Talent attracts capital

In preparing presentations about our placemaking recommendations what has struck me is that the key message can be summed up in three words: talent attracts capital.

Where talent means primarily those with a four-year degree or more. What the most prosperous non-energy-driven states and regions have most in common is a high proportion of their adults with a Bachelors Degree or more.

The phrase talent attracts capital comes from a then New York City Mayor Michael Bloomberg Financial Times column. Bloomberg writes:

Many newly successful cities on the global stage – such as Shenzhen and Dubai – have sought to make themselves attractive to businesses based on price and infrastructure subsidies. Those competitive advantages can work in the short term, but they tend to be transitory. For cities to have sustained success, they must compete for the grand prize: intellectual capital and talent. I have long believed that talent attracts capital far more effectively and consistently than capital attracts talent.

This, of course, turns what we think of as state and regional economic development on its head. For decades economic development work has been built on the assumption that capital attracts talent. So, as Bloomberg points out, we have spent most of our time on “price and infrastructure subsidies”. And more broadly on lowering business costs.

It hasn’t worked! While Michigan has been pursuing the lowering business costs strategy the state’s per capita income has fallen from around the national average to ten percent or more below.

Why? Because talent attracts capital far more than capital attracts talent. It is the asset that matters most to high-wage, high-growth businesses. As the Amazon HQ2 competition clearly demonstrated Michigan and its regions are not competitive. The state is consistently in the 30s the proportion of adults with a four-year degree or more.

So understanding the characteristics of where mobile talent is concentrating has become an imperative for all Michigan regions. Bloomberg, in his Financial Times column, describes where talent is concentrating:

The most creative individuals want to live in places that protect personal freedoms, prize diversity and offer an abundance of cultural opportunities. … Recent college graduates are flocking to Brooklyn not merely because of employment opportunities, but because it is where some of the most exciting things in the world are happening–in music, art, design, food, shops, technology and green industry. Economists may not say it this way but the truth of the matter is: being cool counts. When people can find inspiration in a community that also offers great parks, safe streets and extensive mass transit, they vote with their feet.

We know how to create welcoming communities. We know how to work together as a region and how to provide services regionally. We know how to pay for and provide high quality basic services and amenities. Our Minneapolis case study, Regional Collaboration Matters and our placemaking recommendations report, Creating Places Where Across Michigan People Want to Live and Work, provide examples and sources of what has worked across the country.

We know how to create high-density, high-amenity, transit-rich neighborhoods. For more than a decade, the Michigan State Housing Development Authority convened Sense of Place Council has brought together the relevant state agencies as well as local and state entities with placemaking expertise. They have laid out what needs to be done and how to do it.

What is missing is an understanding that “talent attracts capital far more effectively and consistently than capital attracts talent”. That the path to prosperity for communities is human-capital driven. That the asset that matters most to employers is talent.

What we think of as state and regional economic development now is the icing on the cake, not the foundation of a prosperous economy. That foundation now is high-quality education systems that prepares the next generation for the economy they are going to live in and communities where mobile talent wants to live and work.

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