Wednesday, April 6, 2011

The Tenderloin - The Next Sunnyvale?

Just about any visitor to San Francisco who walks down Market Street past the Westfield Mall notices how the neighborhood progressively worsens.   Tourists are sometimes shocked to find so many seedy neighborhoods not far from the expensive hotel/corporate office tower areas they stay in closer to downtown and Union Square. The city is hoping to fix up the neighborhoods just west of downtown by offering a tax exemption to companies that locate there.

San Francisco has an increasingly well-known 1.5% tax on corporate payrolls.   This tax has done little to stop startups from increasingly favoring the city over distant Valley suburbs many employees don't want to commute to.   Zynga, Yelp, and many A round Internet service firms have all chosen to stay in the city rather than trot out to Mountain View or Sunnyvale like most web startups did in the 90s.  But with Twitter threatening to move just south of the city line, the city felt unusual pressure to retain a corporate tenant. 

The tax isn't going away, but it is being temporarily lifted for companies that locate in the Tenderloin/Mid Market areas.   I've visited San Francisco probably more than any U.S. city I've never actually lived in, and walked through these areas during daylight and had no problems.  They're not atrocious ghettos, but they stand out because of their proximity to downtown.   Not unlike how South of Market used to be before it began gentrifying in 2000 after the completion of Pac Bell/AT&T Park.

While I doubt the Tenderloin will be transformed like South of Market was, there is an opportunity here to take San Francisco's increasing ability to draw startups away from Silicon Valley, and use it to improve some dreary parts of the city. 

Wednesday, December 22, 2010

Did People in Atlanta Forget to Send in Their Census Forms?

I've been growing through the Census data that came out yesterday, and the final figure of 308,745,538 was surprisingly low considering the '09 estimate was 307,006,550.   1.7 million new Americans in 9 months works out to an annual growth rate of just 2.26 million. (The Census is as of April 1, annual population estimates July 1) 

The very slow 09-10 growth wasn't just from the recession, but was the result of some downward revisions.  Georgia, for example, had 9.829 million in the '09 estimate, but just 9.687 million in the official '10 count.  It trailed Michigan by 140,000 in '09 for 8th largest, but that gap grew to 204,000 in the final Census count.   So while I thought for sure Michigan would drop to 9th this year, but it now looks like that will happen in '12 or '13.  Georgia also had a 449,000 person lead on North Carolina, which is #10 in population, in 2009, but came out ahead by just 152,000 in the final '10 count.  Not sure what was going on with the Georgia population estimates over the last 10 years, but the state still gained a Congressional seat even with the surprisingly low final total it posted for 2010.

Thursday, November 18, 2010

California Has 33 NASDAQ 100 Technology Companies, Texas Has 2

I enjoyed reading Joel Kotkin's recent article on how Texas is trumping California in economic development, taxes, and other items important to growing a state economy.   And for any state planning a typical retail, education, health care type of economy, everything he said is right.   However, when it comes to developing a regional technology industry, taxes and government dysfunction have little to do with economic development.

California, the model of high taxes, union ownership of state legislators, and bossy government run by inept bureaucrats, is home to 33 of the 62 technology companies in the NASDAQ 100, according to a recent analysis I put together.   Texas is home to 2 - Dell and BMC Software.  My business-friendly home state of Virginia is home to just 1- the holding company spun out of the Sprint/Nextel merger.    No other state has more than 4, and the one state with 4 is Massachusetts, 3 of which are biotech companies HQ'd in  Cambridge, a city with one hell of a pinko legacy.

Building a technology economy first requires a technology community.   All the garage startups of legend didn't choose their location because of tax incentives, but through collaboration between people with common interests in uncommon topics.   Few places outside of Silicon Valley have this.    Still, every region/state/city/jursidiction with an econ dev budget is still wasting taxpayer dollars trying to promote itself as a technology hub.   But if that's what they really want, then the model isn't Texas, but California.


First Solar, Inc. FSLR Tempe Phoenix Arizona
Microchip Technology Incorporated MCHP Chandler Phoenix Arizona
Activision Blizzard, Inc ATVI Santa Monica LA California
Adobe Systems Incorporated ADBE San Jose SF Bay Area California
Altera Corporation ALTR San Jose SF Bay Area California
Amgen Inc. AMGN Thousand Oaks LA California
Apple Inc. AAPL Cupertino SF Bay Area California
Applied Materials, Inc. AMAT Santa Clara SF Bay Area California
Autodesk, Inc. ADSK San Rafael SF Bay Area California
Broadcom Corporation BRCM Irvine LA California
Cisco Systems, Inc. CSCO San Jose SF Bay Area California
DIRECTV DTV El Segundo LA California
eBay Inc. EBAY San Jose SF Bay Area California
Electronic Arts Inc. ERTS Redwood City SF Bay Area California
Google Inc. GOOG Mountain View SF Bay Area California
Illumina, Inc. ILMN San Diego San Diego California
Intel Corporation INTC Santa Clara SF Bay Area California
Intuit Inc. INTU Mountain View SF Bay Area California
Intuitive Surgical, Inc. ISRG Sunnyvale SF Bay Area California
KLA-Tencor Corporation KLAC Milpitas SF Bay Area California
Lam Research Corporation LRCX Fremont SF Bay Area California
Life Technologies Corporation LIFE Carlsbad San Diego California
Linear Technology Corporation LLTC Milpitas SF Bay Area California
Logitech International S.A. LOGI Fremont SF Bay Area California
Marvell Technology Group, Ltd. MRVL Santa Clara SF Bay Area California
Maxim Integrated Products, Inc. MXIM Sunnyvale SF Bay Area California
NetApp, Inc. NTAP Sunnyvale SF Bay Area California
NVIDIA Corporation NVDA Santa Clara SF Bay Area California
Oracle Corporation ORCL Redwood City SF Bay Area California
QUALCOMM Incorporated QCOM San Diego San Diego California
SanDisk Corporation SNDK Milpitas SF Bay Area California
Symantec Corporation SYMC Mountain View SF Bay Area California
VeriSign, Inc. VRSN Mountain View SF Bay Area California
Xilinx, Inc. XLNX San Jose SF Bay Area California
Yahoo! Inc. YHOO Sunnyvale SF Bay Area California
DISH Network Corporation DISH Englewood Denver Colorado
Liberty Media Corporation LINTA Englewood Denver Colorado
priceline.com Incorporated PCLN Norwalk NY Tri-State Connecticut
Citrix Systems, Inc. CTXS Fort Lauderdale Miami/Ft. Lauderdale Florida
Garmin Ltd. GRMN Olathe Kansas City Kansas
Biogen Idec Inc BIIB Cambridge Boston Massachusetts
Genzyme Corporation GENZ Cambridge Boston Massachusetts
Hologic, Inc. HOLX Bedford Boston Massachusetts
Vertex Pharmaceuticals Incorporated VRTX Cambridge Boston Massachusetts
Cerner Corporation CERN North Kansas City Kansas City Missouri
Sigma-Aldrich Corporation SIAL St. Louis St. Louis Missouri
Automatic Data Processing, Inc. ADP Roseland NY Tri-State New Jersey
Celgene Corporation CELG Summit NY Tri-State New Jersey
Cognizant Technology Solutions Corporation CTSH Teaneck NY Tri-State New Jersey
CA Inc. CA Islandia NY Tri-State New York
Paychex, Inc. PAYX Rochester Rochester New York
Virgin Media Inc. VMED New York NY Tri-State New York
FLIR Systems, Inc. FLIR Wilsonville Portland Oregon
Cephalon, Inc. CEPH Frazer Philadelphia Pennsylvania
Comcast Corporation CMCSA Philadelphia Philadelphia Pennsylvania
DENTSPLY International Inc. XRAY York York Pennsylvania
BMC Software, Inc. BMC Houston Houston Texas
Dell Inc. DELL Round Rock Austin Texas
NII Holdings, Inc. NIHD Reston Washington DC Virginia
Amazon.com, Inc. AMZN Seattle Seattle Washington State
Expedia, Inc. EXPE Bellevue Seattle Washington State
Microsoft Corporation MSFT Redmond Seattle Washington State

Tuesday, October 19, 2010

What Will be the Economic Impact of Jennifer Granholm Leaving Office?

Who will hold the "creating cool" conferences?   Who will launch embarrassing economic development campaigns centered on telling everyone that Lansing is a "cool city"?   Who will give tax credits to convicted felons while raising taxes on everyday citizens?

Jenny did me a favor, though.   I was driving home the other day, and got to listen to her speech at the Brookings Institution.  Honestly, can't remember if it was C-SPAN radio or NPR, but she was as entertaining as ever.   She was pressed about creating jobs, and after ummingg and uhhhing her way through five minutes of Q&A, she started breaking out her old "attract young workers", "make cities places young people want to live" line that's served her terribly since she took office.   Guess she had to break it out one last time for tradition's sake.

Now the interesting thing to see will be the benefit to Michigan of not having her there next year.   Perhaps the new governor will understand that ribbon cutting ceremonies for 100 new jobs mean little when you've lost 10,000 in the past six weeks.     Perhaps businesses will be less terrified of actually moving to a state where the governor wants to tax you to death for making an actual product that can be sold in a store, but will offer you a tax credit if you hire three 25 year old Javascript developers to help build your website.

She'll be gone soon, which should bring hope to Detroit, Michigan, and anyone who appreciates common sense economic growth. 

Wednesday, September 29, 2010

Married 25-34 Year Olds Now a Minority

Just ten years ago, 55% of 25-34 year old Americans were married, by 2009 that number had dropped to 46%, according to data just released by the Population Reference Bureau, and based on the Census Department's American Community Survey.

Living in the Washington, DC area, I feel this every week, especially when I get a break from my marriage to go out with single friends, and see other people my age (which is above 34) hanging out at bars, making grand plans for the weekend that don't involve mowing the lawn or baseball practice. (And yes, my kid plays baseball, no American child should be playing that silly English sport with a black-spotted ball)

While the trend is not surprising, the rate of change is, essentially dropping a percentage point a year. Now, before any economic development exec or urban planner thinks this means their city needs more douchebag bars or four-letter loft neighborhoods to accommodate overeducated workers, here's an interesting excerpt:

Between 2000 and 2010, the proportion of young adults who are married dropped 10 percentage points (to 44 percent) for those with a high school diploma or less. For those with at least a bachelor's degree, the percent married dropped only 4 percentage points, to 52 percent.

...and many of the cities earning high praise from pundits who think we still have a 1990s creativity-based economy aren't following the trend, the report notes that:


Seattle was the only large city where the proportion of young adults who are married increased slightly since 2000.



The article goes on to point out that there's been a flip - high school grads with no college used to more likely to get married, now the opposite is happening.  And here's my favorite line:


Another factor contributing to the decline in marriage rates, especially for less educated groups, is the rise in women's earnings relative to men.

This is kind of what I've been talking about with face-to-face contact now the defining scarce resource of the economy.   The jobs that aren't getting automated or outsourced, and showing the best growth prospects - from skin care technicians to social workers to nurses - are mostly done by women and don't have exceptionally high educational requirements.

Ultimately, we are adjusting to a new world where most middle-class workers, from teachers to nurses, are women, while men are pushed to the top or bottom by productivity gains.   The decline of marriage rates is just one implication of this trend.   I'm sure some of you have spotted others.

Wednesday, September 22, 2010

The End of Big Infrastructure Projects, Part 1

Last week, it was announced that phase 2 of the Dulles Rail project, which includes the actual airport, will now cost $3.8 billion, or about $350 million per route mile, excluding interest. This blew away previous estimates that had the project coming in at $2.5 billion, and is a huge increase from the $1 billion and change it was supposed to cost five years ago.

The DC area media, including those astute microeconomists at the Washington Post, are chiming in cost saving ideas, particularly relocating the airport station above ground. But these do little to address what's pushing the cost up - labor and health benefits.

In our 2010s economy, where face-to-face contact, not creativity, is the defining scarce resource, big capital projects are becoming more costly at a rate faster than inflation. And it's not an issue of corruption or politicians, but the simple fact that labor costs, including benefits, are rising faster than inflation. Moreover, cap labor productivity is barely advancing, while operating labor is practically being automated out of existence. This means any major infrastructure project - road, rail, or building, is being forced into a tough financing situation.

Maryland's financing $1.2 billion of its 18 mile, $2.6 billion inter-county connector with revenue bonds supported by 25 cent/mile tolls that are expected to rise in the future. Drivers on the Dulles Toll Road will face even more significant increases to pay off the revenue bonds funding the rail line going down its median. While transit advocates might like this arrangement, the same construction firms working on rail work on roads, and the forces increasing costs are the same - it's not like philosophy or politicians can do anything about the underlying economics.

The result of all this that we will soon reach a point where most infrastructure is just maintenance and "construction" mostly applies to existing roads and rails. This will also be seen in sports stadiums, which are subject to similar economic constraints and also likely to be built in far lower numbers in the future, regardless of who gets elected.

Friday, September 17, 2010

Let's Hope Minneapolis Doesn't Tell Us It's "Cool" Now

Few top 30 metros have withstood the bad economy of the last few years as well as Minneapolis-St. Paul. Unemployment there is just 6.8%, it's on the verge of becoming the second largest metro economy after Chicago, surpassing Detroit, and a new baseball stadium is bringing 3 million pedestrians downtown every year. Moreover, its economy is rooted in an industry, agribusiness, which is a net exporter and not in the process of being crushed by outsourcing.

Yet somehow a consultant's report is claiming the region isn't on many relocation short lists, and that a regional economic development group will somehow fix this. In DC, we've had regional efforts, most notably the Greater Washington Initiative, that really do little other than provide a way for members to network. Moreover, exactly who do the consultants want to bring to Minneapolis? Another software company with 35 people but 50 press stories about its relocation? Another solar manufacturer who will stay for nine months before heading off to the Philippines? More pictures of lab coat techs staring at test tubes?

All I ask is if this thing gets created, they spare us the "cool city" crap we've gotten from Michigan and that Louisville has picked up on. Rather than attracting new businesses, that's the sort of thing that tells people it's time to leave.