Thursday, May 13, 2010

Geographic Arbitrage: Boise

The population boom in America's Interior West is a frontier for understanding urban geography. This was the last region settled in the country. The climate and terrain are inhospitable. Yet it's boomtowns are full of real estate refugees from Spiky California:

Brain workers like to live near each other. It is easier to keep up with the latest ideas if you keep bumping into other people who work in the same field. As Alfred Marshall, an English economist, wrote in 1890: in industrial clusters “the mysteries of the trade become no mystery, but are, as it were, in the air.” That is why geeks flock to Silicon Valley and financiers converge on New York. But such clusters can become victims of their own success. When a hotspot gets too hot, it becomes expensive to live there, which spurs some brainy people—especially those with children—to migrate to places that are not quite so hot but more liveable. The population of the Boise-Nampa metro area has nearly doubled in the past two decades, sparking a property bubble. Yet housing is still laughably cheap: $150,000 buys you a spacious house with a garden. In the nice parts of Palo Alto, it buys you a poky flat.

The Interior West is full of such geographic arbitrage opportunities. I know many Bay Area tech workers who live in Ft. Collins, Colorado and telecommute. And if the creative class wasn't willing to leave the alpha world cities, then there would be no Austin miracle. For decades, the cream of the talent crop has been leaving the coastal metroplexes in droves.

The California exodus, while obvious in Idaho and Utah, was obscured by immigration and robust birth rates. Once again, population numbers sweep domestic migration trends under the rug. Slowest on the uptake is business. Software is still clustering in expensive locales and acting in an economically irrational fashion.

Part of the problem is where executives want to live. Big city amenities matter more to them, much like the robber barons of the Rust Belt. Big salaries make this possible, but that's little comfort to the rank-and-file. For those on a lower socioeconomic rung, the interior beckons.

Another aspect clouding the vision of companies is the lack of intimate knowledge about flyover country. Boise attracts people who have vacationed at places such as Sun Valley. It's a different amenities consideration and a big carrot for talent. That's bad news for the Heartland. How can economic refugees learn about the value of Des Moines?

Iowa is a key destination for families looking to get out of expensive Chicago. There is a way to target this demographic if cities and towns would spend less time worrying about young adults leaving. That reminds me of Pittsburgh and Columbus.

Like a dating service, the website helps match the right neighborhood to the right person, whether you're looking for nightlife or access to the rivers or bike trails. Explore the region's 90 distinct neighborhoods and cultural amenities. Find money to fix up an older home, nab a business loan and learn about tax rebates and The Pittsburgh Promise.

The website officially launches May 17th.

"The message we're sending out is Pittsburgh is a great place," says Paul Svoboda, special projects manager for the URA. "If there's anyone who's going to boomerang back to Pittsburgh, it's someone who has already got a connection here and by all means lets recognize that. It's a whole new approach."

It most certainly is not a whole new approach. Here's the website, if you are curious. Pittsburgh is recycling the same old anti-brain drain initiatives. As I've previously discussed, Pittsburgh already does an amazing job of keeping talent in the region. What is Pittsburgh doing to attract graduates from other cities?

Rck on C'bus (Columbus, OH) for your talent retention and attraction innovations! New case study results:

If you click on that link, it will download the case study results. You can read NGC's research here. Among the discussion is both retention and attraction. However, the crux of the efforts (follow the money) concerns keeping talent in Columbus. Getting the community behind the initiatives demands that the leadership fishes with worms. Tell the people what they want to hear. That's exactly what Pittsburgh is doing. Columbus is no different.

Both cities need to do a better job of getting on the mental maps of potential real estate refugees. This market is wide open because most of the population starved regions are obsessed with outmigration. Talent attraction is underfunded while old ideas that have already failed are recycled. Look for Youngstown to fill this void.


DTK2OD said...

I'm not sure I see how Pittsburgh's city living website is directed strictly at retention? If I were moving to a new city/community from an overheated housing market I would definitely stand to benefit greatly from having a resource like that at my disposal. Hailing from Buffalo myself it's extremely difficult to attract outside talent to the "3rd poorest city in the nation." I wish we had something similar, so that people could begin to realize we have more neighborhoods than just the gentrified Elmwood Village and the burned-out East Side. BTW Pittsburgh is definitely my #1 favorite city. Went there on spring break this year... you just can't beat that geography or those grand entrances!

Jim Russell said...

One could certainly use the website for relocation purposes. In fact, I would encourage Pittsburgh to promote it with that in mind.

Steve said...

Software is still clustering in expensive locales and acting in an economically irrational fashion.

As someone who works in software I can explain some of the problems. A lot of it is as you put it, "Brain workers like to live near each other. It is easier to keep up with the latest ideas if you keep bumping into other people who work in the same field."

Another problem is that in the software field people change jobs enough that a software engineer wants to be in an area with a sufficent density of relevant jobs. I have experienced this personally. Several years ago I interviewed for a job in Winston-Salem, NC. While Winston-Salem is a fine place to live I decided against taking the job because I thought about, "what about the next job?" This is a real problem. Many companies won't consider relocating non-local candidates and they are very centralized in a particular location. While you would think software would be a leading industry when it comes to telecommuting, nearly all employers in this field want you in one of their offices.

The clusters of software jobs tend to be around locations of sufficient population where there is a leading university. That's why we see Silicon Valley around Stanford, the Route 128 corridor around MIT, the Austin, TX tech cluster around the U of Texas, etc. The only software cluster I can think of without a major university that leads in software is the Dulles Tech Corridor and that only exists because the Federal Government is in DC.

There are leading software schools like the U of Illinois in Urbana-Champaign but they are out in the middle of nowhere. The only software company that I know of that stayed in the Urbana-Champaign area is Wolfram Research. Lots of startups are formed at UIUC but they end up going somwhere else such as Silicon Valley.

This is why Pittsburgh has a huge opportunity right now. It's a major metropolitian area with a leading software school, CMU, but unlike Boston, DC, and Silicon Valley its still not expensive. Add in links to the DC area and everything else that we have talked about in the past, and everything comes together to make Pittsburgh a leading area for tech like Silicon Valley or Route 128. Of course, does this mean in a few decades we will be talking about how expensive Pittsburgh is and how economically irration it is for business to be there?

Jim Russell said...


Excellent insight. Reminds of Mike Madison's view of the Pittsburgh start-up culture. If your venture fails (most likely it will), then what's the safety net? There isn't a critical mass of opportunity that would make someone less risk averse.

You also touch on (perhaps unwittingly) the Youngstown value proposition. A residence in the Mahoning Valley can give you access to the software job market in Cleveland, Akron, Youngstown, and Pittsburgh.

The Pittsburgh-DC corridor is a counterpoint. I'm still struggling to reconcile this connectivity with that of Cleveburgh. But it's win-win for Pittsburgh.