Friday, January 8th, 2010

Replay: The Giant Sucking Sound

Nearly all rich and powerful people are not notably talented, educated, charming, or good-looking. They became rich and powerful by wanting to be rich and powerful.” – Paul Arden

But God has chosen the foolish things of the world to confound the wise; and God has chosen the weak things of the world to confound the things which are mighty.” -I Corinthians 1:27

This is the latest installment in what has become a trilogy of sorts on talent and migration. (See also “Out-Migration Devastates Michigan” and “The Outsiders“).

When I posited that a critical mass of non-natives is a near prerequisite for civic change, someone noted that the Midwest needed to import more talented people because it was no secret what was really need to change things. In his words, “It takes brains.”

I’m sympathetic to this in a sense. In the 21st century economy, attracting top, educated talent is of paramount importance. But I wanted to post a rebuttal as well, because this is not the whole story. In fact, in the long run, it might be of lesser importance than other, more important things that often fail to attract notice. This idea of “attracting the best and brightest” is such a well-established meme that it is seldom subjected to any critique. It’s time to change that. Especially as it is the basis of so much urban policy.

I have a colleague in Hamburg, Germany who attributed his country’s relative economic stagnation over the last couple of decades to the fact that “we’re the children of the people who stayed.” That is, faced with a choice about what to do in the face of dire poverty and endless wars in the 19th century, Germans had two choices: stay or leave, usually by emigrating to the United States.

Today’s Germany is the inheritance of those who stayed. My friend argues, very persuasively, that this robbed Germany of its entrepreneurial energy. Those who were risk takers, those who were motivated to better themselves, those who weren’t afraid to take a chance to get the opportunity for a better future for themselves and their family, left Germany. Those who wanted to play it safe, who preferred the devil they knew, who were in fear of the great unknown, they stayed behind.

Today Germany remains, despite its robust Mittelstand, a place curiously lacking in entrepreneurial energy. I was told that in Germany, to go bankrupt is a moral stigma that ruins you for life in that society. That there are coal mines kept open by subsidies that are higher than the average wage of the workers who are employed there. It would be cheaper simply to pay them their salary for the rest of their life to do nothing than to keep the mine open. Yet these workers insist that they have a right to “earn” a living by mining – and that their children be allowed to become miners too as a sort of hereditary avocation.

The contrast with America could not be more stark. How many coal miners in Kentucky hope that their sons end up in that mine? Maybe, as a last resort. As I noted about visiting foreign countries, you are sometimes made aware of values and beliefs you were never even conscious of holding. The idea that one generation should have it better than the next, that children should surpass their parents in income and social status, I guess I always just thought of as being as natural as the air we breathe. But it seems far from the case.

My paternal great-great-etc grandfather came to the United States from Bavaria early in the 19th century. (I still occasionally get emails from people in Munich with the same last name as me, “Renn”). He was fleeing conscription. My maternal grandfather was the only member of his immediately family born in United States. The rest of them were from Sicily. He was 6’2″ but his brothers were very short because they had been so malnourished as children and didn’t get enough protein. I’m sure most American families can tell similar stories.

If talent matters so much, how is it that a nation made up largely of Europe’s rejects ended up becoming the most powerful economy on earth? While we were able to pick up some great talent in the mid-20th century because of Hitler and WWII, we were not notably the place to be for the European upper crust, whether that be aristocrats or intellectuals.

Maybe education and talent aren’t the most important thing in the long run. Maybe the “talent” that matters is a willingness to take risk, to change, and the desire to better one’s condition. I won’t suggest this is the only thing that matters, but it strikes me as important. To be sure, Europe’s more rigid class structure did not give full scope to intellectual capacities for people from the lower classes, so we no doubt got some geniuses we could put to good use that they were underutilizing. But interestingly, that still seems to be the case today in much of the world.

Also, consider: people who are successful in the now are those who are best adapted to today’s world. But the world isn’t ending in a few weeks, it stretches out into the future. Who will be best adapted to tomorrow? In a world of rapid and increasing change, over-optimization for today’s conditions is an economic death sentence. Rather, we’ve got to be able to change ourselves and adapt to the future. Thus, the willingness to change and to take risk will take on ever greater importance to keep up.

In two absolutely must-read essays called “The Unnaturalness of Human Nature” and “The Role of Undesirables” (available in his masterpiece “The Ordeal of Change“), Eric Hoffer discusses this in his normal penetrating style as he talks about the particular importance of the “unfit” in paving the way to tomorow.

“The inept and unfit also display a high degree of venturesomeness in welcoming and promoting innovations in all fields. It is not usually the successful who advocate drastic social reforms, plunge into new undertakings in business and industry, go out to tame the wilderness, etc. People who make good usually stay where they are and go on doing more and better what they know how to do well. The plunge into the new is often an escape from an untenable situation and a maneuver to mask one’s ineptness. To adopt the role of the pioneer and avant-garde is to place oneself in a situation where ineptness and awkwardness are acceptable and even unavoidable, for experience and know-how count for little in tackling the new, and we expect the wholly new to be ill-shapen and ugly.”

It isn’t just about attracting the talented – usually meaning the educated and already successful – of today. It’s about attracting the talented of tomorrow – and those are people we often don’t even know are talented yet. Innovation depends on the outcast.

So many places seem to be missing the boat. Canada would be a great example. They are trying to make it easy to immigrate there if you are an educated person with money. They want to exclude others who might prove a “burden” on society. But this fails to take a life-cycle view of talent. It’s like have children. Children in the modern economy are a deadweight loss economically for about the first 18-22 years since they produce almost nothing. But without children, where will we be when today’s workers retire? (Again, look at Germany to find out). It’s similar for other aspects of talent. We need to be replenishing the soil with new risk takers and entpreneurs, not actually self-selecting for the risk averse and depleting the nutrients needed for tomorrow.

In an era of rapid change, playing it safe is actually the riskier course. Putting all your chips on the now, and not spreading some money around the table on speculative bets that may never pay off is a recipe for ruin.

Which would you rather have, a handful of Ph.D.’s with big reputations or a few thousand Mexican peasants who literally risked their lives sneaking across the desert to get into this country? Maybe it depends on the time frame you are looking at.

Ross Perot famously talked about a “giant sucking sound” from jobs headed south of the border. He was completely backwards. The real giant sucking sound is America hoovering up all of the risk takers, entrepreneurs and most motivated citizens of Mexico. We’re sending them a few jobs. They’re sending us their true “best and brightest”. We’re sending them some factories, they’re sending us their future.

So I say it takes more than brains – a lot more. As I’ve said before, what really matters is that a city is a place where people of all stripes decide they will plant their flag and seek their fortune – not come to spend it after they already earned it someplace else. If your city isn’t attractive to hustlers, poor immigrants, ne’er-do-wells of various kinds, entrepreneurs, avant-garde creatives, etc., if people aren’t voting with their feet to move there to better their lives, this is telling you something very powerful about the future. In a very real way, the long term future of a city depends as much on attracting the supposedly least talented as it does the most.

This post originally ran on April 19, 2009.

Topics: Demographic Analysis, Economic Development, Public Policy, Talent Attraction

17 Responses to “Replay: The Giant Sucking Sound”

  1. Adam Kuebler says:

    I remember when you ran this the first time, I absolutely loved this post!

    In order to get the educated and talented, you need things to offer the educated and talented. But in order to get the things which are attractive to the educated and talented, you need a market of them to use it. Which came first, the chicken or the egg?

    The entrepreneur.

    The entrepreneur takes risks in places, industries, and markets where the educated and talented don’t go because it is too easy where they already are. But the tired, poor, huddled masses who take a risk because that is their only chance for a better life. Most achieve marginal success for themselves, but what they create for their children, and for their city is bigger than what most of the educated and talented ever do in their lives. They create the environment which attracts the educated and talented: an abundance of jobs, and most importantly, the easy opportunity.

    As you said, it is the risk takers who blaze trails, and lay down the easy paths for the educated and talented to come.

  2. Pete from Baltimore says:

    This post reminds me of when people say “Latinos are such good workers”.I know many Salvadorians and they often complain about some lazy brother of theirs that stayed in El Salvador and doesnt work and lives off the money that my friends send back to their mothers.

    In short , there are plenty of lazy Salvadorians,Mexicans,ect. They just dont come to America.They stayed home.Immigrants are almost always harder working and/or smarter than the ones that stay behind.And by their nature they are usually risk takers.Obviously not all immigrants are saints.But in general i do think that we get the “cream of the crop” .

  3. Alon Levy says:

    Bear in mind, America got the cream of the German and Irish and Italian crop back in the day. Somehow Germany and Ireland and Italy are doing okay today.

    Entrepreneurialism isn’t genetic.

  4. Michelle says:

    Fascinating subject, I am new here and agree with the fact that entrepreneurialism is an integral component to the growth and development of great American cities. However, as an established country, our cities are no longer in the growth and developmental stage, we are in a period of economic downturn and need to think about reorganization and sustainability as opposed to trail blazing entrepreneurialism. Intrapreneurship is what we need to be thinking about right now, the ability to develop new enterprises within our already established cities. And that perhaps most importantly will require creative thinkers with a comprehensive knowledge of the past who are not afraid to look toward an intricate and diverse future. You are correct, people do vote with their feet. And sometimes those feet become immobile, mired down in the impoverished quicksands of decaying cities, a sad social fact we cannot overlook. A great city adapts and builds a new foundation for its people to stand upon – and that foundation inevitably lies within the very strength and diversity of its people. Our success depends upon our creativity and willingness to adapt.

  5. Eric says:

    Understanding the peculiar wanderlust gene that runs in my immigrant family, I have to concur with much of what you say here. My Mexican father and all his siblings married foreigners and none live in Mexico, case in point. All of them would have belonged to the aspiring Middle-class of Mexico, started business there and what not, but they are not doing so. They came here to do that.

    We Americans know that success is maximizing your chances. There’s a hard work gene, but also a gambling one at play…inherited from our prospecting forefathers. We are prone to risk (granted, this also makes us prone to folly and bubbles). I often think of the aspirational risk trait being more manifest the further west you go in our nation. The folks that stopped in the Midwest were the more pragmatic bunch of us. They saw good enough. Californians are the most American of all of us…the most daring and aspirational.

    You could say that the wanderlust/aspirational-risk gene is “inherited”, but part of that is in the ethos of the family in which you are nurtured. In raising us, my father was not particularly insistent on academic/career excellence and whatnot; he kind of, yes…expected that from his genepool. :) But he has always thought with unbridled aspirational vision foremost. I think that is what marks his character, and, I suppose, that peculiar trait transferred to his children. Myself and my two siblings are graduates of the kind of American schools that reject more applicants than they accept (let’s put it that way). The hoover definitely called my father here.

    The kind of people who tend to immigrate here are exactly the restless folks who chance long odds. Part of it is, they just can’t help it. They are the Californians of the world.

  6. Wad says:

    Michelle, you can have “success depend(ing) upon our creativity and willingness to adapt” or sustainability, but not both. They are incompatible.

    The problem with sustainability as an eco-conscious imperative: It’s a losing battle. At the deepest level, how can there be sustainability in a universe of entropy?

    Creativity and willingness to adapt are signs of a dynamic society. That means taking risks and more importantly, knowing when to cut losses.

    The Urbanophile is an intelligent site that has broad applications on the world but has a Midwestern focus. One of the common themes Aaron touches on is finding an economic “why” for the Midwestern cities outside of Chicago that have become the Rust Belt? Why did it happen, and how (or if) they can reinvent themselves?

    The Midwest built itself importance by becoming the world’s industrial powerhouse. It did. Now it’s a graveyard of old factories. Why? Sustainability.

    The Rust Belt sustained those factories, and that sustainability led the factories to become so successful that they found ways to put those same factories anywhere else in the country — and now anywhere in the world.

    Usually, the solution is how to recapture faded glory. This is done while other cities offer opportunities to utilize the talent that is needed to restart moribund areas.

    Michelle, Jane Jacobs touched on these topics in two books she wrote: “The Economy of Cities” (1970) and “Cities and the Wealth of Nations” (1984). She gives a unique look at how cities thrive or wither.

    They’re hard to come by, and the real-world examples cited are outdated (many references to USSR cities and such). A good Cliffs Notes summary is here:

    Read the section under the heading “Unbalanced regions.” The theory is that a dynamic city region has the ability to draw supplies, capital, jobs, migration and transplants. Plus, all 5 must be in balance. This is not a sustainable practice; it’s actually quite chaotic.

    Dynamic cities have the creative people who can adapt and have the willingness to adapt. It’s also recognizing how to adapt to future crises.

  7. Thanks for the great comments. Eric, that’s a great personal story as well.

  8. Michelle says:

    Wad, guess we’re getting bogged down in semantics here, but I have to disagree, sustainability is the capacity to endure, so I don’t understand why that would be incompatible with creativity and our willingness to adapt. I know who Jane Jacobs is and although I don’t come from what is technically known as the American midwest (I come from Picher, Oklahoma, a cursed “supply region” and have experienced first hand the economic, enviornmental, and social impacts of a city putting all its eggs in one basket) I find this a fascinating subject and am just here to learn. I apologize if I wasn’t supposed to post here.

  9. Wad says:

    Michelle, I never meant to discourage you from posting here. You’re addressing the topic and help keep the coversation moving. You should feel welcome to post here. And please stick around.

    Urbanophile is one of the best urbanist sites on the Web.

    My primary quibble with sustainability is the feedback problem. Humans, when they find a good or process that is sustainable, become dependent on sustainability.

    All natural resources are finite. What happens when there is a disruption to or exhaustion of those resources? A crisis occurs, and it’s coupled with the problem of humans’ economic and social position tied to the leverage of those resources. Laborers don’t want to be obsolete, and elites have sunk capital that can’t be recovered.

    Humans are hard-wired to gravitate to stasis, despite our assertions to the contrary. When we seek sustainability, we tend to expect it. That’s the problem.

    Another person who addresses this is Nassim Taleb in \The Black Swan.\ It deals with mathematical improbability and randomness, but Taleb’s applications are far-reaching into most physical and social sciences.

    So we don’t just have to worry about natural resources. Even more complex societies deal with the sustainability dilemma. Look at the sciences, as well. The scientific method is premised that nothing is certain and all theories must be open to be falsified in the future. Yet vanguard theories often produce schisms within their fields.

  10. Michelle, please feel welcome to post anything you’d like, as long as it is on topic. I welcome discussion and disagreement and different points of view on all topics. Your participation is appreciated.

  11. Michelle says:

    Thanks for the feedback guys. It is refreshing to find an intelligent site with an interesting topic. I hope to learn more here.

  12. Patrick (G) says:

    I’m not sure that your point about Germany and entrepreneurial energy vs. U.S. is entirely true.

    To my mind, “entrepreneurial energy” is a means to an end: “social mobility”, and if you look at “social mobility”, the German model seems to work better than the U.S. model. (see Link)

    Which shouldn’t surprise; there might be more entrepreneurial energy in the U.S., but the risks are higher, and that translates into a lower success rate for social mobility.

  13. Alon Levy says:

    Patrick, your link is correct, but to get from it to the peer-reviewed study you need to follow multiple links – from Yglesias’s blog to CAP, which only references the peer-reviewed study without linking to it.

    Full disclosure: I linked to the CAP study on my blog, more than 3 years ago, before I realized just how shoddy CAP is. You can find a compendium of the peer-reviewed studies here along with links – no need for filtering through ideologically motivated thinktanks.

    One of the interesting facts stated in the link above is a comparison of immigrant children’s performance in the US, a low-mobility country, and Australia, a high-mobility country. Even controlling for parental education levels, it claims, US immigrant-born children lag behind their counterparts in Australia.

  14. Eric says:

    Alon: interesting point about American vs. Australian mobility. My Mex-Aussie cousins might be benefiting from stronger social benefits, but I’m not sure that their successful careers would have been hampered much had my aunts come to America instead. Many American cities have great advantages for immigrants. It depends largely in where you live. Austin, TX did a lot for my immigrant family.

    I believe improving the social mobility of immigrants is easy and it is something cities can consciously choose to do better than any other agency, if they can come up with ways to circumvent their own bureaucratic hurdles and allow immigrants to implement the untapped benefits of their cultural intelligence. In her Scully Prize acceptance speech, Jane Jacobs touched on this possibility for cities:

  15. Alon Levy says:

    Eric: yes, Austin would almost certainly do a lot to help your Mex-Aussie cousins. However, it’s in line with the emphasis on equality in education given in the studies referenced in my link. Texas has one of the smallest racial education gaps of any US state.

    (By the way, the Jacobs video contains good ideas, but there are two problems there. First, Jacobs claims that rich preserves turn boring and often decay, unless they are very small. In fact, the opposite is true: rich areas, such as the Upper East Side of Manhattan, can remain rich even as all other neighborhoods around them decay. Second, her emphasis on home ownership is ill-conceived, and even includes the wrong statement that the US has the highest home ownership in the world.)

  16. Alon Levy says:

    You need a better spam filter.

  17. Alon, it has been on my list to upgrade spam filtering. Right now I don’t have a good development environment set up, however, so I’m loathe to install plugins until I have someplace to really test them out.

    In the meantime, I try to delete them as quickly as possible. I also added a couple of terms to the blacklist, so we’ll see if that helps at all.

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