What’s the Matter With Kansas – and Connecticut?

Wichita. Photo credit: spacefem/Wikipedia, CC BY-SA 2.0

In 2012, the state of Kansas under Gov. Sam Brownback passed a large tax cut. Despite this massive fiscal stimulus, the state’s economy actually underperformed the nation during much of the subsequent period and the cuts blew a gigantic $900 million hole in the state’s budget.

Finally the legislature cried uncle. It passed a $1.2 billion tax hike. Brownback vetoed it but the Republican dominated legislature overrode the veto.

Not only did the tax cuts fail to grow the economy, one of the state’s major metro regions, Kansas City, received a gigantic free broadband investment in the form of Google Fiber. Spanning Kansas and Missouri, this investment also failed to produce significant tech growth.

Meanwhile in Connecticut, the state twice raised taxes to address a budget deficit. Unfortunately, these tax hikes did not create long term revenue growth. What’s more, after the most recent rounds of tax hikes, the state experienced a corporate exodus highlighted by GE and Aetna. The state capital of Hartford is also flirting with bankruptcy. Gov. Dannel Malley now admits the state is tapped out on tax increases.

There are a lot of claims one can make out of these situations. I’m only going to point out that both Kansas and Connecticut are out of favor in the marketplace right now. For example, while the suburban office park may not be extinct, it’s certainly facing challenges in high tax settings like New Jersey and Connecticut. Companies like GE are in fact increasingly looking to global city centers for their highest level executives. Connecticut doesn’t have that product on offer and can’t create it. Regarding Kansas, it was likely a low tax state even before the cuts, which did not materially improve its competitive position or instrinsic attractiveness.

It’s simply very difficult to counter these macro forces. When cities were out of favor, even NYC was en route to oblivion. Trying to push on a string often only creates as many problems as solutions.

from Aaron M. Renn

Urban Talent Sheds Say a Lot About Cities

Jim Russell pointed me as the workforce report program that LinkedIn runs.  They use their data to show trends in 20 major job markets.

For each market they track, they put together a map of the 10 cities that market gains the most workers from and the ten in loses the most workers too.

These are interesting maps in their own right. They also highlight the extremely parochial nature of the talent flows into Midwestern cities. It’s pretty stark, actually. Here’s a set of comparisons, looking strictly at inflows. There are also outflow and gross migration charts and more information that’s interesting too, but I’ll leave you to dig into that yourself.

Minneapolis vs. Denver vs. Seattle

Let’s take a look at these three roughly peer cities. First, the top ten cities for Minneapolis.

Despite the Twin Cities enjoying a high reputation withing the Midwest region, their draw remains highly regional. Their top draws are from adjacent states plus Chicago.

By contrast, here’s Denver.

And here’s Seattle:

The difference is stark.

Chicago vs. New York vs. San Francisco

Living up to its reputation as the capital of the Midwest, Chicago’s draw is from a tightly focused region.

Now, here’s New York:

Four of New York’s top ten draws are actually from outside the country. That’s pretty amazing.

And here’s San Francisco.

You see the flows in mostly from other major tech hubs and big cities.

Again, a pretty start difference.

Cleveland vs. Nashville

We see the same thing in smaller tier cities. Here’s Cleveland.

And here’s Nashville.

Again, I’d encourage you to spend some time over at LinkedIn. You can tell a lot about these cities and their economies just by their migration maps. You can also instantly see another dimension of the challenge facing Midwestern cities.

from Aaron M. Renn

The Shortage of “A” Talent

Photo Credit: Jean-Christophe Benoist CC BY 3.0

To restate, the biggest challenge facing many cities in transitioning to the knowledge economy is a shortage of “A” talent, especially true superstars.

I dealt with superstars like Jeff Bezos in my last post. Today I talk about “A” caliber talent.

What’s the difference between the two? It’s arguably a continuum in some respects, or depends on how finely grained the domain. But the superstars are the true world’s best, particularly at something that generates economic growth at regional scale.

But beyond those rare few, there’s also a shortage of just the top level talent that makes cities and organizations go.

When I started as a staffer at Andersen Consulting, I noticed right away that every department at my clients tended to have one or two people who really made the place go. For example, at one client there was a guy in networking named Phil. When I met him, he wasn’t even a manager level person, but you could tell he was just a cut above everyone else and was the go to guy for many things. I wasn’t surprised to see that years later he was running networking for a Fortune 5oo company.

This ability to be the person that makes it happen, or some equivalent level of impact, is what distinguishes the A player.

One of the things that’s most impressive about New York is just how many A level people there are – way more than anyplace else I’ve ever lived.

Just as one small example, Bryant Park is world renowned as a small urban park. There are a lot of reasons why, including the vast wealth of New York City. But it also happens that it’s run by Dan Biederman, either an A player or the superstar of a smaller domain, depending on how you want to classify him. Dan not only runs Bryant Park, he regularly consults around the country on how other cities can run similar spaces better.

But even people under Dan in the org chart are still top notch. Andrew Manshel, who used to work at Bryant Park, runs a great web site called the Place Master, with all sorts of finely detailed information about how to create great public spaces. Mostly likely, in almost any city in America, Andrew would be the #1 guy in town in placemaking.

Of course I’d be remiss if I didn’t mention that Bryant Park’s design drew on input from William H. Whyte, the godfather of successful small urban spaces.

When you take a look at the talent that’s been brought to bear on just this one small park, you start to get an insight into what makes these global cities so successful.

Smaller cities, say regions in the one to two million population range, definitely have A caliber talent. They just don’t have enough of it. This limits their bandwidth for making change. There are tons of opportunities in these places, but often not enough people with the capability level to really seize them and make them happen.

Of course what makes someone an A player is context specific. For cultural mismatch or other reasons, many great people fail in one environment only to succeed in another. So it’s not a simple matter of moving pieces around on the chessboard. Nevertheless, if the quantity of these “make it happen” type people went up significantly, a lot of cities could see some serious results.

Again, when it comes to attracting talent, in the present world you have to have at least some focus on creating or attracting A players and superstars. I’ll have some thoughts on that in a future post.

from Aaron M. Renn

The Superstar Gap

The biggest challenge facing many cities in transitioning to the knowledge economy is a shortage of “A” talent, especially true superstars.

All “talent” isn’t created equal. Crude measures such as the percentage of a region with college degrees, or even graduate degrees, don’t fully capture this. It is disproporationately the top performers, the “A” players and superstars that make things happen.

Sections of the knowledge economy have long been geared to superstars. Economist Enrico Moretti cites research on biotech hubs, in which he notes that it is not just having a top university nearby that mattered in establishing biotech clusters, but having the true handful of academic superstars researchers. In The New Geography of Jobs, he writes:

In a fascinating and now classic article and in a series of subsequent studies, they argued that what really explains the location and success of biotech companies is the presence of academic stars – researchers who have published the most articles reporting specific gene sequencing discoveries. Among top universities, some institutions happened to have on their faculties stars in the particular subfield of biology that matters for biotech; others had comparable research but did not have stars in that specific subfield. The former group created a local cluster of biotech firms while the latter did not.

Richard Florida devotes a significant amount of his latest book The New Urban Crisis discussing the rise of the superstar phenomenon, which he also links to specific superstar cities.

Superstars are important in tech because of the 10x principle I mentioned in my recent post on the Silicon Valley mindset. The best coders are 10x as productive as the merely very good coder. The top entrepreneurs are probably 100x or or more. The presence of superstars, along with some amount of good fortune, can transform the economy of a city or region.

Jeff Bezos is a superstar. Mark Zuckerberg is a superstar. Michael Bloomberg is a superstar.

These superstars are disproporationately located in only a handful of regions.

To see this effect, just look at Austin vs. Seattle. Austin is a booming, prosperous city with a major tech industry.  Yet Seattle is generating significantly greater value. Seattle’s real per capita GDP is $75,960 vs. only $55,323 in Austin. Seattle’s per capita income is $61,021 vs. $51,014 in Austin.

Austin had some good entrepreneurs like Michael Dell, but not superstars in industries that would create massive platforms like Microsoft and Amazon. Austin has a lot of quantity, but it looks to me like there’s a big quality gap vs. Seattle.

And it’s not just that superstars create things, they act like a magnet attracting others. As economic development consultant Kevin Hively once told me, “When you’re the best in the world, people beat a path to your door.”

To see this in action, just look at Carnegie Mellon University in Pittsburgh. CMU has the #1 ranked computer science program in the country. And companies like Google (600 employees), Uber (500 employees), Apple (500 employees), Intel, and Amazon been drawn there and set up shops around it.  Ford is investing a billion dollars into autonomous vehicle ventures there. And GM also has a presence.

It’s interesting to contrast with the University of Illinois’ program.  U of I is ranked 5th in computer science. My impression is that from a commercial impact, they used to be bigger time than they are now. The web browser as we know it was invented there, but that was a long time ago. They have a research park designed for companies wanting to take advantage of proxmity of U of I. There are a lot of companies there, but the tech roster isn’t as marquee as Pittsburgh’s and my impression is that the scale is smaller.

There’s a big differnce between being number one and number five, particularly when something like ownership of the driverless car market is at stake. Maybe that’s why former GE CEO Jack Welch said he only wanted to be in a business if he could be number one or number two.

Cities and states in the Midwest and elsewhere in the interior like to boast of their assets, which include many great schools, but very few world dominating number ones in important fields. This is a big challenge for them.

Superstars aren’t the entire world. The presence of superstar businesses also creates problems as well as wealth. But if these places want to not only thrive but perhaps for some of them even just survive in the knowledge economy world, they need to look at their attractiveness to the truly top tier talent (I will address “A” caliber but not superstar talent in a future post). I don’t often see this talked about.

For example, one thing I don’t see in most discussion of Chicago is its lack of superstar talent. Chicago is very good but not the best in a lot of things. Where they do have arguably world beating talent, such as in their culinary industry, they shine. (I know people in New York who happily admit Chicago has better restaurants).

If I were that city, I’d be looking to see how to create a world’s best talent pool in additional particular high impact industries. Maybe the state should consider some radical type action, such as relocating U of I’s entire computer science and select engineering programs to Chicago as part of UI Labs, and putting serious muscle behind getting at least some critical subspecialities with high commerical potential to be clear #1’s in the world.

This is actually a scenario I plan to study in the future. Right now I’m not sure it’s necessary and some of my initial thoughts are impressionistic. So this post is in part a honeypot to try to lure in those who might react to this or even help flesh out the facts (which might augur against it).

Regardless, this lack of superstar/number one type talent in the interior is a big handicap in the world we live in now. For example, just look back at a 2010 analysis Carl Wohlt did of where the people on Fast Company’s “100 Most Creative People in Business” list lived. Only six in the Midwest and seven in the South vs. 35 in the West and 32 in the Northeast (with 20 international). This isn’t a scientific survey but illustrates the scope of the problem.

Cities and states need to take a more finer grained view of talent, and understand the criticality of having at least some of the absolute best talent to kicking a region’s knowledge economy into high gear. Too many places have a superstar gap.

from Aaron M. Renn

How to Rebuild America’s Infrastructure

This is the new administration’s “infrastructure week” in which they are rolling out new proposals such as privatizing air traffic control.

To dovetail with this, the Manhattan Institute has just published a new booklet called “Rebuilding America’s Infrastructure” that includes some of our best thinking on the topic.

This includes much of my own MI work, including my recent American Affairs article, and studies on sewer upgrades, driverless cars, and local street repairs.

It also features work from Harvard economist and MI Senior Fellow Ed Glaeser, who writes about the limits of privatization and why so much transportation spending goes to bad projects.

And my colleague Nicole Gelinas talks about the need to reform our infrastructure spending system before pouring more money into it, and specific ways to rebuild America’s infrastructure at lower cost, and more.

There are several other chapters as well. Here’s are some excerpts from Glaeser:

The Impossible: Private maintenance of existing infrastructure. For decades, transportation economists have emphasized that the highest returns come from investing in existing infrastructure. In some cases, this means repairing potholes and ensuring the structural integrity of a bridge. In other cases, this means imposing smarter tolls that vary by time of day to ensure more efficient usage. In theory, privatizing some roads, bridges, and tunnels will solve these problems. A private provider will have incentives to ensure that the road doesn’t become unusable. A private toll company will be happy to impose time-varying tolls to make a road more attractive and profitable. Yet throughout much of America, privatization is politically unlikely and tolling is deeply unpopular. Like  government, private providers may skimp on safety, especially when the benefits from spending on maintenance are not always immediately obvious to drivers.

The relatively simple technology of infrastructure construction of the 1930s meant that the unskilled unemployed could easily be put to work building roads. Among the iconic images of the Great Depression are scores of men wielding shovels and picks. That isn’t how roads and bridges are built anymore, though. Big infrastructure requires fancy equipment and skilled engineers, who aren’t likely to be unemployed. The most at-risk Americans, if they’re working at all, usually toil in fast-food restaurants, where the average worker makes $22,000 a year. They’re typically not trained to labor on complex civil-construction projects. Subsidizing Big Mac consumption would be a more effective way to provide jobs for the temporarily unemployed than subsidizing airport renovation.

Some excerpts from Nicole Gelinas:

From Silicon Valley to Massachusetts, highways are getting more crowded at rush hour, yet almost nobody takes the train to work. As rookie New Hampshire Sen. Maggie Hassan said at Chao’s hearing, even her once-rural state could use commuter-rail investments into Boston as the immediate suburbs become more crowded and expensive. Let’s have a national contest for new commuter-rail line cash for regions willing to build denser housing — condos, apartments and single houses closer together — around those lines. More commuter rail would take some pressure off high-cost cities, too, as people would have more housing options outside of the metropolises.

Poorer areas are in a vicious circle: If you can’t deliver water, keep the streetlights on and fill in potholes, you’ll lose even more residents. The feds should offer grants and zero-interest loans for particularly distressed areas, coupled with outside management expertise to help them relearn the basics. For middle-class and wealthier areas, the feds could offer smaller grants and slightly higher interest-rate loans to do the basic work of filling in the cracks in the roads. Some of these boring but vital projects are expensive, too: New York will need close to $2 billion to keep the Brooklyn-Queens Expressway from falling down.

Don’t be afraid to think small. Small federal grants—in the millions or tens of millions of dollars each—can help states, cities and towns start or improve bus service, build sidewalks and bike lanes, and otherwise give people more choices on how to get around in addition to the automobile. Such investments are good for poorer people, who must spend more of their money, as a percentage of income, on transportation.

Click through to read the whole thing.

Cover image via Chicago Transit Authority, CC BY-NC-ND 2.0

from Aaron M. Renn

How Does Housing Stock Affect Urban Revitalization?

The second of Pete Saunders’ nine reasons why Detroit failed is “poor housing stock,” particularly its overweighting towards small, early postwar cottages. Here’s a sample:

Here’s what Pete had to say:

Detroit may be well-known for its so-called ruins, but much of the city is relentlessly covered with small, Cape Cod-style, 3-bedroom and one-bath single family homes on slabs that are not in keeping with contemporary standards for size and quality…..The truth, however, is that Detroit may have one of the greatest concentrations of post-World War II tract housing of any major U.S. city….True, Detroit has more than its share of abandoned ruins that negatively impact housing prices. But it also has many more homes that simply don’t generate the demand that higher quality housing would. That is a major contributor to the city’s abundance of very cheap housing.

I have often been struck by the same thing in Philadelphia. There are some districts of great buildings, but most of the city is made up of mile after mile of two-story, very small row houses. Here’s a snap I took in the Kensington neighborhood that provides a sample.

This is decent density of these to be sure. However, keep in mind that most of these row houses contain a single unit.  The Upper West Side brownstone I live in has been converted into ten units. Also, many of these rowhouse units are extremely shallow. Here’s a picture I found online that illustrates a typical depth.

Photo credit: Flickr/pwbaker CC BY-NC 2.0

As it happens, there has been some redevelopment activity in Kensington, both in residential and industrial spaces. (Some neighborhoods nearby are seeing significant redevelopment).

Someone I know recently bought and renovated a rowhouse in the neighborhood, so I got to tour it. It’s a two-bedroom unit, but very small. It’s barely bigger than your average one bedroom apartment. Unsurprisingly, the person who bought it is in her 20s and single.

As nice as this unit was, it’s basically a starter home, much like those Detroit Cape Cods. Cities need to have housing like that, but if it is overwhelmingly dominant, that’s not healthy.

It’s similar to how so many downtowns are seeing tons of Millennial targeting apartment construction. Older families can have trouble finding housing in these areas because there isn’t great housing to take you through your full lifecycle.

Philadelphia should be fine in the near term. The city has great bones and I really find it compelling in a lot of ways. But I wonder if this type of housing stock is one reason the city has seen less demand than other old major tier one urban centers with great transit.

I put out a poll on Twitter about this and most people didn’t seem to agree with me on the potential negative of being overweight very small rowhouses. We will see how this plays out for Philly.

from Aaron M. Renn

The Fall and Rise of Global Cities

Photo by Dmitry Avdeev, CC BY-SA 3.0

I recently gave a lecture on cities in New York that I’m presenting here in a two-part podcast series. Both parts are excellent reference sources about trends in cities. They are good educational resources for those to whom you want to give an introduction to modern urban trends.

The first part was called “The Landscape of Global Urbanization” and talks about the global shift from rural to urban areas, and the challenges that are going to come from that. This is nothing less than the most profound demographic shift in human history.

Today the second part, which deals with the trends in the developed world.  I talk about:

  • How cities went into decline during the Rust Belt era of the 70s and 80s.
  • The rebirth of cities, but how this rebirth bypassed many American cities.
  • The roots of this divergence between cities in the rise of “global cities”
  • What a global city is
  • Other trends such as downtown tech and an increased preference for urban living that also benefit the global city
  • The cultural power of global cities
  • What’s unique about New York City?
  • The problems facing New York and other global cities

I call this “The Fall and Rise of the Global City.” If the audio player doesn’t display for you, click over to listen on Soundcloud.

Subscribe to podcast via iTunes | Soundcloud.

from Aaron M. Renn