Thursday, December 29, 2011

December 2011 Early Indications: Immigration and entrepreneurship

In our time of economic stagnation, attention on the part of many
political figures is turning to the question of immigration.
Presidential candidate Michele Bachmann called for phased deportation
of 11 million illegal immigrants. The stated rationale for such a
stance includes a desire to "curb the unfair strain on our country's
job markets." Such dramatic proposals notwithstanding, with accurate
information by definition hard to collect at such a large scale, the
connection of immigration to employment is impossible to establish.

Thus, many questions exist: How often are native-born American
citizens pushed to the sidelines by "cheap" immigrant labor? When do
immigrants do the dirty work that employers need done in foodservice,
agriculture, and landscaping/construction? What is the ratio of
immigrants who put a load on municipal services such as schools and
emergency rooms, compared to people who may lack a passport but pay
taxes and spend money where they earn it? There is simply no way to
tell for sure.

In the pursuit of tight borders, however, current immigration policy
seems to be categorically turning away potential contributors to
economic strength: as the rules stand, tens of thousands of
international students who attend U.S. universities cannot compete for
jobs here. Robert Guest, an editor at the Economist, wrote a piece in
the Wall Street Journal last week (12/21/11) in which he compared
sending away international graduates to "Saudi Arabia setting fire to
its oil wells." New York Mayor Michael Bloomberg (who won election as
a Republican and knows something about entrepreneurship) calls the
practice "national suicide."

Speaking of fire, the flame war related to the Guest article burns hot
on the WSJ site: software programmers who lost their jobs to foreign
workers have their story to tell, as do employers who can't fill
technical jobs, or who, once they find a productive contributor, must
do battle with an extremely difficult bureaucratic process to get a
visa. Once again, the situation is so complicated and vast that any
single person's perspective is by definition limited.

I have no way of knowing how often H1B visa holders displace
native-born candidates nor how often they fill a gap for which
qualified applicants are scarce. My belief (following the argument of
my one-time co-author Erik Brynjolfsson at MIT) is that we are in the
midst of a structural shift in the global economy, which causes both
labor shortages in technical jobs and high unemployment in old-school
manufacturing and other sectors. After speaking both to job-seeking
students and candidate-seeking employers, I hear often that there is a
skills shortage: part of the unemployment issue may be that employers
are less willing to hire generalists (read, "liberal arts graduates")
in the era of ERP, social media, algorithmic decision-making, and
global supply chains. The structural shift argument also would explain
the rapid obsolescence of many 40- and 50-somethings' resumes.

My purpose here is not to try to adjudicate message boards or
presidential campaigns, but to argue from history: immigrant
entrepreneurs have helped make America great, and have created
literally millions of jobs. This is not a recent phenomenon, but the
changing makeup of the entrepreneurs reflects the relative openness or
closure of US borders over the centuries, as well as changing patterns
of migration: the relationship between who wants in and how welcoming
the U.S. border is has proven to be emotional and complicated.

Here is the beginning of a list of relevant examples, building on a
post from three years ago. Time after time, immigrant entrepreneurs
have altered the course of business history:

-Andrew Carnegie was famously Scottish. His fortune, about $300
billion in 2007 dollars, funded a wide range of philanthropies that
exerted substantial cultural influence long after his death.

-Alexander Graham Bell, also born in Scotland, invented or seriously
experimented in the fields of telecommunications, aviation, magnetic
storage, desalination of seawater, and even solar cells. He was a true
giant in human history.

-Henry Ford was the son of an Irish immigrant. His one-time business
partner Thomas Edison, who founded 14 companies including GE, was the
son of a Canadian immigrant.

-Ray Kroc, who grew McDonalds into a global giant, was the son of
Czech immigrants. He was enterprising from an early age, to the point
of talking his way into driving ambulances in World War I at 15 years
of age.

-Walt Disney's father left Canada to try to find gold in California;
Walt was born in Chicago.

-Steven Udvar-Hazy fled Hungary after the Soviets occupied his home
country. He founded one of the world's two biggest lessors of
commercial aircraft, International Lease Finance Corporation.

-An Wang, founder of the computer company of that name, was born in
Shanghai. At one point his firm employed 30,000 people.

-Amar Bose was born in Philadelphia to an immigrant fleeing pressure
from the British for his political activities on behalf of Bengali
liberation. The loudspeaker company was founded in 1964 as a sideline
to his professorship at MIT and now ranks among the three most trusted
U.S. electronics brands, according to Forrester Research. Bose employs
more than 9,000 people.

-Sidney Harman, born in Quebec, teamed with his boss Bernard Kardon to
make the first integrated hi-fi receiver; their eponymous company was
founded in 1953. Nearly 60 years later, Harman International employed
about 10,000 people. Harman himself was a fascinating person, devoted
to the arts and learning, and he bought Newsweek for $1 in 2010 from
the Washington Post Company.

--Vinod Khosla emigrated from India after university and co-founded
Sun Microsystems at the age of 27. After leaving Sun relatively
quickly, he has spent most of the last three decades as a venture

-Jeff Bezos founded Amazon after working at a hedge fund following his
undergraduate studies in electrical engineering at Princeton. The
immigrant connection? His adoptive father left Cuba.

-Pierre Omidyar was born in Paris to Iranian immigrants; his mother
holds a PhD from the Sorbonne and his father was a surgeon. After
growing up in Washington, DC and attending Tufts University, Omidyar
wrote the base code for eBay over a long weekend.

-Yahoo! co-founder Jerry Yang was born in Taipei and grew up in San
Jose, raised by a single mother after his father died.

-Google co-founder Sergei Brin's family emigrated from Russia after he
was born. His father is a math professor and his mother is, literally,
a rocket scientist at NASA.

-Elon Musk left his native South Africa at 17, wanting to head to the
U.S. because "It is where great things are possible." By the age of 40
Musk had co-founded PayPal, SpaceX, and Tesla Motors.

-Tony Hsieh was born to Taiwanese immigrants living in California. He
sold his first company to Microsoft for $265 million when he was 24
before co-founding a venture firm that backed Zappos, where he later
became CEO.

-Steve Jobs' biological father was Syrian, though he was adopted by
the Jobs family at birth. The company he co-founded currently employs
60,000 people, who generate a staggering $420,000 of profit (not
revenue) apiece.

These 17 people are mostly household names, but the pattern also works
in most any community: immigrants are frequently the risk-takers who
launch restaurants, convenience stores, dry cleaners, lawn care
operations, and other ventures. Immigration is central to the story
of the United States, and figuring out how to do it right in the 21st
century is both critically important and politically loaded to the
point where rational debate is impossible: nobody knew for sure
whether candidate Herman Cain's proposal for an electrified fence on
the Mexican border was a joke or not.

Open borders are not an option for any sovereign nation of significant
size. At the same time, periods of intense nativism in U.S. history
have spurred extremely restrictive policies. As history should show
conclusively, however, the cost of barring potential entrepreneurs is
high. In a global economy that runs on ideas and talent, former
Citibank CEO Walter Wriston's comment about money - "Capital goes
where it's wanted, and stays where it's well treated" -- holds true of
brainpower as well.

As the U.S. becomes less hospitable, formally and perhaps informally,
those bright, motivated individuals are being courted by New Zealand,
Israel, and Canada, not to mention the potential immigrants' native
countries. Atlassian Software (it specializes in developer tools) is
in Sydney; Weta Workshop generates world-class special effects for New
Zealand native Peter Jackson's movies at its facility in Wellington.
Skype's software was written in Estonia. Spotify's R&D operations are
in Stockholm. Vancouver is home to dozens of tech and software
companies, including the motion-capture studio for Electronic Arts. In
the global race for the next generation of startups, the U.S. has a
privileged position, but that status as a preferred destination is in
danger of being diminished as collateral damage in a debate with other
protagonists, motivations, and constituencies. We can only hope that
some good sense comes into play alongside the fear, stereotypes, and
lack of solid data that currently characterize the issue.