As nations grapple with an increasingly competitive global talent landscape, a new study, published in the journal World Development, suggests that countries should rethink their approach to developing, attracting, and retaining talent. To address the need for a more complete understanding of cross-national variation in talent development strategy, the study proposes Talent Portfolio Theory (TPT), a novel approach to studying and improving human resource development.

The researchers, Stanford sociologist Gi-Wook Shin, the William J. Perry Professor of Contemporary Korea and the director of APARC and the Korea Program, and Haley Gordon, a PhD candidate at Stanford’s Department of Sociology, draw on the principles of Modern Portfolio Theory, a well-established framework in financial investment literature, to propose a new framework for talent development.

The new framework, TPT, views a nation’s talent strategy much like an investment portfolio, emphasizing the importance of diversification, risk management, and rebalancing. Shin and Grodon examine Japan and Singapore as case studies to illustrate how the TPT approach can help scholars, policymakers, and businesses better understand and optimize talent development strategies.

The study is part of the Talent Flows and Development research track of the Stanford Next Asia Policy Lab (SNAPL). Housed at APARC and directed by Shin, SNAPL is a new initiative committed to addressing emergent social, cultural, economic, and political challenges in Asia-Pacific nations through interdisciplinary, policy-relevant, and comparative research.

A Fresh Perspective on Talent Development

Talent development has long been a priority for nations aiming to boost economic growth and compete globally. Traditionally, countries have focused on building human capital — developing skills and education among citizens — and social capital — strengthening networks and relationships that facilitate cooperation and innovation. Existing strategies, however, often overlook the interconnected nature of various talent flows, including the movement of domestic talent, international talent, and diaspora engagement.

Just like financial theory evaluates a given investment (and its risk and return qualities) by how it impacts a portfolio’s overall performance rather than in isolation, TPT treats talent as a portfolio composed of four key elements, known as the “four Bs”: brain train (domestic talent development), brain gain (attracting foreign talent), brain circulation (movement of talent between home and abroad), and brain linkage (engagement with diaspora communities).

“In the study of national talent development, it is imperative to consider both the human and social capital facets of talent, as a country has multiple layers of talent available for use – domestic, diasporic, and foreign – each with different human and social capital potentials,” write Shin and Gordon. They propose TPT as “a better framework for illustrating and comparing different experiences and impacts of talent development at the national level, which is also key in offering policy prescriptions for human resource strategies.”

Insights from Japan and Singapore

Using Japan and Singapore as case studies, the authors demonstrate how countries can apply TPT to manage their talent portfolios. Japan's economic growth relied on two tiers of human capital: top-level scientists and engineers who adapted and integrated foreign technologies for domestic use, and skilled workers who grasped the fundamentals of these adapted technologies and carried out the manufacturing processes. With limited prospects for brain gain, circulation, or linkage, Japan developed these two layers of its workforce by relying on brain train, cultivating domestic talent for its industrial development.

In the early 1990s, however, Japan’s economy ran into trouble. Its system of brain train was well-suited for driving incremental innovation, but it became restrictive in the rapidly evolving landscape of the early 21st century, which demanded more disruptive innovation. “The Japanese model of human resource development necessitated a robust supply of domestic manpower which now became increasingly difficult to sustain, and a shrinking working-age population also meant labor shortage and reduced productivity,” say Shin and Gordon. “In the language of TPT, Japan urgently needed to diversify its talent portfolio beyond its reliance on brain train to address new risks.”

Recognizing the risks of a skewed talent portfolio, Japan began to rebalance its talent portfolio in the 2010s but has struggled with demographic decline and a slow pivot toward international talent. Despite efforts to internationalize higher education and attract foreign talent, Japan’s diversification of its talent portfolio has been stagnant and was hard hit by the COVID-19 pandemic.

In contrast, Singapore’s approach showcases the benefits of a well-balanced talent portfolio. The city-state’s aggressive pursuit of foreign talent (brain gain) and robust engagement with its diaspora (brain linkage) have made it a leader in global talent strategy. Singapore’s government has continually adjusted its policies, actively rebalancing its talent portfolio to maintain a competitive edge.

Singapore started rebalancing its talent portfolio in the 1990s, not only enhancing its efforts toward brain train but also expanding brain gain by internationalizing higher education and actively promoting a “work-migration” path. In tandem with its brain gain initiatives, Singapore also turned to its diaspora, fostering brain circulation and establishing stronger brain linkages. Through concerted efforts by the government and industry, Singapore has successfully produced and attracted creative talent that allowed it to remain globally competitive.

“Talent Portfolio Theory enables a holistic understanding of the various components of Singapore’s talent strategy and its evolution over time, from the country’s focus on brain train during its catch-up phase to its rebalancing with a successful brain gain, in addition to more recent forays into brain circulation and brain linkage,” Shin and Gordon explain.

Toward Fostering Cultural Diversity

TPT offers a powerful framework for crafting more resilient and adaptive talent strategies. As the global competition for skilled workers intensifies, understanding the dynamics of talent portfolios can help countries mitigate risks, capitalize on opportunities, and avoid the pitfalls of overly narrow approaches to human resource development. For instance, countries experiencing demographic decline, like Japan, can look to Singapore’s model of timely rebalancing as a guide for policy adjustment. Businesses also stand to benefit from TPT. The framework encourages companies to look beyond the availability of local talent and consider the broader talent ecosystem, including international talent flows and diaspora engagement.

Shin and Gordon emphasize that structural and sociocultural factors often limit policy options for building and rebalancing talent portfolios. Japan and Singapore illustrate that developed countries with abundant domestic opportunities are better positioned to retain talent and attract brain gain, whereas developing countries often experience talent outflows, favoring brain circulation or linkage (as seen in China and India). Additionally, while ethnically homogenous countries like Japan may prefer to rely on domestic and diasporic talent, multiethnic countries like Singapore can better attract foreign talent and engage in brain gain.

The contrasting experiences of Japan and Singapore underscore the critical importance of fostering cultural diversity to attract foreign talent. Singapore’s success with brain gain, compared to Japan’s more mixed outcomes, largely stems from its multicultural environment, shaped by policies that protect minority rights and actively promote respect for diverse ethnic groups. To remain competitive in the global talent market, countries must prioritize sociocultural policies that cultivate openness, tolerance, and diversity. By embracing these values, nations can attract the best and brightest minds, ensuring their place in a rapidly evolving global economy.

The Indo-Pacific, the world’s fastest-growing region in the global economy, faces complex geopolitical and geo-economic risks. Amid Russia’s unrelenting war in Ukraine and its strengthening ties with a bellicose North Korea, China continues to exert its power through economic coercion and diplomatic pressures. Meanwhile, Asia's established and aspiring democracies must rise to the challenge of preventing further democratic decline and revitalizing their institutions. These trends dominated the agenda at the recent Nikkei Forum, The Liberal International Order in the Indo-Pacific.

Cohosted by Shorenstein APARC, the Keio Center for Strategy at the Keio University Global Research Institute, and Nikkei Inc., the forum was held on June 24, 2024, at Keio University and featured Freeman Spogli Institute (FSI) and Keio experts. Its first session, moderated by Akio Fujii, executive chair of the editorial board at Nikkei Inc., included panelists Oriana Skylar Mastro, FSI center fellow at APARC, and Michael McFaul, the director of FSI. They examined the geopolitical effects of the war in Ukraine, deterrence and provocation in Taiwan, and their implications for security in the Indo-Pacific. The second session, moderated by Nikkei commentator Hiroyuki Akita, included Gi-Wook Shin, the director of APARC and director of the Korea Program, and Kiyoteru Tsutsui, the deputy director of APARC and director of the Japan Program. Panelists considered the connectivity of European and Indo-Pacific security, the rise of authoritarianism and global populism, international partnerships, and various ongoing efforts to protect the liberal international order in the Indo-Pacific. The session recordings in English and Japanese are available on the Nikkei Global Events YouTube channel. 

Conflict, Deterrence, and Provocation

Opening the first session, McFaul underscored the broader geopolitical implications of the invasion of Ukraine. Emphasizing the significance of Russian President Vladimir Putin's recent visit to North Korea, he highlighted the intertwined nature of European and Asian security. McFaul argued against the notion that global security should solely focus on China, stressing that Putin's actions demonstrate a critical link between European security concerns and global stability.

McFaul offered a mixed assessment of the war in Ukraine. He praised the international community's response in providing military support and economic aid to Ukraine, stating, “I have been mostly impressed with how the liberal free world, including Japan, came together to provide weapons first and foremost, to provide economic assistance secondarily, and to put in place sanctions [agsint Russia].” Yet he also criticized delays in Western responses, attributing them partly to internal political dynamics, including actions taken during the Trump administration.

McFaul expressed concern that Russian defensive positions now hinder prospects for a breakthrough on the Ukrainian side, with future developments tied to the outcome of the next U.S. presidential election. He underscored the importance of democratic nations organizing against autocratic regimes, framing the conflict in Ukraine as a critical battleground for liberal democratic values amidst global power struggles. McFaul described that “what I see, tragically, is the breakdown of the liberal International order. We're going back to an earlier period where there was not one order, but two, and maybe many orders, and one of those divisions is between autocrats and democrats.”

Center Fellow Oriana Skylar Mastro addressed the moderator's query about Ukraine’s implications for East Asia by delving into the complexities of deterrence and provocation in relations with China. She highlighted three main concerns: the blurred distinction between actions that deter China versus those that provoke it, the conflicting priorities of reassuring allies versus deterring adversaries post-Ukraine, and the delicate balance between showcasing military capabilities and demonstrating resolve. Mastro argued that while military build-up might deter China, political gestures, such as enhancing Taiwan's international stature, could provoke tensions.

She emphasized the challenges in aligning U.S. and Japanese strategies, especially regarding Taiwan, where differing interpretations of deterrence and provocation persist. “Attempts to signal resolve can be much more provocative than attempts to demonstrate capabilities [...] It seems that the United States and Japan at least have to be on the same page about what is reassuring versus what deters China, what deters China versus what provokes China, and what is more important, capabilities or resolve,” she explained

Mastro stressed the importance of nuanced policy decisions considering how actions perceived as deterrence in one context might provoke, in another, thus impacting regional stability. “I prefer for the United States to speak softly and carry a big stick, meaning we have a lot of capability but we should stop talking about it so much,” she said. She underscored the U.S. and Japan must coordinate closely on strategic messaging to ensure a cohesive approach to managing China's responses and maintaining regional security.

FSI and APARC scholars meet with Yoshimasa Hayashi.

During their visit to Tokyo, the Stanford delegation met with Japanese government officials, including Chief Cabinet Secretary Yoshimasa Hayashi.

Michael McFaul gave an interview to the Japan Broadcasting Corporation's (NHK) prime-time news show News 7, which you can view here >

Manifold Pressures on Liberal Democracy

During the second panel, Gi-Wook Shin discussed the contemporary challenges facing liberal democracy, citing instances of foreign influence from authoritarian states like Russia and China. He began with a personal anecdote from Mongolia, where a friend running for parliament reported intimidation by authorities allegedly supported by Russia. Shin drew parallels to previous instances of interference, such as Russia's involvement in the 2016 U.S. election and China's actions in Taiwan and Korea.

In contrast to the American and British leadership against fascism and communism in the 1930s and 1940s, Shin described the current crisis in global leadership to safeguard liberal values. He questioned whether any country could now step up to combat rising authoritarianism, citing Modi’s India and alliances forming between leaders like Putin, Kim Jong-Un, and Xi Jinping. “I don't think I can say with confidence that the U.S. can defend liberal democracy, I don't see any leader in Europe either, and I don't see anyone in Asia,” he lamented.

He called for strategies to restore and strengthen global leadership in promoting and defending liberal democracy against mounting authoritarian challenges from China, Russia, and others.

In his remarks, Kiyoteru Tsutsui addressed these global challenges to democracy and emphasized Japan's role in safeguarding it. Tsutsui noted Japan's relatively stable democratic environment compared to nations experiencing greater political divisions. Despite recent economic fluctuations in the country,, “Japanese democracy is functioning quite well,” he argued. “Apart from that, Japanese society is peaceful, safe, and stable. Although the economic growth rate is low, people's discontent is not gushing out and they can live quite a good life.”

Tsutsui emphasized Japan's economic and diplomatic contributions to promoting democracy, citing its trusted role in assisting Asian countries through the Japan International Cooperation Agency (JAICA). He suggested Japan could assert its influence not only through traditional democracy promotion but also by establishing standards in areas like infrastructure and public health. “If we look at the global rankings, Japan has quite a big influence.” He underscored the importance of Japan's discreet but impactful diplomacy in upholding democratic values globally, including its involvement in initiatives like the Free and Open Indo-Pacific Strategy, The Quad, and CPTPP. Through practical actions and international cooperation, he said, Japan  demonstrates its commitment to democratic values and counters global trends of democratic decline. Throughout the forum, the panelists agreed that the Indo-Pacific remains at the center of the global struggle between democracy and autocracy. They emphasized the need for collaborative action to bolster democratic institutions worldwide and urged nations to unite quickly to prevent further escalation of tensions in the region and beyond.