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 / Winter 2006 / Issue 45(originally published by Booz & Company)


Best Business Books: The Future

Mr. Neuwirth documents how those at the “bottom of the pyramid” have devised a variety of sophisticated and unregulated systems that make urban life work. “These squatters mix more concrete than any developer. They lay more brick than any government. They have created a huge hidden economy — an unofficial system of squatter landlords and squatter tenants, squatter merchants and squatter consumers, squatter builders and squatter laborers, squatter brokers and squatter investors, squatter teachers and squatter schoolkids, squatter beggars and squatter millionaires. Squatters are the largest builders of housing in the world — and they are creating the cities of tomorrow.”

There’s even a kind of extralegal respect for law and order. You take your life in your hands when you walk around much of Rio de Janeiro’s flatlands, but you need not fear muggers in the city’s huge hillside favelas, the squatter cities where about a fifth of Rio’s residents live. There, local drug gangs maintain law and order, making sure that the only crimes that occur are theirs. The people Mr. Neuwirth describes are not presented as raw statistics. They are his neighbors, his landlords, his friends. Mr. Neuwirth stresses the need to see the squatters’ nobility and desperation through gimlet eyes: “Not one government in existence is successfully building for the poorest of the poor. So the poorest of the poor are building for themselves. That may not fit into any great ideological category, and it is certainly illegal according to current law. But it is sensible, patriotic, and worthy of a true citizen.”

At the other end of the economic spectrum, AnnaLee Saxenian, dean of the School of Information at the University of California at Berkeley, has been studying the ways foreign-born, U.S.-trained technology entrepreneurs have returned to their home countries in recent years to create companies, industries, and entire industrial regions. Just as the emergence of Fairchild and Intel was only the beginning for Silicon Valley, Professor Saxenian thinks the appearance of Indian companies like Infosys and Chinese companies like Lenovo is just the beginning of the development of interconnected regional techno-economic hotspots. As with much of the rest of the globalizing economy, the new competitors to Silicon Valley are also its economic partners and intellectual heirs.

Professor Saxenian has a deep understanding of what makes Silicon Valley and its counterparts around the world thrive. Regional Advantage (Harvard University Press), her 1994 investigation into why Silicon Valley and companies like Sun Microsystems succeeded while denizens of Boston’s Route 128, such as Digital Equipment Corporation (DEC), failed, has become a business school classic. The importance of the circulation of minds, ideas, and ventures in a relatively fluid, continually changing, open system was central to Silicon Valley’s success. In The New Argonauts, Professor Saxenian takes her earlier analysis global. Her research has revealed similar dynamics at work in the world of engineers who came to Palo Alto from Taipei, Mumbai, and Tel Aviv, earned their degrees and worked their first jobs in the semiconductor, PC, or Internet-based industries, and are now putting their experience to work back at home, as entrepreneurs and investors.

The social, intellectual, and economic ties between these “new argonauts,” their mentors and peers in the U.S., and their colleagues and protégés in their mother countries are networked into a system far more complex, with far more cooperation and even sharing (alongside the traditional cutthroat competitions), than in previous eras. If Professor Saxenian is right, then Silicon Valley–style economic development can be good news for large populations in the developing world who would like to move up to a relatively decent standard of living, quite possibly en route to a good life (if you believe that a growing positive balance of trade, the availability of capital for entrepreneurial enterprise, and an expanding middle class collectively offer a bridge over the gulf between the rich and the poor). The good fortune of the previously impoverished might also bring good news as well as bad for the U.S. technology industry. As long as American higher education and entrepreneurial opportunities continue to draw intellectual immigrants, tomorrow’s economic development in China or India might also enrich American companies doing business in those countries. If nothing else, Professor Saxenian’s conclusions ought to make policymakers think twice about restricting the immigration of knowledge workers or allowing America’s institutions of higher education to deteriorate.

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