Where Talent Moves To, What the Chinese are Investing in, and Who is Drinking

In a world of short attention spans, segregated news sources and fetishes for frivolity, what people become famous for has changed. Jane Espenson, an accomplished TV screenwriter who created great episodes of Buffy the Vampire Slayer, had some level of fame previous to this week. But her fame grew to much greater magnitudes on Tuesday when she created a Pringle sculpture* that went viral. You can spend years as an accomplished writer with little public notice. But post a photo of your food sculpture on social media and–BOOM–you’re now the real deal. Regarding today’s fame factory: on the one hand, we are clearly doomed. On the other, that’s a pretty impressive Pringle sculpture. But even as we double-dip a chip into salsa, we present you with where global talent is flowing to, what China is investing in and who the big drinkers are. It’s this week’s International Need to Know, giving Buffy-like kicks to global ignorance wherever we find it.

Without further ado, here’s what you need to know.

A new paper on global talent flows reveals some interesting trends and data, some of which upends our commonly held assumptions. For example, the authors write, “Approximately 3 percent of the world’s population lives in a country different from that of their birth and, despite the impression sometimes presented in the media, this share has been roughly constant since 1960.” Okay, so maybe we should all calm down about immigration. The authors dig down deeper and examine where high skilled talent is moving to. Unsurprisingly, there has been a large increase in the flow of high skilled talent into highly industrialized, high tech economies. In fact, since 1990, there has been a 130 percent increase of highly skilled migrants into OECD (Organization for Economic Cooperation and Development) countries. The growth rate for low skilled migrants was only 40 percent. But, perhaps most startling and consequential for our world is that four countries–the United States, the United Kingdom, Canada and Australia—”constitute the destination for nearly 70 percent of high-skilled migrants (to the OECD) in 2010.” Like a high school dance, all the smart people are gathering together in a corner of the gym forming cliques. Global movement is important for the world–we’ll have more next week on how our world moves, or as may be the case, doesn’t.

China Investment

People are mobile and so is capital. Last week we talked about where Chinese are moving to, this week we follow the money. For the first time, according to Bloomberg, “Chinese companies are buying up overseas assets at a faster pace than U.S. buyers.” As China’s appetite for overseas investment continues to grow, its taste in investments has changed. A few years ago, many of China’s investments were in the energy sector but today China is gobbling up technology, consumer and brand companies. As you see in the chart below, new economy deals are far outstripping old economy. According to Bloomberg, there is also a shift from state-owned companies buying assets to private entrepreneurs buying brand companies and “marquee assets like Italian football teams, American film studios and French fashion houses.” (a merger of a football team, film studio and French fashion house could lead to the most beautiful sports movie of all time). Of course, sometimes it is difficult to distinguish between private and public companies in China. Nonetheless, we are curious to see how these investments pan out and whether there is a difference in the ROI for state-owned investments and the apparently private investments. 

 

Where the World Drinks

Over a decade ago I was spending some time in Russia for work, particularly the Russian Far East. One Sunday morning I bundled myself up (it was winter and much colder than my home climate) and went for a walk. I came across a number of men–not vagrants or homeless or anything, just your average guys–casually drinking vodka. On a Sunday morning. No Johnny Cash Sunday Morning Coming Down song to validate the action. So I am not surprised by the map below from Weird History showing Russia consuming more alcohol than other parts of the world. In fact, if I was making bar bets, I believe I would have gotten most of these drinking statistics correct, which says something about both me and the drinking habits of our globe.

  

*All bow down to the great Espenson Pringle Sculpture:

Lazy Men, Where Chinese are Moving to and Energy Complications

The Interurban bike trail is located near the worldwide INTN Headquarters and the other evening while riding on it, we saw a man with a chain saw leap from one roof to another leading us to hope that “chain saw man” replaces the scary clown meme. As we continued our ride, we started to count the number of jobs that would no longer be around in five, ten, twenty years. We saw a UPS driver, taxi cab and soccer coach among many others. While counting we came to a stoplight and gazed into the upper reaches of Shoreline City Hall where we saw two lonely flip charts in a window awaiting planning of our future. We took a photo hoping to catch this symbolic moment of our uncertain times, but alas our photography skills were not up to the task. Fortunately, however, we are up to lamenting the lost generation of men, hunting down where the Chinese are moving to and contemplating the complications of energy. It’s this week’s International Need to Know, scratching “x’s” on our walls ’til election day while sneaking out important international information to the world.

Men, We Have a Problem

It is somewhat fairly well known that men’s participation in the U.S. labor force has been declining. There has even been speculation that video games and the Internet have made it easier and more fun for men to be unemployed than making a wage. Perhaps less well known is that the phenomenon of fewer men working is a problem throughout the developed world. The Federal Reserve Bank of St. Louis recently compared labor rate participation rates in seven industrialized countries with the United States going back to 1970. They found that “the labor force participation rates for prime working-age men have been falling in all of the countries.” Interestingly, in recent years Sweden, which also saw its male labor participation rates fall since 1970, has seen an increase. Why? We don’t know. But the general trend for three decades has been for men to work less. Coupled with the fact that men are less likely to go to college than women, the data on we men is not good. This phenomenon may help explain a variety of political and economic distress signals around the world. What to do about it, other than shipping our men off to Sweden (we suspect lutefisk and the opening of an ABBA Museum plays a role), we are uncertain.

Where Chinese are Moving to

I am fortunate to work with a number of Chinese investors in my business. Increasingly they not only want to invest here in the United States but also to move here. When I talk with colleagues who are also working with China, they are experiencing the same thing. Two years ago, Barclays did a survey that found that “47 percent of Chinese millionaires plan to emigrate.” I have not found an update to that study but I have no anecdotal evidence to point to an abatement of this desire. So where are Chinese moving to? The Migrant Policy Institute (they move their headquarters every year to a different country) tells us that the United States is the largest destination for Chinese migrants with just over 2 million Chinese.* South Korea is second with 751,000, followed by Canada, Japan, Singapore and Australia. What does wealthy Chinese wanting to move elsewhere say about China’s economy and political system? What does it mean for the future of China? We know one thing: for the recipient countries, history says they will benefit tremendously–just don’t tell the anti-immigration forces.

*We are excluding Hong Kong from this analysis

Energizing the World

We have detailed the ongoing solar revolution in this space, both in terms of the exponential growth in generation and new breakthroughs in storage. But we’ve often couched these breakthroughs in terms of transportation. Of course, the world uses energy for more than getting from point A to point B while making a nice stopover in Point C’s beaches and resorts. No, we use energy for all types of things, including industry, buildings and agriculture. This leads to more emissions into the atmosphere. Below you’ll see a breakdown of these emissions since 1970. Our use of energy has increased tremendously across all these sectors, including in transportation since the era of the wide necktie. The next chart shows that high income countries emissions have actually declined. And just for kicks, the last chart shows China’s outsized use of cement in the world, which is a very energy intensive industry. Evolving the world’s use of energy and emissions will be complicated, but doable, and we continue to maintain will come sooner than people think.

 

 

   

Europeans and Diversity, Fewer Japanese & More Robots, and What the World Reads

Last Friday we saw the great Dr. John perform in Tacoma. Tacoma is not far from Seattle as the seagull flies, but with horrible traffic it was a multi-hour drive and it was also a long ways from Seattle culturally. Seattle, like many cities nowadays, prides itself on its sophistication and worldliness. And yet at Peterson’s Brothers in the Hilltop neighborhood where we ate before the concert, we experienced more diversity than in any Seattle joint we’ve been to. We saw more racial and ethnic diversity, age diversity, socio-economic and many other types of diversity all wrapped around a good meal and a beer. Tacoma felt more worldly and sophisticated than the wonder bars of it’s northern uppity cousin. Such a Night. But even as we boogied with the Good Doctor and enjoyed the vibes of Tacoma, we also examined Europeans’ views on diversity, robotic farms in Japan and what are the most popular books in the world. It’s this week’s International Need to Know, providing you what you need to understand around the world sans any locker room talk.

Without further ado, here’s what you need to know.

Europeans and Diversity

Immigrants are a hot button issue in many places nowadays, including and especially in Europe, which currently has more than its fair share of overly warm knobs. A new Pew Research Center Survey shows that at least in some European countries, non-coincidentally those much affected by the refugee crisis, diversity is not smiled upon. Greece has the least favorable view of diversity with 61% saying it makes a country “a worse place to live.” Italy is not so high on the idea either with 53% unfavorable to diversity. Sweden has the most favorable view of the concept with 36% saying diversity “makes for a better place to live.” Interestingly, the U.S. has far more favorable views of diversity than any of these European countries with 56% of the country stating it “makes for a better place to live.” With a host of upcoming elections in Europe, rhetoric and campaigns will undoubtedly reflect the moods found in these polls.

Fewer Japanese, More Robots

As we’ve noted, there are fewer Japanese today than there were yesterday and there will be fewer yet tomorrow. Japan’s aging population and low fertility rate is emptying the country with the population decreasing by one million people since 2015. With fewer workers, Japan is addressing the situation by turning to robots so we read with interest this Guardian article about a Japanese firm opening the first robot run farm. The Japanese agricultural company, Spread, says that in mid-2017 it will open an indoor farm in which industrial robots will carry out all tasks except for the planting of seeds, Galatians might be surprised that robots will reap what we sow. The company says within five years they will boost production to half a million lettuces. That’s a lot of salad, both for Japanese consumers and for the company. Currently the company supplies 2,100 supermarkets in Japan. The number of farmers in Japan has declined from 2.2 million a decade ago to 1.7 million today. With a smaller population and more people living in the city, you can bet that number will decrease more over the next ten years and the number of robots in Japan will increase. When keeping an eye out for the rise of robots, look to Japan. Its demographics and culture may make it the first of our Asimovian worlds.

What the World Reads

We here at International Need to Know like to read. At any given time we are usually reading at least one novel and one nonfiction book (currently The Singapore Wink by Ross Thomas and The Future of Violence by Benjamin Wittes, plus the new Bruce Springsteen memoir). The other night with Kindle in hand, we wondered what are the bestselling books in the world and what do those books’ popularity say about the world. Wonder no longer, courtesy of the U.K.’s lovereading.com website, here’s the list. We were surprised by a number of the books on the list, including Don Quixote. We have some disagreement about a few of the others’ popularity but that would be tilting at windmills. Draw your own conclusions on the meaning of these books popularity and what it says about our literate world.

  

Rise of the Global Middle Class, Creative Destruction and Immigrants to the Rescue

In the space of less than 24 hours, we talked with both billionaire Paul Allen and rock icon Bruce Springsteen. We thanked them both for their contributions to our life and to society. A day or so later we talked with a middle-aged woman named Yvonne who has settled in on a corner two blocks from the worldwide INTN headquarters. Her new lodgings are modest with only a large umbrella and some plastic bags to protect her from the elements. We expressed our concern for her and asked if there was anything we could do to help. In perfect Queen’s English and diction out of a PBS Masterpiece Theater show (which threw us for a loop and upended our stereotypes), she informed us her house is up the street but she had settled here because of the people who were encamped at her house waiting to travel to their “destination.” We did not know what to do with this information nor how to help this unfortunate soul. Her problems and challenges are well beyond our expertise and experience. If you have ideas of how we can help, we welcome them. Perhaps she will not end up like Paul Allen and Bruce Springsteen but we would dearly like to get her to somewhere better than her current physical and psychological setting. But billionaires, rock stars and Yvonne did not keep us from applauding the rise of the global middle class, worrying about the lack of new companies and nodding at the role immigrants play in entrepreneurship. It’s this week’s International Need to Know, taking us on an international journey to enlightened destinations.

Without further ado, here’s what you need to know.

Rise of the Global Middle Class

Even during the height of the global financial crisis, we traveled lots internationally for work. We were struck that planes were full and there were no tables available at the restaurants in the cities we traveled to. Lots of people were and are hurting but large numbers have entered the middle class in recent years and you see them in museums, tourist sites and elsewhere around the world. It is a sign of global progress, even if it has made touring and traveling more challenging. Allianz’s latest Global Wealth Report tells us that “…in recent years, more and more people, almost 600 million in total, have achieved promotion to the middle wealth class.” Of the 50 countries Allianz monitors in North America, Europe, Asia and Latin America, the middle wealth class share of the overall population climbed from 10% to about 20%. Further, “the proportion of global assets held by this wealth class has also grown significantly, rising to 18% at the end of 2015, almost three times the amount seen at the start of the millennium. So the global middle class has not only been getting bigger in terms of the number of people who belong to it, it has also been getting increasingly richer.”  As you can see in Allianz’s bubble chart below, Asia (not including Japan) has been the fastest growing region and responsible for much of the increase in the global middle class. In fact, it is rapidly catching up to Europe in terms of financial assets. One possible reason for dissatisfaction among the masses in Europe and America is that even though things are slowly getting better, in comparison to other regions of the world, we feel we are falling behind. It’s an Einsteinian economic relativity problem. We talked of fear last week. Be forewarned!  We will dive further into this data in the future with that powerful, incentivizing, sometimes damaging emotion on our mind.

Creative Destruction?

We all fetishize the entrepreneur and the creation of new businesses. And yet, the West has sucked (to use a high falutin economic term) at enterprise creation since the Great Recession. New business creation since 2007 in both the United States and Europe has been like a Japanese child birth ward–not nearly enough babies to fill the place. In fact, the U.S., allegedly the home of the brave and the land of the free, has been particularly bad at new business creation. But, the OECD’s Entrepreneurship at a Glance report gives some measure of hope. So far 2016 is seeing an increase in enterprise creation across a number of OECD countries. This is happening especially in Europe: “The report shows that post-crisis growth in Europe has been more dependent on small and medium-sized enterprises (SMEs) as drivers of economic growth than in the United States.” There is, however, a long ways to go to get to where we were pre-financial crisis. As the OECD notes, “Trend start-ups remain below pre-crisis rates in most OECD economies, although in Canada, France, the Netherlands, Norway, Sweden and the United Kingdom rates were higher at the end of 2015 and beginning of 2016 than before the crisis.” One of the big policy debates we should be having is how policy increasingly places small companies at a disadvantage to big business. I have a feeling, however, through November we will talk of other things instead.

Immigrants to the Rescue

When I was in Silicon Valley a few years ago, the local boosters noted that 50% of the CEOs in the valley were foreign born. It’s both a startling and unsurprising number at the same time. More than any other attribute, the relative success in absorbing immigrants distinguishes the U.S. from the rest of the world. The Harvard Business Review (HBR) provides more data on the importance of immigrants to entrepreneurship and new business creation. According to HBR, “Immigrants constitute 15% of the general U.S. workforce, but they account for around a quarter of U.S. entrepreneurs.” The research also points out that immigrants account for about 25% of U.S. inventors. In fact, nearly 40% of new firms have at least one immigrant as one of its founders. Immigrants are one salve for the lack of new business creation in recent years we discuss above. Changes in policy are needed to make up the rest.