Saturday, March 31, 2012

Risk And Relocation

Proximity matters. You go where you know. The apple doesn't fall far from the tree. That's my takeaway from Ernest Ravenstein's first law of migration, published in 1885:

Most migrants only proceed a short distance, and toward centers of absorption.

The maps (here and here) of the patterns of outmigration from Greater Youngstown back this up. When people bolt from this region, chances are they ended up in Columbus, Cleveland, or Pittsburgh. The perception is that they all moved to Charlotte, NC or some other booming Sun Belt city.

When speaking to a Rust Belt crowd, I love showing those maps. People are surprised. I have their attention. Brain drain doesn't happen like you think it does.

Doing a similar type of analysis for Global Cleveland using IRS data for 1996-2008 via Telestrian, the same law of migration holds. I looked at gross migration (insert link to "Gross Migration versus Net Migration" post) instead of outmigration. Sandusky, Ohio is as important as New York City. The top 10 are as follows:

Geography
Total
1. Columbus, OH
46,344
2. Chicago-Joliet-Naperville, IL-IN-WI
25,162
3. Youngstown-Warren-Boardman, OH-PA
21,956
4. Sandusky, OH
20,027
5. New York-Northern New Jersey-Long Island, NY-NJ-PA
20,025
6. Toledo, OH
18,654
7. Detroit-Warren-Livonia, MI
17,559
8. Cincinnati-Middletown, OH-KY-IN
15,735
9. Pittsburgh, PA
15,401
10. Canton-Massillon, OH
14,710

Most people are risk averse. You move to Columbus because you went to school there. Or, you have friends and family who already live there. Whatever the reason, C-Bus is familiar turf.

Ravenstein's observations are more obvious when you consider the relationship between suburb and urban core. City neighborhoods are dangerous, the schools bad. The outer ring is safe. The choice of residence is easy. If you have a choice.

At the other end of the scale is international migration. Leaving home for a foreign country is a big leap. Most moves are next door, across a shared border. Distance is a proxy for trust. The shorter the distance, the more trust. The more trust, the more likely the relocation.

The best analogy I've encountered concerning the relationship between perceived risk and migration is the geography of venture capital. The logic of Silicon Valley:

Meet the “20-minute rule” that guides fateful decisions in Silicon Valley. Craig Johnson, managing director of Concept2Company Ventures, a venture capital firm in Palo Alto, Calif., who has 30 years of experience in early-stage financings, said he knew many venture capitalists who adhered to this doctrine: if a start-up company seeking venture capital is not within a 20-minute drive of the venture firm’s offices, it will not be funded.

Seeing is believing. Anything further than a few miles might as well be halfway around the world. However, there are exceptions to this rule. Bay Area venture capital can and does travel all the way to India. The money follows entrepreneurs back to their homeland. Travel 8,000 miles in just 20-minutes.

Cleveland can exploit this same loophole thanks to outmigration. For most people, moving to Northeast Ohio is a risky prospect. The problem is more than perception. The scoop has to come from a trusted source. Otherwise, the 20-minute rule applies. The courier is much more important than the message when weighing a relocation decision.

If your city wants more talent to return home, then get your successful boomerang migrants to make the pitch. But don't engage just any repats. Find people who made the big move, well beyond the pale. Those who break the laws of migration make great entrepreneurs. They are risk takers. They think like an immigrant.

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