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-- Urbanophile - does anyone really believe human capital is important - 6-13-10


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-- Urbanophile - does anyone really believe human capital is important - 6-13-10

  1. 1. Leif HinterbergerFrom: on behalf of The Urbanophile []Sent: Sunday, June 13, 2010 8:04 PMTo: Leif@CarreauDesign.ComSubject: The Urbanophile: Does Anyone Really Believe Human Capital Is Important? The Urbanophile: Does Anyone Really Believe Human Capital Is Important? Does Anyone Really Believe Human Capital Is Important? Posted: 13 Jun 2010 03:45 PM PDT If you’re looking for a post that was referenced in Crain’s Chicago Business, click here. For an index to my Chicago related articles, click here. A couple of recent articles I posted drew some curious reactions that I wanted to address head on. In response to Richard Herman’s piece on immigrants and Cleveland, people said: I’m dubious that any reasonable “pitch” could be made to a desired immigrant population under the present status-quo. I think a strong case that a vibrant economy causes immigration – not the other way around…..Agree with [the above]. How do you “attract immigrants” exactly? Do these policies work in Detroit and Philly, or were these cities already immigrant magnets anyhow? How do we know that these policies make a difference?……It would seem to me that the best ways to attract immigrants and immigrant entrepreneurs are the same ways to attract American born people. Good paying jobs, good infrastructure, good schools, less crime and less red tape in creating and running a business…..the rhetoric behind getting immigrants to come to cities with negative job growth sounds similar to paying retailers or to build sports arenas for struggling downtowns. And some comments on my talent disconnect piece included: If “talent” was enough to turn around a local economy, I’d still be living in my hometown of New Haven, CT, which is filled with educated people. You need to recruit specific companies first…..If all a city does is recruit “talent” without finding constructive (and well-paying) uses for said talent–what’s the point? I sense in these comments a couple of things. First is a fatalistic approach to talent. That is, talent comes or doesn’t come of its own accord, because general local conditions or the availability of jobs. Recruitment doesn’t affect things. The second is what I would characterize as a “jobs-centric” worldview. That is, people follow jobs, jobs don’t follow people. The implication of that is that human capital is a semi-irrelevant to economic development. Get the jobs and the people will follow. Is Talent Recruitment Effective? The first matter is one of whether it is possible to affect people’s decision on where to live by recruitment, that is, by marketing and selling your city to people. The arguments above suggest that what really attracts people is a good economy, quality public services, and efficient government. Now I’m a free market kind of guy. I certainly don’t believe that government can conjure up economic growth or wave a magic wand and get people to show up. There is a competitive market out there and product quality, such as the factors above, are clearly very important. But sticking with our free market analogy, let’s ask ourselves a question. How do profit motivated businesses approach the problem of getting people to buy their product? The logic of the skeptics suggests that the only thing that matters is the quality of the product, the price point, availability and similar matters. But clearly that’s not the case. Can you imagine the VP of Marketing and the VP of Sales at a major corporation walking into the CEO’s office and having this conversation? “Mr. CEO, I know you asked us go out and flog our company’s product. But you know what? To tell you a secret, sales and marketing don’t work. It’s all about the product and the price. So we think you ought to just shut down our departments and put all those millions straight to the bottom line.” In real life, as we know, corporations spend gigantic sums on sales and marketing. Clearly they wouldn’t do this if it didn’t work. That’s not to say that every dollar spent on these activities is effective. Clearly much of it isn’t. That’s not to say that product and price aren’t important. Clearly they are critical. But it is also critical to build awareness of your product in the marketplace, to effectively communicate its brand promise and value proposition, and to induce someone to make a buying decision. If this is true for pretty much every for-profit enterprise, why wouldn’t the civic sector of a community – government, non-profits, and business organizations – want to apply the same tools and techniques to their city and region? Clearly, a huge number of cities in America have very low levels of awareness in the marketplace about what they are and what they have to offer. If anything, they’ve got a superficial brand awareness that is neutral to negative. Clearly, cities and states do recognize the power of marketing and sales when it comes to traditional economic development – i.e., luring firms. All of them employ full time people who are out selling the community every day. They are taking site selection consultants on VIP tours. They are showing up at conferences. They are putting deals together. They are buying 1
  2. 2. advertising. But what are these cities doing on the people side?I would challenge any region to do a compare and contrast of the types of activities they undertake on the “firm” side of economic development and the “people” side. I think you’d findmajor activity gaps on the talent side of the equation, even if that’s not reflected in the total dollar spend.Just like every business, every city needs to be aggressively getting its message about about what it has to offer as a place to live, not just as a place to do business. Cities should takeadvantage of every touchpoint with a non-resident to make sure that the message about the attractiveness of place is driven home at some level. It doesn’t have to be pushy, but it ought tohappen.Job-Centricity vs. People-CentricityWhether people follow jobs or jobs follow people is one of those chicken and egg matters I don’t think anyone has fully figured out. But they do seem to move in tandem. Clearly, if peopleare pouring in and there are no jobs, you end up with a situation like Portland, which isn’t good.On the other hand, it’s also clear that one of the first questions any business asks when deciding where to set up shop is whether there’s an appropriate labor force that meets their needsin the location in question. Yes, things like taxes, regulatory environments, the local business culture, proximity to customer and suppliers, transportation access, etc. all factor in. Butlabor force is huge.I can speak to this from personal experience. When working as an IT director I was part of mobilizing an offshore delivery center in Latin America. We ended up choosing Buenos Aires asour location, but only after a seriously long look about whether we could recruit the technical skills we needed there at scale. It’s a huge city but that didn’t mean there were enough peoplewith the right skills. BA worked out great – I was particularly impressed with the caliber of people and the work ethic there, and the time zone can’t be beat. But there is a limit to howlarge you can scale BA. There’s a reason why huge numbers of tech companies have set up shop in India despite its terrible time zone, horrible infrastructure, and significant wageinflation. It’s because that’s where you can find the hundreds of thousands of skilled people these companies need.Some other commenters on my posts suggested that what cities really needed to do is focus on specific niches or segments. I agree. I think it is pretty hard to differentiate yourself ingeneric supersectors like high tech, life sciences, or green industry. Everybody and their brother is chasing these. Instead, you need to look at what the specific segments are where youbelieve you can create competitive advantage and what Warren Buffett would call a “wide moat” business.But that’s not limited to business. The same is true of talent. Chasing a generic “creative class” is no more going to pay off than generic high tech. The question is what specific types ofpeople can you attract to your city.And of course the industries and the people need to match. American cities need to have the right labor force for their target industries, and the right target industries for their labor force.I model it like this:You’ve got competitively advantaged industry segments and human capital segments. Some of it is legacy, i.e., what you have today. For example, existing residents and natives are likelyto have a high degree of rootedness. But you can also look at what newcomers you can attract, because having some level of outsiders is a good thing. Your sweet spot for both is 2
  3. 3. where they overlap. The areas where they don’t overlap is the potential opportunity area for civic change or improvement that might broaden the sweet spot.In short, yes, jobs matter. But talent also matters. And as we transition to a more knowledge oriented economy, including higher skilled, more technical manufacturing, having the righthuman capital in your community is only going to become more important. It’s time to start believing it for real.PS: I should note education is also hyper-critical, so don’t think it is all about raiding other people’s talent pools. That’s a topic for future posts, however.You are subscribed to email updates from The Urbanophile Email delivery powered by GoogleTo stop receiving these emails, you may unsubscribe now.Google Inc., 20 West Kinzie, Chicago IL USA 60610 3