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.
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:
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.