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The Honolulu Advertiser
Posted on: Sunday, October 9, 2005

Reversing Hawai'i's brain drain

By Rob Kay

After picking up David Heenan's latest book, "Flight Capital," I couldn't help thinking of a comment by Walter Wriston, former president and chairman of Citicorp, and one of the most innovative financiers of our time.

In "The Twilight of Sovereignty," Wriston opined that in an era where information flows freely, "capital will always go where it is welcome and stay where it is well-treated." By capital, he meant not only money but human capital.

With these words, the late Wriston (who was actually Heenan's former boss and mentor) summarizes with eerie prescience "Flight Capital's" premise: the United States can no longer count on attracting human capital from around the world as its birthright.

Heenan, former dean of the University of Hawai'i College of Business Administration, Citicorp executive and now trustee for the Estate of James Campbell, explains that after generations of importing the best brainpower to our shores, foreign-born, U.S.-educated technocrats are going back to the countries of their origin.

When our nation's best brains walk, they take with them intellectual capital, skills and an entrepreneurial edge that only an immigrant can muster.

As America's human capital diminishes, so does this country's technological pre-eminence and with it, our economic supremacy. This trend, says the author, will soon lead to a day of reckoning if we don't stem the tide.

"Flight Capital" chronicles the personal accounts of many professionals who have left this country for the lands of their birth. Country by country, he cites a litany of sterling entrepreneurs and technology wizards who find the grass is greener back home. We read about people such as China-born, New Jersey-educated Wu Ying who returned home to launch his own company that now generates more than $2 billion a year in revenues producing mobile phones.

So where, exactly, did we go wrong? Why are the Wu Yings of this world leaving the land of milk and honey?

To begin, as Walter Wriston might say, human capital that once flowed freely into the USA is staying where it is better treated. As up-and-coming nations such as India, China, Ireland, Singapore and Israel develop their own Silicon Valleys and offer a better standard of living, it's only natural that homeboys and homegirls come back to the fold.

The post-9/11 environment in this country has also contributed to the brain drain. Hassles over H1B visas, angst over outsourcing and a sometimes nativist, anti-immigrant backlash have all conspired to shut the door on highly qualified foreigners.

The giant sucking sound created by their departure unfortunately leaves our country bereft of engineers, physicists, chemists, mathematicians and other scientists the very core of our technological infrastructure.

To make matters worse, the United States is simply not producing enough of these individuals to take the places of the foreign-born talent.

Although the author says that " 'Flight Capital' is intended to sound a loud wake-up call to a nation often blinded by hubris," he claims it's not a forecast of certain doom. Corrective actions are possible, and he offers 12 pointers to ameliorate the brain drain.

Does "Flight Capital" have special lessons for Hawai'i policy makers? What about stanching our own brain drain?

Much like the foreign nationals from China, Israel, Ireland and India who yearn to return to the lands of their birth, many Hawai'i-born professionals share the same "homing pigeon" instincts.

Those who've drifted to the Mainland for employment would love to return home. Sometimes this actually is possible.

Hawai'i-based IT and biotech startups now recruit homegrown talent. The problem is that great numbers of skilled technological jobs are not here. How can we change that equation?

Hawai'i may not be an entrepreneurial hothouse like Bangalore, but "Flight Capital" offers examples of small nations (in some cases islands) that have morphed from economic basket cases to phenomenal success stories.

  • Ireland, once the poor man of Europe, is now a high-tech powerhouse with over 1,100 foreign companies doing business there.

  • Cold, windswept, isolated Iceland, with a population of only 290,000, now boasts a high-tech industry second to none in sophistication.

  • Tropical Singapore, once infamous for its malarial swamps and a decrepit infrastructure devastated by World War II, is now the technological envy of Southeast Asia.

    Heenan's message is that Hawai'i can become a new economy hub, but it must undergo serious changes. There's no silver bullet rather, it will take a mix of responses.

    Common components that enabled Iceland, Singapore and Ireland to turn their economies around include overhauling their educational systems, dropping tariffs and high tax rates to encourage foreign capital, providing tax incentives to multinationals and improving labor-management relations.

    Based on the author's commentary, here are specific ideas that could help our state eventually bring back our kama'aina:

  • Encourage every Hawai'i leader to visit Ireland, Israel, Singapore and Iceland to see firsthand how these small "economic supernovas" have completely turned themselves around. The message: You can still be a small player and make a difference.

  • Offer a serious, math and science-based curriculum in our public schools. Without workers skilled in the sciences, we have little to offer offshore companies. A lesson from Ireland: Its turning point came in 1959 when the government decided to completely revamp the educational system.

  • Provide the University of Hawai'i with resources to offer competitive wages to faculty and the ability to repair its crumbling infrastructure. We cannot attract and retain top professors without offering decent salaries. Nor can we expect UH to conduct business in a substandard physical environment.

  • Leverage the presence of the military by encouraging the development of dual-use technologies needed in areas such as homeland security.

    Look to Israel, which has succeeded spectacularly in this arena, as an example.

    The question "Flight Capital" begs is whether our policy makers can see past the current tourism and real estate-based upturn to an economy that moves up the "value-added chain" to knowledge-based industries such as IT and life sciences.

    The good news is that with a robust economy, we are in a better position to make structural changes.

    If "Flight Capital" tells us one thing, it's that without top talent, there's a real danger of becoming another provincial backwater famous for being a second-home mecca for wealthy Mainlanders.