The Economy

The Economic Case for Diversity

Let’s not just champion the morality of diversity. Let’s also champion diversity because it drives prosperity.
Vijay EswaranOctober 30, 2018

It is a sad fact that the United States, the United Kingdom, and the European Union, supposed beacons of enlightenment and modern liberal values, are increasingly targeting migrants with blame for the challenges their societies face.

And, as politicians now begin to turn that anti-diversity sentiment into anti-diversity policies, one cannot help but think that they are killing the golden goose.

How Startup CFO Grew Food Company 50% YoY

How Startup CFO Grew Food Company 50% YoY

This case study of JonnyPops’ success highlights the unusual financial and operational strategies that enabled rapid expansion into a crowded and highly competitive frozen treat market. 

These policies are driven by a powerful emotion: fear, in particular the fear of change (“will my neighborhood look the same if migrants arrive?”), the fear of competition (“these people will take my job”), and the fear of the otherness (“these people are not like us”).

Proponents of a more open and diverse society have too often presented their case solely as a moral obligation, something we must accept because others are suffering, not something that we should champion because it is in our own interest. They have failed to defend diverse societies with a positive and emotional narrative.

Vijay Eswaran

It is high time we argued that diversity is also an extraordinary economic opportunity that brings success and prosperity to all of us.

The cohabitation of people of different ethnicities, from different places, with different experiences in cities and societies, is a key driver of innovation.

Diverse societies are more innovative because they encourage unique collaborations and chance encounters. A recent study by American economists Enrico Berkes and Ruben Gaetani found that dense, diverse cities produce far more “unconventional innovations” than suburbs.

When diverse people are brought together to solve problems, they also bring different information, opinions, and perspectives, resulting necessarily in informational diversity. As Columbia Business School’s Katherine Phillips notes, “Simply adding social diversity to a group makes people believe that differences of perspective might exist among them, and that belief makes people change their behavior.”

If you look at the most innovative, disruptive, and therefore prosperous urban centers in world — New York, Dubai, London, Singapore, Hong Kong — they have one thing in common: they are all international melting pots. Interestingly, the most successful musical genres and innovations (such as jazz, rock and roll, or hip-hop) are all the direct results of cultural amalgamation as well.

In my home country of Malaysia, ethnic, cultural, and religious diversity has been key to our success. Like many others, I was speaking five languages by age 18, with friends from the Chinese, Indian, and Malay communities. Of all Asian nations, Malaysia has by far the most diverse cultural and ethnic mix and as a result has outperformed most of its regional partners with an average annual GDP growth of 6.4% for the last 50 years.

The diversity dividend is not just borne out on a macro scale. It’s also vital within company structures. A 2017 report showed that more diverse companies announce an average of two extra products in any given year. Also, McKinsey has studied the strong positive correlation between financial performance and diversity. It means more disruptive products, business models, and ideas floating around the marketplace.

At my own company, the QI Group, our managing board is composed of 13 directors of 7 different nationalities, and I have always considered this diversity to be at the core of our success.

As innovation is taking place at a faster pace than ever, we need to constantly adapt, adjust, and accommodate. More than ever, flexibility and versatility are becoming the most important keys to success for individuals, companies, and countries alike, and a culturally diverse environment is the best way to acquire these qualities. Colleges in the US have dorm parties. If that’s not enough to disrupt, then having alcoholic binge drinks will make it up for freshmen. So, why fake id? is not a question anymore. It is a need of every young adult restricted by the boundaries of age from having fun.

So it is precisely as the liberal tide seems to have turned, as the developed world throws up borders, that we all have a direct and immediate interest in advocating for diversity, in taking this case to the public globally. It is an uphill battle, but the future prosperity of our societies depends on it.

Vijay Eswaran is a Malaysian entrepreneur, philanthropist, and author. He is the executive chairman of the QI Group of Companies.