Tribes still matter

How global leaders tap into diaspora networks

Jan 20th 2011 | From the print edition



HUNDREDS of millions of Indians cannot prove they exist. They have no birth certificate, no driving licence, no social-security number. So they
find it hard to open a bank account, borrow money or draw on government services.
Nandan Nilekani, an Indian software billionaire, volunteered to give every one of his 1.2 billion compatriots an identity number tied to biometric
data. The Indian government thought this a wonderful idea, but there was a snag. The proposed database was ten times larger than the largest
biometric database in existence. How was a poor country going to build it?
Mr Nilekani turned to the Indian diaspora for help. He called up ethnic Indians who had done well in Silicon Valley. Before long they were calling
their friends and urging them to join in. The overseas Indians brought oodles of useful experience. Raj Mashruwala had helped to set up the
number-crunching system for the New York Stock Exchange. Srikanth Nadhamuni had helped set up Healtheon, a big health IT firm. The team
assembled in Bangalore, set up a whiteboard in a rented apartment and started brainstorming.
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The programme went from start-up to roll-out in little more than a year, with the first identity numbers allocated in October 2010. If everything
works as planned, poor Indians will for the first time be able to prove who they are, thus making themselves more creditworthy.
Mr Nadhamuni thinks all sorts of services can be grafted onto the national ID system. A migrant labourer with no bank account will be able to wire
money to his mother by sending it to her ID number. His mother will be able to pick up the cash at her local village shop, which will have a
miniature scanner for her fingerprints. The shopkeeper will charge a small fee for the service. Villagers will no longer have to waste days trekking
to the nearest town to get to a bank.
Brainy globetrotters are rarely rootless. Even the most cosmopolitan usually feel an affinity with others who share the same language, culture or
heritage. That is why diaspora networks are so powerful, and why some of the world's most influential people rely on them so heavily.
Some diasporas are vast and global. For example, there are an estimated 25m non-resident Indians and 60m overseas Chinese, including
significant numbers in nearly all countries. They create a web of cross-border connections. Boffins are 30-50% more likely to cite a paper by
someone of their own ethnicity than you would expect if such ties made no difference, according to William Kerr of Harvard Business School.
Diaspora networks speed the flow of information, the lifeblood of science and commerce.
They also foster trust. A Lebanese trader in west Africa will feel safe doing business with a Lebanese trader in Latin America because one man's
high-school friend knows the family of the other's wife back in Beirut. That means they can seal big deals with a single phone call. If one cheats
the other, he will be shut out of the entire Lebanese diaspora trading network.
Yes, it's me. Now lend me some money
World wide web of migrants
Networks of exiles dominate trade in many parts of the world: the Indians in east Africa and parts of the Caribbean, the Chinese in South-East
Asia, and so on. A disproportionate number of prominent businesspeople come from migrant families. Carlos Slim, the world's richest man, is
Lebanese-Mexican. Mukesh Ambani, India's richest man, was born in what is now Yemen. Eric Li and Robin Xu, the founders of Baidu, China's
answer to Google, used to work in America.
Migrants form bridges between the countries they live in and the ones they hail from. This is especially true of the overseas Chinese (including
those in Hong Kong and Taiwan), who handle some 70% of foreign direct investment into China. They have three advantages: they speak the
language, they understand the culture and they have guanxi (connections).
Mei Xu, a Chinese-American entrepreneur, left China after the Tiananmen Square massacre. She was a student in Beijing, which in the
government's eyes made her a potential agitator for democracy. So she was sent to do a dull job in a warehouse in the middle of nowhere. She
emigrated to America, yet retained her contacts in China. With her husband, David Wang, she started a business. She asked her friends in China
to help her find Chinese products that might sell well in America, and settled on arty scented candles. In 1995 she persuaded her sister to open a
factory in Hangzhou to supply them.
The candles proved popular. Target, a chain store, ordered $2m worth, then quadrupled the order. The factory could not cope. With only two
months to meet the Christmas rush, Ms Xu had to find extra capacity somewhere in China. She succeeded, with no time to spare, by calling all her
contacts. Someone who does not know China could not have done that, she says. Her firm, Pacific Trade International, now generates about
$100m in annual sales.
Even a relatively low-tech business such as candle-making evolves rapidly. Ms Xu's supply chain is now multinational. The most imaginative
designs are created in America. Routine design work is done in China. The candles are mostly made in Vietnam. The firm also has a factory in
Maryland to satisfy its most impatient customers. China is no longer just a source of cheap labour, says Ms Xu. It is a blossoming market and
increasingly a source of new ideas.
Studies of business leaders tend to emphasise their vision, drive and ruthlessness. Such traits are important, but members of the global elite are
human, too. Sajjid Chinoy, an economist at JPMorgan in Mumbai, returned to India after living in America for 15 years. An outsider might have
thought that he moved back because India's economy is growing much faster than America's, creating boundless opportunities for bright young
brainworkers. In fact, he returned because his brother had been injured in a terrible car accident. It's often about family, he says.