Bangalore, Beijing, and Boston - Tale of 3 Cities

A day never goes by without our president Barack Obama mentioning American jobs moving from Boston to Bangalore and Beijing. Is this threat real or just perceived?

Let us go back and visit the history of US industry for the last half century or so. Manufacturing industry (Textiles, Steel and others) moved out of USA in 1970’s. Auto industry moved out of USA in 1980’s. High Tech manufacturing including Semiconductor industry moved out in 1990’s. Finally, we have been witnessing the migration of software industry during 2000’s. Interestingly, these were the best years in US history. During this period, we saw huge improvement in productivity, creation of more wealth, and creation of more jobs than lost to off-shoring or outsourcing.


America has found its way around each time through innovation of newer technologies and industries thus maintaining its supremacy in the world. So, why is it losing its advantage now? Why do things look so bleak today? Even though there are many factors, the main one I believe is slowing pace of innovation.

Traditionally in America, three entities contributed towards innovation: government, universities, and private sector. After the end of cold war, the government has drastically reduced its budgets in military and NASA. Uncle Sam that was responsible for creation of current technologies like Internet and GPS is no more contributing at the same level.

For the past few decades, the best and brightest of the high school graduates choose management and financial streams over math and science programs. Enticed by the financial benefits, they took their innovation and talents to Wall Street. The financial world witnessed some of the best innovations in the history during the past 20 years. They made lot more money, but left the country without the brain power needed for it to be at the forefront of the technology. Finally those unconstrained innovations and greed on the Wall Street led to ultimate recession.

At the same time, over the last few decades the number of American students in the universities at the graduate level has come down. In almost all universities, most of the grad students were from India, China, Pakistan, and other countries. For a while we were able to maintain our edge by offering these graduates work visas to work and contribute to overall economy. Starting early 2000’s we started tightening the immigration policies. Unfortunately, we applied same policies for skilled and unskilled, and legal and illegal immigrants. This drove many of those bright students back to their homeland, where similar kind of opportunities were now available.

The private sector contributed to most of the innovation in the past 20-30 years. However, with ever growing pressure from the Wall Street on public companies, the companies started managing their stock price than the company itself. Venture capital firms applied similar pressure on the start-ups to reduce cash burn rate. That initially prompted them to look for cheaper skilled workers elsewhere. Quickly, they realized that the skills available in India and China were equivalent to the ones available in US and other developed countries. And those were available in abundant numbers. Today at many technology companies, more patents are filed out of their India and China offshore centers than their home office.

Going back to the question, whether the threat is real or not, I believe it is real. Having actively managed teams in Beijing, Bangalore, and Boston, I don’t find any difference in the quality of resources. The venture capital that is oxygen for most of the start-ups in America is now following the brain power in China and India. The capital that wasn't freely available to those bright young graduates in the past is now readily available leading to more start-ups coming up every day in these countries.

Unless we get our act together, there is a chance of permanent damage to our future as a leader in technology and innovation. America leapfrogged every other nation when a visionary president challenged the nation to put man on the moon; and the nation responded. Today we need similar leader that can rally the nation around his vision. We need more engineers and scientists now than at any other time in the history of our great nation.