Countries are in a high-stakes competition to develop AI talent and respond to the technology's transformative impact on labor markets and economic growth. As the race intensifies, a critical question looms large: What talent development strategies deliver proven outcomes?

In a recent book published by Stanford University Press, The Four Talent Giants, Stanford sociologist Gi-Wook Shin, a senior fellow at the Freeman Spogli Institute for International Studies, examines how countries attract, develop, and retain talent in a globalized world. Shin, who is also the William J. Perry Professor of Contemporary Korea and director of the Korea Program at the Shorenstein Asia-Pacific Research Center (APARC), explores how four vastly different Asia-Pacific nations – Japan, Australia, China, and India – rose to economic prominence by pursuing distinct human resource development strategies, encompassing different approaches to education, migration, and transnational talent mobility.

The study provides a framework that extends beyond the four cases, offering policy lessons for other economies, particularly less developed nations. Below are four insights from the book on the evolution of talent strategies and why countries need to construct multiple forms of talent – domestic, foreign, and diasporic – to address new risks and capitalize on emerging opportunities.

1. Look for variation in mobilizing human resources for development

Several Asia-Pacific countries now rank among the world’s largest economies – a marked shift from the 1980s, when Japan was the only regional economy near the top. Shin cautions against interpreting this rise of Asia-Pacific nations as evidence of a single developmental regional “recipe.” Instead, his work shows that similar economic outcomes emerged from different national paths, shaped by distinct histories of colonial rule, nationalism, state-building, and higher education policy.

Rather than isolating one driver of growth, the analysis highlights how states structured education systems, migration pathways, and global connections to talent in ways that reflected domestic priorities and constraints.

2. Talent includes social capital, not just skills or credentials

Shin defines talent broadly as both human capital and social capital. In a transnational era, the value of talent lies not only in technical expertise but also in the networks, relationships, and institutional ties that connect individuals across borders.

This insight underpins a four-part framework for national talent strategies: brain train (developing domestic talent), brain gain (attracting foreign talent), brain linkage (maintaining ties with citizens and students abroad), and brain circulation (sending talent out and facilitating return). Successful countries rarely rely on a single approach; instead, they combine these strategies in different proportions over time.

3. Talent strategies must be diversified and rebalanced over time

A central contribution of Shin’s book is a framework he calls Talent Portfolio Theory, which likens national talent strategies to investment portfolios. Just as investors diversify assets and rebalance them as conditions change, states must continually adjust how they train, attract, and retain talent in response to economic shifts.

Japan’s experience illustrates both the strengths and limits of a concentrated strategy. Its post-WWII success rested on a robust domestic training system spanning universities, vocational schools, and workplace education. Nevertheless, as the global knowledge economy evolved in the 1990s, Japan struggled to adapt, facing demographic decline and hampered by institutional introspection. Only in the 2010s did Japanese policymakers begin to diversify talent development through study-abroad programs, attracting international students, and implementing limited immigration reforms.

Australia followed a contrasting path, relying heavily on foreign talent through skilled migration and international education. Its system emphasized work-migration pathways and relatively easy naturalization for international students, while more recent policies have focused on sustaining global alumni and diaspora networks. Each model carries risks, but together they demonstrate why diversification and timely rebalancing matter.

4. Political leadership and state policy shape talent outcomes

Across cases, Shin argues that talent strategies are not purely organic market outcomes. Political leadership and state capacity play decisive roles in shaping higher education systems and migration policy. China’s post-reform experience demonstrates how state-led overseas training and return programs helped address the loss of scientific expertise after the Cultural Revolution. Over time, China shifted from emphasizing the return of Chinese nationals to the country toward building broader transnational linkage and circulation mechanisms.

India offers a different model, where long-standing patterns of outward migration produced a global diaspora that functions as a form of “brain deposit.” Alumni of Indian Institutes of Technology and other elite institutions now serve as transnational bridges connecting India to Silicon Valley and other innovation hubs.

For developing countries, Shin offers a counterintuitive lesson: initial brain drain is often unavoidable and can be productive if governments invest in long-term linkage and circulation rather than restricting mobility. To the United States and other nations grappling with anti-immigration politics, Shin’s message is that erecting barriers to attracting and retaining global talent could undermine their long-term economic competitiveness.

Overview and Contributions:

In “Profitable Misconduct, Corporate Governance, and Law Enforcement,” Anat R. Admati, Nathan Atkinson, and Paul Pfleiderer show how misconduct, managerial compensation, and enforcement policy are closely — and at times perniciously — related. Corporate misconduct can cause extensive harm, including death, physical and mental injury, and environmental destruction. Profit-maximizing corporations can also harm democracy and the rule of law by impacting both the language and the enforcement of the law. This paper focuses on a situation in which, as is often the case, law enforcement efforts to address corporate misconduct are ineffective. There are many reasons for this situation, including difficulties in monitoring opaque corporations and detecting misconduct, as well as the many ways corporations can limit their liabilities.

The authors show that when managerial compensation aims to motivate maximizing profits for shareholders, managers will generally engage in profitable misconduct and, importantly, that corporations can reduce or nullify the deterrence effects of fines and penalties that target either the corporation or managers directly might have, thus further weakening already insufficient enforcement. They also show that common enforcement policies, such as those that offer discounted fines when corporations self-report misconduct or implement compliance programs, can backfire and exacerbate harm by making misconduct more profitable. Understanding corporations' strategic responses to law enforcement is essential for designing more effective policies to deter misconduct.
 

Corporate Governance, Misconduct, and Law:

The authors begin by discussing why the policing of corporate misconduct is so difficult. One problem arises because corporations are collections of individuals, which renders responsibility diffuse and complicates the identification of perpetrators. Detecting misconduct often depends on highly visible, chance events such as plane crashes, whistle-blowing, or media investigations. When the profits gained from misconduct exceed the expected fines and other financial consequences, executives may view misconduct as a “cost of doing business.” Other problems are due to the difficulties encountered in estimating the extent of the harm and the limitations on the penalties that can be imposed. Even when misconduct is detected, fines often fall short of the corporation’s private gains from that misconduct. In notable cases, corporations can limit the consequences by declaring bankruptcy. It is also very rare for directors and executives to face meaningful criminal liability.

Governments have often been unsuccessful in prosecuting misconduct because of the high legal bar required to show personal intent to commit crimes and the reticence of prosecutors to pursue challenging cases due to career concerns and limited resources, especially relative to the resources corporations can access. As we saw in the financial crisis, authorities often worry about targeting “important” corporations and imposing significant fines and sanctions.
 

Argument and Implications:

The authors’ mathematical model captures some of the complexities involved in the interactions among corporations, managers, and governments. One of the values of a model is that it can show how well-intentioned and seemingly reasonable policies can be counterproductive once one accounts for various ways profit-maximizing actors will respond. The authors consider, for example, some policies that have been designed to increase the probability that misconduct will be detected in a timely way. These policies encourage corporations to implement “compliance” programs or to self-report misconduct by promising that any fines they must pay will be heavily discounted. Using their model to analyze the effectiveness of this approach, the authors find that these policies can make matters much worse. This is because the discounted fines can increase the profitability of misconduct while it is undetected or not self-reported. This can lead to firms engaging more aggressively in misconduct, knowing that this can be self-reported later, and the corporation will be subject to reduced fines. If corporations strategically take all this into account, the total harm may actually increase. The authors are not contending that these policies will always increase harm, but they are pointing out that these policies are quite likely to be inferior to others that don’t allow strategic responses that can make things worse.

One reason that the fines imposed directly on corporations are often inadequate to deter misconduct is that authorities are reluctant to levy sufficiently large fines because they fear this will lead to “collateral damage” suffered by innocent stakeholders like employees and customers. These concerns are allayed if, instead of corporate-level fines, large fines are imposed on managers. The authors’ model shows that it can be very expensive for shareholders to offset the potential deterrence effects of managerial fines if the only way shareholders can do this is by increasing the manager’s stock-based compensation to make misconduct more rewarding relative to the level of fines. Because it is so expensive for the corporation and shareholders to respond in this way, relying more on managerial fines might be a good policy. Unfortunately, shareholders have much less expensive ways to offset fines on managers — they can indemnify the manager or provide insurance that pays for fines. Essentially, they can simply offset the fines with cash, which is much cheaper. As the authors point out, this suggests that, to strengthen enforcement and deterrence, limitations on corporations' ability to indemnify and insure managers are likely a good way forward.
 

One of the main lessons of the authors’ analysis is that internal governance practices set by the corporation and its shareholders can profoundly influence the effectiveness of external governance designed to limit the harm created when corporations and their managers engage in profitable misconduct. Further study of these interactions and their implications for effective enforcement policies is clearly warranted.

*Research-in-Brief prepared by Adam Fefer.