Indiana Universities Win Award for Creating Economic Development Plan

Indiana University and Purdue recently won an award from the Center for Community and Economic Research for their joint economic development efforts in Indiana.

The two universities econ dev joint venture received the prize for their research effort, entitled "Crossing the Next Regional Frontier: Information and Analytics Linking Regional Competitiveness to Investment in a Knowledge-Based Economy". While their ideas might impress academics, I don't think they'll impress prospective employers.

Now Indiana as a whole is generally strong in terms of economic matters, and I don't think one misguided effort will change that much. However, the "knowledge-based economy", which existed in the 90s and 2000s, could be called that because it was defined by the fact that knowledge was a scarce resource over that period. While it still might be in certain industries, it is now being overshadowed by the even more scarce resource of face-to-face contact, which has developed because it's so cheap to communicate remotely. Compared to ultra-cheap communications, it's so timely and expensive now to meet face-to-face, which is why all the fastest job growing job sectors, from nursing to teaching to social work, depend on face-to-face contact. When knowledge was the dominant scarce resource 12 years ago, the fastest job growing sectors were electrical engineering, computer programming, and other technical positions. That's all changed. Yet many econ dev professionals don't seem to get this, and you don't need to look any further than basic Department of Labor data to see it.

People, especially those developing local economies, really need to get that techie-finance economy of 1995-2009 is gone. Spending $400,000 for every biotech job created makes little sense, especially when you can spend nothing and develop your own small businesses.

Skin Care Specialist Now a Top 10 Growth Profession

Mundane personal service jobs are becoming some of the fastest growing professions. In the past, I've written about some of the "cool" and "creative" jobs defining the future, such as nail care, social work, and teaching. Employment in these sectors correlates more strongly to having a vagina than to having an advanced degree, but they are way too boring for any urban pundit to start writing about.

While I don't think its author is going to get a promotional poster at Barnes & Noble, the Department of Labor's Occupational Outlook Handbook has some interesting findings. It ranks the top 10 growth professions for the next 8 years, and coming in at #8 - skin care specialist. Yes, for all the hype about "creative classes", "knowledge workers", and other sorts of nonsense, skin care is now a leading growth profession.

In addition to skin care, athletic trainer makes the list, as does home health care aide. Even the engineering jobs are mostly angled towards people and medicine, as opposed to faster computers or communications. Only 2 of the top 10 professions have anything to do with finance or IT. Makes me wonder if Jennifer Granholm will invite a skin care professional to speak at the next Michigan "creating cool" conference.

I Saw The Sign

Remember that South Park episode where they find the Ice Man guy who's been frozen since 1996? In order to re-orient him they have to play 1996 music, including the painfully bad Ace of Base hit "The Sign". I think the Ice Man must have worked in Economic Development, because so much of the industry is acting like it's still 1996.

There's still a lot of talk about "tech" jobs, venture capital, and of course, "knowledge workers". Somebody is going to have do something to kill that terrible term along with the equally awful "human capital". Just hearing these things makes me feel like I'm back in 1996 in a product marketing meeting.

In the 2010s, with female-dominated professions like nursing, teaching, and social work continuing to grow, having a vagina will be a greater advantage for many workers than having an advanced education.

One of the things I read many times back in the 90s was how species that survive aren't the strongest, but the most adaptable. Think Alvin Toffler or some other futurist pundit came up with that. Well, if that's true, then it's time to bring economic development into the 2010s, and move it past the world of venture capital, overeducated slackers riding light rail trains in Portland, and panicking that if your city doesn't promote itself as some sort of "tech" hub, it will be falling behind. Computers have made many companies exceptionally productive, and automated and outsourced so many employment opportunities. As a result, many tech sectors, including specialties within greentech and biotech, hold as much promise for future job creation as pets.com.

Attracting "Knowledge" Workers is a Bad Strategy

One of the most prominent trends among cities over the last 15 years has been the push to recruit educated workers by promoting lifestyle benefits. And it only grew stronger in 2002 when Richard Florida came out with his book “The Rise of the Creative Class”. Often spending taxpayer dollars to do so, cities have been falling all over themselves to attract "knowledge" workers. How successful have they been?

Boring Industries vs. Exciting People
One challenge of promoting educated labor to educated management is that no employer ever asks for workers with skills in “knowledge”, rather they need electrical engineers, mechanical engineers, industrial robotics specialists, etc.. Yet many cities don't have much technical understanding themselves, and get panicky about falling behind in a rapidly emerging area. And somehow they think loft apartments near coffee shops, with the obligatory four letter neighborhood name – NoDo, LoDo, SoMa – will make them popular with top employers by showcasing their ability to entertain the bright people firms want to hire. But these image makeovers are like a girl in high school changing her makeup routine hoping to impress the popular kids.

Hopefully we've already seen the worst after Michigan's horribly embarrassing and ineffective "Cool Cities" campaign. But the fundamental issue persists – economic development must be distinctive, and all the cities with successful records of attracting skilled workers established themselves as centers for a particular industry before they tried to market their live music scenes, artists lofts, or started renaming neighborhoods. In successful economic development stories, from Seattle to San Jose to Texas, “cool” industries all existed before there was any attempt to attract “cool” people, and before 55 year old economic development executives started saying “cool” in business meetings.

Specifically, the problem with marketing yourself to “knowledge workers” is that every city needs web developers, LAN managers, and basic IT staff. Software developers will always be demanded by non-technology companies investing in IT, so these people are present in your city regardless of which types of companies you recruit, or how many clubs you have downtown. As I pointed out last week, Boston, the leading medical science region in the country, currently has four times as many openings for people with SQL skills than it does for those with biotech expertise.

Make Sure You Can Touch the Product Before Giving the Company a Tax Break
More important than the typical mix of web designers and software developers available in every city are hardware skills, which are far less common. Hardware industries are far more clustered, and require specialized abilities in design and equipment operation, not just Java or C++ skills you can get in any city.

Hardware also forces a target company's suppliers to do business in a region, and not everything can be shipped. Toyota's Tundra plant in San Antonio has 18 suppliers on-site. One reason why San Antonio has fared better than other regions in the recession is manufacturing workers, not knowledge workers.

The ability to rope in a supply chain is another major benefit of hardware, which you don't get with software, biotech, or any “knowledge” industry based purely on people. Moreover, as time passes, most hardware industries diverge into multiple industries, and the remaining suppliers need to stay put because they depend on local talent. Within the semiconductor industry, for example, very few new companies are building their own fabs, or manufacturing plants. But even fabless chip companies, who design chips but don't manufacture them, are mostly based in Silicon Valley, Orange County, and Austin, where there were already predecessor companies. These regions got a new industry simply though evolution, not active recruitment. But in software, there is no manufacturing to outsource, or supply chain that can be broken apart.

Byproducts
Silicon Valley also got the solar design industry simply out of the fact that most solar panels use the same materials as semiconductors. Similarly, unexpected benefits from byproducts can only spring up when there is some kind of raw material being put to use. Corning, NY's expertise with glass led to new product areas like fiber optics, composite materials that are going to new aircraft like the 787, and to materials for wind turbine rotors.

Hard products force your city to adapt or die far more than if you rely on the same health care, software, and showcase biotech projects as everyone else. Many Michigan union leaders have been more focused on whining about foreign competition that's lept ahead of them, than they have been at creating future trends themselves. Seattle, which also also sits in a heavily unionized state, is instead focusing on future products, rather than pointing fingers at politicians or foreigners for the passage of time. When Detroit native Bill Boeing decided to make his jets in Seattle, he might have picked up on its futuristic spirit 80 years ago.

New Products are More Important than New People
Whether its cars, chips, or jets, manufacturing opens up tremendous opportunities for future industries, and brings in a supply chain of additional companies you don't get when you become yet another city with a 300 person biotech lab. Hard goods are still the basis of any sound economic development strategy, because they can't be turned into sophisticated products without people. Recruiting new people, but not new products, will only give your employers a me too selection of web developers and software programmers available in any city.

Governor Granholm, 1995 is on the Phone for You

One of the most embarrassing attempts at economic development over the last five years has been Michigan's Cool Cities initiative. The state woke up to the Internet boom about four years after the industry went bust, and decided in 2003 to focus on attracting creative workers, not just industrial companies.

This strategy, adopted by just about every other state in the mid-90s, meant showcasing lifestyle benefits, and referencing the work of every author who had written some "knowledge worker" hype piece in 1995. Needless to say, Flint hasn't become the next Austin, and VCs have yet to start camping out in Grand Rapids.

Just to make sure this silly economic development strategy fails, jittery Lansing Mayor Virg Bernero (seriously he's like Tweak from South Park) is telling anyone who'll listen that we need to re-write all of our trade agreements and stop letting all those foreign imports into this country. I understand that the mayor, who really should switch to decaf, is trying to protect the autoworkers who voted for him and the unions who funded him. Problem is if you're trying to attract new workers and new industries, chances are really good they're going to have customers overseas, and will need those trade agreements to sell products.

Much like the Internet bubble, it's time to put Cool Cities into the history books. Lansing has every right to protect its current workers from foreign competition. It just needs to stop expecting people who sell to foreigners to move there.