(The following is extracted from an article that appeared under the same title at http://blogs.forbes.com/victorhwang/ on 7/11/12)
Scientific research supports this view of diversity as a strength. When we examine economic ecosystems, we find that growth can thrive with greater diversity. A few years ago, researchers Lu Hong and Scott Page of the University of Michigan published a study in the National Academy of Sciences that shows how teams of diverse people are more effective than teams of high-ability experts at solving problems. Now, imagine what happens when that phenomenon is applied not just in academic studies, but across entire cities, regions, and national economies in the real world. Greater, diverse networks can solve greater, complex problems.
So, does diversity—or perhaps, to be more specific, the leveraging of our diversity—provide a new roadmap for the American economy? Does it show us how to create new, innovative companies? I recently had a conversation about these questions with two icons of innovation—entrepreneur Brad Feld and academic Vivek Wadhwa. They both recently published important books. Brad’s Startup Communities describes how Boulder, Colorado built a vibrant entrepreneurial ecosystem and the critical lessons learned from that experience. Vivek’s Immigrant Exodusargues that America’s immigration policies are hurting our economic competitiveness because they discourage the skilled immigrants who are most critical for building innovative companies.
Victor: One strong theme runs through both of your books, which is that diversity, openness, and inclusiveness are part of a healthy innovation system. But at the same time, we know that high levels of diversity also create lots of social tension. So, if diversity is so good, then why is it so hard?
Brad: This dynamic isn’t new—it dates back to the beginning of civilization and permeates all of society. The extreme case is the endless efforts of humans to kill other humans that don’t share their same belief systems, have something another group wants, or are simply different. We see this throughout history, all the way back to the beginning of known civilization, as well as forward as far as we can think into science fiction. Why do we think the machines will rise up and try to eradicate all of human society, rather than co-exist peacefully with us?
Victor: So, given all the challenges of diversity, why is diversity a strength in the innovation process?
Brad: Much of our society has been functioning in a hierarchical model for a very long period of time—I give you government, military, and religion as examples of hierarchies. Hierarchies stifle diversity. To advance up a hierarchy, you need to conform to the norms of the hierarchy. Your value in the hierarchy is directly linked to your ability to accomplish the task that has been delegated to you.
In contrast, startups and startup communities operate in a network. This is orthogonal to a hierarchy. Networks are messy, self-evolving, ever changing structures that tend to evolve very rapidly. Nodes on the network are amplified not by conformity, but by what they contribute to other members of the network and the connections between the particular node and other nodes. Bad or ineffective nodes (e.g. people) get ignored and quickly dropped from the network; nodes that contribute attract more connections, which amplify their importance and subsequent contribution. But it’s a chaotic mess that changes constantly—both the structure as well as the impact—and the measurement of what is important changes based on a variety of factors, which are also changing all the time.
Victor: Given that hierarchy and rules get in the way of entrepreneurs, how can governments develop the appropriate formula for letting in the “right” people into a place like the U.S.?
Vivek: Victor, governments should let businesses decide who they want to hire and what they want to build. If Silicon Valley companies say they need foreign talent, why should government get in the way? The big battle that is being fought on the immigration front is by senators and congressmen from States that don’t have major tech centers and that don’t need as much foreign talent. They routinely vote against legislation that is geared to fulfilling the needs of Silicon Valley, New York, Boston, etc. They are not qualified to make these judgments just as the federal government isn’t. We need to let the free markets do their magic.
Victor: American culture is highly polarized today. Half of America seems to say, “Sure, open the barriers for talented people because that grows the economy for all.” The other half of America seems to say, “Opening the barriers more is harming the people who are already here, because that lowers wages, spreads public resources too thin, and creates social tension.” What do we do about that polarization? If half of America just wrong?
Vivek: That half of America—if is really that large (I suspect it is closer to 10%) would agree if they had more information. Few would argue that we need more job-creating entrepreneurs—who employ Americans, more scientists researching cures to disease and innovations that will improve their lives, or more teachers that teach in disadvantaged areas.
Brad: Vivek’s book is especially important because it points out a set of macro dynamics, imposed by a hierarchy, that are profoundly impacting a network. Our government has decided, for whatever reason, to make it harder for immigrants to come to the U.S. and be citizens. This slows down, in some cases dramatically, the entry of new immigrants into the entrepreneurial network in the U.S. We are watching this play out, as thenumber of entrepreneurial companies started by immigrants has stalled.
The punch line is that networks don’t need hierarchies, but they are impacted by hierarchies, the decisions the hierarchies make (e.g. rules, laws), and the behavior of hierarchies on society (e.g. immigration policy, tax policy, wars).
Victor: Many people think of Silicon Valley as a place that thrives because its culture is horizontal—that is, it shuns hierarchies. What are the lessons of Silicon Valley for the world, when it comes to diversity?
Vivek: All I can say is that Silicon Valley is the model for the world. It is undoubtedly the most innovative region in the world. And more than half of its tech workers are foreign born. It is not a perfect meritocracy—women and some minority groups don’t start companies at the rates they should. But the Valley demonstrates one thing: innovation thrives in diversity.
Victor W. Hwang is a venture capitalist, entrepreneur, and co-author ofThe Rainforest: The Secret to Building the Next Silicon Valley. Follow me on Twitter and Facebook.