The Real Reason Trump Shouldn’t Shun all Foreign Markets
Donald Trump said it all in the weeks before he assumed office in 2015. In an interview with Steve Bannon, who would later become his chief strategist, the President elect asserted:
“When someone is going to Harvard, Yale, Princeton, Penn, Stanford — all the greats” and then they graduate, “we throw them out of the country and they can’t get back in.”
“I think that’s terrible,” said Trump, ‘’We have to be careful of that Steve. You know we have to keep our talented people in this country.”
At the time, Bannon was expressing alarm at the salience of Asian CEOs in Silicon Valley companies. But without immigrant CEOs and key technologists from Asia, Israel, and around the globe — Silicon Valley would scarcely exist.
Now confusing the immigration issue is a law-and-order issue. Obviously, we cannot allow illegal mass migration of all the poor people in the world into the U.S. — Trump is also correct on this point.
But the other point he made to Bannon is equally important. The future of our economy is dependent on attracting geniuses from around the world to our shores and our universities. As a national security and economic imperative, any graduate of the PhD or even master’s programs at top American campuses should have a green card stapled to their diploma and a clear path to full citizenship.
As I paraphrase in an article I wrote for the Wall Street Journal in 1996:
“The current immigration debate founders on ignorance of one huge fact: Without immigration, the U.S. would not exist as a world power. Without immigration, the U.S. could not have built the atomic bomb during World War II, or the hydrogen bomb in the early 1950s, or intercontinental missiles in the 1960s, or MIRVs in the 1970s, or cruise missiles for the Gulf War in the 1990s. Without immigration, the U.S. could not have produced the computerized weapons that induced the Soviet Union to surrender in the arms race.”
Today, immigrants are vital not only for targeted military projects but also for most of the leading-edge ventures in an information age economy. Every high-technology company, big or small, is like a Manhattan Project. We must mobilize the personnel best trained and most able to perform a specific function, and deliver a product within a window of opportunity as fateful and remorseless as a war deadline.
This requires access to the small elite of human beings in the world capable of pioneering these new scientific and engineering frontiers.
If you are running a technology company, you will quickly discover that the majority of this cognitive elite are not currently citizens. Unless you can find world champion people wherever they may be, you will not be able to change the world with your exotic innovations. Unless you can fill the key technology jobs, you will not create any other jobs at all, and your country will forgo the cycle of new products, skills, and businesses that sustain a world-leading standard of living.
Discussing the impact of immigration, economists tend to be beady-eyed gnatcatchers, experts on the movements of cabbage pickers and au pair girls and blind to the effect of inventors and engineers.
The most vital immigrant contributions come in a spate of inventions, from microwaves and air bags to digital cable and satellite television, from home computers and air conditioners to cellular phones and lifesaving pharmaceuticals, smartphones and medical devices. Without immigration over the last 75 years, I would very roughly estimate that the real living standards in the U.S. would be between 40-50% lower.
The basic flaw in macroeconomic analysis is failure to account for genius. Almost by definition, genius is the ability to generate unique products and concepts and bring them to fruition. Geniuses are immeasurably more productive than the rest of us.
Using the rough proxy of awards of mathematical doctorates and other rigorous scientific and engineering degrees, prizes, patents, and publications — about a third of the geniuses in the U.S. are foreign born, and another 20% are the offspring of immigrants. A third of all American Nobel Prize winners, for example, were born overseas.
The Elites in Action: Welcome to Silicon Valley
Consider Intel Corporation, our leading microchip and wafer fabrication company. Together with its parent, Fairchild Semiconductor, Intel developed the basic processes of microchip manufacturing and created dynamic and static random access memory, the microprocessor, and electrically programmable read-only memory. In other words, Intel laid the foundations for both the personal computer and Internet revolutions.
Two American-born geniuses, Robert Noyce and Gordon Moore, were key founders of Fairchild and Intel. But their achievements would have been impossible without the help of Jean Hourni, the inventor of planar processing; Dov Frohmann-Benchkowski, inventor of electrically erasable programmable ROMs; Federico Faggin, inventor of silicon gate technology and builder of the first microprocessor; Mayatoshi Shima, layout designer of key 8086 family devices; and Andrew Grove, the company’s legendary former-CEO who solved several intractable problems of the metal oxide silicon technology at the heart of Intel’s growth. All these Intel engineers — and hundreds of other key contributors — were immigrants.
The pattern at Intel was repeated throughout Silicon Valley, from National Semiconductor and Advanced Micro Devices to Applied Materials, LSI Logic, Actel, Atmel, Integrated Device Technologies, Xicor, Cypress, Sun Microsystems, Hewlett-Packard, Granite, and Nvidia — all of which from the outset, heavily depended on immigrants in the laboratories and on engineering workbenches. It overflowed to the “Silicon Wadi” of Israel, which is symbiotic with Silicon Valley. Today, one-third of all the engineers in the bay area are foreign-born.
The next generation of technology is the Cryptocosm of cryptocoins and blockchain, which is entirely a global phenomenon. Its central figures are Vitalik Buterin of Ethereum from Russia and Canada, Pavel Durov of Telegram from Russia and the world, and even Craig Wright, the contentious Satoshi figure from Australia and London. Many of the most inventive pioneers of the movement come from Israel and China, and the corporate center may be Zug, Switzerland.
Now, with the needed expansion of Silicon Valleys and Crypto-wadis proliferating throughout the U.S. economy, we now need Silicon Deserts, Prairies, Mountains, and even Alleys being to be launched from Manhattan to Oregon. Now, this means immigration becomes more vital to the future of the U.S. economy than ever before.
On the foundation of Silicon have arisen world-leading software, crypto, and medical equipment industries equally dependent on immigrants. As the spearhead of the fastest growing U.S. industry — software — Microsoft offers some of the most coveted jobs in the U.S. economy. But for vital functions, it still must turn to immigrants, despite the difficult and expensive legal procedures required to successfully migrate an alien.
The current turnaround genius and CEO of Microsoft, Satya Nadella, came from India as did Sundar Pichai the current CEO of Google. Google co-founder Sergey Brin came from Russia. Also an immigrant is Jony Ives, the key product designer at Apple for the iPhone and other blockbusters, who just left to form his own company.
With U.S. high school students increasingly shunning mathematics and the hard sciences, America is still the global technology and economic leader in spite of, not because of, any properties of the American gene pool or dominant culture. America prevails only because it offers the freedom of enterprise and innovation to people from around the world.
Now we hear leading members of the administration such as FBI Director Christopher Wray attacking the integrity of the Chinese students that populate many of our leading universities. With China producing millions more engineers and scientists than the U.S. every year, U.S. technology companies cannot prevail without attracting many of them to our shores.
By casting suspicion on them as potential problems and enemies, spies and subversives rather than assets and opportunities, he is jeopardizing the vital future of U.S. technology and thus of national power and prosperity.
A decision to cut back legal immigration today is a decision to wreck the key element of the American technological miracle. Congress must not cripple the new Manhattan Projects of the U.S. economy in order to pursue some xenophobic and archaic dream of ethnic purity and autarky.
The key factor in the future of U.S. technology investing is how we treat our geniuses from around the globe. Trump was right: we must keep “our [foreign] talent” here. Make them citizens not outcasts.
As I look to the future, the controlling question for investors is whether the overseas geniuses will still come to the U.S. or whether we have to chase them down in China, Israel, India and other more pro-technology nations. At this xenophobic and technophobic moment, it would be irresponsible to stint on foreign stock markets, with China and Israel in the lead.
Editor, Gilder’s Daily Prophecy