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.
This piece originally appeared on Urbanophile.
Aaron M. Renn is a senior fellow at the Manhattan Institute, a contributing editor of City Journal, and an economic development columnist for Governing magazine. He focuses on ways to help America’s cities thrive in an ever more complex, competitive, globalized, and diverse twenty-first century. During Renn’s 15-year career in management and technology consulting, he was a partner at Accenture and held several technology strategy roles and directed multimillion-dollar global technology implementations. He has contributed to The Guardian, Forbes.com, and numerous other publications. Renn holds a B.S. from Indiana University, where he coauthored an early social-networking platform in 1991.
Photo by John Picken (Flickr: Chicago River ferry) [CC BY 2.0], via Wikimedia Commons
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Superstar at what?
“Jeff Bezos is a superstar. Mark Zuckerberg is a superstar. Michael Bloomberg is a superstar.”
Amazon has its points but Bezos is becoming mainly notable for funding obedient pundits and whores in the media and universities. (And Amazon's usefulness as a middleman might suffer if the tax code were reformed to treat inventory--which is risk as much as asset--more reasonably, so stores could keep things locally available.) Facebook’s social and economic impact is about that of opioids, and it probably employs fewer people. Bloomberg Media may have had its uses, but otherwise, ditto what I said about Bezos, and in a healthy economy Bloomberg Media’s usefulness would diminish with the importance of parasitic finance. (Do any of these heros contribute to the Manhattan Institute?)
Biotech in New York? It’s tiny, and what else is left in New York that anyone but wealthy tourists and starry-eyed halfwits wants to buy? New York is about finance, government, social services, real estate, and entertainment. “Entertainment” includes most of what passes for culture and media. What does New York City export any more, except its problems? I suspect that you understand less than nothing about what New York was when it had a real economy and could stand on its own and afford what it lost to corruption and waste. It was like Pittsburgh, but bigger and with more bling, plus some great museums and such. That was before your time--I think the first time the city had to be bailed out was in 1975, and there was still a substantial real economy there into the 90s. What’s there now is just a bubble. It’s not even interesting any more. I can’t quite believe how homogenized Manhattan has become.
Corporate HQs don’t count--they’re just a decreasing number of front-office clerks who could work anywhere, exporting memos to the places where the products are made. They’re there solely to justify the residence of the top brass in a playground for wealthy tourists. Universities? You could eliminate everything but the STEM departments and the city and country would be better off. (I once held a graduate fellowship in Philosophy at at Columbia. I would have been better off without it.)
Even a lot of what Silicon Valley produces is just fluff that would hardly be missed if it disappeared. This includes a fair bit of the productivity software sold to gullible MBAs (who wouldn't be missed if they disappeared), and lots of apps that do things which anyone but a fool could do with less trouble using tools they already possess. Any money that this fluff draws from foreign markets goes right back where it came from, if it ever reaches the U.S. at all.
The real economy resides in none of the cities you place in the superstar category, except maybe Pittsburgh. There isn’t much real-economy A-level in your superstar cities either. The real economy mostly resides in the suburbs, or some rural areas with primary resources. That's also where the people with real-world skills live, who can make things wanted by markets that don’t depend for their existence on fads and corruption.
Ask for input all you want. Try out every new angle you can think of. It won’t help. You’re committed to defending one of the least credible positions you might possibly have chosen--that failed cities should be bailed out once again, under cover of “New Urbanist” policies (puffed by clever rhetoricians).
And the tide is against you. It’s true that sleazy real estate is now in the White House. But the people who came out of nowhere and put him there, blindsiding the entire bipartisan clerisy (and surprising themselves), are precisely the ones who won’t buy what you’re saying. (Take a look at an electoral map from last November. I think there’s one on New Geography.) A lot of poor and middle class people in metro areas, who held their noses and voted for Hillary, won’t buy it either. As for the rest, you’re preaching to the choir, and there’s plenty of volunteer talent to keep them singing. There’s also the question of how many will still be in the choir a few years from now. It takes a bit of time for the lukewarm, who are only in it for jobs and social opportunities, to sense the wind and start leaving.
Ayn Rand was right
It's some version of the Pareto principle: 1% of the population produces 99% of productivity-enhancing new technology.
Actually, the ratio is likely closer to 0.01% vs 99.99%.
Daniel Jelski