Our Corridors of Innovation

MidasMoments: Rob Slee’s Comments on the Nation

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Last week we talked about the importance of having a positive relationship with failure. Some of you correctly added that in some areas of the country, failure is not only tolerated, it is worn as a badge of honor. It’s no coincidence that in these areas most of the innovation occurs. It turns out that the US has just 5-6 areas where most of our creative ideas and actions emanate.

These ecosystems of innovation are: greater Boston, greater Chicago, Northern California, Southern California and the great Northwest. So what makes these corridors so special? Aside from fostering a positive relationship with failure, they share three traits: 1) they have at least two major universities that feed the area with new technologies and scores of creative individuals; 2) they’ve had at least 3 home grown technology companies go public with resulting market cap’s of more than $2 billion. Large public technology companies tend to spawn hundreds of smaller private technology companies; 3) these corridors are socially tolerant. You know your region is not tolerant when a pink-haired, heavily-pierced young man walks into a restaurant and all of the parents think: “thank goodness that’s not my kid.”

Global capitalism is a battle between incrementalism and departurism. The incrementalists tend to inhabit the U.S. hinterlands; while the revolutionaries feel more comfortable living in the corridors. Many of you have heard me say that business owners who plan to grow their revenues by 5-10% per year for the foreseeable future are dead before they even get the words out of their mouths. Incrementalists are being replaced by owners who depart from traditional business models and strategies.

So what happens to people who do not live in one of these value-creating corridors? While it’s still possible to be innovative, the creativity deck is totally stacked against them. Because radical creativity in the hinterlands tends to be a cause of great concern to the local denizens. In other words, the metaphorical pink-haired crowd is often ostracized and made to feel uncomfortable. Now you know why I left Ohio more than 25 years ago.

For once, I’m not the only person on earth who is thinking about this stuff. According to Richard Florida, my favorite social geographer, place is not only important, it’s more important than ever. Globalization is not flattening the world; on the contrary, the world is spiky. Place is becoming more relevant to the global economy and our individual lives. The choice of where to live, therefore, is not an arbitrary one. Florida says it may be the most important decision we make, as important as choosing a spouse or a career. In fact, place exerts powerful influence over the jobs and careers we have access to, the people meet and our “mating markets” and our ability to lead happy and fulfilled lives.

Just a few tidbits from Florida’s books:

– new college graduates tend to select the city first (usually within the corridors) that promotes opportunities and personal growth, then they seek a job there

– most patents in this country are issued to companies within the corridors

– most new business models are created within the corridors

So why does this matter to the U.S.? Shouldn’t the U.S. generate the same total productivity inside and outside the corridors of innovation? In theory, the answer is yes. While productivity in the corridors goes way up, output in the hinterlands goes way down. So, other than most of our states continue to generate mainly minimum wage-type jobs and they lack the tax revenues to maintain their infrastructure, GDP for the country should be the same.

And remember, corridors outside the U.S. compete for our talent too.

The foregoing explains my quote in “Time Really Is Money”: the future is already here, it is just unevenly distributed.

– Rob

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