Creative Class

In Miami this weekend, where there are lots of houses for sale and even more condos. On Miami Beaches’  upscale La Gorce drive there is a “for sale” sign in front of literally ever other home.  Prices have slipped a bit, but with  the unsold inventory piling up, you’d think folks, especially long-time owners with lots of appreciation  would be slashing prices to move their units.

Check out this graphic to the left, from today’s New York Times which tracks housing price trends by market segment.  The bubble right now, according to the Times report is concentrated in the “middle-segment” properties in the $600-800K range. The high-end is up.  “Weakness in the housing market has been concentrated in certain segments,” Mark Sandi a leading housing economist told the Times. We’re not witnessing the entire housing market caving in.”

Roger Lowenstein provides some perspective in a must-read piece in the same special real estate section of the Times Sunday Magazine. After reviewing Robert Schiller and Karl Case’s empirical forecasts of outsized housing values and an impending real estate crash, Lowenstein weighs in:

“This is the problem I have with the real-estate-equals-dot-com
argument. Most homeowners buy to have a place to live. If prices fall,
they react precisely unlike stock traders; rather than bail out, they
stay put longer. Every share of Cisco may be for sale every day, but
every house is not. Case, Shiller’s partner, tracked 628 home listings
in the Boston area during 2006, as prices began to fall. After four
months, the majority remained unsold, but the sellers lowered their
asking prices by only 3 to 4 percent. While Case says this demonstrates
that real estate is “stickier” than financial assets, Shiller says it
proves that owners are delusional — unwilling to admit that real estate
goes down as well as up.”

And there’s a flips-side to this, as  Wharton Real Estate economist, Joesph Gyourko  told the Times in a separate story on Saturday: ” “Too much homeownership might
restrict mobility, and that may not be a good thing.”

To me, all of this points to the same thing -  the spiky nature of the US and global economies, the growing divide between regions as well as well as classes, and most of all the diverging life-chances of  the  mobile and the stuck.  The enormous implications of this new set of faultilines for our economy, politics and culture are enormous as they are just beginning to become evident.

At Rutgers, I lived with five other guys in an old rickety house where we each paid $55 dollars a month in rent.  So consider me surprised by this story in today’s New York Times on the rise of big-bucks private dorms.

“Few of us long for the days of dorm living — the cramped quarters, the thin foam mattresses, the unsavory communal bathrooms. But imagine a different kind of student housing, one with loft- and villa-like settings, private bedrooms and baths, professional-style kitchens with granite countertops, weekly housecleaning services, plasma-screen TVs,
wireless and high-speed Internet connections in every room, fitness centers, swimming pools, even hot tubs and tanning booths.” To the left, a private dorm near Chicago’s DePaul University.

“Student housing has been the best kept secret in the real-estate market,” the  head of American Campus Communities, which owns some 40 high-end private student residences told the Times. A couple of trends are clear. One is rising property values around universities, as surrounding neighborhoods become more desired places to lives. I’ve also long said that  universities should get out of the real estate business and focus instead on their core activities – discovery, learning and engagement.

Is private housing a trend that will catch on?  What kind of housing – what kinds of communities – should surround universities? Your thoughts.

I was cruising around Hybridcars.com late last week when I came across a story on the record number of Prius (Prii?) sold in February 2007. Additionally, the article lists the top cities for hybrid car registrations during the year 2006. The site  offers two rankings of cities — those with the most hybrid registrations and those where hybrids are most popular (hybrids per 1,000 households). Many of the cities with the most creative class members match with the hybrid lists; ie NY, LA, Chicago,Boston, San Francisco/San Jose. (photos are of Toyota’s Hybrid X — perhaps the next iteration of the Prius)

From the article on Prius sales in Feb 2007,

"It remains to be seen whether Toyota can continue this sales pace, but
those who still view the Prius as a niche vehicle with limited appeal
may want to reconsider. Ditto for those who insist that fuel savings or
government incentives are the only reasons people buy hybrids. Last
month’s record Prius sales occurred in a period of moderate gas prices,
and after the reduction in federal tax credits for Toyota hybrid
vehicles as well as elimination of HOV privileges for new hybrids in
California."

That analysis is seems pretty spot on. Just as creative class members expect certain values and characteristics from their locations and their careers; they also expect much of what they consume to do more than just meet a need. While the creative class is by no means monolithic, the ideas outlined in Rise will continued to be reflected in product design and marketing and consumer expectations.

posted by David

Each Thursday, we’ll take a look a specific demographic, occupation or research trend  “by the numbers.”  We’ll tell you who’s city is at the top and point you in the direction to find out more.  This week, we’ll take a look at technology talent.  We’ll ask questions such as where are computer programmers and scientists? What are their average salaries? Download the full report below.

“First the basics, nationally there are approximately 389,000 computer programmers and nearly 26,000 computer scientists.  Interesting, five metros – New York, Chicago, Washington, DC, Dallas-Forth and Los Angeles – account for more than 27% of the nation’s computer programming talent (See Figure 1).   Likewise, two metros – Washington, DC and New, York – have 20% of the nation’s computer scientists – almost 5,300 (See Figure 2).  By 2014, the nation’s computer programming and science  talent pools are expected to grow to almost 493,000 – a 19% increase over 2005.”

Download “By The Numbers: Tech Talent” report

Posted by Steven Pedigo  (BIG shout out to Jim Kaminski, of Georgetown University, for his research assistance in putting this “By The Numbers” Report together)

From Tim Hartford’s always insightful Financial Times column on why people get “stuck” in place (hat tip:  Ben Casnocha):

Looking to the US, one might ask
why people still live in Detroit, which has suffered for so long? Why
not move to Chicago or New York?…

One reason is that community ties matter. Many people like to stay near
where they were born.  … But emotional ties are not the
only ones that bind us. There are Byzantine restrictions on
cross-border migration. … The economist Andrew Oswald has shown that across
European countries, and across US states, high levels of home ownership
are correlated with high levels of unemployment. More conventional
factors such as generous welfare benefits or high levels of trade
unionisation don’t explain unemployment nearly as well as the tendency
to own houses. Recent research in the Economic Journal by
Jakob Munch and colleagues suggests that people who own their own homes
do find jobs as quickly as those who are free to move, but do so partly
by being less picky about which job to take, and by commuting further….

Even if we did all this, the US economists Ed Glaeser and Joe Gyourko argue that one serious barrier remains: houses do not walk…. The likely result is a gloomy sort of
segregation: those who feel that they can find a good job in the big
cities will move there and pay the higher rents. Those who are less
confident of that would rather have no job in a cheap house than no job
in an expensive house. Detroit will have residents for a long time to come.

In Who’s Your City I call these people “the stuck.” And distinguish them from the fortunate ones of us who comprise “the mobile.“  This is the great fault line of our time, I fear.  And part of the reason I’m writing the book is to help people of all ages, especially young people starting out as well as their parents and mentors, just how important choice of location is to their life outcomes. Many more people – if things continue as they are – will have to join the ranks of the mobile if they want to prosper or even survive. I’m not saying that because I want everyone to up and leave their communities. I’m saying it because it’s an economic fact.  Robert Lucas and Jane Jacobs identified the basic economic logic long ago.  Concentration and density of people brings  higher rates of innovation, greater productivity, and wealth-generation.  So, cost is only part of the equation, as Lucas pointed out. Sure houses are cheaper in Detroit, Buffalo or Pittsburgh. But if there is declining economic opportunity, an outflow of the talented and entrepreneurial, no inflow of new people,  and deteriorating quality of life is it worth it.  Location brings opportunity as well as cost.  More people need to be aware of that – each and everyone of us in fact.

Hartford has his finger right on it.  The fault lines dividing us – the new segregation as he  puts it – are increasingly location based.  Our world continues to get spikier.  I have little doubt that sooner or later this locational segregation is going to come back to haunt us. On the global as well as national scales it already is.  It shocks me that political leadership turns a deaf ear to this issue – or cynically fiddles with it  for short-term political gain. They do so at their own and our longer run peril.

That’s what this company is not just for itself but for the D.C. region.  The Washington Post writes:

When the Corporate Executive Board throws its annual black-tie bash, staffers call it “the prom.” At last month’s company-wide yearly review
meeting, bosses decked out in goofy get-ups did YouTube parodies. A recent staff meeting ended with an office bowling party, open bar included.

Is this any way to run a company worth $2.9 billion? They think so at the CEB, one of the fastest-growing consulting firms in the
country and No. 51 on Forbes’s 2006 list of America’s 200 best small
companies. Scattered across the company’s five offices in
downtown Washington, about 2,000 20-somethings — many hired straight
out of college — are advisers to business executives twice their age. …  And they do it in a
lively, sociable office culture that’s in marked contrast to most of
the companies they work for. … “We often
joke about the high proportion of people in D.C. that either works
here, dates someone who works here or lives with someone who works
here,” said Peter Freire, who has been with the company for 16 years
and manages the department that offers research on human-resources
issues. “It’s like the six degrees of separation of CEB.”

The whole story is here (hat tip: Steven Pedigo). Does your region have a talent magnet like this?

That’s the title of a brand new working paper I wrote with Charlotta Mellander. Here’s the first bit.

“Want to know where a great place to invest in real estate will be five or 10 years from now? Look at where artists are living now,” so wrote a 2007 Business
Week story provocatively titled, “Bohemian Today, High-Rent Tomorrow.” A
wide body of studies has shown that artist and gay populations act as urban
pioneers and that their location choices can have substantial upward effects on
housing prices (Castells 1983; Ley 1994; Zukin 1995; Smith 1996). But artistic
and gay populations are relatively small and the evidence of their direct effect
on housing prices is limited and anecdotal. There are roughly 330,000 working
artists in the United States
and approximately 1.3 million total “bohemians” if we count everyone who works
in arts, design, entertainment and media occupations, amounting to approximately
1.3 percent of the US
workforce in 2000. There are 8.8 million self-identified gay and lesbian gay
people in the United States,
roughly 4 percent of the adult population (Gates and Ost 2004). Still, the
basic idea that gay and bohemian populations effect on housing prices surely
makes for good headlines. And the notion has become an accepted conventional
wisdom among many urbanists and real estate developers. But, a basic question remains: Can groups that
are this small really have a significant effect of housing prices? This is the
core question for our research.”

Click here to download the whole thing. Enjoy.  We look forward to your comments.

So says this article in the New York Times (hat tip: TUS):

“It is no secret that venture capitalists have begun pouring billions into energy-related start-ups with names like SunPower, Nanosolar and Lilliputian Systems. But that interest is now spilling over to many others in Silicon Valley — lawyers, accountants, recruiters and publicists, all developing energy-oriented practices to cater to the cause. The best and the brightest from leading business schools are pelting energy start-ups with résumés. And, of course, there are entrepreneurs
from all backgrounds — but especially former dot-commers — who express
a sense of wonder and purpose at the thought of transforming the $1
trillion domestic energy market while saving the planet. “It’s like 1996,” said Andrew Beebe, one of the remade Internet entrepreneurs. In the boom, he ran Bigstep.com, which helped small
businesses sell online. Today, he is president of Energy Innovations,
which makes low-cost solar panels. “The Valley has found a new hot spot.”

This could spell big trouble for existing energy and automotive companies. Does anyone even remember names like Univac, Honeywell, etc. anymore?  Once the Schumpeter’s genie is out of the bottle, there’s no putting her back in. And the level of inefficiency and bureaucratic incompetence among most incumbent companies in these sectors is mind-numbing.  If you think this has big implications for companies and  industries, ponder for a moment how it could effect regions like for example the Midwest from Ohio through Detroit, or the energy belt running from Louisiana to Houston?  And, California may well be on it’s way to becoming its own economy, surely a very different one from the rest of the country with a different future and a different culture as well.

Love to hear what you think?

Patti Smith writing in the New York Times on her induction into the rock and roll hall of fame:

On a cold morning in 1955, walking to Sunday school, I was drawn to the voice of Little Richard wailing “Tutti Frutti” from the interior of a local boy’s makeshift clubhouse. So powerful was the connection that I let go of my mother’s hand. Rock ’n’ roll. It drew me from my path to a sea of possibilities. It
sheltered and shattered me, from the end of childhood through a painful adolescence. …  Rock ’n’ roll was mine to defend. It strengthened my hand and gave me a sense of tribe as I boarded a bus from South Jersey to freedom in 1967. … Our music provided a sense of communal activism. Our artists
provoked our ascension into awareness as we ran amok in a frenzied state of grace.My late husband, Fred Sonic Smith, then of Detroit’s MC5, was a part
of the brotherhood instrumental in forging a revolution: seeking to save the world with love and the electric guitar.

Boy, that got me. I can just as vividly remember the first time I heard Jimi Hendrix in 1967.  And it also got me thinking about the relationship between musical creativity, innovation and social change.  I’m amazed really by the lack of serious thinking and scholarship around music and its larger social context. Sure there are some sharp popular music critics. But most critics continue to view works of music in isolation, as good or bad, based on their sound, lyrics and dynamics.  Even if they know a great deal about it, most music critics tend to think and write about music absent its larger  social context.

A handful of academics have tried, but the results are spotty. There’s always Walter Benjamin’s notion of the decline of aura in the era of mechanical reproduction. And the cranky complaints of Theodor Adorno about popular music, especially jazz.  There is a small literature on music scenes, a pretty good on technological change and musical creativity. I’m encouraged that a sociologist of the stature of Bill Bielby, also a musician, is involved in a project on early garage bands, including his own. But in the main,when scholars start thinking about musical creativity it begins and ends in the main with Mozart, Beethoven and Bach.

But think for example of the great social histories we have of modern art and its relation to economic, cultural and social trends. Really, I can’t think of anyone who has really tried to understand the musical creativity, the role of music scenes, or cycles of musical innovation in the broader context of economic and social evolution. Can you?

So, I’m starting to dig in. And with a couple of members of my team we are launching on project on  music innovations and music scenes as part of the broader process of economic and social change.  So here, very quickly, are the outlines of what we’re starting to think about.

Music very definitely is part of a broader process of social and economic evolution. It is a reflection of social and economic change, and in turn it helps to produce those changes. But musical creativity occurs in sharp bursts, there are cycles of it. Sure, people are developing musical talent all along, but for a variety of reasons due to the social character of innovations, major outbursts of creativity occur in bunches or clusters. Major innovations in jazz for example occurred in the period from roughly 1920 through the 1950s, roughly. In rock and roll, innovation starts in the late 1940s, with upticks in the mid-1960s,  and mid-to-late 70s, according to rock critic and social theorist Simon Fricke -  Patti Smith’s formative years.  This clustering phenomena is not unique to music, but is characteristic of innovation generally.

The great economist of innovation, Joseph Schumpeter, long ago argued that technological innovation comes in bursts and cycles which set in motion the great gales of creative destruction that shape
industries, economies and societies.

But what if the two are related?  The way I’ve come think about it is that  those great gales of creative destruction don’t begin and end with technology or business, they extend much further into society and culture. Actually, they probably don’t begin with technology. The causality, if you will, here is reversed. Those great bursts are really the consequences of a focused, pent-up release of social energy. This burst of transformative energy pulls unleashes a tsunami of human creative capabilities across the board,  in far-flung fields from entrepreneurship and technology to music and culture -  creating a Steve Jobs and a Bill Gates here; a Patti Smith and a Jimi Hendrix there.

But these concentrated bursts of transformative energy are  not evenly spread across geography. They occur in space as well as in time. In other words, they cluster, concentrate and pull talent into tight spaces or scenes.  Just think about the San Francisco Bay Area in the 1960s and 1970s, producing a series of stunning innovations in semiconductors, computing, software and the like, all the while informing a much broader process of cultural change and musical innovation, from its vibrant music scene to its advances in commerce and distribution especially with the invention of large music festivals.  What did Woz do after he left Apple? He started WozFest, a musical event. No need to push the point. You get the idea.

Great periods of musical and technological innovation, economic and social change, are shaped by the same underlying process -  concentrated periods of social transformation and the unleashing of  human transformative energy across the board, which for better or worse occur in very concentrated places.  More to come.

In the meantime, I’d really appreciate your thoughts, ideas, suggestions, data and references?

Is London surpassing New York as the world’s greatest city? James Harding of the Times of London thinks so. He also thinks it is growing so different that the rest of the UK that it should secede.  The jury is out on the first part of his argument, but it is clear to me that the economic, political, and cultural interests of centers like London or New York or Silicon Valley or Shanghai or Bangalore for that matter are becoming quite different than the countries in which they are located.

The London is, indeed, the coolest city on earth. The capital of the
world. New York, like Paris, has become a mini-break destination, a
playground for grown-ups who enjoy the same standard tourist menu: a walk
around Central Park; a shopping trip in SoHo; an entertaining, if
unsurprising, show on Broadway; and a very large steak. The world loves a long weekend in New York but, these days, prefers to make its home in London. New York has the nostalgia, London the future. New York defines the metropolitan, London the cosmopolitan.

And the reason for this is that foreigners in New York are, always, just that.
The city treats even its long-term residents from abroad as visitors,
welcomed on to the cocktail circuit, perhaps even to a share of a house in
the Hamptons, but never to the power-broking tables at the Four Seasons.
“New York is always American,” says Bill Roedy, the American who has spent
the past 15 years in the UK running MTV world-wide. “Like Paris is French,
Moscow is Russian, New York is American.”

London, on the other hand, is passport-blind. It does not have the luxury of
being the de facto capital of a continental economy. So, it is
international: it treats its visitors as citizens, as players. …

In the wake of the September 11terrorist attacks, Washington also tightened
its borders. The visa restrictions have stopped many foreign scientists,
mathematicians and economists from travelling to the US. The UK’s relatively
open borders have become a competitive advantage. …

But more than these technicalities, what matters is geography: London is the
centre of the world. From London it is possible to work a normal day and talk to Tokyo in the
morning and Los Angeles in the afternoon. A businessman can get on a plane
from Moscow and be in London in five hours, from Bom-bay in seven, even from
Beijing in nine. This is one of the reasons why, over the past 25 years,
London has turned itself into an international marketplace while New York
has remained essentially a domestic financial capital.

Read the whole thing here. (hat tip: Jamie Alderslade).