MBAs Who Flee America

by Vivek Wadhwa on

I’ve writtenlot about America’s flawed immigration policies: how the unavailability of permanent-resident visas and the growing xenophobia in the U.S., combined with expanding economic opportunities abroad, are causing a reverse brain drain. Skilled immigrants are returning home to countries like China and India in record numbers. America’s leaders are accelerating the trend by pandering to uninformed and misguided segments of their electorate who demand that the country close its doors for fear that foreigners will take their jobs away.

The result is that America is giving an unintended gift to countries like China and India, where returnees are teaching locals how to build world-class companies and how to innovate. In almost every high-growth tech company in China, you find returnees in senior management positions. The New York Times reported that it’s the same in scientific research—top research labs have returnees in lead positions, which may give China the edge it has desperately been seeking. China is a long way from challenging America in innovation ability, and if it does make some breakthroughs in cleantech, health care, and science, this is not a bad thing. As I concluded in this piece about China’s entrepreneurship boom, we benefit from innovation no matter where it happens. The problem is that the American economy is stagnant and we’re exporting the people who can help boost it.  And we are creating long-term competition for our tech industry.

On my trip to Beijing, last week, what surprised me most was the number of Stanford grads that I met and how they had no regrets about leaving the U.S.—and no plan to return.

I can understand why so many international students return home from regions of the U.S. that don’t welcome foreigners—these cities always have fewer tech startups and thus fewer jobs. But Silicon Valley is the most open, inclusive place in the world and pays premium salaries to top engineering talent, especially from Stanford. And immigrants thrive in the Valley: they start 52% of its startups.

So why are the Stanford grads leaving? I asked five of them to tell their own stories.

Canada-born Robert Hsiung graduated from Stanford in 2008 and received several lucrative job offers in Silicon Valley, Singapore, and Hong Kong. But he saw far more opportunity in Beijing. He knew that Chinese Internet users were maturing quickly and that the middle class was growing rapidly.  His expectation was that they would demand social networks that provide more privacy than Facebook. So he went to China to start OneCircle.cc. After a successful exit, he is starting his next venture, FoxFly, a mobile platform that makes it easy to create private groups with which to share messages, photos, and “private” comments on content from Facebook and other social networks.

Robert says that he would not even consider going back to the U.S. He may visit the Valley for a short time to expose himself to the latest technology and business models being developed there. But, with Twitter, Techcrunch, and his China Stanford network, there really is no reason to return: his costs are ten times lower; market significantly larger; and funding more abundant, in China.

u Dong decided he wanted to be in China in 2004, after he completed his Stanford MBA. But he was nervous because he feared that he would face hurdles from corrupt government bureaucrats, and be at a disadvantage because his father wasn’t a high-ranking government official.  He chose to start an Internet business because this would provide him with a ‘clean’ environment—where he could just deal with consumers on the web and not have to deal with business licenses or government regulations.

He started a firm called Beyond Tailors that sold made-to-order clothing, and La Miu—now the Victoria’s Secret of China and China’s biggest online lingerie seller. It is growing at 300% per year, is negotiating VC financing to help it grow to a billion-dollar business, and expects to go public in two to three years.

Lu has no thoughts of coming back to the U.S. He says that China is far too exciting.

Joe Chen returned to China in 2002 to start Oak Pacific Interactive. This has become one of China’s leading internet firms. It properties include the Facebook of China, Renren.com (formerly Xiaonei.com), Mop.com—one of China’s largest online forums, and Nuomi.com, a group purchasing website. Joe sees at least a decade of phenomenal growth ahead for the Chinese internet market.

He believes that is a historic period of time for China to regaining its long-lost leadership in the world economy and affairs. And that “any Chinese with a passion for entrepreneurship, the right skills, and love for their motherland would jump at the first opportunity to relocate back to China”. Settling down back home wasn’t easy for Joe at first.  There was minor culture shock which resulted from many years of absence from China.  But the economic opportunities were endless. He found abundant risk capital willing to fund start-ups, and extensive support from all levels of government.

Stanford computer science graduate Jonathan Lin was born, raised, and educated in the U.S. and didn’t have any ties to China.  But during a visit to China in 2002, he was struck by the hunger and the optimism of the local entrepreneurs and netizens.  He came to the conclusion that while an Internet company in the US could make peoples’ lives more efficient and interesting, a company in China would better peoples’ in more fundamental ways.

So he went back to China after completing his Harvard MBA in 2005 and started the Chinese SlideShare, DocIn, in 2007.  This site has millions of daily users, of all sorts—from college students to rural residents. Jonathan says this has the societal effect that he hoped, and plans to continue staying in China to build his dreams.

Amy Gu, started thinking of trying something in the Internet space in China as soon as she graduated from Stanford in 2009. She, and a number of students at the business school, prototyped a trading website similar to kaching.com. She returned to China in June 2009 and launched the sitewww.kaipan.com, which simulates stock trading. A year later, she exited from the company through a merger with a Chinese financial services firm.

Amy is glad she returned to China because of the wide-open opportunities there. She says that China is definitely more polluted than Silicon Valley, “but it’s on a way of having a clearer sky”.

Editor’s note: Guest writer Vivek Wadhwa is an entrepreneur turned academic. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University. You can follow him on Twitter at @vwadhwa and find his research at www.wadhwa.com.

  • Arthur Dullsworthy

    Why wouldn’t Chinese and Indian nationals seek to return home if 1) the economies in those countries are growing at a faster rate than the US economy; and 2) they enjoy a competitive advantage as natives of those countries and native speakers of the language?

    The MBA — I can’t speak for a degree in computer science — provides access to otherwise rationed opportunities in a slowly growing economy. People don’t go to b-school for the value added: it’s all signaling and understood as signaling by recruiters, i.e., a means to reduce employer information costs in the hiring process. This is why entrepreneurs tend not to spring from the overabundant ranks of elite MBA programs.

    Where growth in the Chinese and Indian economies hinges on entrepreneurship, it is likely that an MBA degree will remain as irrelevant and unhelpful there as it is in the US. As for information costs in hiring, it’s more likely that signals conveyed in the language of the local culture provide more information that an exorbitantly expensive (in PPP terms) degree from the US.

    Not that there isn’t a certain amount of xenophobia, but I doubt whether felt animosity to individuals from other countries and legal restrictions on their employment are greater here than in India and China.

  • Vik

    In reply to the above comment: even though its is true that a local bussiness degree would suffice, it still remains an unpleasant fact that educational standards and exposure to diversity and culture provided by top business schools remains unchallenged in developing economies, which are yet to develop elite educational institutions which draw intelligent diverse induviduals from all over the globe.

    It is for this purpose that ambitous induviduals from India and china would still do themselves a favour pursuing a harvard/ stanford MBA than a local one which provides little/ no exposure. (Ofcourse, this statement has no correlation with the essentiality or importance of an MBA with respect to entrepreneurial success)

  • Arthur Dullsworthy

    I take a different view. You could send everyone graduating from HSW to Gitmo for the next ten years without effect on the US economy. Rent seekers are disposable. It may be different in computer science. Actually, given the real exchange rate, the point is to employ talented people in Bangalore. Importing them to the US destroys the arbitrage. No?

  • Bob

    How quaint this article now seems with the U.S. forging ahead and China and other emerging markets looking more and more in danger of crumbling. Nothing compares to America’s political institutions (though inequality is a growing danger)–see Acemoglu’s Why Nations Fail.

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