Archive for September, 2008

Richard Florida
by Richard Florida
Tue Sep 30th 2008 at 8:22pm UTC

Hmmm …

Tuesday, September 30th, 2008

How does stuff like this make it into the newspaper …

Writing in the Toronto Sun, Sue-Ann Levy weighs in on Toronto’s new economic development initiatives, claiming that:

“But after some questioning, it became pretty clear that Build Toronto has creative guru Richard Florida’s finger prints all over it, not those of the blue-ribbon panel members.”

I guess I should be flattered by my influential “fingerprints,” but I’ve not had a single conversation with anyone inside or outside of city hall about these new initiatives. So it’s a real puzzle to me how they could have gotten there.

And Levy shows a disturbing disregard for factual evidence when she writes that:

“… Toronto is not a world-class city. Even Tel Aviv has us beat by a long shot. I was absolutely amazed at how cosmopolitan that city has become during my recent trip to Israel. Istanbul, Turkey, as I discovered, is also open around the clock.”

Say what? There are many, many empirical rankings of world cities. In writing the Canadian edition of Who’s Your City? my research team and I looked over a whole slew of them to gauge how Toronto and other Canadian cities measure up. Tel Aviv certainly has great cosmopolitan energy, and Istanbul may stay open 24 by 7, but Toronto is way ahead of either as a center for business and talent – ranking roughly among the world’s 10 to 12 most important global cities.

Richard Florida
by Richard Florida
Tue Sep 30th 2008 at 8:39am UTC

Milken Index

Tuesday, September 30th, 2008

The 2007 edition of the Milken Institute’s top performing metros is out. Here’s the top ten.

1. Provo-Orem, Utah
2. Raleigh-Cary, North Carolina
3. Salt Lake City, Utah
4. Austin-Round Rock, Texas
5. Huntsville, Alabama
6. Wilmington, North Carolina
7. McAllen-Edinburg-Mission, Texas
8. Tacoma, Washington
9. Olympia, Washington
10. Charleston-North Charleston, South Carolina

What do you think? Does this list jibe with your own thoughts and indicators of America’s top-performing places?

Richard Florida
by Richard Florida
Mon Sep 29th 2008 at 10:14am UTC

Arts, Culture, and Economic Growth

Monday, September 29th, 2008

While Obama and McCain debate the war in Iraq and the financial meltdown, the role of arts and culture funding has taken center stage in the current Canadian contest spurred by recent federal cuts in arts and culture spending. Others have covered what’s at stake in this debate, but let me simply weigh in with what our ongoing research at the Prosperity Institute tells about the role of arts and culture in the economy.

Our most recent research on both Canada and the United States breaks down the economy into its core occupational sectors – finance, management, technology, arts and culture, health. and education – and attempts to guage the effects of each on regional income. In both the U.S. and Canada, finance, management, and technology have a considerable direct effect on income. And both education and health – which are essential for a high-functioning society – have little if any effect on regional income. They’re necessities or public goods, but they don’t drive regional economic well-being. Arts and culture, however, are very important. In the U.S., arts and culture occupations have a significant effect on regional income, about as strong as finance and management and stronger than science technology. In Canada, arts and culture have a less direct impact on income, but a potent impact on high-technology firms, stronger in fact than the impact of science and technology occupations on those firms.

Wendy Waters
by Wendy Waters
Mon Sep 29th 2008 at 7:00am UTC

Generations, Gender, and the Workplace

Monday, September 29th, 2008

Generational and gender shifts are contributing to a different workforce and workplace.

Who is working, the ways they are working, and what kind of work they are doing has changed. How people live their lives outside of work is also different, along with their attitudes toward their careers.

Accounting firm Deloitte & Touche has done their own research to better understand who the new generations of workers are and what they will need from their employer. Here are five facts and analysis taken from Volume 2 of their studies.

Then: Only 37% of married women worked outside the home in 1967.
Now: 61% of married women worked outside the home in 2000.
Implication: Deloitte notes that with a gainfully employed partner, many employees have the flexibility to quit or change jobs whenever they want. Retention is therefore a greater challenge today.

Then: Workers typically had a partner at home who looked after household and personal matters.
Now: Between working married women and working single parents, few employees have a “homemaker” at home.
Implication: Employees need flexibility to handle personal matters and blend their energy between personal and professional.

Then: Men earned the majority of university degrees.
Now: Women earn 55% of all accounting degrees (and 55% of bachelor’s and master’s degrees as of 1998 according to Knoll).
Implications: Attracting and retaining women will be essential for firms like Deloitte (as well as many knowledge economy companies).

Then: Older baby boomer fathers spent an average of 2.2 hours per day with their children.
Now: Generation X fathers spend and average of 3.4 hours per day with their children and 90% say they have either a primary or equal focus on the family compared to work.
Implication: A generation gap at Deloitte who notes that “although many of the leaders in our organization have a stay-at-home partner and a single-minded focus on work, only a small proportion of today’s younger workforce places a primary focus on work.”

Then: Most baby boomers wanted to climb the corporate ladder. In 1992, 66% of college-educated men and 50% of college educated women wanted to move into jobs with more responsibility.
Now: In 2002, only 50% of college educated men and 35% of college-educated women wanted more responsibility. In an independent (non-Deloitte) study, 80% of prime candidates for promotion wanted to work fewer hours.
Implication: Today’s employees will work hard, but will typically not work longer hours and will frequently not trade promotion for their personal time.

I would argue that because of corporate inertia (sticking with “the way things have always been done”) the workplace does not fully reflect these new realities. There is a tension between the previous approach to life that centered on work, and a more current one in which work is blended into the rest of a person’s everyday life.

But changes are happening. When the big four accounting firms are making dramatic changes to work philosophies (and not just Google), it provides strong evidence that mobile and flexible workplaces are not a fad.

Michael Wells
by Michael Wells
Sun Sep 28th 2008 at 9:48pm UTC

Public vs. Private

Sunday, September 28th, 2008

An article in the latest New Yorker talks about the effect the big investment banks going public has had on the Wall Street collapse. By putting themselves at the mercy of the stock market, they surrendered a lot of freedom and autonomy. They were pushed to keep leveraging their bets by shareholder demand for profits. And when the profits fell, so did the companies. Gone are the days when JP Morgan could assemble a few bankers and save the economy. Aside from the irony of the titans of Wall Street not understanding the market, what does this say about modern capitalism?

In a related vein, I heard an interesting interview recently about the rash of IPO’s in the dot-com heyday. The speaker said that the old purpose of going public was to raise capital for expansion, but the new purpose became for founders to cash out. As a result, capital formation didn’t go into new production but private fortunes. The result didn’t add value to the economy.

Google, perhaps the most successful company of the new millennium, held off on going public during the dot-com years and instead depended on private investors. As a result, the owners were able to plow profits back into growth and keep the company’s income and assets out of the public eye. By the time Google did go public it was much bigger than anyone thought – too big for Yahoo to catch up, too big for Microsoft to squash.

So, I’ll throw this out to the economists among us. Has the way the stock market handles new offerings outlived its purpose? Are companies going public too soon, or perhaps totally unnecessarily? Are there problems that are deeper than simple regulation can solve? And what would a better model look like?

Richard Florida
by Richard Florida
Fri Sep 26th 2008 at 10:16am UTC

Freedom Index

Friday, September 26th, 2008

This is the new Cato/Fraser Economic Freedom Index (h/t Alison Kemper). Wil Wilkinson comments:

[T]he frosty land of toques and chesterfields has leap-frogged the U.S. to take 7th place, completely humiliating the tied-for-8th place land of the ever-less-free, home of the brave. Is it now possible to even half-credibly make the case that the United States, in the age of warrantless wiretaps and the shoeless airport security line, is a freer country than Canada? I doubt it. Read it and weep, fair weather laissez faire yanks.

Martin Kenney
by Martin Kenney
Thu Sep 25th 2008 at 7:45pm UTC

Mistaking Socialism for Crony Capitalism…

Thursday, September 25th, 2008

… one victim will be entrepreneurship.

I monitor the financial blogs quite a bit and over the last two weeks an amazing transformation has occurred. Initially, many were calling the current wave of government takeovers “socialism.” Now, with the most recent Bush-Dodd-Frank plan to give enormous amounts of U.S. government money to global financial institutions, few believe this has nothing to do with “socialism.” What a canard. This is simply the final act in a long bout of “crony capitalism.”

Socialism is about government ownership of parts of the economy in an effort to transfer some of the gains to the less fortunate in society. For anyone to believe that the last two decades of financial deregulation and the current giveaways of government monies have anything to do with socialism is simply ridiculous. This is about some sort of booty capitalism where theft was legitimated. When the State abdicates its role as an enforcer of rules of the game, things quickly get out of control and outright fraud becomes the rule.

The New Deal was not socialism, though many accused it of being that. It had many components, but one of them was the enforcement of transparency and rules upon the stock market. It was this that made U.S. markets the envy of the world. These have now collapsed as few trust the financial results being reported by U.S. firms or even a day’s trading results, as investment banks are clearly investing in their own stocks for day trading profits. The SEC and the Fed have openly told firms they do not need to report their results truthfully. This is extremely dangerous throwing the major principles necessary for operating markets overboard at the first whiff of a crisis is extreme and dangerous short-termism. Regaining public trust will take a very long time.

How does all of this affect entrepreneurship and creativity? The U.S. entrepreneurial model was to start a firm, build it, and then use public stock markets to raise capital to build the firm further. In the last decade, many of the advocates for entrepreneurship came to think of public markets simply as exits from which the promoters got rich. This type of thinking is a fundamental misunderstanding of the role of stock markets. The initial public offering is meant to raise more capital so that a firm can grow. The EXIT is only a by-product of the raising of capital for further growth.

This mistaking of a private goal for the public good led to the offering of ridiculous firms in the dot.com bubble, which made billions for unscrupulous “entrepreneurs,” venture capitalists, and investment bankers. It also destroyed the public markets. Unfortunately, this most recent meltdown, which is only in its first stages, will be catastrophic for small firms wanting to raise capital.

For Schumpeter’s gales of creative destruction to work, one needs the transparency that can only come from stern and fair regulation. Otherwise, the creativity that creates new value cannot be expressed because of a generalized lack of trust.

I know I have combined two thoughts in this post. We need to sharpen up our vocabulary so that we can discuss the issues clearly and thoughtfully.

What do you think will be the effect of this collapse on entrepreneurship?

Michael Wells
by Michael Wells
Thu Sep 25th 2008 at 7:37pm UTC

Close-In Neighborhoods

Thursday, September 25th, 2008

An article in today’s Portland Tribune talks about the effect on home values of various businesses – local movies, high end grocers, and bookstores raised values. Day spas and record/CD stores lowered them. What it reinforces here is that the close-in creative class neighborhoods that attract these stores then benefit from the store’s presence. I’d guess the same would hold true in other cities (and wonder what’s wrong with CD shops?)

This reminded me of an article in the latest Portland Spaces magazine about the difference in home value appreciation between close-in neighborhoods and further out suburbs. I had looked at their website and not found it – but the Trib article inspired me to call Portland Spaces editor, who referred me to a study Joe Cortright did for CEO’s for Cities last Spring. It showed that in Portland, housing prices had increased three percent in close-in neighborhoods, while declining five percent in distant suburbs. The same thing held true in other cities studied.

Cortright analyzed the effects on gas prices in this, but I think the more fundamental thing is the growing move back into cities is recreating small neighborhoods and supporting home values.

Richard Florida
by Richard Florida
Thu Sep 25th 2008 at 4:07pm UTC

460,000

Thursday, September 25th, 2008

That’s the number of new single-family home sales this past August, down 34.5 percent from a year ago and the lowest level since 1982 and getting close to modern historic lows (via Calculated Risk).  How low will it go?

Richard Florida
by Richard Florida
Thu Sep 25th 2008 at 10:01am UTC

Happiness, Money, Self-expression

Thursday, September 25th, 2008

Wil Wilkinson takes David Brooks’ – and John McCain’s – “country first” calls for a new collectivism apart.  Individualism, Wilkinson reminds us, is in sync with the great march of human progress. Individualistic societies grow faster and their people are happier than collectivist ones.

Wealth, which produces all sorts of hugely desirable human goods, also weakens orientation toward pre-assigned roles and their obligations and strengthens the orientation toward individual fulfillment, resulting in more fulfillment. Collectivist moral cultures do serve an important function in the typical human condition. But we are lucky when that function has become unnecessary

He cites a study by  Aaron Ahuvia in the Journal of Happiness Studies which finds that:

Rather [than increasing happiness directly through increased consumption], economic development increases SWB [subjective well-being] by creating a cultural environment where individuals make choices to maximize their happiness rather than meet social obligations (Coleman, 1990; Galbraith, 1992; Triandis, 1989; Triandis et al., 1990; Veenhoven, 1999; Watkins and Liu, 1996). This cultural transformation away from obligation and toward the pursuit of happiness is part of a broader transition away from collectivism and toward individualist cultural values and forms of social organization.

Collectivism is a hallamark of backwardness, closure, and fear. To my mind, the value of individualism and individual self-expression is something I thought both liberals and conservatives could agree on. And while I respect John McCain as a individual, his country-first calls for a new collectivism frankly scare me.