(FORTUNE Magazine) – IN THE TRUNK of Robert Nakasone's car is a brown government-issue blanket. It was the blanket handed to his mother when she, like thousands of other Japanese Americans, was ''relocated'' into camps during the anti-Japanese hysteria of World War II. The blanket, which Nakasone's family now uses for picnics, reminds him of how far he has come. A graduate of the University of Chicago Business School, Nakasone is president of the U.S. operations of Toys ''R'' Us, the $2-billion-a-year specialty retailer in Rochelle Park, New Jersey. ''I've worked very hard,'' says Nakasone, 38, ''and I've been very fortunate.'' Asian Americans are rising in corporate America faster than any other minority group. Gerald Tsai Jr., a Chinese American, is set in January to become chairman of $2.8-billion-a-year American Can, the first Asian American to head a FORTUNE 500 company he didn't found. Asian Americans have won top posts at companies not only in Hawaii and California, where most Asians first settle, but across America's heartland from Memphis to Kalamazoo. They have high-powered jobs at some of the best-known firms of Wall Street and Madison Avenue as well. Asian immigrants, their children, and their grandchildren also crowd America's top universities: While a scant 2% of the U.S. population are Asian American, they account for 12% of this year's freshman class at Harvard, for example, and 20% at the University of California at Berkeley. This year the Westinghouse Science Talent Search, one of the country's most prestigious high school academic contests, awarded all five of its top scholarships to Asians. Some 35% of Asian Americans graduate from college, twice the percentage among whites. All that education pays off spectacularly. Even though Asian Americans are generally newcomers -- the majority are not descendants of immigrants but immigrants themselves -- they are already way ahead of the rest of the nation at the bank. According to the 1980 census, the median annual income for Asian American families was $23,600. It exceeded the level not only for the overall population ($19,900) but for whites in particular ($20,800). Of the various ethnic groups that make up the Asian American population, only Vietnamese families, with meager annual incomes of $12,840, fell below white and national levels (see box, page 156). WHY IS IT that Asian Americans tower above the rest of the population in both dollars and sense? Their speeded-up realization of the American dream is due in great measure to hard work, dedication to education, a willingness to adapt to a predominantly white culture -- and, not least, to brains. The evidence is persuasive that Asian Americans are smarter than the rest of us -- the 98% of the population not from the Far East. Asian American children and grownups consistently outscore whites, the population as a whole, and other racial minorities on a wide variety of tests that are used to assess intelligence, scholastic ability, and cognitive development. Says Philip E. Vernon, a psychologist at the University of Calgary: ''Their intelligence can't be denied.'' In 1980, for example, the U.S. Department of Education found that Asian American high school students got A's more often and failed less than whites or any other racial group in eight subjects, ranging from English to art. Asian Americans particularly stood out in subjects requiring nonverbal skills. Similarly, on the Scholastic Aptitude Test, which is used to measure college potential, Asian Americans have the highest average math score -- 518 compared with 491 for whites. Asian Americans perform just as impressively in tests of cognitive development, designed to measure thinking ability rather than how much a child has learned. U.S. schoolchildren aged 9 to 12 were asked in one test to copy simple geometric forms. Chinese and Japanese kids scored better than whites. And in a test of whether children aged 6 to 8 understood that the surface of a liquid in a bottle stays horizontal whether the bottle is tipped or not, Asians passed the test 43% of the time and whites 35%. Psychologist Vernon is one of a flock of social scientists who are intrigued with the riddle of how Asian Americans got so smart. Most of these scientists agree that the answer lies in some mixture of heredity and upbringing, but they tie themselves in knots arguing about the relative importance of the two. By far the easier influence to document is upbringing. In the early 1980s researchers led by University of Michigan psychologist Harold W. Stevenson studied family commitment to education in the native lands of the Asian immigrants. They compared schoolchildren in Taipei, Taiwan; Sendai, Japan; and Minneapolis, Minnesota, which was chosen for its predominantly white population. Stevenson's team found that American children spent substantially less time on academic activities, especially mathematics, than Chinese and Japanese children. By the fifth grade, American children spent 19.6 hours of class time on academic subjects, the Japanese 32.6 hours, and the Chinese 40.4 hours. Asians did more homework: Even on Saturday Chinese fifth-graders toiled 83 minutes and Japanese 37 minutes, in contrast to the American kids' seven minutes. Parents' concern about their children's education was measured by a commonsense index: Did they buy their kids a desk? Among fifth-graders, 98% of the Japanese and 95% of the Chinese had a desk at home, but only 63% of the American kids had one. Interestingly, American mothers said success was due to ability, but Asians said effort was the key. ''The willingness of Japanese and Chinese children to work so hard in school,'' the researchers concluded, ''may be due, in part, to the stronger belief on the part of their mothers in the value of hard work.'' AMONG THE social scientists who think Asian American braininess is largely hereditary is Arthur Jensen, a University of California psychologist who has published controversial studies on the variation in intelligence by race. For evidence Jensen points to the wide variety of tests in which Asian Americans as a group excel. Although no single test proves the dominance of heredity, Jensen contends that taken together the tests span such a broad range of skills and abilities that no large group could ever be taught to ace all of them. Vernon, on the other hand, says the issue cannot be resolved by social science in its current state. ''Asian Americans test better,'' he says, ''because of an interaction between heredity and environment. You can't say it's purely genetic, because there is no way to measure what is purely genetic and what isn't.'' Whatever the source of their talent, Asian Americans seem sure to leave as profound a mark on American society as the Irish, Italian, German, and East European immigrants of nearly a century ago. Declared a recent study published by the Population Reference Bureau, a respected, privately funded organization: ''America's future is likely to be increasingly Asian.'' For 20 years Asians have been the fastest-growing minority. Today they number more than five million and include many ethnic groups, with Chinese, Filipinos, Japanese, and Vietnamese the largest, in descending order. The vast majority came to America in the past 20 years, taking advantage of immigration rules liberalized in 1965 and allowances for Indochinese refugees made after the fall of Saigon. Researchers think the Asian American population is likely to almost double again by the year 2000. The astonishing economic prosperity of Asian American families derives in part from immigrants' success at running small businesses, from Indian newsstands to Korean greengroceries. As the immigrants' children move up the educational ladder, they are often pushed to enter professions rather than try their luck in corporations. Asian parents of aristocratic origins often view professional jobs as appropriately elite for their offspring, in contrast to business; Asian parents of modest means favor high-paying professions like engineering and medicine as the surest path to a better life for their children. Nancy Chen, a marketing representative with IBM, recounts how she bucked her parents' wishes in pursuing a corporate career. ''They said it was too risky to go into sales, and wanted me to be a doctor,'' she says. ''My parents felt they took all the risks when they came to the U.S. so I wouldn't have to.'' Pioneers like Chen blazing trails in corporate America encounter the same hazards any minority group faces. Some of the obstacles are external barriers of racism and stereotypes; some derive from genuine cultural differences and leave corporations mystified about how to get the most out of these talented employees. The age of the Asian American is only beginning to dawn in the corporation. Their numbers at the top are still disproportionately small: A scant 0.5% -- or 159 out of 29,000 -- of the officers and directors of the nation's 1,000 largest companies have Asian surnames. Of dozens of Asian American managers interviewed by FORTUNE, only a handful have already arrived. The majority are striving, convinced, in the best American tradition, that with brains, ambition, and hard work they will win. Stunning successes have been scored by Asian American entrepreneurs and dealmakers. The most famous is An Wang, founder of the $2.4-billion-a-year Wang Laboratories in Lowell, Massachusetts, one of the nation's largest computer companies. A Harvard physics Ph.D., Wang worked as a lab researcher at the university before starting the company. Shanghai-born, he had come to the U. S. in 1945 for schooling. He showed such promise as a scientist that the U.S. government asked him to become a citizen. SIRJANG LAL TANDON, born in India, also came to the U.S. for his education and ended up staying. He founded Tandon Corp., a maker of computer disk drives and personal computers, in 1975 with $7,000 in savings. ''Ambition is what brought immigrants to the United States,'' says Tandon, 44. Now his company has annual revenues of $270 million. Adds Tandon: ''People say, 'Your success is an incredible story,' then they pause and say, 'especially for an Indian.' What do you mean 'for an Indian?' For anybody!'' American Can's chairman-elect, Jerry Tsai, wheeled and dealed his way to the top. Tsai first made his reputation as a hyperkinetic stock trader during the go-go market of the mid-1960s. In 1968 he sold the highflying mutual fund he had established to CNA Financial Corp. But after five years as a CNA executive, Tsai tired of what he regarded as its suffocating bureaucracy. He bought a tiny insurance company, then sold it to American Can in 1982, joining the manufacturer as an executive vice president in charge of its small financial services unit. Within three years Tsai had invested $1 billion of his new employer's money in five major acquisitions. Last year 55% of American Can's operating earnings came from Tsai's side of the company. This year, at 57, Tsai was named chief executive officer. Shanghai-born Peter Huang, 51, is equally adroit at making deals. A Stanford engineering graduate and Columbia MBA, Huang got his start organizing large urban-renewal projects in New York City. In 1966 City Investing, an old-line commercial real estate company with annual revenues of $8 million, hired him to analyze merger and acquisition opportunities. Huang helped build the company into an empire whose revenues topped $6 billion in 1984 and whose stock climbed from $7 to $33. Then, to take advantage of tax law wrinkles, City Investing liquidated itself, a move that increased the value of the shares by a third. Last year, with the liquidation in its final stages, Huang resigned from the company's No. 2 spot. He took around $10 million in severance and retired, temporarily at least, to the ski slopes of Sun Valley, Idaho. With his sights on helping run a big retailer, Nakasone of Toys ''R'' Us began his career at Jewel Cos., a Chicago-based operator of food and drug stores. At 26 he was the youngest manager ever to make vice president. By the time Toys ''R'' Us recruited him 13 years later, Nakasone was boss of Jewel's second-largest food division. Nakasone attributes his success in part to the emphasis his parents placed on blending into a white-dominated society. After their release from a World War II internment camp, they settled in the virtually all-white Southern California town of Sunland-Tujunga to raise their family. ''They made a very conscious choice -- and I'm glad they did -- to not live in a predominantly Oriental community,'' says Nakasone, ''because it wouldn't be representative of what we kids would face when we went out into the real world.'' Unlike Nakasone, Brian Wong, executive vice president of Worlds of Wonder, a highflying Fremont, California, toymaker with 1985 revenues of $93 million, grew up in a mixed neighborhood in San Francisco with plenty of other Chinese around. His immigrant father encouraged the children by speaking English at home. ''This is one area of the country where you can speak Chinese all the time, shop at Chinese grocery stores, eat at Chinese restaurants -- and stay Chinese forever,'' says the 32-year-old Wong. ''But my father wanted me to be able to succeed in non-Asian society. '' To some degree, race is an issue with all Asian Americans, no matter how thoroughly assimilated they are. Says Harry Kitano, a UCLA sociology professor and Japanese American: ''The American stereotype of an American still is white. I think even when Asian Americans are young, they begin to recognize very, very quickly that they don't have that qualification.'' Indeed, Asian Americans say they are attracted to comparatively solo professions like engineering partly because they regard these as careers where performance is judged objectively. Not so with general management at large corporations, where criteria such as white skin and membership in an old-boy network can come into play. THE FRUSTRATIONS and successes of David Lee illustrate these concerns. A China-born mechanical engineer, Lee in 1969 helped found Diablo Systems, now a major maker of computer printers in Silicon Valley. A few years later Xerox Corp. bought Diablo, and Lee stayed on as a manager. But he was stunned when a white boss was brought in over his head. A Xerox spokesman says, ''Race had nothing to do with Lee's situation.'' But Lee contends, ''They didn't think I was good enough to be a manager for them.'' Lee and other disenchanted engineers left to start Qume, another computer- printer company. It later diversified successfully into manufacturing disk drives and personal computers. After a few years Qume was bought by ITT; this time around Lee was invited to stay as president. Under his leadership Qume grew from $143 million in sales to $320 million in three years. ITT promoted Lee to group executive vice president and soon afterward asked him to move to headquarters in New York. But Lee rejected the assignment and soon afterward resigned. He says he was convinced that, despite his rapid rise, there was no room at the top of ITT for an Asian American. ''To have an Asian American run ITT, that's just impossible,'' he says. ''Therefore it wasn't worth it to uproot my family from California.'' With a rueful laugh he adds, ''I think like an American and I act like an American. It's just that I don't look like an American.'' ITT denies that Lee encountered racism. ''At the time,'' says a spokesman, ''we had the highest percentage of minority vice presidents of any major company.'' Lee, 49, now runs yet another fast-growing Silicon Valley electronics company. Many Asian Americans say they have run into racial and cultural barriers. Roy Yamahiro, 58, a human resources manager at Martin Marietta's Denver office, felt his career had stalled despite widely praised work in his field. Yamahiro pioneered the use of the Outward Bound survival school to train corporate executives in teamwork. After 12 years at Martin Marietta, Yamahiro eagerly produced his resume when headhunters sought him out. He now is vice president of human resources development at Federal Express in Memphis. Martin Marietta denies that race or cultural background was ever a fac tor in Yamahiro's career at the company. Upward-bound Asian American executives have discovered that the quick way to neutralize racial prejudice is to find a white mentor willing to ignore ethnicity and concentrate on talent. In the case of Peter Huang at City Investing, it was Chairman George T. Scharffenberger. He plucked Huang from the world of urban renewal and brought him into the commercial real estate arena. In Jerry Tsai's case, it was a tough, outspoken Boston Brahmin named Edward C. Johnson Jr. who hired him as a stock analyst. When Tsai asked for money to start a mutual fund whose aggressive stock trading was to revolutionize Wall Street money management, Johnson replied with a blunt, ''Here's your $250,000 and your rope.'' Answered Tsai: ''I'll take it.'' . Finding a mentor is especially important at such old-line institutions as commercial banks. Leo Au, a 1976 Harvard Business School graduate, felt himself going stale after a few years on the finance staff of Pittsburgh's Mellon Bank. His boss, Jay Roy, told Au that he had a problem. He was doing fine in his job but was rotten at giving presentations. Roy had the bank bring in a moonlighting speech professor to coach him. Now senior vice president in charge of the bank's securities trading and sales operations, Au says the lessons helped reignite his career. Some companies go out of their way to make it easy for Asian Americans to switch from technical careers to the management fast track. David Chavez, a 24-year-old Filipino American, took advantage of such an opportunity at Pacific Bell, an $8-billion-a-year subsidiary of Pacific Telesis. An electrical engineering graduate from the California Institute of Technology, Chavez was recruited for the company's accelerated management program despite his lack of business education. ''I chose Pacific Bell to learn the things I never could have picked up staying in a technical position,'' Chavez says. Similarly Chong Y. Yoon, 53, a Korean American, earned a Ph.D. in chemical engineering at MIT but wished he could be a manager. Upjohn, the Kalamazoo, Michigan, pharmaceutical giant, helped him out. ''Upjohn wanted me to have the opportunity,'' says Yoon. ''There was no problem with my lack of an MBA. Here performance determines who gets ahead.'' Today Yoon is a corporate vice president. Racial prejudice in corporations makes experiences like Yoon's a rarity, believes William Ouchi, a professor of management at UCLA who has studied the progress of Asian Americans in business. ''Younger managers may be in the pipeline to the top,'' Ouchi says, ''but the pipeline has a cork.'' In Ouchi's view many white managers are quick to dismiss Asian Americans as technicians too narrowly trained and docile to ever cut it as executives. Asian women, moreover, often must contend with both racist and sexist stereotypes (see box, page 160). A number of the managers interviewed by FORTUNE believe Asian Americans are themselves partly responsible for their lack of advancement. There is truth, they say, to stereotypes used to discount Asian Americans' executive aptitude. ''I can see why a lot of Asians don't get in the managerial side,'' says Paul Lin, a vice president at Watkins Johnson, a $250-million-a-year , electronics firm in Palo Alto, California. ''Asians, from a people standpoint, aren't open. That's a big problem when you're trying to become a manager.'' Asian Americans sabotage themselves because they are culturally conditioned to be humble, says Byron Kunisawa, a minority consultant at the Multi-Cultural Resource Center in San Francisco. In his view, being humble is broadcasting one's talents on the wrong wavelength. While Asian Americans act patient in the office because they believe ''that good work will win out,'' he says, ''companies are seeing only passivity.'' CONSULTANTS like Kunisawa maintain that to get promotions Asian Americans have to learn more about promoting themselves. The consultants also have standard advice for corporations eager to develop promising Asian Americans. They say employers ought to unhesitatingly point out the deficiencies holding young managers back, such as poor pronunciation, and offer remedial training. But David Wang, a China-born senior vice president at International Paper Co., says Asian Americans aren't counting on being mollycoddled. ''You can't wait for your boss to help,'' he says. Wang thinks it inevitable that Asian Americans will master the social and political skills they need in corporate life, just as they have excelled at all the other tough lessons of immigration. If that is so, Asian American achievers will ultimately occupy a disproportionate share of the country's corner offices. Their effect on U.S. business is likely to be profound, as traditional American values such as the work ethic, promotion by merit, and self-reliance gain a powerful new constituency. The arrival of Asian Americans could herald a revitalized corporate environment -- one that no strait-laced Yankee businessman would have difficulty recognizing as home. BOX: THE SUPER MINORITY'S POOR COUSINS Some Asian immigrants arrived woefully ill equipped for life in the U.S. and have not shared in the buoyant success of other Asian Americans. Refugees from Indochina -- Vietnamese, Laotians, and Kampucheans -- are by far the poorest group. When South Vietnam fell in 1975, the first to flee came from among Indochina's elite. More than 30% of these immigrants held professional or managerial jobs. They know Western culture, if not English, because of the long French colonization, and have thrived. But after 1976 there came a second wave more representative of Indochina's overall population, mostly poorly educated fishermen and farmers. A few, such as the Hmong tribe from the hills of Laos, were illiterate even in their own language. ''The Hmong stand out like Appalachian whites,'' says Darrel Montero, a social work professor at Arizona State University. He and other experts worry that second-wave refugees may remain mired in poverty and unemployment. Among refugees, mostly Indochinese, who have settled in California in the past three years, more than 90% are on welfare. Part of the problem, says Berkeley research scientist Jacqueline Desbarats, is that it doesn't pay for refugees with families to work. A full-time job at the minimum wage pays less than $600 a month, while welfare pays a family of four $850, plus substantial medical benefits. To prod the refugees out of dependency, an experimental project lets them go to work without losing the medical benefits. Indochinese refugees may eventually solve their problem themselves by becoming assimilated. A federal study found that the longer Indochinese live in the U.S., the more fluent they become in English and the more they earn. Moreover, following a classic pattern of Asian American adaptation, the Vietnamese are forming mutual aid societies to help themselves launch their own small businesses.