Why Top Talent Must Flee Silicon Valley

In order for tech workers to cash out on home equity, Proposition 13 forces them to move to another state.

Theme: Real estate refugees

Subject Article: "Silicon Valley is Going to Retrench in 2016."

Other Links: 1. "Are High Housing Costs Forcing Talent to Flee Silicon Valley?"
2. "The Lock-in Effect of California's Proposition 13."
3. "Tesla says Nevada battery plant on track despite report of delay."

Postscript: Expensive Bay Area real estate does much more to deter talent from moving there than it does to push it out. In fact, the tech industry might have converged faster nationally if Proposition 13 didn't discourage relocation. Supply isn't distorted as much as demand is. As out of state tech markets become more attractive to talent, the Prop 13 effect will flip from an agent of retention to one of exodus.

Atlanta's Talent Attraction Problem

From 2000–2013, Atlanta has fallen further behind other large metros in growing its population of college-educated young adults.

Theme: Higher education and economic development

Subject Article: "Best and Worst Cities for Educating Blacks: Instead of educating their own, some cities are importing college graduates."

Other Links: 1. "The Talent Migration Paradox."
2. "Debunking Texas Exceptionalism."
3. "Globalization and Atlanta's Gated Urban Core."
4. "Trolling for millennials with the Atlanta Streetcar."

Postscript: "We're now at a point in Georgia where you can't sustain those high attainment rates just by importing more people," says McGuire. "The challenges in Georgia, and in metro Atlanta for sure, have a lot more to do with doing a better job with the kids who are here than simply counting on lots of middle class families to move here and solve the demands of employers that way."

The Talent Migration Paradox

Better to develop people and have them leave than to attract and retain college graduates.

Theme: Migration and economic development

Subject Article: "Fastest-Growing U.S. Cities Import Their College Graduates."

Other Links: 1. "Joe Cortright Talent Dividend Metrics."
2. "Beyond the Creative Class."
3. "Talent Attraction Expert Joe Cortright."

Postscript: For the migrants themselves, attracting talent is economic development. For the destination community, migration is not economic development. The tale of two cities in terms of inequality concerns townies and outsiders. Tenured residents are left behind or pushed out of place.

Do Jobs Follow People or Do People Follow Jobs?

Battle of the two urban geographic paradigms at Pacific Standard magazine.

Theme: Theories about cities.

Subject Article: "Keys to the City: how economics, institutions, social interaction and politics shape development."

Other Links: 1. "Smart Growth: Education, Skilled Workers, & the Future of Cold-Weather Cities."
2. "THE 'CREATIVE CLASS' IN THE UK: AN INITIAL ANALYSIS."
3. "What Workers Lose By Staying Put."
4. "Stay Put, Young Man."
5. "Failure of Place and Economic Development."
6. "The city startup: Tony Hsieh’s downtown project."
7. "The Interview: Joel Kotkin versus Richard Florida."
8. "Mapping 60 Years of White Flight, Brain Drain and American Migration."
9. "Mobility, Skills, and the Michigan Non-Compete Experiment."
10. "Talent Retention Causes Brain Drain."
11. "Noncompetes Are Lame — Let’s Set the Creators Free."
12. "Q&A With Michael Storper About His New Book."

Postscript: One comment, almost an aside, from Michael Storper's lecture stood out to me. The jobs-follow-people approach does have its place. Storper contends that this theory about cities is effective intra-regionally, but not inter-regionally. That's how I see place-making and place-branding working, changing the psychology of residents and helping with community integration.

Failure of Place and Economic Development

Obsession with the failure of place unleashes a parade of Underpants Gnomes at Pacific Standard magazine.

Theme: Economic development folklore of talent migration.

Subject Article: "Creative Placemaking Has an Outcomes Problem."

Other Links: 1. "Gnomes Know Business."
2. "Underpants Gnomes And Talent Migration."

Postscript: Economic developers and planners are working the wrong end of talent migration. It's all push factors, brain drain. Suburban dreams get labeled, "white flight." Migration is more pull than push. A better place won't solve much of anything. I heard it loud and clear at the IEDC annual conference. Places develop, not people.

Restaurant Talent Migration

Last Friday's post at Pacific Standard.

Theme: How migration and knowledge transfer have transformed Pittsburgh's dining scene.

Subject Article: "Replanting the Rust Belt."

Other Links: 1. "Chef appeal: Pittsburgh's growing restaurant scene attracts staff from bigger cities."
2. "Spoon, Salt land DC dining heavyweights."
3. "Warning: Your reality is out of date. Introducing the mesofact."
4. "Brain gain in rural Minnesota."

Postscript: Where am I going with this post? The diffusion of pork butcher technologies from Germany to England. Innovation depends on migration.

Talent Geography 101

My first post at Pacific Standard is up.

Theme: How talent migration explains the economic geography of energy industry clusters.

Subject Article: "From bog to bayou: Cities are bound by oil and gas" at Fuel Fix blog.

Other links: 1. "Children of the Congo who risk their lives to supply our mobile phones."
2. "Ernest George Ravenstein: The Laws of Migration, 1885."

Postscript: I didn't address other possible explanations for the economic geography of energy industry clusters. Also absent is a discussion of knowledge transfer and migration, which is the underlying theory supporting talent migration as the best explanation of economic geography. I will explore this more in future posts at Pacific Standard.

Tolerance And Talent Migration

More tolerant cities attract more talent. Or, so the story goes. The third of Richard Florida's 3Ts of economic development confuses correlation and causality. More migrants generate greater tolerance, not the other way around. Germany doesn't care:

Although immigration procedures in Germany have already been relaxed, there's been no boom in new arrivals of skilled workers. According to the International Organization for Cooperation and Development (OECD), five to 10 times as many workers are preferring relocation to countries like Australia, Denmark or Canada, rather than Germany.

Manfred Schmidt believes that is primarily because Australia "has been a destination for immigrants for some time." In contrast, the immigration expert says, Germany has only viewed itself in a similar way for the past 10 years or so. There's still a lot to do, he thinks.

"Now it's about signaling to those who want to come that they're welcome," Schmidt explained, adding: "And that we want to address them even-handedly."

Ideally, Schmidt would like to see that this be true not only of highly qualified migrants but also for refugees, asylum-seekers and the families of immigrants.

Emphasis added. Schmidt is right about Australia. International migrants are creatures of habit. You go where you know.

Migrants move to hostile places all the time. Outsiders aren't welcome anywhere. Opportunity trumps tolerance. Every time. What can talent do in Germany that can't be done in Australia? More welcoming isn't a competitive advantage in the war for talent.

Boston Is Dying

Once again, brain drain anxiety grips Beantown. College graduates are fleeing the region, heading to New York and San Francisco. Boston is dying:

Greater Boston has never had a problem attracting talent. The region’s 76 colleges and universities and almost 350,000 students virtually guarantee a steady stream of knowledge-workers-in-training. Our bigger challenge is keeping this young, educated population from leaving Massachusetts once they’ve crossed the stage and received their diplomas. Data presented from WCCP’s new Talent Magnets report show that too often we lump together all of these various reasons that push people out of the Commonwealth without regard for importance, timing, or life needs. We give each reason equal weight, which diminishes the effectiveness of our response. By breaking down talent needs into life stages, policy makers can better prioritize talent retention strategies.

I'll spare everyone the sermon about how talent retention initiatives are foolish and self-destructive. Greater Boston has never had a problem with brain drain. Looking at recent American Community Survey data, Boston is a hot spot for brain gain.

From 2008-2011 (post-Great Recession era migration), Boston gained more college graduates than San Francisco did. That was good enough for 8th place among the 51 metros with a population of 1,000,000 or more people. For total population with a college degree, Boston ranks 6th. There aren't many cities in the entire world with a better talent pool.

Indeed, many of the college educated do leave Boston after graduation. That's the case everywhere, including New York City and San Francisco. Young adults are location whores. Hyper-geographic mobility defines this demographic cohort.

Boston attracts more college graduates than it loses. At some point in the near future, if it hasn't happened already, Boston will have more people with a bachelor's degree than does the San Francisco MSA. Why does Beantown look longingly at the Bay Area? The jealous gaze should be in the other direction. Better to be in Greater Greater New York than isolated on the Left Coast.

Exodus Beijing

Richard Florida is skeptical that return migration can adequately address the brain drain problem. The battle for the Creative Class is a zero-sum game. Some cities win, all the others lose. China's struggle with urban agglomeration:

“We’re anticipating this summer will be a very big season [of relocations out of Beijing] for us,” said Chad Forrest, North China general manager for Santa Fe Relocations, a global moving service. “It seems a lot of people, particularly families with small children who have been here a few years, are reconsidering the cost-benefit equation and deciding to leave for health reasons.”

Emphasis added. Quality of life for city families is a growing concern. Most communities are geared towards young, single, and college educated adults. Too few give a damn about talent with children in tow. Beijing's oversight raises a red flag.

The status quo, Creative Class geography. is that talent will go anywhere it needs to go to get the job done. In the Talent Economy, the rules have flipped. The best and brightest call the tune. The world is flat. Creative families matter, too.

Demographics Of The Higher Education Bubble

Yesterday, I covered the healthcare jobs bubble. Today, I'll look at eds instead of meds. The college student crisis in Japan:

The number of 18-year-olds in Japan peaked in 1992 at 2.05 million, dwindling to about 1.2 million by 2012. During that time, the number of four-year universities grew to 783 from 523.

Even greater energy has been poured into thinking up new departments and majors. According to the Ministry of Education, there were 207 new departments, majors and graduate programs in 2011, and an additional 236 in 2012. In 2006, a whopping 482 new departments and majors were introduced.

The boom has been happening for quite some time. Since the late 1990s, more than 2,000 new academic departments and faculties have been created in Japan, despite an aging population. Although dozens of departments are scrapped each year, that still leaves hundreds added to the pile annually.

Meanwhile, existing schools and departments are suffering. According to the Promotion and Mutual Aid Corporation of Private Schools in Japan, a Ministry of Education affiliate agency, 46 percent of private universities have empty spaces. The group said that nearly 40 percent of private universities were operating in the red.

Japan has been making an effort to attract more overseas students, but the relatively small number of foreigners is not enough to offset the growing number of university spaces.

Emphasis added. Japan's demographic crisis is staggering. Yet the higher education industry there spent two decades in denial. Good luck bailing out that sinking ship.

By way of contrast, Pennsylvanian post-secondary institutions owned up to shrinkage long before demographics became an untenable problem. Today, PA attracts the most out-of-state freshman. Higher education is a major export industry.

Globally, the United States is tops in "exporting" the college experience. Its graduate programs are a particularly powerful draw. Japan is late (too late) to the "Great Brain Race".

With mounting student loan debt and lower national birth rates, anxiety about the higher education bubble is acute. The concern is warranted, if you ignore the entire population outside of the United States. The alarm over the eds and meds economy is myopic in scope. Ask first if a "dying" city or country is importing students and thus exporting education. People develop, not places.

Zero-Sum Creative Class

I highly recommend watching the American Experience episode about Silicon Valley. It's all about talent migration. Specifically, you'll learn how brain drain is an engine for talent attraction:

The eight were Julius Blank, Victor Grinich, Jean Hoerni, Eugene Kleiner, Jay Last, Gordon Moore, Robert Noyce, and Sheldon Roberts. They contacted the New York investment banking firm of Hayden, Stone & Company because Kleiner’s father had an account there.

They asked the bank to help them find a corporation interested in hiring the group of them to help establish a semiconductor operation, preferably, on the San Francisco Peninsula. This attracted the attention of Rock, an analyst at the investment bank. Rock in turn introduced them to Sherman Fairchild, who at that time was IBM’s largest shareholder. Fairchild was interested in redirecting his camera company towards the field of electronics and data processing. Together they created Fairchild Semiconductor in Palo Alto in 1957, the first venture to work solely with silicon.

Over the years, the departing “Fairchildren” helped to create the semiconductor industry. Between 1966 and 1969, no less than 27 new chip ventures were formed by Fairchild émigrés. Two the eight, Noyce and Moore, started Intel Corporation in 1968 and Rock also funded them with $2.5 million.

The novelty of Fairchild Semiconductor concerned talent management. Rigid hierarchies and employee loyalty were the norm. That legacy lives on via noncompete agreements. Brain drain is bad. The company that develops human capital owns that human capital. For Silicon Valley companies, brain drain is good. The Fairchildren changed the world.

The contemporary example of Fairchildren is the Google Diaspora. Ex-Googlers are changing the world. That can't happen in places such as Boston where brain drain hysteria is a chronic affliction. Instead, metros look to Richard Florida and his zero-sum thinking about the Creative Class:

In Miami, we talk a lot about the “brain drain”, where we lose talented people to places like New York and Los Angeles —

Florida: The overriding concept I like is “brain circulation”. It’s not brain drain, it’s not brain gain, it’s brain circulation. So what I think Miami should do is bring people in and send people out. The more people who go out and say, “Miami is this amazing laboratory for urban transformation, and I thought it was fabulous,” the better for Miami. My hope would be that some of those people figure out a way to incubate start-ups [in Miami]. Not just high-tech start-ups — social innovation, social enterprise, urban transformation, arts and cultural organizations. ...

... The concept of brain circulation is very interesting because we tend to harp on the “drain” part of the cycle.

Florida: I just look at the people I know that are choosing to live here. The net in is better than the net out. So I think Miami is winning. It’s really quite amazing, our ability to do brain circulation, and I think we minimize that. We look at every young person who leaves as a big loss, instead of saying, “They’re going out, they’re getting skills, they’re learning the world, and we’re attracting a lot of people.” There are very few regions in the world that have this net in that we do.

That's an odd answer coming Richard Florida. Just a few weeks ago, he stated the following at Atlantic Cities:

Matt, you've hit upon what urbanists sometimes call the giant urban sorting machine. The problem for cities like yours is that young people are the most likely to move. A 25-year-old college graduate is three to five times more likely to move as someone in their 50s. Many cities think they can lure young people back as they get older and have families, and while this may work to a certain extent, the simple math suggests they can never recoup their losses of young people.

What can they do? As I argued long ago, Number 1 is to try to stem the losses. Figure out ways to retain that age group. I'm not saying that only that group matters, but if they cannot be kept or captured it will be hard to stem the sorting problem, as you describe. In fact, this is exactly the problem both Boston and Silicon Valley confronted a half century ago — talented young people were leaving Cambridge (MIT, Harvard, etc.) and Stanford for better jobs, etc., elsewhere. This is why university leaders (not mayors and economic developers) decided to support high-tech development. It could provide a source of employment for these new grads.

Emphasis added. I guess what is good for Miami is bad for Des Moines. Richard Florida is having a hard time keeping his ideas straight. For place-centric thinkers, talent migration is a zero-sum game. Miami is a winner. Des Moines is a loser. Listen to Richard Florida so your city can win, too:

When I wrote The Rise of the Creative Class and I identified these three Ts — technology, talent, and tolerance — I said cities that did all three had an economic edge. And I said that’s Silicon Valley, Austin, Boston, Seattle, on and on. And I used Pittsburg as an example of a city that had great technology but lacked tolerance and talent. And I used Miami, in that book, as an example of a city that was tolerant in lifestyle but lacked technology.

Ah yes, Florida conflating correlation and causality. Again. Cities don't have agency. People do. Talent that migrates, particularly across international borders, has an economic edge. Wherever they end up, talent always wins and the global economy is better for it.

Big Fish Small Pond Talent Migration

Boston twentysomethings wish the city was more like New York, alive 24/7. The silver bullets for Rust Belt cities are greater tolerance and more diversity. Portland went all in on the urbanist utopia in order to woo talent. Schemes, such as cooler urban amenities and creative place-making, to win the great brain race abound. The common theme is making your town more attractive.

I have a different approach. What if communities focused on developing people instead of place? All of the above are about developing place in order to attract/retain people. I've concluded that place-making doesn't work. Worse, it is counterproductive. We need a new theory of talent migration.

The ball got rolling once I realized that Richard Florida's ideas about tolerance and Creative Class migration didn't make sense. I've moved to and lived in a few cool cities. They were not particularly welcoming. Quite to the contrary, I found them to be downright xenophobic. I reconciled that anecdotal impression with the horror stories of making a go of it in talent attraction champion New York City. Domestic or international, migrants overcome a lot of adversity in order to succeed. Nothing would stand between them and personal economic development.

Another clue is that the biggest winners are also the biggest losers. New York's appeal to talent is above reproach. Ironically, NYC tops the list for negative net migration. Every year, thousands more leave than arrive. New York is dying. People vote with their feet. Shrinking city. All nonsense. For every college-educated person New York attracts, the metro spits out two without a degree. There is brain gain in the face of demographic decline.

College-educated people leave New York, too. Many of them return home, literally richer for the experience. New York, perhaps better than any other city in the world, develops people. That's the attraction. That's why migrants put up with all the adversity and high cost of living. It's worth it.

That said, why would anyone swap "San Francisco, Seattle and New York for the Rust Belt"?

In Detroit, so down on its luck for so long, never underestimate the sheer joy the sound of jackhammers brings. "You are seeing construction. It is pretty exciting," said Jim Xiao, a financial analyst for Detroit Venture Partners, the driving force behind the M@dison and an investor in new tech firms in the city.

Xiao, a 24-year-old who evaluates tech firms for DVP to finance, has trouble concealing his enthusiasm. He lives in one of the converted buildings nearby, socialises at the new downtown bars and has a keen sense of mission about tech's role in the city's future. "Where else in the country can you make an actual impact on a whole city when you are in your 20s?" he said.

As a former resident of Seattle and Microsoft employee, Xiao is typical of the breed of tech engineers and entrepreneurs popping up in Detroit.

Emphasis added. Big fish, small pond talent migration. People develop, not places. It isn't the urban amenities. It isn't the tolerance and diversity. You don't move to Detroit to live out your Portland fantasy on the cheap. You certainly don't leave Seattle in hopes of a place-making upgrade. You migrate for opportunity, despite the challenges and the warts. Detroit offers something that New York does not.

Xiao's migration doesn't make any sense in a Creative Class context. Swapping Seattle for Detroit doesn't lend itself to a spikier world. Seeking geographic arbitrage isn't an indicator of agglomeration. It's a sign of economic convergence. Sticking with the "New Geography of Jobs" terminology, talent is moving from a thick labor market to a high-risk locale. The rationale is difficult to fathom in a place-centric world.

Talent is slamming into a ceiling in the thick labor market metros. They can find a better return on their skills in Rust Belt cities such as Detroit. Each migration is a brain gain. In a people-centric world, there is no brain drain. Talent attraction and retention are of no consequence. Place-making, in its current incarnation, is a waste of resources.

Germany Is Dying

Germany is starved for talent. Residents of Spain are hungry for jobs. Both countries are members of the European Union. One big, happy labor market, right? Wrong:

Class of 2012 participant Rafael Gonzalez del Castillo speaks German and could work in Germany. He picked up the language on a student exchange program in the southern town of Darmstadt and lived with German flat-mates in Madrid. But, in perhaps an alarming sign for Europe, he sees more opportunity and cultural affinity in booming Latin America — and has started to learn Portuguese so he can see work in Brazil.

It's part of a rising trend in Spaniards departing for former European colonies in Latin America, meaning that Europe is losing much of its top-level talent to emerging economies.

"I see Brazil as a country that's going to grow so much in these years," said Gonzalez del Castillo, "And I feel close to them because we are Latin people, and our language is similar."

Oh, sweet economic convergence. Better to be in Brazil than in Germany. The gist of the article concerns culture, namely language. Navigating an international border is less daunting. You go where you know.

Looming larger is opportunity. Brazil is growing and Germany is dying. Europe is dying. In the face of crisis, a talent pipeline is being built between Spain and Brazil at Germany's expense. Creative Class Berlin is over. Sao Paulo or bust.

Talent Retention Causes Brain Drain

Brain drain is good for economic development. Get used to that idea. Talent retention is bad for economic development. Get used to that idea, too. The Michigan Paradox, or how talent retention causes brain drain:

What has happened to places that stayed siloed is tragic. In 1985, for instance, the Michigan legislature passed an antitrust bill that also mistakenly repealed an 80-year-old open-competition statute (a law that had helped to spark the US automobile revolution in the early 1900s by letting engineers at big motor companies trade employees). Since the repeal, employees who have learned field-specific skills or built strong customer relationships that might help elsewhere have had to either take unpaid time off or leave the state. Job changes in Michigan have decreased by 8 percent among inventors across all industries—not just automotive—and by 16 percent among technically specialized workers. And that’s bad for innovation. Managers don’t need to pounce on great ideas; it’s not like they can be taken elsewhere.

The other result in Michigan is brain drain. Inventors who hold patents have been 256 percent more likely to move out of the state than their cohort in other places, MIT’s Marx says. He found that inventors who change jobs flee to states that permit them to take new positions in the same field or launch startups. Not surprisingly, places like California have become more attractive to talented workers than, say, Michigan.

Emphasis added. "Places that stayed siloed" are states that allow noncompete agreements. Companies can use the force of law to retain talent. This stifles innovation and encourages outmigration. Michigan's brain drain "problem" is Michigan. Being business friendly is driving away business.

Noncompetes are a metaphor for the zero-sum game between regions vying for talent. The crying about brain drain is ubiquitous. If your prodigal daughters and sons leave, the community is doomed. The community is doomed thanks to all the crying about brain drain. Millions of dollars are wasted on retention. Real estate boondoggles promising a cooler downtown abound. You'll do anything to keep your children from leaving.

Plugging the brain drain stifles creativity. Too much talent churn erodes social capital. Positive or negative net migration poses a unique set of challenges. Resist the urge to make normative judgments and remember that people develop, not places.

People develop, not companies. As with cities, we tend to forget that businesses are made up of people. Talent is the new oil. The freedom to move spurs tremendous growth. Silicon Valley towers over Boston's Route 128 because its workers are more geographically mobile. The Google Diaspora is just as valuable as the Burgh Diaspora.

Attractive Pittsburgh Promise

Perhaps you have heard of the Kalamazoo Promise. If your children attend the city's public schools, they will go to college for free. The method to the madness:

Putting kids through college is viewed as a means to an end. "It was primarily seen as an economic development proposal by the donor," said Mr. Bartik.

The program is an arrow in the quiver of economic development pros, said Mr. Lee. The pitch: "If you put a business in Kalamazoo, Mich., any employee has the option of having the college tuition guaranteed for their children," he said.

As yet, no big business has moved its headquarters or opened a new plant in Kalamazoo as a result of the promise. School district enrollment, though, has jumped by 987 new students, to 11,367.

Unintended benefits aside, the Kalamazoo Promise is an attraction strategy. The Pittsburgh Promise was modeled on Kalamazoo's initiative. Mayor Luke Ravenstahl sold the program as a means to retention. He wanted to arrest the population decline of the City of Pittsburgh. All hail the brain drain boondoggle.

Today, The Atlantic Cities takes a look at the Pittsburgh Promise and its struggles. I want to highlight the comments of John Austin and Alan Berube:

“You need a program that’s simple, blunt, and elegant,” Austin says, which is why the Kalamazoo Promise seems to have worked well in Kalamazoo though it’s been less successful in places such as Pittsburgh and New Haven. "The obscurity and opaqueness of some of these other college guarantees - which aren’t understood by everybody and not everybody qualifies - doesn’t become the economic development success it can be."

And ...

"Cities try all sorts of stupid economic development projects in an effort to grow jobs and grow residents," Berube says. "They build convention centers and hotels and they throw money at developers for stadiums when research has shown that none of those things have proven to provide any real long-term economic success."

Austin questions the marketing strategy. Berube takes on the efficacy of the program. Are both Promises empty? He leaves that as an open question:

"At least they’re aiming at the right thing. Whether they’re effective in growing that thing in the long run? We don’t know that yet."

I think both Austin and Berube miss the point. With the Promise, Pittsburgh isn't aiming at investing in human capital. As for the marketing problem, the goal is wrong. A focus on attraction instead of retention would result in a different campaign. Along comes a different campaign for the Pittsburgh Promise:

Predicting that its $40,000 college scholarships will be a powerful draw, The Pittsburgh Promise today will announce a campaign to attract Hispanic immigrants to the city and the Pittsburgh Public Schools.

Saleem Ghubril, the Promise's executive director, said the goal will be to recruit immigrants now living in cities within a 300-mile radius of Pittsburgh. The announcement will be made at the Promise's annual report to the community, scheduled for 10 a.m. at the South Side offices of American Eagle Outfitters.

The initiative could help the Promise address the thorny challenge of boosting school district enrollment. It also complements recent efforts by other groups, including Vibrant Pittsburgh and Pittsburgh Metropolitan Area Hispanic Chamber of Commerce, to boost the city's foreign-born population.

I suspect this is what Berube would call a "stupid economic development project" to grow residents. I have a different angle. I recently completed some research for Global Cleveland about attracting more Latinos to Northeast Ohio. Latino domestic migration tends to be overshadowed by immigration. And when we talk about workforce development, we think locally. I told Global Cleveland that everyone was overlooking a tremendous opportunity.

A Penn State Lehigh Valley study ("2008 Portrait of Latino Business Owners and Professionals") detailed intergenerational mobility aspirations among Latinos residing in the area. Latinos were leaving cities such as Allentown out of frustration. An academic article (“Immigrant Gateways and Hispanic Migration to New Destinations”) confirmed this observation as a nationwide pattern. Latinos are moving to improve family human capital and economic status.

Pittsburgh Public Schools need fixing. There are other programs addressing these problems. Meanwhile, Latinos are relocating in search of upward mobility, for themselves and their children. The Pittsburgh Promise is an attractive carrot. The target market just switched from Pittsburgh city neighborhoods to Eastern Pennsylvania. It may or may not increase the foreign-born population (many of Latinos migrating domestically are already second or third generation immigrants). Does it matter?

Latino ambition can find expression in Pittsburgh's urban neighborhoods. This, not increasing enrollments, is economic development. In a sense, Berube and I are on the same page. I'm casting a wider net when I talk about improving human capital. That's how I think when I focus on talent attraction instead of retention.

Brain Drain Is Better Than Foreign Aid

Exporting higher education is the centerpiece of the emerging Talent Economy. What about developing countries that lose these superstar students? Have no fear, opening up the borders is the best thing we could do for economic development abroad:

Exporting education opens possibilities that extend outside the US to the world at large. Beyond educating foreign students in existing programs, the US can draw on a major strength—entrepreneurship—to create new programs aimed at educating entrepreneurial students from countries that could greatly benefit from enterprise-driven growth. Research has shown that face-to-face interaction with seasoned entrepreneurs is key to the effective training of budding ones, and the US has a wealth of highly successful entrepreneurs, many of them originally from developing countries, who can help universities train students from developing countries. Furthermore, bringing ambitious and entrepreneurial students to our shores delivers a compounded effect on the U.S. economy. Even when they leave and start businesses in their native countries, they expand US exports. The brain gain/brain drain debate is in the past. Opportunities have dispersed; “brain circulation” is the new reality.

The U.S. already has the financial resources to strengthen its universities—we need only follow the history of our own economic progress, achieved through entrepreneurial efforts rather than state-led programs. We waste hundreds of billions of dollars on foreign aid to governments, through policies first used during the Cold War that now serve only to centralize power and stall bottom-up progress. Today, remittances sent by immigrant workers and the spread of the Internet and cell phones should render state-to-state management obsolete. Indeed, even the State Department is looking to promote entrepreneurship in developing countries.

Instead of aid, we should redirect money to U.S. universities for program expansion to accommodate 3 million new foreign students and have a much more tangible and beneficial effect on the rest of the world. These redirected funds could be used to create capacity for the new foreign students without taking away spots from American students, both by expanding existing universities and creating new ones, while also creating scholarships to enable talented students from developing countries to attend.

Encouraging brain drain is a smart economic development strategy. Youngstown is a good domestic example of this approach. Return migrants are fueling the Mahoning Valley's revival:

"I'm a 'boomerang,'" said Eric Planey, vice president of international business attraction with the Youngstown/Warren Regional Chamber.

The Youngstown native explained that he returned to his hometown three years ago, giving up a banking career in New York City, so that he could renew ties to a once-prosperous steel town that he had left two decades earlier.

Planey's worldly experience is helping his hometown take full advantage of the Utica Shale rush. His broader horizons allow for a useful analogy that would be lost on someone who has never left the region:

"We probably won't be 'Houston North,'" Planey concluded, referring to a nickname that some have given to nearby Pittsburgh, Pa. "But maybe we'll be 'Odessa North' or 'Oklahoma City North.' We could be a second satellite city."

Talent is cycling back to the Rust Belt. I heard an economist on a Cleveland radio station claim that Youngstown is Ohio's boom city. Brain circulation has a lot to do with that reversal of fortune.

Yes, the United States should import foreign born college students instead of sending aid. US cities should encourage the best and brightest to leave. Seeking to retain talent is a mistake, economically counterproductive. Time to update the economic development playbook.

Places Develop People

For talent migration, tolerance doesn't matter. The idea that London is a winner in the vote-with-feet competition because of its cosmopolitan disposition is amusing. No city is immune to parochial attitudes:

But London in 2012, like most other global cities, is in significant flux, much less beholden to sepia-tinged notions of what it used to be and much more a product of its new arrivals. Over the last decade, the foreign-born population reached 2.6 million, just about a third of the city. In addition to longstanding Irish, Indian, Jamaican and Bangladeshi communities, there are now many new immigrants from Nigeria, Slovenia, Ghana, Vietnam and Somalia. I’ve seen Russians fly in on their private jets, and Eastern Europeans breach the city limits in cars filled to the roof with suitcases and potted plants.

The changing population has inspired a certain amount of nativism in the city, sometimes good-natured, sometimes less so. There are those who believe that true Londoners are cockneys, and to be one of those you must be born within earshot of Bow Bells. Or: True Londoners are born within the ring of the M25 motorway. Others think that all it takes to be a Londoner is to have lived here for a great deal of time — at least 70 years, or 52 years, or 8 years, or, in one case, just over a month. “But it was a very good month,” this new Londoner told me, fresh from the north of England. “I’ve totally forgotten Macclesfield.”

Emphasis added. This reality check casts a pall over the slew of welcoming committees designed to increase immigration to shrinking cities. Rolling out the red carpet to any migrant won't do much to enhance talent attraction and boost population. The same is true for expensive urban amenities and transit boondoggles.

Forget migration. There is still a benefit from increasing tolerance and weaving outsiders into the fabric of your community. People develop, not places. A corollary to that slogan is places develop people. Parochialism is a drag on place's potential to develop talent. Eroding that mountain of social capital will unleash creative potential not unlike putting the kibosh on noncompetes:

Pennsylvania still follows the common law rule that treats noncompetes as legal, so long as they are "reasonable" in length, geographic scope, and range of employment.  California law, as many people know, treats noncompetes as presumptively illegal in all but a small handful of cases, and several other states have employment law rules on noncompetes that are nearly as liberal as California's.  PA should change its law, perhaps not all the way to the California end of the spectrum, but to make noncompetes far narrower in scope, and limited primarily to truly high value employees with truly specialized training and knowledge whose development really matters to employers.  (In recent years, I've heard of noncompetes being used and enforced against hair stylists and truck dispatchers.  That's ridiculous.)   In most areas of the economy, the change would improve labor mobility -- which would help small businesses get off the ground.  If you want to start a business, you need money, and you need employees.  PA law should make both of them easier to get.

Noncompetes are parochial and anti-innovation. Removing the barriers to talent movement within the region is akin to priming the pump of tolerance. Place better develops people and talent will move there to reap the benefits. But a shift in attitude against noncompetes is often a function of a dramatic increase in outsiders moving to the region. A place already does a relatively better job of developing people despite entrenched parochialism. I've experienced this firsthand in Seattle and Denver. The backlash against Californication was (still is) substantial. The newcomers are wrecking our cool city. Don't move to Austin. We don't need more people. They still come.

Something else was (still is) attracting talent to those intolerant cities. People are flocking to crowded and expensive locales. The traffic in Northern Virginia is awful. Yet, here I am. What makes you think that your cheaper and friendlier city with better public transit will change that?

Oregon Is Dying

Today's domestic migration winner is tomorrow's loser. Without immigration, the top of the population list would be heavy with shrinking cities. As US geographic mobility continues its decline, Oregon has some soul-searching to do:

As Oregon’s total fertility rate remains below the replacement level and deaths continue to rise due to ageing population, long-term growth comes mainly from net in-migration. Working-age adults come to Oregon as long as we have favorable economic and employment environments. During the 1980s, which included a major recession and a net loss of population, net migration contributed to 22 percent of the population change. On the other extreme, net migration accounted for 73 percent of the population change during the booming economy of 1990s. This share of migration to population change declined to 56 percent in 2002 and it was further down to 32 percent in 2010. As a sign of slow to modest economic gain, the ratio of net migration-to-population change will increase gradually and will reach 70 percent by the end of the forecast horizon. Although economy and employment situation in Oregon look stagnant at this time, migration situation is not expected to replicate the early 1980s pattern of negative net migration. Potential Oregon out-migrants have no better place to go since other states are also in the same boat in terms of economy and employment.

Emphasis added. Other states are not in the same boat as Oregon. What about Texas? I think a return to the early 1980s pattern is a distinct possibility. At least, if you swallow whole the offered rationale for the rosy projection.

As far as Portland is concerned, I cast an eye towards the real estate market in Silicon Valley. The New York Times offers some speculation about the impact of Facebook going public:

It will be some time before the first Facebook shares are sold to the public, and even longer before Facebook’s employees are able to turn their paper wealth into cash and officially take their places as the newest members of the 1 percent. But the mere anticipation of the event may pour a little kerosene onto what is already a fairly hot local real estate market.

That should excite the folks in Oregon. Bay Area real estate refugees have been very good to Portland. The geographic arbitrage play looks to be getting stronger. And, if the economy is relatively worse in California, then neighboring Oregon would benefit from even more inmigration. Concerning migration, proximity matters.

Talent Migration Loser Texas

If people vote with their feet, then Texas is a loser ... in the world of higher education. A journalist for the Washington Post crunched the numbers of the high school graduate college migration. The worst "brain drain" is in New Jersey. Texas is a distant second.

There are a bunch of tasty data morsels in this blog post. There's a link to an interactive map at The Chronicle of Higher Education:

Every two years, a U.S. Education Department survey of colleges and universities collects information about the migration of new full-time students, based on their states of residence when they apply. Use this interactive tool to see these movements in detail during a 16-year period for nearly 1,600 institutions.

As someone trying to analyze talent migration patterns, I find state-level data extremely frustrating. The institutional variable helps me drill down into the numbers a bit.

More importantly, the Post blogger disaggregates the net migration. New Jersey doesn't attract a lot of college freshmen from other states. But it's the number who leave New Jersey that impresses. As for Texas, a good comparison is brain gain winner Pennsylvania. The two states have a similar number leaving. The difference is the big deluge moving to PA for school, which is New Jersey-impressive on the other side of the ledger. When it comes to talent production, Pennsylvania is a winner.

Last nugget, brain drain is all relative:

Nationally, about three-fourths of students stay in their home state for college.

I see states and regions freaking out about brain drain with college graduate retention rates hovering around 75-80%. What's all the fuss about? Population. Ugh.