Bill Kerr: Success in the modern global economy depends heavily on talent, but what makes one country more competitive than another? How do nations cultivate, attract, and hold onto intellectual, creative and entrepreneurial capacity? For the past seven years, International Business School INSEAD, has sifted through and sorted many of the key factors in constructing its Global Talent Competitiveness Index. Welcome to the Managing the Future of Workpodcast from Harvard Business School. I'm your host, Kerr. I'm joined today from France by Professor Monteiro, co-author of the 2020 Report. Felipe will break down the analysis and rankings of 132 countries and discuss this year's theme, artificial intelligence. Welcome, Felipe.

Felipe Monteiro: Thanks for having me, Bill.

Kerr: Felipe, maybe we could just start by talking about your index and help us understand what sets the Global Talent Competitive Index apart.

Monteiro: Bill, as you said, we've been doing this for seven years and what we've been trying to do is can we have really a global coverage? This year we have 132 countries. A multi-variable type of index, so we try to cover many dimensions of talent. And at the same time what we're trying to do is we're using very different sources of data, very reliable ones from World Economic Forum, World Bank, UNESCO. And finally, what we do is we ask the Joint Research [Center] of the European Union to audit the index.

Kerr: Okay. And tell us a bit about some of the variables that you put into there.

Monteiro: We have basically six pillars, and kind of four of those pillars are about input. What do we mean by input? We mean how countries are culturally fair in terms of attracting talent, retaining talent, growing talent, enabling talent. But then I think the model also tries to have variables that capture, okay—what's the consequence of that? What is the output? So what do we see in terms of what are the skills and what's the match between the demand from business and the skills that this country's generating? What kind of new entrepreneurial ventures they are creating? Are they at this country really developing high value exports? So, we try to have proxies to capture along those six pillars.

Kerr: Okay. And by looking at both the inputs and outputs, you're capturing something about the country's institutions, its capacity for worker training and retraining. That's why you're looking at both sides of that channel.

Monteiro: The countries which are really leading the rankings, they are typically fairing very well in all those dimensions. It's very difficult for you to be a leader in our ranking unless you are really covering not only, let's say attraction, but also how you do the retention. What are the outcomes of that?

Kerr: Okay, so give us maybe a few of the countries that are at the top of the ranking, whether it's a stable ranking over time, do countries move around a lot?

Monteiro: If you look at the top 10 and I would even go to the top 20, I would say that the vast majority of the countries there have been in the top of the ranking. We see much more crisscrossing at the bottom of the ranking. What are the countries leading the ranking? Switzerland has been leading since the beginning, but this year there's an interesting swap because number two used to be Singapore and number three the US. And this year US became number two, Singapore number three. And there's just one new entrant in the top 10, which is Australia. Australia used to be number 12, this year is number 10. And if you look at the top 20, there is also one new entrant, which is Japan. So Japan was also I think 21 or 22 and this year became 19 in the rankings.

Kerr: Okay. Well, I guess the US will have to hold onto the silver medal for now and strive for the gold medal next year. What trends in the United States context change to help it move up that list?

Monteiro: We try to include some proxies for artificial intelligence somehow in terms of what types of technology adoption, robot density, emerging new technologies. And on that front the US is doing pretty well. So in some of the new variables we included US is really leading. I don't want to put, attribute all the change or this change from number three to number two to that, but I think that played a role.

Kerr: Okay. And as you think about these technology choices, how do you think about constructing the index around country level outcomes versus city level outcomes, and looking at San Francisco versus the rest of the United States or Paris versus the rest of France?

Monteiro: A lot of the action when it comes to talent is concentrated in certain cities, which we are really talent hubs. So what we've been doing, and this is kind of less developed than the country ranking, is also having a similar ranking. And this year we have 155 cities there. And again, there's some overlap there, meaning some of the cities which are top cities are also in the top countries. You'll see a number of the US cities including Boston—number five in our ranking, San Francisco—number four, New York is number one. But, also Paris is number seven, London is number two, Singapore is number three. So I think it's pretty much the usual suspects.

Kerr: Okay. And maybe as you think about this index, it would be helpful for our readers to think about how you define talent competitiveness. What's the framing that you put around there and are there any misperceptions or difficulties in how you create that definition?

Monteiro: I think the way we define is really the set of policies and practices that enable a country to develop, attract and empower the human capital that contributes to productivity and prosperity. So it's this multidimensional element of it. At the same time, keeping it broad enough.

Kerr: Are there any ever misperceptions or things that people are expecting to see and then they don't see it when they're approaching your index?

Monteiro: I think there are two things maybe going on. One of them is what we discussed before, is many times, when people think about talent, they think about attraction. How do I attract? Maybe they think less about how do they enable, grow everything. So I think this multidimensionality [we] are focusing also on. It's not enough to attract. It's very hard to keep, very hard to retain. I think that's sometimes one of the misperceptions in terms of countries trying to improve the talent competitiveness. I think the second one is, and it's some of those trade-offs that we have as you build an index, is we have to go for proxies of a lot of the things we're trying to capture. So somehow we lose the power of granularity that we can go and say, "I can’t really tell you what's happening in the US, because we don't have that type of granularity in an index like this." At the same time, I think what we can do is we can have comparable variables and comparable measures that I can say, “No, using those proxies, using those 70 variables, this is how the US compares to France, to Singapore, to Switzerland, to Brazil.”

Kerr: Yeah. And as you were highlighting this ability to not only attract talent but also build it internally and develop it, it's helpful to remember that even in some of the most immigrant-heavy countries like the United States and the UK and elsewhere, foreign talent's still usually about 25 percent of the inventive workforce and the entrepreneurial workforce. So, the domestic capacity that you're highlighting there is very important. So, help us with, like, if I'm a CHRO at a multinational or if I'm a mayor of a city, what are some of the key takeaways I should pull from this year's report?

Monteiro: If you want to distill it, I think there are two ways of looking at it. One is what are the overall trends that [are] somehow affecting a large number of countries. And what do we see there? We see there that really the gap between the leaders and the laggards is widening. So it's something for us to pay attention to.

Kerr: And the leaders being like the top five or the top 10? What do you put as the leader group?

Monteiro: I would say the top 20.

Kerr: Top 20.

Monteiro: We also see the stability [among] the leaders. And what's very interesting is to see how the topic of global talent is really getting a lot of traction in many different areas. So it's not only you talk about a CHRO, but I think when we discuss this report, it's very interesting to see, because it's both the companies but also governments, policymakers, international organizations looking at it. So let me try to go and speak more concretely about certain countries. And that's the way I would use it if I were the CHRO.

Kerr: Okay.

Monteiro: In these country profiles, we show how the countries are doing in each of the variables, which is a much more insightful, and I would say actionable way of looking at the report. Because if I look at the report—let's start with Brazil. As our listeners, they have gathered now from my accent, I'm originally from Brazil. So if you look at a country like Brazil, it's not doing well. Okay, it's number 80, eight-zero, in the ranking. But going to the country profile and looking how Brazil is doing, many different variables is much more informative because for example, you look, Brazil seems to be doing pretty well in terms of university ranking or prevalence of training firms. So it looks like that in terms of growing talent it's doing well. But then when we go the capacity to attract talent and we look at variables like migrant stock, international students, brain gain, Brazil's number 123, 105. So you can really see the pain point here is, it looks like that Brazil is a very closed economy, unable, right, to attract foreign talent.

Kerr: The idea here is to help the CHRO know which issues they're likely to encounter if they have an office in Brazil and have remediation for those challenges. Kind of thought through in advance.

Monteiro: Correct. And also as you think about multinationals making location choices, they can also have comparable locations and say, "You know, this is depending on our own competitive advantages and strengths and what we want to do in that country, this is where...what are the strengths, the pain points?" So if you go to another country, and this in this case, France. So France is much better than Brazil. It’s number 21 in the ranking, and there are things that Brazil that France is doing really well. So you look at for example social protection, if you've look at kind of lifestyle, France is one of the best countries in the world for kind of quality of life. And if you look at kind of high value exports, France is doing very well. But then Bill, if you look at, for example, labor-employer cooperation—number 94. So, you see—and I'm here based in France—it's clearly how important it is, the type of reforms the government's trying to do, because you see that social tension between laborer and an employer.

Monteiro: And let me finish with the US. So, US is number two, and there are a lot of things to be happy about the US. And for example, as I look at the university ranking US number one, and obviously Harvard epitomizes that. But then if you look at other variables in our model like things as simple as personal safety or physician density, things that we believe are important for retaining talent or tolerance of minorities or female graduates. Then US goes to positions like 50, 55, 69. So, it is clear as you look at this, where are the pain points? What are the potential areas where the country is really striving?

Kerr: Yeah, and you can also of course believe and suspect that those are going to differ across regions inside the United States, in terms of those pain points and their severity there. So take us through how people could think about this in terms of the global talent race as I think you've used the phrase sometimes, talent arms race. And what I'm, I guess particularly interested in starting with is, you're going to release this report and have a very big presence at the World Economic Forum, when the report comes out. And you've also been working with the EU commissioner for jobs, and social rights, and so forth and how do they think of the purpose of producing this index? Is it to help countries compete better with each other? Is the goal to close some of these gaps? What's kind of the way you want to frame this report?

Monteiro: The goal of the report is really making sure that people can benchmark and they can act. But, I'm glad that you referred to EU commissioner Nicolas Schmit, who wrote a chapter for the report, because in our interview with him, what really caught my attention was really his perception of how important is to work in collaboration. So we interviewed him the day that he was appointed the EU Commission for jobs and he was very clear to say, you know, how important is going to be for him to work closely with Margrethe Vestager, who is responsible for the digital portfolio, as well as with Frans Timmersman who's going to be responsible for the sustainable development and climate. So this idea, we will not find a solution or we will not be able to make progress if we're just academia working on our own and then business on their own and then policymakers. So this multi-stakeholder, multilateral type of engagement, I think is what we hope for. At the same time as you were highlighting, is very important for us to be presenting this at the World Economic Forum. Because this is the type of audience, we could be just talking right in INSEAD and HBS, but it's much more important for us, and as you're doing a podcast, is to reach a much larger audience—many different kind of backgrounds and vantage points.

Kerr: Yeah. So you have mentioned earlier that one of the headline findings, that the top 20 had been more or less stable. I think Japan managed to jump its way in there and that they're also pulling away. But one of the things you described in the report is that the emerging economies may be able to leapfrog up into the top, which is maybe connected to this benchmarking that you described. This perhaps could show an emerging economy how they could best target this leapfrogging process. Tell us a little bit more about that. Do you have any bets as to who or where this might happen? What are the typical constraints that are getting the way?

Monteiro: So you know, it is a hypothesis. Can emerging markets take advantage of that leap frog? So, as a lot of us will be familiar with the idea of leapfrogging is really taking advantage of the lack of infrastructure to skip steps and, alright, adopt a new technology. And I think it is a plausible kind of assumption or a plausible hypothesis to imagine that certain countries, and in our case we asked the founder and CEO of one of the largest IT companies in Latin America to give his thoughts on this and write a chapter. Basically, he's saying, you know, maybe Latin America can do what India did in terms... So India 20 years ago really managed to kind of become the global delivery center for IT services. Maybe there's an opportunity for countries in Latin America, and he specifically talks about Mexico and Brazil, and Uruguay to also take advantage of that moment where AI talent is so expensive and so rare in the developed countries, to have countries less developed but that could really embark and invest and become those delivery centers for AI, too. To what extent is going to happen? Bill, I think we don't know, but I think it is a provocative and maybe inspiring statement to some of the countries, they are to look and say, "Yes, maybe there's an opportunity, as this environment is changing to adopt this new technology."

Kerr: It's interesting the way you framed that. It was about being perhaps a service center into some of the more leading economies, where they're facing talent shortages and find it hard to attract workers. Is there any even deeper aspiration to just be able to create their own AI ecosystem or is it hard to do that outside of one of the leading economies or China, so forth?

Monteiro: So Bill, maybe let me share with you one analysis that we did this year, because so far we've been talking about what are the rankings this year. What we also did is, let us look at those seven years of data and let's see, longitudinally—let's compare what happened with those countries over time. And we tried to map countries in four different quadrants, okay? Clearly, who are the talent champions, who are the talent movers, who are the talent laggards and who are the talent limpers? And you may like or dislike those terms, but try to simplify the complexity of all this. What did we find? First of all is not surprisingly that most of the high income countries are the talent champions. What's interesting though, is to start to see some high-middle income countries starting to get there. Malaysia and Costa Rica are entering that quadrant. We also saw, kind of, China at this point, is really kind of at the frontier between talent mover and talent champion. So you know you start seeing this happening. India is talent mover. On the other hand you still see Brazil there as a talent laggard. So maybe they'll be.... Although as you look at the ranking, it has been pretty stable at the top of the top 20, and I think now China thinks number 42, we may start seeing some of those high-middle income countries becoming talent champions.

Kerr: Okay. One of the things you talk about in your report is education, skills, retraining—because as you highlight, it's not just about the attraction. You want to also look at the outputs at the other end. Tell us about some of your key findings or thoughts on that education layer, the retraining layer.

Monteiro: Yeah, so I think this is pretty important, especially for given this year's theme. So if we talk about global talent in the age of AI, what we learned talking to the different thought leaders who wrote the chapters and doing our research, is the amount of reskilling necessary going forward will be major—a concerted effort in making sure how we can have a smooth transition as AI comes, as digital comes. And it's not trivial, and it's not trivial and I think we need to acknowledge that right now.

Kerr: Yeah and a lot of our podcast is devoted to people trying to help overcome some of those frictions involved with the retraining process.

Monteiro: Yeah, and I think Bill, the understanding that it is a joint responsibility. It is organizations and a lot of people like me who study multinationals, or like you. We know how much of the action is taking place in large multinationals, but it's not only those large multinationals, our governments, our academic institutions. What's the role of multilateral forums, like the World Economic Forum, the United Nations, etcetera. So it is quite a big challenge and I think the solution will not come from isolated actors.

Kerr: Is there a way that you think these types of forums or groups can help share the best practices across the countries or across the member states? I mean, obviously, that's one goal of your report, is to help make that transition, but does the EU have in place this idea that there may be a larger way to hand information or best practices between members?

Monteiro: Yeah, I think the potential is there. The gap between the potential and the actual realization is probably bigger than I wish it were. But I mean, I think our job is really making sure that we make progress, also with some notion of time pressure. Because, typically when you get issues like this job transformation, you talk about the future of the work, the future of work, or as we think about climate change, it's very easy for us to say, "Wow, it's such a big issue. What can we do?" And I think we need to kind of break down the big issues in smaller parts and start working together.

Kerr: Yep. So as we think about this retraining and reskilling, one of the key parts of your report is to talk about the narratives that people are providing to their employees to help guide and navigate and encourage people along this path. Tell us about some of the national differences that you've seen or some examples.

Monteiro: Yes. So, I think the narrative is very important here. If you look back, a lot of the backlash against globalization that we had in the past was because we were not capable of creating a narrative that was understood by the broader segment of the population. As we look at the challenges involved in reskilling and job transformation, a lot of the narrative that we hear is a negative one. It's, you know, AI replacing humans, AI threatening, job loss. I think it's important that we also highlight the potential for this human-machine interaction, the type of hybrid skills that will come up, and start using this much more as AI, as artificially enhanced intelligence, rather than AI as a replacement to humans. I think we should realize this sooner rather than later, otherwise we may get into such a negative spiral that is just technology as job destruction, rather than technology as creating better conditions for jobs, as enhancing what we can do and doing better the things that we can do.

Kerr: Felipe, one of the terms that you have brought in is human centered AI and you connect this into the UN sustainable development goals. Tell us a bit about that phrasing and what goals you're particularly aspiring to meet.

Monteiro: This is very central to what we're doing Bill, and it's interesting because we're even launching the report at a sustainable development goal tent at the world economic forum. Why do we believe it's so central? Because some people might be tempted to look at the AI debate exclusively from a technological perspective. What AI can do as a technology and the big debate now is, okay, what AI can do as technology in a way, “Can I really be a force for good, can I really have a positive social impact? What level of transparency do we have? What is being built in the algorithms?” So, I think it is important that we bring that other part to the conversation, not just to have a tech conversation without forgetting what the most human aspects of it, both in terms of what is built in the system—what's built in AI—but also what kind of consequences this could have and what is the responsibility of different actors on that?

Kerr: Great. Felipe, maybe one more question here on the cities aspect—what is your data on cities? Talk about their talent competitiveness and how does this connect to things like smart cities or other issues that arise at the city level?

Monteiro: I think it's very connected to the smart cities, because as we look at this year, at AI at the city level. A lot of the initiatives that we see in terms of talent attraction is really how can you make those cities smarter and what type of initiatives, and they're very interesting initiatives, not only from other countries or other cities that we think of. In the report, we have a very interesting initiative from Bilbao, in the Basque [region] in Spain, from Berlin. And I think what they're to do is many times realizing that the speed of change or the speed of being able to implement some of those strategies, it will be much faster at a city level. And we also see that's a big advantage of scale. So most of the cities which are at the top are really those hubs. But also I think there's something coming in terms of the ability to benchmark and implement changes faster than probably you can do at the country level.

Kerr: Okay. Yeah, so I think both on the political side, often action in the US at least is easier at the local level than at the national level. And then so you highlight, there's a lot of scale and capacity to bring the pieces to bear faster. Goes back to your earlier comment about the need for the partnerships between the firms and the governments and the educational institutes and others, which we've often found it's easier to pull that together at a local level than perhaps at such a national level or scale.

Monteiro: Absolutely. Yeah.

Kerr: Feilpe, maybe one final thought here. If you had a chance at the World Economic Forum to sit down with a policy maker or a president, what would be the one thing you'd want to leave with them from beyond this podcast about how to attract, and seek, and build, and retain the talent?

Monteiro: It's basically looking this as action points. It is very easy for us to contemplate all the data and, realizing how complex it is, and not act. So, I think action is probably the word, but maybe a more informed action, because when we deal with such a complex issue like talent competitiveness, many times we maybe base our action not on much data. And I think what we hope that those conversations we could have, we bring to the table a lot of data, as imperfect as it can be, we're believing in data and we're still believing in database decisions. And hopefully those who have the power and are in the position to take action, they will do this based on data.

Kerr: Great. We thank Felipe Monteiro, who is the coauthor of the Global Talent Competitive Index, which is in its seventh year—released at the World Economic Forum—for joining us today to talk about his findings and what we can learn from that. Thank you, Felipe.

Monteiro: Thank you, Bill. It was my pleasure.

Kerr: Thank you for listening to this special episode of the Managing the Future of Work podcast. To find out more about our project on the future of work and for more information on the coronavirus’s impact, visit our website at hbs.edu/managing-the-future-of-work and sign up for our newsletter.