In a videoconference hosted by Indian start-up website Inc42, I gave Indian entrepreneurs some advice that startled them. I said that instead of trying to invent things, they should copy and steal all the ideas they can from China, Silicon Valley and the rest of the world. A billion Indians coming online through inexpensive smartphones offer Indian entrepreneurs an opportunity to build a digital infrastructure that will transform the country. The best way of getting started on that is not to reinvent the wheel but to learn from the successes and failures of others.
Before Japan, Korea and China began to innovate, they were called copycat nations; their electronics and consumer products were knockoffs from the West. Silicon Valley succeeds because it excels in sharing ideas and building on the work of others. As Steve Jobs said in 1994, “Picasso had a saying, ‘Good artists copy, great artists steal,’ and we have you know always been shameless about stealing great ideas.” Almost every Apple product has features that were first developed by others; rarely do its technologies wholly originate within the company.
Mark Zuckerberg also built Facebook by taking pages from MySpace and Friendster, and he continues to copy products. Facebook Places is a replica of Foursquare; Messenger video imitates Skype; Facebook Stories is a clone of Snapchat; and Facebook Live combines the best features of Meerkat and Periscope. This is another one of Silicon Valley’s other secrets: If stealing doesn’t work, then buy the company.
By the way, they don’t call this copying or stealing; it is “knowledge sharing.” Silicon Valley has very high rates of job-hopping, and top engineers rarely work at any one company for more than three years; they routinely join their competitors or start their own companies. As long as engineers don’t steal computer code or designs, they can build on the work they did before. Valley firms understand that collaborating and competing at the same time leads to success. This is even reflected in California’s unusual laws, which bar noncompetition agreements.
In most places, entrepreneurs hesitate to tell others what they are doing. Yet in Silicon Valley, entrepreneurs know that when they share an idea, they get important feedback. Both sides learn by exchanging ideas and developing new ones. So when you walk into a coffee shop in Palo Alto, those you ask will not hesitate to tell you their product-development plans.
Neither companies nor countries can succeed, however, merely by copying. They must move very fast and keep improving themselves and adapting to changing markets and technologies.
Apple became the most valuable company in the world because it didn’t hesitate to cannibalize its own technologies. Steve Jobs didn’t worry that the iPad would hurt the sales of its laptops or that the music player in the iPhone would eliminate the need to buy an iPod. The company moved forward quickly as competitors copied its designs.
Technology is now moving faster than ever and becoming affordable to all. Advances in artificial intelligence, computing, networks and sensors are making it possible to build new trillion-dollar industries and destroy old ones. The new technologies that once only the West had access to are now available everywhere. As the world’s entrepreneurs learn from one another, they will find opportunities to solve the problems of not only their own countries but the world. And we will all benefit in a big way from this.
Immigration has become a toxic subject. In the U.S., President Trump is trying to ban or block the entry of refugees and of people from Mexico and parts of the Middle East. Other nations, from the U.K., France and Germany to Australia and Thailand, face political pressure to curb numbers of incomers.
Anger at the erosion of national competitiveness is the root of the rage in the U.S., in my view. Increasing financial inequity, changing racial and ethnic demographics and a widening knowledge gap between technology haves and have-nots are other factors. Immigrants and global trade have become the scapegoats.
Blaming foreigners is not new; it happens when people feel disenfranchised. Throughout U.S. history, each wave of immigrants has forced preceding generations to compete. Newcomers often achieve great success, and face resentment. Chinese engineers helped to build U.S. railways in the nineteenth century, but faced riots and even massacres because they were hired on cheap wages preferentially over whites. The Italian immigrants who came after them were blamed for everything from domestic radicalism to organized crime. Then it was the Poles, the Japanese and the Germans who faced abuse.
The U.S. has gained tremendously from foreign-born inventors. From Alexander Graham Bell, the Scot who invented the telephone, and Nikola Tesla, the Serbian who invented the laser and radio remote control, to Albert Einstein and the wave of scientists fleeing Nazi Germany, immigrants have made the U.S. the world’s leader in technology. Indian and Chinese entrepreneurs fueled the dot-com boom in the late 1990s. A South African, Elon Musk, founded Tesla Motors and the aerospace firm SpaceX.
But in the past decade, skilled immigration has stalled. Flaws in the U.S. visa system make it hard for well-educated and experienced immigrants to stay. Rather than set up companies and create employment in the U.S., foreign-born scientists and engineers have been returning home, taking their ideas and inventions with them. As a result, innovation has become global and the technology playing field has leveled across the world (seego.nature.com/2kmqmjq).
Now, as dark clouds of nativism swirl around Capitol Hill, the country’s leaders face an important choice. They can play the populism card, close the doors and watch U.S. global competitiveness fall — or they can welcome the world’s best and brightest to boost innovation and create jobs. Technology will advance with or without the U.S. The nation needs to decide whether it wants the innovators on its side. Other countries seeking to limit immigration should ask themselves the same question.
Today, internet companies in China, such as Alibaba, Baidu and Tencent, are among the most innovative and valuable in the world. Facebook has mimicked features of their products; Apple has been accused of copying Chinese innovations in the iPhone 7; and search engine Baidu’s artificial-intelligence system is more advanced than Siri. Chinese scientists will soon lead the pack on applying CRISPR–Cas9 gene-editing technology (see, for instance,Nature539, 479; 2016). India has sent an orbiter to Mars and launched a record-breaking 104 satellites from a single rocket. Its new platform for digital currencies, India Stack, may allow its financial system to leapfrog that of the West. Chilean scientists have built cheap technologies that sanitize water by temporarily changing it into a plasma phase. South Korea has built autonomous cars that it aims to have on its roads before the Pyeongchang Winter Olympic Games in 2018.
One measure of globalization is the number of “unicorns,” technology startup firms valued at $1 billion or more. As recently as 2000, nearly all of these were in the U.S.; other countries could only dream of creating a Google, Amazon or Facebook. By February 2017, of the 213 unicorns in the world, China had given birth to 55 and India 10. The U.S. is home to only 110 (Global Entrepreneurship); half of those have at least one immigrant founder. The U.S. share of unicorns is shrinking, and Silicon Valley is facing unprecedented competition.
Gone are the days when, owing to the high costs of the core technologies, U.S. and European research labs held a monopoly on large-scale innovations. Whereas early generations of supercomputers cost tens of millions of dollars, today’s smartphones, which outperform them, cost as little as $30. Sensors, artificial intelligence, robotics, genomics and 3D-printing technologies are globally available and inexpensive. Anyone, anywhere, can use these to build world-changing products. Government-built walls of visas and travel restrictions are no barriers to innovation, only to economic growth.
The contributions of immigrants to tech companies are well-documented. In 1999, regional economist AnnaLee Saxenian at the University of California, Berkeley, foundthat Chinese and Indian executives were at the helm of 24% of the businesses started in Silicon Valley between 1980 and 1998. That proportion doubled the following decade. My research team worked with her to show that between 1995 and 2005, foreign-born innovators founded 52% of technology companies in Silicon Valley and 25% nationwide. We also showed that immigrants generated $52 billion in revenue and employed 450,000 workers in 2005. They filed the majority of patents at technology companies such as Qualcomm (72%) and Cisco (60%), and more than 40% of U.S. government-filed international patent applications had foreign authors.
Then things changed. A backlog of applications built up for employment-based visas that allow permanent residency (green cards). With sociologist Guillermina Jasso of New York University, we analyzed this backlog. As of Oct.1, 2006, there were almost half a million applicants (more than one million when family members were included). Because only about 120,000 visas are available each year, getting a green card can take a decade. We forecast that this wait would increasingly frustrate highly skilled workers, leading to a reverse brain drain.
Indeed, by 2012, my team found that immigrant entrepreneurship had stalled. The proportion of companies founded by immigrants fell nationwide to 24% and in Silicon Valley to 44%. We believe from anecdotal evidence that highly skilled workers are returning to their home countries in even larger numbers today.
Canadian-born chemist Michelle Zatlyn co-founded the US Internet company CloudFlare.
These are the people who set up the unicorns in countries such as China and India. Each of those companies has one or more U.S. returnees in senior leadership positions, and restrictive U.S. immigration policies put them there.
Two decades ago, it was the norm for students who came to the U.S. from China and India to want to stay. No longer. On graduating from engineering courses, most overseas students say that they will work for a short time to gain experience, then return home. Human-resource directors of companies in India and China tell me that they are flooded with CVs from students from U.S. universities. Working for an exciting start-up such as Baidu or Alibaba is more enticing than being locked into a menial U.S. position for a decade awaiting your green card.
When I visit technology centers in China and India, and increasingly in places such as Mexico City or Santiago in Chile, I see a beehive of startup activity. As well as social-media and Internet applications, overseas entrepreneurs are designing wearable medical devices, robots, drone-based delivery systems, microsatellites and agricultural-automation systems. They are building self-driving cars, solar technologies and 3D-printing systems to solve global problems.
Meanwhile, the U.S. visa backlog is climbing. I estimate that there are more than 1.5 million skilled workers in immigration limbo in the U.S. today. Each one is a lost opportunity and a waste of talent.
Everyone loses. The precarious position of foreign-national staff leaves them open to mistreatment by their employers. Rules prevent employees from changing jobs while waiting for their green cards — even to other jobs in the same company. H-1B visas for temporary stays allow employers to replace U.S. workers with people who are paid less than they should be, given their skills. This is one of Silicon Valley’s darkest secrets — and it is why tech companies lobby for more H-1B visas rather than more green cards.Skilled people become frustrated as their careers stagnate. The jobs that would have been created in startups go overseas.
Unless it changes its immigration outlook, the U.S. will forgo economic benefits and jobs in a misguided effort to protect both. It will have to watch as the rest of the world leaps ahead. It doesn’t have to be this way.
The U.S. needs to expand the number of permanent-resident visas and clear the backlog. These people are already working in the country legally and have the experience and skills needed. Retaining them will boost the economy. Accelerated granting of permanent residency could be contingent on buying a house, making investments or starting companies that create jobs. Imagine the benefits of 10,000 new technology startups.
“The U.S. needs to decide whether it wants the innovators on its side.”
We need to make it easy for entrepreneurs abroad to bring startup firms to the U.S. One solution is to provide a “startup visa” as a path to permanent residency. This would perhaps be valid for five years, with an upgrade to permanent residency dependent on the firm’s employment of U.S. workers. The Kauffman Foundation in Kansas City, MO, has estimated that such a visa would create 1.6 million jobs within 10 years and boost the U.S. economy by $224 billion a year.
The solution to the mistreatment of foreign workers is easy: untether the H-1B visa from the employer. Let people change jobs, and let the market decide what their salaries should be. This would remove the financial incentives for companies to replace Americans with cheaper foreign workers and would encourage them to hire the best talent.
By becoming the best place in the world for entrepreneurs to study and work in, the U.S. could again be in the driving seat of technology innovation. Then we can share the resulting prosperity in a more equitable way to mitigate the anger of the electorate.
Apple is facing accusations that it copied Chinese innovations in the iPhone 7. Indeed, China’s smartphone manufacturers released dual-camera systems and handsets without headphone jacks long before Apple did. And the stickers and animations that Apple is adding to iMessage look like a direct knockoff from China’s WeChat. This is quite a twist from the days when Apple accused the Chinese of copying its inventions. The reality is that America’s most innovative company is no longer the world’s most innovative company. Entrepreneurs all over the world are producing innovations that rival what you see in Silicon Valley.
This is also evidenced in the numbers of billion-dollar technology start-ups, or unicorns, that are sprouting up all over the world. Of the 191 unicorns worldwide, 42 are in China and eight in India, according to CrunchBase. Yes, more than 105 are in the U.S., but you would hardly have found any blockbuster technology start-ups in Asia as recently as a decade ago. Today, Chinese Internet companies, such as Alibaba, Baidu and Tencent, are among the most innovative and valuable few in the world.
The world’s entrepreneurs used to dream of coming to Silicon Valley because it was the innovation capital of the world and there were few opportunities elsewhere. This is no longer the case, as I learned during my recent trip to New Delhi. There are start-up incubators sprouting up all over India, and the quality of the start-ups is second only to those in Silicon Valley and China, which are running head to head.
I spoke to about 50 entrepreneurs at local incubators and meetups. Unlike earlier generations, very few had interest in moving to the U.S. Most said they believed the greatest opportunities were in India. As technology designer Himanshu Khanna said, “Why should I move to Silicon Valley when I have a market 10 times as large here?” Five years prior, Khanna had asked me to sponsor him for a long-term U.S. visa, which he could not get.
The tide has surely turned.
For decades, the U.S. invited the world’s best and brightest to come and study at its universities and provided them with temporary work visas. But it placed tight limits on the numbers of permanent-resident visas for those who wanted to stay, so the lines grew longer and longer. My research team at Duke, Harvard and NYU documented that there were, as of October 2006, more than a million skilled workers in “immigration limbo” in the U.S., with only 120,000 green cards being made available every year for their work categories. Ten years later, I estimate the number of skilled workers in limbo is roughly 1.5 million. I explained in my book, The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent, that this would lead to a reverse brain drain. That is exactly what happened.
Hundreds of thousands of highly skilled workers as well as the graduates of top American universities have returned home because of America’s flawed immigration policies. They are in leadership roles at top research labs and at the unicorns in China and India. America has lost an entire generation of entrepreneurs and innovators and bolstered its global competition. That is also why the proportion of immigrant-founded start-ups in Silicon Valley fell from 52% in 2005 to 44% in 2012 and is probably even lower today.
It is in this context that the Obama administration announced its last-ditch effort to reverse the tide. On Aug. 26, the Department of Homeland Security (DHS) proposed a rule to allow foreign entrepreneurs to enter or remain in the U.S. and work at qualifying start-ups. This uses the parole authority under which the president, through DHS, can permit certain individuals to temporarily stay in the U.S.
But the president’s immigration authority is very limited, and this is a very short-term and very constrained fix. The start-up entity must have been formed within the three years before an application for entrepreneurial parole; the entrepreneurs must own at least 15% of the entity; only three foreigners can be employed by the start-up; and the applicant must prove that the start-up has “substantial potential for rapid growth and job creation” by receiving investments of capital totaling $345,000 or more from established U.S. investors with a history of substantial investment in successful start-up entities or at least $100,000 in grants or awards from local, state or federal government entities.
This is not a slam dunk for entrepreneurs wanting to come to the U.S. — and it provides no clear path to permanent residency. Also, to become effective, the rule must undergo a 45-day notice and comment period in the Federal Register. Nevertheless, if it takes effect, it will be better than nothing: it will probably lead to several hundred start-ups moving to the U.S. and creating tens of thousands of jobs here.
What are needed even more badly are DHS rules that let foreigners on temporary work visas change jobs rather than be subject to abuse by their American employers. Present rules prevent employees from changing jobs while they wait for their green cards, which often take one to two decades to arrive. This disadvantages both the workers on temporary visas and American workers, because it allows employers to artificially depress salaries. The foreign workers also cannot start companies, so those who could have created jobs here are getting frustrated and returning to their country of origin.
Immigration has become a toxic subject in the U.S., thanks to the xenophobia being served up in the election campaigns. Though the use of presidential executive privilege is no substitute for lack of governance on Capitol Hill, we do need to enact rules to improve the dire situation. The country’s competitiveness is at stake now more than ever. To quell the social disenchantment that is creating resentment toward immigrants, we need economic growth and job creation and we need to welcome those who would bring about both.
As I read the considerable amount of press Uber is attracting, the level of negativity from the insurance industry is striking. Uber is free-loading. Uber is undermining consumer protections. Uber encourages drivers to engage in what amounts to insurance fraud. And on and on.
Reality is, Uber, Lyft and the many other start-up companies of their ilk are meeting a new set of needs reflected by the burgeoning sharing economy — needs that traditional businesses with traditional business models and traditional approaches to connecting with customers are not satisfying. Functionally, these new entrants supply high-quality goods — whether it’s an immediately available taxi ride in midtown Manhattan or a cozy apartment via Airbnb in Milan. Emotionally, they deliver good value for the money, competent service and a pleasant experience. These offerings also meet higher-order emotional needs that people have, e.g., for control, security, freedom, even independence. This ability to connect not only functionally but also emotionally suggests that the sharing economy sector is here to stay. These companies are firing on all of the cylinders that make for enduring offerings.
That said, the entrepreneurs behind these offerings are riding on the back of the long-established risk-management practices — policies, pricing, product — of the insurance industry while avoiding the burden of full, dedicated insurance coverage.
The reaction of the insurance industry has been to cry foul, call out the regulators and point to the consumer protections provided by traditional insurance.
Is this reaction ultimately productive?
Technology is pulling the rug out from under business models that looked quite durable even a decade ago. Customer habits and desires for discovering, investigating, shopping for, purchasing and servicing insurance bear less and less resemblance to those upon which the industry relied for the first two centuries of its existence.
As an alternative, I propose the insurance industry look at Uber, Lyft and their peers as a force for positive change and as inspiration to evolve the insurance sector toward continuing strength and relevance in the new economy. This approach can be a path to growth, profits and stability.
One way to achieve this vision is for leaders in the industry to foster cocreation platforms. Cocreation, simply put, is bringing together constituents from inside and outside your company to innovate and problem-solve around big opportunities and issues. Cocreation is a way to engage the instigators of the sharing economy in helping the industry figure out how to transform its risk-management practices to work in new sectors of the economy.
What does cocreation look like?
Imagine diverting the industry’s focus from what’s wrong with sharing economy companies, to seeing their emergence as the opportunity to create forms of insurance supporting new business models.
Next, imagine identifying all the constituents who might contribute creatively and with impact to figuring out how to realize the opportunity in a way that is sustainable. These might include experts on current insurance practices, but importantly would include heavy representation of “outsiders”; i.e., people who work for sharing-economy companies, users of their services, regulators, distributors and big data, digital, brand and customer experience experts. Constituents would include people with no connection to the insurance industry who bring totally different perspectives that can be applied to insurance — for example, airlines (shared transportation), retail (mass market franchises and distribution), “experience” companies (innovators that elevate an offering beyond product features and price). What’s important is to include people for whom there is something to be gained by participating.
Now imagine giving these constituents a private forum — possibly a 24 x 7 Facebook-type site — where they can engage in dialog on topics relevant to the challenge, or on opportunities to come together for a facilitated meeting in a physical space where they might prototype solutions to the challenge.
Finally, imagine that you as the insurance carrier can listen effectively and glean insights about possible new offerings and use these findings to define alternative approaches that can be validated through an iterative process of test and learn.
Cocreation is another way to think about solving the “problem” of the Ubers of the world, harnessing the immense creativity that spawned the sharing economy to be a force for enabling new sources of value from which we can all benefit.