Tuesday, July 31, 2012

NYC Talent Disadvantage

Using hyperbole is hard to do when talking about New York City. Its urban economy is king of the entire world. But the metro pales in comparison to Silicon Valley, which is why Mayor Bloomberg is anxious to stoke the fires of innovation. His city is playing catch up not only with San Francisco-San Jose. The Big Apple is also behind Beantown:

If New York has yet to make its mark in digital innovation the way Silicon Valley has done—with Stanford as its engine of innovation, or even Boston, with MIT—some vital trends are moving in its direction. “You’ve got to understand how big we are,” says Bloomberg, citing an encounter with a friend from Boston who told him, when the Roosevelt Island project was first being proposed, “Oh, you’ll never succeed because Boston is the education capital of the country.” Bloomberg says he told his friend bluntly: “New York City has more undergraduate and graduate college students than Boston has people.” That, he said with a chuckle, “sort of ended that argument.”

Actually, the quip should start an argument. What matters more, the aggregate number of brains or the concentration? In terms of innovation, Boston is closer to Silicon Valley than New York is. Boston is a talent production cluster. Producing college graduates defines Boston's economy. In New York City, the business of higher education is a sideshow. Its advantage is decidedly one of talent attraction, not production.

If anything, NYC wastes its raw brain power. Regions with lesser undergraduate and graduate students outperform the world's best metro. Big isn't necessarily better. Bloomberg identified a weakness, not a strength.

War For Talent: Ann Arbor

Despite its 4th place ranking for "creative metros," Ann Arbor has a talent attraction problem. It's a great community with a strong economy, most thanks to the University of Michigan. Finding the right people to fill the growing number of innovation jobs is tough:

The tighter labor market means employers such as Terumo Cardiovascular Systems and ProQuest have had to become more proactive to find the talent they need.

Terumo, which makes heart-lung machines and other medical devices, has 35 positions to fill and has hired almost 200 workers during the last 18 months. To find experienced medical device workers, the company has participated in Michigan Economic Development Corp. recruiting events in Boston and northern California.

"We're trying to get people to come back to Michigan," said Rhonda DeLuca, Terumo's director of human resources.

Targeting expats is a great way to get around the mesofacts barrier. Anyone who grew up in Michigan can distinguish between Detroit and Ann Arbor. Take note of the geographic focus. It's hard to engineer migration. Ann Arbor has to concentrate resources strategically. Piggybacking on the MEDC is a good idea.

Better yet, Ann Arbor should investigate established return migration flows. Such an analysis is tricky business. But there's likely a lot more boomeranging going on than Ann Arbor realizes.

Sunday, July 29, 2012

Economists Suck At Geography

Too many academics play fast and loose with scale. I've seen the geographic unit of analysis change within one sentence. A recent example in Bloomberg:

In a new working paper, Shoag and Peter Ganong, a doctoral student in economics at Harvard, offer an explanation: The key to convergence was never just mobile capital. It was also mobile labor. But the promise of a better life that once drew people of all backgrounds to rich places such as New York and California now applies only to an educated elite -- because rich places have made housing prohibitively expensive. (Shoag and Ganong visualized these changes in a series of excellent animated graphics.)

The states with the highest incomes also used to have the fastest-growing populations, as Americans moved to the places where they could earn the most money. Over time, that movement narrowed geographic income differences. In 1940, per-capita income in Connecticut was more than four times that in Mississippi. By 1980, Connecticut was still much richer, but the difference was only 76 percent. In the two decades after World War II, Shoag and Ganong find, migration explains about a third of the convergence of average incomes across states.

But migration patterns changed after 1980. “Instead of moving to rich places, like San Francisco or New York or Boston, the population growth is happening in mid-range places like Phoenix or Florida,” Shoag says. Lower-skilled people, defined as those with less than 16 years of education, are actually moving away from high-income states.

The offense is in bold (emphasis added). If you analyze interstate migration, then your conclusions should reflect that. Comparing "Boston" to "Phoenix or Florida" is a mistake. The unit of analysis in the working paper is the state (e.g. Florida). Leave cities and metros out of the discussion. Stick to states.

That grievance aired, "Why Has Regional Convergence in the U.S. Stopped?" is a fascinating read. People, regardless of income, used to follow the money. During the great migration, poor from the rural South streamed to the urban North. (Regional convergence) Now, people with less than a college degree are moving from high income states to low income states. (Regional divergence)

Enrico Moretti makes this very point in his book, "The New Geography of Jobs." In a recent interview with the American Enterprise Institute, a controversy arises between Moretti and Shoag:

Differences in geographical mobility, coupled with increasing polarization among American cities, exacerbate income differences across education groups. Indeed, if the less educated people were more able and willing to move to cities with better job opportunities, the gap between college graduates and high school graduates would shrink.

Moretti thinks the unemployed need help moving to where the rent is too damn high. Shoag thinks the crux of the problem is that the rent is too damn high:

These results suggest that rising share BA in high BA areas ((Glaeser and Saiz, 2004) and (Moretti, 2012)) may be the result of out-migration by low-skill workers or domestic human capital production rather than increasing in-migration by high-skill workers.

Emphasis added. That's from footnote #31 on page 19. High housing prices are pushing out low-skill workers (Shoag) as apposed to high-skill workers agglomerating in a select few places (Moretti). But that's a huge "may be" that the paper can't answer. Of course, that doesn't deter Virginia Postrel:

Finally, there’s the never-mentioned possibility: that the best-educated, most-affluent, most politically influential Americans like this result. They may wring their hands over inequality, but in everyday life they see segregation as a feature, not a bug. It keeps out fat people with bad taste. Paul Krugman may wax nostalgic about a childhood spent in the suburbs where plumbers and middle managers lived side by side. But I doubt that many of his fervent fans would really want to live there. If so, they might try Texas.

Postrel sucks at geography. I recommend Moretti over Shoag. Again, Moretti from the interview with AEI:

One of the most striking facts about our society is how different the economic fortunes of cities can be. In the United States, for example, the wage of workers varies enormously depending on the city. The hourly wage of workers in a city like San Jose is more than double the hourly wage of workers in a city like Visalia. These cities are in the same state, are just 200 miles apart, and they share the same legal system, language, and culture—and yet from the point of view of their economies, they look like they belong to different continents. And the gap is not going away—it has been increasing for 30 years. It is not that San Jose has better natural resources or better transportation infrastructure than Visalia, or that its workers work longer hours. The entire productive ecosystem is different. It is hard to understand the reasons that make local economies so different, unless you start thinking about forces of agglomeration.

Emphasis added. That's an economist thinking like a geographer. Jared Diamond would applaud Moretti's natural experiment. How would Shoag's analysis hold up using a similar research design? From the work I've done, I think Moretti is right and Shoag is wrong.

Friday, July 27, 2012

New Economic Geography Of Tech Talent

Within the Rust Belt, there is a great divergence. Urban Milwaukee took a look at the brain drain issue for that metro. Steve Filmanowicz commenting on the disparity of college educational attainment rates between city and suburb:

All of this makes it more difficult to find apples-to-apples comparisons for cities such as Milwaukee. This region’s city-suburbs disparity looks more familiar — but still more pronounced — when viewed alongside those of cities with similar characteristics such as Philadelphia and Baltimore (where compact but relatively high population central cities anchor their regions). Curiously, compact cities such as Pittsburgh and Cincinnati that have lost a huge share of their population now rank better at the city level, but rank rather low in college grads at the regional level. St. Louis — where the central city accounts for a paltry 11.3% of metro population compared to 38% for the city of Milwaukee — comes close to fitting this pattern too.

Emphasis added. Within the contiguous region of shrinking cities, there is a great deal of variance. These facts should confound the grand sweeping narratives used to paint the Rust Belt with broad brush strokes. I see the kings of demographic decline at different stages of globalization, the core is becoming more brainy while the suburban periphery is more isolated. The action is downtown.

Staying with Milwaukee, a reader passed along an interesting article this morning. This piece speaks to the convergence of the Innovation Economy. The world is flat:

"I was very skeptical five years ago that I would do a meaningful expansion in Milwaukee," said Jackson, who then viewed the area as primarily a low-cost employment area. "But what I have found is the majority of talent we need in our company, we are able to acquire in that area."

Space is less expensive, it takes less time to find qualified employees in Milwaukee, and they stay with the company for longer than they would in California, Jackson said.

Firms focused on innovation are seeking cheaper labor and more effective talent management. This national trend is fueling the concentration of the college educated in Rust Belt cities. Pittsburgh and Cincinnati are further along in that transformation than Milwaukee. But overall, the entire Rust Belt is ascendant as the Innovation Economy continues to diffuse.

Ironically,  Chicago is seeking a similar dividend. That region is fighting an uphill battle. Among the champions of agglomeration (the world is spiky), Chicago is still a relatively weak performer:

The city has some distance to travel before it can boast a critical mass of computer professionals. Compared with the rest of the nation, the Chicago area has slightly fewer computer developers than average, according to May 2011 Bureau of Labor Statistics data. San Jose, by contrast, has four times the national average, Washington, D.C., three times the average, and Boston 1.3 times.

And both Chicago and Cook County—in which the city is located—along with the state of Illinois are staggering under unfunded public pension obligations. On Thursday, Moody's Investors Service revised the outlook on Cook County to negative from stable, citing increases in those obligations.

Dennis Woodside, the recently named CEO for Motorola Mobility and former president of Google's Americas region, compared the move to Google's facility in the Chelsea neighborhood of Manhattan. There, he said, the company started with 30 people 10 years ago and now employs 3,000. It has also become a hub for tech start-ups.

"These are people who have incredible talent, don't want to move to California but want to be in the tech industry," said Mr. Woodside. He believes the same thing will happen in Chicago within 10 years. "We have the opportunity to really pull from the universities across the entire Midwest."

Emphasis added. Again, note the convergence of tech talent. The world is get flatter. Chicago's problem is that it will have to compete with Pittsburgh and Milwaukee for these people. The forces of divergence privileged Chicago during its boom. A spikier world benefited the city. The forces of convergence would seem to be working against Chicago, which has long pulled from the universities across the entire Midwest. Now other parts of the Rust Belt are competing for market share. Chicago is a dead man walking.

Thursday, July 26, 2012

Hillary Clinton And Talent Migration


 Some numbers to help illustrate the point:

Policy debates in international development frequently forget to acknowledge that the actions of individual citizens are often as least as important as the large development interventions. In Haiti, benefits from remittances sent home by migrants equal nearly 20% of GDP – more than twice the earnings from the country’s exports. Similarly, the reduction of income poverty in Nepal from 42% to 26% in 15 years was not mainly due to foreign direct investments, nor due to Official Development Assistance, but rather due to outward labour migration and remittances.

<----End Update---->

Brain drain as a problem is a stubborn mesofact. Such a worldview is ignorant. US Secretary of State Hillary Clinton talking about impeding migration (thereby undermining economic development in Haiti):

Clinton said the United States was working to help Haiti’s youth to stay in their country and change what she called “the leading country in the world for brain drain.”

More Haitian college graduates have left Haiti per capita than any other country in the world, she said.

“When you think of the talent that Haiti has produced that benefits us and others, what we want to do is make it possible for any bright, young, ambitious Haitian to stay home and to build his or her country,” she said. “And we are excited by the progress we’re making.”

The best thing going for Haiti right is the brain drain. Clinton wants to put a stop to it. I'm sure she means well. She doesn't understand the relationship between migration and economic development. US policy is rotten from the start.

Meanwhile, international economic development experts are trying to catalyze Haitian migration. The gap between actual research and political rhetoric is huge. The narratives are polarized. But the discourse is changing, for the better. That's why I'm disappointed in Secretary Clinton's position on Haiti.

Wednesday, July 25, 2012

America's Fresh Coast

I support more collaboration between the cities of Chicagoland. I'm intrigued with the talk about developing a fresh water cluster. But give the concern about the "Rust Belt" pejorative a rest:

But for Milwaukee Mayor Tom Barrett, an important part of the action plan includes changing the perception of the area from the "Rust Belt" to "America's Fresh Coast." While retaining its manufacturing prowess, he said the region could build upon its water assets and use it as a beacon to attract residents and business investment.

Another one of the region's assets is Rust Belt-ness, or Rust Belt Chic. The rebranding work is already done. Milwaukee in particular needs to do a better job of leveraging the new geographic stereotype. Use it as a beacon to attract residents and business investment.

Clamoring that your Rust Belt city is the exception to the rule is like staking your flag as the next great center of biotech. Everyplace else is making the same claim. Just go be great like Albany did with nanotech.

How Brain Drain Created Mexican Middle Class

Brain drain isn't a problem in need of a fix. It's economic development that should be promoted. How outmigration saved a struggling rural community in Mexico:

From Santa Maria del Refugio, a once rural, now almost suburban, community of 2,500 in central Mexico’s Guanajuato state, young men have gone to the United States seeking the social mobility they could not find at home.

Their money, and many of the workers themselves, have since returned, as the U.S. economy slowed in the global recession. For the first time in 40 years, net migration is effectively zero. About the same number of Mexicans left the United States last year as arrived. Migration experts expect the northward flow to pick up again as the U.S. economy improves. It is also possible that as Mexico provides more opportunity for upward mobility, some potential migrants will stay home.

In Santa Maria, dollars scrimped and saved in the United States have transformed a poor pueblo into a town of curbed sidewalks, Internet cafes and rows of two-story homes rising on a hillside where scrawny cattle once grazed.

The same model could apply to rural communities in the United States. Unfortunately, brain drain is framed as an evil to combat. (For example, see "Hollowing Out the Middle.") A tremendous opportunity is squandered. What about taking advantage of the brain drain that will inevitably occur?

Brain drain is understood as failure. Talent quits on her hometown. The region isn't cool enough to retain the best and brightest. Regardless, migration is a success story. Communities that keep all graduates from leaving are the failures. The lack of geographic mobility is an indicator of poverty. The stuck are the least fortunate. Politicians touting retention are not to be trusted. They do not understand economic development. They are the problem, not brain drain.

Another Appalachian Urban Rebound

Roanoke, Virginia has good bones. The setting for the city is as dramatic as you'll find anywhere in the United States. These assets set the table for the next Chattanooga or Greenville:

“People think this is too good to be true,” said Chris Morrill, the city manager. “You have this developer who knows the finances, knows the law, knows how to do these historic renovations and is really committed to the community. It’s real.”

Mr. Morrill added: “When folks from other communities come in here and I show them some of the stuff that’s Ed’s doing, they’re like, ‘How can we clone this guy and bring him back to our community?’ ”

[Mr. Walker’s conference] is intended to share his blueprint for urban redevelopment, a field known as placemaking; he will study it at Harvard’s Graduate School of Design this year, with a prestigious Loeb fellowship. But many towns already have their own version of Ed Walker, said Bruce Katz, a vice president at the Brookings Institution and founding director of the Brookings Metropolitan Policy Program, which focuses on cities. “This is happening across the country,” Mr. Katz said.

The tagline for the conference is "Radical Trust in the New Frontier". The theme should be familiar to readers here. Recycled cities offer unique opportunities you can't find in the latest boomtown.

Since moving to Northern Virginia, I've been to Roanoke a few times. I love the area and the city. I can see the attraction. But the place is off most people's mental maps. If you are looking for an undiscovered urban gem, check out Roanoke.

As Bruce Katz remarks, there is a bigger story in play. Here is the Burgh Diaspora angle:

The keynote speaker for Thursday's session is Bob Lambert, a Roanoke native and graduate of Patrick Henry High School and Virginia Tech who has spent the past three decades in California, most of it as a senior executive with The Walt Disney Co.

When he left Disney last year and became a venture capitalist, Lambert was senior vice president for worldwide technology strategy and development for the company. His job was to be looking for new technological breakthroughs, and he was a key figure in the Pixar collaboration with Disney.

Lambert has been a frequent visitor to his hometown and maintained old friendships here.

"Four or five years ago, I noticed the city was changing in an interesting way. Developers were revitalizing downtown. There was the Taubman. I started watching the city a lot more closely and started coming back even more often," he said.

Not long ago, he said, a Roanoke friend called him in Los Angeles. "You ought to come in this weekend," she said, "and see how much is going on." There was a concert at CityWorks' Kirk Avenue Music Hall, a show at Jefferson Center, a wine tasting, a run on the greenway and other events.

"The thing I love about this city is the human scale of it," Lambert said.

As for (X)po, "There's more to it than just the rising appeal of small cities," which he predicts will be able to attract young people who want to live in places where they find a good quality of life and can work through their computers and smartphones.

"It's about how small businesses will evolve and exist."

He cites Ogden, Utah; Albany, N.Y.; and Asheville, N.C., as some of the places that are attracting the best and brightest. "They are mini Silicon Valleys."

Emphasis added. Once again, I see evidence of diffusion instead of agglomeration for the Innovation Economy. Roanoke's revitalization is interesting because there is no large university at the core to anchor the economy. In the above article, Ed Walker makes that precise point. What can we do to help such cities? Walker and Roanoke are trying to figure that out.

Tuesday, July 24, 2012

US Economic Geography Of Startups

For your startup, you'll need access to financial capital, talent, and experience. Generally, this favors established geographies such as Silicon Valley. Forces of agglomeration dominate the Innovation Economy. Other considerations are leaking into the conversation. The new geography of entrepreneurship:

However, small towns do have their advantages. For starters, you’re almost certainly looking at a lower cost of doing business. And, as Sorenson and Dahl’s study suggests, you’re also much more likely to have a community to rally around both you and your startup. ...

... As startup communities continue to sprout up in areas such as Durham, N.C. and Pittsburgh, Pa., organizations like American Underground and AlphaLab are there to help innovative technology companies launch quickly and successfully. By providing work space, mentoring, seed capital, and other resources for aspiring entrepreneurs, they make it possible to focus on launches instead of leases.

Pittsburgh isn't the next Silicon Valley. There can only be one.The point is that the Innovation Economy is beginning to diffuse, as opposed to continuing to agglomerate. One doesn't have to be in the Bay Area or Boston to succeed.

But don't push this story too far. The Pittsburgh boom does not mean we can stick a fork in Silicon Valley. As the Rust Belt makes plain, dominance takes decades to unwind. The descent is gradual, with an occasional spectacular collapse.

Friday, July 20, 2012

Peak Employment Pittsburgh

In terms of jobs, Pittsburgh is already fully recovered from the recession. However, June 2012 marks a historic occasion for regional employment. You can find the numbers here. Pittsburgh Today with the news:

There were 1,176,000 jobs in the Pittsburgh region in June, which makes it not only the highest June figure for the region but also the highest jobs figure ever for any month on record, according to the Bureau of Labor Statistics. The previous high figure for June was back in 2001 when there were 1,172,100 jobs in the region.

Emphasis added. The last employment peak for June was in 2008 (now the 3rd best June in Pittsburgh's history). Since then, "the Pittsburgh region has gained 10,700 nonfarm jobs.  In contrast, none of the 14 regions against which Pittsburgh is compared gained jobs over that time period." Among the losers are Boston, Denver, Charlotte, and Minneapolis.

Too bad the population numbers are so anemic. Otherwise, we'd be celebrating prosperity in Pittsburgh. I hear Denver and Charlotte are growing. Good luck finding work.

Forced Return Migration

In South America, governments are refining the art of talent geopolitics. The common thread is exporting brains. What comes after studying abroad serves as the crux of the policy debate. Ecuador versus Brazil:

Allan Goodman, president of the New York-based nonprofit Institute of International Education, said that such programs often fall short because neither the government nor the local economy can provide satisfying jobs for the returning scholars.

"This seems to me to be different. There's real integration between education and labor in ways that I don't see in a lot of countries," said Goodman, a former Georgetown University School of Foreign Service dean. "It seems to me they read the playbook for best practices to make this work and they've adopted all of them."

In order to ensure that beneficiaries honor the agreement to return, they or relatives must sign contracts promising to repay if a student doesn't come back, or drops out, and putting up collateral such as a home. When students return home, they will be placed in jobs in universities and state institutions, generally teaching and doing research.

Guarderas, for example, said that after he gets his degree in Madrid, he expects to return to the state-run Army Polytechnic, where he taught before departing in February, and to use his new knowledge to expand the use of alternative energy:

"Apart from whatever I'm assigned, I want to develop ... a private initiative to install photovoltaic cells on private homes, which in the long term will mean allowing people to disconnect from the country's power grid."

Goodman said that the "Science Without Frontiers" program that neighboring Brazil announced last year is "the gold standard" in efforts to reverse brain drain. It is granting 100,000 scholarships for university study abroad, three-quarters of which will be paid by the state, the rest by the private sector.

Yet that program doesn't include job guarantees for beneficiaries. Nor does it specify any commitment to government service upon return.

Brazil's education minister, Aloizio Mercadante, told reporters recently that officials have no problem if some of the beneficiaries stay in the country where they study because that gives the government and scientific institutions contacts in those countries.

Emphasis added. Advantage Brazil. Ecuador is attempting to force return migration in order to ensure a return on the state's investment. Traditional brain drain thinking won't get the country very far. There isn't anything novel in this approach.

Brazil sees a return on the state's investment even if the brains don't come back home. The state is encouraging geographic mobility, much like China has done. Between Ecuador and Brazil, the talent gap will continue to get wider.

Thursday, July 19, 2012

UK Rust Belt Urban Rebound

I've taken some heat for touting Cleveland's urban rebound. I'm familiar with the backlash. I've been singing the praises of Pittsburgh for 6+ years. There are many reasons to temper my enthusiasm. Chris Briem (Null Space) reminds us of the perils in over-interpreting the data. To much less fanfare, he highlighted Pittsburgh's hidden demographic positives. The two posts are not mutually exclusive. There isn't a paradox. Garbage in, garbage out doesn't mean that there isn't an urban renaissance. For example, see the city center boom in the United Kingdom:

Are urban populations growing because people want to live in cities again or because they have to? It is a mixture of the two, says Tony Travers of the London School of Economics. Moving to London generally enhances a career because so many companies are based there and people change jobs a lot—the so-called “elevator effect”. This may just about be true of Manchester. Lately sticky jobs and housing markets have glued urbanites in place. But supply makes a difference, too. As big cities have welcomed growth in their centres, many small towns have resisted it.

The return to city living is not unique to Britain. Berlin and—at least until recently—some southern European cities have also been growing strongly. In America, the foreclosure crisis has pushed people back into cities and inner suburbs, says William Frey of the Brookings Institution, though it is not clear whether that trend will last.

Emphasis on words of caution added. Urbanists are quick to pop the champagne. Critics and cranks stand at the ready with a rebuttal. Okay, the suburbs and exurbs aren't dying. Neither is the urban core. One is an old trend. The other is a new trend. I'm not waiting for the definitive Census take to declare Pittsburgh is booming. So sue me.

The data points are adding up. What's stark in Manchester, UK is showing up less pronounced in Pittsburgh and Cleveland. Global forces are at work. That has a lot more explanatory power than another dubious data run proving people still like the suburbs. Mesofacts don't change overnight.

Tuesday, July 17, 2012

Search Space Return Migration

You go where you know. In order to better understand migration, geographers have modeled our familiarity with territory. This is "awareness space". "Search space is a subset of awareness space within which possible new residential locations are evaluated." A story about how Sarasota gets onto the mental maps of retirees looking for a new home:

Circling back in retirement to recapture a happy memory — Mike Valentino's first glimpse of Sarasota Bay as a new CEO, Karen Valentino's girlhood Florida vacations — is a common navigation of what demographers call the "search space."

This is the sum total of geographic sites that become familiar over a lifetime. Most people look within their personal search space when deciding where to spend their leisure years — and baby boomers who choose to relocate are expected to do the same.

The history of Southwest Florida's retirement population was built on military postings to two airfields here in World War II, and family beach vacations down the old Dixie Highway from Michigan and Illinois. Both sweeping demographic trends introduced Sarasota into the search space for thousands of retirees.

You don't go where you don't know, your geography of fear. Ann Arbor is indistinguishable from ruin porn Detroit. Starups in Southeastern Michigan have a problem attracting talent This is the Rust Belt Curse. Most communities don't end up as part of someone's search space.

The exception to that rule are Rust Belt expats. Brain drain from affluent suburbs is introducing urban living to the awareness space of outmigrants. Upon returning to a city such as Detroit, neighborhoods that were once taboo are now part of the search space. Re-populating the core is possible thanks to the talent exodus.

Monday, July 16, 2012

Cleveland Brain Drain And Innovation

"Adam Jackson is a San Francisco-based serial entrepreneur and angel investor. He issues a rallying cry to get startups happening outside the Valley, using the methods used in the developing world." -TechCrunch

I added the link to "Adam Jackson" in the TechCrunch bio. Jackson has a proposition for his hometown of Cleveland, Ohio:

I’m from Cleveland, Ohio. Cleveland is part of the rust belt – a region of the US that has fallen on economic hard times largely due to globalization and the permanent export of manufacturing jobs. Because of these conditions, the cost of living in places like Cleveland has fallen sharply. The fact is, there are still plenty of smart and motivated people there that would be thrilled to have high-paying tech jobs. The problem is, there aren’t enough schools or organizations teaching them the actual skills they need. I believe the MEST model would work well here. Develop an intensive school that teaches people how to run a lean technology business and even build the tech side of it themselves. It’s much easier to bootstrap in places like Cleveland than it is here in Silicon Valley. That could serve as a huge advantage to this type of a program and its participants.

Any fellow midwesterners want to brainstorm this with me?

Emphasis added. If you want to know more about the MEST model, click through the link. Jackson is highlighting part of Cleveland's Rust Belt Chic advantage, ample urban frontier geography. He's emblematic of the other part, exporting talent. This is the brain drain dividend, a policy innovation I've seen used in the developing world (e.g. Michael Clemons). Migration, even outmigration, is economic development.

If you are interested in brainstorming with Adam Jackson and have a Twitter account, I recommend getting in touch with him. One idea I have is inviting Cleveland expatriates to boomerang back and be MEST participants. Migrants make great entrepreneurs. They are proven risk-takers. What say ye, Global Cleveland?

Friday, July 13, 2012

Rust Belt Chic Brazil In NYC

Rust Belt Chic is ubiquitous. In a generic sense, the concept captures a unique sense of place. The dorky old ways you couldn't wait to leave behind now fill you with longing and nostalgia. Or, more simply, you appreciate the charms of authenticity:

Great pictures! Butte looks like a gritty mountain town. You are exactly right about the Pennsylvania look; quite a few of those pictures reminded me of an Appalachian oil town or coal town. Butte looks strangely similar to Oil City, PA, and Wheeling, WV.

The title of the thread says it all, "BUTTE, Montana | Rocky Mountain Rust Belt." You don't have to be in the Rust Belt to find Rust Belt Chic. But there is more to it than topography and building stock.

Rust Belt Chic is also about romanticizing working class culture. We seek out blue collar food and music, putting a contemporary spin on the old ways. Hand cut potatoes are deep fried in duck fat and piled on top of organic locavore greens. A Pittsburgh salad becomes haute cuisine.

That's a long-winded introduction to the forró craze seizing New York City:

But the boomlet in New York also seems propelled by the desire of young music consumers for something that sounds new and exotic but which you can still dance to in the old-fashioned way — close and tight. That parallels the genre’s evolution in Brazil, where about a decade ago sophisticated college-age urbanites adopted and adapted the old, rough-hewn sound, polishing it into a style now known as “university forró.” ...

... In a telephone interview from Recife, during a break in rehearsals for Friday’s show, Cláudio Rabeca said he was worried about only one thing in his band’s American debut. Nobody in Quarteto Olinda speaks English, he said, so he was going to have to take extraordinary measures to assure that his message gets across to New Yorkers.

“Forró is music that was originally played in homes, at parties, in small places where people who were farm laborers, bricklayers or maids were encouraged to dance,” he said. “You can’t dismember the music from the dancing, they’re totally linked, and we want to communicate that to American audiences. So we’re going to bring along big placards with messages to that effect written out in English, and show them from the stage. It can’t be just the thing of the music. It has to have the dance too.”

Emphasis added. Is that Rust Belt Chic? I'm asking an open question. I think it is. A blue collar cultural artifact is finding a second wind in an ironic environment.

Thursday, July 12, 2012

Rethinking Educational Attainment Rates

Got talent? Rightly so, every US metro is asking that question. Lou Glazer on how Michigan cities can address the need:

Creating places where talent — particularly mobile young talent — wants to live. This means expanded public investments in quality of place, with an emphasis on vibrant central-city neighborhoods. Young talent is increasingly concentrating in high density/walkable big city neighborhoods. (Think Chicago.) So for Michigan to become prosperous again, Detroit primarily and then Grand Rapids and Lansing/East Lansing must be talent magnets.

Emphasis added. Implicit in this recommendation is the value of talent density. The creative magic of the urban environment is all about living close to downtown. Knowledge doesn't travel very far. Face-to-face interactions rule. Serendipity is the mother of invention. It's all hogwash.

Migration and geographic mobility (to add commuting to the equation) comprise the magic of cities. I doubt residential density of people with college degrees has anything to do with innovation. What matters is the geography of talent employment. If there is a density/proximity dividend, then you would find it in the clustering of businesses in the urban core. Via Urban Demographics, the daytime population of London:

I downloaded the data, explored it and did a little 3D mapping of population density. The daytime population density figures for the City of London are quite staggering (350,000 people per square mile!). During the day, the population of Westminster is nearly 1 million - compared to about 250,000 permanent residents. The City of London only has about 11,700 permanent residents but its daytime population is 390,000. If you're looking for the London Borough with the most prams, then head to Newham - it has the highest number of children aged 0-4. If you're looking for overseas visitors, head to Westminster where you are bound to bump into one of the 65,000 or so who are there.

There's a lot of moving around in London on a daily basis. The job density is astounding. I'd bet that if not a soul lived in the City of London and Westminster that London as an economic powerhouse wouldn't skip a beat. How does that relate to college educational attainment rates?

Say your metro doesn't rank so high in terms of percentage of workers with a college degree. The competition is to attract/retain talent. The region must boost educational attainment. I think a better and more effective approach would be to entice more employers of knowledge workers to locate downtown. How many of these metro jobs are located outside of the urban core? What's your city's daytime talent density and how might you increase that number? When we talk about how cities can attract talent or be more creative in terms of residential value, we are going at the problem in the wrong way. We need a better understanding of how cities work.

Wednesday, July 11, 2012

Global Economy's New Map

The United States is losing the Great Brain Race. The headline sells the story. By 2020, the United States will be behind both China and India for percentage of global college graduates. Alarming news. The Oxford Internet Institute tells a different story:

A team at the University of Oxford's Internet Institute has produced a set of maps showing the "geography of the world's knowledge".

This measures how populations are consuming and producing information in the online world - mapping the level of internet use, the amount of user-generated material in Google, concentrations of academic activity and the geographical focus of Wikipedia articles.

And in contrast to the rise of the Asian economies, this tells a story of continuing Western cultural dominance.

"In raw numbers of undergraduates and PhDs, the Asian economies are racing ahead," says Prof Viktor Mayer-Schonberger, from the Oxford Internet Institute.

"But what's interesting is how the West persists in its positions of strength - because the West controls the institutions.

The Knowledge or Innovation Economy is diffusing. Developing countries are rapidly gaining ground. Yet the West maintains its advantage. From the same BBC report, the geography of US knowledge:

In the US, says Prof Mayer-Schonberger, there is hugely disproportionate investment around Silicon Valley and the Boston area, with large tracts of "wasteland" between.

"Each era has its own distinct geography. In the information age, it's not dependent on roads or waterways, but on bases of knowledge.

"This is a new kind of industrial map. Instead of coal and steel it will be about universities and innovation."

Emphasis added. It has been about universities and innovation for decades. The Great Divergence got going as early as the 1970s. You can find a new new kind of industrial map in "The Great Brain Race" by Ben Wildavsky:

Q: As the global higher education market grows, what do you see as areas of enduring strength for the United States and areas in which the U.S. will lose its position?

A: Market are unpredictable – and I think that’s true of the global academic marketplace as much as any other kind of market. So I’m hesitant to make any grand pronouncements. Here’s a cautionary tale: In the late 19th century Americans flocked to the first modern research universities in Germany and brought the model back to the United States, where it was perfected to the point that we became the world’s research powerhouse. A little more than 100 years later, the quality of Germany’s universities had plummeted – and it is now copying the U.S. model as it attempts to create a group of world-class institutions. So things can change quite a bit over a century. One possibility worth considering is that universities may take entirely new forms. We’re already seeing a large number of cross-national partnerships between universities, including many U.S. institutions. As travel and communication gets even easier and cheaper, one could imagine wholesale mergers to create global institutions – the university equivalent of multinational corporations. Nigel Thrift, vice chancellor of the University of Warwick, talks about universities following the model of “firm theory,” in which business begin in one country, trade with others, establish international branches and alliances, and eventually merge with competitors and become multinationals. I have no idea whether this will really happen – there’s also a good argument that the best universities are strongly rooted in place. But I think this thought experiment illustrates how conventional notions of competition between the United States and other nations may fade.

In the near term, we shouldn’t lose site of the fact that we remain hugely dominant – we have a disproportionate share of top researchers, 70 percent of the world’s Nobel winners, hold most of the top slots in global college rankings, and so on. We also pass an important market test, continuing to attract the lion’s share of top international students. That said, patterns of mobility could well change, and with so many new and improved universities in other nations focusing on science and engineering, that seems likely to be an area where we might lose ground. But as I indicated before, this isn’t necessarily worrisome if we look at the sum total of knowledge production around the world. From a U.S. point of view, where we are likely to remain very strong is in our creative spark, in academia and beyond. This is something other nations urgently wish to emulate – our ability to innovate, and to use research discoveries in entrepreneurial ways. For undergraduates, we also have a tradition of liberal arts. It isn't as widespread here as I would like, but I think it’s been a crucial element of our ability to graduate creative thinkers. Universities in many other nations don't have a liberal arts tradition at all. A few are trying to change that, but for now our ability to ask questions, to challenge the conventional wisdom, to be nonconformist at times, is likely to continue to be an area where we stand out.

Emphasis (in italics) added. Many of the graduates found in India and China (usually the best ones) studied abroad. The United States is very good, the best in the world, at producing talent. What this new new map already looks like:

Yale has some collaborations in China, for instance, in which it takes advantage of cheap lab space and well-trained technicians -- China’s comparative advantage, for now -- and supplies senior faculty to lead research projects -- what Yale president Richard Levin, an economist, calls “the scarce factor of production … the sophisticated knowledge worker who is the leader of the enterprise, whose research design is driving the system.”

Bases of knowledge (e.g. Silicon Valley and Boston) give way to the sophisticated knowledge worker. The places that are best at producing such workers will be the Silicon Valley or Boston of the Talent Economy.

Migration Is Economic Development

Your business is striving to retain talent. Your community is trying to plug the brain drain. In terms of economic development, both aims are destructive. Any attempt to keep people from moving, whether between employers or towns, is wrong.

Initiatives and policies designed to impede geographic mobility are baffling. Duncan Green, Head of Research for Oxfam GB, attempts to explain the anti-migrant bent:

‘Sedentary prejudice’: Development organisations cherish a mental image of happy peasants, tilling fields or resting of an evening in a flourishing village with schools, water and the like. I think many people in development therefore see migration as a failure – the talk is all about people forced to migrate, rather than choosing to. At least that point of view is reinforced by European history (think of the forced and miserable emigration of the Irish famine), but makes even less sense for New Worlders in countries built on migration.

Radioactive politics for campaigners: the gulf between politics and economics is probably wider on migration than any other issue. It’s always at the top of public concerns, and politicians know what’s in store if they’re seen as ‘soft on immigration’. Campaigning organizations are also keenly aware of the public mood, so the issue stays with the thinktanks like CGD until that mood shifts.

But I also wonder if there’s a more subtle political problem – supporting migration sets you up to oppose poor people in the UK. Lining up with a bunch of liberal economists to inform your fellow citizens that they are wrong (and quite possibly racist too) is not a comfortable exercise for any progressive spirit.

Brain drain: despite plenty of arguments to the contrary, a lot of people still see ‘stealing their doctors and nurses’ as an act of neocolonial plunder.

Sedentary prejudice resonated most with me. We fetishize the local. We privilege the insider and dehumanize the outsider. We are happy peasants until some migrants destroy everything. To model it as an equation: Local Graduate > Non-Local Graduate.

From the perspective of economic development: Non-Local Graduate > Local Graduate. Much better to attract than to retain. Encouraging a local graduate to stay makes everyone poorer.

Rust Belt cities such as Detroit are wasting millions of dollars on talent retention. Metros should be in the business of catalyzing migration. Urban economies thrive on churn. Whereas plugging the brain drain makes communities more intolerant, less creative. It's a downward spiral, a negative feedback loop.

Tuesday, July 10, 2012

Ironic Recovery Geography

If you haven't yet heard about Pittsburgh's post-recession boom, you will soon enough. There's a bigger story percolating, hiding under the mostly useless population numbers. This is no dead cat bounce:

Rebound in an unlikely place. According to Jennifer Mapes, a visiting assistant professor in the State University of New York—Plattsburgh's geography department, some of the best opportunities for workers looking for a change are in the Rust Belt, or the chain of once-industrial cities stretching across the Midwest.

Many people still view the Rust Belt as a symbol of economic failure. However, according to Mapes, this belief is exactly what makes these cities attractive to workers. "Cities that had no downside before the recession have nowhere to go but up," she says. "They now have to be aggressive, but the opportunity is there."

The key to this type of recovery is a willingness to accept risks, and deep pockets willing to take a chance. Take Pittsburgh, for example. The steel industry made many people there rich. When steel left town, these people were willing to make gambles on healthcare and technology. Those gambles are now paying off.

"I don't think you're going to be successful without this sort of a gamble," Mapes says. "Incremental changes in small towns aren't going to get you anywhere. The last few years have really shown me that you can enact change—you can push back against national and international forces."

Professor Mapes aptly describes the Rust Belt's urban frontier advantage. Typically, the civic cynics project the downward trend long into the future. What has always been bad will continue to get worse. The analysis is poor and ignores the rebound going on in plain sight. Border Guard Bob lives! Please stay in Pittsburgh and get a life.

Some of the gambles around the Rust Belt are beginning to pay off. Before jumping on the next cool city fad, take a longer look around to see what is already working. What you find might surprise you.

Great Divergence Within Brooklyn

Speaking of the income disparity within Brooklyn, I missed this New York Times article published last Sunday:

The city’s most populous borough remains stunningly diverse. Neighborhoods like Red Hook and Bedford-Stuyvesant mix lives side by side, though not always comfortably. But a look at some of the typical signs of gentrification, income and education shows that sections of the borough are increasingly on divergent tracks.

In the community district that embraces Park Slope and Carroll Gardens, the proportion of households earning over $100,000 rose to 43 percent in 2010 from 28 percent in 1990. In Brownsville and Ocean Hill, the number stayed flat, around 9 percent, while those earning under $25,000 rose to 46 percent from 43 percent, according to a study of household income by Susan Weber-Stoger, a Queens College sociology research associate.

In Williamsburg and Greenpoint, the proportion of residents holding graduate degrees quadrupled to 12 percent; in East New York and Starrett City, it remained 4 percent.

Emphasis added. The recent economic crisis has exacerbated the Great Divergence. I can see why there is a persistent exodus of Latinos from the city. Opportunity is elsewhere, found even in Reading, PA. You are better off in a struggling Rust Belt community than to remain in Brooklyn.

Whether Brooklyn is dying or booming depends on the neighborhood. One should also consider the time frame and emerging trends. More and more of Manhattan is spilling over into America's urban frontier in Cleveland, Pittsburgh, and Detroit. Much of Brooklyn will remain a cul-de-sac of globalization.

Great Divergence Within New York City

In the United States, perhaps around the world, New York stands atop the urban hierarchy. Whichever city you slot in second place, it seems to be almost an order of magnitude behind. Without a doubt, NYC is on the right side of Enrico Moretti's new geography of jobs:

The divergence of Menlo Park and Visalia is not an isolated case. It reflects a broader national trend. America’s new economic map shows growing differences, not just between people but between communities. A handful of cities with the “right” industries and a solid base of human capital keep attracting good employers and offering high wages, while those at the other extreme, cities with the “wrong” industries and a limited human capital base, are stuck with dead-end jobs and low average wages. This divide—I will call it the Great Divergence—has its origins in the 1980s, when American cities started to be increasingly defined by their residents’ levels of education. Cities with many college-educated workers started attracting even more, and cities with a less educated workforce started losing ground. While in 1969 Visalia did have a small professional middle class, today its residents, especially those who moved there recently, are overwhelmingly unskilled. Menlo Park had many low-income families in 1969, but today most of its new residents have a college degree or a master’s degree and a middle- to upper-class income. Geographically, American workers are increasingly sorting along educational lines. At the same time that American communities are desegregating racially, they are becoming more segregated in terms of schooling and earnings.

Emphasis added. Brains are agglomerating in certain parts of the country. But what about within a metro? A Bronx tale:

The Bronx’s inability to catch up with the rest of the city’s phenomenal economic growth has been disconcerting. In the early 1970s, the Bronx and Brooklyn had similar average household incomes. Since then, though, the gap has grown significantly. The average Brooklyn resident is now around 23 percent richer than the average Bronxite; people in Queens are roughly 32 percent richer. (Manhattan residents are 265 percent wealthier; Staten Island residents, by the way, are 55 percent richer.) What happened?

Read Moretti's book to find out what happened. Rust Belt cities diverged from Creative Class cities. As the above NYT article explains, New York is a microcosm of the national trend. The Bronx is comparable, perhaps favorably so, to Buffalo, Detroit, Cleveland, and St. Louis. How might the Bronx revitalize, too? Pull a Pittsburgh:

So perhaps the Bronx shouldn’t try to become a more affordable Greenwich Village (like parts of Brooklyn) or an enclave of the young, hip and ambitious (like parts of Queens). For economic inspiration, Katz suggests, the Bronx should look outside New York. Pittsburgh lost its steel industry, but the city — home to Carnegie Mellon, Pitt and other research institutions — redefined itself as a solid second-tier educational and research center. The Bronx, Katz says, is also strong in the highly coveted “eds and meds” sector. “It boggles the mind,” he says, how much hospitals and universities spend. As a result, they offer extensive potentially valuable service jobs without degree requirements.

Emphasis added. Even within Brooklyn and Queens, there is a great divergence. Vitality changes dramatically from neighborhood to neighborhood. The urban geography of globalization is hyperlocal. Global cities harbor great income disparity, where nurture trumps nature. Your genetic disposition matters less.

What that means is that there are parts of Pittsburgh that are better connected to Manhattan than the entirety of the Bronx. The next New York neighborhood to gentrify isn't in the Bronx. It's the South Side Slopes of Pittsburgh.

Monday, July 09, 2012

Emerging US Talent Geography

Cincinnati is starved for talent. The metro is setting "Bold Goals" concerning the development of human capital. David Joyce, chief executive officer of GE Aviation, frames the problem:

“Put yourself in my shoes. I have to compete with every city in the United States for great talent,” Joyce said. “So I’m at every campus looking for the best and brightest finance majors, engineers, business majors in the room. I want to bring them into a community that differentiates itself in addition to a company that differentiates itself.”

Emphasis added. The war for talent is heating up. Regions are upping their game and better cultivating homegrown brains. The focus is still on building a cool city in order to attract talent:

To most people, Nashville is a one-note town: Music City, home of the American country scene. That's not necessarily a bad thing, says Liza Massey, president and CEO of the Nashville Technology Council. "It's great because it shows we have a creative, vibrant community."  ...

... Although the Nashville Is Hiring campaign has only been recently announced, Massey says the effort will include an ad campaign as well as visits to tech conferences like SXSW. Earlier this year, the Technology Council sent a street team of young Nashville residents to the Tennessee music festivals CMA MusicFest and Bonaroo wearing bright yellow shirts that exclaimed "I'm a hotspot!" with QR codes that could be scanned for more information about the tech jobs available.

Massey hopes that the campaign will allow them to entice workers from nearby Atlanta, Indianapolis, and Raleigh, but their bigger range of initiatives will also allow them to lure tech workers away from larger cities like L.A., New York, and Chicago. She thinks their efforts show candidates that Nashville is dedicated to creating the best tech working environment in the country. "I challenge them to find another city on their short list that has such a coordinated effort and is taking such a holistic approach."

Emphasis added. Nashville is a "community that differentiates itself." Joyce would love Cincinnati to follow in the footsteps of Music City. Both cities are behind the times, chasing yesterday's paradigms of economic development. Neither will beat San Francisco, L.A., New York, and Chicago at this game. The Cincinnati advantage:

Allison, 26, was seeking a San Francisco base for DotLoop, the technology company he founded in his hometown of Cincinnati three years ago. ...

... Austin Allison dropped out of his second year of law school in 2009 to found DotLoop, which automates paperwork for real estate agents. Launched with angel capital, the company became profitable in 17 months, he said. In May, to accelerate growth, it took $7 million in funding from Trinity Ventures.

San Francisco is the clear place for that expansion to happen, he said.

"San Francisco has a talent pool that is different and more robust than the talent pool that exists in the Midwest," he said. "Our office here will become our bleeding-edge tech arm, but our internal operations will stay in Cincinnati."

He wants to hire 10 to 20 people in San Francisco within the next year. Having an office that projects the right vibe - "fun, cool, energetic, with lots of natural light, high ceilings and an open floor plan" and near amenities and transit - is a key part of recruitment, he said. Another big consideration is flexibility: a space that can grow with the company, or a shorter lease period in case it needs to relocate.

Cincinnati and Nashville are angling to get the right vibe, one that San Francisco already has (as well as an international reputation for such amenities). Missing in the urban upstarts is the thick labor market, the "more robust" talent pool. Nashville has the edge on cool and creative. Cincinnati has legacy assets. Score one for the Queen of the West.

Cincinnati, not Nashville, produces the talent and startups that Trinity Ventures wants. There is a link via DotLoop between San Francisco and Cincinnati, where "internal operations will stay." I wish Nashville the best of luck barking up a dying tree.

Migration And Geographic Clustering

Migration is more than a link between two cities. It is a link between two neighborhoods. The clustering of Little West Michigan in Detroit:

Peter Brand was tired of driving back to Grand Rapids after seeing a Tigers or Lions game and saying to himself the Web marketing firm he co-founded -- Mindscape at Hanon McKendry -- ought to be doing more business in Detroit. So in May, after three years of procrastination and study, he finally opened a downtown office.

The opening of his 1,100-square-foot office in Paradise Valley -- formerly the Harmonie Park area of downtown -- was a small pebble making barely a ripple in the metro area's large pond of real estate.

But Brand and others from West Michigan say that a bucket of those pebbles can, one by one, create a wave for downtown Detroit that's as large as a small boulder.

Perhaps the bucket is on its way.

Over the past few months, the Grand Rapids-based companies Mindscape, Atomic Object Inc. and Lambert, Edwards & Associates all have opened offices in downtown Detroit no more than a stone's throw from each other -- creating what Atomic Object's Carl Erickson calls a "little West Michigan."

Emphasis added. Peter Brand's company is the pioneer migrant. He broke through all the negative geographic stereotyping and moved his business to downtown Detroit. Via his network, other people in West Michigan hear about the opportunity. Brand's assessment is trusted. It drives migration. Thus, other firms cluster around where Brand landed.

The relationship between social capital and migration is hyperlocal. Your lens of analysis must be fine enough to pick up chain migration from Providence, RI to Pittsburgh, PA. I highly recommend reading the entire article cited above. You can see how parochial attitudes stifle urban redevelopment and why outsiders are vital to the Rust Belt rebound.

Friday, July 06, 2012

Hot Pittsburgh Real Estate Market

Shrug off the population estimates. Wait for better migration numbers. But pay attention to two things in Southwestern Pennsylvania. The first is the size of the workforce. With each passing month, another record falls. The region is enjoying historical highs. The second data point concerns home sales. The metro market is blistering:

Ron Croushore, president of the West Penn Multi-List, as well as a principal of Prudential Preferred Realty in the region, expects homes to continue to sell briskly in the region while also expressing concern over what he sees as a growing shortage of homes to sell.

“With historically low interest rates and increasing consumer confidence, the southwestern Pennsylvania real estate market is hot,” said Croushore, in a prepared statement. “However, we are seeing a shortage of homes for sale in all price ranges in our region.”

Pittsburgh, a shrinking city, has a shortage of supply. With all the vacancy and blight, this may come as a shock to some. Perhaps the population is robustly growing.

I think the rush of people is yet to come. There's a bump, for sure. Newcomers are trying to cram into all the same places. In late 2010, I was on a cityLIVE! panel with Luis von Ahn. I recall him mentioning that Pittsburgh was expensive. Moderator Jesse Schell agreed. When all costs were considered, real estate was comparable to Los Angeles. The best talent liked only a few neighborhood. Supply was dear. Affordable Pittsburgh was a myth.

The economic health of metros paints with very broad brush strokes. Whereas the forces of globalization acting on an urban geography are almost hyperlocal. Our metrics tend to be too coarse to pick up on this transformation. Thus, a hot real estate market in "Southwestern Pennsylvania" jumps out of nowhere.

I've been watching this dynamic play out in Cleveland. A few good inner ring neighborhoods does not an urban renaissance make. Proof? The City's population is in decline. That fact lords over every neighborhood. That number trumps low vacancies and rising rents downtown. The feeling of vitality in Ohio City can't possibly be real.

Thursday, July 05, 2012

Mystery Of Declining Geographic Mobility

US geographic mobility is declining. Why? Ryan Avent (Free Exchange) summarizes the findings of a Federal Reserve Bank of Minneapolis report:

This homogenisation reflects the rising importance of “non-tradable” work. As the name suggests, non-tradable goods and services are not traded across long distances. Californian dentists tend not to clean Floridian teeth; every city has its own dentists. Cars, by contrast, are tradable, so not every state has its own car plant. Recent research by Michael Spence and Sandile Hlatshwayo of New York University’s Stern School of Business found that 98% of employment growth between 1990 and 2008 occurred in non-tradable industries. Education and health-care jobs now account for 15% of employment, up from less than 10% in 1990. With more of the country’s employment mix present in each state, it is less necessary to move to find work.

I buy that explanation. It makes sense and dovetails with Enrico Moretti's understanding of the US Innovation Economy. The second rationale doesn't pass the sniff test:

Young workers in particular used to have to move to gather information: to see whether they could stand a Boston winter, say, or cared enough about the Californian climate to pay Californian rents. In recent decades, however, it has become much easier to learn about places without moving house. Deregulated airlines and innovative online-travel services have slashed travel costs, allowing people to visit and assess different markets without moving. The web makes it vastly easier to study every aspect of a potential new home, from the quality of its apartment stock to the surliness of its baristas, all without leaving home. Falling mobility isn’t simply caused by labour-market homogenisation, the authors argue, but also by greater efficiency. People are able to find the right job in the ideal city in fewer hops than before.

Better information should catalyze greater geographic mobility, not gum it up. The implication is that there is less failed migration. Another possibility is that your typical failed migrant is, for some reason, less likely to leave in the first place. Regardless, more efficient migration doesn't fit well within general theories of migration. Part of the mystery endures.

Wednesday, July 04, 2012

Rust Belt Chic Migration

Understanding why the Creative Class flocks to Boulder or Portland is easy. What about Niagara Falls? The attraction:

“More than just the monetary incentive … it would be cool to work at a place where these ideas are actually coming out of City Hall,” said Stephen Epps, an applicant from San Jose, Calif., who studies urban planning. “It’s a pretty smart way to go about getting new people into a city that has been losing population for four decades.” ...

... “We’ve been trying to get people to think of Niagara Falls as the next cool place,” said Mayor Paul A. Dyster. “We’ve lost our brightest, most ambitious young people. They decided that to pursue their dreams, they could not do that in Niagara Falls. We’ve got to change that perception.”

I don't think the mayor means the next Austin. He's hoping to be the next Detroit. Niagara Falls is promoting its urban frontier assets. There aren't any "Ts" in place. There's a big difference between Creative Class chic and Rust Belt Chic. You either want to party with Lebron James in South Beach or have your own Pittsburgh Potty.

Speaking of King James, anyone remember what Richard Florida wrote about The Decision? My favorite passage:

The more I think about it, the more the reaction from white, privileged America seems to me to smack of racism and classism. Does anyone criticize Bill Gates or Steve Jobs or the Google or Facebook guys when they abandon their old companies and home towns to launch new startups? Yes, the LeBron James show was self-aggrandizing and over-the-top, but when all was said and done, it wasn’t all about Lebron James either.

Boston still whines about losing the Facebook guy. As for Bill Gates, he moved Microsoft from Albuquerque to his hometown of Seattle. Gates and Paul Allen did the boomerang before it was Rust Belt Chic. But don't let the facts get in the way of a sermon. Buried in the lust for stardom is the common thread geography:

So why Miami? Why would the “Three Kings” choose this particular location over, say, the Big Apple or L.A.? The reasons, I believe, lie deeper than its low taxes, abundant sun, and great nightlife. Experts and average people alike tend to think that companies pick places that offer the best cost profiles and that people go to the cities that give them the highest salaries and biggest bang for the buck.

But real entrepreneurs – those who want to build something new – sometimes pick “frontier locations,” places where they can mold the environment to help them reach their desired goals, like the tech pioneers of  Silicon Valley in the late 60s and 70s, or Hollywood’s early moguls. Perhaps this is what Miami had to offer “the Three Kings.” The place is diverse enough, open-minded enough, free-wheeling enough, and hungry enough that they can make their own rules.

Emphasis added. Greenfields unleash innovation, stoke creativity. Brownfields are the new greenfields. Niagara Falls doesn't have talent, technology, and tolerance. Downtown lacks dazzling amenities. But it does have an urban frontier, like Seattle did when Gates did his return migration. If King James wanted a frontier location, he could have stayed in Cleveland. If he felt the need to leave where he grew up, Oakland or Detroit would have been a great destination. Ultimately, it was all about glam and glitz.

Tuesday, July 03, 2012

High-Tech Talent Trade

Northeastern University is ahead of the curve. Too far, in my estimation. A glimpse into the future of the Talent Economy:

Seattle imports high-tech talent, and Boston exports. So it makes sense that one of the big players in Boston’s competitive higher education market, Northeastern University, would see a new niche opening up across the country, where it can help feed a fast-growing high-tech cluster with more brainpower.

Northeastern, a 114-year-old private institution with 20,500 full-time students, has been working for almost two years to build out a network of regional graduate schools in underserved higher education markets, starting with Charlotte, NC and Seattle. No one would call Boston “underserved” by higher education, as it’s the home of Harvard, MIT, Boston University, Boston College, Tufts University and more. But in Seattle, where companies like Amazon, Microsoft, Facebook, Google and others can’t seem to get enough people with advanced degrees in high-tech disciplines, Northeastern has spotted a void it thinks it can fill.

Emphasis added. Importing high-tech talent is a hallmark of the Innovation Economy. Producing that talent defines the Talent Economy. Talent production and superstar faculty are agglomerating. Whereas talent is trickling down the urban hierarchy. From this perspective, the transition looks stark.

Northeastern is jumping ahead to the decline of the Talent Economy, when talent production will diffuse to lower cost markets. I doubt the described business model will work now. Companies like Amazon, Microsoft, Facebook, Google, and others need to move where the talent is produced. The labor market is getting thick in places such as East Liberty in Pittsburgh.

Monday, July 02, 2012

Retroblogging: Zagat-Less Burgh

Way back in 2006, during my first few months of blogging, Chris Briem addressed a Pittsburgh shortcoming at the now-mothballed Pittsblog. For Zagat, Pittsburgh was off the map. Dirty backwater? Banal blue collar cuisine? Inbred hilljacks? Jeet yet?

The implication is that Pittsburgh isn't cosmopolitan enough. At least, Pittsburgh was no Seattle or Boston. With a few notable exceptions, the chefs were bush league. Local tastes were too conservative. Dining out was an anachronistic experience.

Today, Fodor's goes where Zagat fears to tread:

With former churches turned into craft breweries to the Andy Warhol Museum, along with patents and inventions stemming from Carnegie-Mellon University, Pittsburgh has always adopted a cutting-edge vibe. Its dining scene is equally eclectic. What's heating up this summer is a rash of new casual eateries that straddle savory and sweet. Whether you're on the hunt for artisan chocolate or a five-star hot dog, this Rust Belt city has your palate covered.

Emphasis added. Hey, the Burgh has always been cutting edge! That strikes me as the new brand retroactively applied. No matter, it is a nice plug for the city.

2006 isn't that long ago. Zagat-less Burgh was something to consider. No more. Pittsburgh is a foodie town. The restaurant scene has grown up. Do Steeler fans still talk about sushi-gate?

Pittsburgh's known for several things, almost none of which fit into the Haute Couture category. We smoke in bars, grow startlingly large beards and find eternal style in the hooded sweatshirt. Toby Keith's tour stops here not once, but twice. Oh, and cuisine? As a general rule, it goes like this: If something is at first unacceptable -- a salad, say, or a sandwich -- Pittsburghers then pull out their trump-card fixer-upper, a heaping addition of french fries.

So now, on to today's topic.


Sushi and Pittsburgh.

Really, based on everything else, the two make for strange bedfellows. Spend enough Internet search time tracking the connection of those terms, and you'll find the story from 1997, when then-Steelers linebacker Chad Brown fled in free agency to Seattle. His wife complained shortly thereafter to the media that Pittsburgh lacked the high-end culinary distinctions they looked for in a city. Like -- wait for it ... wait for it -- sushi.

Too soon?

End Of Talent Agglomeration

The economic geography of the United States has reached a tipping point.Forces of agglomeration are yielding to more cost effective diffusion. The scattering of finance:

But regional offices perform more and more of the sophisticated work usually associated with Wall Street and nearby trading hubs like Jersey City and Stamford. This parallels a shift in some technology jobs away from Silicon Valley to Portland, Ore., and cities in Texas, said Michael Shires, a professor at the School of Public Policy at Pepperdine, who prepares an annual ranking of the best cities for employment.

“I expect to see an acceleration,” he said, noting that while these middle-tier jobs may lack the salaries and glamour usually associated with Wall Street, “these are the support people that actually make the stuff work.” What’s more, there are many more positions in the middle of the jobs pyramid at Wall Street firms than at the top.

Deutsche Bank’s office in Jacksonville started out in 2008 as a back-office service center, according to bank officials. Since then, technology workers, legal and compliance staff members, and trading support jobs have been added. More recently, some traders who deal directly with clients are being located there. Lower costs and taxes are behind the moves, the officials said.

Stars can maintain their prestigious zip codes. The rest of the workforce will have to make do with Salt Lake City and a much smaller salary. The world is getting flatter.

Back in March, I blogged about the same trend of near-shoring non-legal work for law firms from Washington, DC to Nashville, TN and Wheeling, WV. Last summer, I covered "small market migration." Talent is finding its way down urban hierarchy in a number of sectors. The Innovation Economy has begun its decline.

Sunday, July 01, 2012

Density Versus Migration

Density or migration, what makes cities hubs of innovation? The crux of the debate is that knowledge doesn't travel well. I'm starting with the same assumption when I claim it is migration that matters. The density dividend is muddled. Residential density is often conflated with occupational density. With so many wealthy brains living in the suburbs, I don't understand why urbanists are so excited about the positive link between college educational attainment rates and prosperity. Stamford, Connecticut.

I realize I'm out on a limb all by myself. Cities. Density. Wealth. End of story. If you are talented, best get your ass to New York. Permit me to go over the rainbow and visit with an innovation commune in Cupertino, California:

The Rainbow Mansion, named for its address on Rainbow Drive in Cupertino, was founded in its current communal housing form in 2006. Three friends, who met at a conference in Vienna about space, landed in Silicon Valley around the same time, each getting jobs at Nasa’s Ames Research Center. They decided to move in together, saw the Rainbow Mansion listed on Craigslist, and found four roommates to join them.

People moved in and out over the years until the last original resident, Will Marshall, 33, moved out in February, leaving the mansion in the hands of the next generation. “It’s the flux of people that keeps the ideas going,” he says.

He rejoined the other two members of the original Rainbow trio, Jessy and Robbie Schingler, who married shortly after their Rainbow-dwelling days, to form a new communal house in San Francisco called the Elements, this time named for the professional interests of several inhabitants who work in wind, water and solar energy.

For them, communal living is a movement. Schingler, 30, a PhD student in computer science, talks of “scaling” the lifestyle into a global network of communal houses with a shared mission of “having a positive impact on the world”. She calls it the Embassy Network. She imagines physicists, mathematicians and engineers from San Francisco travelling to Berlin for a conference and dropping in the local communal house for a few nights, tapping into an immediate network of like-minded locals.

Emphasis added. Reading the Financial Times article, I can see the case for density. Where else but Silicon Valley? Proximity is so valuable that the best talent feels the need to cram into a mansion. Case closed.

More important than the shared living space is the "flux of people". The "global network of communal houses" is the diaspora model. Geography is annihilated, not reaffirmed. San Francisco and Berlin are the best of neighbors.

Innovation isn't agglomerating. It is globalizing. Affinity interests connect people all over the world. Churn or burn.

Jobs Of The Future Geography

The future is now. We are watching the economy transform before our eyes. Our idea of work from just 5-years ago is out of date:

“The kind of job where you come in and work 9 to 5, and where someone tells you what to do all day is becoming scarcer and scarcer,” said Erik Brynjolfsson, an economics professor at M.I.T. and co-author of “Race Against the Machine,” a book about how automation is changing the job market. “The kind of job where you have to hustle and hustle and where you’re not sure whether you will have enough clients next month, where you have less job security, is becoming much more common.”

Welcome to "Free Agent Nation." What does this economic geography look like? Brian Kelsey (Civic Analytics) holds Austin up as an example:

Some people move to Austin, especially from larger cities, with very unrealistic expectations about salary levels. Many people settle for full-time jobs somewhere but then quickly realize that they can make at least as much money working on their own.

Austin's entrepreneurial culture plays a role in nurturing that trend, but I think it's just as much due to the enterprising nature of people who make the decision to put down roots here, whether they are artists, musicians, finance professionals or software developers.

There are downsides, of course, with health insurance near the top of the list of concerns for these "free agents," as (author and journalist) Daniel Pink calls them. But overall, I think this trend is what makes Austin such an interesting place. If the "Free Agent Nation" were to have a capital, I think Austin would be a strong candidate.

Emphasis added. Why Austin? Missing is a theoretical lens to make sense of the trend. Enrico Moretti offers such a perspective, which is why I highly recommend his book, "The New Geography of Jobs." Instead of fitness instructors, Moretti discusses yoga teachers. Business is booming. This is the spillover from innovation. Such jobs support a wide variety of services. But some places are better than others. Where the innovation labor market is "thick", associated jobs (innovation job multipliers) pay better.

Kelsey is describing a different kind of free agent, people at the top of the talent food chain. Young, smart, and ambitious people move to cool Portland, Oregon. The dream doesn't pan out. One can either return home or go 1099 in order to stay. For this sector, Austin could be the capital. However, the spillover free agent economy (e.g. fitness instructors) isn't as strong. That's how I would define Austin's challenges. Is the labor market thick enough?

That's a fair question as long as forces of agglomeration continue to shape the Innovation Economy. I'm seeing evidence of diffusion. These forces put a host of other cities in play, namely those with less expensive real estate and a college educated workforce. (See Pittsburgh.) Free agents should be looking at emerging metros, not established ones.