San Francisco’s Detroit Moment

Like Detroit in 1960, the wages are too damn high in San Francisco at Pacific Standard magazine.

Theme: Economic convergence of Innovation Economy.

Subject Article: "How Silicon Valley’s most celebrated CEOs conspired to drive down 100,000 tech engineers’ wages."

Other Links: 1. "LOCAL ECONOMIC DEVELOPMENT: SOME CITIES DEVELOP MORE THAN OTHERS: SPECIALIZATION, HUMAN CAPITAL, AND INSTITUTIONS."
2. "WHY I’M MOVING MY BUSINESS FROM SAN FRANCISCO TO ST. LOUIS."
3. "Silicon Valley 2014 economic forecast: Talent crunch, M&A uptick, development sprawl."
4. "Guerrilla Geographies of Artisanal Toast."
5. "The AOL Of China To Build A Suburban Tech Campus In The Sky."

Postscript: Evidence of the decline of the Innovation Economy starts with talent arbitrage. Where can a tech firm find cheaper workers? Clear to me now that we are on the other side of that inflection point:

Jennifer Kelly used to take refuge in her $1,750-a-month, two-bedroom downtown Campbell home.

The former tech sales manager, who made up to $180,000 a year working at startups during the last decade, had a routine of working out on her home Stairmaster or taking joy rides in her sports car to relax after 14-hour workdays.

Now Kelly, who didn’t want her real name used in this story, is stringing together short-term contract work and sleeping in an aging SUV that she parks on a rotating slate of dead-end streets in Silicon Valley.

“Professionally, I’m at director level,” she said. “I had a safety net.”

Two neurosurgeries and a layoff, exacerbated by rising housing costs, have made Kelly, 51, a personification of Silicon Valley’s affordable housing crisis. The region’s high cost of housing affects residents at all pay grades with varying degrees of severity. It also hamstrings employers looking to lure talent to one of the country’s most expensive real estate markets.

Silicon Valley's regional economy is imploding, collapsing under the weight of its own success. Detroit suffered the same fate, but during a different economic epoch. I honestly don't think the Detroit comparison is hyperbole.

Why Technology Firms Are Moving Downtown

Outsourcing innovation employment to recent college graduates at Pacific Standard magazine.

Theme: Convergence of Innovation Economy.

Subject Article: "Companies Say Goodbye to the 'Burbs: Young Talent Wants to Live in Chicago, Not Libertyville; Dilemma for Older Workers."

Other Links: 1. "Move to Dubuque, Not San Francisco."
2. Comment from Dave at Burgh Diaspora.
3. "Mapping Silicon Valley’s Gentrification Problem Through Corporate Shuttle Routes."

Postscript: The resonating read for today's post, "Tales from an overworked City":

Competition among interns is incredibly tough, says one undergraduate who has completed a stint at a boutique bank. “Only a certain amount of interns get through. You will try to be the first one in and the last one out.” Interns, he says, will break the rules. “You want to impress.”

Moreover, an increasing number of international students is adding to the pressure: “Once they’ve got the internship they want a job in the City to get their foot in the door in London so they can get their visas. We’re competing against students from America, China and India. It’s very, very competitive.”

Pay sky-high rent to locate in London in order to "hire" the best and brightest for a pittance. The driving logic behind the economic geography of innovation is the cost of talent.

Move to Dubuque, Not San Francisco

Revitalization of Dubuque, Iowa is a strong indicator of the demise of the Innovation Economy at Pacific Standard magazine.

Theme: Rise of the Talent Economy.

Subject Article: "Corporate Entrepreneurs Are at the Heart of Downtown Revitalizations."

Other Links: 1. "Dubuque?"
2. "Learning from Dubuque, Iowa."

Postscript: When the cost of labor starts driving firm location decisions, the economy is dying. The Innovation Economy is dying (i.e. converging):

But while this geographic battle for supremacy is compelling, its effect is actually to make location less, not more, important. For instance, thanks largely to the internet itself almost everyone has access to the same information; for most people, the days of having to be close to a data centre are long gone; and investors such as us are looking globally for promising companies we can help.

While every location has its opportunities and disadvantages – it is easier to find top computer scientists in San Francisco, for instance, but easier to hold on to them in Helsinki – where you start out is no longer a helpful predictor of your chances of success. Today, the simple truth is that great companies can come from anywhere.

Like manufacturing before it, the world of innovation is getting flatter.

Silicon Cleveland, Where the Rent Isn't Too Damn High

Innovation has already abandoned Silicon Valley at Pacific Standard magazine.

Theme: Convergence of the Innovation Economy.

Subject Article: "Some Further Thoughts on Moving Silicon Valley to Cleveland."

Other Links: 1. "Rust Belt of Silicon Valley: San Jose Is Dying."
2. "A Creative Comeback in the Big Easy."
3. "A Snowier Silicon Valley in BlackBerry’s Backyard."
4. "Midsize Cities in Poland Develop as Service Hubs for Outsourcing Industry."

Postscript While the move of Silicon Valley to Cleveland got the blog post spotlight, economic convergence in Poland was the star:

In fact, Lodz, a former textile manufacturing center with a population of about 740,000, is just one of several Polish cities that have become service hubs for an international corporate clientele that values Poland’s well-educated and often multilingual work force.

In midsize cities like Wroclaw and Gdansk, Poles are doing back-office work not only for Indian outsourcing companies like Infosys, Wipro and Tata Consulting Services, but also for major corporations like IBM and banks including Citigroup and Bank of New York Mellon.

About 110,000 people work in what is broadly known as the business services industry in Poland. The category includes outsourcers like Infosys that take over such functions as finance or information technology for customers, as well as banks and other companies that set up in-house operations to do their own back-office work.

For me, Poland has been a bellwether for the convergence of the Innovation Economy. Dell moved operations from Limerick, Ireland to Lodz, Poland. Ireland itself is a hot spot of economic convergence. The competition for talent is fierce with more places competing for a piece of the innovation pie. The salary ask for employees in alpha global cities is too damn high.

Silicon Valley Is Detroit: Are Zoning Laws to Blame?

Detroit was yesterday's Silicon Valley. Silicon Valley is well on its way to becoming tomorrow's Detroit at Pacific Standard magazine.

Theme: Economic convergence of the Innovation Economy.

Subject Article: "Why a Nonprofit Backs Dropping Out of School."

Other Links: "Excerpted from THE NEW GEOGRAPHY OF JOBS by Enrico Moretti."

Postscript: Rezoning and supply-side economics won't solve San Francisco's gentrification problem.

Portland Is Dying, Revisited

It's the birth rate, stupid at Pacific Standard magazine.

Theme: Economic convergence and migration economies.

Subject Article: "Steve Duin: The sustained mediocrity of Oregon's higher-ed system."

Other Links: 1. "London: people moving out, people moving in."
2. "London Brain Drain."
3. "Check of Portland’s vitals shows signs of life."
4. "'Fastest Dying Cities' Meet for a Lively Talk."
5. "Texas Is Dying."
6. "Chicago Is Dying."
7. "Germany's Ann Arbor Dilemma."
8. "Urban Innovators: University Park Alliance."
9. "Got kids?"
10. "Economist tells Akron group that attracting talent is key to thriving cities."
11. "Talent Attraction Expert Joe Cortright."
12. "Not Dante's Pittsburgh."
13. "Once nearly extinct, U.S. streetcar is back."
14. "Don’t count on future immigrants for economic growth."
15. "Rust Belt chic: Declining Midwest cities make a comeback."
16. "Millennials Flock to Washington After Abandoning City in Recession."
17. "Andrew Zimmern on AZ Canteen, Pharmashilling, and Why Pittsburgh Is Hot"

Postscript: Believe or not, I'm tired of writing about Portland. But then I stumbled into that Steve Duin opinion piece comparing higher education in Oregon with that of North Carolina. It was a good opportunity to clear the air about the Portland-Pittsburgh comparison. Enough of that. Andrew Zimmerman saying nice things about Pittsburgh:

Pittsburgh: You talk about an island in the Darwinian sense. Here's a major American city stuck at the end of a series of river valleys, cut off from the rest of country. It is a Eastern European immigrant city — working class, blue collar — that has reinvented itself over the last 10-20 years with this craftsman approach to life that reminds me of cities like Austin, Portland, OR and Portland, ME. I hate to be one of those people who's like 'Pittsburgh is the next big thing,' but I get around more than most people and I'm telling you, Pittsburgh is like the next big thing. The geography lends itself, it's incredibly lush farmland, and inexpensive city with incredible history. They're renovating 100 year old railroad terminals into city markets. They had chefs who left the city because there was no scene and went to LA, they have the talent to be anywhere in America, and they have come back and can afford to open their own places and do what they want. It's very, very exciting. As a student of these things, there's just enough Fortune 500, sports teams, to feed that group. The art community and food community are kind of leading but there's money following them.

I think people who are in eastern Pennsylvania and it's like: Who can afford a $5 million house on the beach? Why not get a beautiful house on the river? I saw places that are just breathtaking. It's also got the Appalachians running through, so it's got stunning geography. The food scene is cool. Lots of good stuff going on. There are these old bars in these old 'hoods ... It's like today's special is goulash, tomorrow's is stuffed cabbage, huge portions. There's like three grandmas and a grandpa making this from scratch, the best stuffed cabbage I've ever had and I grew up on that.

If you think Zimmerman is gushing about the Burgh here, give this a listen: "Go Fork Yourself: Pittsburgh with Rick Sebak."

Rust Belt of Silicon Valley: San Jose Is Dying

Silicon Valley decline at Pacific Standard magazine.

Theme: Convergence of Innovation Economy.

Subject Article: "Danny Rimer: What U.S. startups can learn from Europe."

Other Links: 1. "Silicon Prairie News."
2. "Silicon Roundabout."
3. "Mother of Reinvention: HOW BOSTON’S ECONOMY HAS BOUNCED BACK FROM DECLINE, TIME AND AGAIN."
4. "Facebook and Google Are Gentrifying San Francisco Neighborhoods."
5. "San Francisco split by Silicon Valley's wealth."
6. "Rivers of Steel National Heritage Area."

Postscript: Danny Rimer suggests that the Rust Belt part of Silicon Valley concerns manufacturing, a Bay Area Mon Valley. I'm more interested in the rethinking of San Francisco producer city instead of a consumer city. I think we're seeing the end of the push for urban amenities in the core as an economic development strategy.

Tech Talent Recruiting Geography

With the Innovation Economy in decline, the Talent Economy is rising at Pacific Standard magazine.

Theme: Economic geography of talent production.

Subject Article: "Inside LA’s ongoing talent conundrum."

Other Links: 1. "The Brain Gain: The Rise of San Antonio’s Talent Economy."
2. "Inskeep Explores Growing Pains Of An 'Instant City'."
3. "The Great Migration, 1910 to 1970."
4. "Migration Economies and Portland."
5. "America’s great divergence."
6. "The World Is Spiky: Globalization has changed the economic playing field, but hasn’t leveled it."
7. "Michigan Cool Cities Success."
8. "Fleeing Los Angeles for Harrisburg."
9. "Silicon Valley’s New Jersey Problem."
10. "Innovation Economy Is Dying."
11. "Once BlackBerry Focused, a Campus Widens Its View."
12. "Google's growth in city puts Pittsburgh in top tier of regional sites."
13. "End of Creative Class Migration."
14. "Economic Geography Of Talent Production."

Postscript: A link that didn't make the cut that probably should have:

When it comes to recruiting and managing talent, [Steven Woods] is like the general manager of a baseball team, scouting and meeting with potential recruits and discussing possible roles they might play in the company. He speaks about a certain former intern who will be joining the company from the University of British Columbia as though he had just found a new all-star shortstop.

He's not just competing with RIM and Microsoft for talent, but also against other Google locations around the world, some in much warmer climates like Silicon Valley. Still, Google saw the value in setting up operations down the street from RIM.

"Google had this great insight, which of course sounds obvious -- but as Canadians we often know it's not obvious -- that people don't all want to move to California,'' Woods says.

Google, much like other technology giants before it, sees the University of Waterloo and the surrounding region as one of its top three recruitment centres for undergraduates, alongside the Massachusetts Institute of Technology (MIT) in Cambridge, Massachusetts, and Carnegie Mellon University in Pittsburgh.

Emphasis added. For Google, the top three in no particular order are Kitchener-Waterloo, Boston, and Pittsburgh. It's an impressive talent production triangle that will be the epicenter of the emerging global economy.

Silicon Valley’s New Jersey Problem

Challenging Vivek Wadhwa at Pacific Standard magazine.

Theme: Economic convergence of innovation.

Subject Article: "Silicon Valley Can’t Be Copied."

Other Links: 1. "Zero-Sum Creative Class."
2. "Keep Albany Weird."
3. "The Rise and Sprawl of San Diego’s Tech Hotspots."

Postscript: The article about San Diego's tech scene is a worthwhile read. Most places are chasing only the Millennial generation. The approach in San Diego is more holistic and, therefore, more challenging to the hegemony of Silicon Valley. As for why Silicon Valley and not Boston or New Jersey, I blame social capital. Too much, not too little, social capital undermined the expansion of the Innovation Economy in New Jersey. I think the same affliction now grips Silicon Valley. A good example is the geography of venture capital. The golden apple doesn't fall far from the tree. Venture capital is restricted by the distance decay of trust, a.k.a. the "twenty minute" rule. The resulting parochial culture took a bizarre turn with Sean Parker's wedding among old growth Redwoods. The cry for immigration reform rings hollow.

End of Creative Class Migration

Silicon Valley is the new Detroit at Pacific Standard magazine.

Theme: Innovation Economy convergence.

Subject Article: "The Metropolitan Revolution."

Other Links: 1. "Is the World 'Flat' or 'Spiky'? Rethinking the Governance Implications of Globalization for Economic Development."
2. "Thomas Friedman And Richard Florida Are Wrong."
3. "Artists fleeing the city: High cost of living, fewer part-time jobs drive them out of New York."
4. "The Ungeography of the Creative Class."
5. "The Brain Gain: The Rise of San Antonio’s Talent Economy."
6. "Why investors & tech startups are flocking to downtown Las Vegas."
7. "The New Geography of Jobs (Enrico Moretti)."
8. "Innovation Economy Is Dying."
9. "Should Cities Professionally Brand Themselves To Attract Workers?"
10. "Debunking Myths About Highly-Skilled Immigration and the Global Race for Talent."
11. "Talent Attraction Crisis."
12. "10 Reasons Why Pittsburgh Owned 2012."

Postscript: Apropos of everything, Bruce Katz (co-author of "The Metropolitan Revolution.") musing about Silicon Valley's decline:

"What's happening now is workers want to be in Oakland and San Francisco," he told Walter Isaacson. Young workers want to live in a city -- somewhere they can ride bikes, shop locally, walk to their favorite restaurants and bars, and live in a dense urban or urban-lite environment with nearby amenities. But Silicon Valley isn't like a city. It's like a suburb. "Silicon Valley is going to have to urbanize," Katz said. "[There is a] migration out of Silicon Valley to places where people really want to live."

I come to a similar conclusion from a different angle. Silicon Valley, the spiky center of the Innovation Economy, is diffusing. Both Enrico Moretti and Richard Florida describe the concentration of brains in a few US metros. The start date for this migration trend is 1970, the beginning of the Creative Class Era. I figure the Innovation Economy peaked in the late 1990s with the Dot Com boom. In the wake of the last recession, some 40-years after the birth of the Creative Class Era, the dominant talent migration pattern began to change. Brains were showing up in Flat World San Antonio. Innovation was becoming less spiky. Companies looking for geographic arbitrage opportunities move to where real estate and talent are cheaper. Silicon Valley 2010 is Detroit 1950.

Silicon Valley Decline

Latest post up at Pacific Standard magazine.

Theme: As the Innovation Economy diverges, more and more places effectively engage in the war for talent. That's bad news for talent attraction champion Silicon Valley.

Subject Article: "Montreal Is Growing Its Own High-Tech Workers."

Other Links: 1. "International Migration is Projected to Become Primary Driver of U.S. Population Growth for First Time in Nearly Two Centuries."
2. "Shrinking City Myths."
3. "Keep Pittsburgh Weird."
4. "Talent Attraction Crisis."
5. "New Findings: Seasonal Foreign Agricultural Workers Create American Jobs."
6. "The Brain Gain: The Rise of San Antonio’s Talent Economy."

Postscript: The contrast between Portland and Pittsburgh is instructive. For the Innovation Economy, Portland is a winner. It is a magnet for talent. For the Talent Economy, Pittsburgh is a winner. It is a magnet for businesses starved for innovative talent. Talent production is the name to today's game.

Cuba’s Talent Export Strategy

Catching up on my Pacific Standard blogging, leveraging Cuban brain drain.

Theme: Thinking about what a talent export economy looks like.

Subject Article: "Cuba's greatest export? Medical diplomacy."

Postscript: The Cuban example is troubling. Is medical talent able to come and go to Brazil? Captive labor? Slave labor? Human trafficking? Cuba doesn't own its talent. The country acts like it does.

Migration As Economic Stimulus

Migration, international or domestic, is economic development. However, we can debate how greater geographic mobility enhances growth. Atlantic Canada is dying:

It turns out that 80% of more of the employment in a local community is actually based on the economic activity (and population) in that community – nurses, electricians, hairdressers, waiters, plumbers, taxi drivers, teachers, etc.

Therefore, if we reduce the population by 11,000, we reduce the overall local economy by a significant amount leading to widespread losses in the 80% of the economy that was hurt by the loss of those 11,000. ...

... The other deeply flawed assumption regarding the ‘rightsizing’ of communities is the linearity of public services and public infrastructure costs. If you drop the population by 20%, the theory goes, you will reduce the cost of these services by 20%. This turns out not to be the case. In fact, you could argue that public spending goes up – particularly in the area of income transfers – where EI, social assistance and even workers’ compensation costs rise. The insurance firms will quietly tell you the number of homes that burn down also rises as economic prospects fall.

Shrinking New Brunswick gets hit with a double whammy. The demand for local services wanes with net outmigration. The smaller local population is still on the hook for legacy costs meant for a larger number of people. It looks like a death spiral for the community.

In fairness to Rust Belt cities such as Cleveland, the obsession with demographic decline is rational. Mayor Frank Jackson's "bold prediction":

"I will guarantee you that, with a good education system and the policies that we have in place, when they take the next census, we will have population growth."

Net inmigration benefits the city, a place. Simply growing the population (more births than deaths) will do the trick. More people demanding goods and services will act as a stimulus.

The more efficient allocation of labor is also part of conventional wisdom. Move to where the jobs are located. On a larger scale (national instead of local), economic migration spurs growth. Again, the framework of analysis is place-centric.

A different framework of analysis for economic development is focusing on talent instead of place. For some reason, US immigrants tend to be more entrepreneurial than the general population. It stands to reason that more immigrants will spur job creation. Attracting migrants isn't about growing the population. The goal is to prime the pump of the regional economy. The quality of the migrants matters more than the quantity.

Well, why are immigrants more entrepreneurial? When a person moves, that individual economically develops. People develop, not places:

What if there was a program that would cost nothing, improve the lives of millions of people from poorer nations, and double world GDP? At least one economist says that increased mobility of people is by far the biggest missed opportunity in development. And an informally aligned group of advocates is doing its best to make the world aware of the "open borders" movement, which suggests that individuals should be able to move between countries at will.

Vipul Naik is the face, or at least the voice, of open borders on the Internet. In March 2012, he launched Open Borders: The Case, a website dedicated to the idea. Naik, a Ph.D. candidate in mathematics at the University of Chicago, is striving for "a world where there is a strong presumption in favor of allowing people to migrate and where this presumption can be overridden or curtailed only under exceptional circumstances." Naik and his two primary co-writers, Nathan Smith and John Lee, parse research into immigration impacts, answering claims by those they call "restrictionists"--people who argue against open borders--and deconstructing writings on migration by economists, politicians, journalists, and philosophers. ...

... To prove the economic power of open borders, supporters often turn to the work of Michael Clemens, a development economist and one of the strongest voices for loosening border restrictions. Clemens is not an open borders advocate, but his research and writings make it very clear that movement of people across international borders should be a much higher priority than it is now. He is, he told me, "in favor of a vastly more sensible way of regulating movement," if not "a utopia of completely free movement." Based out of the Center for Global Development, a think tank in D.C., he has spent much of the past half-decade compiling international labor mobility statistics that are, as he says, "gasp-inducing."

Barriers to emigration may--according to Clemens's paper--"place one of the fattest of all wedges between humankind's current welfare and its potential welfare." Though he affirms that the research on migration's effects is far from complete, what Clemens has found "suggests that the gains from reducing emigration restrictions are likely to be enormous, measured in tens of trillions of dollars." Remove all remaining barriers to trade, says Clemens, and all remaining barriers to capital flow, and it still wouldn't compensate for the inefficiencies created by current global labor mobility restrictions. His research indicates that allowing free movement of all people across international borders could double world GDP.

According to Clemens, we are all victims of an epic intuition fail. "Development is about people, not places," he has said many times over, and often the best way to make a person richer is by allowing them to move to another place. We don't really care about helping poverty-stricken Liberia, we care about helping poverty-stricken Liberians. It sounds almost too simple at first: A very large percentage of people who have gone from extreme poverty to relative financial stability have done so by moving across borders. So why don't we just let more people move?

To plug the brain drain, even if doing so bolsters the population numbers, undermines economic development. Talent retention is a drag on growth. We are more concerned about place than people.

"What about state sovereignty," you might ask.

What about prosperity?

Migration is an entrepreneurial act. Moving from one place to another is an economic stimulus. People leaving Cleveland promotes growth.

As more of the world demographically converges, the focus on talent is of greater importance. Winners and losers won't be defined by population, but by connectivity and churn. Those in Cleveland clamoring for a better Census result are barking up the wrong tree.

Economic Geography Of Innovation

The rent is too damn high? Now, hold on just one gosh-darn minute. The New York Times begs to differ:

Of course, not everything that wealthy New Yorkers spend money on is cheaper here. Housing, after all, is absurdly expensive, even for the rich. Complex zoning regulations and limited land make it all but impossible for supply to grow alongside demand. Still, it’s somewhat unfair to compare housing costs here to those in a place like Buffalo, or even Atlanta, since perks like access to amenities and unusually lucrative jobs are baked into the cost of New York real estate. Yet those higher rents all but ensure that tenants will appreciate an amazing bakery or a fancy shoe store — and that retailers will have to lower prices to compete for their business. Regardless, the rent burden isn’t actually as onerous as people assume: the typical resident here pays roughly the same share of her income in rent as does her counterpart in Los Angeles, Chicago, Philadelphia and Houston, according to N.Y.U.’s Furman Center for Real Estate and Urban Policy.

Okay, we're talking about the wealthy. The journalist goes on to discuss the flip side of the story. How push-factors are reshaping NYC demographics:

Between these competing forces of higher-paying jobs and high living costs, the high costs seem to be winning out. As I talked to Handbury, I began to realize why, in part, New York seems so wealthy. It’s not so much that the city has been colonized by hedge-fund millionaires (though it often feels that way) as it is losing its lower classes. The greater New York area now has the longest average commute in the country (35 minutes, compared to a national average of 25). Many of the less-educated are leaving the metro area altogether: from 1980 to 2010, the population of college-educated workers rose by 73 percent, while the population of workers without college degrees fell by 15 percent, according to Rebecca Diamond, an economics graduate student at Harvard.

Overall population loss associated with substantial gains in the number of college-educated are an indicator of intense, rapid economic development. Real estate refugees tend be in the lower classes and cannot benefit from the agglomeration spillovers of the Innovation Economy. The rent is too damn high.

Manhattan isn't the only place where top talent is clustering. The rent isn't too damn high for anyone in Cleveland or San Antonio. One doesn't have to go to NYC anymore to get a piece of the globalization action. For creative practices such as software development, the world is flat:

Lua’s international success was facilitated by Lua’s increasing ability to fill a particular niche. Lua is especially useful for providing end users with an easy way to program the behavior of a software product without getting too far into its innards. The number of projects around the world needing such functionality is quite significant. Their number, however, is quite small in Rio, where most software projects involve building web applications, a task for which Lua was poorly suited. Rodrigo’s company was seeking to mend this -- his project ultimately aimed to extend Lua to web development. Until he succeeded, though, Lua was a better fit for foreign projects.

Cutting local ties is not enough, however. Global ties must be formed and exercised. For Lua, its team’s integration into the international world of academic computer science provided an early start. In 1996, the team published a paper about Lua in a U.S. journal read widely by American software developers, including videogame engineers at LucasArts, who decided to integrate Lua into one their games. Thanks to LucasArts programmers, Lua soon had friends in the right places. In 1998, LucasArts engineers advocated for Lua at the Games Developer’s Conference, the world’s largest game development event, in San Jose, California. Quite soon, other companies were decided to incorporate the language into their products as well.

Lua’s relative isolation in its early life turned into an unexpected strength. JavaScript, although widely used, is often condemned as an “ugly” language. Such ugliness is the flip side of its popularity: The language bears battle scars of the so-called browser wars of the late 1990s, when Netscape and Microsoft fought for browser market share. Yet fixing JavaScript’s problems would be nearly impossible due to its ubiquity and would have required somehow correcting the myriad web browsers and websites that rely on older versions of JavaScript. Lua, in contrast, could turn its back on its past several times. In fact, seeing no commercial prospects for Lua early on, the team had decided to make the language free. It has since focused on elegance and usability.

The Rio innovation did nothing for the city and Brazil. Most of the positive externalities were bottled up in Silicon Valley, where the rent is too damn high. Knowledge flows are global. The benefits are not. You either live in Greater Greater New York, or you don't.

That worm seems to be turning. The talent is too damn dear. Why pay Silicon Valley wages when you can count on a glut of CMU graduates staying in Pittsburgh? Manhattan offers diminishing returns. More people can benefit from globalization in Houston.

Density Boondoggles

Is it density or migration? Venture capitalist Brad Feld weighs in:

The cities that have the most movement in and out of them are the most vibrant.

The densest city in the world won't be as vibrant as the city with the most talent churn. Yet planners and urbanists tout the former over the latter. We've reached the point of density for the sake of density. It is an end instead of a means to an end. The art of the density boondoggle:

The following is the conversation held at every regional summit on Long Island:

Advocate: Let’s keep our young people from leaving! There’s a…brain drain!

Public: How do we stop it?

Developer: Build denser housing! Let’s make it…affordable! Walkable! Let’s make it…mixed-use sustainable smart growth…with a downtown, pedestrian-friendly feel.

Municipality: Development approved!

What's the question? Greater density is the answer. It will plug the brain drain. I promise. But plugging the brain drain will reduce talent churn. Long Island will be less vibrant.

There is a name for the Cult of Density. It now has its very own -ism. All hail Vancouverism:

Vancouverism is, at the root, a movement to go from low density, to higher density, to make Canadian and North American cities about people once again.

Making cities all about people sounds great. All I hear is the chant of the Underpants Gnomes:

Phase 1: Create a cool city.
Phase 2: ?
Phase 3: Retain talent.

That will be $500,000. Thank you for your patronage, Memphis. Consulting is fun!

Development approved. That's the story line playing out in downtown Las Vegas with Zappos. Density is king. Don't listen to Brad Feld. Talent churn doesn't matter.

If Vancouverism were harmless, then I wouldn't blog about it. The misplaced emphasis on density has negative impacts. Vancouver is more about people, those who are young, single and college-educated:

'Revitalizing,' but leaving seniors behind

Last July, Vancouver city council unanimously approved a three-year Chinatown Neighbourhood Plan and Economic Revitalization Strategy. More than a decade in the making, the plan focused on economic revitalization, after two-thirds of businesses surveyed in Vancouver's original Chinatown reported declining revenues between 2008 and 2011 -- blamed mainly on losses to newer Chinese-language communities in suburbs like Richmond.

The revitalization plan envisions new residential development, "to connect with younger generations and reach out to people of all backgrounds to ensure Chinatown is increasingly relevant to a more multi-cultural Vancouver." At the same time, it acknowledged that in a neighborhood where 67 per cent of households are low-income -- more than twice the City of Vancouver average -- such redevelopment "can displace low-income residents." What is good for old Chinatown's businesses, in short, may be less so for its poor and isolated elderly.

S.U.C.C.E.S.S., Vancouver's primary provider of culturally- and linguistically-supportive housing and services for Chinese seniors, is providing a partial answer. It operates a single multi-level care facility in old Chinatown for people with cognitive impairments or who require round-the-clock nursing. But its 103 beds, soon to be 113, are about one-tenth of what the UBC Centre for Urban Economics anticipates will be needed over the next 15 years to house Chinese seniors.

Meanwhile, the support it offers seem a world away from Rosesari and her neighbours living in privately operated SROs like the May Wah Hotel. Yet the women are spirited and resilient. "I'm happy and I'm healthy," Rosesari told me through Pang's interpretation. Both she and Lin say they like living in Chinatown. They feel at home here, where the language spoken is the one they know.

They are also in their 90s. As time goes on, they and others may no longer be able to manage the May Wah's staircases, its lack of mobility aids, and its communal bathing facilities. The alternatives available to them then are in terribly short supply.

Welcome to the dark side of the obsession with wants and needs of the Creative Class. Vancouverism is boutique urbanism, catering to a specific demographic at the exclusion of all others. People are either displaced or fall into the cracks. Bike lanes and food trucks trump the needs of seniors.

Renting An Alpha Global City

For the most mobile talent, geographic arbitrage is increasingly attractive. The allure of Big City isn't worth the cost and visa hassle. Kiwi homecoming:

"It certainly seems as if those who are going to the UK stay for less time because of the difficulty of obtaining long-term visas or residency. For Kiwis who want to migrate elsewhere more long-term, other options apart from the UK, including Australia, may become more preferable," said Dr Baird.

Kiwis tended to be drawn home by the lure of family, lifestyle and a desire to own their own home, she said.

"Although real estate in the major cities is increasingly pricey, owning land is often still more achievable in New Zealand than in the big Australian and European cities, especially if financed by overseas savings."

Emphasis added. Land is cheaper back home. Wages are higher abroad in major global cities. New Zealand  migrants get the best of both worlds.

Moving to New York or London is like going to college. You amass human capital and graduate. The payoff is elsewhere. The greatest value for your Cornell degree is outside of Ithaca.

Innovation Economy Is Dying

The rise and fall of an economic epoch is measured by employment. The convergence of agriculture and manufacturing don't concern production. When less people are needed to produce more goods, the economy has peaked. The workforce needs retraining. In his book "The New Geography of Jobs", Enrico Moretti argues that the Innovation Economy is still diverging. Regional job growth is dependent on creative industries such as Apple:

Apple, Moretti says, employs 13,000 directly in Cupertino but has spurred 70,000 indirect jobs in the region. Two-thirds of American jobs are in the local service sector, he writes, and “the almost magical economics of job creation” are that “for each new high-tech job in a city, five additional jobs are ultimately created outside of the high-tech sector in that city, both in skilled occupations (lawyers, teachers, nurses) and in unskilled ones (waiters, hairdressers, carpenters).” What’s more, innovation “has a disproportionate effect on the economy of American communities. Most sectors have a multiplier effect, but the innovation sector has the largest multiplier of all: about three times larger than that of manufacturing.”

Regarding economic development, the strategy is clear. Innovation jobs are the Holy Grail. That's great until the Innovation Economy starts converging. The Economist weighs in on this economic epoch's iconic company:

Yet even if it produces a cheaper iPhone, pushes deep into China and wows the world with a smart TV, its shares will not reconquer last year’s peak. Competition is now tougher in its core markets. Rivals will not let it disrupt new ones so easily. Apple may dip into its $137 billion cash lake to boost its share price by paying fatter dividends or buying back more stock. That would delight some investors, but others would see it as a tacit admission that the firm’s great innovation engine has stalled. Apple won’t crumble, but it has peaked.

Emphasis added. Since I've read Moretti's book, I've compiled a lot of anecdotal evidence that the Innovation Economy has commenced convergence. The conclusion that Apple has peaked is icing on the cake. Silicon Valley is the next Detroit.

Prototypical Pittsburgh

Pittsburgh is unique. Sure, Providence has its own brand of Rust Belt Chic. The urban culture of Pittsburgh sets the standard. San Antonio discovering its inner Burgh:

“San Antonio is always reinterpreting its past,” says historian Jesús F. de la Teja, who’s been writing about the city for 30 years. “In the process, it’s turned into one of those distinctive American cities like New Orleans or Santa Fe. It continually sharpens its image.”

Despite all the sprawl, San Antonio is indeed distinctive. While researching the metro's talent migration patterns, I toured the funky neighborhoods. They oozed a strong sense of place, authenticity. As a diamond in the rough, I was reminded of Pittsburgh. The Pittsburgh Regional Alliance (PRA) recently picked up on the comparison I am making:

A recent article published on Texas CEO Magazine’s website talked about the “brain gain” in San Antonio, citing a rise in the number of talented young people with college educations choosing to move to that medium-sized city – particularly to its more urban neighborhoods — to live and build their careers.

Sound familiar? It should, as we’re seeing those same trends in the Pittsburgh region, as I’ve noted here before. Similarly, the Alamo City is also seeing strong “return migration” of native sons and daughters who went away for college or to launch their careers. (We call them boomerangers, or as a colleague prefers, gumbanders.)

Pittsburgh is my muse. Studying the region's alleged brain drain problem led me to a new way of thinking about economic development. Focus on the people, not the place. That lens illuminated the flow of return migrants. Speaking in generalities, the gumbanders want the opposite of the suburbs.

Like cool cities sucking up all the college-educated talent, return migration to historic urban neighborhoods is indicator of the post-Innovation Economy. More from the PRA:

As a model for this new “talent economy,” the article cites Pittsburgh and specifically Carnegie Mellon University. It notes that instead of trying to lure graduates away in competition with other firms and locales, companies like Google and Disney are relocating right on campus. (Google has since moved to Bakery Square.)

The production of talent attracts innovative businesses. In the Innovation Economy the widget is knowledge and talent attraction is the name of the game. In the Talent Economy the widget is talent and brain drain is the name of the game. The outflow of CMU graduates to Los Angeles is what enticed Disney to set up shop in Pittsburgh. Jobs are following return migrants back home.

The same potential exists in San Antonio. The PRA piece notes a major impediment to the Talent Economy:

And while I am sure University of Texas in Austin has some powerful spinoff benefits, San Antonio does not have a CMU or a Pitt. Their major research university is one of the University of Texas Health Science campuses, which does about $200 million in R&D. In fiscal year 2010, that figure in the Pittsburgh region was just over $1 billion.

This is the Rust Belt advantage. Legacy costs are now legacy assets. Brain drain becomes brain gain. The quality of San Antonio's talent exports isn't as good as Pittsburgh's. If San Antonio wants to attract more business, then it will have to do a better job of producing talent. Develop people, not place.

Chicago And Economic Convergence

Last November, I was in San Antonio as a presenter at a Texas CEO Magazine Enlightened Speaker Series event. Rackspace chairman Graham Weston, via his 80/20 Foundation, commissioned me and Richey Piiparinen to study San Antonio talent migration. Over breakfast, I shared with the audience our preliminary findings. Weston's reaction:

“Going into it, I thought the data would show we were losing brain power and we were experiencing a brain drain,” Weston said. “As it turns out, San Antonio is a prosperous and exciting place.”

Rather than building from a declining foundation, Weston sees San Antonio building from strength. “Especially when considering all the other cities in the country – the ones that are struggling with unemployment, and we’re not; those struggling with foreclosures, which we’re not; ones that are struggling with keeping their young people and keeping their college educated children, and we are not,” observed Weston.

Of the top 100 metros in the U.S., San Antonio ranks as number six in brain gain – those over the age of 25 with a bachelor’s degree or advanced degree who have moved to the city. To realize the full potential of a talent economy, as Pittsburgh has done, San Antonio will need to produce talent. “It shows you how important our universities are and how the decades ahead are so important to rise to even greater promise. We have to have an educated population and this is an invitation to all the universities in town to up their game,” observed Weston.

Weston has a lot at stake in the brain gain – Rackspace hired about 800 employees in 2012 and tends to focus on recruiting people to San Antonio because Rackspace cannot fuel that growth purely from the San Antonio population. “What I’ve learned is,” said Weston, “the idea of return migration is a more powerful and better long term approach because we know when we find people in Silicon Valley, New York or D.C, if they have a tie to Texas there’s a very good chance we can recruit them.”

Weston said talent must be grown at home. “We can’t recruit our way to greatness.”

Emphasis added. I talked about the convergence of the Innovation Economy and the divergence of the Talent Economy. As a regional economic development imperative, talent production is replacing talent attraction. But that doesn't mean talent attraction is no longer important. San Antonio is heavily reliant on the talent development prowess of Washington, DC.

I've taken to contrasting DC and Chicago in order to understand how talent migration patterns are shifting. In terms of development, DC has supplanted Chicago as the #2 city in the United States. I wouldn't be surprised to see, in the near future, DC challenge the prowess of New York City on that score. The strong connectivity with DC is a great economic asset for San Antonio. That said, Chicago is still a prize.

For all the talk of Chicago's decline, the city remains a magnet for college-educated workers. DC is catching up, as opposed to Chicago falling back into the pack.With the recent trend of return migration, I'd say that Chicago's talent churn is improving and there's considerable upside to the exodus. Regardless, Chicago's brain gain does not appear to be abating.

Something I haven't discussed is how the convergence of the Innovation Economy can benefit Chicago. Knowledge production no longer begins and ends with Silicon Valley. The world is getting flatter:

Chicago isn't flyover country anymore, says AOL founder Steve Case, who now runs Revolution Ventures.

Mr. Case says his Washington, D.C.-based venture fund eventually expects to make 80 percent of its investments outside Silicon Valley in places such as Chicago, where he's already invested in BenchPrep, an online test-preparation service.

“Silicon Valley will remain the cornerstone of the entrepreneurial economy and a magnet for talent,” Mr. Case said Monday in a call with reporters. “But what we're starting to see, and will see, accelerate is this regional 'rise of the rest.' ”

The "rise of the rest" is convergence. More metros will compete for the best talent. That's why I recommended to San Antonio better talent production. That's why I'm bullish on Pittsburgh and bearish on Portland. The talent production strategy can work as long as there are places for graduates to go, like Chicago. Few cities do a world class job of developing talent.

If Chicago is to reinvent itself yet again, then the leadership must understand the city's position in the Talent Economy. Brain drain (i.e. return migration) is economic development, an asset for Chicago. Talent moving back to Des Moines or Krakow is not a zero sum game.

San Francisco Is Dying

When I write "the Creative Class economy is dying" I mean the Innovation Economy is converging. More cities are getting in on the talent attraction game. The makes life tough on established Creative Class winners such as San Francisco:

San Francisco is using millions of dollars in federal grant money to help train and educate local residents to make them attractive hires for the booming technology industry.

As The City celebrates its emergence as a tech hub around industry heavyweights such as Salesforce.com and Twitter, city officials are emphasizing the need to make sure some of the benefits accrue for San Franciscans who don’t yet possess specialized technology skills.

“A significant portion of San Francisco’s worker population lacks the skills and educational attainment to access these opportunities,” a city grant application stated. Back in the dot-com boom of the late 1990s, San Francisco’s demand for IT workers was met through “in-migration,” the application noted.

San Francisco is getting a talent production bail out. "In-migration" doesn't cut it any more. Suck it, Portland.

In contrast, witness the rise of Silicon Beach in Los Angeles:

L.A. has extraordinary resources to sustain and build upon its tech boom. Perhaps most surprising is its strong technology talent pool. UCLA, USC and Caltech collectively graduate more engineers annually than Stanford and Berkeley, major feeders of Silicon Valley. And L.A. tech staffers tend to possess more interdisciplinary skills than their northern counterparts, having developed expertise in cinema, communications, music, design and entrepreneurialism while pursuing engineering degrees.

Concerning talent production, :Los Angeles > San Francisco. L.A. tech firms aren't dependent on "in-migration". Thanks to Brian Kelsey (Civic Analytics), I got wise to U.S. talent production geography and L.A.'s importance to the pool of software developers:

And, if after all this talk about using labor market information to identify workforce availability in your region still doesn't produce the software developers you need, sign up for career fairs in Chicago, Pittsburgh, and Los Angeles. They led the U.S. in graduates prepared for software development jobs in 2006.

Better to be Chicago, Pittsburgh, or Los Angeles than San Francisco or Portland. Even if you don't buy my argument that the Innovation Economy is converging, San Francisco did apply for the grant. The in-migration of talent was deemed insufficient. Silicon Valley is sounding the alarm about return migration to India and China:

Friel stressed the importance of supporting education and training for the local population, "natural and immigrant alike," and doing whatever possible to keep the region attractive to talent from around the world.

At the same time, he said, "I don't think it's realistic or healthy to continue to rely on such a large inflow of engineering and science talent from abroad, particularly from Asia. This inflow has been the source of much of the Valley's historic edge in innovation, but conditions for these immigrants, support for their education, financing for their business ideas, have improved in their home countries and declined here."

Even as attracting and retaining top talent remains important to the region, California's investment in higher education is declining. While the total number of science and engineering degrees has leveled off, the percentage conferred to foreign students has been sliding in both the state and nation as a whole, the report notes.

Better to have a UCLA or a CMU than to be Creative Class cool. Talent attraction alone won't save your city. The economy is diverging to the places where the best talent is produced.