Creative Class

Over at the Financial Times, Michael Skapinker writes that New York and London will rebound for three reasons:

[O]ne day, with new regulations in place, companies will return to raising funds, banks to lending and financiers to making money. New York and London will remain the best places to do this because they retain the advantages they had before. The first is language. Lehman Brothers may have gone overnight, but it takes centuries for a language to disappear. A global generation has invested years learning English, which has no ready challenger. The two cities’ second advantage is law. The US may be excessively litigious and lawyers may charge outrageous fees in both cities, but where else would you look to the law to defend your corporate rights? Shanghai? Moscow? The third advantage is collective brain power. This may seem laughable, given where bankers’ supposed intelligence has landed us now, but the solutions to this crisis will come in cities most open to raucous debate from whoever has anything to contribute. The next 30 years will be different, but New York and London will rise again.

Maybe – but we’re also likely to see some shift in financial power, especially to Asia, over this time. I also think it’s a huge mistake to read NY and London as financial centers. My own sense is that it is their broadly based creative economies that have propelled NYC and London to economic heights. I’d like to see the two cities spread their bets even more broadly across entertainment and creative industries and other forms of innovation.

And Charlotte looks to be hard-hit, according to the Wall Street Journal:

“The sale of Wachovia bank to Citigroup Inc. has thrown this city — obsessively proud of its status as the nation’s second-leading banking center behind New York City. Construction continues on the new Wachovia headquarters in Charlotte, N.C., even as the bank is absorbed. Overnight, Charlotte faces the prospect of losing not just thousands of jobs but its civic identity.”

Worse yet, cities and states are already feeling the effects of tight credit, according to the New York Times:

“Cities, states and other local governments have been effectively shut out of the bond markets for the last two weeks, raising the cost of day-to-day operations, threatening longer-term projects and dampening a broad source of jobs and stability at a time when other parts of the economy are weakening. The sudden loss of credit, one of the ripple effects of the current financial turmoil, is affecting local governments in all parts of the country, rich and poor alike.”

This will surely get worse in the weeks and months ahead so expect more cutbacks. And it will hit everything from badly needed infrastructure projects to schools and even great state universities. This kind of retrenchment will surely affect the ability of U.S. cities and regions to compete globally for investment, business, and talent in the long run.

Paris is tops; London, next; with Barcelona in third. Berlin. Amsterdam. Munich, Stockholm, Prague, Rome, and Athens round out the top 10 European city brands, according to this new ranking (via Planetizen).

What do you think?

I wanted to share some great news from one of our Creative Communities – Noosa, Australia!

In April, the Creative Class Group commenced a year-long partnership with Stockwell’s Noosa Civic Business Park and the Sunshine Regional Coast to bring our Creative Communities Leadership Program to Noosa. After only 6 months, the Noosa catalysts are having an amazing impact on their community. Check out the release below that highlights their successes:

NCA ESTABLISHES SOLID PLATFORM TO GROW CREATIVE AND KNOWLEDGE ECONOMY

The Noosa Creative Alliance has taken its next step in developing Noosa’s economic base by formalizing its organizational structure into an Incorporated Association.

Having risen from Richard Florida’s Creative Communities Leadership Program which was instigated by Stockwells Noosa Civic Business Park in conjunction with the Sunshine Coast Regional Council and supported by the Department of Regional Development, the Alliance has now set down a solid platform to springboard the innovative projects it already has well underway and develop some further projects in the future. The five projects it is currently undertaking include:

The original 30 catalyst strong membership base who were tasked with developing projects which would drive Noosa’s  creative and knowledge economy  forward, has now grown to some 40 plus.

Whilst the new association name will be formerly known as the Sunshine Coast Creative Alliance Inc the group will continue trading as the Noosa Creative Alliance as it completes its 12 month pilot program.

Stockwell Managing Director Mark Stockwell congratulated the Noosa Creative Alliance members on their foresight and commitment to the program. “When we embarked on this project we were looking for 30 key business and community leaders who were keen to see Noosa develop its economic base,” Mr Stockwell said.

“There is no doubt that the caliber of talent we have uncovered in Noosa through this program and the commitment to Noosa will see the area continue to emerge as a knowledge and creative economy.”

Cool Ideas start up business operator and Acting Chariperson Marcus Xavier has been working closely with the NCA catalyst to assist with moving the catalyst projects forward.

For a class to exist – the working class, the capitalist class – it has to inherit something to continue from one generation to the next. Money, or the lack of, was usually the thing that helped define a class. Titles and status also worked pretty well. If a class is defined by intangibles – like drive, character, education, creativity – can it be inherited and, if it cannot, can it be a class?

Think of entrepreneurship. If one cannot inherit the “claw with the prey,” how does the class continue? What holds it together from one generation to the next? This has interesting public policy implications. What should public policy support? Are we still in the Schumpeterian world where the capitalist class invites in the gifted few to revitalize the system from time to time? We seem to invite immigrants and they seem to perform rather well.

Recently, I was going through some U.S. Patent and Trademark Office data on patenting and I was looking at patenting around the world. In the accompanying Figure One, I have plotted patent data from various nations over the last half century. It is a little difficult to interpret because it is on a log-linear scale. What you will notice is that the number of patents in the U.S. has roughly doubled over the last half century. Germany has also roughly doubled. Japanese patenting, on the other hand, has expanded enormously from 1963 through 2007 and then it continued to grow quite slowly. Taiwan and Korea began their rapid patenting growth in the 1980s. Korea is continuing to expand the number of patents filed quite rapidly in 2000. In contrast, Mexico has remained at roughly the same low level for the past half century. The new players are China and India, which have started from extremely low levels, but are expanding at an astonishing rate. This is interesting but not surprising.

When one looks at Table One, which depicts the number of patents per 10,000 persons, the data is even more interesting. Japan, the U.S., and Taiwan have roughly the same number of patents per person and Korea is not too far behind and will likely pull even with them within 10 years. However, China and India on a per capita basis trail these nations by three orders of magnitude. What if these two nations can improve their per capita performance to only one-tenth that of the more advanced nations? In sheer numbers, each of them will surpass Japan and rival the U.S.! If, as is entirely plausible, in three decades they become as innovative as Korea, they will produce more than twice as many patents as the U.S. Would this mean that centuries-long technological dominance of the Western European and European settler nations will be over?

How plausible is this scenario?

USPTO Patents per 10,000 Persons, 2007 (Total Number)

• U.S.     — 3.07 (93,691)
• Japan   — 2.81 (35,924)
• Taiwan — 3.26 (7,491)
• Korea  — 1.51  (7,264)
• India    — .0051 (578)
• China   — .0057 (756)

It probably feels about as good to be a banker today as it did to be running an Internet startup back in the day. That is, until the other shoe drops. Yves Smith reports on the ennui engulfing this season’s technique-arbitragers, finance professionals with “a narrow skill, like being able to structure CDOs…unable to land jobs” in the imploding financial services industry. Reports indicate that half of the people working in debt sales, trading, or research in NYC at the beginning of 2007 will be fired at the end of the year or won’t get a bonus. For fans of Leveraged Sell-Out and the Banker Method, this is not good news.

The similarities are not lost on those of us who participated in the technology tomfoolery in the early to late 90’s, where those who could hand-code HTML had a skill they could trade – albeit for a very brief period – for 80 large and on-site espresso. Smart people understand the half-life of the trix-y things they know, and act accordingly. Those that miss the phase shift take a more stable job or shift careers, leaping from the back of one hungry crocodile to the next like Pitfall Harry. A few even become entrepreneurs. Some follow the heat and light elsewhere, “…moving west or to Europe, including Russia, or to Dubai” according to Jeanne Branthover, managing director of Boyden Global Executive Search.

Technique without creativity is a commodity, and all that this entails. What’s of interest to me is the crucial intermingling between technique and creativity, and how people use the current foundation of technical work as a mechanism to learn, incorporate, and innovate. There are heaps more places to do that then ever before. It’s a spiky world. Where will innovation in the production of complex, mission-critical software applications, energy and the environment, or finance happen next? I suspect that innovation will go where the people go.

What’s creativity and what’s technique in your line of work? When will the particular tricks-y things you do become automata, or simply routine knowledge that represents the ticket to entry? If the talent in your industry goes elsewhere, will you switch locations, switch industries, or stay put?

In Flight of the Creative Class, I argued that America was no longer a single country, but two or more divided along the lines of social and economic class. Now, alongside Bill Bishop’s The Big Sort comes a new American Human Development Index, modeled on the landmark UN report. The Independent summarizes some of its key findings.

The United States of America is becoming less united by the day. A
30-year gap now exists in the average life expectancy between
Mississippi, in the Deep South, and Connecticut, in prosperous New
England. Huge disparities have also opened up in income, health and
education depending on where people live in the US, according to a
report published yesterday.

The American Human Development Index has applied to the US an aid agency
approach to measuring well-being – more familiar to observers of the
Third World – with shocking results. The US finds itself ranked 42nd in
global life expectancy and 34th in survival of infants to age. Suicide
and murder are among the top 15 causes of death and although the US is
home to just 5 per cent of the global population it accounts for 24 per
cent of the world’s prisoners.

Despite an almost cult-like devotion to the belief that unfettered free enterprise is the best way
to lift Americans out of poverty, the report points to a rigged system
that does little to lessen inequalities.

“The report shows that although America is one of the richest nations in the world, it is
woefully behind when it comes to providing opportunity and choices to
all Americans to build a better life,” the authors said.

Some of its more shocking findings reveal that, in parts of Texas, the
percentage of adults who pass through high school has not improved
since the 1970s.

Asian-American males have the best quality of
life and black Americans the lowest, with a staggering 50-year life
expectancy gap between the two groups.

Despite the fact that the US spends roughly $5.2bn (£2.6bn) every day on health care, more per
capita than any other nation in the world, Americans live shorter lives
than citizens of every western European and Nordic country, bar
Denmark..

Using official government statistics, the study points
out that because American schools are funded primarily from local
property taxes, rich districts get the best state education. The US has
no federally mandated sick pay, paternity leave or annual paid vacation.

“Some Americans are living anywhere from 30 to 50 years behind others when it
comes to issues we all care about: health, education and standard of
living,” said Sarah Burd-Sharps co-author of the report.

Although the US is one of the most powerful and rich nations in the world, the
study concludes it is “woefully behind when it comes to providing
opportunity and choices to all Americans to build a better life”.

The report is here, some key factoids, and a series of maps.

Writing in the New Zealand Herald, Richard Wagstaff skewers a ANZ Bank report which divides government spending into productive and non-productive categories, placing culture along with other functions in the former category.

To
make its point, the report divided government spending into
“productive” and “non-productive” categories. Among productive spending
were education, law and order and transport …

Similarly, spending on culture is deemed
“non-productive”. Business professor Richard Florida would disagree.
His book Rise of the Creative Class found that to succeed in a modern
economy, cities have to attract creative thinkers. Auckland City
Council has embraced this concept. Last year, it released a blueprint
for growing its creative industries. The council says these
employ more than 13,000 workers in Auckland alone and contribute $1.7
billion to the city’s Gross Domestic Product. But even as New Zealand
cities strive to compete with others world-wide, ANZ says helping
cities to be more liveable through culture is “non-productive”.

The full story is here.

The great fire-sale of US assets continues. In the 1980s, it was Japanese and European companies buying up US factories, who incidentally helped restore their competitiveness. Then, there was the buy-up of great buildings and commercial real estate. Now, the the dollar down and weakened real estate markets comes the buying up of prestige properties in super-star markets from NY to Palm Beach.   The Wall Street Journal reports on the recent buying binge by the Russian super-rich:

As many of America’s wealthy are roiled by the credit
crisis and general financial gloom, a growing number of rich Russians
are house-shopping — and buying — in costly U.S. enclaves.

Fertilizer mogul Dmitry Rybolovlev is set to pay
nearly $100 million to Donald Trump for an oceanfront mansion in Palm
Beach, Fla., say people familiar with the deal reached in May. Last
year, Oleg Baibakov, president of GSC City, a Moscow
construction-management and consulting firm, bought a condo at
Manhattan’s Time Warner Center for $13.5 million, according to public
records.

And in Snowmass, Colo., perhaps the most famous
Russian oligarch, Roman Abramovich, paid $36.4 million in April for a
200-acre ranch. The property’s massive, split-level house is five
minutes away from an $11.8 million ski-in, ski-out house that Mr.
Abramovich, owner of England’s Chelsea soccer team, purchased two
months earlier, records show …

In New York City, foreign buyers now make up about 15%
of the market, with Russians the largest contingent, says Hall Willkie,
president of real-estate firm Brown Harris Stevens. “A few years ago we
didn’t see any Russians,” Mr. Willkie says. “But now, especially at the
high end of the market they are buying big apartments…so they are a
significant factor.” …

Sergey Skaterschikov, a Moscow-based private-equity
investor, is shopping for a house in Palo Alto, Calif., because his son
will attend school in the area … At a recent Sotheby’s International Realty conference,
agents discussed Russian as well as Chinese nationals as new markets
for eight-figure homes, according to Washington, D.C.-based broker
Daryl Judy … In January, San Francisco-based brokers Misha
Kurgatnikov and Victor Borelli met with a delegation of more than 100
Russia-based brokers representing wealthy Moscow clients interested in
buying distressed luxury properties in California and Las Vegas …

Russian developers also are getting involved. Mirax
Group Corp. of Moscow has invested in 13 partially completed houses at
the Aqua, a New Urbanist-style development near Miami’s South Beach.
The $75 million project will offer fully equipped homes, including
linens, flatware and towels, aimed at Moscow-based buyers … It
hopes eventually to be involved in developments in cities including New
York, Atlanta, Chicago, Las Vegas and Aspen, Colo., says Dimitry
Lutsenko, a Mirax board member, via email. Security-related requests by Russian buyers are
common, including underground parking, gated entrances and video
cameras.

Science Magazine reports (h/t: Kevin Stolarick):

Berlin’s mayor, Klaus Wowereit, likes to joke that the city is “poor but
sexy.” He may now want to add “and smart.” Despite chronic budget shortfalls,
Berlin’s city government has pledged €160 million ($250 million) over the next 4
years to attract top researchers to the city’s four main universities as well as
its research institutes.

The impetus for the “Berlin International Forum for Excellence” came from
Jürgen Zöllner, the city’s senator for science and education. He initially
proposed a new “superuniversity,” but the city’s existing universities feared
that the new institution would lure away their best talent. Instead, the city
will set up a foundation that will identify existing “areas of excellence” and
distribute funds to top up salaries of world-class researchers, set up graduate
schools, and attract visiting scholars to the city.

Berlin’s universities and scientific institutes will work together in
governing the new foundation, Zöllner said in announcing the plan yesterday.
It’s a chance to make Berlin “one of the most important locations for research
in the world,” he crowed. That level of collaboration is unusual, says former
federal undersecretary for research Wolf-Michael Catenhusen, whom Zöllner
charged with negotiating an alternative to the superuniversity. “It is as if
MIT, Harvard, and Boston University were all to cooperate on a project.”
Catenhusen says the foundation’s planners hope to attract additional private
donations to boost the pot of funds.

My colleague, Stolarick notes that: “”To help put the size of the investment into perspective, Berlin had
a population of 3.4 million in 2006.” The competition for talent is heating up.