SALIEGH SALAAM: Harvard decision shows US innovation flywheel is slowing

In 2022 I relocated from SA to Cambridge, Massachusetts, for a sabbatical year at Harvard University and Massachusetts Institute of Technology (MIT) Sloan. Immersed in the dynamism of Kendall Square, I saw first hand what powers the world’s most formidable innovation ecosystem: open institutions, global talent, deep capital and a culture of trust. These elements formed a self-reinforcing flywheel — one that now shows signs of slowing. 

On May 22 the US government revoked Harvard’s ability to enrol international students, triggering immediate legal challenges and widespread condemnation. Some viewed it as political theatre. But for long-term investors it raised a deeper concern: why inject uncertainty into one of America’s most enduring advantages — its ability to attract and integrate top global talent? 

The US still leads in research, venture capital and higher education, but durable leadership depends on more than scale. It requires system-level reliability: institutional openness, reputational gravity and policy coherence. Even temporary volatility can reshape long-term perceptions — especially when peer nations are signalling the opposite. 

The headline numbers remain strong: 

• More than 1.1-million international students in the US;
• $50bn-plus annual economic contribution;
• 56% pursue science, technology, engineering & mathematics (Stem) fields; and
• At Harvard alone about 6,800 international students generate about $380m in local spending. 

But these students are more than economic contributors. They fuel labs, launch start-ups and drive breakthrough discoveries. The flywheel logic is simple: talent-capital-research-discovery-more talent. Disrupt that input and the engine slows, subtly at first, then structurally. 

Platform risk a macro concern 

Harvard’s case won’t cause a sudden exodus. But it compounds a growing pattern of mixed signals. While countries such as Canada, Singapore, Germany and China are broadcasting strategic openness, the US appears increasingly unpredictable. 

Within days of the Harvard decision Hong Kong University of Science & Technology offered affected students expedited enrolment and housing, and Japan’s education ministry encouraged its universities to follow suit.

The data already reflects migration in motion. The number of US-based researchers applying for jobs abroad is up 32% year on year and non-US researchers applying for US positions are down 25%. This is not theory. It’s a reallocation of talent, attention and eventually, capital. 

Before 2024 the US was a trusted global platform with reliable talent inflows, the institutional premium was justified and it was part of a self-reinforcing global network.

Post-2024 policy volatility has raised platform risk, input friction has weakened innovation throughput, reputation risks compression of valuation multiples and declining trust has weakened international linkages.

As former Reserve Bank of India governor Raghuram Rajan recently warned, foreign students have long underpinned America’s innovation engine. Undermining that inflow risks long-term decay — economic and intellectual. 

Global capital is reacting

From December 31 2024 to April 30 2025 non-US equities (MSCI EAFE) outperformed the S&P 500 by nearly 17%. Part of that shift reflects valuation. But a growing share reflects platform risk — investors recalibrating exposure to system-level volatility. 

Take Toronto-based Cohere, now valued at $5.5bn and backed by Oracle and Microsoft Azure. Its rise is no accident. Canada’s clear immigration policy and co-ordinated ecosystem have turned talent strategy into national strategy. 

MIT Sloan has written extensively on this trend: the most successful innovation platforms are no longer merely historic — they are deliberately engineered for both innovation and resilience. 

Capital is also evolving. It is no longer just chasing opportunity. It is selecting system design. 

Yes, the US still leads. But flywheels don’t stop abruptly — they slow. Quietly, then significantly. What capital now watches for is not just short-term noise. It is strategic consistency under pressure.

The strength of the US was never just its universities or markets. It was how its institutions, policies and values worked together to compound trust over time. That trust now faces its first real test in a generation. And capital — such as talent — has options. 

• Salaam is chief investment officer at Vunani Fund Managers.