Sometimes you have to talk to outsiders to appreciate them, such as Indian-born Vivek Paul of Wipro. “I would add three to your list,” he said to me. “One is the sheer openness of American society.” We Americans often forget what an incredibly open, say-anything-do-anything-start-anyming-go-bankrupt-and-start-anything-ag ain society the United States is. There is no place like it in the world, and our openness is a huge asset and attraction to foreigners, many of whom come from countries where the sky is not the limit.
Another, said Paul, is the “quality of American intellectual property protection,” which further enhances and encourages people to come up with new ideas. In a flat world, there is a great incentive to develop a new product or process, because it can achieve global scale in a flash. But if you are the person who comes up with that new idea, you want your intellectual property protected. “No country respects and protects intellectual property better than America,” said Paul, and as a result, a lot of innovators want to come here to work and lodge their intellectual property.
The United States also has among the most flexible labor laws in the world. The easier it is to fire someone in a dying industry, the easier it is to hire someone in a rising industry that no one knew would exist five years earlier. This is a great asset, especially when you compare the situation in the United States to inflexible, rigidly regulated labor markets like Germany's, full of government restrictions on hiring and firing. Flexibility to quickly deploy labor and capital where the greatest opportunity exists, and the ability to quickly redeploy it if the earlier deployment is no longer profitable, is essential in a flattening world.
Still another secret to America's sauce is the fact that it has the world's largest domestic consumer market, with the most first adopters, in the world, which means that if you are introducing a new product, technology, or service, you have to have a presence in America. All this means a steady flow of jobs for Americans.
There is also the little-discussed American attribute of political stability. Yes, China has had a good run for the past twenty-five years, and it may make the transition from communism to a more pluralistic system without the wheels coming off. But it may not. Who would want all his or her eggs in that basket?
Finally, the United States has become one of the great meeting points in the world, a place where lots of different people bond and learn to trust one another. An Indian student who is educated at the University of Oklahoma and then gets his first job with a software firm in Oklahoma City forges bonds of trust and understanding that are really important for future collaboration, even if he winds up returning to India. Nothing illustrates this point better than Yale University's outsourcing of research to China. Yale president Richard C. Levin explained to me that Yale has two big research operations running in China today, one at Peking University in Beijing and the other at Fudan University in Shanghai. “Most of these institutional collaborations arise not from top-down directives of university administrators, but rather from long-standing personal relationships among scholars and scientists,” said Levin.
How did the Yale-Fudan collaboration arise? To begin with, said Levin, Yale professor Tian Xu, its director, had a deep affiliation with both institutions. He did his undergraduate work at Fudan and received his Ph.D. from Yale. “Five of Professor Xu's collaborators, who are now professors at Fudan, were also trained at Yale,” explained Levin. One was Professor Xu's friend when both were Yale graduate students; another was a visiting scholar in the laboratory of a Yale colleague; one was an exchange student who came to Yale from Fudan and returned to earn his Ph.D. in China; and the other two were postdoctoral fellows in Professor Xu's Yale lab. A similar story underlies the formation of the Peking-Yale Joint Center for Plant Molecular Genetics and Agrobiotechnology.
Professor Xu is a leading expert on genetics and has won grants from the National Institutes of Health and the Howard Hughes Foundation to study the connection between genetics and cancer and certain neuro-degenerative diseases. This kind of research requires the study of large numbers of genetic mutations in lab animals. “When you want to test many genes and trace for a given gene that may be responsible for certain diseases, you need to run a lot of tests. Having a bigger staff is a huge advantage,” explained Levin. So what Yale did was essentially outsource the lab work to Fudan by creating the Fudan-Yale Biomedical Research Center. Each university pays for its own staff and research, so no money changes hands, but the Chinese side does the basic technical work using large numbers of technicians and lab animals, which cost so much less in China, and Yale does the high-end analysis of the data. The Fudan staff, students, and technicians get great exposure to high-end research, and Yale gets a large-scale testing facility that would have been prohibitively expensive if Yale had tried to duplicate it in New Haven. A support lab in America for a project like this one might have 30 technicians, but the one in Fudan has 150.
“The gains are very much two-way,” said Levin. “Our investigators get substantially enhanced productivity, and the Chinese get their graduate students trained, and their young faculty become collaborators with our professors, who are the leaders in their fields. It builds human capital for China and innovation for Yale.” Graduate students from both universities go back and forth, forging relationships that will no doubt produce more collaborations in the future. At the same time, he added, a lot of legal preparation went into this collaboration to make sure that Yale would be able to harvest the intellectual property that is created.
“There is one world of science out there,” said Levin, “and this kind of international division of labor makes a lot of sense.” Yale, he said, also insisted that the working conditions at the Chinese labs be world-class, and, as a result, it has also helped to lift the quality of the Chinese facilities. “The living conditions of the lab animals are right up to U.S. standards,” remarked Levin. “These are not mouse sweatshops.”
Every law of economics tells us that if we connect all the knowledge pools in the world, and promote greater and greater trade and integration, the global pie will grow wider and more complex. And if America, or any other country, nurtures a labor force that is increasingly made up of men and women who are special, specialized, or constantly adapting to higher-value-added jobs, it will grab its slice of that growing pie. But we will have to work at it. Because if current trends prevail, countries like India and China and whole regions like Eastern Europe are certain to narrow the gap with America, just as Korea and Japan and Taiwan did during the Cold War. They will keep upping their standards.
So are we still working at it? Are we tending to the secrets of our sauce? America still looks great on paper, especially if you look backward, or compare it only to India and China of today and not tomorrow. But have we really been investing in our future and preparing our children the way we need to for the race ahead? See the next chapter. But here's a quick hint:
The answer is no.
SEVEN: The Quiet Crisis
