Talent attracts capital far more than the reverse
The primary lesson Michigan Future has learned can be summed up in three words: talent attracts capital. In this case, talent means primarily those with a four-year degree or more. What the most prosperous nonenergy-driven states and regions have most in common is a high proportion of their adults with a bachelor’s degree or more.
The phrase talent attracts capital comes from a 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 10% 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 two big regions — Detroit and Grand Rapids — are not competitive. The state is consistently in the 30s in the proportion of adults with a four-year degree or more.
So, understanding the characteristics of where mobile talent is concentrating has become 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 the 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. Michigan Future’s 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.” The path to prosperity for communities is human-capital driven. 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 communities where mobile talent wants to live and work. To create those places will require five fundamental shifts in Michigan’s approach to economic policy:
1. Shift from an emphasis on being a low-cost state to a state that develops, retains and attracts human capital as its core strategy for economic success.
2. Shift from intolerance to welcoming all people who will increasingly be needed in a 21st-century economy as Michigan’s population rapidly ages.
3 .Shift from an economic strategy based on low taxes to one that recognizes taxes must be balanced with the need for public investment in lifelong learning, workplace skills, placemaking and shared prosperity.
4. Shift from state limitations that prevent regions from controlling their own destinies to giving them the flexibility to develop, finance and implement their own quality of place strategies.
5. Shift from accepting a crumbling 20th-century infrastructure to providing a world-class, 21st-century infrastructure where transportation matters most and means complete streets, not just fixing the damn roads.
Lou Glazer is president of Michigan Future Inc.