Business Week: "Portland...is enjoying a huge influx of designers, engineers, and entrepreneurs drawn by its funky..."By Sam Adams
August 21, 2006 COMPETITION -- PLACES TO BEAT Slicker Cities America is losing its competitive edge. That premise has been pounded into our heads so often by pundits, and reinforced with each report on the rise of China and India, that it's almost taken as a given. But can a nation that has averaged 3.4% growth for three years and keeps posting sterling productivity gains really have a competitiveness problem? Or is that problem much more local? Here is a quick tale of two cities. In fact, they are two cities in one metropolitan area -- Boston. Since the tech boom peaked in 2000, greater Boston has lost 120,000 jobs. It has also lost 5% of its population, a trend seen across Massachusetts, as young families, no longer earning enough to afford skyrocketing housing costs, moved out of the city and nearby blue-collar towns like Chelsea and Revere. But right across the Charles River, Cambridge is booming. Local biotech powers Genzyme (GENZ ) and Biogen Idec (BIIB ) have been expanding their labs, as have pharma giants Pfizer (PFE ), Novartis (NVS ), Bristol-Myers Squibb, Schering-Plough (SGP ), and Wyeth (WYE ). Kendall Square, an old industrial district abutting the Massachusetts Institute of Technology that in the 1970s boasted overgrown lots and dirt-cheap rents, is now jammed with gleaming offices and restaurants like the Blue Room, where venture capitalists cut deals over lunch. The action "is just like Silicon Valley 10 years ago," says Noubar Afeyan, CEO of Cambridge-based Flagship Ventures, which works with more than 15 area startups. With 150 biotech companies, triple what it had just three years ago, Cambridge is perhaps the world's hottest life sciences hub. That's no small feat: Forty U.S. states are targeting biotech as a key industry, as are big-spending Asian and European governments. The two metro Bostons illustrate the dynamics of 21st century economic competition. The real contest isn't between nations. It's between communities, whether they be neighborhoods, cities, or tight-knit regions. Those with hard-to-replicate strengths are carving out lucrative slices of the global economy. Cambridge's strengths include MIT and Harvard, nearby top teaching hospitals, and vibrant urban environments where talented workers earn enough to support their lifestyles. For biotech companies, says Afeyan, "This is a very easy place to recruit scientists and management." The same dynamism is on display elsewhere. They don't talk much about declining competitiveness in Portland, Ore., which is enjoying a huge influx of designers, engineers, and entrepreneurs drawn by its funky neighborhoods, miles of bike paths, and recreation options. Nor in fast-growing Orlando, where a cluster of entertainment, aerospace, and software talent has turned it into a world leader in digital media. Montreal, Stockholm, Atlanta, Raleigh-Durham, Edinburgh, Singapore -- all are thriving as magnets of knowledge workers and investment. LOCATION, LOCATION But in the end, companies and talent still tend to cluster in areas rich in new tech sources, suppliers, and personal amenities. "The paradox of globalization is that location still matters," says Harvard Business School competitiveness guru Michael E. Porter. "The more barriers disappear, the more that capital and talent become mobile, the more decisive become geographic advantages." Areas most punished by globalization, he notes, are those whose geographic advantages have ebbed, such as Detroit's proximity to the Great Lakes. Factors that lure investment today, like good schools, roads, tax policies, and support industries, are controlled by communities, not national governments. Farsighted communities everywhere are taking heed and raising their game. Cities up and down China's coast are lavishing perks on multinationals as they vie for new manufacturing. Nations like Romania are promoting their highly educated, multilingual workers in a bid to be a new Bangalore for outsourced software and back-office support. In North America, though, communities must go beyond tax breaks, cheap land, and convention centers. Successful ones are hiring consultants to map detailed game plans to develop new industry clusters. They are amassing war chests to subsidize training, R&D projects, and even startup capital. Local agencies are breaking down silos among universities, corporations, and cities across entire regions to collaborate on development. Communities also are putting much heavier emphasis on attracting college grads aged 24 to 34. "They are the dream demographic of a fast-growing economy," says Joseph Cortright of Impresa, a Portland economic consulting firm that works with cities across the U.S. These young adults grew up with computers, have up-to-date training, and are tomorrow's entrepreneurs. Research by economists such as Harvard University's Edward L. Glaeser shows that communities with high concentrations of college grads also have the strongest economies. Trouble is, young talent is scarcer as America ages. Two-thirds of U.S. metro areas have fewer 25- to 34-year-olds than a decade ago, Cortright notes. To draw them, more cities are listening to George Mason University public policy professor Richard Florida, author of the 2002 best-seller The Rise of the Creative Class. Many cities and states produce plenty of college grads, but they don't stay. To thrive, Florida argues, communities need urban areas attractive to bohemians: "Competitive advantage is shifting to places that are very open to allowing people to express themselves." A case in point is Portland, at the forefront of the so-called new urbanism. The area's ranks of college grads aged 25 to 34 swelled by 50% from 1990 to 2000. Despite layoffs by Intel (INTC ) and others, its economy has averaged 5.5% growth for four years, thanks largely to the swelling population and services like design. Once-seedy areas like the Pearl District boast dozens of art galleries and some of Portland's fanciest restaurants. Old warehouses now house companies like Ziba Design, whose clients include Apple Computer, (AAPL ) and ad agency Wieden + Kennedy. Ziba founder Sohrab Vossoughi says a stimulating city center is key to his ability to hire 20 designers a year. "The values of this generation are in line with the DNA of this city," he says. One recruit is Vermont native Meral Middleton, 26. She likes that she can snowboard at Mt. Hood and hang out at chic restaurants. Her boyfriend, an Adidas designer, is one of 10,000 locals who bike to work. "Design is as much a lifestyle as it is a job," she says. "The time away from the desk may be when you find that epiphany." But it takes more than fun urban centers and strong universities to thrive in most creative industries. It's no accident that cities like Orlando, Edinburgh, Montreal, and Los Angeles lead in burgeoning industries like digital media, for example. Each has lots of artists, film producers, and computer whizzes. They also compete hard for investment. Take Edinburgh and nearby Dundee, the capitals of Scotland's $5.2 billion digital media and creative sector and home to gaming pioneers Real Time Worlds and Rockstar Games, creator of Grand Theft Auto. The University of Abertay Dundee offered the world's first computer gaming degree, and the cities host top industry conferences and contests. Local banks and even Scotland's government offer startup capital. "For many companies just on the cusp of success, a little help can really be important," says Real Time Worlds studio manager Colin Macdonald. CANADIAN SUNRISE The growing willingness of local governments to pump subsidies into key sectors is perhaps the hardest challenge for U.S. communities to confront. Singapore plans to invest $1.7 billion over five years to be a biotech power, while India allocated $2.3 billion for biotech initiatives last year. North Carolina's Research Triangle illustrates the way communities are trying to meet the challenge. After enjoying explosive growth in the '90s, the region's electronics industry was hit hard by the 2001 recession and rising competition from China. And while the Triangle boasted 500 life sciences companies and $2 billion in public and private R&D, an analysis by Harvard's Porter concluded that the region relied too much on manufacturing while it lagged in producing new companies, products, and jobs. "He basically said we don't have a clue where we are going," says Charles A Hayes, CEO of investment promotion group Research Triangle Regional Partnership. So state and local agencies in 2003 drew up a master plan. It includes spending $60 million to train 3,000 life sciences engineers, a new biotech manufacturing and education center, and collaborative efforts among universities, companies, and government agencies in 13 counties: Five years ago, each county had its own development plan. "We used to think we were competing with each other," Hayes says. "We've realized our competition is now global." Posted Wed, 08/16/2006 - 5:24pm.
Believe it or not, we reallySubmitted by Steve on Wed, 08/16/2006 - 8:41pm.
Believe it or not, we really need a better set of university and graduate schools. If you look at a lot of these areas, the universities draw the employers. I think the Research Triangle has 3 major schools. People graduate stay and either work or start companies. Nothing against PSU, but I don't even know if it is the best engineering school in town (don't forget UofP.) We are close to making something happen, but building more office space is not going to do it since almost every locality tries the easy fix (tax bonuses or free offices.) » reply
Read the whole articleSubmitted by mmmarvel on Thu, 08/17/2006 - 4:32am.
You asked what will make them succeed? How about reading what the article states - "Factors that lure investment today, like good schools, roads, tax policies, and support industries,..." We have poor schools, not due to lack of money but due to the way it's spent. We have horrible roads because ODOT and POT think roads should take a back seat to overly expensive trains and streetcars. Our tax policies ... I believe the Beatles said it best with the song TaxMan, it describes Oregon and Portland in particular to a tee. Support industries - well you need the other parts to attract that part. Portland is becoming the biggest example of the haves and the have-nots. You have doctors, engineers, chic artists, etc. who are living large; and you have the homeless, the poor, the disenfranchised (this is especially evident in the downtown area but is spreading). Our "land use" policies continually drive home prices higher and higher. Our "transportation policy" continues to demand (and get) more and more subsidies (which takes money which could be spent elsewhere). The "middle-class" is becoming a smaller and smaller group of people, in Portland you are either a have or a have-not. I help build for a living, I see what is going on, I see what prices are doing - the middle class is a dying breed. Portland is moving towards you're an engineer/doctor, whatever or you're a service worker. There will still be folks like me who are necessary to build and maintain the buildings that we build but we have been priced out of Portland (in particular) and in some cases out of Oregon all together. We live in Vancouver, we live in Camas, we live in places where it's cheaper to have us come in (on the contractors dime) and live in a motel for a month while a project is being worked on, than it is to live in the area where our job is. Oregon has one of the highest unemployment numbers in the country - THAT should tell you something. » reply
It's also about funding...Submitted by Tim J. on Thu, 08/17/2006 - 2:41pm.
You write, ""Factors that lure investment today, like good schools, roads, tax policies, and support industries,..." We have poor schools, not due to lack of money but due to the way it's spent. We have horrible roads because ODOT and POT think roads should take a back seat to overly expensive trains and streetcars." Good try at the spin machine...clearly its not JUST about money but neither it "not due to lack of money..." either. P.S. Federal Lightrail money cannot be used for roads. » reply
Spin???Submitted by mmmarvel on Sun, 08/20/2006 - 6:30am.
No, more like reality. I've heard the numbers for funding of schools (Portland public schools) that range from $5000 to $12000 per student (depends on who's doing the talking and if they include the 'all funds' budget). So my question is - how much is enough? $6000? $8000? How much? Plus, have you EVER seen it where 'the number' is met, and they don't ask for more? So please answer, how much is enough? As for the Federal lightrail money unavailable for roads, I know that all too well, however, there's no law saying we need to waste the local taxpayer money on inefficient, budget busting light rail. Like drugs, you can just say no - many cities do, just cause the 'cookie jar' is there doesn't mean that you HAVE to stick your hand in it. » reply
Inequality is a major NATIONAL problemSubmitted by Roland Chlapowski on Fri, 08/18/2006 - 10:19am.
While the Portland middle class is definitely under attack from economic forces and policy choices, Portland is certainly not -by ANY stretch of the imagination- "the biggest example of the haves and the have-nots." We are moving in the wrong direction, though, to be sure. Fostering middle-class success definitely has to be a policy priority at every level (including state, local, & county), but unfortunately, the rising inequality in America is largely a NATIONAL problem. There are things that localities can and should do to fight the tide of a withering middle class and rising inequality, but with national economic policies like the ones we currently have, it will be an uphill battle. The Brookings Institution just recently came out with a study called, "Where Did They Go? The Decline of Middle-Income Neighborhoods in Metropolitan America" - which is both insightful and illustrative of the point that this is a national problem. (And it shows that it is a problem on which Portland is doing relatively "well" compared to other major North American cities - we rank 19th out of 100 in the share of the total metro/urban popuation that falls into the middle-income category.) You can take a look at the report yourself at the following address: http://www.brookings.edu/rios/data/sources/report/02a6b7c4264cff408000730c0a1415cb.xml Also worth taking a look at is Nobel prize-winning economist Paul Krugman, who points out in his NYTimes column today how much the fate of the middle class depends upon national economic policies, and the ideology held by the policy-making majority in Washington DC. http://select.nytimes.com/2006/08/18/opinion/18krugman.html?hp There is certainly a lot of work to be done at every level, but I would argue that *increasing* funding in public transit and dense urban design will help young people moving here encourage more to do so... I know that not needing to own a car made Portland very attractive -and affordable- compared with other cities when I first moved here years ago. And I do not think that it is a coincidence that the most economically vibrant cities tend to be the ones with good public transit and subway systems. For people just starting out - who tend to be the most entrepeneurial-, to be able to get around with relative ease and without spending an additional few hundred dollars a month (at minimum) to own a personal motor vehicle is a huge deal- it can make the difference between getting by and sinking financially. That Portland is so bike-friendly and relatively transit rich is probably a big reason why so many young people take a chance here; take a look at the demographic that uses bicycles the most, and I think you will see that a large part of it is younger people moving to Portland. » reply
Longtime Residents IgnoredSubmitted by Terry Parker on Fri, 08/18/2006 - 1:28pm.
“Communities also are putting much heavier emphasis on attracting college grads aged 24 to 34.†And age discrimination in employment and lifestyle choices continues to grow for those over 40 with the City unwilling to recognize and address that fact. One lifestyle example is the disinvestment in roads. The younger a person is, the more likely they are to choose walking or biking over driving. “A case in point is Portland, at the forefront of the so-called new urbanism. The area's ranks of college grads aged 25 to 34 swelled by 50% from 1990 to 2000. Despite layoffs by Intel (INTC ) and others, its economy has averaged 5.5% growth for four years, thanks largely to the swelling population and services like design.†Since the growth rate appears to closely be the same as the unemployment rate, one conclusion that can be drawn is the new urbanism recruits out-of state workers while ignoring those already established in Portland. » reply
Short changing local education is the reason...Submitted by Sonja on Fri, 08/18/2006 - 2:59pm.
Short changing our public schools and colleges is the reason Portland has to recruit so many folks from out of state. Terry, I have read your other posts, and when you write your no-tax for schools rhetoric, you are part of the problem you cite. » reply
How Much???Submitted by mmmarvel on Sat, 08/19/2006 - 8:27am.
No, the problem is in the way the schools spend the money but that is another argument for another time. Let's stick to this one - HOW MUCH IS ENOUGH? I've seen numbers that say we spend from $6000 to $10000 (if you include the all funds budget) per kid. This is much more than I scrap together to send my kid to a private school (where her education is has proven to be FAR superior to public education). So I ask, HOW MUCH? Tell me Sonja, how much is enough? When my private school does a better job with less than even the low end number - how much DO we have to spend? » reply
Econ 101Submitted by Roland Chlapowski on Fri, 08/18/2006 - 3:47pm.
"Since the growth rate appears to closely be the same as the unemployment rate, one conclusion that can be drawn is the new urbanism recruits out-of state workers while ignoring those already established in Portland." - Well, you *could* draw that conclusion, but it would be baseless and wrong. Terry, Just because you see that the city's economic growth rate is in the vicinity of the unemployment rate, you can't draw a spurious connection between the two!!! You seem to be assuming that when economic growth is strong (5.5% is pretty good!), unemployment rises. So does that mean that when the unemployment rate is low, you should expect less economic growth than when there is high unemployment? You just can't connect the two numbers so callously and speciously. Correlation is not causation. What is the rationale? How exactly do you connect the growth rate of the overall economy with unemployment in your argument? You can certainly make a totally defensible argument and say that an increase in the labor force (the newcomers to Portland) keeps down wages and/or increases unemployment among Portland natives, but the overall growth rate of the economy has absolutely nothing to do with such an argument. It is a tangental and spurious piece of evidence which is totally non-supportive to your point. » reply
Sam, This is another in aSubmitted by paul on Fri, 08/18/2006 - 4:13pm.
Sam, This is another in a string of articles that celebrates Portland's appeal to the creative class--but there are some dissenting voices, including Florida himself, who has spoken critically of Portland's inability to hold onto these creative class types once they mature into their 40s, have kids, and get ready to create some wealth. Then there is the recent Oregonian and Willy Week stories on the creative class--both of which pointed out that Oregon's creative class, in contrast to those in Seattle and San Francisco--don't seem to be actually creating many jobs or wealth. I have to second the comment above about educational institutions: the lack of a major research institution to complement (or as part of) OHSU is a tremendous and longstanding problem. Just compare the research dollars that are brought in directly by U Washington--and this is not even considering the multiplier effect around that institution. So what can you do? I think you and other City leaders can change the tone around entrepeneurship. We celebrate the creative class--but do we celebrate our entrepeneurs? Are we making this city friendly to business? Can we send a message that it's not just cool to be creative, but it's cool to be successful? Can we balance our sensitivity to the environment with a lure for big, job creating businesses? That, to me, is the challenge--changing Portland's regional reputation from the sleepy poor relation of Seattle and San Francisco to a center of ideas, entrepeneurship, and economic growth in its own right. » reply
"I do not think that it is aSubmitted by Steve on Fri, 08/18/2006 - 5:29pm.
"I do not think that it is a coincidence that the most economically vibrant cities tend to be the ones with good public transit and subway systems" Sorry, I have to take exception. A lot of cities with only bus service seem to have more diversified and vibrant economies than Portland: 1) Seattle (don't tell me monorail) I think tying MT automatically to economic growth is a false assumption. » reply
Ruling out mass transit's benefits to the...Submitted by Sam on Sat, 08/19/2006 - 7:37am.
...economy is also folly. It is a piece of an intregrated transportation/econcmic approach, not the be-all or end-all. » reply
Wrong on nearly all accountsSubmitted by Isaac on Mon, 08/21/2006 - 9:58pm.
Steve, please do some research before you make yourself look foolish. Seattle - N/S light rail under construction, Sounder commuter rail » reply
Too Many Government ControlsSubmitted by Terry Parker on Sat, 08/19/2006 - 11:02am.
“How exactly do you connect the growth rate of the overall economy with unemployment in your argument?†Maybe I am being over simplistic, but we are basically talking about the same time period of the last four years of so. The City should be focusing on attracting companies that provide family wage long term jobs for those in need of them. Also look at who has left. The first one that comes to mind is Columbia Sportswear, in part because the City had a disagreement with them over their need for parking. There are other companies that have also left Portland for the same reason. The one, two or three people upstarts are fine if they eventually develop into major employers, but lets make getting the people who live here now employed first priority. So then how do you measure success? Sonja brought up schools. Success however is not closing neighborhood schools, but neither is it asking the over taxed middle class to contribute more dollars for them. Finding ways to improve the quality of education should not be just raising taxes and throwing more money into the pot, or even constructing a new building. Is reading Shakespeare really helping to prepare students for the workplace in the modern day world? Redistributing who pays would however make a big difference. If all the property tax abatements and urban renewal districts paid their fair share of taxes just for schools, the amount would come close to if not exceed what the Portland School Board wants in their latest funding levy. And don’t forget the agreement that was made when the Multnomah County I-tax was voted in; educators instead of taxpayers would be come more financially responsible for their own health care benefits like the rest of society. Whoops, there is another one the school board is just paying for in the new contract and not talking about or living up to promises. Obviously a lowering the unemployment rate would demonstrate success, but to many people success is also big houses and fancy cars. Portland doesn’t want either of them. Portland would rather exercise control through taxpayer subsidies than have a truly successful free market that works. Success to the middle class means more than just getting by, yet in Portland with all the subsidies to transit, bicyclists, urban renewal, police and firefighter retirement benefits, and Homer type developers, success becomes farther and farther away. Portland (and Oregon) must better balance the needs of all of its citizens, stop using the tax codes in a socialistic manner, relinquish control of choices in housing and transportation mode back to the people, and charge large corporations an equitable amount of taxes for doing business here. A functioning city works better than just a pretty one, yet too often the latter takes priority because that is what people see. » reply
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This article from the most
This article from the most recent issue of Businessweek magazine includes mention of Portland's success at attracting younger creative types...
"...They don't talk much about declining competitiveness in Portland, Ore., which is enjoying a huge influx of designers, engineers, and entrepreneurs drawn by its funky neighborhoods, miles of bike paths, and recreation options..."
"...Communities also are putting much heavier emphasis on attracting college grads aged 24 to 34. "They are the dream demographic of a fast-growing economy," says Joseph Cortright of Impresa, a Portland economic consulting firm that works with cities across the U.S. These young adults grew up with computers, have up-to-date training, and are tomorrow's entrepreneurs..."
Ok, so we can get them/you to Portland, now what do you/they need to succeed? Post your ideas.