This essay was first published by Seoul National University's Institute for Future Strategy. You can also view the Korean version.

Technological hegemony surrounding artificial intelligence (AI) has emerged as a central facet of national economies and security. Global competition among countries and corporations to secure high-level talent has intensified into a matter of survival. Worldwide demand for AI talent now exceeds supply by more than threefold. In Silicon Valley, AI dominates the discussion, and competition among big tech firms to attract talent is escalating. Ultimately, the rivalry between the United States and China will be decided not only by capital or technology but by who succeeds in attracting and retaining global talent.

In South Korea, concerns over talent outflows from Korea are growing. Last year, Korea ranked fourth among the 38 OECD countries in terms of AI talent outflow. Compared to other advanced economies, Korea’s AI industrial ecosystem remains underdeveloped, while overseas firms offer better compensation and research environments. The recent phenomenon of 56 Seoul National University professors relocating abroad over the past four years, a “new brain drain,” must be understood in this broader structural context.

This reality is also clearly reflected in the Global Talent Competitiveness Index, published annually by INSEAD. Korea ranked 31st this year, a position disproportionately low relative to its economic standing, and fell seven places compared to two years ago. In particular, Korea performed poorly in attracting and retaining talent, ranking 55th and 37th, respectively. These findings suggest that, beyond economic incentives, social, cultural, and environmental factors play a decisive role in talent mobility.

Korea’s talent outflow is especially alarming because it coincides with record-low fertility rates and rapid population aging. Before this convergence hardens into irreversible decline, Korea must establish a Ministry of Human Resources to oversee a comprehensive national talent strategy and devise systemic measures for talent development, attraction, and utilization.
 

Talent Portfolio Theory
 

In a recent book published by Stanford University Press, The Four Talent Giants, I proposed a framework titled “talent portfolio theory.” Just as financial investment strategies adopt a portfolio approach, national talent strategies should also be portfolio-based, emphasizing diversification to minimize risk and continuous adjustment (rebalancing). In other words, just as financial portfolios are composed of cash, stocks, real estate, and bonds, talent portfolios consist of four elements—the “4B's”: brain train, brain gain, brain circulation, and brain linkage.

Moreover, just as investors design different portfolios, each country’s talent portfolio varies depending on its economic needs as well as cultural and institutional contexts. Japan, Australia, China, and India (all discussed in the book) include all four B's but have constructed distinct portfolios that contributed to their respective economic development. A portfolio approach transcends the traditional binary of “brain drain versus brain gain” and offers a more comprehensive and flexible framework for understanding national talent strategy, one that is particularly relevant for Korea.

First, “brain train” refers to developing domestic human resources through education and training. It is a fundamental element of any portfolio. In Japan’s portfolio in particular, homegrown talent accounts for a large share. Japan has favored domestically educated and trained talent over foreign or overseas-trained individuals, making them the backbone of its economic development.

By contrast, Australia places greater emphasis on “brain gain.” Brain gain involves importing foreign labor, and approximately 30 percent of Australia’s workforce is foreign-born. Until the 1970s, Australia upheld the “White Australia” policy, but a major shift toward multiculturalism subsequently elevated brain gain to a central position in its portfolio. Brain gain pathways include the study-to-work route, where international students remain for employment, and the work-to-migration route, where individuals enter on work visas and later settle. Australia has effectively utilized both pathways.

“Brain circulation” involves bringing back nationals who were educated or employed abroad, and it has been critical to China’s portfolio. Following China’s opening in the 1980s, Chinese nationals came to represent the largest share of participants in the global talent market, including international students. Approximately 80 percent of them returned to China after the 2000s. Known as haigui (sea turtles), these returnees played prominent roles in China’s science, technology, education, and economy, supported by numerous central and local government programs designed to promote talent circulation.

“Brain linkage” refers to those who do not return home after studying or working abroad but instead serve as bridges between their host countries and their homeland. By leveraging their local networks, social capital, they support their home country from abroad, making this a key component of India’s portfolio. India refers to them as a “brain bank” or “brain deposit,” exemplified by leaders of Silicon Valley big tech firms such as Google CEO Sundar Pichai.

However, all talent portfolios carry inherent risks. When adjustment is delayed or fails, risks can escalate into crises with negative effects on the broader economy. The experiences of the four countries illustrate this point.

Japan has faced two major risks. A talent strategy centered on domestic talent weakened its global competitiveness, while demographic decline reduced its labor pool. Although Japan actively attracted foreign students to increase brain gain, its exclusive social and cultural environment limited their integration into the workforce after graduation. While there are many reasons behind Japan’s “lost 30 years” since the 1990s, one factor was its failure to adjust a portfolio overly concentrated on domestic talent in a timely manner.

Australia has confronted rising anti-immigration sentiment and tensions with China. Public concern grew over excessive immigration and perceived threats to national identity, prompting the government to tighten immigration policies. Amid conflict with China, Australia diversified its foreign talent sources from China to India and Southeast Asia. The pandemic, which restricted cross-border mobility, dealt a severe blow to Australia’s talent attraction efforts.

In China’s case, despite aggressive brain circulation policies, top-tier global talent has remained hesitant to return, as relinquishing careers built abroad is not easy. China accordingly shifted its focus toward brain linkage for these elite individuals. At the same time, brain circulation and linkage strategies became a source of friction with the United States, and rising anti-immigration and anti-China sentiment in the U.S. and Europe reduced opportunities for study and employment abroad. Recently, China has adjusted its portfolio to strengthen domestic talent development.

India, despite its strong brain linkage, remains vulnerable to brain drain. However, as economic opportunities expand domestically, return migration has increased, gradually reshaping its portfolio composition.
 

What Should Korea’s Talent Portfolio Strategy Be?

What, then, about Korea? Let us examine Korea’s situation by comparing it with the four countries through the lens of talent portfolio theory.

Brain train: Human resources have been critical to Korea’s economic development, with the government playing a central role. Key examples include preferential policies for technical and commercial high schools during the 1970s under the Park Chung Hee administration to support industrialization, and efforts to internationalize universities in the 1990s as part of globalization. While less dominant than in Japan, brain train has constituted a significant share of Korea’s talent portfolio.

Brain gain: Korea has imported low- and semi-skilled labor from China and Southeast Asia to fill so-called 3D jobs, but attraction of global high-level talent has remained limited. As in Japan, social exclusivity and cultural barriers continue to impede integration.

Brain circulation: Comparable to China, brain circulation has played a vital role in Korea’s economic development. Overseas education and experience have carried strong premiums, and China explicitly benchmarked Korea and Taiwan when designing its own policies.

Brain linkage: Compared to brain circulation, brain linkage has, until recently, occupied a relatively small share of Korea’s portfolio.

Facing the AI era, low fertility, and the crisis of a new brain drain, what strategy should Korea pursue in the global competition for talent? As noted above, rather than fragmented and ad hoc measures, Korea must comprehensively review and continuously adjust its talent strategy through a portfolio approach.

Brain train: Korea must cultivate talent for future industries, particularly in science and engineering. Training should be aligned with AI-related fields to better match university output with corporate demand. The excessive concentration of top students in medical schools must be corrected. Support mechanisms to retain domestic talent should be strengthened. A recent Bank of Korea survey of 1,916 science and engineering master’s and doctoral degree holders working domestically found that 42.9 percent of science and engineering master’s and doctoral graduates are considering overseas employment within three years—an alarming signal. While brain train will remain vital, its relative share is likely to decline.

Brain gain: As demographic crises intensify and the share of brain train diminishes, the necessity and importance of brain gain will grow. In particular, Korea must actively utilize the more than 300,000 foreign students currently in the country as human and social capital. At present, universities focus merely on filling enrollment quotas, and most foreign students either leave Korea immediately after graduation or remain employed only briefly. This, too, constitutes a form of brain drain. To increase the share of brain gain in the portfolio, foreign students must be managed holistically from selection to graduation and employment. While immigration is ultimately inevitable, it must be approached cautiously and deliberately, considering its impact on the domestic labor market and anti-immigration sentiment. Australia’s successful experience offers useful lessons.

Brain circulation: Although it occupies a relatively modest share of Korea’s portfolio, a certain level should be maintained. With declining numbers of students studying abroad and reduced inclination among overseas Koreans to return, care must be taken to prevent a sharp drop in this component. Otherwise, Korea risks losing global competitiveness, as Japan’s experience warns.

Brain linkage: Alongside brain gain, brain linkage is crucial to Korea’s portfolio adjustment. Key target groups include departing domestic talent (the new brain drain), foreign students, and the diaspora. Although their likelihood of reemployment in Korea is low, their potential for exchange and collaboration with Korea remains open. Like India, Korea should foster and support brain linkage by treating them as a “brain bank” or “brain deposit.”
 

Toward the Establishment of a Ministry of Human Resources

At the national level, a control tower is needed to design an optimal talent portfolio and make timely adjustments. Korea should establish a Ministry of Human Resources by consolidating functions currently dispersed across the Ministry of Education (universities and graduate schools), the Ministry of Science and ICT (R&D), and the Ministry of Employment and Labor (foreign employment support). It is worth recalling that Singapore, ranked first globally in talent competitiveness, established its Ministry of Manpower early on. Expanded and reorganized from the Ministry of Labor in 1998, it played a pivotal role in transforming Singapore into a talent powerhouse. Through education and development investments, Singapore strengthened domestic talent competitiveness while opening its doors to multinational talent, and it also implemented policies to promote talent circulation and linkage. From the perspective of talent portfolio theory, Singapore represents a successful case of diversification and continuous adjustment. In the increasingly fierce global competition for talent in the AI era, nations and firms that fall behind cannot secure their future. Korea is no exception.

Mak, who is co-director of Stanford Frontier Technology Lab and an investor in national security startups at Brave Capital, explains the importance of fostering these kinds of connections and bringing students into the conversation.

“The future of national security depends on collaboration, and this seminar is our effort to help forge those connections,” she says. “It’s been exciting to watch it evolve—and continue to grow—into a platform that bridges communities that rarely share the same room: students, technologists, policymakers, investors, and public-sector innovators.”

In its early years, the series featured government leaders like former Secretary of Defense Bill Perry, founders of pioneering companies in satellite imagery and robotics, and leaders from organizations such as the Department of Energy’s ARPA-E. More recently, CEOs like Hidden Level's Jeff Cole, whose company develops stealth and radar technology, and Baiju Bhatt of Aetherflux, a space solar power venture, have joined the discussion series.

Strengthening this flow of expertise between government and innovation hubs like Silicon Valley is key to the future and success of both sectors, and the students of today will be the leaders and policymakers of tomorrow driving those ventures, observes Eric Volmar, the teaching lead at the Gordian Knot Center.

"In modern entrepreneurship, every founder needs to be thinking about the policy aspects of their technologies. In modern government, every leader needs to be thinking about how emerging technologies affect national priorities,” says Volmer. “Tech and policy are fusing together, and our whole purpose is to prepare students for this new era.”

By giving students the opportunity to hear the personal accounts of innovators who have paved the way in addressing national issues and societal challenges through entrepreneurship, the co-leaders of “Silicon Valley & The U.S. Government” hope to encourage students to do the same.

“Students are looking to be inspired—to be mission-driven. Service to the country is one of those missions. Hearing how others have answered the call is what these seminars are all about," says Steve Blank, a lecturer and founding member of the Gordian Knot Center.

“Silicon Valley & The U.S. Government” meets once per week each fall and spring quarter. It can be found in the Stanford Courses catalogue as CEE 252, and is cross-listed for students in the Ford Dorsey Master’s in International Policy program as INTLPOL 300V. Recent sessions of the course are posted online every two weeks.

Motivation & Overview

India’s services sector is internationally renowned and has helped propel the country’s economic growth. Indeed, in recent years, a majority of the value added to India’s GDP has been concentrated in services. Especially noteworthy are India’s software and computing services, which include large multinational conglomerates like Infosys and Tata Communications Services. 

Yet as Indian software has flourished, the growth of its computer hardware and manufacturing has been sluggish. Tellingly, India is still a net importer of hardware and other electronics. At first glance, this divergence is puzzling because both the software and hardware sectors should have benefited from India’s educated labor pool and infrastructure. How can these different sectoral outcomes be explained?
 

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Fig. 1: Electronics production value compared to software and software service revenues.
 

In “Comparing Advantages in India’s Computer Hardware and Software Sectors,” Dinsha Mistree and Rehana Mohammed offer an explanation in terms of state capacity to meet the different functional needs of each sector. Their account of India’s computing history emphasizes the inability of various state ministries and agencies to agree on policies that would benefit the hardware sector, such as tariffs. Meanwhile, cumbersome rulemaking procedures inherited from British colonialism impeded the state’s flexibility. Although this disadvantaged India’s hardware sector, its software sector needed comparatively less from the state, building instead on international networks and the efforts of individual agencies.

The authors provide a historically and theoretically rich account of the political forces shaping India’s economic rise. The paper not only compares distinct moments in Indian history but also draws parallels with other landmark cases, like South Korea’s 1980s industrial surge. Such a sector-based analysis could be fruitfully applied to understand why different industries succeed or lag in emerging economies. 

Different Sectors, Different Needs

In order to become competitive — both domestically and (especially) internationally — hardware manufacturers often need much from the state, what the authors call a “produce and protect regime.” This can include the construction of factories and the formation of state-owned industries (SOEs), as well as tariffs to reduce competition or labor laws that restrict union strikes. Perhaps most importantly, manufacturers need a state whose legislators and bureaucrats can coordinate with each other in response to market challenges. Such a regime is incompatible with excessive “red tape” or with the “capture” of regulators by narrow interest groups. Because customers tend to view manufactured goods as “substitutable” with each other, firms will face intense competition as regards price and quality.
 

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Fig. 2: Inter-agency coordination required for sectoral success.
 

The situation is very different for service providers, whose success depends on building strong relationships with customers. States are not essential to this process, even if their promotional efforts can be helpful. Coordination across government agencies is similarly less important, as just one agency could provide tax breaks or host promotional events that benefit service providers. Compared with manufacturing, customers tend to view services as less substitutable — they are more intangible and customizable, which renders competition less fierce. Understanding India’s computing history reveals that the state’s inability to meet hardware manufacturers’ needs severely constrained the sector’s growth. 

The History of Indian Computing

Although India inherited a convoluted bureaucracy from the British Raj, the future of its computing industry in the 1960s seemed promising: political elites in New Delhi supported a produce-and-protect regime, relevant agencies and SOEs were created, and foreign computing firms like IBM successfully operated in the country. 

Yet by the 1970s, some bureaucrats and union leaders feared that automation would threaten the federal government’s functioning and India’s employment levels, respectively. Strict controls in both the public and private sectors were thus adopted, for example, requiring trade unions — which took a strong anti-computer stance — to approve the introduction of computers in specific industries. The authors make special mention of India’s semiconductor industry. It arguably failed to develop due to lackluster government investment, the need for manufacturers to obtain multiple permits across agencies, decision makers ignoring recommendations from specialized panels, and so on.

Meanwhile, implementing protectionist policies proved challenging. For example, decisions to allow the importation of previously banned components required permission from multiple ministries and agencies. After India’s 1970s balance-of-payments crisis, international companies deemed inessential were forced to dilute their equity to 40% and take on an Indian partner. IBM then left the Indian market. At the same time, SOEs faced growing competition over government contracts and workers, owing to the growth of state-level SOEs.

The mid-1980s represented a partial turning point as Rajiv Gandhi became Prime Minister and liberalized the computing industry. Within weeks, Rajiv introduced a host of new policies and shifted the government’s focus from supporting public sector production to promoting private firms, which would no longer face manufacturing limits and would be eligible for duty exemptions. Changes to tariff rates and import limits would not require approval from multiple agencies. Meanwhile, international firms reengaged with Indian markets via the building of satellite links, facilitating cross-continental work, such as between Citibank employees in Mumbai and Santa Cruz.

However, this liberalizing period was undermined and partially reversed after 1989, when Rajiv’s Congress Party (INC) lost its legislative majority and public policy became considerably more fragmented. Anti-computerization forces, especially the powerful Indian trade unions, worked to stymie Rajiv’s reforms. Pro-market reformists were forced out of their positions in Indian bureaucracies. Rajiv was assassinated in 1991, after which Congress formed a minority government with computer advocate P. V. Narasimha Rao as PM. Yet all of this occurred at a delicate time, as India was at risk of defaulting and had almost completely exhausted its foreign exchange.

By the late 1990s, both the hardware and software sectors should have benefited from the rising global demand for computers, yet India’s history of poor state coordination hindered manufacturers. Meanwhile, software firms were able to take advantage of global opportunities given their comparatively limited needs from state actors and political networks — for example, helping European Union banks change their computer systems to Euros. Ultimately, the Indian state has powerfully shaped the fortunes of these different sectors.

*Research-in-Brief prepared by Adam Fefer.