Tag Archives: Creative class

The New Wave of Wealth Creation: ThinkGeek

Photo credit: Washington Post

Photo credit: Washington Post

GameStop, the digital gaming retailer, has just paid $140 million to purchase Fairfax-based ThinkGeek, an online retailer of apparel and gadgets to the “geek” market segment entranced with nerdy cultural icons from Star Trek to Minecraft, from Doctor Who to Game of Thrones. The company peddles products as diverse as “Rebel Fighter silk ties” to mini-refrigerators mimicking Han Solo embedded in a block of carbonite.

The company was formed by four Fairfax residents in 1999 as a side project but grew steadily and organically, reaching sales of $112 million by 2012, according to Wikipedia. The founders sold the company to an outside owner relatively early in the game, so it doesn’t seem likely that the original founders made much, if anything, from the deal.

Still, I love the ThinkGeek story because it typifies the kind of subterranean wealth that is being created in the United States economy. Other than the nerds who patronized the website, who’d ever heard of ThinkGeek before? Who knew it was based in Fairfax, Virginia? Who imagined that the enterprise was worth $140 million?

While it takes some technological competence to run an online retailer, most of its technology can be purchased off the shelf. Other core competencies are logistics and fulfillment and, most important, the ability to market creatively to a demographic niche. The Fairfax County Economic Development Authority didn’t have to recruit ThinkGeek to move to the county — it got off the ground there because that’s where its four founders lived. It stayed in Fairfax because it could easily recruit tech-competent employees there. I’m willing to bet that no one offered ThinkGeek any “incentives” along the way.

Those of us who think about what it takes to create more prosperous, livable and sustainable communities need to ask ourselves this question: What can we do, if anything, to foster the growth of more ThinkGeeks in Virginia?

— JAB

Measuring Diversity

Source: WalletHub

by James A. Bacon

A popular body of thought today hails “diversity” as one of the United States’ great strengths. That may be difficult to imagine at the moment, with race relations more strained than at any time since the school busing controversies of the 1970s, but the idea has much to recommend it. Innovation, argued Frans Johansson in his book “The Medici Effect,” comes at the intersection — the intersection of cultures, the intersection of academic disciplines, the intersection of industries. Insofar as the world is evolving into an innovation-driven economy, metropolitan regions that entertain a wide diversity of perspectives arguably have greater potential for artistic, cultural and entrepreneurial innovation.

WalletHub, a compiler of imaginative geographical rankings, has devised an intriguing set of metrics to compare the diversity of 230 sample U.S. cities based upon their rankings in a larger group of 350 cities. (Interestingly, Washington, D.C.-based WalletHub counts Arlington, a county, as a city.) The twelve metrics used in 2015’s Most Diverse Cities in America index fall into four broad categories: economic class diversity; ethno-racial & linguistic diversity; economic diversity; and household diversity.

By way of explanation, the compilers of the diversity rankings write:

Rapid diversification is one of the main drivers of our economic success. In recent decades, waves of immigration as well as financial and social mobility have not only changed the face of America but also ushered in a wealth of fresh perspectives, skills and technologies.

And thanks to its ever-expanding diversity, the U.S. remains forward-looking and extremely adaptable to change. According to the United Nations Industrial Development Organization, economies generally fare better when they openly embrace and capitalize on new ideas. Conversely, those relying on old ways and specialized industries tend to be more susceptible to the negative effects of market volatility.

There is no question that cultural diversity breeds innovation. A classic example is the interaction of many musical styles rooted in local American cultures — from African-American blues, white Appalachian bluegrass, Cajun zydeco — that gave rise to jazz, country, rock n roll, soul, rap, punk and many more musical styles. Musically, the U.S. is the most innovative country in the planet, with no peer. On the other hand, some might take issue with the notion that socio-economic and educational diversity — another way of describing inequality — is a boon to innovation. Likewise, one could argue that industry diversity is a hamper to innovation; innovation is most likely to occur in regions with powerful industry clusters like those seen in the Silicon Valley (digital), New York (financial) or Los Angeles (film).

It would be interesting to run correlations between WalletHub’s diversity metrics and metrics of economic performance to find which factors show the strongest relationships. Complicating any such analysis is the fact that, while WalletHub is measures the diversity of “cities,” cities are embedded in larger metropolitan areas, which may or may not share the same diversity characteristics.

With that important caveat, it is interesting to view the diversity of Virginia cities:

diversity_rankings(For a detailed breakdown of all 12 metrics, click here.)

If there is a strong correlation between diversity and innovation, Hampton Roads cities should be the economic dynamo of Virginia. Let’s just say that that’s a stretch. Likewise, Arlington is the least diverse “city” in the state — just too darn many affluent and well-educated residents. Yet somehow it manages to have one of the highest incomes of any jurisdiction in the U.S.

Frankly, I don’t find the data terribly useful in their current incarnation. But I give WalletHub credit for its creativity in dreaming up new metrics. I hope the company recycles this feature in 2016 in a format that compares metropolitan regions rather than core cities. For wonks like me, the data could prove endlessly fascinating.

In Praise of Whimsical Statuary

whimsical_art
Yes, it’s true, London has more statuary per square mile devoted to dead kings, lords, generals and admirals than any other city on the planet. (One cathedral, Westminster Abbey, has more statuary than entire states in America.) It’s all very serious and patriotic, and of considerable interest to foreign visitors. Perhaps the most best known monument is that of Lord Nelson, victor of the battle of Trafalgar. Needless to say, monument space in a premier locale like Trafalgar Square is very precious — you can’t turn it over to just any old run-of-the-mill military hero like the dudes who led the Burma campaign or won the battle of Omdurman.

How is it, then, that a skeletal horse stands upon one of four plinths at such a revered location? Moreover, how is that the skeletal horse is bedecked with an electronic ribbon with a digital ticker tape-like display of the London Stock Exchange? Apparently, the work by Ekow Eshun, a German artist, is a commentary on the relationship between money, power and history. I’m not certain exactly is what is implied, but I’m sure it’s not meant to be flattering to those in power. Thus, has public art evolved from celebrating national institutions to questioning them.

DunamisI suppose one reaction to such art would be to declare it symptomatic of our civilization’s self-loathing — a sign of decay. There’s probably some sense to that view. But I have a second reaction. I find the statue amusing. It makes a nice change of pace from dead heroes. Google “whimsical statues in London” and you’ll find an extraordinary variety of creative works, such as the one at right of a jester holding up an elephant by its trunk. It’s all part of “cool Britannia,” part of what makes London such a fun, exciting, world-class city.

Virginia could use a few such public works itself. Of course, public art requires public spaces to display it. And Virginia suffers from a paucity of quality public spaces. Try putting this kind of art in a shopping center or subdivision. There aren’t many suitable locations. But if we want to build the kind of communities that inspire creativity and innovation, we need to open ourselves to the display of creative work even if, from time to time, it challenges the nexus of money and power. We want to see more wealth-creating entrepreneurs, and challenging the nexus of money and power is exactly what entrepreneurs do.

— JAB

Let Richmond Be Richmond

Virginia Museum of Fine Arts gallery. Artsy fartsy, it's who we are. Get over it. Embrace it.

Virginia Museum of Fine Arts gallery. Artsy fartsy, it’s who we are. Get over it. Embrace it.

I delivered this speech last night to a gathering at the Branch House in an event hosted by the Virginia Center for Architecture. — JAB

Buffalo, N.Y., a metropolitan region about the size of Richmond, is debating how to pay for a new $1 billion stadium complex for the Buffalo Bills National Football League team. The City of Richmond is debating how to pay for a $56 million stadium for the Richmond Squirrels AA baseball team. I don’t know if Buffalo will ever find the money, but it really doesn’t matter. If professional sports is your yardstick of metropolitan prestige, Buffalo is running – maybe I should say stampeding — Richmond into the dirt.

But, objectively speaking – assuming this audience can be objective – where would you rather live? Let’s look at some commonly used metrics:

  • The Richmond metropolitan region has a lower unemployment rate than the Buffalo metro – 4.8% compared to 5.8%.
  • Richmond has a lower poverty rate – 11.6% compared to 14.4%.
  • Richmond has a higher median household income — $55,300 compared to $46,400.

I think we can safely and objectively say that big league sports is no guarantee of metropolitan prosperity.

While Richmond can’t seem to get a minor league baseball stadium off the ground, consider VCU’s Institute for Contemporary Art. The community managed to raise $33 million through private philanthropy with no angst whatsoever.

Pro football or contemporary art. What do our choices tell us about the Richmond region? Richmond is an artsy fartsy kind of town. And that’s OK. In fact, I’m going to argue that artsy fartsy is a good thing as we reinvent ourselves for the 21st-century Knowledge Economy.

It is commonplace today to observe that the biggest challenge for any metropolitan region is recruiting and retaining the highly skilled, highly creative citizens – scientists, artists, educators, entrepreneurs – who drive innovation and contribute disproportionately to economic growth. Somewhat more controversially, I would argue, those desirable citizens are more likely to want to live and build a career in a region that has vibrant arts & culture than one that has big league athletics.

If you accept that proposition, then it tells you a lot how we ought to be investing our civic capital. For the billion dollars it would take Buffalo, N.Y., to build a bigger, better stadium for the Buffalo Bills, we could make Richmond the arts capital of the Southeastern U.S.!

The urban geographer Richard Florida made a big splash thirteen years ago when he published the book, “The Rise of the Creative Class.” His argument, boiled down to its essence, is that Americans, young Americans especially, were increasingly likely to choose where to live based on the attributes of the region rather than because that’s where they could find a job. He turned economic development on its head. Instead of recruiting corporations, we should be recruiting the creative class. Corporations will follow the creative in order to gain access to employees with the higher-order skills and aptitudes that are in short supply.

If we embrace that perspective, we need to ask two fundamental questions: (1) What does it take to attract young professionals to RVA? and (2) What does it take to keep them here? In other words, how do we do a better job with recruitment and retention?

Richmond has a relatively stable population. We don’t get a huge flux of people moving in or moving out. Fortunately, we do seem to attract more people than we lose — we experience net in-migration. Between 2013 and 2014, the Internal Revenue Service recorded the influx of nearly 32,000 new “tax returns” into the core Richmond region – by which I mean Richmond, Henrico, Chesterfield and Hanover. During the same period, those four localities experienced an out-migration of 29,000 tax returns. That represented a net gain of about 2,800 tax-paying households in a region with about 300,000 tax returns – or a gain of not quite one percent. That’s not bad. But it could be better: We’re not in the same league as national talent magnets like Austin or Raleigh, much less Silicon Valley.

Interestingly, two-thirds of the in-migration came from other locales in Virginia, only one-third from outside the state. Pending closer analysis of the numbers, I would conjecture that that RVA functions as a regional magnet for talent, as opposed to a national magnet, drawing mainly upon the hinterland of smaller Virginia cities and towns. Many could come from the many fine colleges and universities in the state. But we really don’t know. There’s a lot we still need to learn. Continue reading

Transience and Fresh Blood, Two Sides of the Same Coin

fresh_blood

Every community needs fresh blood — newcomers who bring  different perspectives and creative ideas. But it’s possible to have too much of a good thing. If everyone is a newcomer, communities lose social cohesion. Transients don’t have the same stake in a community that the old-timers do and they’re less likely, all other things being equal, to participate in the political process, engage civically and contribute to local causes.

I thought it would be interesting to see which localities in Virginia are most dominated by newcomers. Working with Internal Revenue Service migration data, which tracks the movement of tax filers between 2010 and 2011, I calculated the percentage of in-migrant tax filers for that year as a percentage of all tax filers, and then ranked Virginia’s localities. (Click here to view a spreadsheet of all Virginia localities.)

Though not especially surprising, the findings are interesting. The most transient localities in Virginia, as seen in the chart above, are cities and the state’s most urbanized county, Arlington. Prince George County, southeast of the Richmond-Petersburg region, is the only anomaly.

fresh_blood_low

The localities with the least fresh blood tend to be rural, poor and geographically isolated, predominantly in the mountain regions of Virginia, but some from the red clay country of the Southern Piedmont.

There is an extraordinary difference in the degree of transience. Fredericksburg had almost nine times the number of newcomers expressed as a percentage of all tax filers in 2011 that Dickenson County did.

By itself, this data is little more than a curiosity. It becomes useful when correlated with transience/fresh blood with economic indicators such as job growth, income growth, housing prices and other cost of living indicators, education, voting participation and various indices of social engagement.

– JAB

Redefining Richmond: Arts! Culture! Food!

ICTby James A. Bacon

Richmonders berate themselves (and outsiders mock them) for their inability to decide where and how to build a baseball stadium for a AA baseball team. If the region’s political and civic leadership can’t pull off this most basic of regional tasks, one might legitimately wonder if they can accomplish anything useful at all. But it turns out that Richmonders can mobilize behind civic projects — it just has to be the right kind.

A case in point is Virginia Commonwealth University’s Institute for Contemporary Art, which has raised $33 million of its $37 million funding goal. Construction of the facility, designed by an award-winning New York architect, is located at Belvidere and Broad, one of the region’s busiest intersections and a gateway to downtown. This project, which will showcase art from VCU, one of the nation’s leading art schools, has not been controversial at all. Funds were raised through contributions by local philanthropists. With help from a construction loan from the VCU Foundation, construction began in June.

A city and region define themselves by the long-term investments they make in civic infrastructure. To pick a very different example: Buffalo, N.Y., a region of comparable size to Richmond, has poured money into a pro football complex downtown more magnificent than anything than Richmonders could conceive of erecting in their own city — and locals still aren’t satisfied. Buffalo groups are exploring an even more grandiose facility. Richmond has nothing to compare. But it does have arts and culture out the wazoo. And we locals like it that way.

Speaking to the Richmond chapter of Commercial Real Estate Women, Institute Director Lisa Freiman outlined the vision. As reported by Virginia Business, the institute will  showcase a changing array of exhibitions not only by VCU artists “but the best of contemporary art from around the world.” Freiman predicts that the facility “will create opportunities for cultural tourism and community revitalization.”

The tie-in between contemporary art and economic development is stronger in Richmond than it would be in many other regions. The advertising industry is remarkably vibrant for a region Richmond’s size. Local companies serve national clients, and they employ artists, graphic artists, videographers and the like. There is a easy, natural cross-over between the art world and the advertising world. Supporting one supports the other.

rappahannock

Travis Croxton (left) and Ryan Croxton, owners of the Rappahannock restaurant. Photo credit: Times-Dispatch.

Meanwhile Richmond — and Virginia as a whole — is developing the reputation as an up-and-coming foodie region. Esquire Magazine has just named Virginia “The Food Region of 2014” in its 2014 Food and Drink Awards. “The Old Dominion has seemingly overnight exploded into one of the country’s greatest gastro regions,” writes the magazine, as reported in the Times-Dispatch. While the recognition goes to Virginia as a whole, Richmond is a vibrant part of the state’s foodie scene. Rappahannock restaurant won recognition as one of the 12 “Best New Restaurants” in the country.

The article cited Virginia’s diverse geography and the ability to source fresh, locally grown produce and artisinal food products from the mountains to the Chesapeake Bay as a big plus for restaurants aspiring to national quality. I’m sure that’s a factor, but I think the story is bigger than that. Richmond and Virginia produce great restaurants because the local marketplace supports them. People are willing to pay premium prices that restaurants must charge in order to recruit and pay chefs of national caliber.

New Yorkers and Washingtonians may laugh at Richmond’s pretensions in the worlds of art and cuisine — to many we’re still a hicksville backwater still fighting the Civil War. What they don’t see is how the region is steadily reinventing itself. Once the city prided itself on being a regional center of corporate headquarters. That prop to the economy suffered heavy damage during the recession of 2007-2008 and has been slow to recover. But there has been tremendous activity beneath the surface. Redevelopment along the downtown canal. The Richmond Folk Festival. Converting the James River into the region’s “Central Park.” The boom in downtown living. The French Film Festival. The gentrification of Church Hill and Scotts Addition. The creation of a fantastic network of mountain biking trails. The rise of the foodie movement and the renaissance of locally grown food.

Unconsciously, Richmond has been building the foundations of the “creative class” economy. It’s becoming the kind of place where creatives want to live, work and play. When creatives settle here, they start new businesses. In time, some of those businesses become success stories and economic dynamos that will propel regional growth. VCU’s Institute for Contemporary Art symbolizes how Richmond is redefining itself as something very different and very new.

More Awesomeness in Richmond

Another reason I love my home town: Richmond has 40 miles of world-class single-track bicycle trails. I’ve been on a few of them, although, I do confess, I don’t ride nearly as fast as the two guys in this short video! (Nor can I do the neat wheelie tricks up and down stairs.)

What I find especially cool is that the biking enthusiasts — trail gnomes, in their own parlance — help maintain the trails for everyone’s benefit. They clear routes of fallen trees and debris (as shown in the clip), prune vegetation and repair sections worn away by run-off. It’s an all-volunteer effort.

Biking trails in wild public spaces in the center of the city are a rarity and a gem.

— JAB

Live Art

SONY DSC

It was a gorgeous day in Richmond yesterday, temperature in the high 60s and the most perfect blue sky I have ever seen — the ideal setting for street artists to ply their craft. In the second annual RVA Street Art Festival, nearly 30 painters gathered at the old GRTC bus garages this week and used brick walls as their canvas. Thousands of people came to watch. 

See more pictures of the RVA Street Art Festival.

Kudos to Ed Trask and Jon Baliles for organizing another great event.

— JAB

SONY DSC

Let’s Jump on the Peer-to-Peer Bandwagon

Vested interests in cities around the country are mobilizing to thwart a new generation of peer-to-peer technologies threatening to disrupt the lodging and transportation industries.

I have documented the difficulties of Uber, the e-hailing service (tap on your smart phone app and an Uber limo comes to pick you up), in Washington, D.C., where it has run afoul of the taxicab cartel. There must be at least a dozen more start-ups coming out of Silicon Valley or Europe — I’ve included YouTube shorts for RelayCars, Airbnb and Flightcar — that allow people to catch rides, share rides, rent someone else’s car or rent someone a room in someone else’s house.

As start-ups, these companies focus their efforts first on major markets like San Francisco, Chicago, New York and Washington. But they often run into regulatory barriers, as described here and here. Not surprisingly, the stakes are really big in those markets and the special interests are really entrenched.

So, here’s the idea. Why don’t second-tier cities (or regions) like Richmond and Hampton Roads make themselves hospitable to the peer-to-peers? Sure, there are local taxi services in each region but they have very small travel-share and they lack the political clout of their big-city counterparts. Why don’t we go out and promise to help work through any regulatory obstacles if these guys commit to establishing a serious presence in our regions.

We could end up with a greater variety of transportation and travel choices, which benefits everyone (except the entrenched competitors). And having more of these Internet-based services active in the region adds a coolness factor that the younger generation might find attractive. Yeah, I know, half or more of these companies will be out of business in two years. So what? The other half might transform their industries. And, as regions, we could send out a signal to the world: We’re open to competition, open to innovation. Check us out.

Another idea from the fertile (some might say febrile) brain of Jim Bacon…

Misunderstanding the Link between Taxes and Economic Development

Tax Foundation graphic reproduced in the Atlantic Cities blog.

Tax Foundation graphic reproduced in the Atlantic Cities blog.

by James A. Bacon

In his latest post at the Atlantic Cities blog, Richard Florida asserts that a “lower state income tax does not spur economic development.” In support of his proposition, he argues that states with higher tax burdens are more affluent; they have higher concentrations of talent and workers in the so-called “creative” occupations. Writes Florida:

States with tax [income tax] burdens that range from $1,205 to $1,864 per person average $10,000 more in income than states with zero state income taxes — $81,594 versus $69,612. The same pattern is true of wages — states with high collections average $50,610 in wages versus $43,638 for states with low collections.

That’s pretty much his whole argument, although he does cite a two-year-old study from Nevada finding that states with Republican governors are associated with somewhat lower rates of growth and another study that criticizes “business climate” indexes as designed with political ends in mind.

There’s really no excuse for such superficial analysis. Yes, it’s true that high taxes and high incomes are correlated. But which way does the causality run? Do high taxes lead to high incomes, or do high incomes lead to high taxes? I would argue that the high incomes came first and the high taxes followed.

The evidence will show that some high-income states can trace much of their good fortune to historical factors, such as their 19th-century and early 20th-century leadership in the industrial revolution that created the vast wealth that seeded key institutions (universities, especially) necessary for the transition to the late-20th century transition to the knowledge economy. Thus, to pick an obvious example, Massachusetts prospers today because it is home to Harvard, MIT and a host of other highly ranked universities with billion-dollar endowments — not because of the splendiferous benefits conferred by its high taxes. Other states retain pockets of prosperity because they are home to world-class industry clusters that emerged decades ago and that seemingly no amount of mal-governance can dislodge. Think California, Silicon Valley and Hollywood.

What small-government conservatives argue is that lower-tax regimes stimulate more economic growth than high-tax regimes. Lower taxes may have little effect on an entrepreneur’s proclivity to launch a new business, but they do allow entrepreneurs to retain more of their earnings, which they can reinvest in growth. (With the wealth of online tax calculators and estimators available, it’s much easier for businesses to get a better idea of their tax situation in order to grow in one state or another.)

The evidence is indisputable that high-tax states, on average, experience less job creation and significant out-migration to low-tax states. It’s pretty intuitive that people don’t move from New York to, say, Florida, North Carolina or Georgia for the better restaurants and high-brow culture. They move in search of superior job opportunities and lower cost of living. As a result, over a time span measured in decades, the income and wealth gap between Southern states and Northern states has narrowed considerably, even more so if you adjust for the differences in cost of living.

Where the debate gets interesting is when you ask the question, do higher taxes allow some states and local governments to support a higher level of infrastructure, amenity and service that people value more than the taxes they’re paying? Essentially, that is the argument that Florida makes. Insofar as states and regions use higher taxes to pay for better public schools and higher education, there may be some truth to that counter-argument. But when higher taxes go to pork-barrel spending, outrageous retirement packages for public employees and a more generous safety net for the poor, the argument falls apart.

To summarize, taxes are only one variable among many affecting economic growth and they explain only a modest fraction of the variability in growth rates between states. While lower taxes are (to my mind) clearly preferable to higher taxes, it would be unwise to overstate the case and tout them as an economic-development panacea. On the other hand, it is foolish, as Florida has done, to insist they have no significance.

For what it’s worth, Virginia’s income tax burden is 8th highest in the country, according to Tax Foundation data. Maybe that explains why economic growth here is relatively sluggish given the otherwise favorable business climate we have.