Innovation, Future of Work, International Concerns, Personal Perspective
Life is not a zero-sum game.
In 21st Century American society it is easy to get sucked into the mindset of "us against them" or "me against the world" that appeal so much to our basal instincts, including fear of others. Human's penchant for being alert to threat and risk is deeply embedded in our evolution and requires cognitive effort to resist. Additionally, inequality and the precariousness of making a living in modern, capitalistic America leads to many living on the edge and/or fearful of falling from their current economic position.
In 21st Century American society it is easy to get sucked into the mindset of "us against them" or "me against the world" that appeal so much to our basal instincts, including fear of others. Human's penchant for being alert to threat and risk is deeply embedded in our evolution and requires cognitive effort to resist. Additionally, inequality and the precariousness of making a living in modern, capitalistic America leads to many living on the edge and/or fearful of falling from their current economic position.
This pessimistic economic mindset and mood has negative spillover effects on society. Studies show that increases in economic inequality are associated with political polarization in the Unites States (US) and globally. An adversarial mindset to "the competition" both individually and collectively (ie, "zero-sum thinking") can thus drive both economic and political actions that are harmful to society as a whole.
What is "zero-sum thinking"? Essentially it is the belief that benefits to one person or group tend to come at the expense or cost of other persons or groups. The concept is thought to originate from work by the anthropologist George M. Foster who investigated "peasant" societies' view of the world and came to the conclusion that many individuals in these societies have an “Image of Limited Good.” That is to say, many people see all of the desired things in life (food, property, wealth) as existing in finite quantity and limited supply.
A fascinating paper by Chinoy et al from 2022 found, among other things, specific factors that were related to more or less zero-sum thinking in a survey of 15,000 individuals in the United States. Specifically, they found respondents view the world as less zero-sum if:
- They, their parents, and their grandparents experienced more upward mobility during their lifetimes.
- They, their parents, or their grandparents immigrated to the United States.
We will get back to immigration later it is ironic that the effects that a more prosperous society seeks to accomplish - upward mobility for its citizens and (perhaps more contentiously) robust immigration of skilled workers - are imperiled by zero-sum thinking.
While zero-sum thinking is commonly felt and believed, a further investigation into just what this doctrine proports leaves one feeling a different approach is not only needed but warranted. When others win, you can win. A modern nation relies on taxes from its citizens (and immigrants - to the tune of $467.5 Billion in federal and state/local taxes 2019) to fund projects and priorities that benefit others. What becomes tricky to negotiate is who is being taxed and who benefits from the government's actions and interventions. I would argue we all benefit at the most basic level as a growing tax base ultimately leads to more robust services and programs.
Despite the fact that the US Federal Government provides useful benefits to its citizens (Social Security, rule of law, security), the "rugged individualism" that is so pervasive in American culture leaves many to feel they have to "got it alone", that the government is not their friend, and that "others" are the competition. In truth, no one succeeds alone.
Ironically, perhaps the most outward manifestation of the combination of American Capitalism and individualism is the reverence for the entrepreneur. The lore of the Silicon Valley start-up that grew from a garage to a global behemoth is seductive if not often the full story. Entrepreneurship is most often predicated on having a sufficient "cushion" of support including family wealth (among other factors) or a partner who is working in a more "stable" position with provided employer-sponsored health insurance, for instance. In some ways, pursuing entrepreneurship in America seems to be privilege inaccessible to many. Perhaps not surprisingly, then, some studies have found a positive relationship between inequality and entrepreneurship across US states, though the relationship between entrepreneurship and measures of a country's overall economic health are nuanced (economies as a whole can benefit from entrepreneurship even if all individuals don't).
In essence, many American entrepreneurs have in place their own "safety net" to ensure that they can take risks in starting something new and bringing new ideas and products to market. What might be possible for entrepreneurship and innovation in the US, though, if more people were given a sufficient social safety net?
The Social Safety Net and Taking Innovative Risks
Entrepreneurship is a risky endeavor. One is taking the chance on advancing a new idea, solution, or product that faces a variety of hurdles to success. Some of these hurdles include entrenched interests and firms who seek to maintain market dominance while other challenges include communicating the value of the new idea to potential investors, partners, and ultimately customers.
On top of the myriad logistical challenges of entrepreneurship, systems of social support within the United States in particular make striking out on one's own a major challenge. For example, health insurance in the US is often tied to employment and while expansion of health insurance options through government initiatives like healthcare.gov are helpful, the costs of many of the government-backed health insurance offerings are prohibitive. This is perhaps the most salient example of how the robustness of a "social safety net" can affect one's willingness to engage in entrepreneurial activities, which has been demonstrated to be the case in prior work. There are a variety of social safety net programs beyond affordable health insurance that can matter including some form of universal basic income to provide a floor of economic stability and/or childcare subsidies to limit an expensive cost barrier to millions of parents participating fully in the economy. One can imagine more robust government initiatives to lower healthcare and childcare costs alone could make an entrepreneurial path more attainable.
There are also arguments that redistribution through the provision of public goods may help reduce both inequality and political partisanship/polarization. These initiatives help individuals, our communities, and our society function better.
The COVID Aid Test Case: An Expanded Social Safety Net & Increases in Entrepreneurship
The injection of stimulus checks to US households during the COVID-19 pandemic provided a mini experiment in the effect of income stabilization on entrepreneurship. We saw an increase in small business formation within the US during this time and while correlation does not prove causation, many speculate increased government stimulus was a key driver of this behavior.
Furthermore, US Census data of monthly new business and "high-propensity" (likely to create jobs) new business applications shows a post-pandemic boom. In June 2019 there were 292,133 new business and 183,754 high-propensity new business applications. In June 2021 these numbers rose to 451,903 and 304,108; in June 2022, they were 406,294 and 271,717; and in June 2023, the numbers were 467,170 and 317,257.
So, in the three years after COVID first hit (2021, 2022, 2023), the US has averaged 441,789 and 297,694 monthly new business and high-propensity new business applications in June, up 51% and 62% from 2019 levels, respectively. We are seeing a remarkably consistent level of new business creation post-pandemic. The numbers remaining robust even after many of the pandemic-related subsidies and stimulus actions ceased suggest there might be more to the trend than solely the presence of increased economic support to citizens, though. Economic optimism within the US population may also play a role as might larger increases in the money supply do to efforts by the Federal Reserve to stimulate economic activity in 2020 and beyond.
Regardless of the exact causes for the spike in new businesses, these trends are quite different than prior years where entrepreneurship was on the decline. And while entrepreneurship in the US is climbing post-pandemic, it remains uncertain whether the new businesses formed will result in an increase in employment (ie, businesses that ultimately hire employees to grow).
It is often the case that for a new business to grow and expand it must be in some way innovative, bringing new products and solutions to market. And innovation at a macro level is critical to the growth and development of large economies. So, where does innovation stand today?
Progress & Innovation
Recent data suggests declines in US innovation over the past several decades. A January 2023 paper published in the journal Nature found that from 1945 to 2010 scientific papers and patents are increasingly less likely to break with the past in ways that push science and technology in new directions. While some work suggests the key measure in the aforementioned Nature paper, the disruption index, may be biased by citation inflation or a growth in publication rates, the study prompted many to ask if our current systems and incentives are hindering true scientific innovation.
There is a twisted irony to the fact that a concentration of resources and power in a hyper capitalist "winner take all" system ultimately can stifle innovation and progress. Established power players (think big technology companies in the US) become entrenched and work hard to maintain their market dominance.
The concentration of resources also occurs in various societal structures and working environments. Even those institutions deemed a societal good can succumb to market forces. Higher education, especially in the United States, is an interesting example where there truly are "elite" institutions whose resources dwarf others, leading to higher levels of research productivity (through graduate student and postdoctoral research labor advantages) and placement of their alumni into faculty positions. Cumulative advantage takes hold, ensuring those considered the "winners" in their spaces continue to win.
We must ask if all this concentration is good for our society as a whole, especially as innovation drives economic growth. A paper by Nicholas Bloom and colleagues (Are Ideas Getting Harder to Find?) posits that economic growth arises from people creating ideas and can be captured by the product of research productivity x number researchers. Their paper finds that while research effort has risen substantially over the past few decades, research productivity is declining sharply.
We find that research productivity for the aggregate US economy has declined by a factor of 41 since the 1930s, an average decrease of more than 5 percent per year.
- Bloom et al, 2020; Are Ideas Getting Harder to Find?
- Bloom et al, 2020; Are Ideas Getting Harder to Find?
How might we advance research and innovation further? A more thoughtful distribution of resources to ensure funding is not overly concentrated would help. Furthermore, increasing access to opportunity will help bring diverse perspectives, skills, and ideas to the table.
And so we come to the importance of improving immigration to the US to help in these areas.
And so we come to the importance of improving immigration to the US to help in these areas.
Power of US Immigrants in Driving Innovation and Our Economy
The US is a nation of immigrants and data show embracing more accessible immigration practices can assist us as our current population ages and in the process help grow our economy. In addition, immigrants drive American research and innovation, making our economy more dynamic. An important study released in December 2022 found that while immigrants represent 16% of all US inventors, they produce 23% of total innovation output (which was measured by number of patents, patent citations, and the economic value of their patents). The study also found that immigrant and native-born collaborations drive additional innovation through the mixing of ideas and perspectives.
Data from NBER digest of study by Bernstein et al., 2022
Another study released in 2022 has shown immigrant entrepreneurs play a large role in founding or co-founding successful US companies. Specifically, over half (55%) of America's start-up companies valued at $1 billion or more had at least one immigrant founder. That percentage rises to 64% if founders or co-founders who are the children of immigrants are included.
What is amazing about the impact of immigrants on US innovation is how difficult it is for many highly skilled individuals to successfully work in the US. Current caps on H-1B employment visas for the private sector and various backlogs in the review of applications for green cards makes the recruitment and retention of foreign talent to the US challenging.
And while fears of immigrants taking US Citizens' jobs and opportunities are certainly understandable, they are often unwarranted based on the data.
Importantly, data show an increase in H-1B science, technology, engineering and math (ie, STEM) workers in cities is associated with significant gains in wages for natives. A recent study, published in March 2023, found evidence that large multinational companies based in the US were likely to replace skilled visa rejected employment with "offshoring," ie, employing a skilled worker outside the US, implying that US companies cannot necessarily get talent from current citizens in all cases.
The evidence that H-1B employment is not detrimental for native employees is somewhat conflicting, however. An October 2022 study looking at US firms who "won" versus "lost" the H-1B visa lottery (ie, were able to obtain H-1B visas for skilled, immigrant employees, or not) found some evidence that additional H-1B employees "crowd out" other workers at the firm. Furthermore, this study found some evidence that additional H-1Bs increase firm profits and decrease payroll costs per employee. From a purely economic point of view, one could argue that these data are supportive that the H-1B program improves firm profits even if it potentially hurts the employment prospects of some native employees.
The Economic Innovation Group, a bipartisan public policy organization, has published important data on the topic of immigration and innovation, among others. They also surveyed the American voting public in 2022 on their perspectives on skilled immigration in the United States. They find that most US voters do not have strong opinions on the economic impact of immigration on the country or are split in its effects being economically net positive (38%) or negative (37%), despite evidence that skilled immigrants boost a variety of economic metrics. When the survey administrators better gauged support for specific skilled immigration programs that would boost the US economy and innovation, support was over 70% overall and over 60% in registered Republicans, who are politically more likely to oppose immigration. Thus, there are signs that immigration reform can be a winning political position, especially if it is framed as an economic and innovative "win" for the country.
The Abundance Agenda
In closing, to grow entrepreneurship and innovation in the United States we need to make opportunity more inclusive to our citizens and support more effective immigration pathways for skilled workers. We need to have an abundance agenda - more social safety nets, more community support, more inclusion, and more access to education, opportunity, and employment in America.
I can't say I came up with the abundance agenda term, hearing about it first from The Atlantic writer Derek Thompson, but I like the concept. We must get out of a scarcity mindset that hinders our ability to advance as a people and society. Hoarding resources and opportunity is not a successful long-term strategy.
Scott Galloway echoes this abundance notion in a piece on greater accessibility to higher education. Knowledge itself should not be a scarce and expensive resource to obtain. Increasingly, with the proliferation of data and content on the internet, finding information is easy even if extracting knowledge is not. One could even make the argument that it is precisely due to the overwhelming amount of information available online that finding true knowledge has become more difficult. Our higher education institutions have a role to play in helping turn data and information into knowledge and producing individuals with the necessary skills and values to grow our economy responsibly. The US is in a unique position to provide opportunities and freedom of thought and expression to our citizens and future citizens (ie, immigrants), which allows them to innovate and make the world a better place. Higher education is and can remain our "front door" to the some of the best and brightest young minds who come to America to learn, live, and prosper, while positively impacting our economy. But we can't take international students and scholars for granted.
In order for the United States to reach the ideals expressed in our founding - "life, liberty, and the pursuit of happiness" from the Declaration of Independence - we must recommit to being a welcoming nation. Expanding immigration pathways for highly skilled workers who want to live and work in the US and contribute to our economy while advancing their own well being should be a win-win for these individuals and our country. We must get past our zero-sum thinking and remind ourselves that in a truly inclusive and democratic society, when our neighbors are allowed the freedom and opportunity to leverage their skills and expertise to their economic benefit, our economy as a whole becomes more robust and we all prosper.
To innovate, people must be allowed to think, speak, publish, associate, and disagree.
They must be allowed to save, invest, trade, and profit. In a word, they must be free.
- From Superabundance
They must be allowed to save, invest, trade, and profit. In a word, they must be free.
- From Superabundance
While the United States is a nation with a complex history and many current societal challenges, we are also still viewed by many across the globe as a land of opportunity.
The diversity of our nation presents challenges and opportunities. As a nation of immigrants, cultures and beliefs collide and mix here like almost no where else on Earth.
The American entrepreneurial spirit, commitment to capitalism (greed is good?), and our "rugged individualism" are all assets and, sometimes, liabilities. How we leverage and refine our current systems and beliefs will ultimately determine whether our future is bright or diminished. Through caring and compassion for our current citizens and those who want to join us (immigrants) I think we can achieve a more prosperous future for all of us.
In the words of Bill Clinton:
"There is nothing wrong with America that cannot be cured by what is right with America."
"There is nothing wrong with America that cannot be cured by what is right with America."
More from the Blog:
- The Challenges of Being an International Researcher: Implications for Advanced Degree Labor Markets (series from 2020)
- Precarity, Competition, and Innovation: How Economic Systems and Societal Structures Shape Our Future
Further Reading
- America's pandemic-era social safety net boosted entrepreneurship. What's next?
- Are Ideas Getting Harder to Find?
- The Burden of Knowledge and the “Death of the Renaissance Man”: Is Innovation Getting Harder?
- What do we know about the disruption indicator in scientometrics? An overview of the literature
- Immigration, Innovation, and Growth
- The Contribution of High-Skilled Immigrants to Innovation in the United States
- The Role of International Students in the US Higher Education System
- The Case for Economic Dynamism Report, from the Economic Innovation Group
- Immigration Policy is Innovation Policy, from the Economic Innovation Group
- The Economic and Fiscal Consequences of Immigration, National Academies of Sciences, Engineering, and Medicine Report
- Why America is Still the Land of Opportunity for Immigrant Entrepreneurs (And Why We Should Thank Them)
- We Need an Abundance Agenda
- What Policies Promote Abundance?, from the Center for Growth and Opportunity
Books Worth Reading
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