Sunday, February 28, 2016

The Slow and Stubborn March Away From Tech Transfer

As a specific, tech transfer might as well be generic. Take local inspiration and zap it with the magic of Zeus. Unicorns bound forth and the region prospers as the next Silicon Valley. The tech transfer puzzle is a bit more interesting than that, but not much. A tech transfer office at a university is supposed to be Zeus. Instead of lightening bolts, the world hears farts and the startups stink.

In the wake of the oil bust, Canada has this unicorn lust. Nationalists want the massive valuation. Big egos measure innovation in this way. Zero-sum aspiration:

We need to compete by generating wealth from Canadian ideas and commercializing them globally—from Canada...That starts with a proper innovation strategy, something we haven’t had in 40 years.

The sovereignty of ideas is a losing proposition. Measure Canada by within borders, the map looks unimpressive. Measure Canada abroad, an artificial intelligence powerhouse revealed.

The world isn't waiting for your AI startup. The world is desperate for your AI knowledge and talent. Canada does very well on that score.

But Canada doesn't have a clue how to leverage that AI knowledge and talent because the country spent a decade drunk on China's commodities binge. As resource curses go, yesterday was too late.

Saturday, February 27, 2016

The Diminishing Economic Returns of Locating in the Urban Core

The world is flat. It has been that way for a few decades. However, geographic stereotypes are slow to catch up to reality while the stubborn myth persists that innovation prefers dense urban environments. On the latter score, historian Margaret O'Mara proves that innovation prefers the suburban. If anything, the city is detrimental to ideas having sex. As for the former score, the data still look (irrationally so) spiky. Fed up with the United Kingdom mesofacts, PwC complains about a talent shortage:

Despite half of our graduate vacancies being in the regions, we find it harder to fill these roles as there is still a misconception among graduates that London is where all of the opportunities are.

PwC finds operating outside of London to be cost effective. Employees don't find residing in London to be cost effective. Grads look for jobs in London regardless. For most migrants, the herd mentality rules.

For inter-regional migration, risk aversion is the rule. Concerning country-to-country, the biggest cities shine on the mental map. Within a country, trendy cities punch above their weight. Furthermore, domestic outsiders cluster near the core where cosmopolitan norms hold sway. The gateway neighborhoods are as predictable as wealthy neighborhoods sitting upwind from smelly industry (typically the northwestern part of the region in the United States).

Talent crams into the urban core because such people don't know any better. Awareness of geographic arbitrage opportunities take time to amass. Intra-regional migration tends to be of the sprawl variety:

[Large employers] are saying, what is the situation going to be like in 2025 and these employees are going to be hitting 30 . . . are they still going to want to be London-based and if so, what are we going to have to offer to keep them, and can we afford it?

Can large employers pay employees enough money to keep them in London? This isn't a question of a firm enjoying the positive externalities of a dense global hub. As far as businesses are concerned, the world has been flat for quite some time.

Thursday, February 25, 2016

Stick a Fork in Manufacturing

I have a bone to pick with workforce development programs. Name one initiative that favors labor. Real estate development favors the real estate developers. Economic development favors industry. Workforce development should promote, you know, the workforce. It never does. The only salve for the blue collar soul is community development, which takes a backseat to real estate development.

All workforce development programs should start with two questions. First, which jobs will globalization and technology make vestigial? Second, how can labor avoid the trap of a captive labor market? The first question is tough to answer. I don't know. No one knows. The second question is easy. Stop asking regional employers how to best to subsidize the wage they pay. Start asking regional employees how to best maximize their pay.

This conflict of interest has taken a bizarre turn in Maryland. Tenured manufacturers don't like labor favors for newcomers from other states:

"Existing Maryland manufacturing companies will be depleted of key talent because they'll drive a couple miles away from their current job and get a tax-free job," said Drew Greenblatt, the owner of Baltimore-based Marlin Steel and a regular spokesman for American manufacturing. "This is basically picking winners and losers, and the winners will be newbies that move to Maryland, not people who have been here for years or generations."

If blue collar labor works for a company new to Maryland, labor gets a tax break. That's great for labor already living there. Manufacturing jobs don't pull people across state lines like it used to in the age of the Great Migration. Service jobs and most manufacturing jobs are substitutable. Will you make widgets or sell widgets? The wage is about the same for either occupation.

If Maryland makes hay in attracting manufacturing employers, people won't follow those jobs. Making steel isn't all that different from pushing Slurpees at Seven Eleven. Who will move 500 miles to push Slurpees? Labor subsidies for new owners of a Seven Eleven franchise would look absurd. Same goes for manufacturing.

Tuesday, February 23, 2016

Splendid Isolation: Geography of Innovation

Old ideas can sometimes use new buildings. New ideas must use old buildings.

Ideological geographies are stubborn things. Once a stereotype takes hold, the myth persists decades after reality gave up the ghost. The ghost is Jane Jacobs and Richard Florida the torchbearer of her myth. Alfred Marshall and all that, urban density begets innovation. Something in the air makes ideas have sex. Somehow, "something in the air" has become a social science maxim.

Turn out, that something in the air is decidedly suburban. And suburban can be rural or urban. Compare and contrast Apple (rural) and Amazon (urban):

Amazon and Apple aren’t all that different. As Amazon has grown, the famously unflashy company has started to build things in South Lake Union that are as monumental and futuristic as Apple’s infinite loop, including a set of spectacular “biospheres” now under construction that will be at the center of a new urban campus with more than three million square feet of office space. Slated to open in 2017, the giant domes of glass and steel promise the same security and privacy as Apple’s Cupertino retreat. They are in the city, but not of the city.

Urban Amazon isn't a sidewalk ballet. Ideas have sex as in a brothel, not in public space or a third space. Sure, proximity matters the same way it does in the sprawl of Cupertino. The monastic campus operates in the same way in Palo Alto as it does in downtown San Francisco. Wherever the spaceship lands, the results are the same. Innovation.

The common thread is crowded isolation. High-functioning introverts (default social invalids) live, work, and play in new and old buildings walled off from reality. It's a bubble in more than one sense of the term. The Silicon Valley bubble is, first and foremost, a fishbowl.

The fishbowl doesn't work so well without exotics. Rural is as good as urban given proximity and diversity. Guard against inbreeding homophily.  Innovation doesn't require a city. Innovation demands migration.

Monday, February 22, 2016

The US Rust Belt's Middle Income Trap

Doug Saunders is a remarkable journalist. I'm not sure how he does it. He camps out on the frontier of globalization and tells us where the puck is going. Wayne Gretzky's father would be proud.

His latest wonder connects Dongguan, China with 4th migration Cleveland, USA. 4th migration in Cleveland is latent. African-Americans long denied entry into the middle class geographies of the inner suburbs have arrived. Similarly, the Chinese of Dongguan have journeyed from rural to urban, a Great Migration. At least 60 years later, they find the same warmth of other suns.

5th migration vexes the aspirations of both places. Global wages running wild in Dongguan:

Two-bedroom apartments in Dongguan typically cost between $200,000 and $400,000 (and China’s mortgages require at least 30 per cent down); those prices fell in 2014, but last year shot up by almost 20 per cent, after a new high-speed bullet train made Dongguan a desirable bedroom community for the larger city of Shenzhen.

The high-speed bullet train brings post-manufacturing wealth to a manufacturing neighborhood. But manufacturing in China, as it is everywhere else in the world, is economically convergent. The wage only gets so high before industry become unprofitable. Vietnam looks increasingly attractive to robber barons. Divergent wages from Shenzhen obliterate the capped blue collar prosperity. Real estate developers raise up to meet the more lucrative financial flows. Gentrification. Progress.

The same highest common denominator holds sway in Cleveland:

“There are fewer people in the middle, and being in the middle is less of a boost than it once was, because of declining median incomes,” says Mr. Duke. “Real incomes aren’t going up, but the cost of things you want to buy to consider yourself middle class are going up real fast.”

Bidding up the price of things people in the middle want to buy are eds & meds workers at University Circle. Figuratively, the high-speed bullet train is Case Western University. A smaller percentage of the peak manufacturing workforce numbers will cull divergent demand for goods and services. The African-American 4th migrants are too late. They are caught in the same middle income trap as Dongguan.

Donald Trump Testing Sun Belt Exceptionalism

Democrats lost West Virginia to the Republicans. Early in the POTUS primary battles, the Republicans seem to have lost West Virginia to Donald Trump. And by "West Virginia", I mean economically dislocated blue collar white males. This demographic used to be angry at liberals. Now, they are furious with the political party that promised them employment salvation.

The Tea Party first blamed union-friendly liberals for Rust Belt woes. In swept a host of GOP governors who promised austerity and fiscal responsibility. Deregulation would make Made in the USA competitive again because labor, not management, killed the goose that laid the golden egg.

If any state represented Sun Belt in the Rust Belt, Indiana does. Manufacturing still dominates there like no place else. All the polity needed was some middle class common sense ample in the sprawling, booming South. Baseline Indianoplace, "Downtown...was once so desolate that men armed with shotguns hunted pigeons on Sundays among empty buildings and a trash-strewn river canal."

Fair to say, Indianapolis is an exception to the Rust Belt city rule. Perhaps Richard Longworth is right to hold up the Sun Belt playbook for America's Middle West. Not. So. Fast. "Workers 'Devastated' by Carrier's Plan to Move Indianapolis Facility to Mexico":

"It's pretty damn bad when you've got people that figured they'd be able to retire there with some dignity and due to no fault of their own, now they're finding out they're not going to have a job," Chuck Jones, the president of United Steelworkers Local 1999, told RTV6 Tuesday.

Donald Trump gives voice to people like Chuck Jones. Manufacturers and Republicans promised workers some dignity in exchange for their vote. The GOP (and its subsidies) failed, miserably, to deliver. 2016 is the reckoning.