Where are college grads moving for jobs?

According to Frey’s research, it has slowed the long-running flow of younger people and college grads to the Sunbelt, tilting the landscape of talent retention and attraction toward larger cities and metros, while reinforcing the position of tech centers and quality-of-place destinations like Austin, Raleigh-Durham, Seattle, the Bay Area, Denver and Portland. At the same time, it appears to have put older Rustbelt metros back on the talent map, with some like Pittsburgh actually registering real gains in the migration of young college grads.

via Creative Class » Blog Archive » Where the Brains are Going – Creative Class.

Verizon 4G will not come to Spokane in 2011

Spokane 4G cellular information is often the first or second most searched for topic on this blog.

According to Verizon’s own web page, Verizon’s “4G” cellular network will not be installed in Spokane during 2011.

Update March 2011: Verizon now says they plan to install 4G in parts of Spokane at some point during 2011.

Update: May 2011: Verizon 4G coming in June.

Update: May 2011: T-Mobile ups speed from 21 Mbps to 42 Mbps, including in Spokane.

Related Posts:

Note – No U.S. cellular phone company is deploying actual “4G” cellular networks. They are all deploying faster data networks, but not actual 4G. Verizon’s will be the fastest of the bunch – so far.

Related Articles

Why specialized company startups locate in the big coastal cities

He made the mistake of leaping before thoroughly analyzing when co-founding Knovel, he says. He and his partners were living in upstate New York and located the company there by default. They had not realized how difficult it would be to find specialized employees in a lightly populated, semi-rural area. “We made a commitment for five years [on a building lease] and it cost us a lot of money to get out. But we had to move our headquarters to New York City, because we simply could not attract the right talent to this area,” he says.

via Think Like an Engineer – BusinessWeek.

This is likely a contributing factor to why Spokane’s tech sector collapsed and why Seattle is the center of innovation in the Northwest.

The Northwest Innovation web site tracks innovation and startups in the Pacific Northwest region. Searching their web site for “Spokane” reveals typically two or three mentions annually.

For Spokane to resume real growth (as compared to subsidized growth) requires a mind and culture shift in understanding innovation, and embracing and supporting the necessary infrastructure for change.

Related:

Yet another historical Spokane economy report

Planting a tree in Spokane Washington, United ...

Image by 350.org via Flickr

From Maximizing Spokane’s Assets – Focus 21 – April 2004:

More striking was the comparison of Spokane’s socio- economic indicators to the State of Washington and the United States – significantly below averages for both. The more startling indicators were:

  • Up until 2000 job growth always exceed labor force and population growth, since 2000 that trend has reversed,
  • Unemployment exceeded 6%, the highest ever in Spokane’s history
  • End of 2003, over 14,000 were unemployed and over 65,000 were registered for new

or better jobs – an indicator of the underemployment in the Spokane area.
Cornerstones of the economy are small business (86% under 20 employees) and a regional business services hub, which includes two growth sectors – health and higher education. Fairchild AFB has a major economic impact on the local economy fueling business services. Primary industries – which also have a major affect on the income characteristics of the economy (typically offer higher than average job earnings) – need to be retained and grown.

This review is a Red Flag to the community that the economic growth Spokane enjoyed in the ‘90’s is over and most likely, with the major declines in the area’s primary metals sector and new global competition, outsourcing and corporate mergers/consolidations, will never return without significant focused effort on economic development, job creation and innovation.

Interesting. This concurs with my own findings across the board.

Silicon Valley has the same # of jobs as it did in 1995

A view of downtown San Jose, the self-proclaim...

Image via Wikipedia

Total job growth has been nil over 15 years.

At about 850,000, the number of jobs in the valley today is about the same as in 1995, the year Yahoo was founded and three years before Google was born. Over the same period, the population has grown by 20 percent.

Lots of economics verbiage, much of it hand waving, expended trying to explain until we get to:

When Khanh Le and his partner, Khamvong Thammasouk, co-founded San Jose touch-technology startup Borei in February 2009, “We decided the best way to build a company is with research and development, sales and marketing and intellectual property creation at our headquarters here in San Jose, and manufacturing overseas, which is very similar to a lot of companies. There’s nothing new about that. It’s just the reality.”

via Silicon Valley jobs: A recurring cycle of boom and bust – SiliconValley.com.

Similarly, much high skilled software development has been moved overseas.

The general response is to say we all need even more education. Today’s Master’s degree has become the Bachelor’s degree of the 1970s[1].

Home grown innovation is being exported – and government stimulus checks used to buy consumer goods made in China – are serving to stimulate overseas economies. Here in Spokane we seek to create an innovation-based economy  – but we may end up running faster and faster only to be stuck mostly in the same place?

At some point, leadership needs a no-holds barred discussion about what’s happening and what policy choices we need to make.

Notes:

[1] In the early 1970s about 12% of the population had earned a 4 year college degree. In the 25 to 29 age group today, the percentage is about 1 in 3. Today, about 10% earn a Master’s degree or higher (in some fields, the ratio is much higher), which is about how many earned a 4 year degree in the early 1970s.  Thus, the Masters degree is roughly equivalent to the Bachelor’s degree 35 years ago.

Another Spokane economy historical document

Throughout the 70’s and 80’s, there was a growing hope that high technology industries could add markedly to the Spokane metro area. Some challenged the feasibility of this goal without a research university saying that Spokane could not hope to compete in the newly emerging world of high technology or biotechnology without this vital asset.

Although Spokane has four 4-year universities and a thriving community college system, Spokane has been bereft of a technology transfer, research university. All of the universities have post baccalaureate programs, but prior to 1988, there was little if any collaboration between programs, faculties, or students of any of these institutions.

To answer the challenge, the Washington State Legislature, with local guidance, created the Spokane Riverpoint Higher Education Park and created the Joint Center for Higher Education JCHE. The JCHE mandate was to catalyze a high tech sector, begin the effort to provide high tech worker education programs, and to be the administrative agent for the newly created Spokane Intercollegiate Research and Technology Institute SIRTI. The JCHE was to spur university collaboration in teaching of computer science, biotechnology, and other technology classes; collaboration in research projects especially with industry partners; and foster high-tech worker education and training programs. SIRTI was to be operated as a research and technology-facilitating institute that would provide grants, independent research laboratory space, project management help, infrastructure, and the capability of scientists from all local colleges and universities to collaborate. See Spokane Higher Education Park at Riverpoint, Master Plan and Design Guidelines.

via Terabyte Triangle | America’s Leading Digital Downtown, Spokane, WA.

Interesting. There are far fewer post baccalaureate programs in science and technology (engineering) than there were ten years ago. We seem to have gone in the wrong direction.

It appears the Joint Center for Higher Education did not work out- and was shut down by the legislature. SIRTI was re-constituted in 1998 with a 17 member board. The Board has 9 public members and 7 members representing WSU, EWU, GU, Whitworth, CCS, UW and CWU. No mention is made of who is the 17th Board member? The current Board roster is here.

SIRTI is to focus on “research that benefits the intermediate and long-term economic vitality of eastern Washington” – but they now support start ups statewide as there is a clause that allows that.  In the past, they also supported businesses in North Idaho, which is a bit of stretch for a Washington state government agency.

Update to this post:

I crossed out the two sentences above to clarify. In this link (which is above but not obvious), the Board is described as having 17 members. I missed one reference in the article – the SIRTI Board is to have 9 members of the public, 7 academic representatives and 1 representative from the WTC.

When the error was brought to my attention, I did more looking into the SIRTI Board structure based on the listing on their web site. Read more of this post

The “TechStars” incubator for starting successful companies

TechStars is a three-month accelerator program that gives budding entrepreneurs access to mentors and hundreds of angel investors and venture capitalists. Today we talk to Andy Sack, Executive Director of TechStars Seattle, about what happens at TechStars, and the patterns he sees emerging in the startup world.

via TechStars: Discovering Seattle’s next big thing — building43.

This comment points to Prof. Richard Florida’s thesis that highly educated, smart mobile talent will go where the opportunities are:

TechStars also serves as a magnet for entrepreneurs to come to its chosen cities. “I think with TechStars in Seattle, Seattle’s rising. Given the amount of talent, and education, and sort of the natural resources of the region, there should be even more bigger technology companies coming out of Seattle.

The corollary is that communities that lack this sort of magnet will lose the smart, ambitious, highly educated, mobile workers. And that will stunt their communities own future opportunities.

Spokane has SIRTI, a state agency that provides some what similar start up incubator services to a variety of entrepreneurs including in science and technology.

Parking Management System

Ideas:

What if sensors on the street knew exactly which parking spots were free? The city could use that real-time information for dynamic meter pricing, discouraging driving when car traffic is too high. San Francisco is already trying the idea.

via Parking Management System | Streetline.

New seed capital fund now available in Spokane

A new start up fund has been established, called Inland TechStart LLC, with an intent to raise $1.5 to $2 million. The fund is intended for very early stage, “pre-angel” stage funding and hopes to begin making investments in the $25,000 to $75,000 range in 2011.

An unusual aspect of the fund is that proposals must be pre-qualified by SIRTI, which could be both a good or bad. On the positive side, SIRTI staff can provide excellent advice and guidance to entrepreneurs, helping them build a stronger business case and team. On the down side, a state agency acts as a “filter” to decide who gets funding or not (“filter” is the word in the story).

via New fund here to provide seed capital to tech firms | Company Activities & Management > Company Structures & Ownership from AllBusiness.com.

Overall, this is a positive for Spokane that looks at addressing the difficulties in obtaining funding for technology related start ups in Spokane.

Verizon introduces 150 MBps home Internet service

Touting the fastest mass-market offering in the U.S., Verizon FiOS has launched a broadband product with speeds of 150 megabits per second downstream and 35 Mbps upstream.

via Verizon FiOS Speeds Up To 150 Mbps | News & Opinion | PCMag.com.

At a pricey $194/month, the service is limited to high wage areas where Verizon provides service, including north of Seattle, Redmond and north.

Until 2010, Verizon provided service in North Idaho, southern Spokane County and NW Montana but sold their telephone service to Frontier Communications. During their ownership, Verizon upgraded only the Western WA and Portland area networks with their enhanced fiber network services.

Comcast is now selling a package of home Internet service and mobile Internet data service. The new “4G” service is available in the Tacoma to Bellingham area, Yakima and the Tri-Cities.  The combined package is priced about the same as home Internet service by itself. How this relates to Spokane’s opportunities should be clear tomorrow.

Spokane and 4G Cellular

Image representing Clearwire as depicted in Cr...

Image via CrunchBase

The second most frequent search on this blog is for information about “Fourth Generation” or 4G cellular service and when it will come to Spokane.

T-Mobile began offering in mid-2010 a faster data service they call 4G – its faster than 3G but still slower than true 4G except when its faster (confused?) in about half of Spokane and half of Spokane Valley. Their web site has a detailed coverage map that estimates availability down to the street level. (Competitors say true 4G is is faster than T-Mobile’s interim 4G but its easy to make that claim when they haven’t built 4G networks yet …)  A chart here illustrates that all the carriers are misrepresenting 4G – in fact, none of them are building 4G networks but all are building faster networks.

Sprint is the other company that has put 4G in much of Washington and has done so with their Clearwire (now just Clear) subsidiary. In 2008, Sprint bought a majority of the Clearwire company which, like Sprint, was working to deploy “WiMAX” 4G wireless data services. Sprint obtained investment money from Comcast, Time Warner, Intel, Google and others.

In Eastern Washington, Sprint rolled out their WiMAX 4G network in Ellensburg, Yakima, Zilah, Sunnyside, the Tri-Cities and further east. Spokane is not currently listed on their “Future CLEAR City” map and the company has announced it will “freeze” expansion of its network due to their financial situation. (Update: They will be getting new funding and will eventually resume building the network.)

For more information, see CLEAR | 4G WiMAX Internet Coverage Map with Service Area.

Because of the Comcast investment, those who have Comcast cable TV and who live in the Sprint 4G areas can now receive combined cable modem and wireless 4G data service for about the same price as standard cable or DSL modem service alone. The Comcast service requires the Clearwire 4G service, which is not available in Spokane.

Other cellular providers such as AT&T and Verizon are rolling out 4G services. They have not announced specific dates of 4G service in Spokane – but we do know that Verizon plans to have service rolled out to all of their service areas by 2013. AT&T starts in mid-2011 and says it will take “several years to build out 4G”. A map of the initial Verizon 4G service area is here.

Bottom line: T-Mobile has a pretty good 3G+ system they call 4G running now in about half of Spokane and half of Spokane Valley. Sprint’s CLEARwire solution is not available in Spokane and has announced a freeze in further network construction. Verizon and AT&T are rolling out service and the best we can say is that Verizon expects to complete their network roll out by 2013.  AT&T plans to begin implementing their 4G network – somewhere – starting in the summer of 2011.  Besides T-Mobile’s “4G”, Spokane should be online with a 4G network sometime from 2011 to 2013.

Update: Please see this newer post. Verizon now says they hope to have their 4G in some parts of Spokane in 2011.

Tomorrow: Creativity, Innovation and Infrastructure

“The Long Nose of Innovation”

The bulk of innovation is low-amplitude and takes place over a long period. Companies should focus on refining existing technologies as much as on creation

via The Long Nose of Innovation.

“How to Keep Innovating”

More from Bill Buxton:

Always be bad at something that you are passionate about.

By this, I really mean two things: always be a beginner at something, and always be in love with what you are beginning.

via How to Keep Innovating – BusinessWeek.

Starting a Global Business With No U.S. Employees

The Eritrean-born physics Ph.D. left his job as a stock analyst to launch MCAP Research LLC, a Montclair, N.J., business aimed at helping investors process reams of company earnings reports. Over the past two years, he has developed the company from an idea to a working website with paying customers.

But he hasn’t hired a single U.S. employee or made any significant capital investments in computer servers or other infrastructure.

via Starting a Global Business With No U.S. Employees – WSJ.com.

See the next post, below this one, for more on this and why this is relevant to Spokane.

The “entrepreneur” above has outsourced all of his software work to Belarus, Ukraine and Pakistan.  No high skilled jobs were created in the U.S. – none.

Creating an Innovation Culture – for Spokane

Closeup of a stone sign bearing the Microsoft ...

Image via Wikipedia

In “Economic Gardening” I said that Spokane needs to foster a risk-taking “innovation culture”. But how do we go about establishing a community wide belief in risk-taking, innovation and experimentation? That’s tough.

I found this essay on the need to create an innovation culture in Ontario, Canada. The essay is from reports done for Ontario, and is hosted on the web site of Bill Buxton of Microsoft Research, Redmond, Wa and Toronto. Bill has a series of articles he has written on innovation for BusinessWeek and I will try to link to those another day.

I have excerpted some sections of that essay here:

We are in a race that does not have a finish line. Our competitors next door, and around the world, are not standing still. All of the provinces and states around us are continuing to improve their business and investment climate….. We must continue to innovate and to sharpen our competitive edge. In the race for quality jobs and investment, our goal is to get out in front and stay there.

….

In the new global environment, we must recognize that our capital – both financial and human – can migrate quickly. The critical challenge Ontario faces is to differentiate itself. That is, to rise above the crowd by creating an environment where good things are happening, where entrepreneurs and business people can grow and succeed, and where people want to live and work.

….

In Ontario, our key challenge – collectively and individually – is not merely to adapt to change but to anticipate it and take steps ahead of time to make the most of it. Underlying what follows is a belief that by following our current path, Ontario will – at best – maintain its position. In order to improve, it will take change to innovate – to break stride.

  • The most wealthy nations and regions of the world are the most innovative;
  • Most new jobs depend on innovation;
  • Innovation is a renewable source of wealth, and The status quo is not a viable option.

The most wealthy nations and regions of the world are the most innovative.

…although high-tech, knowledge-intensive industries account for 39% of overall employment in Ontario, they generate more than two-thirds of new jobs in the province.

….

By their very nature, human ideas are unlimited, and are therefore renewable sources of wealth. Traditionally, natural resources were a key factor in determining a nation’s economic wealth. But as ideas have become more and more crucial in modern times, even nations with limited natural resources can become global economic leaders – as long as they can generate and apply new ideas.

….

Innovation means generating and adapting to change

First one invents, then one innovates. One may invent or discover a new product or a new way of doing things. But, from a social perspective, innovation occurs only when this new product or process becomes widely used.

via Creating an Innovation Culture.

Embracing change, though, means changing or replacing the old ways. This is something that does not go over well in Spokane (writing from personal experience!):

Innovations not only create new products, processes and institutions, but also destroy the status quo. The very role of innovation is to change or replace traditional ways of doing things. That is why innovation tends to face certain barriers, such as:

  • lack of public knowledge;
  • reluctance to accept change;
  • concerns about the cost of change, and
  • opposition by those who prefer the status quo.

Innovation is inherently risky.

To innovate, one must step beyond what is known and accepted by society. That is why it involves risks.

….

Innovation involves collaboration.

Innovation is typically made possible by entrepreneurs who build teams with experts in areas such as invention, technique, business and finance. There are countless examples of successful entrepreneurs who use their resources and commercial abilities to team up with “smaller players” with great ideas.

….

Innovation depends on:

  • human capital (people and skills);
  • organizational and physical infrastructure (corporations, schools, universities, colleges, and governments, communications systems, etc.);
  • financial infrastructure (banks, investors and other sources of capital);
  • legal infrastructure and civil justice system (intellectual property laws), and
  • social or community capital (relationships between people and between organizations).

….

Innovation also rests on our culture – the values, rules, customs and incentives that govern the way we work and the way our institutions function.

In the world of innovation, culture comes down to shared attitudes, values and beliefs. It determines how well we encourage creativity, risk-taking, entrepreneurship, and networks to share knowledge and ideas.

The next section in the document summarizes the perceived resources of Ontario in terms of what the area has to offer. This is followed by some discussion about industry clusters:

Industries tend to cluster in certain geographic locations. Clustering helps companies reduce risks by creating communities of workers and suppliers that meet their needs.

When it comes to financing ideas, lenders tend to be hesitant because they have few hard assets to seize in case of a business failure. Clustered economic activity allows people and organizations to develop track records that become well known to others in the community. These track records are critical to one’s ability to attract the financing necessary to develop new intellectual properties. Clustering can also give employees, as well as those who are self-employed or entrepreneurs, some security in their job or work choices; for example, the option to move to another company or employer is enhanced when you have developed a track record within that cluster of companies. Good track records help entrepreneurs and innovators overcome these barriers.

As noted elsewhere in this blog, according to a study out of EWU, Spokane does not have an IT, high tech or bio-tech cluster today. I add that I believe the State government intends to purchase a bio-tech cluster for Spokane by funding huge health care sciences growth at WSU-Spokane.  But without other elements, which  remain missing, this may not become a self sustaining industry cluster.

Innovation works best when people with different knowledge, skills and perspectives are brought together to tackle challenges. These “renaissance” teams can be created within organizations, firms and in geographic communities.

Highly functional networks in communities also benefit from the interaction of various skills. For example, bringing a new invention to market requires:

  • creative thought;
  • scientific ability;
  • financial skills;
  • marketing work, and
  • customer acceptance.

This combination of business skills is what panel member Bill Buxton calls the New Multiculturalism.

Of course, the importance of networks in the geographically based community extends beyond individuals to organizations, both public and private. For example, it is well-documented that “innovative communities” foster close ties between universities, colleges and private sector research organizations

Missing from Spokane is what I call the “hip culture” although that term might not be the right term.   Spokane lacks the “hip” culture that throws “flash mobs” in Seattle and other large cities, or the fun group of people that throw “Zombie Walks” and other odd but creative activities such as Honk Fest West.

This sort of zaniness is part of what makes creativity – and innovation – part of the culture in the hip metro areas. Other types of creativity lurk in Spokane but do not get the attention they deserve – the creative film makers at North by Northwest, for example. And we have a chapter of the Society for Creative Anachronism.

Related to that, Spokane tends to get infrastructure deployment of new technology later, often much later, than larger metro areas. Spokane, being a smaller community, was very late to have broadband Internet access available to all urban and suburban homes in the area (probably about 2006). T-Mobile’s partial “4G” cellular in Spokane (its not actually 4G and only covers about half the city and valley) is the only advanced 4G-like service available in Spokane.  Does this matter? Yes. When people in Seattle are surfing the web at high speeds in 2000 – and Spokane is still mostly on dial up modems in 2005, it means we do not experience the web as others do and are unlikely to see and understand the opportunities made possible by the new technology.

The single most popular web post on this web site is the post about whether or not Trader Joe’s is coming to Spokane. Living in Spokane, I did not even know what Trader Joe’s is about – in fact, I’d never even heard of them. On a recent trip to the Seattle area, I spotted a Trader Joe’s and went inside. (Short story – Trader Joe’s is brilliant marketing of a small grocery store concept.)  We are now too cut off in too many ways to see the leading edge of business, technology and cultural innovation. This is tragic.

Creating a business is about identifying a problem or need, and solving that problem or meeting that need.  Each new creative fad, and each new technology creates its own set of opportunities. Early movers dive in to the gold rush and have opportunities to solve problems when the entry costs are still low.

But in Spokane, we often don’t see the 21st century opportunities until they’ve  been established elsewhere for years. Trying to dive in at that point requires a lot more capital than is needed for the early movers. And serious VC money is no longer available in Spokane. Both of these problems – late awareness of opportunities, and lack of VC money, are big hardships for creating national or world class innovation businesses in Spokane. (The exception is health care, where the State government intends to fully fund ever expanding health care education, research and health care delivery, forever.)

How do we create an environment at the firm, organization and community levels that rewards those who take risks and those who look for new and more effective ways of doing things?

Innovation results from thought followed by action.

It depends in part on the personal abilities of the leading innovator. But innovation is also affected by the environment – where we live and work.

Culture reinforces the behavior and strategies we require to succeed in any given environment. But environment dictates culture, too. If we live in a business environment that favours innovation, then such behaviour will become prevalent. There is an old saying, which goes: “Necessity is the mother of invention.” The more demanding the environment in certain respects, the more likely the organization or individual is to respond innovatively.

….

We need to identify and deal with impediments to innovation, including:

  • lack of skilled workers;
  • lack of information on, and access to, technologies;
  • lack of information on markets;
  • lack of technology assessment and business supportservices;
  • barriers to inter-firm cooperation;
  • barriers to business, labour and government cooperation;
  • barriers to university/college and business cooperation;
  • lack of access to financing, and
  • lack of a corporate or community culture that values innovation.

….

Many other jurisdictions have identified innovation as the key to competitiveness and are attempting to improve their innovative capacity. In the 21st century, the ability to innovate will separate the economic leaders from the rest of the pack. Advanced world economies know this and are seeking ways to use knowledge to create competitive advantages and a platform for further job creation and investment.

The good news is that everyone agrees on the need for innovation and “innovation cultures.” But by the time we reach the end of the essay, the solution to how we create an innovation culture is still elusive.

The LAST thing Spokane needs is yet another government, non-profit or consultant’s report telling us we need to embrace innovation! Well duh. Future investments in such studies should be directed to figuring out how to create – and fund – an innovation culture in Spokane!

The factors working against innovation are entrenched here, unfortunately. This is a culture where good enough is, well, good enough. Suggestions to try something new are met with “But we’ve always done it this way. Why change?”

Moving away from attitudes like this is what I mean by the challenge we need to confront in “Creating an innovation culture – for Spokane”.

Oregon’s High-Tech Employment Trends

OLMIS – Oregon’s High-Tech Employment Trends – What is High Tech?.

Ick:

The Oregon Employment Department forecasts a decline of 3 percent for computer and electronic product manufacturing over the 10 years from 2008 to 2018. This compares to overall employment growth projected at 9 percent.

Sadly, the Federal government policies seem to encourage migration of high value engineering work, especially software and now electrical engineering, to off shore destinations. This is not just a Spokane issue.

Here’s a chart of all engineering jobs in the U.K. – per the link, the number of engineering jobs in the U.K. is shrinking as companies move more work and more manufacturing offshore. Today the U.K. is in a financial disaster zone of horrible proportions. This “free trade” was, said the economists, going to deliver benefits to all parties. Has it?

Source

Spokane’s long term lagging economy

I have noted, repeatedly, that Spokane’s regional economy has lagged behind much of the state – for decades.

I ran across a 2003 Brookings Institution report that had this to say about Spokane’s past and recent economy:

However, the region’s economic performance has lagged behind that of the Puget Sound in terms of job creation and income growth. Agriculture has not been a source of employment growth for many years; productivity advances and stringent competition in the grain markets that are the mainstay of eastern Washington agriculture have removed possibilities of job growth in this sector. Mining in adjacent northern Idaho has also been severely impacted by international competition, tighter environmental regulation, and depleted deposits, resulting in several major mine closures. Since the 1980s, forest-based industries throughout the Northwest have been constrained by new sustained yield standards and tighter regulation of forest practices to protect various environmental values and endangered species. Thus another strong source of jobs in the Inland Empire became a source of dislocated workers.

And draws this conclusion:

As a consequence of these trends, a transition to alternative economic bases is an important goal. Technology-based development and a strengthened health care sector linked to biotechnology and biomedical instrument manufacturing are seen by area business leaders as the keys to further job and income growth in this region.

Read more of this post

Economic Gardening – Solving Spokane’s Economic Challenges

“Economic Gardening” is a topic I have wanted to cover since I began this blog – finally! And it’s fall and the seeds on this Douglas Maple are getting set to drop and start new seedlings next spring …

The concept of “economic gardening” began in Littleton, Colorado and lays out the background to why Spokane’s economic situation has (as documented by the data on this web site) fallen behind the income growth of Washington and the nation. “Economic gardening” is about growing your own business community by harnessing local innovation – and not being dependent on recruiting companies (or big government programs) from some where else.

The following also leads to general ideas towards a solution … read on!

Does this first paragraph quote sound familiar?

At the time, the entire state was in a recession and Martin Marietta, the community’s major employer, had laid off several thousand employees. There were nearly a million square feet of vacant retail space and downtown vacancies were approaching thirty percent. The Littleton city council expressed displeasure at having our future being dictated by out-of-state corporations and directed staff “to work with local businesses to develop good jobs.”

via Economic Gardening. All of the following quotes are from the Economic Gardening page at the Littletongov.org web site.

If an outlying area was successful at attracting new industry, it seemed to be a certain type of business activity: the branch plant of industries that competed primarily on low price and thus needed low cost factors of production. Rural towns with cheap land, free buildings, tax abatements, and especially low wage labor would “win” these relocating businesses. Our experience indicated that these types of expansions stayed around as long as costs stayed low. If the standard of living started to rise, the company pulled up stakes and headed for locations where the costs were even lower, often Third World countries.

(Gee, that explanation sounds familiar!)

we launched economic gardening with the simple concept that small, local companies were the source of jobs and wealth and that the job of economic developers should be to create nurturing environments for these companies.

…. it became clear that only three to five percent of all companies were high growth and these were creating the great majority of new jobs. Birch coined the term “gazelles” to describe these nimble, fast growing companies, a term which has since come into widespread usage. This small percentage number turned out to be true for Littleton and seems to be generally true for most communities (company towns being the obvious exception).

What we did notice in fast growing companies was a high correlation between growth and innovation. New products and processes seemed to be their lifeblood. At about the same time, we discovered works by economists Paul Romer, Paul Krugman, Brian Arthur, Annalee Saxenian and others that seemed to reinforce this point. It’s really ideas that drive companies and economies. Based on this, we proceeded to develop a full blown 13-part seminar series to bring state-of-the-art business practices to Littleton companies with a focus on innovation. We ran these for four years trying to make dramatic differences in the revenues and employment levels of our target companies. …. Instead, we ran head on into what most Small Business Development Center directors know in their heart of hearts—this activity is mostly a waste of time.

They found that creating a fast growth, innovation-based company depended entirely on the “temperament” of the CEO. No amount of government programs to “create innovation businesses” will succeed – until you change the culture.

in trying to understand why we weren’t having any more success than we were, we always came back to the same fact: Temperament is not very amenable to change, at least over short periods of time.

….

We read a study out of Dallas that indicated the most vibrant economies (in terms of producing jobs and wealth) were highly unstable in the sense that they had the highest rate of business start ups and business deaths. This turbulence also looked like an economy operating at the edge of chaos.

….

temperaments in organizations are much like regimes. Guardians are stable tending toward frozen ice while intuitives are chaotic like fire. Organizations that adapt and survive over the long run are neither ice nor fire, they are both. Intuitives provide the ideas, push for the changes. The Guardians provide the stability and the order that allow ideas to come to fruition

Bu the local planners came to realize they cannot make innovation happen. It takes a major culture change:

Even though we knew the tools and techniques that helped make entrepreneurs successful, there was another intangible (but very real) factor keeping local economies from improving. For the lack of a better word, I initially called it the “culture” of a community. By this, I meant the way that entrepreneurial activity and risk and innovation and even diversity and newness are viewed by local people.

The Morgan Leigh Group 2003 report documented that in Spokane “We frown on risk-taking”.

The next paragraph applies to where Spokane has come from – and to a fair extent, still is:

The Commodity Trap
In particular, I began to see a distinct pattern in “resource production” towns – communities that existed primarily to produce natural resources (farming, ranching, mining, timber, fishing). Because natural resources tend to be commodities – that is there is no difference between them – the consumer makes a decision based on the lowest price. Thus commodity producers are in a race to the bottom to provide ever cheaper prices which puts extreme pressure on employee wages.

Commodity production is not only the major reason for widespread poverty in these types of communities, but it also affects mind set about entrepreneurial activity. When profit margins are razor thin, a single mistake can send a farm, a ranch, a saw mill, a mine, a fishing boat into bankruptcy. Fear of mistakes and failure becomes paralyzing to innovation and risk.

Consequently, this type of environment – survival – reduces risk taking entrepreneurial activity. Then, like Spokane,

commodity towns tried to improve their situation by recruiting commodity industries. These towns billed themselves as low cost environments for business—low labor costs, low land costs, low utilities, low taxes.

and

Recruiting “successes” brought in commodity businesses who stayed as long as costs were low. When the standard of living started to rise, the commodity companies left for Mexico or southeast Asia where costs were even lower.

The linked web page where these quotes originate does not entirely solve the culture problem. The description of the commodity-based economies in smaller isolated towns – like Spokane – fits well. The description, above, applies to Spokane’s loss of many large companies (Kaiser Mead Smelter, parts of Kaiser Trentwood Rolling operations, Agilent, Itronix, ISC/Getronics, and others) – which as I documented have largely gone overseas for locations even cheaper than Spokane.

The question left unanswered is – “How do we change the culture here from risk aversion status quo to risk-taking entrepreneurship and innovation?”

The immediate problem is not the lack of resources to help support Spokane area entrepreneurship – the problem is the lack of a culture that fosters rule breaking, mind bending, risk taking innovation.

The key then is to determine:

  1. Step 1 is to accept that our current plans have not gone far (go read the history of Spokane area economic plans linked at right of this page). The chart I have drawn of a decades long drop in per capita income relative to the nation points to the general failure of current plans.
  2. Step 2 is changing the area culture to one that fosters and accepts risk taking as is done in Seattle or Silicon Valley. I have no idea how this is done or how to proceed. Suggestions wanted! This takes an entire community to change its outlook.
  3. Step 3 is to provide the necessary support structures – this means a combination of government, education and business initiatives.

Jumping to Step 3 without addressing the culture issue will not lead to the results we want. We must address Step 2 first.

At Step 3 we have SIRTI (provided your business idea fits their template model). We then need to add StartupWeekend and similar ideas to create new businesses, preferably those that are in tradable clusters, delivering products and services to outside the area to generate and bring income from elsewhere, into to Spokane. We need other kinds of business support too.

SIRTI ought to be the local sponsor of StartupWeekend.

But let’s not put the cart in front of the horse – we need to figure out Step 2 first!

Spokane area firm Itron Announces Record Quarterly Financial Results

Itron, Inc. – Itron Announces Record Quarterly Financial Results.

Itron is said to employ nearly 500 people in Liberty Lake, Wa, near Spokane. The company employs perhaps 7,500 to 8,000 total including elsewhere in the U.S. and outside the U.S.

The company makes electric power meters and sees significant opportunity with the up coming transition to “smart meters” for electricity, gas and water.

CNN: “Microsoft’s consumer brand is dying”

Ouch. Big Ouch: Microsoft’s consumer brand is dying – Oct. 27, 2010.

Microsoft, as a company, has failed to create new businesses around new products.

Reuters says much the same. Read more of this post