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Flight Capital: The Alarming Exodus of America's Best and Brightest

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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 his book, 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 Mr. 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 University of Hawaii School of Business Dean, Citicorp executive and currently trustee for the Estate of James Campbell in Hawaii, explains that after generations of importing the best brainpower to our shores, foreign-born, US 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 preeminence and with it, our economic supremacy. This trend, says the author, will soon lead to a day or reckoning if we don't do something to stem the tide.

Flight Capital chronicles the personal accounts of a numerous professionals who have left this country for the lands of their birth. Country by county he cites a litany of sterling entrepreneurs and technology wizards that find the grass is greener back home. We read about people such as China born, New Jersey educated Wu Ying who returned to his homeland to launch his own company that now generates over $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 with, 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 U.S. is simply not producing enough of these individuals to take the places of the foreign born talent.

Although the author says, "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 twelve specific points that can ameliorate the brain drain.

For those concerned about America's ongoing brain drain, this is a must read.

Shortly before reviewing this book, I attended a conference at which many of the attendees were executives. Conversation at breaks and during the lunch kept turning to a single topic not even on the conference agenda: "How hard it is to find people who can do the work."

Joe Salimando, an electrical industry analyst, predicted a shortage of electricians and project managers--more than ten years ago. That shortage has hit today, with a vengeance. The average electrician is in his mid-40s, and the average senior project manager is in his early 60s. The statistics are grim for other brainworkers--both in skilled trades and in the professions. The average nurse is 53 years old, for example. And try to hire a competent machinist--I dare you!

None of this should be surprising. In the 1970s, schools began to abandon properly equipping children for the real world. That is not to say that every graduate of the 1970s and later is inept. But what has happened is the best and brightest have had to succeed despite their "education," not because of it.
Another factor is 98% of American homes contain a brainwashing machine (also called a "television"). These machines expose their victims to a steady stream of anxiety-producing marketing messages, regularly scheduled depressing news, and a litany of falsehoods and propaganda. Which is why I haven't watched television since my early days of graduate school (oh, so long ago--and I don't miss it).

Compounding the difficulties, American corporations are run mostly by plundering executives and incestuous boards. The corporate practice of squeezing non-executive employees to pay for the lavish "compensation" of CEOs and key officers is still a problem, despite some recent federal cases. For example, Disney reneged on the performance bonuses they owed their Imagineers, but in the same year let Michael D. Eisner "earn" $830 million. Until enough Americans boycott Disney and demand a refund of that $830 million, we can't expect this kind of "Rob the poor to give to the rich" chicanery to stop. Among the collateral damage: Kids who grew up in the 1970s and 1980s to see their dedicated, hard-working parents discarded like yesterday's trash while the executives who ruined their lives were paid tens of millions of dollars. That's hardly very motivating, and it certainly has not engendered employee loyalty among those who are today's junior workers.

Another problem is the Internal Revenue "Service." (Not taxes, per se--though in sum, taxes work out to 70% to 90% of income and would be punitive even if cut in half. The federal government alone uses five different taxation methods on individuals, including national sales taxes and a flat tax.)

John Graver has interviewed wealthy expatriates and found that every one of them cited the IRS as the number one reason for leaving. Anyone who has been caught up in the machinery of this criminal-infested agency understands why. The GAO reports each year on IRS employee behavior that normal people would be locked up for (such as stealing 4300 computers from their own offices). Congress, however, pretends none of this is a problem. Congress is concerned about political infighting, not about engaging in productive use of their time. So, this problem isn't likely to go away any time soon. We are stuck with an unfettered, arrogant federal agency that is not only abetting individual criminal actions, but is also driving away the wealthy--who take their job-producing capital with them.

So now the chicken has come home to roost and the cost to America is staggering. The USA is losing its dominance in every area in which it now leads the rest of the world. We have societal, institutional, cultural, and other factors driving the knowledge workers away. This, despite the fact that the real wealth today is created in the knowledge economy. But the good news is we may be able to do something to save ourselves and future generations. And therein lies the real value of Heenan's book.

"Flight Capital" consists of ten chapters. The first chapter explains the brain drain problem (quite well, I might add). Heenan tells us why this is happening, what forces are accelerating it, and what it is costing us.

Each of the next eight chapters examines a different economic competitor to the USA and how each is attracting human capital (as opposed to how the USA drives people away). A basic tenet in business is "Know your competition." Heenan has analyzed the competition, and provided minute detail on each of the eight selected competitors. He even provides a "guided tour" in each of many cities to the various restaurants, night clubs, and attractions. What I like about this aspect isn't so much the interesting read it provides, but the evidence that Heenan isn't some armchair analyst making generalizations. My confidence in his information is high.

The final chapter provides a mix of common-sense and insightful advice on how to get the USA back into the game. You might want to ask, "Who is Heenan to have the magic answers to our problems?" Actually, he doesn't claim that he personally has the answers. Remember, eight out of the ten chapters in this book examine the competition. Heenan developed his advice by looking at what works. This is much better than any theory. The untested educational theories of the 1970s and beyond are partly to blame for the brain gap problem we have right now. Heenan has refused to take the reader down that road again--instead, he focuses on facts and draws conclusions based on results. And aren't good results what we're really after, anyhow?

I'm glad I read this book, simply because it is a high-quality book. But what would really make me happy is if every leader in America--in government, academia, and business--also read it. And took it to heart. We, as a nation, must answer some tough questions in the very near future. Fortunately, the answers we need are in this book. Thank you, Mr. Heenan--you have rendered the nation a tremendous service.

A note on the writing: form is important, as it dictates readability. Fortunately, this book scored very well on substance and on form. This book actually uses Standard Written English (SWE). This was a refreshing change from the Pidgin English that so many of today's authors slop onto our reading palettes. The care taken in writing this book shows that the author and publisher actually cared about the reader. That's a huge plus.

Let me say at the outset. This is not the sort of book I would normally buy at a bookstore or borrow from the library. In fact, I probably wouldn't even be shopping or browsing in the designated section which includes this book. Had this book not been sent to me for review, I wouldn't have known about it. And it would have been a sad occurrence indeed. I say that because this is a great book on a fascinating topic and I'm pleased that I was given the opportunity to read it. I learned a lot I didn't know about the phenomenon of globalization and also about a problem of which I was unaware: the flight of America's best and brightest to other countries around the world. David Heenan, the author of this important work, says it right up front: "Forget terrorism. Forget weapons of mass destruction. The next global war will be fought over human capital." And he methodically presents his case providing lots of information about the eight countries he surveys: Ireland, Iceland, India, Singapore, China, Taiwan, Israel, and Mexico.

According to the author, who has experience in both business and academia and is a leading expert on globalization, the best and brightest in America are returning to their homelands in record numbers. More importantly, they are also taking America's technological expertise and economic preeminence with them. In this book he explores this exodus through the personal stories of dozens of successful, foreign-born professionals who are leaving America for opportunities in their native lands. Drawing on their experiences, Heenan analyzes the economic, cultural, and political factors that are driving this flight, as well as the initiatives that countries are using to attract top talent. The author clearly defines the current problem: "After centuries of importing brainpower, the United States is now a net exporter. In the past few years, nearly 200,000 foreign-born Americans -- many of them...highly talented techies -- have returned to their motherland every year. This reverse brain drain, or 'flight capital,' stimulated in part by lucrative government incentives, has spawned flourishing new scientific havens from South Asia to Scandinavia."

There were two chapters in this book -- one about Iceland and the other about Singapore -- that I found particularly interesting, probably because I hadn't given much thought to their place in the arena of economic globalization and, furthermore, I really didn't know much about them and their place in the modern world. Regarding Iceland, that very, very cold "Land of Fire and Ice," Heenan says that "...miraculously, this subarctic island of 290,000, Western Europe's poorest nation a century ago, now ranks, per capita, among the world's seven richest countries." Frankly, I never would have guessed that. The last travelogue I saw about Iceland was about thirty or so years ago and nothing was mentioned about its rank in the global marketplace. (As I recall, most of the film seemed to be about the rowdiness of its teenage population!) Now I am told that Reykjavik, Iceland's capital, has become one of Europe's most cosmopolitan cities and the country itself is off and running in the world of biotechnology, genetic research, and other high-tech scientific enterprises.

Then there is Singapore, an island about the size of Rhode Island. According to the author, this tiny nation has become "one of the world's great economic successes." I always pictured Singapore as sort of a backward spot on the Asian frontier which had too many rules and harsh punishments for breaking them, a country that I would probably never want to visit, much less take up residence in. Well -- surprise, surprise -- I will now have to reevaluate my assessment of this booming nation based on the information which Heenan presents in his book. Heenan makes a point of the fact that "Notorious for ... rigid controls, this never-naughty nation has recently loosened up." Good news for those of us who prefer a more relaxed behavioral atmosphere in which to conduct business and trade. And it seems to be paying off. Singapore has attracted scientists worldwide and wants to be home to more than a dozen world-class life-sciences companies within the next five years.

The "brain-drain" problem is serious and needs to be addressed now. As Heenan says: "America cannot afford to equivocate. For centuries, our leaders have responded to similar challenges. Yet, history offers many examples of other great countries that came to catastrophic ends because of their unwillingness to respond to change. Nothing short of meeting this threat will safeguard America's talent base and shape the kind of society in which our children and their children will prosper. The time to act is now," and, furthermore, "America is in a state of transition, at the beginning of an economic and attitudinal revolution. Inevitably, this revolution means restoring the American Dream. For this to happen, all segments of society will have to pool their talents."

The author suggests a dozen strategies for winning the talent war, including: know thy competition, adapt -- or die, spur immigration reform, dust off the welcome mat, target the best minds, celebrate science and technology, and, one of the most difficult, from my perspective, reform -- really reforming -- public education. I am afraid I am pessimistic about the last one mentioned. I have watched over 40 years of so-called "public school reform," and fail to see any substantial improvement in the public schools of our nation. (Please note that I spent over 17 years in the public school system as both teacher and administrator, so I know something about the problem of school "reform.") But one can always hope!

If you are a current-events buff or news junkie, as I am, you will not be disappointed with this book. Heenan's prose is very readable and the work is obviously intended for general audiences, as well it should be since the problem affects all of us, not just those engaged in international commerce or business.

Great insights on a timely topic from one of America's best business thinkers. As usual, David Heenan sees the Big Picture where most others don't. As a former businessman turned professor and consultant, I see firsthand many of the things that Heenan writes about. Many of my best and brightest international students see as much opportunity in their home countries -- especially places like China and India -- as they do in America. The U.S. is still the Land of Opportunity, but we will soon lose that competitive edge if we continue to be so complacent about attracting and retaining the world's best and brightest.

and people are free to move to better prospects!

In the 1980s, foreign students from Taiwan, India, China, etc, flooded the US for MBA, PhD, etc. Then they got jobs, moved up the corporate ladder, worked very hard to become CEOs. But most of them never made it beyond the bench work engineers, hardly VP or CEOs. Now the opportunities existed in their home countries. Of course, they will go back. It is nothing new. The flight of capital is a good indicator of the growing economy. The more India and China growing, the more the world is growing. The 2.3 billion people of India and China, is 40% of the world population.

Now that Chinese and Indian companies are getting IPOs and doing well. The next step, they will be investing in USA by buying everything: US companies, stock and bonds, hedge funds, private equity, mutual fund, pension fund, etc. The flight of capital is now Foreign Direct Investment
(FDI) in USA. The book misses this important point.

Let me start by saying that I'm one of these guys who resents this modern, hyper-capitalistic world we now live in, where everything is a competition, and `economic growth' and `technological advances' are seen as the ultimate good and are pursued at any cost. That being said, I'm slowly and reluctantly starting to accept that this train is moving at full speed and won't be stopping anytime soon. Thus, I better get on board or get left behind.

The premise of this book is essentially this; America is losing much of its intellectual talent to overseas, and if we hope to continue our preeminence in the globalized economy, we better put a stop to it. Not so much about native-born Americans, `Flight Capital' is more about foreign-born talent, who come to America for schooling and job opportunities, yet are being enticed to go back to the land of their birth to participate in the burgeoning economies there. Heenan's stated goal is to convince the reader that we need to stop this "brain drain" of intellectual talent, and to do this he takes us through a virtual who's who of developing economic powerhouses such as; Ireland, India, Iceland, Singapore, China, and more. He describes how these countries are luring our scientists and engineers away, and lays out a plan of action to keep potential talent here. I will give Heenan credit, he is an optimist, and he lays out his case very convincingly, even if I don't necessarily agree with his worldview.

I think it is safe to say that I am not the target audience for this book. I am a modestly educated blue-collar worker and Heenan is clearly a big shot, an elitist if you will. I don't mean this in a derogatory way, I admire his accomplishments, but his argument isn't very appealing to those of us who will never be scientists or engineers, not to mention his somewhat dismissive attitude toward American-born workers. Personally, I think we should be concentrating on improving the native workforce, but Heenan only briefly mentions this and sees it as less practical. He clearly prefers to just import the talent.

As far as foreigners no longer coming here, Heenan could have fooled me. I work for a major R&D center (as a grunt) and there is no shortage of immigrants. As a rough guesstimate, I would say about half of the scientists and engineers are foreigners, mostly from China, India, or Russia/Eastern Europe. Anyways, that's enough complaints from this cynic. I did enjoy reading the book and would definitely recommend it as a valuable work on globalization, science and technology.

Unfortunately, "flight capital" is not immediately self-explanatory, but the concept is simple: Knowledge is a form of capital and it can migrate across borders.
Even before globalization, flight capital was a reality. When Britain was the technological leader of the world, it passed legislation to keep knowledge workers from emigrating. It didn't work, and the United States benefitted from "mechanics" who brought the techniques of steam and textiles with them.
Now, says David Heenan, hundreds of thousands of foreign-born American workers are re-emigrating to the countries of their birth (or, sometimes, their parents' birth).
Heenan, recently honored as one of Hawaii's leading businessmen, has been to the hotbeds of advanced economic growth and talked to these "homing pigeons" in Ireland, Iceland, India, Singapore, China, Taiwan, Israel and Mexico.
Some of the things they told him ought to make Americans think. Quite a few homing pigeons did it for their children, and not, primarily, because of better opportunities to make money or get their research interests funded easily, although those were big issues, too. They found the more cohesive societies in Israel, Iceland or Mexico more comforting places to have their children grow up in.
"Children are often the dominant factor in the relocation decision," says Heenan.
Although he calls this brain drain "alarming," Heenan acknowledges that it does bring some benefits for America. Homing pigeons are often "informal ambassadors" for American values.
"Flight Capital" is about an extremely thin stratum of American workers. Heenan's pigeons average well over two graduate degrees each.
The premise of "Flight Capital" is that researchers and creative brainworkers generally will drag the masses up, or at least along, with them. Thus their departure supposedly harms the economic outlook of less creative American laborers.
Thus Heenan can take a relaxed view of the international migration of ordinary jobs: "In the minds of many, the outsourcing of jobs has become the bogeyman of the times. The truth is far more complex. Most research has shown that exportation of work, if anything, is mildly positive to U.S. economic well-being."
So it may be, but when it's your town that was just destroyed by the transfer of a major employer to China, the benefits seem abstract while the drawbacks are real.
Attempts by a few lively, lucky countries to "move up the food chain" of jobs -- as Singapore has so dramatically done -- can readily be interpreted by those being kicked off the chain here as something other than a desirable economic development . Often, the praise of the postindustrial economy comes across to the workers in it as nothing but fancy talk for a policy of "sweating labor," and all too often, that's all it is.
One issue not taken up by Heenan is whether the losses of potential innovation to American business might not be well worth the cost if they mean that other countries get on their own feet economically (and, necessarily, socially and politically) instead of depending on American handouts, military defense and food.
In 1950, America produced half the world's economic output, an unhealthy and expensive situation that we should be glad to be passing beyond.
Alarming or not, flight capital is real and "Flight Capital" is a good introduction to the subject.
Heenan offers a 12-point call to action; policies that have been more or less consciously pursued by all eight of his exemplar countries, perhaps most consciously by Ireland, everybody's prime example of a "worst to first" economic "miracle."
Some of the 12 are obvious, if not always honored in practice, and others are hardly controversial. They are: know the competition, adapt or die, spur immigration reform, dust off the welcome mat, target the best minds, encourage dual loyalties, reform -- really reform -- education, nourish the halls of ivy, celebrate science and technology, expand the workforce, reconsider national service, act now.
Let's reconsider national service, then. (Pause 10 seconds.) It was a lousy idea in 1964 and it still is.

Richard Florida's "The Flight of the Creative Class" and this book by David Heenan hit the on the same challenge facing America. Intellectual capital is mobile and increasing it is being drawn to locales other than America. Lacking Florida's narcissism and hyperbole, Heenan's level-headed approach to this topic is considerably more appealing. Heenan explains how societal, institutional, and cultural factors in the US are driving knowledge workers away from our shores and creating incentives for their return to their nation of birth. Heenan also goes into great depth detailing the efforts of nations such as China, Taiwan, and India to draw these well-educated people back home.

A compelling book about the emergence of global competitors and their impact on America's role as the dominant superpower. This book introduces the reader to the astounding development taking place in places like Ireland, Iceland, Israel, and of course India and China. He discusses how our immigration policies are causing individuals to emigrate from the US following their post-secondary education. He lays out how this trend will have lasting and deleterious consequences on our role in the world.

He points out the demise in our math and science scores relative to other global players (we are now ranked 19th globally, just after Latvia). In contrast, India generates about 300,000 engineering graduates per year and is slated to grow by 50% in three years.

He presents a number of startling statistics about our need for change. He points out that not even 1 in 3 eighth graders in the US meets proficiency standards in reading and math, despite the huge sums of money we pour into our public education system (p. 257). Further, the US has seen a 25% decline in math and science PhDs since 1997. (p. 259). He rightly points out that we must increase support for science and engineering programs if we have hope to keep up with the rest of the world.

The book goes beyond sorrowful lamentations and offers a number of proposed reforms. Heenan's recommendations include a need to reform public education in a fundamental way, a call for national service, a need to embrace science and technology, and a need to target the best minds. On the last point, he writes that our national rallying cry should be "give us your geeks!" (p. 255).

In sum, this book is thought provoking and persuasive. A great read.

David Heenan sounds a clarion call of alarm about educated immigrants who are now leaving the U.S. and returning to their home countries. His concern for America's well-being comes through powerfully. His portraits of the different national groups who are now repatriating are vividly drawn and rich with quotations from representative individuals. Heenan is careful to specify how each group is unique as he describes the forces pulling Irish, Icelandic, Indian and numerous other immigrants back to their native nations. Most of his clear, straightforward suggestions about ways to address this crisis sound very logical. He argues quite persuasively for globalization, and for the ability to live and work anywhere and remain connected. However, he feels this trend presents a threat to the U.S., a threat he perhaps could have spelled out more clearly. When he illuminates the tremendous contributions immigrants have made to America, he warns of the problems their departure could cause. getAbstract recommends his book to executives who need to plan for a diminishing educated labor pool or who do business internationally, especially those who can sift these arguments to see which elements apply most fully to their industries or situations. Your workforce may be sailing away faster than you know.