From Outsourcing to Insourcing

By Evan D. Robertson, Project Associate.


It’s no secret that Market Street staff feel strongly that manufacturing serves a vital role in the local economy. Two great examples that come to mind are Matt Tester’s blog titled In Which We Tell Manufacturing’s Future which details the myriad of developments that are restoring American manufacturing competitiveness, and Ellen Cutter’s past post describing the adoption of automation in factories throughout the country. So, to add more fuel to the fire, I recently came across Charles Fishman’s article pronouncing the death throes of outsourcing in America.

The chase for cheap labor has been a part of American business ethos for decades. But, as Fishman describes, CEO’s are beginning to see that this pursuit comes at a cost: less control over intellectual property (knock-offs), higher shipping and logistics costs, and increased wage parity with China. Increased wage parity with China? I know, borderline crazy talk. But, when General Electric recently moved the production of their technologically advanced, environmentally sustainable water heater (GeoSpring) to the United States, they were able to eliminate one out of every five parts, cutting the cost of materials by 25 percent. And, the reduced complexity of the water heater cut General Electric’s labor costs. The American manufactured water heater takes just two hours to manufacture, down from ten hours in China. With efficiency like this, you can see why Jeff Immelt, CEO of General Electric, states “I think the era of inexpensive labor is basically over. People that are out there just chasing what they view as today’s low-cost labor – that’s yesterday’s playbook.” The decades-long ethos may soon be coming to an end.                

Crowdfunding Local Development

By Matt Tester, Project Manager.

As the reality of our Great Reset takes shape, I’ve developed a fascination with the question of how our places – infrastructure and buildings – will be financed and developed going forward. My last post covered a cadre of urbanists making waves with a fiscal argument for efficient infrastructure development that prioritizes local return. In this post, I want to highlight what I think is one of the most exciting ideas to land in the realm of placemaking: crowdfunded real estate development.

As covered by Emily Badger in Atlantic Cities (read the piece – it’s long and it’s good), Washington D.C.-based brothers Dan and Ben Miller have launched the first investment platform through which anyone can invest in local real estate projects. Their new company, Fundrise, provides a website listing local investment offerings (properties) in which anyone with a computer and money to invest can buy shares. What their existence means is that neighborhood residents can invest in neighborhood projects, shaping their community’s destiny in unprecedented ways.

According to its founders, Fundrise has arisen in response to a real estate development model that produces a disposable built environment while also excluding the average citizen from enjoying the bounty (historically) generated by commercial real estate projects. The predominant real estate investment vehicles are accessible only to certified investors and poorly account for local preferences, resulting in cookie-cutter properties. Citizens can’t invest in projects that most acutely impact their neighborhoods. Further, local projects that lack scale or fail to meet pre-defined criteria struggle to find capital. Quirky projects that local residents might love often fall through the cracks.

Fundrise’s early projects have shown promise. Shares for their first project, a two-story brick building in Northeast Washington, D.C., sold out in three months and design work will begin this year for the Asian-inspired market that will fill the space. Still, the crowdfunding model faces challenges. For instance, the Miller brothers have swallowed almost a million dollars navigating regulatory webs and developing the concept; most developers wouldn’t stomach those sunk costs. The potential for fraud certainly exists, just as it does in any complex investment. And, of course, the investment could tank – businesses fail and the buildings that house them sometimes share the same fate.

Despite the challenges, companies like Fundrise may be ushering in one of the most disruptive ideas to ever hit real estate development. The problem of up-front regulatory costs may be circumvented by Fundrise’s model, which would allow other developers to simply list their projects on the Fundrise website. If Fundrise provides the investment platform (think Kickstarter), each developer’s project wouldn’t require its own version. And, the more painless the process, the more interest developers will take, and the more we’ll see local residents pouring money into projects in their own neighborhoods. I, for one, would welcome the age of local development finance. I’ve already got my eye on a few properties in my neighborhood’s commercial district, and will be watching with interest.                

Bridging the generational gap in Gwinnett

By Matt DeVeau, Project Associate.

When Nick Masino moved to Atlanta in the late 1990s at 23 years old, he settled in Gwinnett County, an area northeast of the core city known for its excellent public schools and decidedly suburban, low-density character. But Masino, now the Senior Vice President of Economic Development and Partnership Gwinnett at the Gwinnett County Chamber of Commerce, recognizes that a 23-year-old moving to the region today is much more likely to eschew Gwinnett in favor of a more dense, walkable neighborhood located “Inside the Perimeter” – a term Atlantans use when referring to communities close to the central city that fall within the Interstate 285 ring road.

For Gwinnett to maintain its position as an economic powerhouse in the decades to come, Masino and other community leaders recognize that the county must work diligently to attract and retain young professionals. This was the focus of the 2012 Partnership Gwinnett Summit, which took place earlier today on the campus of Gwinnett Technical College. The annual summit highlights the progress and successes of Partnership Gwinnett, a community and economic development initiative that Market Street worked with community leaders to create first in 2006 and again in 2011.

According to Census Bureau data, Gwinnett’s population grew by nearly 37 percent between 2000 and 2010, but much of this is attributable to the 45-to-65 and 65-and-over age groups, which each grew by more than 66 percent. The 25-to-34 age group had by far the slowest growth rate at just 9.9 percent. While this in many ways reflects national demographic trends, it nonetheless poses a concern for Gwinnett, which relies on its dynamic and educated local workforce to fuel growth in targeted industries such as advanced manufacturing and health sciences and services.

Of particular concern are changes in the location preferences of young people. Consumer research by RCLCO, a national real estate consultant, found that 81 percent of “Generation Y” renters are moving to urban or close-in “Urban-Lite” environments. Two-thirds say living in a walkable community is important, and one-third say they are willing to pay more for the privilege. This is problematic for a place like Gwinnett that, with a few notable exceptions, is mostly typified by auto-oriented subdivisions.

The summit focused on the multi-faceted ways in which Partnership Gwinnett is addressing these issues. The event featured three panel discussions, each focusing on an area that is important to attracting and retaining young people. The first addressed education and the attempts of Gwinnett’s schools and colleges to integrate technology into the learning process and to orient curricula to prepare students for jobs available in the county both today and in the future. The second focused on the entrepreneurial environment in the county and metro area, and highlighted the need to better publicize the access to capital and other resources that are already available to local entrepreneurs. The third focused on the effort of three Gwinnett cities – Duluth, Snellville, and Suwanee – to market to create environments that appeal to young professionals through marketing and placemaking.

The event closed with a keynote address from Brian Leary, a developer whose graduate thesis at Georgia Tech was the impetus for the redevelopment of a former steel mill into Atlantic Station, a massive mixed-use development in Atlanta that was the nation’s largest urban brownfield redevelopment at the time of its completion. Leary reiterated one of the day’s most common themes – that Gwinnett must appeal to young professionals, particularly those who work in the county’s booming business sector but live in the city. In other words, Gwinnett needs to appeal to me, about 12 months ago. Prior to joining Market Street, I worked at the Gwinnett Chamber as a Research Associate supporting Partnership Gwinnett. Like many of my younger colleagues, I lived in a multi-family apartment building in the City of Atlanta, within a close walk of dozens of restaurants and bars.

Gwinnett County probably won't be able to match the kind of environments – both physical and social – that can be found in major cities like Atlanta, and frankly it shouldn’t try. What it can do is provide many of the best elements of urban living – such as walkable places and their accompanying dense social networks – to a community that can offer other advantages such as great schools and an abundance of quality jobs. I think it’s truly remarkable that Partnership Gwinnett is making such a strong push in this area. If fully implemented, I expect that it will pay dividends down the road in the form of a new generation of leaders and innovators.                

Book Review: For the Love of Cities

By Matt Tarleton, Project Manager.


With lots of personal and work-related travel in the last few months, I took advantage of plenty of airborne downtime, set aside the crosswords and sudokus, and read a few books that I’d been carrying around for a while. The first on the list, For the Love of Cities, is written by Peter Kageyama, co-founder of the Creative Cities Summit and former President of Creative Tampa Bay. 
I delved into the book a few months ago after it was passed along to the Market Street team by one of our clients, the Greater Omaha Chamber. The opening chapter sets the stage for the larger discussion by challenging the reader to question, although not overtly, if we really “love” our community. Not like, but love. Or more explicitly, do we have an emotional connection with the place we’ve chosen to call home? Kageyama believes that those who truly love their community necessarily become engaged in their community. They become “co-creators” or the “one percent” according to Kageyama. They become entrepreneurs, activists, artists, and other citizens that create new assets and experiences (a community garden, a store for local artists, a neighborhood watch, etc.) that are consumed by the other 99 percent and increase the character of a community.
Kageyama best writing lies in the early chapters that follow this introduction, where he discusses what, in his opinion, has led to people falling in love (and out of love) with their cities. This naturally includes a discussion of how we can change the dialogue regarding community development, and in turn, our policies, to focus on creating places with which we have an emotional connection. And while there are some utopian assertions (e.g. let’s talk about “love” and “fun” in council meetings instead of “density bonuses”), Kageyama makes some very keen observations. The following passage supports what we at Market Street often emphasize to our client communities – that great things can be done at little cost, that residents and volunteers (Kageyama’s “co-creators”) can be change agents, and that creating an enjoyable community can help create a prosperous community.
“When the makers (co-creators) are doing cool stuff that we see, engage in, and consume, we appreciate it and we become more engaged with our place. We might even be motivated to try to do something ourselves because we have seen how cool it is when things are made to happen. That may be the ultimate gift that the co-creators provide their communities. We can be moved by seemingly small and insignificant things. Communities that recognize this can develop strategies and tactics that embrace the idea of how to make the community more interesting, engaging and loveable. These strategies can be layered into existing approaches to community and economic development with relatively little expense. Things that make communities interesting and loveable don’t necessarily cost a lot of money. What they do require is insight and sensitivity to the idea that we are building emotional connections with our citizens – not just paving roads, expanding our tax base and collecting garbage.”

(pp. 40-41)

Kageyama is most effective in the first four chapters when discussing his central idea – “the love affair between people and their places” – challenges the reader to think about their own relationship with their place. The next few chapters, which focus on identifying and quantifying the most “loved” communities and their defining attributes, will frustrate the most elementary statistician, and likely seem redundant to anyone that has read anything written by Richard Florida in the last decade. The same is true for the final chapters which focus on ways in which communities can become more loveable. There are some interesting stories interwoven in these chapters about various co-creators and the impact they had on their communities. There are also some unfortunate digressions such as a discussion of how communities can and should emulate Apple, Inc.

In the end, Kageyama’s message is clear: find your community’s co-creators, empower them, and help other residents move up the “continuum of engagement” to increase their numbers of co-creators. You’ll find of plenty of examples from other communities: this may be the most valuable piece of the book to many readers. The first few chapters are certainly a worthwhile read, and as previously mentioned, you’ll find some examples in later chapters that may help you uncover and empower the co-creators in your community. It’s worth purchasing and passing around the office. But it’s perhaps more valuable to the average co-creator described by Kageyama. The ideas will resonate with them, the characterization will at times exalt them, and the stories inside may inspire them.                

Red State, Blue State, My State, Our States

By Jonathan Miller, Project Associate.

The 2012 presidential election is over. The votes are in, the large touch screens are back in hibernation, and millions of TV viewers will happily return to seeing commercials that have not been approved by a candidate. There are many memorable moments from the campaign, including mentions of both Big Bird and the use of bayonets in American military history, made-up words like “Romnesia” and phrases like “binders full of women,” and the relentlessness of Mr. Donald Trump to make news during the campaign.

ECONOMIC CHANGES BY 2012 ELECTION OUTCOME, JANUARY 2008 TO SEPTEMBER 2012 

 

 Note: Florida was uncalled at time of publication, thus is not included.
Source: U.S. Bureau of Labor Statistics; National Association of Realtors via Economy.com

One of the defining aspects of the campaign was the recurring question, “Are you better off than you were four years ago?” This question shaped the campaigns and put the spotlight on the state of the economy. The following table shows, on aggregate, how red states and blue states fared over the past year. Interestingly, while all states fared poorly over the past four years, blue states shouldered a heftier share of the economic burden.

While the implications of this election are still coming into view, it is clear that the American electorate is a dynamic body, ebbing and flowing in response to many different issues. However, we now must turn to the task ahead and understand how the election will impact America over the next four-plus years. The following headlines, gathered from a number of news outlets, give a glimpse as to what we can anticipate in the coming days, weeks, and years.

“Vote data show changing nation,” The Wall Street Journal, November 8, 2012

“Hispanic vote tilts strongly to Obama in win,” Reuters, November 7, 2012

“How US marijuana legalization may change the world,” Time, November 8, 2012

“Back to work, Obama is greeted by looming crisis,” New York Times, November 8, 2012

“Political focus shifts to fiscal cliff,” The Wall Street Journal, November 8, 2012

“How the gay-marriage victories are (slowly) transforming the notion of family,” Time, November 8, 2012

“How to rebuild trust and infrastructure,” Time, November 8, 2012

“US and European stocks struggle to stabilize: Worries over fiscal cliff and eurozone economy linger,” Financial Times, November 7, 2012

“Election removes cloud from health law's future,” The Wall Street Journal, November 8, 2012

“Boehner extends hand, says GOP open to ‘new revenues’,” Washington Post, November 8, 2012

“These not-so-united states,” Washington Post, November 8, 2012

The political battles that are coming over the next four years are varied in scope, size, and topic. The country is grappling with social issues, economic challenges, and an overall lack of trust in government. For the second Obama term to be successful, the outcome of the campaign should not be considered a resounding endorsement or mandate, but rather a signal that bipartisanship is truly the only way forward.                

Women: 50 Percent of the Population, But Only 35 Percent of Entrepreneurs

By Ranada Robinson, Senior Research Associate.

Today, I attended an Innovations in Economic Development Forum at Georgia Tech with my colleague Evan Robertson. The theme was Empowering Women Entrepreneurs, and the two speakers were Alicia Robb from the Kauffman Foundation and Jen Bonnett of StartupChicks.

In addition to the starting statistic cited in the title, women also account for less than 16 percent of owners of businesses with employees.

Alicia Robb talked about several important actions women must take to be more involved in the economy as well as some of the public policy implications.

• Women need to learn to define success on their own terms, measuring personal satisfaction, independence, and balance, not just financial gain and firm size.
• Women need to establish networks of mentors and peers and work on exuding confidence and being willing to seek funding. Did you know that only 21 percent of women entrepreneurs actually ask for angel capital?
• Women need to increase their presence on the investment side—only 15 percent of angel investors are women and only about 11 percent of investing partners at venture firms are women.

Public policy suggestions included:

• Encouraging more women to go into STEM fields,
• Providing financial literacy training opportunities for citizens,
• Developing more inclusive policies that encourage women and minorities to pursue entrepreneurship,
• Making sure financial capital is available and affordable, and
• Creating better balance between women and men at senior levels of angel investor networks and venture capital firms.

Jen Bonnett, one of the founders of StartupChicks, discussed her adventures in entrepreneurship including her most notable startup endeavor: eTour, which was acquired by Ask.com. She believes there are five main steps to success (in this order):

1. Education: Not just degrees, but entrepreneurial training on topics such as financing, business operations, and negotiating.
2. Community: Creating a support system of peers who can help each other as they travel similar paths.
3. Coaches: Finding mentors and advisors to hold the entrepreneur accountable and provide direction.
4. Connections: Developing the connections to investors and customers needed to grow a business—these may come from the coaches as a natural progression when they see how hard the entrepreneur is working.
5. Capital: Women do not ask for the money they need to be successful—both speakers noted that men generally overstate their business’s growth potential while women frequently understate theirs.

Small businesses are critical to the American economy, and the gap between men and women entrepreneurship is still staggering even in 2012. Communities who are actively seeking to support and grow entrepreneurship and small business must strive to be all-inclusive in supporting and encouraging the lucrative ideas of every resident to see economic growth for all.

 

Graphic Source: Ezebis.com 

There Will Be Graphs: Part Six of a Series

By Evan D. Robertson, Project Associate.

If you’ve ever used LinkedIn, or Facebook for that matter, you’ve probably noticed a pesky little box somewhere in the upper right hand corner with a head line that reads something to the effect of “people you may know.” Often times, these connections are dead on. Other times, you’ll get a random stranger, or worse, people with whom you just aren’t on speaking terms. Awkwardness aside, both social networking websites use a generally straightforward process to determine whom to recommend. It’s called “triangle closing.” Triangle closing can help you identify potential connection opportunities, allowing you to improve the overall connectivity of your network. Information having trouble reaching some of your Chamber members? Increasing the connections between your members might improve the situation. But, I am getting a little ahead of myself. First, I’d like to go through the highly self-conscious process of analyzing my own social network. For this analysis, I simply downloaded my Facebook friends network, and looked at the relationships between my friends in the context of my whole Facebook network.

While analyzing your own social network will likely have you narcissistically asking whether this is really all the people you know, it is equally interesting, and if you’re a business professional, insightful. My social network, containing all 173 of my friends on Facebook, is pictured above. Nowhere close to the few thousand that most people seemingly “know” on the web these days, but I’ve always been a quality over quantity type of guy.

Overall, my social network is fairly disconnected. My Facebook density is .087, with a value of 1.00 equaling a network in which everyone is connected. In other words, my network has about 8.7 percent of the total possible connections. Interestingly the average degree of my network (the average number of people an individual is connected to) is 14.89, so the average person in my network knows about 15 of my other Facebook friends. Both the lack of connectivity in my network and the number of interconnections isn’t surprising as my social network is largely a time lapse.

Three large clusters appear in my friends network, they are highly correlated with time (no regression needed, I lived it). The three clusters are centered around three important periods in my life: high school, my undergraduate education at Georgia State, and graduate school at Georgia Tech. Each cluster is loosely connected to one another, with only a few of my friends serving as network bridges. As an aside, it was remarkable to see who these network bridges were as they weren’t who I was expecting. Now, for the important bit: why does this matter?

Let’s, hypothetically, say that my Georgia Tech friends are throwing me a birthday party. They want to get as many of my close friends as possible to the party. Come party day, I arrive, and I am surprised. Surprised to notice that everyone I know from Georgia Tech is there, and a few people I know from high school, but absolutely no one I know from my soul-searching period at Georgia State is in attendance. Is my surprise valid? Not at all. Here’s why.

The above graph displays the shortest path (in red) between my most connected Georgia Tech (Point A) friend and a Georgia State friend selected at random (Point B). In order for my Georgia State friend to receive an invitation to my surprise party, my Georgia Tech friend would have to communicate with four other people. More accurately, the information would have to flow directly through two specific people (network bridges) in order to have the remote possibility of reaching my Georgia State network. Even if the information was able to find these bridges, it still has to deal with the possibility of information being muddled. It’s similar to the game of telephone you played when you were a child: some information is bound to be inaccurate by the time it gets to its final recipient. In this case, maybe my Georgia State friends get directions to the wrong house. With this knowledge, is there any way to ensure that my Georgia State network is more represented in my next birthday extravaganza?

Quite simply, yes. It is the exact same method that LinkedIn uses to identify “people you may know.” How does it work? It’s easily demonstrated pictorially.

Above is my graduate school network with three people highlighted in red. This is a partial triangle, one person knows two other people, however, those two other people don’t know one another. Triangle closing would entail connecting these two other people as shown by the green line below.

With the triangle closed, my network has become denser; information is able to flow more freely than before. If I complete this process a number of times, I can begin to establish more network bridges between the three distinct clusters of my social network. Information, thus, can flow more freely.

Understanding your social network, whether it’s your own or your organization’s, can give you greater insight into how you are connecting with your target audience. Imagine if my network were members of a local Chamber of Commerce, understanding that the network is clustered into three distinct groups would help me to understand what types of connections I should begin to make and who would best be able to bridge relationships across these distinct groups. With the explosion of social networking tools such as LinkedIn, Twitter, and Facebook, having greater control over your communication strategy and understanding your audience (and connections between your audience members) can improve the efficacy of your social media campaigns, especially in ascertaining why certain information isn’t getting to some of your audience. If nothing else, it can create some really cool graphs.