Tuesday, January 23, 2018

Minneapolis and the Bold North

Lake Harriet in Winter by Amy Mingo. Licensed under CC BY 2.0

In 2015 I reposted an article out of Minneapolis about how people in that city were thinking about the idea of rebranding themselves as the capita of a region called “the North” as opposed to the Midwest. I then followed-on with a few thoughts of my own.

The idea has apparently gathered some steam, as the Wall Street Journal recently reported:

A growing movement in Minnesota aims to break free of its Midwest roots and embrace its bone-chilling winters with a new identity: the North.

Seeking to conjure up images of competitive winter sports, icy lakes and snuggling in front of a toasty fire, these northern evangelists are ready for their moment in the sun when Super Bowl LII comes to Minneapolis on Feb. 4.

Minnesotans are “sick of being this afterthought in this afterthought called the Midwest. We’re the star of the North and no one else can offer that,” said R.T. Rybak, who served as mayor of Minneapolis from 2002 until 2014.

The state is using the North to tackle an economic challenge: historically low unemployment and sluggish population growth. Employers complain that they can’t find the workers they need to fill jobs. The unemployment rate in the Minneapolis region stood at 2.4% in November. The state has an unemployment rate of 3.1%, a full percentage point lower than the national average.

I don’t have much commentary right now except to note that they now seem to now be equating the North with Minnesota. This is effectively the same point I made when I previous noted that Minneapolis is mostly the capital of Minnesota. If the region is a state, why not just sell “Minnesota”? Nevertheless, I thought this idea was intriguing back then and still do. Embracing the idea of the city as the “capital of cold” is I think fundamentally a sound one.

from Aaron M. Renn

Monday, January 22, 2018

Using Private Capital for Infrastructure Is Not as Easy as It Sounds

Photo Credit: John W. Iwanski, CC BY-NC 2.0

Rahm Emanuel and former President Bill Clinton made a media splash in 2012 when they announced the formation of the Chicago Infrastructure Trust. The CIT would channel significant amounts of private capital into upgrading Chicago’s infrastructure, starting with a $200 million green energy retrofit project for city and school buildings.

“What you are doing here is the first, in effect, infrastructure bank using private capital that any city in the United States has established,” Clinton said at the time. The funding strategy, Clinton continued, was “the nearest thing we can get to a free lunch.” [via Better Government Association]

Fast forward, and, as the Sun-Times put it last month, the Trust is a bust:

The Uptown Theatre could have been the signature achievement of the grand plans Emanuel announced five years ago, with former President Bill Clinton’s endorsement, to persuade private investors to bankroll billions of dollars in public works projects across the city. 

The bold idea was that private financing could be found for much-needed, big-ticket improvements for the city, making it possible to get more of them done sooner and sparing taxpayers from having to foot the bills. City Hall says that still can happen. 

But the infrastructure trust has fallen short of the expectations the mayor laid out. It has yet to raise a dime in private financing for a single public works project, records show. At the same time, it has cost Chicago taxpayers more than $5.1 million to pay for its handful of employees, offices on Wacker Drive, consulting fees and other expenses.

I classify the CIT as an idea worth exploring that simply didn’t pan out. I think we actually want politicians who will try something new. In this case, $5.1 million isn’t chicken feed, but in the grand scheme of a city like Chicago, it’s hardly a large government outlay. Things certainly could have been vastly worse (e.g., the parking meter lease, the $200 million shell of an underground high speed rail station, etc). If $5.1 million is that max burn, it was probably a good idea to give the CIT a go. The major downsides are political, which is why the incentives often militate against politicians trying anything with the least risk of failure. (Rahm did himself no favors here by overhyping the CIT before it had actually done anything).

To his credit, Rahm has actually walked away from doing some bad deals with private money. He didn’t force the CIT to do something when it just wasn’t going to work out. (Apparently they did do something with energy efficiency, but it was tiny). He also walked away from an attempt to privatize Midway Airport, which is exactly the kind of facility you’d expect private investors to be salivating over.

The lesson I take away from this is that, in an American context at least, successfully using private funds to do infrastructure investment is a whole lot harder than many people seem to think.

from Aaron M. Renn

Friday, January 19, 2018

Industrial Concentration and the Decline of Competition

Economic concentration, such as industry consolidation into a handful of dominant giant players, has garnered a lot of talk lately. I mentioned, for example, a paper by Thomas Philippon arguing that the US has seen declining competitiveness in its markets.

David Wessel at Brookings recored a very short – less than three minute – podcast laying out the issues and evidence. Given the short length, I’d especially recommend giving it a listen. If the audio player doesn’t display, click over to listen on Soundcloud.

Cover image by Dmitry Avdeev, CC BY-SA 3.0

from Aaron M. Renn

Thursday, January 18, 2018

Amazon HQ2 First Cut Designed to Keep America Guessing

Photo Credit: Rober Scoble, CC BY 2.0

Amazon released its first cut of 20 cities in the bakeoff for its new 50,000 job HQ2, down from 238 initial bids submitted.

It’s hard to know exactly how to interpret this, but one takeaway is that Amazon wants to keep us guessing about where they are heading. There are bigger cities and smaller cities, high cost cities and low cost cities, red state cities and blue state cities, cities in every area of the country, etc.

The traditional high cost east coast cities are well presented. Among higher cost locales are Boston, NYC, and Washington. Philly is also on the list as a lower cost major east coast metro. There are two sites in metro New York and three sites in metro Washington listed separately, so there are really only 17 metros on the short(er) list.

The west coast has only one representative: Los Angeles. The Bay Area did not make the list. Denver is the sole representative from the Mountain West area. On the whole, this list is biased towards the eastern half the country.

Several Southern cities are on the list: Atlanta, Austin, Dallas, Nashville, Miami, and Raleigh. I was surprised to see Raleigh but not Charlotte, which is the notable loser among southern high growth cities. (I never rated Houston’s chances highly).

The greater Midwest had four cities: Chicago, Columbus, Indianapolis, and Pittsburgh. It’s especially notable that Minneapolis-St. Paul, which many people touted highly, did not make the cut. Nor did Detroit, which was another favorite (perhaps sentimental) among some folks.

And Canada had one entry in the form of Toronto.

Here are some observations. Note that these are relative to Amazon’s initial cut list, not the final winner. It may be that Amazon is doing a lot of misdirection with this list.

  • The idea that transit would be a decisive factor did not pan out. Many cities with very weak transit networks made the list.
  • The idea that state social policy factors would be determinant for a tech company like Amazon did not pan out. Indiana, North Carolina, and Texas are on the list.
  • All of my favorites – Chicago at the top, followed by Dallas, Atlanta and Philly – made the list.
  • Among smaller cities, the ones the made the list mostly have high or decent population growth. When you need to hire 50K people, labor force growth counts for a lot. Pittsburgh is the only exception here.
  • Toronto’s chances were likely hurt by the tax reform bill. Toronto had a much lower effective corporate tax rate than any US city, but that gap has narrowed.

Again I think this will be an interesting market test of the “rest of the rest” idea. Will Amazon pick a high cost coastal market, or a lower cost interior city (perhaps splitting the difference with Philly)?

The cities which made this list may also regret it. Putting together an initial bid only required a limited amount of money and civic time and attention. Now the costs start going up for the losers. It may well have been better to be one of the people who got cut early than to keep making through all these rounds only to lose (or potentially even to win).

For those on this list, the trick may be to figure out how to use it for marketing purposes as a form of social proof. I think all of the smaller cities will have an uphill climb, but if you’re Indianapolis or Columbus you can take the fact that you’re on the list as a form of marketplace validation, particularly regionally.

from Aaron M. Renn

Wednesday, January 17, 2018

Patrik Schumacher’s Privatized Vision for the Global City

Patrik Schumacher. Image via the Guardian

Architect Patrik Schumacher was the long time collaborator of Zaha Hadid, and how heads her eponymous firm after hear death in 2016. He’s a controversial character to say the least, wanting to essentially privatize all aspects of the city. But he also attacks the planning and zoning regulations that he argues are sending housing prices into the stratosphere.

I interviewed Schumacher for the Guardian, and the article is now online.

When Patrik Schumacher, who took over as head of Zaha Hadid Architects after its legendary founder’s death in early 2016, gave a speech at the World Architecture Festival in Berlin later that year, he nearly caused a riot. In the speech, which was about how to reduce sky-high urban housing prices, he proposed eliminating social housing, privatising all public spaces – including streets – and selling off most of London’s Hyde Park for development.

The London Evening Standard slammed him on its front page, mayor Sadiq Kahn criticised him as “just plain wrong”, protesters showed up at his offices, and some fellow architects called for denying him any future platforms to speak or write.

Schumacher was no fringe figure. He’d been a partner at Hadid’s practice and has helped design acclaimed structures ranging from the Maxxi museum in Rome to the Leeza Soho in Beijing, which will feature the world’s tallest atrium. He has a PhD in philosophy and has written a two-volume, 1,200-page book called the Autopoiesis of Architecture. When he took over at Zaha Hadid Architects he inherited one of the highest-profile jobs in global architecture, with real clout to see his ideas put into practice.

So was he actually serious in that speech?

“Quite serious, especially about the privatisation agenda,” he says.

“My staff here in the firm – young professionals – they know they have to be close. They can’t afford to live miles away,” he says. “They need to be in the pub afterwards debating issues. They need to slip over to the exhibition opening or that university lecture close by. They need to go to the networking breakfast before work or be available on the weekend maybe for seminars. People feel it in their bones. They have to be in the centre.”

Land prices are the biggest threat to this urban primacy. “People are moving out of LA, out of the Bay Area. They have to create other tech clusters because of land prices. Now that’s a tough choice for a young startup – to swallow these huge prices or to pull away. But pulling away means being less connected, being less productive potentially.

“These are decisions we shouldn’t have to pose to ourselves. It’s the same as here in London where people pull away and try to build a kind of tech cluster in Croydon. It’s sub-optimal. It’s not necessary. They should pile in to Shoreditch and to the tech cluster there rather than pulling away to Croydon. It makes no sense.”

Click through to read the whole thing.

from Aaron M. Renn

Tuesday, January 16, 2018

Would You Move to Wisconsin to Save Ten Minutes?

Next City pointed me at a new ad campaign the state of Wisconsin is running aimed at luring Chicago Millennials to move north.

The focus of the campaign is on Wisconsin’s lower cost of living and shorter commute times vs. Chicago. The state says:

The messaging conveys the central idea that Wisconsin is “more you.” You can be more here, mean more, create more impact, and have more, making Wisconsin a better fit for you. To drive this point home, specific ads contrast life in Wisconsin with that in Chicago, highlighting the state’s shorter commute time, lower cost of living, lower taxes and numerous recreational, social and cultural opportunities.

I find this interesting because, other than potentially outdoor recreation, the campaign does not really attempt to convince you that Wisconsin is better than Chicago in any respect, merely that the costs of living there are lower. In terms of product, the campaign imagery portrays Wisconsin in two ways: as a place for outdoor recreation, and as a facsimile of urban Chicago.

Here are some clips from their pre-roll ads. First, an urban rooftop bar in what appears to be Madison:

Here’s a stylishly dressed couple heading to a swank restaurant.

The image at the top of the post shows outdoor recreation. Here’s another example.

One thing about a campaign like this is that attempting to lure residents to a state, as opposed to a specific locale, is an intrinsically difficult task. Wisconsin has multiple urban centers and diverse rural type areas as well. State agencies have to be fair to all areas of the state. But it’s impossible to represent all areas equally well in a campaign of this type. So they have a hard job.

I’d also give them kudos for the outdoor focus. Wisconsin is already known to Chicagoans as a place for outdoor recreation, weekend homes, etc. Chicago has the lake, but otherwise much of northern Illinois is flat. So it’s natural to highlight the easy availability of outdoor activities in selling the state. It’s interesting to see that the campaign appears to steer clear of hunting and fishing, two great Wisconsin pastimes.

Unfortunately, they are attempting to compete against Chicago where Chicago is actually pretty strong. The Windy City is more expensive than Wisconsin, but probably has America’s best “Quality-Price Ratio” of when it comes to truly big city urban environments. The reality is that someone with a professional income can live pretty well in Chicago. Also, you aren’t going to live in one of nicer urban precincts of a city like Milwaukee for the ridiculously cheap rent you might imagine, particularly if you want to live in one of the high quality apartments or homes showcased in the video.

As I always remind people, choosing a place to live is more like buying a house than buying laundry detergent. For Tide, all you care about is the price tag on the bottle. But I’m guessing very few of us live in the cheapest home we could find. It’s more likely the opposite, that we live in the most expensive one we can afford, in the best neighborhood, with the best schools, the nicest amenities, etc. Price is a factor, but not the only one. Also, if cheap is what you are looking for, America, and even the Midwest, is replete with low cost communities.

Another of their focus areas is commute time. They claim that, ““Chicagoans have the longest commute times in the country.” I thought this was curious, but perhaps it came from this survey. By contrast, they note that Wisconsin’s average commute time is 22 minutes. It’s not fair to compare a city against a state in commute time. But even so, per that survey that says Chicago has the worst commute, the average commute time there is only 32 minutes. Are people really going to move to another state to save ten minutes?

Some people in Chicago undoubtedly have long commutes. But some do in Wisconsin as well. I never had an L commute of anywhere near an hour, not even when I lived in Evanston. So I don’t think the hour commute they talk about in at least one of their ads will even resonate with most Chicagoans. Also, their shots of the L make the principal negative feature boredom. But otherwise it actually looks quite pleasant, with no crowding at all – maybe even better than reality.

The best Wisconsin appeal based on a cost-quality-commute type of evaluation is probably suburb to suburb. The nicer suburbs of places like Indianapolis and Columbus compare very favorably with most Chicago suburbs. I would assume the same is true for Madison and Milwaukee. Of course, in Chicagoland the suburbs are actually seeing declines in college-degreed Millennials, so the pond to be fished there may be limited. Then again, maybe Wisconsin’s best appeal isn’t to Millennials, but to Generation Xers in the 35-55 bracket.

When I think of Wisconsin I think of cheese, beer, Packer nation, pristine lakes and forests of the northern part of the state, the Dells, and Madison’s (deserved) reputation as one of the best (if not they best) examples of a lefty college town.  Some of the Wisconsin images, such as beer and brats, also apply to Chicago, making them hard to use as a marketing hook. But many of the traditional ideas about the state are missing from this campaign. Chicagoans, who know those images well, will probably be wondering what’s up.  Maybe cheese curds aren’t cool. But then again, either was Pabst Blue Ribbon until some marketing folks made it so.

Marketing to Chicago, and potentially next to Minneapolis and Detroit, makes sense at one level. People tend to move shorter rather than longer distances. People moving to Wisconsin are also likely to have some historic connection to the state, and Chicago is a good place to look for them.

But it’s also an example of the Midwest’s beggar thy neighbor style of economic development. The fight is against the city next door, with the rest of America (to say nothing of the world), not part of the picture. Is there a better market for Wisconsin to try to attract from?

Based on its target geographies and appeals based on cost, this campaign doesn’t appear to becoming from a place of perceived strength.

from Aaron M. Renn

Monday, January 15, 2018

The Upsides of Tight Labor Markets

Photo Credit: Kathryn Decker/Flickr, CC-BY-2.0

If you didn’t see it, the NYT had a front page piece on Sunday about how tight labor markets in some cities are forcing employers to rethink their stance towards hiring people with criminal records.

Employers are also becoming more flexible in other ways. Burning Glass Technologies, a Boston-based software company that analyzes job-market data, has found an increase in postings open to people without experience. And unemployment rates have fallen sharply in recent years for people with disabilities or without a high school diploma.

Until recently, someone like Jordan Forseth might have struggled to find work. Mr. Forseth, 28, was released from prison in November after serving a 26-month sentence for burglary and firearm possession. Mr. Forseth, however, had a job even before he walked out of the Oregon Correction Center a free man.

Nearly every weekday morning for much of last year, Mr. Forseth would board a van at the minimum-security prison outside Madison, Wis., and ride to Stoughton Trailers, where he and more than a dozen other inmates earned $14 an hour wiring taillights and building sidewalls for the company’s line of semitrailers.

After he was released, Mr. Forseth kept right on working at Stoughton. But instead of riding in the prison van, he drives to work in the 2015 Ford Fusion he bought with the money he saved while incarcerated.

“It’s a second chance,” Mr. Forseth said. “I think we’re proving ourselves out there to be pretty solid workers.”

Mr. Forseth got that chance in part because of Dane County’s [Madison’s] red-hot labor market. Stoughton Trailers, a family-owned manufacturer that employs about 650 people at its plant in the county, has raised pay, offered referral bonuses and expanded its in-house training program. But it has still struggled to fill dozens of positions.

A lot of people got essentially exiled from the labor force during the Great Recession and its aftermath. This includes people with criminal record, but as noted in the piece it also includes others like high school drop outs, those with disabilities, people who ended up with a long employment gap on their resume. We could add to that people recovering from addictions of various types, etc.

Businesses love to complain about not being able to attract workers. But now they are starting to take previously off-limits action themselves, instead of asking the government to bail them out.

This is a positive development and I hope it lasts for a while and expands geographically. Employers had been acting like the prima donnas of hiring, demanding the exact right person with the exact right skills, etc. This bad for them and bad for the country.

There’s always been a group of people essentially shut down of the system and living life on the margins. This is probably inevitable in any human society of any size. But when you end up with millions and millions of people in that category, that’s a very bad development.

America is the land of the second chance. There are a lot of people in the country who need another chance. Sadly, not everybody is going to make it. But getting people a job, where they can start taking responsibility for themselves and their family, and start a journey of personal change and growth, is essentially a precondition to getting at least some percentage of people out of a bad spot.

As I noted when talking about proposed “ban the box” regulations:

These companies have become penny-wise and pound foolish.  Today they only care about short term profits in the now. With untold millions of unemployed, underemployed, and out of the labor force Americans of prime working age, these firms would be well-served to change their approach and start making a broader effort to give people a chance to get their foot back into the working world.

When this sort of structural unemployment is high, the social contract broadly construed says it’s something we all should care about and want to do something about.  If American business decides they won’t, ban the box regulation is likely to be among the least of the consequences the discipline of the political marketplace ends up imposing on them.

Perhaps the marketplace is starting to force businesses to take the kinds of actions that are probably beneficial for themselves in the long run.

from Aaron M. Renn