What the anti-immigration nuts don't understand

There is some sort of insanity running loose in the country, led by the likes of Tom Tancredo, that says all immigrants to the U.S. are criminals from Mexico. Last week, the government released a study showing the majority of immigrants to major U.S. cities are involved in high paying white collar and professional jobs, and that many of them have brought substantial amounts of money with them. Of course, this leaves out agricultural areas that are totally dependent on immigrant labor. Still, it makes the point that, as usual, the issue in nuanced.

But best of all, today, Tom Friedman describes a start up company in St. Louis that make the same point. The story also illustrates Tom's major idea, The World Is Flat.

Enjoy Tom Friedman at his best.

April 18, 2010
Op-Ed Columnist
Just Doing It
By THOMAS L. FRIEDMAN

St. Louis

You’ve heard that saying: As General Motors goes, so goes America. Thank goodness that is no longer true. I mean, I wish the new G.M. well, but our economic future is no longer tied to its fate. No, my new motto is: As EndoStim goes, so goes America.

EndoStim is a little start-up I was introduced to on a recent visit to St. Louis. The company is developing a proprietary implantable medical device to treat acid reflux. I have no idea if the product will succeed in the marketplace. It’s still in testing. What really interests me about EndoStim is how the company was formed and is being run today. It is the epitome of the new kind of start-ups we need to propel our economy: a mix of new immigrants, using old money to innovate in a flat world.

Here’s the short version: EndoStim was inspired by Cuban and Indian immigrants to America and funded by St. Louis venture capitalists. Its prototype is being manufactured in Uruguay, with the help of Israeli engineers and constant feedback from doctors in India and Chile. Oh, and the C.E.O. is a South African, who was educated at the Sorbonne, but lives in Missouri and California, and his head office is basically a BlackBerry. While rescuing General Motors will save some old jobs, only by spawning thousands of EndoStims — thousands — will we generate the kind of good new jobs to keep raising our standard of living.

It all started by accident. Dr. Raul Perez, an obstetrician and gynecologist, immigrated to America from Cuba in the 1960s and came to St. Louis, where he met Dan Burkhardt, a local investor. “Raul was unique among doctors,” recalled Burkhardt. “He had a real nose for medical investing and what could be profitable in a clinical environment. So we started investing together.” In 1997, they created a medical venture fund, Oakwood Medical Investors.

Perez had a problem with acid reflux and went for treatment to the Mayo Clinic in Arizona, where he was helped by an Indian-American doctor, V. K. Sharma. During his follow-ups, Dr. Sharma mentioned those four words every venture capitalist loves to hear: “I have an idea” — use a pacemaker-like device to control the muscle that would choke off acid reflux.

Burkhardt, Perez and Sharma were joined by Bevil Hogg — a South African and one of the early founders of the Trek Bicycle Corporation — who became C.E.O. Together, they raised the initial funds to develop the technology. Two Israelis, Shai Pollicker, a medical engineer, and Dr. Edy Soffer, a prominent gastroenterologist, joined a Seattle-based engineering team (led by an Australian) to help with the design. A company in Uruguay specializing in pacemakers is building the prototype.

This kind of very lean start-up, where the principals are rarely in the same office at the same time, and which takes advantage of all the tools of the flat world — teleconferencing, e-mail, the Internet and faxes — to access the best expertise and low-cost, high-quality manufacturing anywhere, is the latest in venture investing. You’ve heard of cloud computing. I call this “cloud manufacturing.”

“In the aftermath of the banking crisis, access to public markets is off-limits to start-ups,” explained Hogg, so start-ups now have to be “much leaner, much more capital-efficient, much smarter in accessing worldwide talent and quicker to market in order to do more with less.” He added, “$20 million is the new $100 million.”

And technology is making this all possible. Chris Anderson of Wired Magazine pointed this out in a smart essay in February’s issue, entitled “Atoms Are the New Bits.”

“ ‘Three guys with laptops’ used to describe a Web startup,’ ” he wrote. “Now it describes a hardware company, too” thanks to “the availability of common platforms, easy-to-use tools, Web-based collaboration, and Internet distribution. ... Global supply chains have become scale-free, able to serve the small as well as the large, the garage inventor and Sony.”

The clinical trials for EndoStim are being conducted in India and Chile. “What they have in common,” said Hogg, “is superb surgeons with high levels of skill, enthusiasm for the project, an interest in research and reasonable costs.” This is also part of the new model, said Hogg: Invented and financed in the West, further developed and tested in the East and rolled out in both markets.

What’s in it for America? As long as the venture money, core innovation and the key management comes from here — a lot. If EndoStim works out, its tiny headquarters in St. Louis will grow much larger. St. Louis is where the best jobs — top management, marketing, design — and shareholders will be, said Hogg. Where innovation is sparked and capital is raised still matters.

You don’t hear much about companies like this. Our national debate today is dominated by the ignorant ramblings of Sarah Palin, talk-show lunatics, tea parties and politics as sports — not ESPN but PSPN. Fortunately, though, we still have risk-takers who are not paying attention to any of this nonsense, who know what world they’re living in — and are just doing it. Thank goodness!