Kai-Fu Lee was waiting serenely at the upscale sushi and seafood buffet he had selected for our meeting in Redmond, Washington. One thing about Lee: Friends let him choose the restaurant. He keeps copious notes on scores of establishments, so dining out with him is pretty much a sure bet.

Over the eatery's din, Lee spoke eloquently about two of his favorite subjects: China and its students. The nation, he observed, was hungry to transform itself from an outpost of low-cost manufacturing to a hub of technology creation--and it boasted an enormous and growing reservoir of newly graduated engineers and scientists.

The challenge for foreign companies was to help those new technologists leaven their traditional Asian values with a more Western mind-set. "What it is going to take for success in the 21st century is a combination of both," Lee explained. "How you adjust the humility with confidence, the perseverance with self-criticalness, the courage with the serenity."

It was May 31, 2005, and Lee was still a vice president at Microsoft. Although he was working in Redmond then, few knew China better. Microsoft had hired him in 1998 to open its research lab in Beijing.

The lab attracted top Chinese computer-science graduates, and it has since made its presence felt in just about every Microsoft business, contributing key algorithms for MSN's new search engine and developing ever more realistic graphics for Xbox games.

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Lee was promoted to Microsoft's headquarters after just two years in Beijing, but he returned often to China, giving scores of lectures aimed at helping university students learn how to prosper in a modern, internationally competitive world. He was becoming, in fact, an A-list celebrity on Chinese campuses, a Brad Pitt-meets-Albert Einstein blend of movie star and scientific statesman.

His Mandarin-language book, Be Your Personal Best, sold more than 400,000 copies within six months of its debut last September. And his Web site -- www.kaifulee.com -- draws tens of thousands of Chinese seeking advice on education and work.

All of which was why Microsoft's archrival, Google, was at that moment dangling a package worth at least $10 million to lure him away.

Google wanted Lee to help it conquer the search market in China--a meager $278 million in 2005 but growing at a dizzying pace--where it currently trails homegrown Baidu.

Even more important is the market for talent. In 2004, roughly 350,000 computer scientists, information technologists, and engineers graduated from Chinese institutions of higher education, compared to 140,000 in the United States, according to a study by the U.S. National Academies, the nation's top science advisory body.

Soon after our dinner, to Microsoft's utter dismay, Lee would accept Google's offer. His new job, which comes with the title vice president for engineering and president of Google Greater China, is to create a talent magnet, building an R&D center that will tap into the nation's trajectory and mining the best and brightest from Chinese universities to feed Google's own growth. His story speaks volumes about the global race to apply talent to innovation--and what it will take to win.

The Guanxi Imperative

The fact that Lee, who was raised in Taiwan and the United States, has found such an audience in China underscores the importance there of role models who can thrive in both Asian and Western cultures. He was born in Taiwan in 1961, the youngest of seven children. Both his parents came from mainland China.

His father, a Nationalist Party legislator during the 1949 communist revolution, fled to Taiwan for safety; it took a year for Lee's mother to escape with their then five children.

Lee's oldest brother moved to the United States and took in Kai-Fu, who was 11 at the time. Lee eventually earned his bachelor's degree with highest honors from Columbia and a PhD in computer science at Carnegie Mellon, where he pioneered an approach to speech recognition based on statistics and machine learning.

After a brief stint on the CMU faculty, Lee joined Apple Computer, where he helped develop QuickTime into a standard multimedia format, and then Silicon Graphics. In 1998, he was already a minor Silicon Valley legend when Microsoft came knocking, asking him to open a China research lab.

Lee had three key goals in founding the Microsoft lab. One was obvious: to do great research that would feed new products. The second, which in 1998 put Microsoft far ahead of its competition, was to open a novel conduit for attracting the untapped talent in Chinese universities. The third and most ambitious was to help create the innovation infrastructure--starting with world-class education and training for students--that would enable China to become a more integral part of the modern world.

The three goals, clearly, were intertwined. To attract students, for example, Lee had to show government and university officials that he was not just grabbing the best talent but was also seeking to create a system from which everyone would benefit.

In short, Lee needed to build guanxi, the networks of mutually beneficial relationships essential to success. In China, there's no such thing as a purely business relationship. Instead, you must blend formal relationships with personal ones, often on different levels. And even as you take, you must also give back.

Lee understood this from the outset. While some at Microsoft leaned toward building the new lab in business-savvy Shanghai, he chose Beijing, which was home to more top universities and closer to key government agencies.

He and his colleagues then called on universities and government officials, entered into academic collaborations, and spoke to thousands of students about what was needed to succeed in the 21st century. The Microsoft lab became the top draw for Chinese computer-science graduates and built top programs in speech recognition, wireless, multimedia, graphics, and search.

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For his success, Lee was called back to Redmond and named vice president of Microsoft's natural interactive services division, charged with commercializing features like text-to-speech technologies. But last May, when he learned that Google planned to establish a China R&D lab, he emailed CEO Eric Schmidt, expressing interest in the job.

The Google brass bit hard, offering Lee a $2.5 million signing bonus and another $1.5 million after one year, plus stock worth more than $5 million.

Lee inked the deal last July. Microsoft quickly sued to enforce its noncompete clause, drawing headlines around the world. But the firms settled within a few months--and last fall, Lee began putting his guanxi to work for Google.

"It's Overwhelming."

Lee rushed to China for the fall job interview season. Nearly simultaneously, he launched into a book tour, visiting 25 universities in three weeks. Be Your Personal Best is rooted in Lee's imperative of incorporating the best attributes of the United States and the Middle Kingdom.

But it also offers something deeper and more personal, describing three concentric circles--representing value, attitude, and action--around which people should evaluate, plan, and live their lives.

It's a self-help book in the best American tradition, but tailored to Chinese tastes--and brilliantly so. Even Lee was astounded by the turnout for his appearances, with an estimated 60,000 young people cramming into halls in the course of the tour.

Tickets to the "free" talks were scalped for up to $55 each, a staggering sum for Chinese students, and an online survey ranked him as the most influential person on Chinese university campuses.

"Kai-Fu is a pop star among university students in China," says Wei Sun, dean of the Beihang University College of Software Engineering in Beijing, who has worked with Lee since his Microsoft days. "He is an eloquent speaker. He prepares well. His topics are right on with what the students are keenest to hear."

One talk, he remembers, was simply about making presentations, a skill unknown to many Chinese students. Lee carried it off like a motivational speaker. "He was getting into Martin Luther King, 'I have a dream,' " says Sun. "He did things they have never seen before." Lee's message about realizing one's potential found even wider resonance. "It's overwhelming," says Sun.

Students are flocking to Lee's volunteer-run Web site in growing numbers. From about 30,000 registered users just before he left Microsoft, the site has swollen to 110,000 users today, many of them seeking help with fundamental issues of career and life.

Typical questions: "Can't female students be software engineers?" "I'm a student of computer science but more interested in marketing and economics. Do you think it makes sense for me to get a master's degree in computer science?"

Not surprisingly, Lee's soaring appeal is already helping Google. Some 10,000 r�sum�s arrived at its Beijing offices in the first two months; the figure is several times that now. Lee had intended to hire 50 R&D staffers during his first year. Now, he notes, "we have found so much talent in China, we have already exceeded our hiring goals. It appears I will easily double that."

Whatever pull Google has for Chinese graduates, for now it's often Lee himself who seals the deal. Xin Zheng, who earned his doctorate in computer science from Tsinghua University early this year, turned down a Microsoft job to join Google as a software engineer.

"Kai-Fu is a leader of life values for Chinese students," Zheng says. "He knows a lot of Chinese students' puzzles and problems. His instructions lighten the road ahead."

Lee, of course, must parlay his personal appeal into a sustainable R&D organization--which comes back to building guanxi. "Part of being successful in doing business in China is to be viewed as sincere, trying to do something positive," Lee says. "[There's] no substitute for that."

So Lee has already hosted a nationwide programming competition, dubbed CodeJam, that drew 13,500 entrants. The final round, held live in Beijing, consisted of three programming problems worth 1,500 points.

Lee notes that only "a handful" of programmers in the world typically exceed 1,000 on similar tests. To his astonishment, four of the 50 CodeJam finalists topped that figure. The winner, Chuan Xu, a student at Zhejiang University, will join the Google lab after he graduates this spring.

Reversing the Flow

In April, Google announced a Chinese-language brand name for its search engine: Gu Ge, or "harvesting song." But before they harvest anything, Google's new Chinese scientists still have much to learn.

At Microsoft, Lee found that many new hires, accustomed to following explicit instructions, had a hard time with Western management, where it is common to confront a boss and where seizing the initiative without specific directions is often prized.

To speed his recruits' progress, to help East meet West, Lee is trying out new Internet-based training and team-building exercises--sometimes even before new hires begin work. Lee is also seeking mentors, Mandarin-speaking experts skilled in the ways of Western research and development who will advise the young recruits.

The hope is that, by year's end, Lee's bright-eyed researchers will be on the way to creating technologies that improve the company's standing in China. In the past, Lee notes, Western firms have "localized" products created elsewhere, tweaking menus or changing documentation for Chinese users.

That is no longer enough. "User behaviors and preferences are different in different parts of the world, so you can't take a one-size-fits-all approach to innovation," he says.

So the R&D center, staffed by homegrown talent well-versed in local preferences, will create products initially for the Chinese market: Search and paid advertising for mobile phones are likely, as is Chinese speech recognition as a search interface.

Eventually, though, Lee expects the lab to help change the flow of innovation worldwide. In areas such as mobile-phone usage, China is leading the world. "So we will build a product first in China and then understand the product and move it back to the United States or Europe when that market matures," he says.

That chance to make a global impact is another big drawing card for the Google center. Yang Liu, an early hire lured from Sybase's China operation, puts it this way: "A group of smart and great people could do something really great for the world."

It's clear already that realizing such ambition will be more than a matter of nurturing top talent--and that meshing East with West won't be a pro forma exercise. Google, which recently launched Google.cn, attracted the wrath of many in the United States by agreeing to the self-censorship dictated by Chinese laws, which includes blocking search results on sensitive topics such as "Tibetan independence."

In February, Lee was hounded on the subject when speaking at UC Berkeley and Stanford University. Lee declines to comment on the censorship issue, referring to Google's testimony at a congressional hearing that it does far more good than harm by offering its services in China and that it simply must respect the regulations of different governments.

Google is, of course, playing with a double-edged sword. The democratic urge it represents--its mission is "to organize the world's information and make it universally accessible and useful"--is fundamentally at odds with China's restrictive policies.

Lee must appreciate that. Given his commitment to working with Chinese officials and supporting change from within, though, it is almost inconceivable that he does not support Google's line.

That stance may yet compromise the search giant's global ambitions. In the Middle Kingdom, though, it seems unscathed. In fact, Google is hot. Lee still draws excited crowds wherever he speaks. Top tech grads clamor to work for him. A new generation of talent is rising, raw but potent, eager to change the world.

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