At his Consumer Electronics Show keynote, Intel (NASDAQ:INTC)CEO Brian Krzanich announced his company wants to take on the diversity gap, not just at his company, but in the greater tech industry. For unfamiliar readers, diversity in technology has been hard to come by. For example, in Google's recently released diversity report, the company reported a workforce that's only 30% female, 2% African-American, and 3% Hispanic.
And it's not just Google: Yahoo, Apple, and LinkedIn, among others, are woefully lacking when it comes to diverse workforces. According to the last U.S. Census population projections, African-Americans are 13.2% of the United States' population, Hispanics/Latinos are 17.8%, and women are a little over 50%. Of the mentioned companies, LinkedIn "leads" on women employees with 39%; Apple takes top spot with 7% African-American and 11% Hispanic employees, although it should be mentioned Apple has a large, "technology-lite" retail workforce.
To be fair to these technology giants, they correctly note the problem is centered in a lack of qualified candidates seeking positions in technology. But a conversation is happening in Silicon Valley, and that's a good thing. And for Intel to donate money to this cause is admirable.
But when I heard what the company's $300 million is going toward, I was left thinking the company's either not serious about addressing this concern, or simply not thinking of the most direct way to solve this problem. Personally, I think Intel could use this money more effectively.
A new pipeline is needed
According to The New York Times, the company plans to use that money to fund engineering scholarships and to "support" historically black colleges and universities. And, again, these are both admirable goals, but it's a rather indirect way to solve the problem -- not to mention the scholarship route has been done before. Intel, working in concert with these other tech firms, has the potential and financial wherewithal to institute a new and effective pipeline to address the diversity gap: an on-the-job-based apprenticeship program consortium with specific skill training.
Let me be clear, this is not to demean historically black colleges -- or any college, for that matter. This is to address the underlying economics of a college degree; economically, a degree is merely a signal an employee has the potential to learn -- and more recently, an expensive signal at that. And in the fast-moving fields of technology, in many cases a degree is not a hard requirement for success -- if you don't believe me ask Mark Zuckerberg or Bill Gates.
And this isn't just my opinion, many are questioning the current value of a four-year degree over direct, applicable skills and training. Andrew McAfee wrote an intriguing article, "Stop Requiring College Degrees," that outlined there may be better ways to gauge a prospective employee's aptitude. But the real story is where the article was published: The Harvard Business Review, essentially the bastion of higher education.
Why this matters for all stakeholders, including shareholders
On the surface, there's a large contingent that appears to be unaffected by homogeneous workforces. However, that's a rather myopic way of looking at the problem. For example, in the field of banking a recent MIT Sloan Business School study found that "ethnic diversity leads all traders, whether of majority or minority ethnicity, to price more accurately and thwart bubbles." The study concluded that "overpricing was higher in homogeneous markets because traders are more likely to accept speculative trades."
Therefore, it's entirely possible a more diverse Wall Street could have predicted the risk more effectively in the lead up to the housing bubble, and the $700 billion check taxpayers cut it in 2008 could have been lessened -- or avoided altogether. In addition, more effectively aligning a prospective employee to a career they truly desire has the potential to keep that employee a motivated, productive member of society that leads to more tax dollars and GDP-boosting spending power, among other benefits.
Building upon that fact, shareholders have even more to benefit from a diverse workforce and leadership. Nonprofit firm Catalyst found that companies with the most women on its board of directors outperformed those with the least women 16% in return of sales and return on invested capital by 26% in a 2011 study, although it is important to note correlation is not causation here.
This outperformance probably has to do with a diverse field of experiences to pull from. Matter of fact, a study published at the National Academy of Sciences found that groups of diverse problem solvers can outperform groups of homogeneous higher-ability problem solvers.
Finally, as an added benefit, diverse employees have the ability to quickly act on hidden trends in their communities, giving employers insight into minority markets that are experiencing increased buying power at an "exponential rate."
But first, we need a new conversation
Unfortunately, discussions about diversity anywhere -- not just in the workforce -- seem to take on the form of relitigating the Civil Rights Act of 1964, which was signed into law over 50 years ago. In order to address a new economy, we need to embrace new thought on the subject. Diversity needs to be from a broader lens, and economic upbringing and current opportunity gaps need to be considered, in addition to race and sex.
Personally speaking, as an African-American raised in an economically depressed area, I can truly say both are barriers to long-term wealth and should be addressed. Merely discussing this subject in terms of race, and not in the broader context of economic opportunity and background, has the potential to turn many off and might not provide the ladder to success for those who have the greatest need.
As a sad commentary of American psyche today, many Americans feel their children's standard of living will be worse off than theirs, crushing the real American Dream. Investing in these communities could do a great deal for those the postrecession economic recovery forgot.
So, Intel, the ball is in your court. After spending up to a reported $5 billion for the Fab 42 factory that does not appear operational, how about you spend some money filling it -- or another U.S. factory -- with economically diverse, well-trained employees? In the end, technology has the potential to solve these long-term, complex issues that have beguiled governments and legislatures for decades. Intel and other tech firms can help fix this problem, but not by taking a page from the “cut a check; clear your conscience” playbook of yesteryear.