Creative Class

Here’s my interview with BusinessWeek’s Michelle Conlin:

Richard Florida: The U.S. Is Facing a ‘Talent Shift’

The bestselling author worries about the consequences of so many American-educated MBAs starting their careers in Asia

Richard Florida, the author of the bestselling books The Rise of the Creative Class and The Flight of the Creative Class, is a preeminent thinker about human capital and its importance for business. His new book, The Great Reset, due out in April, argues that a true recovery will require a complete break from the consumption lifestyle and a move towards a new economic model that is actually sustainable.

Florida is the director of the Martin Prosperity Institute and a professor of business and creativity at the University of Toronto’s Rotman School of Management. Bloomberg BusinessWeek talked with Florida about how many American-educated MBAs are no longer beginning the Grand Tour of their careers in the U.S.

Bloomberg BusinessWeek: Some of the best and brightest American-educated kids are seeing their future—in Asia. Does this worry you?

Richard Florida: From the beginning, I’ve been worried about this talent shift. Two things are happening. Countries such as Canada, Australia, and New Zealand are going after our best and brightest. In China and India, the best and the brightest are staying. One of the biggest tools foreign companies have is our business schools. All these great companies are coming to recruit. This shift is happening in real time right in front of our eyes. I see it in the Rotman School where I teach.

What are you seeing there?

I did the commencement address this year. I was blown away. In enormous numbers, the students were going to China, to India, to the Middle East. To a person, they said they found much more opportunity and possibility for career advancement over there. My jaw dropped. I literally could not believe how many kids.

The trend looks pervasive to you. Yet there’s radio silence from policymakers.

People in Washington are brain dead about this.

How to save Detroit, how to stimulate the mortgage industry. This flight of talent out of this country is actually a much more fundamental problem than anything talked about in Washington. Keeping top talent here as well as attracting top talent to our shores is a fundamental economic advantage. I don’t think most people want to admit what’s happening. They don’t want to see it.

Why the denial?

I think we in the U.S. have taken this for granted for so long. When I see the figures that 50% of all patented innovation in the U.S. comes from foreign-born inventors, I think that the important core of American ingenuity is not American ingenuity. It’s the ability to attract the world’s best people. That’s part of what made Hollywood great—European directors.

How do you see this playing out?

I don’t think any one country will dominate us. But if China picks up its share of global talent, and then India, and then Australia—you add up those percentages, and they create an enormous structural disadvantage for us. It erodes our competitive advantage. The U.S. always used to benefit from these big crises. In the 1870s, we got a lot of immigrant skills. In the 1930s, a lot of Europeans poured in. Now look what’s happening. I mean, imagine Silicon Valley without Andy Grove.

Americans following the Olympics at home have been almost as pumped as their athletes are about their record haul of medals. “I have looked (at the medal count),” Viktoria Rebensburg told USA Today, after picking up a gold medal in the women’s giant slalom, “But I didn’t expect I could give a medal to this thing. I never thought that would happen, so it’s cool. And maybe we will win this.”

The United States hasn’t dominated a Winter Olympics since 1932. With 32 medals earned thus far, statistics guru Nate Silver predicts the U.S. will end the games with 34, ahead of Germany with 30, my adopted home-base of Canada with 26, and Norway with 23.

But wait a minute. The USA is a much bigger country than any of these. With 300 million-plus people it’s nearly four times the size of Germany, 10 times bigger than Canada, and 60-plus times bigger than Norway.

So with the help of my statistically minded colleagues at the University of Toronto’s Martin Prosperity Institute, I decided to take a different kind of look. We rated and ranked medal performance by the size of each country’s population. We’ve dubbed this new ranking system the Winter Olympic Medals Per Capita Metric, WMPC for short, where we rank medals per one million people.

Now the results get interesting.

The U.S. ends up in 19th place, with roughly one medal per one million people, less than Australia and about the same as Poland. Germany ends up 14th and Canada ranks 10th with five times the take as the USA. The top finisher is tiny Norway with four-plus medals per one million of its people.

If Silver’s projections hold, the U.S. will end up in 21st place by the end of the games. Norway will top the list with five medals per one million people, followed by Austria in a distant second place with 1.9. Slovenia will come in third with 1.4, then Switzerland (1.3), Sweden (1.1), Latvia (1), Finland (.9), and Canada (.8).

What happens when we track medals historically, going back to 1924? The United States comes in 14th, with slightly less than 0.8 medals per one million people. Norway is far and away the dominant Winter Games force, taking home a whopping 62 medals per one million people. Scandinavia, the Nordic countries, and the European alpine nations are also powerhouses, with Finland earning 29, Austria 23, Switzerland 16, and Sweden 13. Estonia and the Netherlands produce about five medals per one million. Canada produces four – still five times the American rate and eighth overall. (Excluded from our analysis are the Soviet Union and several other former Eastern bloc nations that were initially bigger countries that have subsequently broken into smaller parts.)

Looked at this way, the USA seems a lot less dominant than it first appears.

Though U.S. unemployment is in the 10 percent range and we continue to hear people are “just happy to be employed,” a new survey from The Conference Board finds that only 45 percent of Americans are satisfied with their jobs. Even greater numbers of those under 25 are unhappy with their employment.

Here is an excerpt from the On Deadline column/blog at USA Today.

Only 45% of American are satisfied with their work, the lowest level ever recorded in 22 years of surveys, the Associated Press reports.

The figure is down from 49% in 2008, says the Conference Board research group, which conducts the survey.

Workers under 25 expressed the most dissatisfaction — about 64% of them saying they are unhappy in their jobs.

That is a pretty large number of young American workers starting their careers in a negative way. One of the key findings was that most workers don’t find their job interesting.

Doing something interesting — creating something new, solving a problem that is important to a group of people, and working in an industry one is passionate about — is a key driver for talented people.

For some of the talented, this wave of unhappiness in the U.S. workplace will lead them to form new firms or become self-employed. This should lead to greater innovation and societal wealth.

Moreover, smart existing organizations will continue to improve what they offer to talent. Even in the depths of a recession, talent must be satisfied with fair compensation, a stimulating environment and challenging work. This dissatisfaction trend, The Conference Board points out, has been growing for decades.

Thomas Hoving, who ran the Metropolitan Museum of Art from the mid-‘60s to the mid-‘70s, died yesterday. Hoving re-imagined, rebuilt, rejuvenated, and re-branded the Met, adding several new wings and new departments. In the process, he revolutionized most major museums in the U.S., introducing the blockbuster traveling exhibit and putting the focus on attracting the general public rather than just the elite.

But among all of the art controversy and politics, buried in one short paragraph in the full page obituary in today’s New York Times, is I think the reason for his success and survival at the Met. It reads:

“Despite his braggadocio, Mr. Hoving, the son of a Fifth Avenue merchandising tycoon, proved to be an able administrator and budgeteer. Even during the city’s financial crisis, when many other cultural institutions were in the red, the museum was usually able to balance its books, and its merchandising operation grew tremendously in his years, eventually contributing more than $1 million in annual income.”

Several years ago, I took one of those weeklong “Executive Education” intensives at Harvard Business School (one for public broadcasting executives). The Met under Hoving was an accounting case study. When Hoving took over the Met was running large annual deficits and he reorganized operations, demanding that they start making money. We were given financial statements and asked how long the museum could keep losing money at its current rate – the answer was over 100 years, given the size of its endowment and quasi-endowments. Hoving told the trustees the Met was “moribund, gray, and dieing” and they were living on their savings. Along with revolutionizing the art side, he revolutionized the business.

Hoving’s business sense and ability to make money insulated him from being ousted for the many controversial initiatives, acquisitions, and PR stunts he undertook. He was able to back up his talk with actions and satisfy the business leaders and donors the Met depended on, and they backed his success.

There are important lessons here for anyone wanting to expand support for the arts, or for that matter undertake any bold leadership initiatives.

Earlier this week, Chad Moutray, Chief Economist of the Office of Advocacy for the SBA,  released a research paper titled Educational Attainment, “Brain Drain,” and Self-Employment: Examining Interstate Mobility of Baccalaureate Graduates, 1993-2003.

The paper makes use of the Dept. of Edu’s 2003 Baccalaureate and Beyond (B&B) database. Moutray investigates the employment and location of self-employed and wage and salary workers 10 years after graduation. Some of the findings include:

• academic achievement (grades) is more likely to indicate higher mobility than choice of major
• states with “knowledge economies” are more likely to attract these highly mobile college graduates
• having strong ties to home detracts from mobility – actually owning a home ‘crushes’ mobility for self-employed

You can download this interesting and important paper via the SBA’s Office of Advocacy and here’s the link to the December 8 press release.

Thanks to Lena and SOMA Magazine. Click here to read the whole story, then scroll to pages 42 and 43.

Many of us had the advantage of committing most of our really stupid behavior before the days when everyone at, say, a keg party had the ability to record and publish said misdeeds. There are lots of stories of people losing opportunities for jobs because of inappropriate material posted on social networking sites. In a well-publicized case, someone lost an opportunity after tweeting “Cisco just offered me a job! Now I have to weigh the utility of a fatty paycheck against the daily commute to San Jose and hating the work.” Someone noticed it and responded “Who is the hiring manager. I’m sure they would love to know that you will hate the work. We here at Cisco are versed in the web.”

On the other hand, having an impressive social media presence can be a huge asset for a job seeker. For example, being LinkedIn to important people in the field or people with buying authority builds one’s gravitas, regularly retweeting interesting articles makes one a useful resource, even clever Facebook updates give an insight into one’s creativity and personality. A good social media presence also improves traditional resume fodder,  a hyperlink to “please visit my blog” is better than “excellent written communication,” and “I am proud of the recommendations on my LinkedIn profile” is so much better than “references available on request.”

Have you experienced any social media snafus?

Geoff Flood, CEO of T4G Ltd., has 230 employees who develop enterprise software solutions for large organizations. Gordon Pitts of the Globe and Mail recently interviewed him.

Asked about why he has chosen to have development centers in Toronto, Vancouver, and Halifax, he answers:

We have a strategy of locating where smart people want to live. All of these cities, Toronto included, fit that bill. There is a limit to the technology resource in the country, and we need to go where bright people want to live and can thrive.

…

For example, our largest customer is in Atlanta and the work is being done in Halifax. It is a good export business; it’s good for the talent in Halifax.

Isn’t that the opposite of the old Canadian model whereby people move to where the work is – whether Fort McMurray or any mining town?

We’re in a business where we can live anywhere and work anywhere, and we don’t really care where it happens. It’s 24/7, it’s fast-paced but if you can do it in your kitchen, we don’t have a problem. We provide communities that have a great living environment with the chance to add new workers.

In Vancouver’s case, haven’t you got some contracts, as well?

We don’t typically look for the customers in the local city. We think it is better to be in the export business and compete on a larger scale, but it’s really nice if you can work at home.

Shouldn’t you be in India, where you can slash costs?

Most people would think there is some sense to doing that. But at this point the pendulum is swinging back. I don’t think the cost advantage is there in the way it might have been 10 years ago. Even for low-cost commodity kinds of work, we’re on about par. And we want to do the hard stuff, the creative stuff, and you tend to find more of the resources to accomplish that in North America.

…

We have to be better and so do they. The global competition is wonderful, and it’s something we need to be able to work with. But in the area where we work, we have a competitive advantage.

Flood also mentions being interested in harnessing the talent of Saskatoon and Lethbridge. Seems that rather than going abroad, he’s finding pockets of talent in smaller centers.

Could this be a model for future economic and business development?

What, exactly, is entrepreneurial strategy, anyway?

I regularly teach classes on entrepreneurship and new venture development, and more than occasionally drop in to provide my perspective on topics of interest to those forming or funding technology-driven, high-growth companies. Since I have been spending a lot more time up in front of students (and, thus, getting peppered with great questions), I have been giving a lot of thought to what passes for “entrepreneurial strategy” courses (or sections of courses). To me, it seems that the bulk of entrepreneurship pedagogy has, in a relatively brutish way, simply ported over the issues relevant in a typical strategic management class and attempted to convert those topics into material appropriate to the new venture setting. The more I think about it, the less persuaded I am that this is helpful for students; and I continue to have my suspicions that this approach forwards the research frontier.

Why we have decided to believe that the theories and questions in strategic management – relevant to large, established firms – apply equally well to either nascent or newly established firms merits further consideration. What evidence do we have that the same proscriptive advice we give in the case of large-firm strategy applies to nascent or newly established firms? And does that advice apply equally well for both innovative, high-growth firms (the software startup) and replicative entrepreneurship (a neighborhood bakery)?

In Innovation and Entrepreneurship, Peter Drucker notes, “I have not come across any discussion of entrepreneurial strategies. Yet they are important, and they are distinct, and they are different.” Consider that the next time you are perusing your local bookstore seeking insight on how to build a business.

As previously discussed on this blog, in Canada this recession has pushed a number of people into self-employment. In the U.S., the trend has been less pronounced. Yet I suspect one part of the trend is happening, or soon will, in America – the move by many firms to hire “contract” employees who technically are not employees in that no deductions are taken from their pay and no extended medical or dental benefits are offered.

In Canada, some of the newly self-employed are launching new entrepreneurial start-up businesses that eventually may hire dozens of people or more. Entrepreneurship seems to be doing better in Canada than it has in a while.

But many “self-employed” persons are working on contracts in positions that were formerly salaried. A corporate recruiter recently explained the trend in the Globe and Mail:

Jeff Aplin, Calgary-based executive vice-president with David Aplin Recruiting, has also noticed a shift to more temporary work. Across Canada, he’s seen a surge of demand for contract consultants in accounting, engineering or IT to work a fixed term with a fixed task. “There’s definitely more appetite for a flexible work force” he says.

Because the 21st century economy will likely require the ability to adapt and change quickly, successful companies will likely want a certain percentage of their staff to be on fixed term contracts. Contractors may be a larger part of the future workforce.

Just because employers prefer it doesn’t mean those with talent to “sell” will want it. (And the unemployment rate in many skilled areas isn’t that high so, even in this down time, employees have some power here). Presumably, contractors receive some advantages, such as increased pay to compensate for the lower benefits.

So, for contractors, what are the advantages? What will employers need to offer in the future to have a healthy pool of contractors to choose from when they need them?

Do you primarily work on contract, doing work that others are paid on salary for?

Do you like the freedom? Or would you prefer a salaried position with set vacation allotments, benefits, etc.?