Creative Class

There’s a great post by Edward Glaeser (in the Economix blog of the New York Times), titled “New York, New York: America’s Resilient City.”

In it, he describes how New York has managed to avoid the decay that has afflicted many large older cities, and, after a brief downturn in the 1970’s, came roaring back as arguably the most influential single city in the world.

His explanation? In a word - “smart people.”

“New York still has an amazing concentration of talent. That talent is more effective because all those smart people are connected because of the city’s extreme population density levels. Historically, human capital — the education and skills of a work force — predicts which cities are able to reinvent themselves and which ones are not. Those people who are continuing to pay high prices for Manhattan real estate are implicitly betting that New York’s human capital will continue to come up with new ways of reinventing the city. “

Glaeser continues, describing why dense cities succeed…

“They thrive by enabling us to connect with each other, which then promotes learning and innovation. The current downturn will only increase the returns to being smart, and you get smart by hanging around smart people. As long as New York continues to attract and connect those people, the city will continue to thrive.”

Now here’s what every city planner wants to know. Is this replicable? Can this success be engineered or encouraged, and are the effects measurable in 10 years, 20 years, a lifetime?

Does anyone have successful examples of campaigns and projects to replicate this resilient infrastructure? Or perhaps, examples of some cautionary unsuccessful attempts?

Best wishes to everyone for a creative and fruitful New Year!

Few things are more important in capitalism, or any society for that matter, as the incentive structure. If the incentive structure is right, people will move into productive activities. If it is not they might become unproductive or, even worse, destructive. During 1980, the business community engaged in unproductive, or what we call rent-seeking activities. These take from Peter and give to Paul. During the 1990s, the U.S. was involved in one of the most productive periods in its history with large numbers of people engaged in productive activites (ICT revolution) that created new wealth. During the 2000s, a set of unfortunate events created an incentive structure that destroyed instead of creating wealth. This destructive entrepreneurship was caused by ideology, changes in the tax laws, and lax regulation. The outcome - trillions of dollars in wealth lost. This form of destructive entrepreneurship is the legacy of the past decade when investment did not flow into productive activities. In fact, it was destructive. How to change the incentive structure to get us back to a productive form of enterpreneurship is a million dollar question for which there are no easy answers.

I’m a member of the Net-Generation, people born between 1978 and 1997. At first glance, my cohort seems tailor-made for a decentralized and “flat world,� so we shouldn’t care so much about the place where we work. After all, the internet, like no other technology, has lowered geographical and temporal barriers for communication and collaboration, and N-Geners, like no other generation, are the most comfortable and capable working, learning, and communicating online. Case in point: I recently found myself collaborating on a project with two college pals on Skype (the free online video phone application): one in Palo Alto, California, the other in Alaska, while also chatting and sharing photos with a friend who was in an internet café in rural Vietnam.

However, while technology has lowered barriers and allowed people all over the world to participate in the global economy, it’s a mistake to suggest now that ‘place’ is no longer important for today’s emerging creative workers. Indeed where one works matters now more than ever.

Whether interested in finance, law, politics, computer programming, consulting, or medicine, young friends and colleagues of mine are drawn inexorably to the epicenters and major nodes of their respective fields; in cities, suburbs, and exurbs that also happen to score very high on the creative class index. This is certainly true for my friend in Palo Alto, a city straddling the area between San Francisco and Silicon Valley. He is a talented computer programmer working for an internet start-up. But what about my friends in Vietnam and Alaska, you ask? Did Google just open a server farm in Juno? Is rural Vietnam the new Silicon Valley? Why do your friends want to live there? Truth is they don’t.

My Alaska friend was working for Mark Begich, a Democrat, who defeated the incumbent Senator (and convicted felon) Ted Stevens. If ever there was an appropriate time to say “got out of there like a bat out of hell,� Jeff’s escape from Alaska after the big victory was it. Jeff is passionate about politics, and he is now in Washington, D.C. looking for full time work. Truth is he would rather struggle for a little while in D.C. than be instantly employed anywhere else. After all, every politically engaged young person he and I know wants to be in the U.S. Capitol and, as a result, a burgeoning social scene of smart, creative, and ambitious young people has flourished there. Dave, my friend in Vietnam just graduated from McGill’s School of Management and is wandering Southeast Asia barefooted and bearded trying to ‘find himself,’ but really he’s just on vacation. Like me, he will soon find himself up to his elbows in financial statements and spreadsheets. He is returning to Toronto to work at a boutique private equity group. Jeff was drawn to the epicenter of the political world. Dave, a former business student with an entrepreneurial streak, will return to Toronto- Canada’s financial capital, because he knows the city offers great opportunity for a person with his interests (it also helps that he is a die-hard Leafs fan). In both instances, the where did not merely influence their decisions, it determined them. If anything, their stints in Alaska and Vietnam simply reinforce the notion that the Creative Class, and young people in particular, travel and move throughout the world with increasing ease.

Though not identifying it as the “Net Gen� specifically, Richard Florida presciently foresaw the emergence of a new generation of the “Creative Class� in The Rise of the Creative Class, a theme that has surfaced in ensuing works. His experience interacting with students at Pittsburgh’s Carnegie Mellon University revealed that young people are drawn to certain hubs, crowding together in thriving and diverse places where like-minded individuals share lifestyles, cultural tastes, and work interests. While the moniker ‘Creative Class’ is not generation-specific, by 2018, when all members of my cohort will be of working age, the Net Generation will, simply put, dominate the creative class. As Boomers retire and Generation Xers fill the ranks of senior management, there will be an overwhelming demand for these young, highly educated people. Attracting them to companies and regions where they can thrive and prosper will be the next great imperative for today’s corporate leaders and politicians.

I encourage everyone to share your thoughts and opinions with me.  If a conversation begins, I will be happy to engage in it with you.

Today, CEO-Read announced it’s “100 Best Business Books of All Time.” Among the top 100, The Rise of the Creative Class.

Congrats, Rich!

How has The Rise of the Creative Class shaped your area’s approach to community and economic development? Has the book changed your perspective on creativity and talent management? How? Share your stories with our team.

To learn more about the guide for the top 100, click here. The guide is set to be released in February 2009.

In an interesting article by the author of Liar’s Poker, Michael Lewis discusses the current stock market collapse.

The article is thought-provoking in its own right, but it brings up an intriguing question: Were the folks who created the Wall Street securitization machine part of the creative class? Were these financial innovations innovations at all? To put a punctuation point on the question, are flimflam persons and those that create Ponzi schemes creative? They certainly are clever and imaginative.

Google CEO Eric Schmidt counters the notion of the long tail (via Whimsley):

although the tail is very interesting and we enable it, the vast majority of the revenue remains in the head. And this a lesson that businesses have to learn. While you can have a long tail strategy, you better have a head, because that’s where all the revenue is. a very short Head of Long Tail aggregators: Amazon, iTunes, Google and their kin dominate their markets to a blockbuster-like degree.

Chris Anderson, author of The Long Tail, responds noting the “irony” that:

a very short Head of Long Tail aggregators: Amazon, iTunes, Google and their kin dominate their markets to a blockbuster-like degree.  … [N]ew research from McKinsey suggests that this sort of radical inequality is increasingly the norm as markets get more networked. ”Powerlaws do imply wildly unequal distributions of money, power, celebrity and everything else.” So much for “democratization.” And it’s not just companies. The Long Tail - the powerlaw created by network effects - may be creating super-celebrity,

Whimsley concludes: “There’s more, and he holds on to some of his assertions, but basically, it’s all over for the long tail.”

We have been looking closely at the geography of creative industries and occupations. You get exactly this pattern of a big fat huge head (that is extreme geographic concentration in two super-celebrity markets - New York and L.A.), a dramatic fall-off after that, the emergence of one or two specialized nodes (Nashville in music, D.C. in media, Las Vegas in dancers, and so on) and then some gentle dispersion among much smaller centers in the tail. We see this pattern of a biruficated, barbell-like spatial structure popping up in the geography of these and other creative industries and occupations. More to come…

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.

New York Times nonfiction bestsellers on the candidates.

No. 2 - The Obama Nation - “The Democratic candidate as an extreme leftist.”

No. 5 - The Case Againts Barack Obama - “The Democratic candidate as a calculating extreme leftist.”

No. 9 - Faith of my Fathers - “A family memoir of the Arizona Senator and Republican Presidential Candidate.”

No, 13 - Sarah - You know who …

Here’s something interesting…

So Maclean’s did a nice article about a recent study measuring “Learning,” from the Canadian Council of Learning. The name of the article is “Canada’s Smartest Cities.”

But I wondered about the difference or connection between Smarts and Learning, so I did a search of the meaty 45-page report - and found zero (nada, zilch, l’oeuf) instances of the word “Smart.” The authors were plainly sensitive to the issues surrounding labeling something as “smart.”

I’ve wondered about this frequently. Is it elitist to value higher education?  By celebrating smartness, are we in essence devaluing those who have not had the opportunities or chosen the path to higher learning?

I confess, I enjoy being around smart people. I find a strong connection between well-educated people and those who are open, tolerant, inquisitive, far seeing, and inclusive. But I’ve also found some of the most maddening people in well-educated professionals - rude, selfish, entitled, unsympathetic, and petty. (They make me want to hang out in a trailer park, or some other low-rent neighborhood where anything goes.)

I still think that the educational attainment of city or community is one of the best measures of a place’s quality of life.  Generally, better-educated citizenry make tougher and better decisions for the future, and see value in making a community better for all, not just their peers.

One of reasons we believe the creative economy/society is different from the industrial and agricultural economies is that it relies on a resource (creativity), that every single human being has. The question is whether our institutions and their leaders can provide mechanisms and devices that support the individual in exercising their creativity productively.

Richard often speaks of Toyota’s long-standing practice of listening to workers on the shop floor in generating new ideas and solving problems. The results of this corporate culture (which extends and exists beyond national borders) are obvious.

WSJ writer Phred Dvorak offers a piece on Best Buy and its engagement of its employees (at all levels) in a predictive stock market game whose results are checked against management forecasts. In the online market, called TagTrade, employees can buy stock in answers to questions posed by managers. The price of the stock then reflects the thinking and creativity of Best Buy’s employees. According to the article, the market’s judgment has often performed better than management’s. Here is a snippet.

TagTrade is open to all of Best Buy’s 115,000 U.S. employees. The roughly 2,100 of them who choose to participate get $1 million in fake money to trade for a nine-month period. The top trader in the period wins a $200 gift certificate.

Jeff Severts, a 38-year-old executive who is currently chief of the company’s Geek Squad personal-computer maintenance services, spearheaded development of the market. Mr. Severts says TagTrade helps flag potential problems early.

In January, he asked both his management team and the market to predict sales of a new service package the company was offering for laptop computers. A week before the company began selling the product, the market’s guess was 33% lower than the team’s official sales forecast. It subsequently sank further.

When initial sales figures confirmed the market’s prediction, Mr. Severts ended the offer and began redesigning the service package. He listed a TagTrade stock to gauge the revised package’s chances of starting on time, in mid-September. The stock rose, and Mr. Severts says he took “great comfort from that.” On Sunday, Best Buy started offering the new package.

Best Buy isn’t the only company using prediction markets as a way to tap the knowledge of front-line employees. Web-search giant Google Inc. uses them to solicit forecasts on everything from how many users its Gmail service will attract to whether products will launch on time. Other companies that have experimented with them include General Electric Co., Intel Corp. and Microsoft Corp.

Does your company or organization offer avenues for all to provide input? What about your city or region? Are these systems creative, simple to use, and engaging? We do live in an era of cheap communications. Do they ‘invite’ people in? Companies and cities that do this will reap the benefits, while those who don’t will be battling from a position of weakness.