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Intuit headquarters in Silicon Valley. (PHOTO: COOLCAESAR/WIKIMEDIA COMMONS)

End of Creative Class Migration

• June 28, 2013 • 1:37 PM

Intuit headquarters in Silicon Valley. (PHOTO: COOLCAESAR/WIKIMEDIA COMMONS)

The best and brightest have more options than ever before. Now, companies need to go where the talent is located.

Richard Florida says the world is spiky. Thomas Friedman holds the opposite view. The world is flat. Truth be told, the world is spiky and flat. Both Florida and Friedman are wrong. The Creative Class economy is getting flatter:

New York arts executives say their biggest concern is one they have no way to measure but are nevertheless convinced of: that art school graduates aren’t even attempting to move to New York at the beginning of their careers. Mr. Davis of Vinylux says five of his employees are graduates of the prestigious Rhode Island School of Design who moved straight to Philadelphia after graduation.

“Now, the smartest kid has a whole set of options; the best and the brightest go to Berlin, or Austin, Portland or Minneapolis,” says Robert Elmes, director of Galapagos Art Space, a Dumbo performance space for emerging artists, that is opening a venue in Berlin. “The recession has created a situation where people don’t consider New York City to be a place of opportunity.”

The above voiced brain drain anxiety is from 2010. Take it with a grain of salt. A few artists relocating to Paducah, Kentucky, isn’t a crisis. Every community complains about out-migration. Cry wolf. Get funding.

Still, the ironic migration is worth noting. Garner a few more data points and we might have a trend. Tony Hsieh’s bet on Downtown Las Vegas:

Silicon Valley is facing heat from cities like New York, Seattle, and Denver. Indeed, it’s no longer the only hub sparking innovation.

Las Vegas is one of these up-and-coming alternatives competing for early-stage startups. If casinos and bright lights spring to mind when you think of Vegas, you’ll be in for a shock. The area that is attracting tech entrepreneurs is the local community just north of the glamorous strip, and there’s a lot less neon here than on the more famous boulevard of casinos.

Startups are setting up shop on Fremont Street in the heart of the downtown corridor. To cater to the needs of the new arrivals, new office spaces, co-working spots and trendy restaurants have rapidly emerged.

Tech, part of what economist Enrico Moretti terms the “Innovation Economy,” is converging. Until very recently, the Innovation Economy was diverging. Richard Florida was right. The world was spiky. Now, Silicon Valley is the next Detroit. I’m serious.

When labor costs become an overriding concern, an economic epoch has reached a tipping point. With efficiency gains, less employees produce more goods. As manufacturing converged, innovation diverged. Detroit fell. Silicon Valley rose. Back to New York:

The talent gap is viewed by many as being one of the most pressing concerns facing the city’s tech industry. New York is only 38th among the 50 states in the percentage of bachelor’s degrees awarded in science and engineering and 28th overall in the Technology and Science Work Force Index, which measures the skills of the state’s population at large.

Tech is booming in parts of New York, but some firms are still struggling to fill engineering positions. Condition One, a leader in video technology, recently decamped to Silicon Valley from Brooklyn, citing access to a larger pool of talent in northern California.

Companies go where the talent is located. Silicon Valley isn’t the only hot spot competing with Brooklyn. Watch out for Pittsburgh:

This diversified support system is an oft-cited reason among those that have moved to new cities for professional opportunities. To this end, although the university system may have initially been the main reason CivicScience founder John Dick considered Pittsburgh, he wouldn’t have done so without the array of other benefits. ”As a software and data mining company, there is no better source of the kind of talent we need than [Carnegie Mellon University],” says Dick. “When you factor in the great standard of living here, the beautiful outdoors in the region, and the progressive trends in local development, it was actually quite an easy decision to make.”

Emphasis added. Brooklyn and Silicon Valley are talent magnets. As more places such as Las Vegas come online, the competition for Innovation Economy employees is more fierce. Greater demand from a flatter world (economic convergence) pushes up wages. Microsoft starts bellyaching for immigrants. Instead of competing with Creative Class cool Austin and Portland, a software and data mining company moves to Rust Belt Chic Pittsburgh where that talent is produced.

New York City is wise to the winds of change. It wants to be like Pittsburgh. From Aaron Renn’s (The Urbanophile) review of The Metropolitan Revolution:

The most notable thing here in my view is that New York believes it has to be in the tech talent production business. NYC has traditionally been the ultimate talent attractor. They didn’t need to worry about producing the world’s top talent because it would seek them out. Silicon Valley and most tech hubs rely on this kind of talent attraction for their supply. By setting up a tech talent factory in town, however, NYC is saying that they don’t think they can meet their tech industry ambitions solely through hoovering up outsiders. They need to be in the production business as well. I’m not sure what Jim Russell thinks of this, but he’s often claimed that the era of prosperity on an attraction model is waning in a more convergent world (i.e., where tech & talent are becoming more decentralized). NYC seems to be responding to this reality.

Emphasis added. Perhaps there is more to this artist exodus after all. The rent is too damn high for the Creative Class. Brooklyn is too cool for school, until now. Talent attraction is no longer good enough for economic development. Suck it, Portland.

Jim Russell

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