Monday, October 31, 2011

Book Review: Instant City

The Age of the "Instant City" is at an end. The subtitle of Steve Inskeep's new book is "Life and Death in Karachi". The Pakistani city serves as a case study for the urban boom in the wake of World War II. You'll learn as much about urban planning as you will Pakistan. The problem is migration, first political refugees (partition of India) and then economic refugees (rural to urban). The latter movement connects Karachi with the likes of Los Angeles, Houston, and Phoenix. All are, according to Inskeep, instant cities.

Inskeep defines instant cities in terms of population. The cities are growing at a much faster rate than the host nation state. I would define instant cities in terms of sprawl and the [seemingly] endless search for greenfields. Karachi's expansion in terms of area is as impressive as the spiraling population. There is more to manage than just religious differences.

Greenfields are "blank slates" best suited for the rationally planned community that was a hallmark of the era of logical positivism. Inskeep offers up Islamabad as a contrast to Karachi, which was anything but a blank slate. The planning paradigm found expression on the outskirts of Karachi. In American cities, the planning paradigm found expression in the urban core where neighborhoods were razed to make way for massive residential projects. A blank slate was imposed on the landscape.

The irony is that chaos ruled Karachi, particularly in the outskirts. I suspect Jane Jacobs would love Karachi. Clearly, Steve Inskeep embraces feral urbanization:

All this makes Karachi an especially vivid place to test some theories about the world's growing cities. The planet's urban population has increased by more than 2.7 billion since the end of World War II. Expanding urban zones are the engines of the global economy and also showcases for inequality.The gap between rich and poor, a focus of protests last weekend in the U.S. and other countries, is spectacularly on display in a swiftly expanding city in the developing world, as I could see without leaving my restaurant table at Port Grand. I noticed that the signage was not in Urdu, Pakistan's most common language, but in English, spoken by the globalized elite. Across the water to my right stood harbor cranes, the kind that unload billions of dollars' worth of supplies bound for U.S. forces in Afghanistan; to my left I saw a bridge with a new metal wall running its length. The wall keeps ordinary people on that bridge from gawking or taking potshots at the affluent at Port Grand. It costs 300 rupees to pass the armed guards at the gate of the jetty -- the equivalent of about $3.50, more than many Karachi residents earn in a day.

Yet two recent books argue that for all their flaws, growing cities offer unmatched opportunity for the poor. After all, cities grow in part because millions of people migrate from the countryside, note Triumph of the City, by Edward Glaeser, and Arrival City, by Doug Saunders. Whatever problems they encounter, these migrants more easily find jobs, schools, and hospitals in cities than in their poor home villages.

Could this optimistic view possibly hold true? Even in Karachi?

Having explored this troubled city for the book Instant City: Life and Death in Karachi, I have to say yes -- on average. Pakistanis live better in Karachi than elsewhere, according to the U.N. Human Development Index, which measures cities and rural areas according to health, education levels, and income. When the UN used the index to rank different Pakistani districts, Karachi did better than almost anywhere else in the country. Not only do medical centers and universities exceed what's available outside the city: the potential employers range from tanneries to towel manufacturers and real estate developers, and from hypermarkets to the dozens of newspapers and TV channels that chronicle the city’s distress.

The Glaeser reference invokes, in my mind, the claim that the world is entering the Age of the Instant City and leaving behind the Age of the Suburb. Cities are cool. Jane Jacobs cool. Karachi is Jane Jacobs chic.

Karachi is no longer an instant city. It is stabilizing, like New York City. The story is one of infill and better managing the huge population. Karachi is a brownfield in need of revitalization, gentrification. Now would be a good time for urban planning best practices.

Eventually, even in Pakistan, the countryside will empty out enough to signal an end to that migration pattern. In the States, we are seeing the end of the Rust Belt to Sun Belt migration. Brownfields are the new greenfields. We see blank slates where there really isn't one, instead of imposing it. There is nothing instant about it. Change will be hard and slow.

Sunday, October 30, 2011

Sun Belt Migration Bust

I'll take one last swing at the latest domestic migration numbers. William Frey from Brookings is well quoted concerning the great slowdown in geographic mobility. You can find the more formal analysis here. The narrative rehashes what is showing up in the press. The only graphic associated with the Brookings article is worth discussing:

Migration map

The migration spotlight is on the 25-34 cohort, the after college relocation and the war for talent. Riverside, Phoenix, Atlanta, and Charlotte drop off the map post-Great Reset. Their top gainers replacements are the usual suspects (i.e. DC, Denver, Seattle, and Austin). No surprise there. The migration boom towns are yielding to brain magnets.

The young and well educated were able to move during the economic downturn. They clustered in the cities already awash in the young and well educated. Talent attracts more talent. As the economy improves, other migrants should become hungrier for risk. I doubt Riverside, Phoenix, Atlanta, and Charlotte get back on the map.

I predict Pittsburgh will absorb a good chunk of that slack. We'll see more Buffalo-to-Steel City instead of Buffalo-to-Charlotte. Detroit-to-Pittsburgh is a flow to watch. As for return migration, Charlotte-to-Pittsburgh is already a trend (anecdotally speaking).

Thanks in part to the shale gas revolution, the stars have aligned for Pittsburgh. The positive press is now credible. Forget eds and meds. Pittsburgh is town and gown. Town and gown means plenty of tech and talent. There's no longer a black hole between NYC and Chicago.

Saturday, October 29, 2011

Young, Educated Flock To The Steel City

I'm still sorting out the wonderful migration news for Pittsburgh. I mentioned the William Frey numbers yesterday, which I found at The Washington Post:

Here's a list of large U.S. metro areas ranked by the estimated annual net migration of people age 25-34. The 2008-10 numbers were released Thursday.

Frey compared the new 2008-10 numbers with those from 2005-07. Pittsburgh stands out as doing much better over the later three-year period. How much better? Net migration is up 6,768, which is 7th best on the list. That number is how much migration has improved from the 2005-07 benchmark. On the balance, Pittsburgh lost young adults during 2005-07. It's a remarkable turnaround.

No matter how you look at the list, Pittsburgh is doing a lot better than Minneapolis. This morning, I read about how the young, educated are flocking to the Twin Cities:

"There is a growing divide between areas that are experiencing gains or losses in their younger populations," Brookings Institution demographer William Frey reported last summer. "Large stretches of the nation are sustaining only meager growth, or even declines, in their youth population." ...

... Partly because they are smallish cities in a major metro area but with a teeming university campus sprawling across both of them, demographer Frey found that Minneapolis and St. Paul are the nation's fifth-youngest when lined up against the primary cities in other metro areas. They're in the same league with college towns such as Austin, Texas, and Columbus, Ohio.

The Twin Cities area as a whole, his analysis showed, stayed even in its share of under-45s during the past decade, even as many others fell: not just Rust Belt cities like Akron or Milwaukee but more happening cities such as Boston, Chicago, Los Angeles, New York and San Francisco.

Gainers, however -- those doing better than we are -- included key competitors such as Seattle (up 4 percent), Portland (up 7), Denver (up 9) and Atlanta (up 15).

Emphasis added. Ironically, Pittsburgh is now on the right side of that divide. The metro is getting younger and smarter. The recession has hurt young adult migration to Minneapolis. In some respects, the loss of the Twin Cities is the Steel City's gain.

A more useful contrast is with Cleveland. a metro that gained migrants aged 25-34 over the 2005-07 period. The recession hit Cleveland hard and it shows up in the numbers. (Note: An astute reader noticed I misread the chart and that Cleveland slightly improved its migration situation during the recession. Meaning, the metro lost more than less of the 25-34 age group.) Cleveland lost almost 2000 young adults during 2008-10. In terms of Frey's "divide", there is Pittsburgh and then you have the rest of Cleveburgh.

Friday, October 28, 2011

Great Reset Migration

Update: Courtesy of The Washington Post, the William Frey numbers for the net migration of the 25-34 cohort. I'm trying to figure out what "Since2005-07" refers to. It looks like Pittsburgh is 7th overall in attracting young migrants and ahead of such metros such Chicago, San Francisco, and Denver. Am I reading the rankings correctly?
<------------End Update------------>

More articles continue to appear in the wake of the American Community Survey data dump yesterday. The heart of the matter concerns the impact of the recession on migration. The Carsey Institute at the University of New Hampshire with the analysis:

The institute’s study compared three years’ worth of data from the Census Bureau’s American Community Survey, which was released early Thursday and covered 2008-10, with the data from 2005-7. Since the survey’s findings are released in three-year increments, this was the first time that researchers had a set of data that included only years since the financial collapse began, allowing them to make a direct comparison to a similar period before the collapse.

Using this and other data from the I.R.S. that many researchers consider even more comprehensive, they found that migration into formerly booming states like Arizona, Florida and Nevada began to slow as soon as the recession hit and continued to shrink even into 2010, when many demographers expected it to level off. At the same time, Massachusetts, New York and California, which had been hemorrhaging people for years, and continued to do so in the three years before the financial collapse, suddenly saw the domestic migration loss shrink by as much as 90 percent.

Arizona, Florida, and Nevada are the new Rust Belt states. The dark times are just getting started. New destinations are reshaping America's economic geography. Analysis from Brookings William Frey:

“These places that were getting real new interest amid the bubble are not seeing that anymore, and in a way it is making people give another place a second look,” Mr. Frey said. “The dynamics of high housing costs on the coasts and relatively affordable inland is starting to change so, in effect, that shuts off the merry-go-round.”

“If nobody can buy or sell their homes, there’s going to be a stagnancy,” he added.

Atlanta, which ranked third as a destination for young people in that age group from 2005 through 2007, sank to No. 23 in the period from 2008 through 2010, according to Mr. Frey’s analysis. Phoenix dropped to No. 17 from second place, and Las Vegas plummeted to No. 35 from 10th place.

The winners were cities like Washington, which skyrocketed to sixth from 44th, Denver, which jumped to first from 12th, and Boston, which is now No. 26, up from No. 45.

Mr. Frey said that, in many ways, young people were staying in the more established cities with a kind of wait-and-see approach to the economy. He said he expected the relocation rates to pick up as soon as there were new housing and job opportunities for young adults.

“They are trying to bide their time in a hip place they know,” he said. “But there is going to be a pent-up demand for migration, because right now people are just putting their lives on hold.”

Plenty of meat in that passage. I now have a better idea why Frey is lumping in Pittsburgh with other established hipster destinations. The recession marks a dramatic improvement, even when compared to the rest of the United States, in Pittsburgh's migration ledger.

I also appreciate the tip of the hat to less risk appetite. Young adult migrants are riding it out in familiar confines. The gambling, going where you don't know, should pick up with the economy. For Pittsburgh, that might mean that those staying put now will pick up and go.

I'm betting the opposite will happen. More people from elsewhere will head to Pittsburgh as the risk aversion subsides. The mesofacts of the matter have changed that significantly.

Thursday, October 27, 2011

Pittsburgh Hot Migration Destination

“It’s the economy and hipness,” said William Frey, a demographer with the Brookings Institution, who analyzed the census data comparing the 2005 to 2007 period with 2008 to 2010. “Young people are going to places that have a certain vibe. If there’s a recession, they want to ride it out in a place like that. And Washington has the extra advantage of being a government town that’s not as hard-hit by recessions as others.”

<---------------End Update--------------->
The lede is that American geographic mobility continues to decline. The trend would seem to benefit the Rust Belt. As usual, a finer grained analysis is warranted:

Other bright spots in the housing bust included urban, high-tech college meccas that are proving to be a draw for young, college-educated adults of all races and ethnicities. The data covering 2008-2010 show that Raleigh, N.C.; Austin, San Antonio and Houston, Texas; Denver; Pittsburgh; and Baltimore and Washington, D.C., all of which tend to promise specialized tech jobs and hip lifestyles, had some of the biggest gains in residents.

William H. Frey, a Brookings Institution demographer who reviewed the education and race data, said many of these cities will continue to attract new residents after the economy fully recovers. He said other cities must seek ways to diversify their industries, draw new investment and build partnerships with local universities to attract young talent, much like Pittsburgh has been striving to do after the collapse of its steel industry.

"Right now, the 'cool' cities are serving as way stations for the small number of adventurous young people who are willing to move in a down economy. But when the broader economy picks up, a much larger group of people will move to wherever the jobs spring up," Frey said, noting that people are staying put for now because they have to, not because they want to.

Emphasis added. Like Austin, Rust Belt Shittsburgh promises "specialized tech jobs and hip lifestyles". Who knew?

Pittsburgh is one of a handful of cool cities serving as a way station for young talent. I'm reminded of Seattle and Minneapolis during the Gen X recession of the early 1990s. Those two cities blossomed as a major national destination during the Dot Com boom. Similar growth doesn't seem likely in today's global economy and I think that will impact the recovery migration, effectively muting it.

Regardless, Pittsburgh stands out as a new winner in the war for young talent. The city is emblematic of the economic transformation catalyzed by the Great Reset. There are always emerging landscapes from such a calamity and Pittsburgh is it.

Wednesday, October 26, 2011

Burgh Diaspora Foodies

Why is an Pittsburgh expatriate following China Millman's Twitter feed? While you ponder that mystery, behold the work of Lauren Bracey. Bracey is the brain drain behind the Burghilicious blog. However, the juice for this post comes from Bracey's own Twitter account:

DC transplant by way of Pittsburgh. At home: avid cook and baker with severe silliness. At work: I help NPR make its email program connect with readers.

Apparently, Pittsburgh food tastes much better in DC. Near as I can tell, Bracey moved to DC in 2011. But the Pittsburgh beat lives on.

The social media reality is seamless. Pittsburgh. DC. What's the difference? The migration destination is your day job. You moonlight as a native and resident.

Economic Geography Of Xenophobia

Inert populations are more risk averse than the geographically mobile. Cosmopolites have a greater capacity to trust strangers and expand market. Then there is the tale of technological diffusion and global economic development:

[Jared] Diamond hypothesized that Eurasia's east-west orientation allowed freer movement of people and animals than did the Americas' north-south orientation because of the greater climate variability when moving north to south. This gave Eurasia an advantage in the spread and development of technology.

In a Sept. 13 article in the American Journal of Physical Anthropology, Sohini Ramachandran, assistant professor of biology, and Noah Rosenberg, an associate professor of biology at Stanford University, report on data from 678 sites in the human genome exhibiting a high level of genetic variance. These sites provide information about genetic similarities and differences between populations in the Americas and in Eurasia. The researchers studied how geographical variables, such as latitude and longitude, affected these variations.

Their results show greater genetic differentiation of people in the Americas, indicating a lower rate of migration. "If two populations remain isolated, then they have an opportunity to diverge in their patterns of genetic variation over time," Rosenberg said.

Eurasia developed more quickly than the Americas thanks to greater geographic mobility. Migration means greater prosperity for the individual and the two communities at each end of the journey. Somehow, the latter gets lost in translation. Most communities would rather be like the Americas, more rooted in place.

Such thinking extracts a high cost. Autarky cannot compete with economic liberalism. In other words, talent retention policies retard growth and entrench intolerance. This negative feedback loop feeds risk aversion and patronage. The politics of brain drain is the economics of failure.

Tuesday, October 25, 2011

Lemonade Urban Redevelopment

Your city's biggest liabilities are its greatest assets. That's the lemons-to-lemonade development paradigm, a Rust Belt philosophy. Out of the box thinking in Cleveland:

The [Hipp Deck] embodied a compelling vision for Cleveland’s parking infrastructure; a hybrid landscape, which recognizes the reality of parking demands, but also engages the desires of residents. Cars avoid the uncovered top level of parking decks, but people love the view! Sloped decks also work great for theater seating. We hope this exciting people-centered vision for the future of our ever-present parking infrastructure will help inspire the collective acts of our fellow artists, activists and designers.

I get hung up on the ideological stance that parking garages are a bad use of valuable urban space. That doesn't mean I'm a fan of car-centric development. On the contrary, I contend downtown retail is a relic of the industrial era. Pittsburgh is still struggling with this turn back the clock approach. The problem is that there is no sense in clicking your heels three times and wishing the parking lots away. A jihad against auto America will get you nowhere fast.

Cleveland is having a rails-to-trails moment. What to do with all the parking garages, particularly after the worker bees have gone home to the suburbs? Reimagining downtown like a skate punk, the Urban Design Collaborative sees spatial opportunity where most people see dormant land use. This is your father's Cleveland, culturally appropriated. You might say that someone has hacked the city's software.

Monday, October 24, 2011

Paying Graduates To Stay

Joel Kotkin has a meaty piece about America's demographic advantage. In the United States, Europe, Japan, Korea, and even China, only the States can expect a growing labor force over the next few decades. The reason for this demographic dividend? Immigration.

States get younger by attracting a more youthful demographic. Yet the common response is to double down on retention. Some funded schemes in New England:

Massachusetts is funding internships at private companies—$2.2 million this year, up from $1 million last year. In a pilot program started in July, Vermont is forking over cash to graduates who stay in the state.

New Hampshire, under the direction of a young-worker retention task force established by Democratic Gov. John Lynch, has launched a nonprofit called Stay Work Play to sell the state to college students. The state also is directing one-third of its entire marketing budget toward wooing and retaining younger people.

Thanks to Chris Briem (Null Space) for bring the above Wall Street Journal article to my attention. The Vermont initiative is troubling. The bulk of the money will go to graduates who would have stayed regardless. The effectiveness of attracting young talent is much easier to measure. No one can say with any certainty if the Vermont effort was worth it or even if it worked.

I'm in my sixth year of blogging about brain drain. I've looked at policy ideas that preceded Burgh Diaspora. The same approaches get tried over and over again. Each year, the same places complain about brain drain. Nothing seems to be working. Anyone out there other than Cleveland and Youngstown willing to try a new way to solve this problem?

Shale Oil Jobs And Migration

While reading about the shale oil boom in North Dakota, I try to imagine what it would look like in Eastern Ohio. I have no idea if the Utica Shale is anything on the scale of the Bakken. But consider this migration tale:

School bus driver Barb Russell heard there was good money to be made here in the oil fields of North Dakota, so last month she packed a bag, locked her Farmington, Minn., home, and headed west. She tripled her income.

The 60-year-old grandmother rose every morning at 3 a.m. in September to drive a bus full of Halliburton workers to drilling rigs in a place where trucks roar non-stop and everybody who wants a job has one. ...

... New drilling technology has freed up vast reserves of oil in the Williston Basin of western North Dakota, fueling an economic bonanza that has become a flat-out gold rush. As the rest of the country desperately tries to skirt a double-dip recession, North Dakota boasts a $1 billion budget surplus and the nation’s lowest unemployment rate. Recruits from Minnesota, Texas and both coasts keep arriving, reversing a long population decline. Schools are rushing to hire more teachers. Towns are adding more cops.

Safe to say that the shale gas in the Marcellus hasn't fueled a similar migration boom. That's a bit of a mystery. Still, things might play out differently in Eastern Ohio. (See this story about Steubenville.)

Don't expect man-camps to pop up in feral Youngstown. Also consider the low unemployment in North Dakota that preceded the rush. The labor market has been tight there for the better part of two decades. School bus drivers won't be moving in from the next state over.

The energy industry talent migration to North Dakota isn't extraordinary and likely temporary. Hence the man-camps or even the booked motels in Williamsport, PA. The more opportunistic migration comes from a neighboring state. Proximity matters. Is someone in struggling Orlando, FL going to roll the dice in Williston, ND? I doubt it, at least not yet.

Beware of the hype that the oil and gas industry is pitching. The impact on unemployment will be subtle. Better for Ohio to figure out how to cash in on revenue from the drilling.

Sunday, October 23, 2011

Buffalo Defining Rust Belt Chic

We are born into the love affair of family. Marriage is the love affair we choose. That's the biggest image problem facing Rust Belt cities. Only natives love them. In Buffalo, that's changing:

"It's the most wonderful city I've been to in a long time," said Dieter Meyer, a Leesburg, Va., architect. "There's great architecture there, but there's really cool neighborhoods, like the Elmwood neighborhood and Allentown."

"The conference was one of the best, and I've been to a dozen of them," said Andrew Potts, a historic preservation attorney in Washington, D.C.

Then he added this: "The historic building resources in the Buffalo region are just incomparable in the United States."

"Incomparable." For years now, frontline publications across the country have been singing Buffalo's praises as a top-tier destination for architecture, history and art.

"Buffalo has a kind of power, the power of the authentic place," architecture critic Paul Goldberger of the New Yorker has said.

Emphasis added. The National Preservation Conference was in Buffalo this year, thus the above glowing reviews. By now, the Rust Belt Chic connection should be obvious. The geographic aesthetic is authenticity, something sorely lacking in most Sun Belt boomtowns or hipster destinations such as Portland.

Growing up in Buffalo must be like having a stunningly beautiful sister. Familiarity breeds contempt, "What's so special about her?"

To outsiders, Buffalo is exotic. To most insiders, the city is the dull place you can't wait to escape. Buffalo is best seen with a rear-view mirror.

You go where you know. To almost all of America, the Rust Belt is either Flyover Country or a region to avoid. Hence the surprise that Pittsburgh is a top-20 destination in 2012 as ranked by National Geographic. Can a neighborhood be "cool" if no one has heard of it? As more outsiders discover these gems, Buffalo and other shrinking cities will get on the map. The Creative Class will flock to the Rust Belt.

Saturday, October 22, 2011

Economic Geography Of Talent Production

Last Monday, I posted a little something about the talent production clusters in Boston and Pittsburgh:

Pittsburgh and Boston are the only two metros "dominated" by the higher education industry. I'd characterize them as talent production centers. Other metros may produce more talent. But that doesn't define them like it does Pittsburgh and Boston. Talent production activities should continue to agglomerate in both regions. At some point this week, I'll take a closer look at what that means.

Producing talent means a lot more than supplying a local workforce. Research universities are, in and of themselves, engines of economic development. An article about just that in Area Development Online:

From California’ Silicon Valley to Austin’s “Technology Cluster,” there are numerous examples of successful collaborations between universities and industry. Chief executive officers and others involved in site selection should consider whether collaboration with one or more universities would enhance their next facility location decision. In the right circumstances, working with a research university in the area in which your company is locating may prove to add tremendous value. ...

... [S]uccessful collaborations tend to attract new business, and successful new businesses attract other new businesses. The ripple effect can be felt even in a heavily industrialized city like Pittsburgh, where the acclaimed Carnegie Mellon University Collaborative Innovation Center has attracted more than 200 new companies — including Apple Pittsburgh, Disney Research Pittsburgh, and Intel Research Lab — and 9,000 jobs, and has become the catalyst for considerable revitalization.

The main attraction would seem to be knowledge production. Idea spills over into innovation. Innovation becomes marketable product. A startup is born. All the while, proximity matters. Pick a site near a research university.

As part of Scholarship in Action, the university lured Cliff I. Davidson to Syracuse after a more than three-decade-long career at Carnegie Mellon University. He was attracted by the possibility of working with the city of Syracuse to use "green" roofs to manage storm water. "I tried to do this work in Pittsburgh, and because our university did not have the same kind of outlook to teaming with the community, it was difficult," says Mr. Davidson, a professor of engineering and computer science who, with graduate students, has installed research equipment on top of the Syracuse convention center's 1.5-acre green roof.

The effort also led the university to establish the Connective Corridor, which links the campus with the downtown area through buses that bring students and others to theaters, museums, and buildings Syracuse has purchased to house some of its academic programs. In the last year, approximately 17,000 riders a month used the buses, compared with 250 a month when the service began in 2006, according to the university.

The implication is that CMU isn't willing to sacrifice its standing as a major research university in order to better engage the host community. All the while, Pittsburgh would seem to be benefiting regardless of the focus. However, staying the course (membership status in the Association of American Universities) didn't seem to be working for Syracuse.

I don't understand why Syracuse University can't maintain a research-driven agenda and better engage the host community. The new mission does highlight the value of a university or college beyond the usual talent pipeline of graduates and higher education jobs. The brains don't have to stay for Syracuse to benefit.

In fact, Pittsburgh's (and Boston's) brain drain is what attracted the likes of Disney to partner with CMU. Companies are well aware from whence the talent came. The graduate jobs fair is a map of the Pittsburgh connectivity economy. That's the power of the talent production cluster. Pittsburgh gets a return on its investment from the success of CMU alumni around the world.

Syracuse is taking aim at immediate gratification, putting the talent to work before they graduate. More students might stay because of the strong relationship with the host community. Those who still leave have enriched Syracuse.

Thursday, October 20, 2011

Stabilizing Cities

Whatever the direction of the trend, a stabilizing city is a place finding population equilibrium. The story in the Rust Belt is one of arresting decline. The Sun Belt is struggling with the legacy costs of spectacular growth. Richard Florida on the emerging paradox:

The North, [Mancur Olson] argued, may have suffered from outmoded labor-management practices and too much hardening of its organizational arteries. The South and West, he speculated, were more wide open territories where new kinds of industries and new ways of organizing might be able to take root. In retrospect, it's clear that Olson had painted America's economic geography with too broad a brush. Some Sunbelt cities, especially the ones that bought into sprawling housing development as a substitute for real growth, have fallen victim to the economic crisis. And there are cities in the once-dying Frostbelt -- such as Ann Arbor, Madison, and even Pittsburgh -- that have built new knowledge and creative economies around their great universities.

I disagree. Olson did not paint with too broad a brush. Two articles in the latest issue of The Economist solve the riddle. First up are the green shoots in the blighted brownfields of Detroit:

Yet despite all the gloom, there is a bit of a sense that things might just be starting to turn, and the reason is simple: Detroit is now incredibly cheap. And that has drawn some admittedly rather pioneering types back into town.

Olson's wide open territory exists in inner-city Detroit. America's economic greenfields are shifting from Sun Belt suburbia to Rust Belt urban chic. There are similar greenfields in the Rust Belt cities of the South, such as Chattanooga. In retrospect, Olson could not have been more precise.

Second are shrinking cities such as Flint and Pittsburgh. I like the coda of the piece:

And there is hope. Bruce Katz of the Brookings Institution has long believed these cities will once again be the engines of their regional economies. Pittsburgh, for instance, reinvented itself as a successful tech and health hub, even as its population continues to fall. As Aristotle put it, “a great city should not be confounded with a populous one.”

Emphasis added. The epoch of equating population growth with success is over. We already obsess a new set of metrics such as educational attainment rate. Quality beats quantity. The other big change is the move from suburban tech park to center city cluster. A good example is Mayor Bloomberg's aim to transform New York into a global hub of innovation. This isn't Google occupying a former horse pasture. It's Google retrofitting a Nabisco bakery plant in Pittsburgh.

Wednesday, October 19, 2011

Entrepreneurial Migration To Pittsburgh

Are you an entrepreneurial dreamer? Pittsburgh wants you:

The Experienced Dreamers™ contest is all about getting you to think about your dream – whatever it is you believe you were born to do – and asking if you have the courage to pick up your life, move to Pittsburgh and make it real. If you've got a dream and the passion to follow it, we want to hear about it. And – for one dreamer – we're going to give you the resources to help you do it.

From October 19 until December 16, 2011, we will be accepting applications for the contest. There's no fee to enter, but you must be 45 or older and you must not have lived within 100 miles of Pittsburgh in the last 10 years.

I emphasized the catch. John Cook at GeekWire had similar reaction to my own, where's the anxiety about the young adult demographic? Cook followed up with Shawn Bannon, who appears to be handling the PR for the initiative. Part of his reply to Cook shows up in the press release:

The contest, which is being managed by Leadership Pittsburgh, Inc., was created to raise awareness of Pittsburgh's virtues among Americans 45 and older after a study commissioned by the Jewish Healthcare Foundation found that the region could realize an economic impact of more than $2.5 billion by attracting 1,250 new 45-and-older residents over the next 20 years.

That would be an interesting study to read. Regardless, go check out the extended quote at GeekWire. (Cook's analysis is also worth your time.) Bannon puts to bed the concern about brain drain and the spotlight on attracting an older, more experienced demographic.

I've seen some research (here and here) that support this kind of targeting. The key demographic cohort for retention is 35-44. Attracting 45+ is really hard. The next stop is the snowbird migration.

My guess is that the talent dividend (i.e. $2.5 billion) is all about experienced entrepreneurs who could shepherd start ups coming out of CMU and Pitt. The ideas, energy, and even venture capital aren't in short supply. The know how to bring a product to market is lacking.

How will the contest engineer this migration? It's a publicity stunt designed to get the word out. The approach isn't innovative. I'd like to know why anyone thinks it will work this time. I'm jazzed about the 45+ focus. I'm not impressed with the plan to achieve the goal.

Tuesday, October 18, 2011

Brain Gain Migration

In today's Business Journal Daily, there is a great story about brain gain in Youngstown, Ohio. The newspaper interviewed, among other people, Dr. Cynthia Anderson. (Watch the interview in the sidebar to the right of the article.) Dr. Anderson is the president of Youngstown State University. She expresses quite clearly the link between return migration and the economic redevelopment of the Mahoning Valley. The narrative she weaves is exactly the same story that Jim Cossler of the Youngstown Business Incubator has been evangelizing over the last few years.

The brain gain trend isn't new. In fact, the brain drain that everyone laments still exists. The focus has shifted away from talent lost to leveraging talent gained. Likewise, resources are shifted from retention to force multiplying the attraction. That's in Youngstown. I hope to see something similar take root in Cleveland and Pittsburgh.

What's helping to bring the brain gain migration into focus is the Great Reset. The Atlantic posted a reminder today about Richard Florida's musings on the subject:

Before the crisis, Frey notes, young college grads had been strongly attracted to Sunbelt bubble metros like Phoenix, Las Vegas, and California's Inland Empire, where housing was cheap, credit readily available, and local economies were booming around real estate and services. But that has changed. In the wake of the crisis, young adults are flowing towards larger cities, college towns, knowledge-based and creative economy metros, and even some older Rustbelt metros are beginning to increase their ability to retain and attract them.

Austin topped the list in attracting college grads in the 2007-2009 period -- it was the only U.S. metro to register more than a two percent gain in college grads. Two other Texas metros -- Dallas and Houston -- also did well, making the top five in terms of total migration, along with Denver and Seattle. Raleigh, North Carolina,, with its concentration of universities and tech, and Portland, with its quality of life, registered large percentage gains. Migration of young adults to places like Phoenix, California's Inland Empire, Atlanta, and Charlotte, which topped the list in 2005-2007, the immediate pre-crisis period, slowed. ...

... But perhaps the best news is that a significant number of older Rustbelt metros -- like Buffalo, Cleveland, St. Louis, Hartford, and Milwaukee -- that had been losing young adults and college grads have stemmed those previous losses, while others -- including Pittsburgh, Columbus, and Baltimore, as well as New Orleans -- have begun to turn them into gains.

Florida's thinking about Frey's research drives my comparison of the diverging fortunes of Pittsburgh and Charlotte. Charlotte's decline is indicative of the shift away from conventional knowledge economy migration. Pittsburgh's rise is tied to an emerging economic epoch. I'm still trying to figure out what that epoch might be. The dominant migration patter is clear: Boomerang. Youngstown and Jim Cossler are ahead of the curve.

Call it "brain circulation" if you like. The missing piece is a workforce development program that acknowledges this important flow of talent. This policy innovation will come out of Youngstown, Pittsburgh, and/or Cleveland. The children of Rust Belt refugees are coming home.

Emigration Nation

Take a look at this map of the United States. On this map, demarcate the Midwest. Now look at this map and see how well you did. You just failed a cultural geography quiz.

There is a science to mapping culture. The regions you learned in school blow the dust off of some old geography paradigms, likely pre-Carl Sauer and the Berkeley School. The Midwest region you drew says more about you and where you are from than some objective understanding of American subcultures.

The map I offered up as the standard of US cultural geography comes from Colin Woodard in conjunction with his new book, "American Nations: A History of the Eleven Rival Regional Cultures of North America". Woodard has an article out in the latest The Washington Monthly. I intended to write about the nuanced cultural and political geography detailed, but an unrelated passage piqued my interest:

We’ve never been a nation-state in the European sense; we’re a federation of nations, more akin to the European Union than the Republic of France, and this confounds both collective efforts to find common ground and radical campaigns to force one component nation’s values on the others. Once you recognize the real map (see above), you’ll see its shadow everywhere: in linguists’ dialect maps, cultural anthropologist’s maps of the spread of material culture, cultural geographer’s maps of religious regions, and the famous blue county/red county maps of nearly every hotly contested presidential election of the past two centuries. Understanding America’s true component “nations” is essential to comprehending the Tea Party movement, just as it clarifies the events of the American Revolution or the U.S. Civil War.

Emphasis added. "Real" and "true" are classic terms of cartographic power. I'm not going to get into Michel Foucault or postcolonial theory. Suffice to say, the worldview of the mapmaker is on display. The detail of the US cultural geography is compelling. The map makes sense to me. I take issue with the characterization of France. Woodard makes an assertion that reveals his ignorance of French cultural geography. To him, France is a "real" nation-state.

Graham Robb wrote a book like Woodard's, but about France. The “Discovery of France: A Historical Geography From the Revolution to the First World War” is a great read. It explodes the myth of a French nation. Robb also explores how the science of geography is crucial to successful state building. She who makes the map, wields the power.

Our regional divides stem from the fact that the original clusters of North American colonies were settled by people from distinct regions of the British Islands—and from France, the Netherlands, and Spain—each with their own religious, political, and ethnographic characteristics. For generations, these discrete Euro-American cultures developed in remarkable isolation from one another, consolidating their own cherished principles and fundamental values, and expanding across the eastern half of the continent in nearly exclusive settlement bans. Some championed individualism, others utopian social reform. Some believed themselves guided by divine purpose, others championed freedom of conscience and inquiry. Some embraced an Anglo-Protestant identity, others ethnic and religious pluralism. Some valued equality and democratic participation, others deference to a traditional aristocratic order modeled on the slave states of classical antiquity.

Woodard's worldview of Europe stems from his intimate knowledge of US cultural and political geography. The France he describes is accurate in New World terms. In France, the parochial divisions are obvious. Across the pond, those divisions don't matter. From afar, France the nation-state is more real.

Imagining a national community isn't possible unless you leave the parochial territory. A Penn State student from Pittsburgh will trust other people from "Pittsburgh" more than Penn State students from "Philadelphia". That distinction goes out the window if the two students from either side of Pennsylvania meet in Thailand.

A Pittsburgh Nation or Rust Belt Nation depends on emigration. Those who leave define a new cultural (less parochial) geography. The scale and area of trust expands. The economic ceiling is higher.

That all said, introducing Woodard's "Greater Appalachia":

Founded in the early eighteenth century by wave upon wave of rough, bellicose settlers from the war-ravaged borderlands of northern Ireland, northern England, and the Scottish lowlands, Appalachia has been lampooned by writers and screenwriters as the home of rednecks, hillbillies, crackers, and white trash. It transplanted a culture formed in a state of near-constant warfare and upheaval, characterized by a warrior ethic and a deep commitment to personal sovereignty and individual liberty. From south-central Pennsylvania, it spread down the Appalachian Mountains and out into the southern tiers of Ohio, Indiana, and Illinois, the Arkansas and Missouri Ozarks, the eastern two-thirds of Oklahoma and on down to the Hill Country of Texas, clashing with Indians, Mexicans, and Yankees along the way. Intensely suspicious of lowland aristocrats and Yankee social engineers alike, Appalachia has shifted alliances based on whoever appeared to be the greatest threat to its freedom; since Reconstruction and, especially, the upheavals of the 1960s, it has been in alliance with the Deep South in an effort to undo the federal government’s ability to overrule local preferences.

America’s great swing region was founded by English Quakers, who believed in man’s inherent goodness and welcomed people of many nations and creeds to their utopian colonies on the shores of Delaware Bay. Pluralistic and organized around the middle class, the Midlands spawned the culture of Middle America and the Heartland, where ethnic and ideological purity have never been a priority, government has been seen as an unwelcome intrusion, and political opinion has been moderate, even apathetic. An ethnic mosaic from the start—it had a German rather than British majority at the time of the Revolution—it shares the Yankee belief that society should be organized to benefit ordinary people, but it rejects top-down government intervention. From its cultural hearth in southeastern Pennsylvania, southern New Jersey, and northern Delaware and Maryland, Midland culture spread through central Ohio, Indiana, and Illinois, northern Missouri, most of Iowa, southern Ontario, and the eastern halves of South Dakota, Nebraska, and Kansas, sharing the border cities of Chicago (with Yankeedom) and St. Louis (with Greater Appalachia).

There is no Great Lakes Nation or Rust Belt Nation or Midwest as Richard Longworth has constructed. Instead, there is New England (Yankeedom or Boston), SE PA (Midlands or Philadelphia), and SW PA (Greater Appalachia or Pittsburgh) occupying what we typically think of as the Midwest. St. Louis is a mix of Pittsburgh and Philadelphia. Chicago is a mix of Boston and Philadelphia. Cleveland is all three cities rolled into one mistake on the lake.

The "Rust Belt" is culturally and politically complicated. Yet we continue to use the stereotype. The geographic convention lends itself to grandstanding like Rick Parry did last Friday in Pittsburgh. Pittsburgh is Youngstown is Detroit is Gary, etc ... But if you want to engineer a Rust Belt nation-state, then start your project in Charlotte, North Carolina.

Monday, October 17, 2011

US Cluster Geography

Pittsburgh is more eds than meds. Meds would seem to better define Philadelphia. US economic geography according to EMSI:

Since we are a data company with a specific knack for the industry side of things, here is a quick look at how cities are often shaped and characterized by the industries that compose them. We have selected the 30 most populous metro areas and pulled some key details on large, highly concentrated industries to see how the reputations of those cities are often shaped by key, often nationally dominant industries.

Pittsburgh and Boston are the only two metros "dominated" by the higher education industry. I'd characterize them as talent production centers. Other metros may produce more talent. But that doesn't define them like it does Pittsburgh and Boston. Talent production activities should continue to agglomerate in both regions. At some point this week, I'll take a closer look at what that means.

EMSI lists the top 3 clusters for each large metro.Third for Pittsburgh is "crude petroleum and natural gas extraction". 2011 employment lags well behind that of higher education. But this sector is predicted to grow by 32% in five years. That's over 3,000 new jobs and an emerging cluster. Pittsburgh is the only metro in the East to sport such a cluster in its top 3. Pittsburgh is, already, the energy hub of the East Coast. That distinction will only become more obvious.

Friday, October 14, 2011

Rick Parry Is A Gas Bag

I expected Rick Parry to use some stock geographic stereotypes and plug the energy economy in such a way that would help spur migration to Pittsburgh. He did not disappoint:

And right here in Penn­syl­va­nia, and across the state line in West Vir­ginia and Ohio, we will tap the full poten­tial of the Mar­cel­lus Shale and cre­ate another 250, 000 jobs by get­ting the EPA out of the way. While Mar­cel­lus shale is today’s oppor­tu­nity, the deeper Utica shale for­ma­tions offer equally vast poten­tial with more jobs over the hori­zon for Penn­syl­va­nia and its neighbors.

The ben­e­fits of the boom in Amer­i­can nat­ural gas pro­duc­tion are also demon­strated in man­u­fac­tur­ing and pro­duc­tion. We see that right here at U.S. Steel’s Mon Val­ley Works Plant that employs more than three thou­sand work­ers, many of whom make the steel prod­ucts other com­pa­nies use to develop the Mar­cel­lus Shale today.

The face of man­u­fac­tur­ing in indus­trial states has changed rapidly. Nat­ural gas explo­ration is a game-changer that can bring new oppor­tu­ni­ties to replace the ones that have been lost. Devel­op­ment of nat­ural gas will cre­ate jobs in the sup­ply chain and lead to lower energy costs for manufacturers.

West­ern Penn­syl­va­nia is known for pro­duc­ing great quar­ter­backs I want West­ern Penn­syl­va­nia to Quar­ter­back a new energy rev­o­lu­tion that cre­ates jobs all across America.

There is a lot of silliness in this passage. The biggest laugh at loud moment concerns the increase in shale gas production. Big government is standing in the way? Via Energy Burrito, the odd economics of shale gas extraction:

Wall Street experts say well economics motivate producers to keep drilling for gas even when prices have sifted into the mid-$3s/Mcf. Even at lower prices, analysts say operators still receive good rates of return from gas drilling in the Haynesville and Barnett, as well as other gas fields such as the Fayetteville Shale in Northwest Arkansas and the Marcellus Shale in Appalachia. The Marcellus especially is close to desirable Northeast US markets where premiums to the Gulf Coast Henry Hub price can be $0.50/Mcf or more, experts said.

But the lag in well completions isn't the full story on why output from gas plays continues to rise. Upstream companies that increasingly become expert at finding a play's "sweet spot" are another reason for increasing production, particularly in the Barnett Shale where activity persists a decade after the play became an industry hot spot, John Bookout, managing director of energy for big equity capital investor Kohlberg Kravis Roberts, said.

If there is a problem in the Marcellus it is too much production. We don't have to go into why the EPA doesn't matter. Parry does not appear to understand the domestic energy economy.

Next up are the mesofacts. The Steel City lives! We can thank game-changing shale gas for that. Where would Pittsburgh be without hydrofracking? The region would remain mired in the depression that started in the 1970s when all the jobs were exported to China, Mexico, Japan. Damn that NAFTA. Now damn the EPA for keeping the Rust Belt rusty.

Parry's speech is a time warp. I kept imagining the B-reel footage still associated with the Pittsburgh Steelers and blue collar football while reading the text. From the Cradle of Quarterbacks will come an energy revolution and a manufacturing renaissance. Steel is coming home.

Thursday, October 13, 2011

Energy Talent Shortage

China is hungry. Japan is shying away from nuclear power. Australia is trying to feed both countries and a load of others with its wealth of natural resources. The choke point in this bonanza is the talent pipeline:

The demand for highly specialized skills means that an experienced offshore welding inspector can make more than $2,000 a day, about twice as much as in the Gulf of Mexico, said Dane Groeneveld, a regional director for NES Global Talent, which recruits labor for several big LNG projects in Australia.

"We can't grow quickly enough to support the demand for staff," Mr. Groeneveld said.

Some major contractors like Bechtel Corp., which is building three LNG plants on Australia's Curtis Island for different operators, have forecast a need to import electricians and welders. But Australia has tough restrictions on granting visas to foreign workers, and companies must also contend with local unions who have complained about contracts going offshore.

Emphasis added. The obvious answer is to import skilled labor. The unemployment picture in Australia is relatively good. Yet the tolerance for more immigrants is at a nadir. Unfortunately, workforce development can't keep up with the demand.

I think the geoeconomic sands have shifted enough to seriously consider the prospects of exporting US talent to places such as Australia. Labor mobility is much better here and all the shale hype will have workers lining up for training. The problem with mining jobs is the boom-bust cycle. You have to be willing to go where the jobs are.

Given the persistent jobless recovery, moving to China is increasingly an option:

"I just got tired of how the economy was going back home. I just figured things had to better somewhere else," said Francine, a former real estate agent in Las Vegas who recently moved to Xi'an, in central China, for work.

She has two jobs, but says her standard of living is a little bit better than when she left Nevada. "It's kind of ironic -- the middle class in China is growing while the middle class in America is shrinking."

Francine, who spoke with on condition of anonymity, had never been to China before making the decision to move there with her husband, and she doesn’t speak Chinese. But she's found enough locals who speak her language, and "when I meet someone who doesn't speak English, I play charades with them." The couple moved into a small one-bedroom apartment where he works in the import/export business, and she works constantly as a freelance magazine writer and at a learning center. She said she was surprised by the difference she felt immediately in the way her new neighbors treated her. ...

... “After the market crashed, the only jobs that were available were temp jobs, or jobs with very high turnover. Either way, I knew that I could not get by like that or even dare to save money,” Francine said. “So, after a grueling two month debate with myself, I finally decided to sell what little I had left of my belongings and put the rest in a small storage unit…and armed with $300, I flew to China.”

That's a daring migration tale, one you usually see for people moving to the United States. From the standpoint of geographic arbitrage, the risk makes a lot of sense. You don't need to live in an expensive global city to make money in a Creative Class enterprise.

Talent crams into New York City not because of same great return on personal or career development. People take a swing at the Big Apple because of the Frank Sinatra song. Make it in the world's #1 place. That's the draw.

The Great Reset has damaged the luster of that mythology. Today's biggest risk takers are leaving the States and rolling the dice in China or some other emerging economic power. By comparison, New York is a conservative play that will cost you dearly. The future of the Creative Class is elsewhere, in China. If you can't bring yourself to take on such a big risk, I recommend New Brunswick.


Kathryn Klaber (Marcellus Shale Coalition) makes the case for shale gas:

These are good, family-sustaining jobs, and not exclusive to those who work long hours on drilling rigs. The supply chain that supports our industry's work is robust and its economic impact is cascading. Recently, the U.S. Labor Department's Bureau of Labor Statistics reported that Washington County -- one of the most active Marcellus producing regions -- had the third highest percent increase in employment in the entire nation.

The connection between job growth and shale gas is tenuous. Regardless, it will be a major selling point in the upcoming election. The latest hype from National Public Radio:

Around the region, you can find many stories of businesses doing well because of the drilling boom — especially in Pennsylvania. U.S. Steel executive Doug Matthews says he had difficulty finding a hotel room in the small town of Williamsport last winter.

"That was a little bit surprising," he says.

Matthews is the senior vice president of tubular operations at U.S. Steel — his division makes the pipes and tubes the gas drilling industry uses.

U.S. Steel is based in Pittsburgh and is still a big driver for the local economy. When it does well, so do its contractors, like Chapman Corp. in Washington, Pa.

Shale gas is becoming THE economic story for Southwestern PA and the surrounding area (e.g. Youngstown). The really big driver for the local economy is eds and meds. Energy plays a significant part if you count coal and nuclear power as well as natural gas. Finance is back on the map. Tech is doing well. Pittsburgh is doing well.

Pittsburgh's revitalization predates the Marcellus boom. Washington County is lucky to be in the MSA. There are plenty of counties with substantial drilling not experiencing the same kind of job growth. Yet the Rust Belt pejorative endures. Look at Pittsburgh now! See how shale gas can save your shrinking community.

Klaber's ridiculous sales pitch, the hyperbole, is putting Pittsburgh on the map. Roboburgh couldn't deliver the migrants. Gasburgh can and will:

In an ad that has blanketed radio airwaves in the Washington region, a woman’s voice gently intones, “Imagine . . . one million new jobs.”

“One million new American jobs,” echoes a man. “One million new opportunities to build a career,” says the woman.

“Support a family.”

“Follow your dreams.”

And where will these “one million new jobs” come from? By expanding oil and gas drilling and building new pipelines, says the American Petroleum Institute, an industry lobbying group that paid for the ad campaign, which also has featured in newspapers, on television and on Metro platforms.

Pittsburgh is the face of this promise. It's a wildly inaccurate portrait, but an effective one. More importantly, the vision could help swing Rust Belt voters.

The cold, hard truth doesn't matter to prospective migrants. More people will "know" Pittsburgh as an energy boom town. You want a job? Move to Southwestern Pennsylvania.

Wednesday, October 12, 2011

California Brain Drain

California is hemorrhaging talent. The cost of living is too high. Taxes are out of control. The state is bankrupt and dysfunctional.

As usual, Chicken Little is wrong. So says the Milken Institute. If anything, California has a relatively low outmigration rate of highly-skilled workers. That wasn't always true:

Whether California faces a brain drain is a fair question to ask in a state that has seen an exodus of skilled workers before. The downsizing in aerospace and other defense industries after defense cuts in 1992 dramatically reduced job opportunities for some of the best and brightest, and it reversed California’s longstanding trend of net in-migration (Gabriel et al., 1995).

That 1990s brain drain has haunted Californians. Some pundits point to the Great Recession as the potential trigger of a new brain drain. California’s unemployment rate is the second highest in the nation, and the hightech sector alone shed more than 75,000 jobs from 2008 to 2009. (Footnote 6) Since the recovery began in 2009, growth has remained slow, causing concerns that knowledge-based firms will relocate or start up elsewhere.

The brain drain hasn't shown up, yet. The erroneous perception stems from an actual crisis. It's an interesting parallel to the Pittsburgh exodus of the 1980s. The specter of those dark years helped to shape Richard Florida's ideas about Creative Class migration.

California's recovery from the 90s also supports the kind of optimism that still seems prevalent in much of the battered Sun Belt. We've been down before but always came back strong. Not this time thanks to the Great Reset.

The Milken report blows a big hole in the brain drain myth. There is also a word of caution:

California’s high-tech economy has been highly dependent on bright, talented immigrants. On the upside, our study reveals that foreign-born, high-skilled workers in California are as unlikely to move to other states as native Californians. On the downside, however, there is a good chance that, once they decide to relocate, they will move back to their home countries. Many of the developing economies, especially China and India, are growing at full speed. While this presents unprecedented opportunities for California’s business and trade, it can also pose serious challenges to an economy where the formula for prosperity has always included immigrants seeking better opportunities than were available back home. With opportunities in their home countries multiplying on a daily basis, it is even more imperative for California to plan ahead in order to maintain a stable supply of skilled workers. One obvious strategy is to cultivate home-grown human capital, the sort that is least likely to leave California.

Emphasis added. Most boom towns and states have benefited from substantial brain gain via migration (international and/or domestic). Instead of cultivating home-grown human capital, the investment is in Creative Class amenities. The better to attract more talent. That winning strategy is now a liability. Tortoises such as Pittsburgh hold most of the cards.

The reversal of fortune bodes well for the Rust Belt. Emerging markets batter California's talent pool while tech continues to diffuse to more cost effective and skill rich locales. A company can make software anywhere. Why not in Youngstown?

Tuesday, October 11, 2011

Too Much Trust

Bowling alone has its perks. Some communities are wound too tightly. Drowning in social capital:

“When people are highly attached to their communities and highly embedded, the context in which that is taking place really matters,” Lee says. “Under normal circumstances, just average day-to-day life, being strongly attached to your community is a good thing. But under crisis conditions, that’s not necessarily the case.”

In this case, the crisis is the Gulf oil spoil. Deep roots hinder the ability to deal with trauma. Even tougher is the need to leave. Refugees from parochial neighborhoods have a hard time adjusting to a new environment without access to a strong network.

I see strong parallels with economic crises in the Rust Belt. Sean Safford studied the problem of too much social capital in Youngstown, Ohio. His research is more concerned with the civic leadership and broader access to that elite circle of power. After reading Safford's work, I'm convinced that Robert Putnam has it backwards. Those who bowl together stay in Buffalo.

Monday, October 10, 2011

Pierogi Dance Party

Cleveland is staking claim as the Rust Belt Chic capital of the world. When I imagine Rust Belt Chic, I envision Gen Y at a working class tavern eating city chicken and dancing to polka music. The new spin on old school:

Dean Montrose and DJ Sputnik are creating an audio-visual techno music experience that will make the cafeteria line full of Salisbury steak and Polish sausage seem a million miles away. The restaurant known for old world Eastern European charm is going Euro chic.

So will Bernie take off the apron and move to the beat?

"With two artificial hips and two artificial knees? I'm lucky I can serve pierogis," he said.

Thanks to Christine Borne, editor-in-chief of The Cleveland Review, for bringing the article to my attention. The party is at Sokolowski's University Inn in Tremont. Anthony Bourdain of No Reservations fame went there with Rust Belt legend Harvey Pekar. Bourdain gushes about the retro feel of the place. This is bat shit crazy Cleveland.

Bourdain would prefer a punk rock show, turning his nose up at techno. Dig the aesthetic, Tony:

Portland sucks.

Friday, October 07, 2011

Exodus Exposed

I'm noticing a deluge of "brain drain" stories today. It's a coincidence, but a lot of good reads nonetheless. I feel like I'm watching California implode in slow motion as one mesofact after another melts into the past. The fear of exodus sets in:

A possible consequence of this reality would be a unique brand of brain drain — the state’s college-degree wielding youth choosing to seek employment elsewhere once they face the realities of the state’s financial situation post-graduation. If such an exodus were to occur, it would further serve to undermine our already struggling industries and economy. Without college graduates, our state will lose talented citizens who could be helping to fuel the economy and pioneer new enterprises.

California has been losing a large amount of talented citizens for decades. That isn't a problem as long as college graduates from elsewhere continue to move to Los Angeles or San Francisco. Those two metros (along with San Diego) continue to act as immigrant gateways for likely entrepreneurs. That legacy migration has made California soft.

California is a magnet for talent. As a result, the state has ignored local investment in human capital. Colorado is on the same path and will experience the same problems in due time. Both states must figure out how to leverage outmigration for purposes of economic development. It might be too late for California.

Carnegie Mellon University New York City

Something I will be tracking:

Several schools that have flown under the radar in the citywide competition to build a tech campus are poised to shake up what had appeared to be a dogfight between Cornell and Stanford universities.

The two engineering powerhouses have hired lobbyists and public relations firms to pitch their proposed Roosevelt Island campuses. But details of three other bids—led by New York University, Columbia University and Carnegie Mellon University— that would use other sites are emerging. They would be strong contenders if multiple winners are chosen. ...

... Carnegie Mellon's proposal is altogether different. The Pittsburgh-based university is partnering with Steiner Studios to propose an entertainment technology center adjacent to Steiner's home at the Brooklyn Navy Yard. The site is one of three the city had suggested to prospective applicants in its request for proposals. The school and studio have long had a relationship, with Carnegie Mellon students doing internships at Steiner.

A spokesman for Carnegie Mellon confirmed the university is preparing the bid, but declined to offer details. Douglas Steiner, chairman of Steiner Studios, said the proposal calls for an entertainment technology center like ones Carnegie Mellon created in Pittsburgh with Disney and Google. The initial phase calls for about 150 students in two existing historic buildings, totaling about 32,000 square feet. Additional buildings would be added over time.

“It think it's a really good fit, considering all the mayor has done in growing the production business in New York City,” Mr. Steiner said. “If we can bring Carnegie Mellon … I think we forever change the relative weight of New York in the production business. The media capital of the world in terms of headquarters is New York, but not production.”

The links between NYC and Pittsburgh are important. A lot of big-time innovation talent migrates between the two metros. The trick is getting those in Pittsburgh to understand how winning the bid in New York will be a huge boon for SW PA.

The geography of the competitors is worth mentioning. You have NYC universities. Cornell, which already has a strong presence in the Big Apple, is in NY State. The Stanford connection should be obvious enough (Silicon Valley). And then CMU ... More to come as this story develops.

Stream Migration

I'm still mulling over whether or not I agree with the distinction. If you are interested in migration theory, then you might appreciate the discussion about stream migration. Right now, I'm getting a lot of mileage out of the comments. Readers are offering up a variety of migrations to see if they qualify as a "stream". One that got my attention:

You may want to read the article “The Right Place” by Lee Eisenberg in the May 1981 issue of Esquire magazine, about how leading edge members of groups (dream-chasing scouts, he calls them) select the next hot place to migrate to, in this case Santa Fe New Mexico.

Dream-chasing scouts are the vanguard of Creative Class migration. They move to Portland, Oregon before anyone else knows it is cool. I would call it a "pioneer migration" and I'm sure there is some academic term that defines the concept.

There you have it, Rust Belt outmigration. Now I need to figure out if it is a "stream".

Thursday, October 06, 2011

More Euro Crisis Migration

On Monday, I blogged about the migration of talent from Greece to Germany because of the current financial crisis. At a large scale, the move from Spain (another distressed country) to Germany is easily explained in terms of economic rationale. See this graph about the difference in unemployment in the respective countries. We can understand leaving Spain for Germany as a rational choice. At a finer scale, a rational choice theory of migration begins to fall apart. Exactly where these refugees end up in Germany is mostly a matter of network migration:

The Spanish government encourages job-seekers to leave. In January, it signed a cooperation agreement with Germany to push German companies to offer jobs in Germany to out-of-work Spaniards, focusing on the engineering, health and tourism sectors. The arrangement got a publicity boost when German Chancellor Angela Merkel visited Spain to meet with Prime Minister José Luis Rodgríguez Zapatero to discuss the matter, among other topics.

Eduardo Rodríguez-Priego, a 37-year-old civil engineer from Madrid, moved to Frankfurt in late 2009 after losing his job at a Spanish real-estate company. He had a brother already living in the German financial capital and decided to try his luck there after nine months of a fruitless search for a job in Spain.

"Four months later I found a job, even though I didn't speak any German," Mr. Rodríguez-Priego said.

Rodríguez-Priego moved to Frankfurt without a job. He could have gone to Berlin. But his brother lives in Frankfurt and is part of his network. Statistically, we see the brain drain from Spain and the brain gain in Germany. Doing so, we completely overlook an important migration pattern.

There may be a number of companies elsewhere in Germany even more desperate for talent. The wages might be better. The skills needed could be a better fit for the unemployed in Spain. There may even be a glut of workers in Frankfurt. What's missing is an established pathway to those jobs in lesser known regions.

Those lesser known regions strive to rebrand and build amenities like you find in Frankfurt. They preach and practice more tolerance. They embrace the Creative Class. And the talent keeps moving to Frankfurt.

So, businesses in those lesser known regions move to Frankfurt because that's where the talent is. Legacy migration is funny. It doesn't care about your youth groups or cool city initiatives. People go where they know.

Wednesday, October 05, 2011

Shale Gas Arbitrage

The Financial Times takes a detailed look at the shale gas boom in the region spanning Western PA, Eastern Ohio, and Northern West Virginia. The geography is important to the story, which looks at the overall economic impact of the fracking revolution in that area. There are other plays, but this one is the biggest. The key is the isolation and the tremendous arbitrage opportunity that it generates:

Shale gas is particularly important because it is stranded in US, with no facilities to sell it on world markets, although the country’s first liquefaction plant to enable the gas to be exported is now under development. As a result, gas is much cheaper in North America than in other leading economies. The US price of about $3.60 per million British thermal units compares with about $8 in the UK and $16 in Japan.

The cost comparison is even more favourable for US manufacturers of petrochemicals that use gas as a raw material and compete with international rivals using oil-based feedstocks. The US gas price works out at the equivalent of $22 a barrel, about one-fifth of the Brent crude price of more than $100.

I've also read, on numerous occasions, that the shale gas in the Marcellus is particularly cheap to extract. I've also posted before that happenstance has resulted in old school economic geography. Proximity to a raw resource drives industry location decisions. More from the Financial Times:

The Pennsylvania-based US Steel is another company investing in Ohio to make tubes for oil and gas wells, committing $100m to a new facility to revitalise a plant that first started production in 1905. As well as benefiting from supplying shale gas producers, it is making growing use of their product as a raw material.

John Surma, US Steel chief executive, explained recently how the company has been substituting cheap gas for expensive coal in its blast furnaces, saving tens of millions of dollars a year, and is exploring techniques to yield even bigger savings. “We are thankful”, he said in a speech to industry executives last month, for “the natural gas your revolutionary work is helping to bring to market”. ...

... “Natural gas is to the chemicals industry as flour is to a bakery,” says Cal Dooley, president of the American Chemistry Council, an industry group. “Cheap gas means both international and American companies are now looking at the US as the preferred location for new investment.”

The big prize in this competition is ethylene, an essential intermediate product used to make many plastics. Dow said this week that while Middle Eastern ethylene producers had the lowest costs of all, the US was now lower-cost than south-east Asia and well below western Europe or north-east Asia. Those calculations have inspired the company to restart one ethylene plant in Louisiana next year and to build a new one in the US to start operating in 2017.

Other companies are reaching similar conclusions. Royal Dutch Shell has said it plans to build an ethylene plant in the Appalachia region, meaning Pennsylvania, Ohio or West Virginia. Other oil and gas groups, including Chevron and ConocoPhillips, are also looking at possible new plants. LyondellBasell, the chemicals company, and Williams, which operates gas pipelines, are looking at adding to their US production capacity.

For the first decade of the millennium, high and volatile gas prices made US production uncompetitive relative to producers in emerging economies. Jeffrey Lipton, a former chief executive of Canada’s Nova Chemicals who now spreads the shale gas gospel, says the balance of power has shifted back to North America. Unlike in some industrial sectors, China has no competitive advantage in chemicals, because it is an importer of gas and oil.

As the effect of cheaper American raw materials works through the value chain, Mr Dooley says, other manufacturers will also be encouraged back to the US to take advantage. “Even in the auto industry we are starting to see a response,” he says. “There are composite and plastic components presently being made outside the US, because it has been cheaper. That competitive advantage no longer exists. In the future the US will be in a far stronger position to be a supplier to the auto industry.” The ACC estimated in March that a 25 per cent increase in ethane production could create 400,000 jobs.

This is the jobs boom. To date, those gains show up in extraction (see this graph). That's great for Texas, Oklahoma, and Colorado in the near term. Long term will see Pittsburgh emerge a global center for energy related industries as long as the shale gas can't find a way to the rest of the world.

Reverse Engineering Migration

A great way to create jobs and attract migrants is to export talent. That doesn't mean sit back and let graduates leave. A community should be strategic about valuable destinations and help the resident thrive in that location. This is the talent trade economy and reciprocity applies. How hiring immigrants helps multinational firms penetrate fast growing markets abroad:

High-skilled immigrants are likely to have several attributes that could help U.S. multinationals capitalize on foreign opportunities. Beyond language skills, well-educated immigrants typically possess specialized knowledge about how to conduct business in their home countries. They are likely to have a strong understanding of customer behavior there and to have insights about what kinds of products would succeed. Furthermore, high-skilled immigrants often also have relationships and are part of networks that can facilitate foreign market access. In order to study these e§ects of skilled immigrants, it is particularly useful to work with data that links individuals of particular ethnicities to specific firms.

I understand migration as a link between two communities, not a zero-sum game. The move to improve can benefit both sending and receiving country, even when the brains boomerang back home. The above study provides proof of how any community experiencing outmigration can generate a return on the investment in the educated who leave.

To put it in a domestic context, Boston needs to stop worrying about brain drain. And I thought Chicago has an annoying inferiority complex:

Right now, Massachusetts has an Avis strategy without the Avis motivation: "We're #2, but our sense of entitlement keeps us from trying harder."

Keep that up, and in twenty years we'll all either be working for universities or the burrito shops nearby.

We're a second-tier financial services town. Second-tier tech town. Second-tier retail town. Second-tier defense contracting town.

That doesn't attract the best talent in the world, and it doesn't give you a strong position in the global economy. It leaves you to play a retention game — let's try our best to hold on to the people who grew up here, or who got a degree here — rather than an attraction game.

And it leaves you exposed to sniping from boosters of the top-tier locales, seeking to attract even more talent to their companies. For example, Marc Andreessen, co-founder of Netscape, recently told The Economist that "a massive brain drain from Boston to the Valley... has all but gutted Boston as a place for high-tech entrepreneurship." (That didn't stop his venture capital firm from funneling money a few weeks later to a Boston mobile technology start-up...perhaps the last one left in town?)

Talent moves to Silicon Valley and venture capital heads to Boston like a remittance flow. Boston is great at producing the talent Silicon Valley wants, that it so desperately needs. The two regions are tightly linked. It's a commensal relationship, a great asset to both places. Instead, Boston sees the migration as a problem that needs fixing. Protectionist thinking wins again.

Monday, October 03, 2011

Knowledge Economy Is Dead. What Is Next?

For Pittsburgh, the early 1980s dramatically marked the end of the Steel City. The decline can be easily traced back to the population peak of the 1950s. But the apex of industrial might was 1910, a century ago. It was all downhill from there.

We tend to think of the knowledge economy is still emerging. That's true for fast growing countries such as China, India, and South Korea. For the United States, the apex is the decade of the 90s. Since then, it has been all downhill. As Salon (hat tip Chris Briem) argues, the Creative Class is dead:

For many computer programmers, corporate executives who oversee social media, and some others who fit the definition of the “creative class” — a term that dates back to the mid-’90s but was given currency early last decade by urbanist/historian Richard Florida — things are good. The creativity of video games is subsidized by government research grants; high tech is booming. This creative class was supposed to be the new engine of the United States economy, post-industrial age, and as the educated, laptop-wielding cohort grew, the U.S. was going to grow with it.

But for those who deal with ideas, culture and creativity at street level — the working- or middle-classes within the creative class — things are less cheery. Book editors, journalists, video store clerks, musicians, novelists without tenure — they’re among the many groups struggling through the dreary combination of economic slump and Internet reset. The creative class is melting, and the story is largely untold.

Creative Class theory reminds me of the next hot town. Once you hear about it, the scene is over. Cool is already somewhere else. The knowledge economy (along with the rush to suburbia) starting blooming in the 1950s. The greatest physical artifact of the knowledge economy is Eisenhower's Interstate system. The Pennsylvania of the new economy was California, (hat tip Aaron Renn) which is now on the edge of a huge collapse:

All states may have been created equal, but they were equal no longer. The states that had enjoyed the biggest boom were now facing the biggest busts. “How does the United States emerge from the credit crisis?” Whitney asked herself. “I was convinced—because the credit crisis had been so different from region to region—that it would emerge with new regional strengths and weaknesses. Companies are more likely to flourish in the stronger states; the individuals will go to where the jobs are. Ultimately, the people will follow the companies.” The country, she thought, might organize itself increasingly into zones of financial security and zones of financial crisis. And the more clearly people understood which zones were which, the more friction there would be between the two. (“Indiana is going to be like, ‘N.F.W. I’m bailing out New Jersey.’ ”) As more and more people grasped which places had serious financial problems and which did not, the problems would only increase. “Those who have money and can move do so,” Whitney wrote in her report to her Wall Street clients, “those without money and who cannot move do not, and ultimately rely more on state and local assistance. It becomes effectively a ‘tragedy of the commons.’ ”

The point of Meredith Whitney’s investigation, in her mind, was not to predict defaults in the municipal-bond market. It was to compare the states with one another so that they might be ranked. She wanted to get a sense of who in America was likely to play the role of the Greeks, and who the Germans. Of who was strong, and who weak. In the process she had, in effect, unearthed America’s scariest financial places.

“So what’s the scariest state?” I asked her.

She had to think for only about two seconds.


In American mythology, California is at the top of migration tales. Young, smart, and ambitious? Pack your bags for the Left Coast. Domestically, California has been bleeding people at least since the 1990s and the Dot Com boom. By the time you first heard about the wonders of Silicon Valley, it was over. The knowledge economy crested. Richard Florida is a historian, not a futurist.

We are about two decades into the decline of the knowledge economy. Out of the rubble of the current financial crisis will come the post-knowledge economy. What will that world look like?

China will dominate geopolitics while playing catch up in knowledge industries. Manufacturing still matters, everywhere. Expect knowledge production to be relevant, as well. But companies will need less workers for greater production. Innovation will fuel spectacular efficiency gains. Work will move to where the demand is. Get ready for America's great brain drain.

The best book I've read about this post-knowledge economy future is "The Great Brain Race" by Ben Wildavsky. We are in the midst of a shift from all the world studying at US universities to Carnegie Mellon setting up shop in Rwanda. If American knowledge workers want jobs, then more and more of them will have to go abroad.

Also telling are the seismic shifts in the energy economy. Oil is back in a big way in the Western Hemisphere. Roughnecks trained in Pennsylvania won't be working in the Marcellus region:

Up and down the Americas, it is a similar story: A Chinese-built rig is preparing to drill in Cuban waters; a Canadian official has suggested unemployed Americans could move north to help fill tens of thousands of new jobs in Canada’s expanding oil sands; and one of the hemisphere’s hottest new oil pursuits is actually in the United States, at a shale formation in North Dakota’s prairie that is producing 400,000 barrels of oil a day and is part of a broader shift that could ease U.S. dependence on Middle Eastern oil.

For the first time in decades, the emerging prize of global energy may be the Americas, where Western oil companies are refocusing their gaze in a rush to explore clusters of coveted oil fields.

“This is an historic shift that’s occurring, recalling the time before World War II when the U.S. and its neighbors in the hemisphere were the world’s main source of oil,” said Daniel Yergin, an American oil historian. “To some degree, we’re going to see a new rebalancing, with the Western Hemisphere moving back to self-sufficiency.”

Emphasis added. Did Borders lay you off? Move to Winnipeg. Or, go teach English in Brazil. California is no longer an option. Indiana doesn't want you hanging out in Bloomington on the dole.

I thought the end of the Cold War was a turbulent time. It pales in comparison to what I am seeing now. I grew up imagining that the Soviet Union is evil and that I could make a living as a knowledge worker. So much for that world view.