Thank you for writing this.
As an international student whose country represents 1% of the total class, let me tell you this: I am having a great international experience – I am living abroad in a new country, and 99% of my class is international to MY eyes. This couldn’t change even if the non-U.S. student population became lower as a percentage of the total, as long as I still have the same probability of entering the program. And just like Swan said, the restrictions for working in the U.S. after just mean I will probably have to go somewhere else, which may still be good for HBS’s global footprint in the long term. In addition, the most demanded post-MBA jobs are still very open to visa sponsorship.
The big losers from this are the U.S. students themselves, but only in terms of their MBA experience (we’ll see the long term in a second). Decreasing the international composition of the class will only impact their own exposure to global cultures. Moving everyone to a campus in, say, France or Singapore for a whole semester will not help at all. It would be an immense expenditure which could work as a marketing point to boost applications, but not much more. It could even be detrimental, as I feel that at Aldrich is where the real magic of having almost 1000 people sitting in U-shaped rooms and discussing the same topics takes place. I do agree on the point that more cases should be international, and also that recruitment should be more international as well.
But if we think of HBS as part of a supply chain for human capital, I think it simply means that the ‘product’ (us) cannot be placed in a market as easily as before. Immigration and job market restrictions, in essence, are just like trade restrictions. If we think macro-wise and aggregate all grad students of all universities, this means higher costs of factors for production in U.S. firms (management and executives salaries) and probably a redistribution of wealth from the poorly educated to the highly educated in society (think for instance how competitively priced legal professional services would be for blue-collar workers if there was a near-infinite supply of lawyers and bar exams did not operate partly as a barrier for entry). It’s an interesting source of wage security for incumbent U.S. residents with an MBA. And long-term, the State is simply offering protectionism for the best educated in society. Therefore, U.S. MBA students will reap benefits from this policy in terms of income. It is unclear whether the decrease in competitiveness from the lack of international exposure will have an offsetting effect on the future income prospects of these students.
I think that in order to answer question 1, we would have to do a detailed analysis which we are not qualified for. But in general terms, the current situation is not at all acceptable. Companies have been safeguarding profits through tax and financial loopholes, which make the system more complicated than it should be and result in distortions in the firms’ decision-making process. Trying to bring some order to this is not, in itself, a bad thing. I think Andrew’s assessment of the impact assumes that the average effective tax rate will go up as a consequence of this reform, which is something we do not really know. My guess is that, if this plan had the backing of all or most of the Republican party, then the essential backers of the party (who are they, again?) themselves are happy with it. One very likely consequence of this plan is that, regardless of what the average effective tax rate will end up being, the U.S. government will take a bigger share of it, and that is good enough for most parties involved. Also, that additional tax revenue can go back to corporations in the form of subsidies.
I sometimes wonder about question 2 as well. Seems like the tax issue will be solved once we have a very strong global enforcement of tax standards and rates. Also, if we look at history, despite the very-short-term apparent steps back, we see trade globalization becoming more and more relevant. Just from that perspective, a global government sounds like a good idea. However, I do not think citizens of developed economies are willing to let citizens from other parts of the world (which greatly outnumber them) set the universal economic policies. Which is why we do not see citizens from rich democratic countries advocating and acting for stronger democracies in emerging countries. At least for the next couple of decades, it looks like national interests are rock solid. And with them, the States that put them in practice.
Just by looking at some quick Wikipedia data, for 2015-16 we have $26 bn revenues for 8.1 bn passengers, which works out to about $3.2 usd per passenger. This sounds rather expensive for a country with a gdp per capita of around $1850 usd/yr. Deutsche Bahn carried 2 bn passengers with 300k employees in 2013 (they probably became more efficient since then). Would you say the high number of employees (1.3 Mn) is a roadblock for the Indian Railways’s profitability? If costs went down, then so could ticket prices (since this is a public service) and more people could ride.
Coming back to the question, I think digitization would be a great tool for overhead simplification and not just customer service. The gains from these efficiencies could be returned to the passengers through lower prices or higher investment in the network. Of course, this reorganization would require immense amounts of political effort (which may be better spent elsewhere) and training for employees to utilize these technologies.
I like this essay because it reminded me of a question I had a few weeks ago. Would the developed world’s attitudes (procastination, mostly) towards global warming be different if most of it were located near the equator? Are we suffering from the fact that the most influential people in this world live in areas with 10-degree winters and, therefore, may not subjectively see global warming as such an emergency? While Greenland has this opportunity, the percentage of global population living within the tropics is expected to increase from 40% now to 50% in late 2030s. Will global citizenry preferences change significantly at that point? (specifically regarding this apparent tradeoff between economic prosperity and the environment). This also applies to CEO decision making (let’s remember the example of the consultant sitting in the top floor of corporate HQ, making decisions around a plant hundreds of miles away which he has never seen).
The immigration question is also quite interesting. Greenland simply does not have the human resources to undergo the expansion they call for. The decisions about citizenship around this point will definitely have an impact on the kind of nation they may become in 50-100 years, provided they are able to gain independence as some of them want.
What happens when an unstoppable force meets an immovable object? For years, we used to regard everything related to technology (and especially the internet) as an unstoppable force for progress. At moments, we used to believe that there was nothing large tech companies could not achieve eventually. It is remarkable that we are now starting to question this, not on the inherent limitations of scientific and technological knowledge in a market economy, but on the regulatory and protectionist side. Why can’t these super-powerful companies successfully lobby for changes in regulation which would allow them to grow? What are the incentives countries like Russia, China, etc. face when they decide to put pressure on companies to host data locally? My advice for Microsoft would be to shift the discussion away from geopolitical aspects and reflect on the actual costs for doing business which will be passed to the customer as a consequence of redundancy and data localization. But the outlook is not good. States are waking up to the fact (with China leading) that having national control of key digital players will be a key advantage in the international conflicts to come.
Regarding the decommoditization, I honestly don’t see how it could happen. Is there such a thing as certified copper? How important is the mining company’s name and reputation at the moment of the sale of minerals in an open market?
Interesting read! I wonder how this also plays out given the situations seen in recent decades regarding the energy markets and trade between South American countries. For example, Argentina started out being a net exporter of energy to, among other countries, Chile. Over the years, macroeconomic instability and restrictive trade policy decisions put a heavy strain on this supply, and so Chile had to find other ways to get the energy they needed. To me, it sounds that internalizing energy production or, at least, ensuring it remains as local as possible, is a means of ensuring adequate supply and political control of this key ingredient of the industrial matrix. The push for renewables, then, may also bring more independence to countries.