Thursday, November 17, 2011

How The Talent Economy Works

Talent is the new oil. The latest issue of The Economist is out with immigrant networks gracing the cover. Digging deeper into the magazine reveals a useful abstraction of the emerging talent economy:

Such migrants do not merely benefit from all the new channels for communication that technology provides; they allow this technology to come into its own, fulfilling its potential to link the world together in a way that it never could if everyone stayed put behind the lines on maps. No other social networks offer the same global reach—or commercial opportunity.

This is because the diaspora networks have three lucrative virtues. First, they speed the flow of information across borders: a Chinese businessman in South Africa who sees a demand for plastic vuvuzelas will quickly inform his cousin who runs a factory in China.

Second, they foster trust. That Chinese factory-owner will believe what his cousin tells him, and act on it fast, perhaps sealing a deal worth millions with a single conversation on Skype.

Third, and most important, diasporas create connections that help people with good ideas collaborate with each other, both within and across ethnicities.

The global economy is being rebuilt on this network infrastructure. Face-to-face yields the stage to distance trust. Dysfunctional supply chains give way to faster and larger capital flows. Geographic arbitrage is practical, logistically possible. Diaspora networks have a huge competitive advantage.

China exports talent and, as a result, receives FDI from the destination country. That's a substantial return on investment in brain drain. Brain drain promotes economic development.

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