Date: Tue, 11 Jul 2006 23:44:24 -0700 From: Norm Matloff To: Norm Matloff Subject: new Vivek Wadhwa column To: H-1B/L-1/offshoring e-newsletter Vivek Wadhwa is easily the most out-of-the-box thinker among CEOs and ex-CEOs in this business. Some readers will reply, "That's not saying much," and I would agree with them. I find that most of them are either so full of themselves or so socially inbred (i.e. they only talk to people in their own little circle, all CEOs and the like) that they are incapable of seeing what's good even for their own industry, let alone what's good for the nation. (See my Forbes Magazine article, at http://heather.cs.ucdavis.edu/Archive/Forbes.txt) Yet Wadhwa is definitely different. I originally dismissed him as just another simplistic-thinking employer of H-1Bs, but I was wrong. I don't know whether he and I will ever agree on the H-1B issue, but he is certainly someone who is committed to taking a fresh look at an issue, especially an issue in which he has had some financial interest, unencumbered by conventional wisdom. That is all too rare today. I agree with a number of points he makes in the enclosed column, though I disagree on a few too. I will focus on the latter here. # And as a professor researching engineering and globalization, I am baffled # by how the U.S. seems to be doing the opposite. Instead of honing our own # strengths, we're focused on the strengths of our new global competitors. The He makes an interesting point out of this, but I would take the argument in a different direction entirely, as follows: For years, the U.S. said, correctly, that its strength was in creativity, that we did not suffer from the problem that, in the words of the Japanese proverb, "The nail that sticks out gets hammered down." We didn't have a rote memory-oriented educational system. Yet in fact our educational system has been pushed more and more into a rote-memory, teach-to-the-test orientation. And no, I'm not blaming George Bush's "no child left behind" philosophy of this; the trend has been on for a good 20 years now. Keep this in mind as you hear more and more rhetoric from the pro-offshoring crowd that we can thrive by sticking to innovation. Aside from the fact that it's a fallacious argument to begin with (see http://heather.cs.ucdavis.edu/Archive/InnovationNotTheAnswer.txt), the fact is that our push for "educational excellence" is producing just the opposite effect. Ironically, Wadhwa himself cites innovation as our salvation. Again, I suggest reading my above-cited posting on this, but interestingly Wadhwa's own example shows just how few "sticking out nails" we are producing these days. He reports that his study showed that the widely-held notion that China and India are wildly outproducing the U.S. in engineers is based on faulty data and bad assumptions. Good for him for conducting this study (which confirmed and quantified what people like me had been saying), but the more interesting question here is, how did such misinformation become so widely accepted? One answer is that those with vested interests (CEOs who want to detract attention from their offshoring activities, engineering deans about to see their empires wither, politicians looking for an issue and looking for campaign contributions from the industry) have been engaging in a PR campaign to advance their interests. But the deeper answer is that younger journalists are products of that same rote memory-based climate which our educational system has devolved to. They don't question. They collect the requisite number of quotes, then write their formulaic article. They're putty in the lobbyists' hands. And it is the same lack of critical thought, plus the huge effect of campaign contributions from the industry, that leads to the situation that Wadhwa now laments: # Still, the House Democrats' Innovation Agenda from Nov. 15, 2005, called # for graduating 100,000 more engineers and scientists. In his Feb. 2, # 2006, State of the Union address, President Bush called for hiring # 100,000 additional teachers for math and science. Intel's ( Craig # Barrett and Microsoft's Bill Gates routinely lament the shortage of # engineers and scientists and say their companies have problems hiring # domestically and therefore we need drastic measures. Wadhwa should ask himself just how it is that such a situation has developed. # KEY FACTS. Commenting on our study, Friedman writes he would bet many of the # engineering degrees being granted by U.S. universities are going not to U.S. # citizens, but to foreign students, who will return to their home countries. # And he adds a caveat: Within the next 20 years, the average quality of # undergraduate engineering degrees in China and India will start to mirror # the U.S. quality. Sorry to be so catty, but the mere fact that Friedman, who makes uber-arrogant pontifications on technology and trade in spite of having utterly no background or qualifications to speak on them, is itself an indictment of today's press. And by the way, many journalists who subscribe to this e-newsletter agree with me on this point on the press. It's amazing that Wadhwa would feel that one of the first people he must bring the news to is Friedman. This is just weird. As to Friedman's statements above: 1. As Wadhwa points out, the vast majority of U.S. engineering degrees are NOT going to foreign students. This isn't news. For instance, it's been in the CRA newsletter ever since the mid-90s, probably much earlier. Friedman got his idea straight from the industry lobbyists' propaganda sheets, and in fact the industry has admitted that they use Friedman to propagate the views they want the American public to have. (See http://heather.cs.ucdavis.edu/Archive/TomFriedmanSV.txt) 2. Both Friedman and Wadhwa are wrong about the issue of whether the foreign students will return to their home countries. The real point is that they will stop coming here in such large numbers in the first place. As Wadhwa knows, for the vast majority of foreign students in engineering, their motivation to come to the U.S. for study has NOT been to partake of a superior university system, but rather to immigrate to the U.S. and enjoy its higher standard of living. Nothing wrong with that, but it IS important to understand, especially because that is rapidly changing. Foreign students astutely discern that engineering is no longer a path to a lucrative career in the U.S., due to H-1B, offshoring and age discrimination (all interrelated), while meanwhile economic opportunities for engineers in their home countries are booming. Why come to the U.S. in the first place? See for example http://heather.cs.ucdavis.edu/Archive/ForeignGradStudents.txt and http://heather.cs.ucdavis.edu/Archive/IntnlHigherEd.txt 3. As I stated above, for most foreign students in engineering, the quality of U.S. universities was NOT the draw. Thus Friedman's basic premise is incorrect when he talks about Chinese and Indian universities coming up to the quality of the U.S. But it is also incorrect in that, at least in the computer area, the quality in the top schools in those countries has always been comparable to the U.S. Their universities are not as active as the U.S. in research, and they do suffer from the rote-memory syndrome (China quite sharply, India to a substantial degree), but in terms of curriculum, laboratories and so on, they've always been good. Wadhwa makes much of the research issue. I love doing research, and consider it one of the attractions of being a university professor, but I think it's importance in terms of contributions to industry is greatly exaggerated. For this reason, his point about relatively few American students pursuing graduate degrees in engineering is off track. Yes, it's certainly true that it's an economic issue, as he says, but he considers it a problem that should be remedied, as he feels we "need" all that research. We don't. # 5. We've got enough qualified computer programmers. The Wall Street Journal # reported that Microsoft received resumes from about 100,000 graduating # students in 2004, screened 15,000 of them, interviewed 3,500, and hired # 1,000. It said that Microsoft receives about 60,000 resumes a month for its # 2,000 open positions. Yes, and it's not just Microsoft or the other big firms. And it's not just now. Firms have never lacked for applicants (and never lacked for qualified applicants). The only thing they've lacked is enough CHEAP applicants. I've got lots of data like that above in my university law journal article, http://heather.cs.ucdavis.edu/MichJLawReform.pdf Again, I agree with most of Wadhwa's points here. The fact that I've harped on the points of disagreement should not obscure the fact that I think he's written an excellent column. Norm http://businessweek.com/smallbiz/content/jul2006/sb20060710_949835.htm JULY 10, 2006 Viewpoint By Vivek Wadhwa Engineering Gap? Fact and Fiction It's no time to panic about the numbers of engineers India and China are graduating compared with the U.S. Here's the real story in this big debate As a former tech CEO, I learned to sleep with one eye open. Competition is always looming and it doesn't take much to lose your edge. So I found you need to focus on your strengths and force the competition to battle on your own turf. And as a professor researching engineering and globalization, I am baffled by how the U.S. seems to be doing the opposite. Instead of honing our own strengths, we're focused on the strengths of our new global competitors. The reality is India and China will always have an advantage in their numbers. But we have the freest markets, the most highly trained workforce, the resources and ability to innovate, and the best universities in the world. In a previous column, I wrote about a study that my students completed at Duke University (see BusinessWeek.com, 12/13/05, http://businessweek.com/smallbiz/content/dec2005/sb20051212_623922.htm "About That Engineering Gap"). This study showed that the some of the most cited statistics in the outsourcing debate are inaccurate. BIG REVERBERATIONS. A common argument is that we graduate just 70,000 engineers a year vs. 350,000 in India and 600,000 in China, therefore we're in trouble. We reported that the U.S. is actually graduating more engineers than India, and the China numbers aren't quite what they seem. In short, we showed that the U.S. is in much better shape than most people think. I was surprised by the attention our study received. In addition to extensive media coverage, it caused the National Academies to issue a small revision to a report they recently published on U.S. competitiveness. The New York Times columnist and author Thomas Friedman added a page to the 2006 update of his book The World Is Flat, discussing our report. I was asked to submit written testimony (http://www.cggc.duke.edu/pdfs/051606_Testimony_of_Vivek_Wadhwa.pdf) to the U.S. House of Representatives Committee on Education and the Workforce. Still, the House Democrats' Innovation Agenda from Nov. 15, 2005, called for graduating 100,000 more engineers and scientists. In his Feb. 2, 2006, State of the Union address, President Bush called for hiring 100,000 additional teachers for math and science. Intel's ( Craig Barrett and Microsoft's Bill Gates routinely lament the shortage of engineers and scientists and say their companies have problems hiring domestically and therefore we need drastic measures. KEY FACTS. Commenting on our study, Friedman writes he would bet many of the engineering degrees being granted by U.S. universities are going not to U.S. citizens, but to foreign students, who will return to their home countries. And he adds a caveat: Within the next 20 years, the average quality of undergraduate engineering degrees in China and India will start to mirror the U.S. quality. There are many opinions about what is happening in the engineering field, but here are some of the facts that routinely get lost in the debate: 1. Shortages usually lead to price increases. If there were a shortage of engineers, salaries should have risen. Yet in real terms, engineering salaries have actually dropped (see BusinessWeek.com, 9/15/05, http://businessweek.com/the_thread/economicsunbound/archives/2005/09/good_t ime_to_le.html "Good Time to Learn Accounting"). 2. Twenty-five to 40% of engineering graduates don't become engineers. At Duke, I noted that 40% of our Masters of Engineering Management (http://memp.pratt.duke.edu) students were accepting jobs in fields such as investment banking and management consulting. Our researchers called other engineering schools and found this was common. Don Giddens, dean of engineering at the Georgia Institute of Technology, says that this is by design--schools provide a broad education that prepares students for careers other than "strictly" engineering. 3. Quantity usually comes at the cost of quality. China has increased the number of engineers it graduates by a staggering 126% over the last five years with a factory-like approach to education. Degree quality can't be maintained unless academic staff and facilities grow with student populations. According to the Chinese Ministry of Education, from 1999 to 2004 the number of technical schools in China actually fell from 4,098 to 2,884. During that same period, the number of teachers and staff at these institutions fell 24%. 4. Graduate too many and you'll create unemployment. China's National Development and Reform Commission recently reported that job openings in China have dropped 22% over the last year and that 60% of China's upcoming university graduates will be unable to find work. Media reports say that in an effort to "fight" unemployment, some universities in China's Anhui Province are refusing to grant diplomas until potential graduates show proof of employment. And Premier Wen Jiabao announced that China would be cutting university enrollment levels. 5. We've got enough qualified computer programmers. The Wall Street Journal reported that Microsoft received resumes from about 100,000 graduating students in 2004, screened 15,000 of them, interviewed 3,500, and hired 1,000. It said that Microsoft receives about 60,000 resumes a month for its 2,000 open positions. 6. The vast majority of engineering undergraduates aren't foreign nationals. According to the American Society of Engineering Education (ASEE), the percentage of undergraduate engineering degrees awarded to students with U.S. citizenship or permanent residency has remained close to 92% for the past seven years. 7. U.S. students don't gain enough financial benefit from postgraduate engineering education. The proportion of domestic to foreign students completing graduate degrees in engineering dropped from 60.3% in 1999 to 57.4% in 2005, and doctoral degrees from 54.4% to 40.4% in the same period, according to the ASEE. In a National Bureau of Economic Research working paper (http://www.nber.org/papers/w11457), Harvard economist Richard Freeman says this is because salaries for scientists and engineers are lower than for other professions, and the investment that students have to make in higher degrees isn't cost-justified. Doctoral graduate students typically spend seven to eight years earning a PhD, during which time they are paid stipends. These stipends are usually less than what a bachelor's degree-holder makes. Some students never make up for this financial loss. Foreign students typically have fewer opportunities and see a U.S. education as their ticket to the U.S. job market and citizenship. 8. The majority of foreign engineering students come here to stay. A report prepared for the National Science Foundation (http://orise.orau.gov/sep/files/stayrate05.pdf) showed that the number of foreign-born doctorates who chose to stay in the U.S increased from 49% to 71% from 1989 to 2003. While these numbers are likely to decline, I'd bet Friedman that they don't decline to 1989 levels. This is not to say that engineers aren't important or that we shouldn't graduate more of them--today, a sound knowledge of technology and engineering is essential in almost any area. Richard Benson, dean of engineering at Virginia Tech, points out that engineering graduates find their way into professions such as law, medicine, and business. MAINTAIN THE LEAD. He says we would do better as a nation to have more engineers working on the critical problems of the day: energy, environment, security, communications, and health. Yet he emphasizes the importance of making distinctions across the different engineering disciplines: We could simultaneously have too many computer engineers and not enough civil engineers. We must maintain our lead in research and encourage our best minds to gravitate towards engineering and science. But instead of requiring our scientists to make economic sacrifices, perhaps we should pay them salaries equal to those of doctors and lawyers. If researcher salaries were at market levels, we wouldn't be dependent on foreigners to fill our graduate programs. And if we paid scientists as well as we pay investment bankers, we would see students tripping over each other to study math and science. DON'T RELAX. We could also be doing a lot more to encourage U.S. companies to expand U.S.-based research, to provide ongoing education and training for their employees, and to work more closely with universities in commercializing research. Bottom line: Let's be really worried about looming competition, but let's focus on the right things--and make more effective of use of our strengths. Because after all, Friedman is right, in the future India and China may catch up to where we are today. _____ Vivek Wadhwa vivek@wadhwa.com the founder of two software companies, is an Executive-in-Residence/Adjunct Professor at Duke University. He is also the co-founder of TiE Carolinas, a networking and mentoring group.