite rigid. The U.S. can accomplish these objectives with modest changes to current policies like the controversial H-1B program. Polling data suggest that most Americans support these reforms, even after the bitter election.
Political change can move very slowly, and then suddenly quite fast. We often underpredict how long it takes for real change to take root but then underpredict the speed at which change spreads. The extension of marriage rights to same-sex couples took the tiniest of steps for decades in many countries, until suddenly major leaps came one after another. Immigration reforms, including H-1B revisions, have been stuck in the mud for more than a decade in America, and the future is hard to predict. Some of the specific recommendations may be enacted by the time you read this book. That would be just fine by me, as America needs to get started. The debate will continue for years to come, and we need to build a better understanding of why certain proposals should be enacted and how to monitor their performance.
But the real message of this book goes beyond tweaks to the law. America needs to restore the promise of the American dream for it to remain the magnet for global talent. The U.S. economy depends upon it. But it is not just about restoring the American dream to those abroad, as many American citizens have lost their own dreams, too. The businesses that benefit so much from global talent, especially in the U.S. tech sector, must become leaders in ensuring and demonstrating that global talent helps the average person. One-sided calls for an infinite number of visas are not going to work, and people everywhere have a lot of thinking to do about how the future of work will reshape the jobs available in society and the equality of opportunity for everyone. These companies and their leaders need to apply their drive and skills to make a dent in the universe here, too.
1. Article titles and quotes are from Bloomberg Businessweek, May 15–21, 2017.
2. In an August 2017 poll, 42 percent of respondents said the U.S. admitted too many “low-skilled workers,” versus 12 percent who said too few. By contrast, 36 percent of respondents felt the U.S. admitted too few “high-skilled workers,” versus 15 percent who said too many. At both skill levels, about half of respondents thought the level was about right or had no opinion. Politico & Morning Consult, “National Tracking Poll #170803 February 03-06, 2017: Crosstabulation Results,” August 2017, https://www.politico.com/f/?id=0000015d-c4ae-d494-a77f-e6be72bd0000