- 02 Oct 2018
- Managing the Future of Work
Ep 14: The gift of global talent: Why talented people are the world’s most precious resource
Joe Fuller: Immigrants are more likely to be top performers in fields ranging from software engineering to entrepreneurship. Their contributions to innovation—measured in everything from Nobel Prizes to patents—are indisputable. Though its impact is global, the US has enjoyed a disproportionate benefit from migrant talent. And it must take care to retain that edge. Welcome to the Managing the Future of Work podcast. I’m your host, Harvard Business School Professor and visiting fellow at the American Enterprise Institute, Joe Fuller. Today we have a special episode. I will be talking to my colleague, Bill Kerr, whom many of you know as the co-host of this podcast and serves as co-chair of the Managing the Future of Work project here at Harvard Business School. Bill’s new book is called The Gift of Global Talent, and it documents the significant impact of foreign-born talent on America’s economic dynamism and highlights how the US can work to make the most out of that gift. Bill, congratulations on the book. Welcome.
Bill Kerr: Thank you. It’s a pleasure to be here. It’s also a little different to be on this side of the table.
Fuller: On that side of the mic. Well, turnaround’s fair play, since you got to interview me on upscaling once. So, Bill, let’s start by talking about the essence of the book. The book refers to global talent in the title. What do you mean by that?
Kerr: That’s a great question to begin with. The book starts with a place where, I guess, the talent is indisputable. I begin with an example from the Nobel Prize ceremony in 2016, where the United States, or people working in the United States, received seven Nobel Prizes. But six of the seven winners were people who had been born outside of the United States, and had come and were working in the United States at the time of their research. The bonus question I typically ask is, “Can you remember who the seventh was?” And it’s Bob Dylan. That was the American-born winner of that year. The question that then follows—and you raise a great question there—is: How do you go from Nobel Prize winners, which are very clear and demonstrable talent, to thinking about the broader impacts that the movement of people have around the world? Many of our MBA students come from abroad, many people who work at Apple or Facebook come from abroad, so how do we measure those types of questions? The point I try to build in the book is to talk about, it’s a spectrum. I am not going to be able to give a single definition that says “this is what talent means.” But when we look across the spectrum, we’re going to find very consistent patterns, and we’re going to find patterns that all point—whether we’re talking about college-educated workers or inventors or Nobel—they’re all going to point in a similar direction, and it’s really going to be more of a matter of degree. How strong is the effect that we’re talking about that does that?
I have one kind of funny, I think—in the refereeing process for a book, an academic publisher has “refereed” the book—I had a reviewer who wrote one of the nastiest reports that I’ve seen ever, and the reviewer made a statement saying that, “Talent is a very ambiguous term. What does that mean? The book should be clearly labeled about tertiary-educated individuals.” And I was trying to imagine what would happen to my readership if I talked about “tertiary-educated individuals,” rather than using “talent.” In the end, I’m going to have to go with talent, and hope that the point gets conveyed.Fuller: It would certainly put a damper on going to one of your kids’ “What did my dad do” day at school and explaining, “I wrote this book called tertiary-educated individuals.”
Kerr: Exactly, exactly.
Fuller: That would stun a few second graders. Bill, it would seem pretty easy to measure talent in terms of Nobel Prizes or even patents. How should we go about thinking about how to measure talent? What are the metrics we should be using?
Kerr: One of the sad ironies about our data-development process is that we know much more about the things that get shipped in cargo boats around the world than we know about the knowledge workers who are implants. You could even take something quite simple and prominent in the news today, the H-1B visa program. We don’t actually have a measure of the number of H-1B recipients or holders who are currently working in the United States. There are ways we can try to measure it, but people can choose to migrate somewhere else, or they choose to go home. Those are difficult things for us to capture. There’s also a data-collection process that we rely on for our information about talent, but that is usually a national-level process. So, the United States conducts a census of its people. Likewise, Norway conducts a census of its people. But it’s very rare for us to be able to connect people who are going from one place to the next. Definitions about education levels differ across countries. How we measure a lot of this stuff, and then if we were to actually try to bring it all into one place, is difficult to accomplish.
Fuller: And increasingly, it seems, we’ve got people with a foot in both camps. They are spending six, eight months of their work life in the United States, another three or four months back at home—whether it’s in India or China or elsewhere.
Kerr: Exactly. There’s a lot of circular migration. People who are even in transit migration. I may go and want to study in the UK for a year in order to try to enter into the United States, trying to think through those patterns. At some level, any researcher in this space is going to ultimately say, “I can’t measure everything that I want to measure. But what I can do is I can assemble a lot of pieces of the puzzle, and I can try to sort of make sure that any patterns or data pieces that I pick up on and emphasize are ones that I see in several places.” What you find, actually, is that, whether you’re looking at Nobel Prize winners or whether you’re looking at inventors—and inventors actually are remarkably well measured across the globe by the World Intellectual Property Organization—or whether you’re measuring college-educated workers, you find that there’s differences in degree, in terms of some of the data patterns that I pick up on in the book and emphasize, but they’re not … they point in different directions. There’s sort of a very logical kind of a progression as you move up the talent hierarchy in terms of how people are moving around.
Fuller: Well, if we can’t really measure these flows, what are the most important trends that you’re seeing that you can call out, given those patterns?
Kerr: Our first trend is that the likelihood of somebody migrating is increasing in their talent level, as we would express it. So, roughly about 2.5 percent, 3 percent, of the world’s population lives outside of their country of birth. That’s going to be two to three times higher for those who have a college education. When you get up to inventors, you’re looking at about 10 percent. When you go to Nobel Prize winners over the last century, you’re about one in three. And if you look in the most recent years, it ends up being one in every two Nobel Prize winners moving around. So, the higher the talent level, the more likely we are to find somebody working or studying or doing things in another location. Some of that just comes from a very natural kind of, if I’m going to be a tennis superstar, it makes sense for me to try to find my way to that camp in Florida, where I can really exercise those talents. Or, if I’m going to be very good at math, MIT being a destination for that. That sort of matching process that happens between talent and location really expresses itself.
Another clear trend that we find is that the United States, across many of these measures, is a big recipient, or has an inbound advantage from this. So, if you think about college-educated workers, it used to be about 50 percent of migrating college-educated workers were ending up in the United States. That number is down to about 40 percent, but it’s still quite substantial. When you go look at inventors, the number gets even higher, and when you go look at Nobel Prize winners, the number gets even higher. It’s a pattern that repeats itself—that the higher we look at, the more likely the US has been to be a destination in this way.Fuller: Do we have any sense of who are the net beneficiary countries from that decline, from the US attracting 50 percent down to 40 percent?
Kerr: It’s been, I think, a broad-based increase. There used to be three or four—the United Kingdom, Canada, the United States, and so forth—that were like the real net recipients. It has, I think, become more diffused, more broad-based. The other thing that we’re seeing a lot more of is multinational companies or others locating their talented people around the world—think Shanghai, Beijing, taking it to India and elsewhere—that those processes are also leading to people migrating into new places.
Fuller: Well, Bill, let’s go back to the start of these flows. How did this market for global talent start getting activated, and what’s the history of it?
Kerr: You hear so much today about megatrends. Everyone wants to talk about these five or 10 megatrends and how they’re going to impact their business and so forth. I think it’s remarkable—if you went back to, say, 1975, even 1985—how off some of our megatrends would have been. One obvious one that people have talked about is, you would have basically missed China and the megatrend that China became. It would have been overshadowed by Japan and the preoccupation with Japan’s industrial might that was at that time. It would, likewise, have been a very rare megatrend list that would have put global talent and its movement as being kind of a key thing at that point in time. We already had people migrating around the world, but it was a relatively small amount compared with what we’ve seen today and the transformative effects. Let me try to maybe make a measurement around that.
In the United States, in 1975, about one out of every 12 inventors would have been an immigrant, and today, that number’s about one out of every three and a half or so, is an immigrant. Likewise, if you go back to the 1950s or so, about one out of every three Nobel Prize winners in the United States was an immigrant. Today, that number is about two out of every three. This has had a substantial increase in terms of our talent pools, and also in terms of how our economy and our universities and so forth operate. There were several things that happened that got this ball really rolling, and they all kind of have ways of feeding in upon themselves. One is that China and India opened up and began to send large numbers of people abroad. We would have had, in 1975, let’s say roughly 1.5 percent of our inventors being Chinese, and 1.5 percent of them being Indian, so let’s say 3 percent total—2.5 percent, 3 percent total. Today, that total is probably about 18 percent of US invention. It’s an enormous increase that is coming from two very populous countries that have had intellectually gifted and raw-talented people who had been looking to migrate around the world and find their opportunities. But there are other factors, because this is not just a story only about China and India. We’ve seen similar increases in Hispanic migration, in Russian migration, and related. So, some factors that took off was a) the rise in the knowledge economy. It became ever more interesting economically for somebody to migrate to another location, and the gaps between the United States, or between London, and some of the opportunities people had in their home countries was less. But now we had the transportation infrastructure, communication, to allow that to happen. The university systems, also the education systems, became more adept at pulling in the global talent and bringing them into the classrooms and utilizing them. Likewise, our professor pool in many of the advanced countries became more immigrant heavy, which has kind of a drawing effect into it. So, a bunch of these things kind of took off. One of the things the book also talks about is that there was some very special things that immigration policy set up, particularly with the United States, and having an employer-driven immigration system that meant, for a lot of companies, thinking about global talent became ever more important. They could say, “Wow. It would be great for our company to have the following people in the United States working on programming, or working in science and engineering. And I can now use these visas to go out and recruit those people or take them from the school system, from the graduating university students, and put them into our companies.”Fuller: How is it that that responsibility got vested in companies, as opposed to policy makers? In the 60s, I can remember traveling in Asia with my family, and US policy makers talking about the need to fight the brain drain, which was the attraction of talent from developing countries to the first world, and then suddenly, by the 1980s, you’ve got not only active cultivation of the brain drain, but it’s been seconded to companies to kind of define what we need.
Kerr: This goes to something we hear a lot about today. Is it a points-based system? Is it an employer-based system? And what are the pros and cons of those? Should the United States be moving more toward a points-based system? Should other countries move more toward an employer?
Fuller: Could you just say a little bit of what a points-based system is for the listeners?
Kerr: In a points-based system, if Bill Kerr wanted to migrate to Canada, what he could go do is look online, on the Canadian website. They list how many points various attributes that Bill Kerr would have, and my sort of total that comes from that. So, having a doctorate degree gets you more points than a master’s degree, which gets you more points than a bachelor’s degree. If you are able to speak French, that gets you some more points. If you’re a younger worker, that gets you some more points. But it’s a very clear system that is outlining a point structure, and you have to get above a certain number of points in order to enter into a pool that the immigration system is going to be selecting from. An interesting sort of anecdotal thing is that, on the night that Trump was elected President, that Canadian immigration website crashed, because there was so much inbound traffic going to it. But it’s a very clear system. Then, that is a process that unleashed it.
Now, let me contrast that with the United States’ system. In the United States’ system, if I wanted to migrate as a skilled worker for employment-based reasons, I basically have one requirement, which is that a US company wants to hire me and makes an application on my behalf. There’s going to be some basic requirements. They make sure I’ve got some education level and so forth, but those are actually very minimal compared with the simple fact that Microsoft or Apple or Google or whoever, that they want to employ me in the country. One of the questions is, what’s the thing that shifts us between one or the other? The points-based system has many advantages to it, but it also has a big liability. The big liability is under-employment of the migrants that come. You can think about, I max out the score as a nuclear engineer, and I’ve got my PhD and I speak French and all this other kind of stuff, but there’s no real jobs for nuclear engineers in Canada when I arrive. So, what the employer-based system has as its particular advantage is that the job is guaranteed. I’m being hired for a job at Microsoft, or I’m being brought into the country for a job at Microsoft. So, that’s a guarantee that we’re not going to have the under-employment of the worker. Likewise, there are some potential advantages in that Microsoft has an incentive to understand if I’m going to work well on teams? Am I a creative person? And they also have some capacity in saying, “You know what? A bachelor’s degree in artificial intelligence right now is worth more to us than a PhD in nuclear engineering.” Those kinds of things are impossible for a bureaucracy to keep up with.Fuller: Very hard for a bureaucracy to deal with. Right.
Kerr: With all the resources and all the best interests, you need to have that private actor’s incentives to make that happen. Now, the book invokes the classic 1980 Poison song, Every Rose Has It’s Thorn, and goes through and tries to talk about all the things that—when you put the employer in charge of the system—what that means. I kind of sometimes summarize this by saying—and I’ll use Microsoft again as just a name that we all know—that what we basically do with our immigration policies, that for employment-based things, we say to Microsoft, “Whomever you want to bring in, that’s who we’re going to bring in.” We’re almost outsourcing the selection and delivery of the immigration policy to companies, which has a very profound implication on our lives, and on how the companies are going to use the visa and so forth, in ways that are not obvious from the beginning. Now, before we move on, let me just say that—while we set up the points-based system here, and we set up the employer-based system here—in reality, every country has elements of both. If you are a Nobel Prize winner, or if you’re going to be an NBA basketball player, you’re going to come into the country. You’re not going to wait in line for an H-1B or enter that lottery. So, if you have very demonstrable skill levels, every country has enough points, kind of has a points system, to let you in.
Fuller: They’ll find a way.
Kerr: Likewise, or if you’re willing to invest a million dollars, again, we’ll find a way to have you enter the country. And in the Canadian system, for example, there are some points that are given if you have a guaranteed job offer. So every country ends up being a hybrid. It’s a question of more, where do we lean on this front?
And I guess, the other thing to kind of put into context here is that, for the US immigration system as a whole, we are very employer-based around our employment visas and our work in that process, but most of the immigration debate often comes around lower middle-skilled workers and family members and so forth. That’s done through a family reunification process. It’s a very different set of policies that govern that broad-based migration than the employer-based migration, which is really the focus of my book.Fuller: So, when you’re using the phrase “global talent,” you’re really talking about that sub-segment of more-skilled, more-highly educated workers that have a capability that could be deployed, really, anywhere.
Kerr: Yes. This goes back to that Potter Stewart definition.
Fuller: Right.
Kerr: At some level, I am hesitant to ever say it must be the following. So let’s think about the most natural kind of “it must be” would be that you must have a college degree. And yet Bob Dylan, who we mentioned earlier, he didn’t have a college degree. Many members of Congress don’t have college degrees, and many of our greatest tech entrepreneurs have not had college degrees. So we have to be careful about segmenting on one specific requirement. And, likewise, I recognize and comment a little bit in the book, that there’s things like apprenticeships and a lot of work in that space that we just don’t have the capacity to measure it. So I want to make sure that we’re using as much of the data range as we can—we talk about that spectrum—and go back to the notion that these things all are along a continuum. And we always find a very logical pattern as we look up and down that continuum, which leads me to say at the end, you may want to extend that a little bit further. You may want to cut it back a little bit in terms of where this sort of talent definition starts or ends, but you’re still going to be dealing with the same sort of set of facts, and the same sort of impetus into the economy that we’re working with.
Fuller: Bill, you’ve eluded to several of the effects the global talent flows have on countries. Could you just illustrate that a little bit for our listeners? What are some things they would see readily around them that’s a manifestation of this?
Kerr: The most direct case, Joe, is science and engineering and, in particular, invention in the United States. This has been really the epicenter of global talent impacts, both for our country and then also for the world. Not to de-emphasize the other parts—and the book tries to go and paint a broad picture of all the different places—but, science and engineering really has been a key zone. One thing that we have observed—let me give a very tangible example—is that we have increasingly relied on immigrant talent for our invention process. Earlier I described that one out of every 12 inventors was an immigrant in 1975. Today, that number is about one out of every three and a half, so it’s significant more reliance. But, that’s also had a very particular impact on the spatial concentration of invention in our country.
Fuller: You’re going to have to define spatial concentration for people.
Kerr: Yes. Let me try to unpack that. Throughout many of the 1960s, 1970s, 1980s, the United States was actually becoming more spread out in terms of invention. In other words, if you looked across the country, invention was more evenly distributed across remote states, company towns, big cities. We were doing invention in a lot of different parts of the country. There were very kind of “well knowns” then. The company town—like Rochester, New York—where a lot of invention was being done in what is otherwise a very remote part of the country. The impact of high-skilled migration has been to stop that de-concentration, and instead re-concentrate invention in very dramatic ways. One of the more staggering statistics that we’ve calculated is that, if you take the Indian and Chinese invention—just those two groups—and the people who are living in the San Francisco Bay area—so, Indian and Chinese inventors living in the San Francisco Bay area—they account for about one out of every 12 patents in the United States today.
Fuller: OK.
Kerr: And to put that number in context, if I started with the state that patents the least—frequently, that’s like North Dakota or Alaska, depending upon the year—if I started with that state, and I kept adding states, you know, like going up the patenting order, that would be 28 states that I would have to assemble before I would have the equivalent of the Chinese and Indian invention that’s being done in San Francisco. Back in 1975, it would have been only five states. So, you’ve had a very significant concentration of invention that’s happened in one location. Likewise, we see that technologies and the leadership of technological spaces moves much faster between Boston, New York, Silicon Valley, and so forth, because global talent is more willing to move around to wherever the next breakthrough happened, and that can change technology leadership in a faster way.
So, the net consequence that many of us then see, is first: “Well, there’s a lot of crazy stuff happening over at Silicon Valley. How can I be a part of that?” if you’re a company. Those in Silicon Valley will, of course, talk about the escalating rents and prices that they have to pay. And one measure that we think about—or why we think about rents a lot—is that that measures how important a place is. If you take Market Street in San Francisco, the rents that are being paid on Market Street today are staggering, and it’s out of proportion to other things that we’ve seen across cities in times past. The impact of global talent has had a very significant thrust to reshaping US economic geography, and in particular, emphasizing the importance of certain places that have become these talent clusters.Fuller: Bill, the phenomena you’re describing keeps coming back to Silicon Valley, the health care cluster in Boston, financial services and fintech in New York. How is this gift that the US has benefited from affected foreign competitors?
Kerr: I think in the book, it is predominantly US focused, and the global talent story has been more US focused than elsewhere. But this effort to build up global talent is in London, it’s in Berlin, it’s in Shanghai, Hong Kong, around the world. People are trying to activate and bring in the talent for them. This gets into very important questions about if you are Siemens vs. General Electric—in terms of trying to attract in that talent—it matters a lot which company is able to grab the talent and bring them in inside. Some of the places where you see this impact happen in product market competition as well. And one of the things I’ve tried to think through is, what has been the impact of global talent on the rise of the tech community on the West Coast, and their ability to compete with other companies around the world? You’re never going to make a one-to-one relationship, but just take the example of Nokia, based out of Finland, and their ability to compete with Apple in the emerging smartphone market. There’s a lot of things that went into why Apple won that battle, but I think the ability of Apple to draw in that amount of talent from around the world into their operations would have had an impact that affects smartphone sales on a global basis.
Fuller: It sounds like if you denominated the balance of trade terms, the US has got a huge surplus when it comes to talent.
Kerr: Yes. It’s staggering. The Nobel Prize wins is when your head almost wants to turn around. You’ve had, through 2016, 107 people migrate to the United States that won the Prize. We’ve had four that migrate out of the United States, and then did work elsewhere that won them the Nobel Prize. It’s unbelievably lopsided. When you go into even things like invention, there’s a diagram in the book that shows just how skewed the movement is toward the United States. Even to the point that some of the biggest recipient countries—if you thought about just measuring the inflow—the inflow into the United Kingdom or into Germany and so forth is big, but their outflow to the United States is even bigger, such that they end up being a net deficit in this space. There are a few other smaller countries that are net recipients, but none of the bigger countries have been a net recipient, in part because of this sucking gravitational pull toward the United States.
Fuller: Let’s talk about how this affects companies. If you’re a company in one of those company towns, or in a remote region, or even in a country—a foreign country, that doesn’t have the long type of history the US has, or the UK and a few other countries, Canada, in terms of being able to accommodate immigrants—how does this affect them?
Kerr: Well, we can start with what’s been the impact for organizations in the United States. We see an increasing attention paid to these emerging talent clusters that are driving the economy. One of the bell marks of that has been that, if we look at the inventions that the top—say, 50 or 100—companies the United States conduct, that has become ever more concentrated in a few key cities rather than the company town that we described earlier. So go back to 1995—we struggled to build this kind of data before 1995—but in 1995, the largest US companies were under-represented in America’s top patenting cities. So take the top 10 patenting cities; they were doing about, say, 40 or 42 percent of their invention in those cities, whereas the nation as a whole was about 50 percent. So, they were disproportionately, again, spread out, and they were forced to spread out. Today, at least in 2015, that number was, for the top 50 companies, was at 68 percent. By the time we do this podcast, it’s probably going to be at like 70 …-
Fuller: … 71 percent?
Kerr: Yeah, 72 percent. It is moving fast! It is moving fast, and is now disproportionately more than the nation as a whole. A lot of large companies, especially as they look at things like the internet of things and software and worries about “What’s the future of my industry and the technology space that’s in it?” have said, “I’ve got to get ever closer to those sources of information.” One of the things I’ve worked on in addition to the book, or in parallel, has been a Harvard Business Review article that came out about navigating talent hotspots. It goes through and talks about, do you make a choice like General Electric did, to move your headquarters? Are you going to open up a series of corporate labs across the talent hotspots? Are you going to try to access them via executive emersions? There ends up being a set of different plays that companies can run, depending upon where they are, what they see as the important input that they want to pull from one of those locations.
Fuller: In your estimation, does that work? If you’re a company that’s located in a company town and wants to get in the flow of things and you open an office on Sand Hill Road in Menlo Park and send a few executives out there, is that enough of a response, or do you end up having to really fundamentally think about reconfiguring where you locate your operations ?
Kerr: That’s a complicated question, and it’s something that requires a couple of chapters in the book to unpack this. Let me try to think through some of the principles. Why do you want to be there? You want to be there because, even though we all have access to the internet today—and you can go and look at all these plans and so forth and you can read about what’s happening—you miss the emerging ideas. You miss the tacit knowledge about what to actually do in those locations. You can take an example of us at Harvard Business School. Every single case that we teach in the classroom is available online, but there’s something special about coming here and working through those cases and developing that knowledge set. That’s what the companies feel like they need. But if you’re managing a 300,000-person organization, you’re, of course, not going to move all of them into a town. In fact, you’re probably only going to move, in your case, like 10 for one of these innovation labs, or if you’re moving a headquarters, something between 100 and 500 people.
Fuller: Like GE.
Kerr: But you got to think about the fact that most of your employees are going to be elsewhere. What you’ve decided to do, what you have to believe to be true, is that minimizing the distance between the people who are making some key decisions and also working on some key innovations, minimizing that distance is worth inserting more distance elsewhere in the organization. Because the beautiful thing about a suburban office park was that we had seven buildings in a row and everyone was all there. So, those internal distances were less than if we’re going to have a headquarters downtown, we’re going to have production facilities elsewhere. Companies have to navigate that, and they have to think through, if they are inserting that distance, how are they going to make sure that the ideas that they do pick up in the key talent places are best utilized elsewhere in the organization? How can they ensure that that knowledge flows well around the companies and so forth?
An example of one place we’ve been able to measure a response on that front, about one out of every five patenting teams today for a US multinational company includes somebody in the United States and somebody outside the United States. Again, wind the tape back to 1975. That number was basically zero percent. So, this is a very recent phenomenon that has seen a lot of growth as companies have tried to navigate. We only put 10 people into that innovation lab. They’re not going to turn the course of this whole company by themselves, but we need to make sure that they’re integrated, that the knowledge is flowing outwards, and that we actually can then realize some real productivity benefits from that.Fuller: Well, Bill, it sounds like global talent is a gift if you’re a multinational corporation with products …
Kerr: … especially if the immigration system gives you the keys to the kingdom.
Fuller: Yeah, exactly. You can specify what you need and when you need it and how much you need it, and vet the candidates to your satisfaction.
Kerr: Well, I think many of them would argue that how much they need it is not true. They get to specify some of what they need, but we have substantial …
Fuller: … limits, yeah.
Kerr: ... substantial limits. The very policy that’s given them all this power has sometimes also been called America’s national suicide by those same companies, saying that the limits of the number of visas or our ability to bring people in challenges us.
Fuller: Right. Let’s take a step back and think of this more from a national point of view and some of our listeners that aren’t people who work in big companies or big academic institutions. Does this gift really accrue to everybody, or does it just accrue to some?
Kerr: Well, there’s an old expression that a rising tide lifts all boats. In the book, I sort of morph that into saying, “A rising tide doesn’t lift all boats, and, in fact, it sinks a few.” This is a gift, and the book is built—and I fundamentally believe—that talent can deliver exceptional global rewards for us. The reason is that, if you have people who are under-productive or can’t achieve their education potential or can’t interact with the people who are going to most energize them and utilize their talents, then we all suffer. The ability of people to be able to match those great environments is going to be one that we create a lot of surplus. Migration in this domain is not a zero-sum game. It’s not that we lose or that Point A loses when that person migrates to Point B. In fact, we can generate enough to help everybody. But it’s also very clear that not everyone participates in this gift in equal domain. There’s two groups that I feel pretty comfortable have gotten a lot of good benefits. One, the migrants, themselves, usually is a strong beneficiary. There’s been some ways that we’ve been even able to measure some of the salary gains even at the low end through lotteries and so forth that people won that let them come to the United States. Very clear that they get an advantage. Likewise, the employer in the US system is the one that pulled the trigger, and so you better believe that they’ve got a benefit that comes …
Fuller: … an economic impulse.
Kerr: An economic impulse. Then you get into the more difficult question of who is benefiting in the broader economy and who is also being harmed here? One of the things that we’ve learned over the last decade is that that is a very nuanced question and a very challenging question. If anyone just says, “Oh, I can label these groups as being ...” It’s actually not so simple. So let me walk through a couple of examples here.
You may ask, and this is frequently asked when a high-tech executive goes before Congress, you may ask, “What’s the employment gain to Microsoft or to Intel when we hire an H-1B worker?” The executives will frequently talk about the number of additional people who they hired to work alongside them. Some of my research has shown that, in fact, when you’ve hired a young, skilled immigrant into the company, we tend to find—and we do our best to make this a causal statement and take out simple growth of the company and so forth—what you tend to find is that the company, overall, has gotten bigger, but not every group has gotten bigger. So you find that the young American that’s working in the marketing department has also been hired, but what you see is that there’s not among older tech workers a similar kind of response. There’s a reason. The book tries to walk through, why is it that older tech workers feel like they’ve been particularly disadvantaged by high-skilled immigration? But kind of a Twitter-length idea here is that, there’s much returns to experience in that sector relative to accounting or relative to management or something. You’re constantly needing to learn new languages, you’re constantly needing to update your skillset. It’s just not that if you’ve worked in the industry for 20 years, you may not have that much of an advantage relative to someone that is three or four years out. One of the implications of that has been that, when you give to employers the opportunity to say, “How do I want to use this visa?” they see some great opportunities of keeping their tech-oriented workforce younger, they may have fewer family commitments, they may be much more aggressive at wanting to work all night and all weekend. You can start to see a logic to how that plays out. So now let’s go back to our executive. The executive could be absolutely telling the truth. The executive walks in there and says, “Nobody has lost a job. We’ve increased the overall employment payrolls. We’ve hired Americans alongside the immigrants.” And yet this older tech worker who is on the outside—and I have several of these characters that are in my book—they’re saying, “Yes, Silicon Valley keeps growing and growing and growing, and there’s never a job for me.” They both actually are talking about the same phenomenon, but just coming at it from different perspectives. Then you have the broader questions about rising rental prices and wage rates. The book has a chapter about inequality, and it opens with the bus protest that happened against the tech workers in San Francisco. For those that aren’t familiar with this, many of the tech talent want to live in downtown San Francisco but there’s a number of the tech firms that are located further down in Silicon Valley, so they have a bus system that goes up and collects …Fuller: … with good WiFi and …
Kerr: Yeah, exactly. By some estimates, in 2015, that system run by the tech companies was 40 percent of the size of the Caltrans system. It’s an enormous thing that is kind of like an infrastructure layer that’s sitting on top of the city as a whole. The bus protest broke out and said, “You have these palatial campuses where you get massages and free sushi and you ride back and forth in that WiFi-driven bus” …
Fuller: … not to be confused with the Harvard campus, but go ahead.
Kerr: Exactly. “And yet, the rest of us are suffering from higher rents and we don’t participate in these opportunities.” There’s been recent studies that have come out that have documented some degree to which people are being pushed out of these major talent clusters purely just based upon the cost of living, so they end up moving to Sacramento, or they move into a place that’s more affordable around that. That’s a broad challenge that we face.
Fuller: Well, obviously immigration has been very much in the political debate in the last two years in the US and in most of the developed world. As you focus particularly on this layer of global talent that’s really mobile, has world-class skills, are there two or three things that we could be doing that would allow us to accept the gift more efficiently and spread the benefits more effectively?
Kerr: Exactly. I would start by saying that this is a place where, despite the very broad base—and I mean that across Europe as well as also the United States and elsewhere—despite the pushback against migration, it’s not hard to look out to the future and say that this race for global talent is about to heat up. If you think about the aging workforces, which a lot of your work has been involved in, and the growing power that people who are able to do this very talented work with technology that’s exploding, there’s going to be a continual race in order to get this. The book talks a little bit about efforts by countries as distant as Chile or Malaysia to try to make sure that they get some of their share in this.
For the United States, I think of the response as being one where we received an amazing amount of talent, but we actually, probably, with our immigration policy made it harder rather than enable that process. We have an overall very crude system, a system that doesn’t differentiate very well across the potential talent of individuals. Most of the reforms that I talk about in the book are about ways of, regardless of whether you think immigration should be expanded or contracted, even if we just left the number where it is today, we could do much better. We could do much better. The most prominent example of that is the H-1B visa program, which every April 1st is the start of H-1B season. There’s 85,000 visas that are awarded each new year. The way that the process works is that—in the background, there are some requirements and so forth, but I will abstract from the details—you start putting your application in on April 1st. It used to be—let’s say the 85,000 lasted us most of the year—they would just keep taking those applications all the way up until December, when the 85,000 ran out. Then they would say, “All right, everybody. We’re done for the year. Let’s start again April 1st of next year.” The way we now work is that, usually in the first week we get about 300,000 applications. The way the system operates is they keep the process open for one week, so they accept applications even though they know in the first day they’re going to go over that. They’re just sold out. Then what we do is we conduct a lottery over those applications in order to determine who is going to get a visa. It’s an unbelievably inefficient system. Let me just take, again, go back to the Microsoft that we’ve had running throughout this story. Say Microsoft puts in 75 applications, or 100 applications, and let’s say I get 50 slots. They don’t even get to pick which 50 of their 100 are the ones that they are going to employ. So there’s very simple ways that we could correct that—that I don’t think we have to go all the way into this big battle as to should the 85,000 be 185,000, or what should that load be? We can just even start with saying, with that 85,000, we could use them in a much better way by doing something very simple like wage ranking, where we just start with the person that’s going to be paid the highest salary and that’s the first one that gets the visa. We work our way down that list until we run out.Fuller: Continue to rely on the notion of the marketplace to determine the value of these things.
Kerr: Exactly. It’s not that—in the book I, of course, come up with 10 counter arguments for wage ranking. An easy one would be that you would worry that too many visas would go to just New York and California, because they’re very expensive places, so the wages have to be naturally higher. Likewise, for entrepreneurs or for other groups, smaller companies. So we would want to think a little bit about a few of those details or safeguards to put around it. But if you think about from a political process of something people would understand, it would be very direct to implement, it would follow us down a logical pattern. You accomplish so much with such a relatively small change in that process. I’ve got some other recommendations in the book, but if I start with like one on the policy side, that’s the one I want to begin with, is what can we do just to make our system a bit more effective at utilizing the information it already has to allocate our precious spots in a more systematic way? But the book also goes beyond just the policy domain. One of the messages I’m trying to give to the tech community broadly is that the gift of global talent has been a pretty large gift to you.
Fuller: To the US tech community.
Kerr: To the US tech community, in particular. I think it’s seven of the top-10 market cap companies in the world right now are US tech companies, and almost all of them rely very heavily on global talent. In many ways, they’ve even been set up in order to utilize global talent and to utilize these labors. To kind of walk through that, they have to recognize that the nation as a whole does not view this in such, “Oh, this is all great,” kind of terms. An idea of like, “Let’s just argue for unlimited visas,” that doesn’t play very well. Even something simple, like the fact that 50 percent of the US’s PhDs are immigrants. That’s just a true cross-sectional fact. A lot of times the tech companies want to emphasize something like that. The lobbyists want to emphasize something like that. You have to realize that maybe in middle America, the fact that 50 percent of our PhDs are immigrant is actually more of a problem rather …
Fuller: That’s a source of complaint.
Kerr: Yeah, exactly. One of the things I’ve tried to argue to them is that they become very good at denting the universe, trying to create scalable products that affect all of our lives. Everyone in this studio would have the iPhone. What could they do in this space to also show that benefit to the country as a whole and to society as a whole? And why that’s super important is that, at the end of the day, immigration is not about economics. Economics plays a very important role, but it’s a political choice. As we’re seeing in the United States and as we’re seeing in many places around Europe and elsewhere, it is a choice that people make politically and through the political process that either makes it very easy for people to come in and migrate or makes it very difficult for people to come in and migrate. For them to retain this gift, one of the things I hope is that they’ll also make sure that others understand and they communicate and share how this is benefiting the nation as a whole.
Fuller: Bill, your book paints a very clear picture of the history of global talent and particularly how the US has benefited from these global talent flows. As you think out into the future, and particularly if we look at some of the demographic trends that you cited earlier that are very much affecting the composition of workforces in all the major countries that have significant bases of technology, and academic institutions, and what-not, what do you foresee in what should our listeners be thinking about?
Kerr: I think we’re all going to have to uncover some more cards in the future. I like to point toward two, I think, startling facts or projections out to the future that we need to mutually consider, and there’s a tension that I’m going to describe between them. One—and let’s just stick on the talent clusters for a little bit—I’ve described several points the growth of invention in the United States, the immigrant share and so forth. If I showed you those trend lines from over a 43-year period, there are really not that many blips, and we’ve had wars, we’ve had great recessions, we’ve had 9/11, there’s been a lot of stuff that’s happened, and if anything, they appear to be accelerating. The talent cluster phenomenon, and it’s going to be increased to include Shanghai, and Beijing, and Hangzhou, and other places as well, but that talent cluster phenomenon is going to remain very prominent for businesses into the future. And yet, at the same time, one of those numbers that I uncovered in this work that just leaves me kind of scratching my head at night is that by 2030, it’s projected that China and India will be home to half of all young college-educated workers. Young, meaning 25 to 34 years old, college-educated workers. Half. And, at that point in time, it’s expected that western Europe and North America account for 18 percent. And you go back to 2005, which doesn’t seem that long ago, in 2005 Western Europe and North America were a majority, and yet we’re seeing an enormous number of people who are going to enter into the university systems in these countries, into the labor markets and so forth. And of course, for companies around the world accessing that consumer base, accessing that talent base for their work is going to become ever more important. So if I look out to the future, I don’t know what that organization’s going to look like, but I’m going to imagine they’re going to try to hold both those two things in tension—that there’s going to be a select set of cities and places that are increasingly becoming more powerful in terms of the work that they’re doing, more important to be a part of, and yet on the opposite side, on a global basis, we’re going to have a workforce that’s going to be pulled increasingly from China, India, Brazil, Indonesia—places that are increasing their education base at a very strong rate, and in domestic basis.
Fuller: And it’s arrogant for American companies to assume they’re always going to be the ones that attract that talent and are able to manage them. I noticed the other day a great story about the fifth generation mobile technology where a major patent was awarded to Huawei. The initial concept was developed by a Turkish scholar identified by Canadian manager in Huawei’s lab in Ottawa, and the future is going to be a war for companies fighting for that talent as well as countries.
Kerr: Exactly. And then the countries, their effort to compete to be an attractive place, to be holding those decision makers, those researchers that are looking out, scanning the world for technology and so forth, will be very important.
Fuller: Bill, thank you for joining us today for the fascinating conversation on the enormous importance of foreign talent as described in your new book, The Gift of Global Talent.
Kerr: Joe, I appreciate the opportunity to be on this side of the table. Thanks for having me.
Fuller: Thanks, Bill! I’m Harvard Business School Professor Joe Fuller. Thanks for listening.