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October 10, 2006
The search for talent
This week's Economist is running a special report on The Search for Talent. (Most of the report requires subscription but the lead article is open to all). The theme through out the report is the global search for talent. Companies are move abroad to get more and cheaper brains. The end point of their analysis is, unfortunately, rather predictable:
America still has overwhelming advantages in the war for talent. One is the quality of its universities, which regularly dominate global league tables. The second is the quality of its business environment—from the availability of venture capital to the quality of its management cadre to its willingness to pay for the best people. The state of California alone has more venture capital than any country outside the United States. Robert Huggins Associates, a British-based economics consultancy, found that the world's top seven regional “knowledge economies”, measured by things such as patent registrations, investment in R&D and the proportion of knowledge workers, were all in the United States.
Europe has less reason to be cheerful than America. Business is burdened by rigidities and regulations. The universities are not what they were. The EU invests 30% less in R&D than America does, and most of its 400,000 researchers working on the other side of the pond have no intention of returning. Yet Europe, too, still has huge strengths in the “tacit” skills that are at such a premium in a knowledge economy. Germany has deep expertise in engineering, Italy in design and Finland in wireless technology. Europe is also doing more than America to reform its immigration system in hopes of attracting talent. All the same, Europe needs to get serious about freeing its economy and its universities from intrusive controls.
Most of the discussion is about how to attract, manage and cope with really smart people. In fact, one of the areas that they highlight as a problem is a potential backlash again talent elites. If smart elites are what drive economic growth in this new economy, then everyone needs to just accept that fact.
I afraid they are taking a wrong turn here. They seem to have fallen in to the "great man" theory of history as applied to economics. Yes, innovation is the engine of economic growth. But, as Edison said, genius is 1% inspiration and 99% perspiration. Much of innovation comes from not geniuses but everyday people. Issue is not how to develop and garner the best of the best - but the talent of everyone. The team that plays like a team usually beats the team with one super star who tries to do it all.
Capturing the tacit knowledge of workers and customers is just as important as nurturing the lone genius.
In fact, one of the articles describes the changing dynamics of why companies go abroad:
If Western companies were initially attracted to the developing world by the low price of talent, they have now moved on to other considerations. Srini Koppolu, the head of Microsoft's India Development Centre (MSIDC), explains that one reason why Microsoft established a development centre in Hyderabad was to gain an edge in the talent war. Being in India gives you access to first-rate techies who do not want to move abroad. MSIDC has grown from 20 employees in 1998 to over 900 today.
The other advantage is local knowledge. Vijay Mahajan, a former dean of the Indian School of Business, which sits next to Microsoft's campus, points out that the developing world is a booming market as well as a huge labour pool. GE calculates that 60% of its growth over the coming decade will come from the developing world, compared with 20% over the past decade. And the only way to understand the new market is to be immersed in it.
Many Western companies thought that their goods would almost sell themselves in the developing world. They reckoned without complicated distribution systems, feisty local competitors and idiosyncratic local habits. Packaged-goods companies found that customers did not want their jumbo packets, for example, because they had little money and little storage space. Local people could have told them that.
Hewlett-Packard has set up research facilities in India in the hope of building a stripped-down 5,000-rupee ($109) computer. Electrolux Kelvinator has developed a refrigerator that will stay cold even after a six-hour power failure. Nokia has produced a mobile phone that includes a built-in flashlight and a dust-resistant keypad.
It is as much the search for localized tacit knowledge that is driving companies as the search for cheaper brains -- which has always been the case.
So, yes we need an educational system that fosters talent and an economic system that rewards it. But we need to keep in mind that “talent” comes in many forms and in many skills. Simply catering to some (self-proclaimed?) knowledge elite is not the way to achieve economic prosperity. Developing the knowledge of everyone is the way to real success.
Posted by Ken Jarboe at October 10, 2006 8:53 AM
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Comments
You're missing the point: companies need to be immersed in their markets in order to understand demand. But the fact remains that they need high-powered talent to create their supply. Local people - read here, normal people - can tell them they want a 5000 rupee computer or a cell phone with a dust-resistant keypad. But there's still the issue of deciding which local desires can be fulfilled most profitably, which is the job of people with business talent and training.
Once that is decided (which could theoretically be done by anyone, even if those with business expertise have a large advantage), one must still actually design and build the goods to meet the particular demand. How do you build a useful computer that costs only $5000 rupees? That 99% (in this case, more like 99.99%) of the people you talk about being just as important as the talented 1% wouldn't have a clue where to begin answering that question. It's the team of brilliant computer designers who have spent a decade of 60-plus-hour weeks applying their 160 IQs to terrifyingly technical problems who will figure out how to create such a computer and meet the normal people's demand. Janitors and salespeople - and even doctors, attorneys, accountants, and executives - are useless for such a task.
The prospects in other fields are similar. Who holds the key to future medical breakthroughs? The 99% or the brilliant biochemistry Ph.D.s? Who will make the robotics breakthroughs that further revolutionize factory productivity? Blue-collar factory workers may be able to provide all sorts of information about what problems the current robotics systems have, but I guarantee they won't be designing the new robots that overcome those problems.
In short, both kinds of expertise are necessary - the "tacit" knowledge of what people want and what problems should be solved on the one hand, the ability to create what the people want and to solve those problems on the other. What makes today's economy so unique - and talent of the sort the Economist talks about so immensely valuable - is how utterly necessary such a small percentage of the population has become for creating the goods demanded by so many.
Posted by: Alan Hurst at December 21, 2006 4:27 AM
Alan -- I agree that "talent" is important, and it always has been. My point is that talent alone isn't the answer - or even a major part of the answer. Many of those great new products don't spring out of the heads of geniuses - but are the result of an agglomeration of incremental ideas coming from the field through trial and error. And through seemingly minor suggestions and improvement from the rest of that 99% of the population.
Posted by: Ken Jarboe ![[TypeKey Profile Page]](http://www.athenaalliance.org/weblog/nav-commenters.gif)
at December 21, 2006 10:20 AM
What is the price of a Talent in Rupees?
Posted by: Alice at March 19, 2007 5:16 AM