Remote work will break the US monopoly on global talent
November 8th, 2021
Remote work is creating a new economic niche, and countries that put in the work to fill it will finally be able to compete with the US to attract talent. This is the once-in-a-generation opportunity for small, stable countries to grow, diversify, and up-skill their economy.
The United States has been the #1 target destination for immigrants for generations. It has a mythical reputation as the place where anyone can go from rags to riches. It's been much more stable than many regions, and the American standard of living is much higher than the world average. However, the US makes it difficult to enter the country, preventing prospective immigrants from accessing these opportunities.
Even so, it's been hard to compete with the US for talent. Countries' ability to compete for immigrants has historically followed a steep power law. In a 2016 Gallup poll, 3.5x more prospective migrants wanted to move to the US than to Germany, the second-most desirable location.
Remote work has changed this equation dramatically. Accelerated by the pandemic, it's more possible than ever to attract highly skilled, highly paid residents and bring their high incomes and valuable know-how into your community.
Small, stable countries in favorable timezones have a once-in-a-generation opportunity at their fingertips. Welcome these talented, energetic go-getters into your country, and you will rapidly stimulate your economy, up-skill the local population, and prepare your country for the future.
This proposition will be especially attractive to countries that are keen to:
- Diversify the economy: Countries with concentrated economies (often around tourism) need to diversify their economies for long-term sustainability and antifragility. Welcoming immigrants to do remote knowledge work is a rapid way way to expand beyond their traditional economic base. (examples: Aruba, Croatia)
How has remote work opened up new opportunities?
Remote work opens up new opportunities for what I call "immigration arbitrage". It's historically been difficult for most places to attract immigrants with lots of education and earning potential, because those immigrants generally sought cities like London or New York or San Francisco where they could plug into an economic powerhouse.
Remote work has changed this dynamic for many industries. Now, you don't need to be in San Francisco to be a highly productive programmer or in London to be a highly productive stock trader. Now, if you're in Mexico City, you can call in to your colleague sitting in a SF and you can make the same contributions as them, yet without having to actually physically be in the US. You're close enough that you can fly in for the quarterly team retreat or annual company conference, but you don't have to get an employment visa.
This opportunity is especially open to countries with ideal time zones, if they're willing to create a welcoming environment for people in their region or around the world to work with world class companies in the same time zone. For example, Vancouver has been an early mover on this opportunity. Tech companies based in San Francisco and Seattle have "innovation hubs" whose primary role is to create a place that talent that hasn't been able to get a visa to the US. We've also started to see this in places like Lagos and Buenos Aires. Nigerian developers can work alongside startups in Berlin and London, while Argentinian developers work as consultants for companies based in the US. We're going to be seeing a lot more of this now that remote work is more widely accepted by companies worldwide.
This also gives these cities a better chance of becoming knowledge economy powerhouses in their own right. Before, they had a cold start problem—these places lacked the critical mass of key talent, so those who did have the skills and motivation would leave for greener pastures. Now, they can compete to initially bring people to their city on dimensions other than economic network effects (e.g. climate, quality of life, regulatory arbitrage, safety), and then once you have a critical mass of people, it starts a flywheel to develop an ecosystem of its own, rather than just a "little brother" of an existing hub.
This strategy is defensible
It's difficult for the largest, richest countries to copy this strategy, because:
- Immigration is politically unpopular in places like the US, France, Japan, and UK. Compared to countries that haven't received much immigration in the past, it is unlikely for these economic juggernauts to dramatically change direction and put out the welcome mat, even to highly skilled immigrants.
- In addition, these countries have giant populations, so even with the political will to welcome immigrants, the bureaucracy is likely to act more slowly than smaller, more nimble countries.
- Large countries also have less to gain on a percentage basis. If 10,000 highly skilled Hong Kongers move to the US (population 330 million), it will show up as a small blip on the overall GDP of the country. If that same group moves to The Caymans (population 65 thousand), growth would skyrocket.
This is great news for smaller, less wealthy countries, because it gives them a defensible advantage against the incumbents.
Which countries are well-positioned for this opportunity?
Here are some characteristics that make a country especially well-positioned to take advantage of this opportunity. They're not all necessary for success—I can't think of any countries meet all of these criteria anyways—but the more the country has, the more likely it will be competitive at attracting immigrants:
- Small and nimble
- Good climate, natural beauty
- Timezone that matches some of the world's biggest economies
- Short flight to the world's biggest economies
- Short flights to immigrants' home countries
- Political and monetary stability
- Openness to change/innovation – e.g. regulatory arbitrage as a bonus
- Low cost of living
- Good educational opportunities
Here are some countries that meet many of these criteria. Which countries would you add to the list?
- Uruguay – Island of stability in a sea of instability in Latin America. Nestled between Argentina and Brazil (two countries with growing social unrest and, in Argentina's case, high inflation). Good timezone to collaborate with both the US and Europe. I'd expect Uruguay to be especially interested in this strategy, given attracting immigrants is one of the current president's top priorities.
- Canada – Stable, high quality of living, good educational system including world-class universities, close to the US, English-speaking, welcomes immigrants, access to great amenities like restaurants, already has a strong base of knowledge workers.
- Croatia – Beautiful, in the EU but lower cost of living than other EU members, one of the safest countries in the world, short flight to centers of commerce like London and Paris and Berlin.
- Singapore – English-speaking, physical safety. This city state has long been a place for highly educated, high net worth people from around the region to move to escape political instability and high taxes.
- Caribbean islands – Proximity to the US, beautiful climate, relative safety. The native language for many of these island nations is English, "the language of commerce".
- Panama – Stable and safe relative to its neighbors. Could be attractive for people in the Central American region to move there and still be close to home. I could also imagine people from South America moving there, since they have a shared language and it's closer to the US than Uruguay. The US dollar is widely used in Panama. Also, Panama has world famous beaches and surfing, which are very attractive to a certain subset of knowledge workers.
- Costa Rica – Similar story to Panama, with the addition that it also has a thriving biotech manufacturing sector.
Immigrant groups to cater to
The following groups have lots of people who are highly educated and have a lot of potential to contribute to the knowledge economy, yet have growing reasons to leave their home. A smart country would do well to attract these high-potential people and make it as easy as possible to put down roots:
- Cubans – Stuck in a Communist regime, surplus of doctors (and so many other countries have a shortage of doctors!)
- Hong Kongers – Fleeing the growing influence of the Chinese government in Hong Kong; in some cases they are coordinating immigration as a group, which brings additional opportunities for becoming the place for Hong Kongers to end up. (The Taiwanese may be in a similar position soon.)
- Argentinians – Recession, high inflation, low social trust, high taxes, high crime
- Brazilians – Recession, political instability, extremely high crime
- Venezuelans – Hyperinflation, physical danger, repressive government
- Lebanon – Sectarian conflict, economic meltdown
- Nigeria – Growing political instability, high poverty, poor infrastructure
Which groups would you add to this list? Let me know!
Obstacles & problems to solve
Here's an incomplete list of challenges that will make this shift more difficult. I believe they are all surmountable, but important to take into account. Let me know what you'd add to this list!
- Labor laws – It's complex to follow labor laws in lots of different countries, though companies like Remote.com are making this easier over time.
- Foreign exchange & capital controls – Foreign exchange is complicated, expensive, and at times risky. In addition, some countries' governments make it very difficult to move money in and out of the country.
- Language barriers – It is challenging for teams to work together when there are large language differences between team members.
- Cultural differences – The business culture in San Francisco is very different from the business culture in Buenos Aires, for example, and as a result people may work less productively with each other at first because misunderstandings may be more common than people who were educated in the same business culture.
- Time zones – Distant timezones can make collaborations very difficult, and even small timezone differences can result in additional overhead to keep everyone in the loop. This gets especially tricky in the spring/autumn when clocks around the world change at different times (or not at all) for Daylight Savings.
- Trust building – Most people I speak to say that it's harder to build trust over video chat vs in-person, and I have to say I agree (though it's not impossible!).
- Pay equality – It's not generally agreed upon whether people doing the same job in different places should get paid the same amount or if their pay should be adjusted according to their local cost of living. I've seen this create a lot of tension on teams.
Rather than being discouraged by these challenges, I'm excited. There are so many businesses to be built, and so many opportunities for governments to create value! If you're working on a solution, let me know!
~ ~ ~
As an American, I'm sad the US is frittering away its enviable position as the world's most desirable immigration destination. But if we're not going to use this opportunity to power the American engine of economic growth, I'm at least happy that the world is changing to enable other countries to take on this mantle.
When a trillion dollar bill is lying on the ground, the important thing is that somebody picks it up, even if it's not us.
Keep in touch!