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Without changes to America’s visa system, those many bright young immigrants who do want to stay in the U.S., will not. To discuss the problem I spoke with tech entrepreneur Vivek Wadhwa, Vice President of Innovation and Research at Singularity University, and author of ”The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent” and Robert Litan, Director of Research at Bloomberg Government.
Ray Suarez (RS): We’ve asked a few people on the program already whether the United States is losing the race for global entrepreneurial talent, and whether we should be concerned - Vivek Wadhwa, how do you answer that?
Vivek Wadhwa (VW): Well you have to go abroad to see what’s happening - go to India, China, go to any of the big cities there, go to Brazil, and you see the buzz of activity. When you start meeting the people over there, you realize that many of them, as many as a third or sometimes a half of them, are returnees from the United States - and they’ll tell you about the frustrations they faced in America, and why they left the country that they wanted to be part of.
RS: For example?
VW: For example in India, there are two or three companies that were elected to be the Indian Amazon, which were founded by returnees. These are people that I’ve mentored and I’ve helped. One of my students, Churikan Chanduri, has also gone there and started a company, which I think is going to be a billion-dollar company within the next five years or so. He wanted to be in the United States, he was frustrated that he couldn’t get a visa, that when he went for job interviews, employers wouldn’t even talk to him because he was on an H1-B visa - so he just left and he’s doing very well back home.
RS: Robert Litan, should we be concerned in this country when we hear stories like that?
RL: Absolutely, because if you look at the trend of new firm formation, it’s been down since the recession. We used to have around 600 thousand firms formed a year - it’s fallen to around 400 thousand. That’s due to lack of capital, it’s obviously due to lack of risk-taking, but we could obviously use all the entrepreneurs we can get. And one of the things we know from the data is that immigrants have a higher propensity to form businesses than native-born Americans, and we also know from Vivek’s research that fully 25% of successful high tech startups in America were founded or co-founded by immigrants. And fully 40 percent of the leaders of the Fortune 500 today are either immigrants or sons or daughters of immigrants. So we need all the help we can get, and you’ve got other countries like Chile, who are actually paying people to come to their country to become entrepreneurs.
RS: Not that I would ever suggest an autarchy where we try to satisfy all our own needs on-shore, but if we were doing a better job here, training up the entrepreneurs and inventors of the future, would this be such an issue?
VW: I would argue that we would still want as much foreign talent as we can get because innovation thrives in diversity. You know this is like one state trying to say “We can grow our own NFL players.” The fact is that you want to bring in the best from everywhere and have your players compete, that’s the only way you’re going to create world-class teams. So we want that diversity that immigration brings.
RS: Robert Litan, how much more should the U.S. do in terms of developing startup incubator programs of the sort we’ve heard about earlier in the program? Government sponsored startups such as Enterprise Ireland and Startup Chile, are they a model for the United States or really too small to amount to much when you’re talking about an economy the size of ours?
Robert Litan (RL): Well, Startup Chile’s not really an incubator - it’s just basically a mechanism to get the best entrepreneurial talent into Chile - they actually pay them. But, when most people talk about incubators they’re talking about all the kinds of programs you see all over the country that in a way have nothing to do with government. For example, you have all kinds of programs in Silicon Valley and Austin and all other kinds of high tech hubs, where basically you have buildings that offer free space and then you’ve got mentors and helpers that encourage entrepreneurs to do their thing - and I think the more of this stuff the better, and frankly I’m not sure you need government to do it.
RS: Vivek, is this an important place for government to be making policy and indeed putting some money behind this? Or can the marketplace take care a lot of these questions by itself?
VW: Ray, you know the Startup Chile program, I designed it. I saw an opportunity for Chile to take advantage of America’s stupidities, as I called it, because we’re chasing away brilliant people. Now the good news for us is that we don’t need to do that - everyone wants to come here - so all the government has to do is to get out of the way. Right now the government is a barrier - it’s an inhibitor. If it would only just get out of the way, let companies hire the people that they desperately need and let entrepreneurs in America do their magic as they always do, this economy would be thriving. So the answer is, stay out of the way and let us do our magic.
RS: You say that while we’re in the middle of an intense debate over the future of immigration law in this country. Can we design an architecture that distinguishes between one kind of worker and another and make sure that the U.S. attracts enough of both kinds, high-skill and low-skill?
RL: Sure we can. The fact that the undocumented worker issue - there are about 11 million of them - has been tied to the issue of importing high-skilled talent, has been purely a political artifact. Democrats in Congress have more or less held hostage the high skilled liberalization in order to get either a pathway to citizenship or at least some documentation for the existing undocumented workers. Republicans up to this point as you know haven’t displayed much interest in doing anything about undocumented workers and they’ve just focused on high skilled - but they were of course scared out of their wits by the 2012 election. There’s some optimism that this bill is going to move forward - but there are features in this bill that would establish a pathway to citizenship for the undocumented, would liberalize the rules for highly educated workers, and at least would make a start to let more entrepreneurs from foreign countries in.
RS: If Robert Litan, as you suggest, circumstances have created a space for us to at least talk about how to fix the immigration system, what would a redesigned H1-B program look like?
RL: Well first let’s be clear for our listeners, explain what an H1-B is: it’s a temporary visa for up to six years. It can be renewed, it’s focused on skilled people, but mostly they’re people from India and China who have tech skills. There are a lot of things wrong with the H1-B program in my view, but I would like to see some kind of mechanism that will allow these temporary workers to stay here and apply to be entrepreneurs without such high monetary thresholds. Because right now under the Gang of 8 proposal, you have to show that you are bringing in at least $100,000 to support your enterprise, or that your enterprise has $250,000 of revenue. These are very high targets and Vivek is right, we’d rather have people start these companies here than there.
RS: You were both talking about the inflexibilities in the H1-B system. If a worker who is legally in the U.S. under an H1-B comes up with an idea that they believe might make a lot of money - and they want to spin it off into their own business - can they do it? Or are there impediments built into their status while they’re here on an H1-B? Vivek?
VW: The funny thing is that you can start a company if you’re on an H1-B visa - you can’t work for it. So this happens to my students all the time (laughter). It’s really bizarre.
RL: Well you’d have to reapply, actually.
VW: Well it’s so complicated, you have to have a board of directors - you can’t own more than X percent of the company - it is so cumbersome, that I know students who have tried. They just got frustrated and said we’ll just leave and start our company somewhere else. Many of them went to Chile, others went to Brazil, others went to New Delhi - they just left the country out of frustration.
RS: So Robert Litan, by definition that would be an impediment to immigrant entrepreneurship, straight up?
RL: No kidding. And of course it’s ridiculous, and if you’re going to invent this new thing you’re talking about, you’re working for Intel, I mean Intel’s going to get it. There is an out, you can make an application but you’re going to be held up for a while - and if you’re trying to raise money, who’s going to give you money when your immigrant status is subject to question? So, yeah we penalize people for starting new businesses. Now, let me just defend the companies for a minute - because the companies of course that are taking these workers in are paying for all the costs. And they actually under the Gang of 8 proposal, they have to pay even higher fees. And there’s one other thing we haven’t talked about - there’s an additional requirement that the companies show, that they’re paying the H1-B holder quote “significantly more” than they would pay an American worker. If that number is a very large number we could actually see a decrease in the number of people brought in, so a lot of this is subject to a lot of uncertainty.
RS: Is our NAFTA partner and next door neighbor Canada doing it any better? They have a point system - the plan has been talked about by some as a better way to evaluate and attract entrepreneurial talent than the system in the United States. Robert Litan, Canadians doing it better?
RL: Yes. Number one is they have a much more welcoming policy towards entrepreneurs, and number two, to high-skilled talent. There was an article on Bloomberg.com, our free website - an amazing story about how the Canadian immigration service went out - and they’re looking for workers in areas where there are job shortages - and they found this guy in Atlanta, who was unemployed, but he was a mechanic who had skills - I don’t know how they found him - and they flew him to the Western part of Canada, and he was offered a job making a hundred thousand dollars a year. He’s quoted at the end of the story saying it felt like he hit the lottery. He got a hundred thousand dollar a year job, he got health insurance in Canada, he’s happy as a clam. And Canada is actively looking for people with skills where there are shortages.
VW: You know the funny thing is the Canadian immigration minister is coming here in a couple of weeks to speak to Silicon Valley entrepreneurs about moving over to Canada - they’re actively marketing themselves to say “come and stay here, we want you - forget about America, we want you.”
RAY: Vivek Wadhwa is a tech entrepreneur, academic, and researcher based out of Silicon Valley. And Robert Litan is the director of Research for Bloomberg Government.