Legendary value investor Joel Greenblatt of Gotham Asset Management has a new book coming out. His book is entitled Common Sense, and it focuses on several big policies, including immigration, education and banking regulations. He sat down with ValueWalk to talk about some of the issues in his new book and about value investing.
This interview has been broken down into multiple parts. Click here for Greenblatt's views on education. Click here for his views on banking regulations. Click here for Greenblatt's explanation of what's happening with value investing.
The U.S. Federal Reserve is treading carefully with raising rates amid the widespread economic, macro and geopolitical uncertainties sweeping around the world. The Fed raised its target level as high as 20% in the early 1980s to deal with runaway inflation, but we're a far cry from that today — a time when inflation threatens Read More
Joel Greenblatt: U.S. is "blowing it" on immigration
We also talked about immigration, which is another topic Greenblatt talked about in his book Common Sense. He said the U.S. is "clearly blowing it" in this area, especially the area of skilled immigration. Greenblatt said the Business Roundtable ranked the U.S. second to last in welcoming skilled immigrants. The only country that was worse than the U.S. was Japan, which he said was embarrassing because Japan actively discourages immigration.
Greenblatt drew attention to data from the National Academy of Sciences, Engineering and Medicine, which found that on average, every skilled immigrant the U.S. contributes between $500,000 and $1 million in taxes from themselves and their descendants. Further, for every skilled immigrant that's brought in, it creates two jobs for people who are already here. He noted that Bill Gates has said that for every H-1B hire Microsoft makes, they add an average of four additional employees to support them.
"We shouldn't be second to last in the world," Greenblatt said. "We should be number one. Canada and Australia let in an unlimited amount of skilled immigrants. They set government standards for skills they have to have. We have an H-1B program that lets skilled immigrants work here, but our program is difficult, takes a long time, is expensive and very uncertain."
Suggestion for improving immigration
Greenblatt notes that it is expensive to take in unskilled immigrants, so he has a suggestion for how to tweak the H-1B program. Instead of the low caps on the number of skilled immigrants that are currently set, he suggests taking in an unlimited number of them and charging employers a 20% tax on top of their salary for five years before they get a green card. That will keep immigrants from taking jobs from skilled workers who are already here.
"Countries that lack opportunity or political freedom or safety have a brain drain," Greenblatt said. "Everyone who has those skills would like to leave there, and we should be the opposite. We should be a brain magnet. We have opportunity, political freedom, safety, we have those things in spades."
He also noted that immigration is a controversial topic because people debate how welcoming the U.S. should be. Greenblatt said taking in unskilled immigrants is expensive, but for every one or two skilled immigrants, the U.S. could take eight to 10 unskilled immigrants, supported by the 20% tax paid by the employer of the skilled immigrants. Another option is to take eight to 10 children out of poverty in the U.S. Regardless, he said skilled immigrants are like a free goldmine.
"Let's take the free money and do both," he said. "Help people who are already here and help people who want to come here."
This article first appeared on ValueWalk Premium.