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Wednesday, April 9th, 2014

Indianapolis: The Sound Map Video

I post a lot of city videos. I also write a lot about authenticity in cities and marketing. Last week Indianapolis artist Stuart Hyatt sent me this one that I think manages to be very cool as a video but also provides a very authentic look at the actual experience of Indianapolis.

Stuart is working on a project called the Indy Sound Map designed to create, well, a sonic map of the city. He did this for Washington St. end to end across the city. Rather than stop at that, Jonathan Frey filmed his journey and Forrest Lewinger used the recording to create a soundtrack for the film that’s part of a forthcoming album. You can read more in this Nuvo article about the project.

First the video, then more commentary. If the video doesn’t display for you, click here.

What I like is that this shows Indianapolis as it really is, not as a fantasy world city of nothing but shiny downtown hipster joints. I also really like that there’s a big focus on actual people. That’s not to say this is a completely 100% portrayal of everything. The bus is overly stressed whereas the auto dominated nature of the city doesn’t come through. But on the whole the feel I think is right.

Obviously this was an art project not a marketing film. But I think it’s easy to see how you could take the basic concept of this and adapt it to marketing. Will that happen? Nope. All civic marketing is inherently ultra-conservative, and as someone rightly pointed out about a recent Cleveland video, the funders who underwrite such ventures expect that the end product will heavily feature them and be consistent with their brand values. But this I think shows that there are ways to show cities other than ultra-slick time lapses that can work.

Sunday, March 9th, 2014

Sunday Night Dinner in Indianapolis


Sunday night dinner in Herron-Morton Place, Indianapolis. This is one of three dinner groups in that neighborhood. Photo by Amanda Reynolds (check out the mirror!)

Urban culture varies radically from city to city. Yet to a great extent the culture of the usual suspects type of places tends to get portrayed as normative. In New York, for example, with its tiny apartments, the social life is often in public, in many cases literally on the streets of the city, which pulse with energy. As the ne plus ultra of cities, the street life of New York is often seen as what every place should aspire to. There’s a body of literature which attributes all sorts of positive effects to this New York style urbanism, such as the notion of “collisions” and “serendipitous encounters”. But while New York’s street life and social scene may indeed be engaging, how often does one actually strike up a conversation with someone random on the street or in a coffee shop there that turns into something meaningful? The only collisions I’ve ever had there were literal.

New York is the most well known and championed style of interaction, though hardly the only one. Think of San Francisco and something clearly distinct will come to mind, albeit with some similarities. LA has its own mythos. The TV show Portlandia does a great job of capturing our idea of the quirky urban life of that city.

Cities that lack the cachet of an NYC, SF, or Portland can often find their own urban culture lacking in comparison. To be taken seriously, the logic goes, they must measure up to the yardstick defined by others. But while I do not subscribe to the idea of value free cultural comparisons, I do believe cities need not judge themselves as wanting just because they don’t function like New York City. Rather, they should seek to be the best they can be on their own terms. Since few cities are anything like New York, aspiring to that kind of urbanism would only be a case study in frustration anyway.

Indianapolis cultural commentator David Hoppe once said something to the effect that “the social life of Indianapolis happens in back yards.” And this is true. Unlike a New York City, Indianapolis does not wow you just by walking down the street. While I believe in trying to contextualize the facts on the ground in the most positive way possible for moving forward, that doesn’t mean reclassifying genuine defects as virtues. In the case of Indianapolis, the generally poor impression left by its built environment and lack of street life can’t be denied. There are plenty of great places to go, but you generally need someone to point you in the right direction.

But there are countervailing virtues as well, ones generally under appreciated. Unlike New York, Indy has a far more robust social life in private spaces like houses and back yards. This produces a qualitatively different type of social capital, one with its own unique set of strengths.

One example of this is the emergence of community based Sunday dinners. This was an organic movement and as a result lacks a fancy name, but in keeping with the generally low key and unpretentious character of the city, let’s just call it Sunday Night Dinner.

Sunday night dinners are a type of intentional community in which 6-8 families in a neighborhood decide to get together for dinner every Sunday night on a rotating basis. This originated in 2006 on Pleasant St. in the Fountain Square neighborhood when a group of neighbors decided to start getting together regularly for dinner. Here’s how Tonya Beeler, one of the founding members, describes it:

When most of us talk about it, we just call it Sunday Night Dinner. It’s unassuming, I know – but that’s what Sunday Dinner is to us. We’ve had it consistently for almost 8 years – having only cancelled dinner a handful of times. The majority of the families on the original list are still regular participants and we’ve added and lost a few through the years.

What is Sunday Night Dinner to us? In this stage in our lives, its sometimes difficult to physically connect to your neighbors, but we know that each Sunday we’re going to see our friends. It’s also a good time to have newcomers to the neighborhood connect with some of us old timers. We’ve also had visits from Mayor Ballard (before he was elected) and Melina Kennedy (when she was running) and I still have a fond memory of John Day sitting down to sup with us. But what is it mostly? Just a day in the week where we meet to take a breath, sit down, and eat together. It’s my favorite day of the week.

I used to be part of a quarterly dinner club in Chicago. Given the frequency, our idea was to make each dinner “special” in the sense that we went all out with super high-quality food, etc. In Indy, while good food is certainly part of the equation, the regular weekly cadence means it’s as much about friends and neighbors as it is special ambiance. It’s about regular life lived in the city. In the picture at the top it’s paper plates and plastic cups all the way – and that’s just fine. Can’t stay for some reason? No worries, bring some tupperware, grab some food, and run. In a sense, it’s the Kinfolk Magazine ethic (motto: doing things simple sure is complicated – and expensive) in genuine form, shorn of Portland pretense.


Sunday night dinner in the Beeler’s backyard in Fountain Square, Indianapolis, Easter 2012. Photo: Cindy Ragsdale

Oh, and typically with children, which actually exist in abundance in Indianapolis.

The idea spread and now there are Sunday night dinner groups all over the city. I’m told there are three in Herron-Morton Place alone, which I can’t quite wrap my head around given how small the area is.

I can’t help but notice the similarity of these dinner groups to religious small group gathering. In the last couple decades, Evangelical churches have moved away from mid-week services in favor of small group gathering during the week (sometimes called home groups or other names). The idea is to promote more actual community than is possible in a larger assembly format. These dinner groups are in effect secular small groups, ones that help provide the sense of connectedness, regularity, and rootedness that’s so often missing from our contemporary world.


Outdoor fun on Sunday night isn’t just for summer in Herron-Morton Place, Indianapolis. Photo by Amanda Reynolds.

These groups aren’t just walled garden cliques, however. The host generally invites guests to attend. So there’s a type of brokered introduction which in my experience is the real source of “serendipitous” encounters of genuine value. An arranged guest invite is one way to get people connected in their neighborhood, or even to help people who are deciding whether or not to take the plunge into city living to get a feel for what life lived in a particular neighborhood is actually like.

In fact, if you are visiting Indianapolis on a Sunday night, or live there and want to check it out, email the City Gallery at the Harrison Center For the Arts and they will set you up. The email address is citygallery@harrisoncenter.org

I don’t want to suggest that Indianapolis invented the concept of the dinner club or is the only place such events occur. For all I know, lots of places do this. (Heck, as big as it is, odds are that includes New York City). And as with all traditions, this particular instantiation will likely die off at some point (though it’s still growing eight years after starting on Pleasant St). Yet the prevalence of this type of cultural phenomenon is part of the explanation for why Indianapolis has consistently managed to punch above its weight class in so many areas. Although the type of obvious assets and strength evidenced by super-cool buildings or crowds on the street may be lacking in Indianapolis vis-a-vis some other places, the city contains deep reservoirs of cultural capital that aren’t as visible and may never be fully understood or mapped, but nevertheless are of profound importance. This is the real secret sauce of the city.

Copying this idea, locally or anywhere, is definitely welcomed. Should you be interested, here are the “Indianapolis Rules” for Sunday night dinners, courtesy of Tonya Beeler:

1. Dinner is every Sunday night, with six to eight families, each hosting on a rotating basis.

2. The host is responsible for preparing all of the food for everyone. (Work? Yes, but it also means seven weeks of not having to do anything but show up).

3. The host is responsible for inviting all guests. Do not invite guests without checking with the host first.

4. If you’re not coming, tell the host as far in advance as possible.

5. At the very beginning of the dinner, the host makes sure all the guests know of any rules for the house (no one allowed upstairs, kids can’t eat in the living room, toilet handle needs to be held down for 3 seconds, whatever).

6. If your family will not be coming for dinner, but you still want food, there’s no need to let the host know, just stop by early in the meal (so you don’t miss anything, food goes fast!!!) with some tupperware and fill it to go.


Sunday night dinner in Fountain Square, Indianapolis. Painting by Kyle Ragsdale.

Sunday, February 2nd, 2014

Replay: Rebranding Columbus

This post originally ran on August 15, 2010. Some anachronisms have been left in the piece, so keep the original date in mine.

It’s no secret I’m a fan of Columbus, Ohio, one of those under the radar cities that’s a whole lot better than its external brand image would suggest.

That frustrates local civic leaders, who’ve undertaken a major re-branding effort, as discussed in a recent NYT piece, “There May Be ‘No Better Place,’ but There Is a Better Slogan:”

Quick, what do you think about when you hear the words “Columbus, Ohio”? Still waiting…. And that’s the problem that civic leaders here hope to solve. This capital city in the middle of a state better known, fairly or not, for cornfields and rusting factories has a low cost of living, easy traffic and a comparatively robust economy….What Columbus does not have, to the despair of its leaders, is an image. As home to major research centers, it has long outgrown its 1960s self-concept as a cow town, and its distinction as the birthplace of the Wendy’s hamburger chain does not quite do the trick these days. The city lacks a shorthand way to sell itself — a signature like the Big Apple or an intriguing tagline like Austin’s “Live Music Capital of the World.” As a result, those working to attract new companies, top professors, conventions and tourists have a hard time explaining how Columbus differs from dozens of other cities that likewise claim to be livable, progressive and fun.

As I’ve said many times, branding isn’t marketing. It isn’t about tag lines, messaging, or talking points. Yes, there’s an element of that and getting your message out. But branding starts with what’s on the inside not messages to the outside. It’s about who you are, what your values are, what you stand for, what you aspire to be when you grow up. The marketing part just helps communicate that.

I won’t reprise my general prescription on branding, but here are a few pieces you can review if interested:

Despite what the title of the NYT piece might suggest, I think Columbus gets it on this:

How do you stoke the imagination of outsiders and the enthusiasm of residents? Columbus, starting from relative obscurity, has found that you cannot just hire an advertising agency, like New York and Las Vegas did, and come up with a slogan. It needs to find something real and heartfelt to trumpet, a task force of business, educational, political and arts leaders here concluded.

Your brand has to be something that is authentic, that’s true to the place. It has to resonate with the people who are there. That’s not to say it can’t be aspirational. That’s how we grow. But to simply chuck your past and trying to be something completely different is overwhelmingly difficult and often fails. So kudos to Columbus for trying to find something true to the character of their city.

Apparently they’ve been at this a while, and one of the techniques has been involving residents in helping to define the new brand: “But this time, three years into their inner journey, city leaders expect to succeed by drawing the whole population into the process and teasing out shared points of pride.”

When I read something like “drawing the whole population into the process”, alarm bells go off. It’s not PC to say this, but too much public involvement at the wrong stage is a bad idea. Clearly, it’s important that the public buy in and that the results be shared and genuine input solicited without delivering a fait accompli. But design by focus group almost never works. I’ve seen a lot of civic visioning efforts that tried to be maximally inclusive – I even served on the steering committee for one – but I’ve yet to see one that produced compelling results or moved the needle. Think about it. Did Steve Jobs design the iPod by asking people what they thought about music players? No he did not. Apple, and all the best product companies, succeed by giving us the thing we didn’t even know we wanted until they gave it to us.

That’s not to say you ignore market research. There’s certainly an element of archeology and anthropology here. And it certainly has to go beyond simply hiring a fancy pants advertising firm, something Columbus wisely avoided. But community involvement isn’t probably going to get it either. Partially that’s because people who are too close, who are on the inside, probably have difficulty articulating the uniqueness of a place. I don’t have enough personal experience with Columbus to go into depth there. I’d have to get more deeply embedded in the community to really understand the place at a deeper level. But I’m confident that the qualities they are looking for are there to be discovered in Columbus. The city is doing well in a tough region. There have to be reasons why. It’s going to require digging deep though.

The Fallacy of Awareness

I gather from the NYT piece that the people in Columbus think they’ve got a pretty great city, and that if they could only get other people to see how great it is, their standing in the league tables of public estimation would go way up. I believe the first part is true, but not the second.

Wanting to have your city taken seriously is likely wanting to be a member of the cool kids club. How do you get in? Well, it goes without saying that you need to have the qualifications – to be good looking, rich, to suck up to the right people, etc – but is that enough? Sometimes yes, but more often not, particularly for people who don’t score overwhelmingly high.

Think about it, the defining characteristic of a clique is exclusivity. If it was too easy to get in, membership would lose its value. So if you think about cities, the urbanists, media types, academics, activists, etc. who are the arbiters to the public at large about what cities are the coolest and best generally all pick the same ones – cliques also enforce conformity of mindset – and it just so happen that those are the places that contain most of the said taste arbiters. Why would any of them choose to champion Columbus, unless they had some personal connection there?

People who are members of an elite clique generally spend most of the time talking with and about each other, and little time about anyone else, even to put them down. To be ignored is the ultimate penalty of being an outsider. This is true of almost any field.

Here’s a classic example from the blogosphere. There was a minor kerfuffle a while back about Andrew Sullivan using “ghost bloggers.” Fellow Tier One blogger Ann Althouse took extreme umbrage at this in a way I find very revealing about the mindset of members of an exclusive clique:

I seriously believed I was interacting with Sullivan, a writer I have respected for maybe 20 years. I wouldn’t have bothered with Patrick (or Chris). I really don’t care what they think. If they insult me, they are to me like any number of bloggers who insult me and whose bait I don’t take. I would always take Sullivan’s bait, because Sullivan is important. Not to know whether it’s Sullivan or one of them makes a mush out of the whole blog.

Of course when she says Andrew Sullivan is important, what’s she’s really implying that she’s important, and can’t be bothered wasting her time on anyone who isn’t also on the VIP list. To have fooled her into debating mere peons – whose writing she admits she can’t tell from Sullivan’s himself – is treachery of the highest order.

In fairness to Althouse, she does link to lesser known bloggers (including, once, me). The point is not that she’s evil, which I don’t think, but that this is how the world really works.

If you are the Columbus, Ohio of bloggers, how do you get Ann Althouse, Andrew Sullivan, etc. to care about you? I can actually share a personal story in that regard. The first two and a half years of this blog was almost exclusively about Indianapolis, and I had very wide readership there. But I received very little recognition or acknowledgment in that city. Quite the opposite in fact. As an example, one journalist I assisted with a story told me flat out I wasn’t authoritative enough to quote in the piece. While I hope I’m getting better over time, I don’t think my content was that much less compelling then than it is today. And it was obviously being read. So why the difference? It’s the same dynamic I’m talking about. They might not have known who I was, but they knew who I wasn’t – and that was one of the boys. Quality product and awareness had nothing to do with it. Having experienced that end of the spectrum is one reason I try to be a champion for new voices.

There’s an industry out there that creates the myth or fantasy of the instant or overnight success who achieves fame and glory when their talent is finally seen by the public or the right people. Susan Boyle for example. I’m sure that does happen from time to time. But is that the way it ordinarily happens? And how much staying power does fame and recognition have in those circumstances?

I’d suggest that this sort of thing happens far less than we are generally led to believe. I read a lot of magazine profiles of people and when I hear them talk about how they got their big break, I’m always amazed at how often there are one of two basic tales. The first is, “I was sitting in my office one day wondering how we were going to pay the rent when my phone rang and it was Frank Gehry asking if I could design some lighting fixtures for his new Guggenheim Museum”. The second is, “I just showed up at Vogue and lied that I was sent there by Steven Meisel and they interviewed me and I got the job.” How likely is it that most of these stories are true? Or at least that they are the whole truth?

One of my guilty pleasures is the New York Observer. One of the things I love about it is, that due to the gossipy nature of the publication, they always give you the back story on who the people they are talking about are. That 27 year old chief curator at the top tier museum? Yeah, his mom was an heiress. He wouldn’t advertise that fact in most of those other magazine profiles. I’d bet most of these stories would fare similarly under scrutiny, though perhaps in different ways.

Clearly, awareness, and awareness by the right people, is critical. You really do have to get out there and knock on Vogue’s door – probably getting it slammed in your face the first few times you do it. Everybody needs lucky breaks. I have no doubt that if my personal promotional skills were better, I’d be further along in achieving my own ambitions.

But there’s a lot more too it than that. You want to be a member of the club? You’ve got to break the door down yourself. You’ve got to make it so that they can’t ignore you. If Columbus wants to be taken seriously, it’s going to have to force itself into the conversation. That takes relentless hard work and creating a product so compelling that the urbanist elite has to respond to it and take it seriously. Simply being a great place to raise a family, having a relatively good economy, high quality of life and low costs – a value proposition virtually identical to lots of other cities regardless of what locals might think – is not going to get the job done.

One Columbus official said, “Candidly, we believe we are one of the brightest stars in Ohio’s future.” One of the brightest stars in Ohio? I’m sorry, that’s not going to cut it. It’s like I tell the people in Indy when they get excited about being the “Diamond of the Rust Belt”: that sounds an awful lot like bragging that you won the loser’s bracket in the JV playoffs again this year. There’s nothing wrong with being in Ohio – and Columbus would be ill-advised to try to pretend they are something different from the state. Columbusites can be proud of Ohio and their role in it. But if they want America to pay attention to them, they need a message and reality to match that ambition.

That’s what Portland did. Portland didn’t get to be Portland through superior marketing and talking points about having the lowest costs and quality of life on the west coast with all those natural amenities to boot. They went out and did nothing less than define a new vision of what a small city in America could be. And they delivered on it through relentless hard work and actual execution over the course of decades.

Staking Your Claim

If Columbus wants to raise its profile, then it has to start setting the agenda. That’s not to say they have to try to be the next Portland or anything. But they’ve got to find areas where they can stake their claim and create something that compels the world to pay attention.

I’ll be the first to admit that this section will be unfair to Columbus. I’m going to compare it to its “twin city” of Indianapolis, a place I know far better. So keeping in mind that I just probably know more about what’s going on in Indy, and that I’m clearly a partisan of that city, I’d like to note a few things.

First, Columbus just seems more with it than Indy on a host of matters. In fact, when it comes to things like urban design, density, public transit, and many other matters, Indy is almost worst in class. It’s hard for me to even name one urban infill project that exhibits proper urban design, for example, while in others cities I tend to note that the majority of new developments do. Columbus, by contrast, just seems to get it on most issues, from urbanism, to pedestrian investments, etc. Yet why is Indy much better known?

One reason is that while Columbus does a very good job of ticking all the boxes, I can’t name many areas where it has gone above and beyond the checklist. And therein lies its problem. Columbus is a quality follower and implementer of the right things, but isn’t an urban innovator or a place that has carved out a distinct and compelling offering versus broadly similar peers.

A lot of people from bigger cities don’t care for Indy much. If you want walkable neighborhoods, tons of independent restaurants, etc. it is not your place. But time and again Indy has gone out and pulled things off that many other cities can only dream about, and put themselves in the spotlight.

The NYT notes of Columbus leaders, “One model they have studied is Indianapolis, which raised its profile by describing itself as the amateur athletic capital of America.” The NYT gets it completely wrong. Indy didn’t raise its profile by describing itself as anything. Back in the 1970′s a group of glum city leaders sat around a table wondering what they were going to do about a city best known, if as anything, as “India-no-place.” They hit on the idea of amateur sports. But rather than a marketing program, they instead committed themselves to going out and making it a reality, a process that continues to this day, though not limited to only amateur sports.

Indy built a downtown arena in the 1970′s. They built a domed stadium at the bargain price of only $80 million in 1983 without a team to play in it in an era before widespread pro sports franchise relocations. This let them pick the Colts up in 1984 on the cheap. Yes, that was a lucky break, but one they were ready to exploit. They put the domed stadium next to the convention center, not just to help conventions, but anticipating that major sports events would have ancillary activities that would use the co-located space. They created the first of its kind Indiana Sports Corp. to oversee all aspects of luring and hosting events. They saw the benefits of industry clustering, and recruited sporting sanctioning bodies to town, culminating with the NCAA headquarters. They started off with unglamorous events like the trials for the 1984 Olympics. They took risky bets when opportunity presented itself such as jumping in to host the 1986 Pan Am Games when the original host city backed out. They built state of the art facilities for sports few people gave much though to like swimming and bicycling.

In effect, Indianapolis created the entire industry of using sports events hosting as an economic development platform, and they did it in a holistic, extremely intelligent way that involved putting some major chips on the table for projects with an uncertain outcome. And they are still at it today, 35 years later after, as all successes do, everybody and their brother has tried to get a piece of this pie. The competition is brutal, and Indy has spent big – some say too big – to stay at the front, such as by going full out to host a Super Bowl in 2012. Indianapolis is arguably still the best place in America to host a sporting event.

I’m a believer in all the research that suggests sports investment is a bad idea with a dubious payoff for cities. But Indianapolis is an exception. There’s no doubt this was a major force in transforming the city – and getting its name out there. How much would the city have had to pay for all the de facto advertising impressions they’ve gotten from all this sports investment?

Is Columbus willing to stake a similar claim in another speculative area and put big money behind it, staying with it over the course of decades? Is Columbus ready to pile $3 billion in chips on Red 14 the way Indy did?

Indy also conceived many other similar types of programs that not only add to local quality of life, but also get the city’s name out. Consider the quadrennial International Violin Competition of Indianapolis, one of the most prestigious such competitions in the world. Why would anyone take seriously a fine arts competition in Indianapolis? Well, they wouldn’t, all things being equal. So when the city did it, they had to come up with an unbeatable package. First, they partnered with the world-renowned Indiana University School of Music to give them musical credibility. And they set up for the winner a year’s loan of a Stradivarius violin, a recital at Carnegie Hall and other places, intense coaching from some of the world’s best violinists, and more. That certainly got people’s attention.

Or consider the Indianapolis Prize for animal conservation. Again, why would anyone think of Indianapolis in this field? They wouldn’t – except that they city anted up and made it the single biggest cash prize in this field in the world and recruited a top international nominating committee and jury.

Or look at the currently in progress Indianapolis Cultural Trail, which is taking over 8 miles of downtown street lanes away from cars and giving them to people. It is a unique project, that includes the highest quality bicycle boulevard I’ve seen, along with an often separate pedestrian walkway, significant green features, and major public art installations. While honestly this has not received the publicity it deserves, it has been covered in Surface, Dwell, Streetsblog, and elsewhere. It’s a totally unique project. From now on anyone who wants to undertake a major downtown urban trail project is going to go to Indianapolis to see what it did. Why? Not because they want to, but because they have to. Because at some point somebody is going to ask the question, did you look at the Indy Cultural Trail? – and if they development team says No, they are going to look pretty stupid.

I’ve also noted how suburban Carmel, Indiana is staking out a claim to be a nationally premier suburb, with 5% of all the modern roundabouts in the United States, the largest deployment of roundabout interchanges in the United States, an ambitious agenda of New Urbanist retrofit, a $150M concert hall, and much more.

You might not know any or all of these, but in their fields, they are known. They are all projects of major ambitions, that attempt to innovate and set the agenda, and which serve a branding function for the city. They were also conceived with a recognition that nobody is going to pay attention to Indianapolis unless the city forces them to. And it has. And it’s not just in the traditional civic sphere. Here’s a point to ponder: with Columbus’ vaunted gay community, why is it Indianapolis that is home to the Bilerico Project, the Huffington Post of the LGBT community?

I could go on and on – best airport in the United States, anyone? – but I think you get the point. Indy isn’t in the club yet, and may never get there – but it has come a long way.

Again, if I knew Columbus better, I’d probably be able to give examples there too. I’m sure Columbus isn’t totally without these types of programs. But my blog has been traditionally Midwest focused. And I’ve tried to keep a finger on the pulse of what’s going on in all these cities, including Columbus. I read the Dispatch online for over two years and still read Columbus Underground regularly. But I haven’t come across that many truly compelling stories of national relevance – and certainly nowhere near as many as I’d expect for a city that’s rocking and rolling as much as Columbus is.

Maybe the painful truth is that Columbus today just isn’t very different from the other places with which it competes – and that’s what this re-branding should really address.

Columbus has most of the blocking and tackling nailed. It’s a city that gets it. But to break through at the national level, Columbus is going to have to do a lot more than get it. Columbus is going to have to start playing offense, start dictating an ambitious – and let’s face it, risky – agenda around items that are so compelling the world won’t have any choice but to sit up and pay attention. Because it’s unlikely anybody is going to start giving Columbus the props it craves otherwise. It’s just like they told me at my old firm about the secret to making partner – you’ve got to already more than be there.

Thursday, January 16th, 2014

How Globalization Isolates Struggling Cities

My latest piece is in the January issue of Governing Magazine. It’s called “How Globalization Isolates Struggling Cities. In effect, this is a companion piece to my recent post on metro-centric economic development strategies. Here’s an excerpt:

In the age of globalization, cities and states would rather build bridges to the world than to the town next door. Some of this is simply the way the economy works. As Richard Longworth, senior fellow at the Chicago Council on Global Affairs, wrote in his book Caught in the Middle: America’s Heartland in the Age of Globalism, “Chicago probably deals more, daily, with Frankfurt or Tokyo than it does with Indianapolis.”

He went on to identify the problem at hand, noting that “Globalization is beginning to isolate cities from their hinterlands: The hinterlands see this trend and are disinclined to do anything to speed it up. They perceive that most of these people—globalization’s winners—have never spent 30 seconds worrying about globalization’s losers.”

This is the two-tier society we see developing nationally playing out at the local level. It creates a tug of war at the state policy level, and it tears apart the whole notion that we are a commonwealth. It creates states that are, as Longworth put it, “hives of warring interests.”

Sunday, January 12th, 2014

Why State Economic Development Strategies Should Be Metro-Centric

Globalization, technology, productivity improvements, and the resulting restructuring of the world economy have led to fundamental changes that have destroyed the old paradigms of doing business. Whether these changes are on the whole good or bad, or who or what is responsible for bringing them into being, they simply are. Most cities, regions, and US states have extremely limited leverage in this marketplace and thus to a great extent are market takers more than market makers. They have to adapt to new realities, but a lack of willingness to face up to the truth, combined with geo-political conditions, mean this has seldom been done.

Three of those new realities are:

1. The primacy of metropolitan regions as economic units, and the associated requirement of minimum competitive scale. It is mostly major metropolitan areas, those with 1-1.5 million or more people, that have best adapted to the new economy. Outside of the sparsely populated Great Plains, smaller areas have tended to struggle unless they have a unique asset such as a major state university. Even the worst performing large metros like Detroit and Cleveland have a lot of economic strength and assets behind them (e.g., the Cleveland Clinic) while smaller places like Youngstown and Flint have also gotten pounded yet have far fewer reasons for optimism. Many new economy industries require more skills than the old. People with these skills are most attracted to bigger cities where there are dense labor markets and enough scale to support items ranging from a major airport to amenities that are needed to compete.

2. States are not singular economic units. This follows straightforwardly from the first point. As a mix of various sized urban and rural areas, regions of states have widely varying degrees of economic success and potential for the future. Their policy needs are radically different so the one size fit all nature of government rules make state policy a difficult instrument to get right. Additionally, many major metropolitan areas that are economic units cross state borders.

3. Many communities may never come back, and many laid-off workers may never be employed again. Realistically, many smaller post-industrial cities are unlikely to ever again by economically dynamic no matter what we do. And lost in the debate over the n-th extension of emergency unemployment benefits is the painful reality that for some workers, especially older workers laid off from manufacturing jobs, there’s no realistic prospect of employment at more than near minimum wage if that. As Richard Longworth put it in Caught in the Middle, “The dirty little secret of Midwest manufacturing is that many workers are high school dropouts, uneducated, some virtually illiterate. They could build refrigerators, sure. But they are totally unqualified for any job other than the ones they just lost.” This doesn’t even get to the big drug problems in many of these places. This isn’t everybody, but there are too many people who fall into that bucket.

I want to explore these truths and potential state policy responses using the case study of Indiana. An article in last week’s Indianapolis Business Journal sets the stage. Called “State lags city with science, tech jobs” it notes how metropolitan Indianapolis has been booming when it comes to so-called STEM jobs (Science, Technology, Engineering, Math). Its growth rate ranked 9th in the country in study of large metro areas. However, the rest of Indiana has lagged badly:

Indiana for more than a decade has blown away the national average when it comes to adding high-tech jobs. But outside the Indianapolis metro area, there isn’t much cause for celebration.

Careers in science, technology, engineering and math—typically referred to as STEM fields—have surged in growth compared to other careers in Marion and Hamilton counties. It’s a boon for economic development, considering the workers earn average wages almost twice as high as all others, and employers sorely need the skills. Dozens of initiatives focus on building STEM jobs in the state.

A recent report ranked the Indianapolis-Carmel metro area ninth in the country in STEM jobs growth since the tech bubble burst in 2001. But while the metro area has grown, the rest of Indiana has barely budged from the early 2000s, an IBJ analysis of U.S. Bureau of Labor Statistics found.

Indianapolis grew its STEM job base by 39% since 2001 while the rest of the state grew by only 10% (only 6% if you exclude healthcare jobs). Much of the state actually lost STEM jobs.

This divergence between metropolitan Indianapolis (along with those smaller regions blessed with a unique asset like Bloomington (Indiana University), Lafayette (Purdue University) and Columbus (Cummins Engine)) and the rest of the state is a well-worn story by now. Here are a few baseline statistics that tell the tale.


Item Metro Indianapolis Rest of Indiana
Population Growth (2000-2012) 15.9% 4.1%
Job Growth (2000-2012) 5.9% -7.2%
GDP Per Capita (2012) $50,981 $34,076
College Degree Attainment (2012) 32.1% 20.1%

Additionally, there does appear to be something of a brain drain phenomenon, only it’s not brains leaving the state, it’s people with degrees moving from outstate Indiana to Indianapolis. From 2000-2010 a net of about 51,000 moved from elsewhere in Indiana to metro Indianapolis. As Mark Schill put it in the IBJ:

“Indianapolis is somewhat of a sponge city for the whole region,” said Mark Schill, vice president of research at Praxis Strategy Group, an economic development consultant in North Dakota.

The situation in Indiana, Schill said, is common throughout the United States: States with one large city typically see their engineers, scientists and other high-tech workers flock to the urban areas from smaller towns.

Even I find it very surprising that of my high school classmates with college degrees, half of them live in Indianapolis – this from a tiny rural school along the Ohio River in far Southern Indiana near Louisville, KY.

What has Indiana’s policy response been to this to date? I would suggest that the response has been to a) adjust statewide policy levers to do everything possible to reflate the economy of the “rest of Indiana” while b) making subtle tweaks attempt to rebalance economic growth away from Indianapolis.

On the statewide policy levers, the state government has moved to imposed a one size fits all, least common denominator approach to services. The state centralized many functions in a recent tax reform. It also has aggressively downsized government, which now has the fewest employees since the 1970s. Tax caps, a comparative lack of home rule powers, and an aggressive state Department of Local Government Finance have combined to severely curtail local spending as well. Gov. Pence took office seeking to cut the state’s income tax rate by 10% (he got 5%), and now wants to eliminate the personal property tax on business. Indiana also passed right to work legislation.

I call this “the best house on a bad block strategy.” I think Mitch Daniels looked around at Illinois, Ohio, and Michigan and said, “I know how to beat these guys.” Indiana is not as business friendly as places like Texas or Tennessee, but the idea was to position itself to capture a disproportionate share of inbound Midwest investment by being the cheapest. (I’ll get to Pence later).

The subtle tweaks have been income redistribution from metro Indianapolis (documented by the Indiana Fiscal Policy Institute) and using the above techniques and others to apply the brakes to efforts by metro Indy to further improve its quality of life advantage over many other parts of the state (see my column in Governing magazine for more). One obvious example is a recent move by the Indiana University School of Medicine to build full four year regional medical school campuses and residency programs around the state with the explicit aim of keeping students local instead of having them come to Indianapolis for medical training.

What there’s been next to nothing of is any sense of metropolitan level or even regional thinking. The state does administer programs on a regional level, but the strategy is not regionally oriented and the administrative borders don’t even line up. Here are the boundaries of the various workforce development boards:

There’s a semi-metropolitan overlay, but as I’ve long noted places like Region 6 are economic decline regions, not economic growth regions. Here’s how the Indiana Economic Development Corp. sees the world:

These are not just agglomerations of the workforce districts, there are numerous differences between them. The point is that clearly the organization is driven by administrative convenience and the political need for field offices, not a metro-centric view of the world or strategy.

Add it all up and it appears that Indiana has decided to fight against all three new realities above rather than adapting to them. It rejects metro-centricity, imposes a uniform policy set, and is oriented towards trying to reflate the most struggling communities. I don’t think this was necessarily a conscious decision, but ultimately that’s what it amounts to.

When you fight the tape, you shouldn’t expect great results and clearly they haven’t been stellar. Since 2000, Indiana comfortably outperformed perennial losers Michigan and Ohio on job growth (well, less job declines), but trailed Kentucky, Wisconsin, Minnesota, Iowa, and Missouri. But notably, Indiana only outpaced Illinois by a couple percentage points. That’s a state with higher income taxes (and that actually raised them) that’s nearly bankrupt and where the previous two governors ended up in prison. Yet Indiana’s job performance is very similar. What’s more, Hoosier per capita incomes have been in free fall versus the national average, likely because it has only become more attractive to low wage employers.

Fiscal discipline, low taxes, and business friendly regulations are important. But they aren’t the only pages in the book. Workforce quality counts for a lot, and this has been Indiana’s Achilles heel. (My dad, who used to run an Indiana stone quarry, had trouble finding workers with a high school diploma who could pass a drug test and would show up on time every day – hardly tough requirements one would think). Also aligning with, not against market forces is key.

I will sketch out a somewhat different approach. Firstly, regarding the chronically unemployed, clearly they cannot be written off or ignored. However, I see this as largely a federal issue. We need to come to terms with the reality that America now has a population of some million who will have extreme difficulty finding employment in the new economy (see: latest jobs report). We’ve shifted about two million into disability rolls, but clearly we’ve to date mostly been pretending that things are going to re-normalize.

For Indiana, the temptation can be to reorient the entire economy to attract ultra low-wage employers, then cut benefits so that people are forced to take the jobs. I’ve personally heard Indiana businessmen bemoaning the state’s unemployment benefits that mean workers won’t take the jobs their company has open – jobs paying $9/hr. Possibly the 250,000 or so chronically unemployed Hoosiers may be technically put back to work through such a scheme – eventually. But it would come at the cost of impoverishing the entire state. Creating a state of $9/hr jobs is not making a home for human flourishing, it’s building a plantation.

Instead of creating a subsistence economy, the focus should instead be on creating the best wage economy possible, one that offers upward mobility, for the most people possible, and using redistribution for the chronically unemployed. You may say this is welfare – and you’re right. But I would submit to you that the state is already in effect a gigantic welfare engine. In addition to direct benefits, the taxation and education systems are redistributionist, and the state’s entire economic policy, transport policy, etc. are targeted at left-behind areas (i.e., welfare). Even corrections is in a sense warehousing the mostly poor at ruinous expense. So Indiana is already a massive welfare state; we are just arguing about what the best form is. I think sending checks is much better than distorting the entire economy in order to employ a small minority at $9/hr jobs – but that’s just me. Again, we are in uncharted territory as a country and this is ultimately going to require a national response, even if it’s just swelling the disability rolls even more. I do believe people deserve the dignity of a job, but we have to deal with the unfortunate realities of our new world order.

With that in mind, the right strategy would be metro-centric, focusing on building on the competitively advantaged areas of the state – what Drew Klacik has called place-based cluster – and competitively advantaged middle class or better paying industries.

Contrary to some of the stats above, this is not purely an Indianapolis story. Indiana has a number of areas that are well-positioned to compete. Here’s a map with key metro regions highlighted:

This may look superficially like the maps above, but it is explicitly oriented around metro-centric thinking. Metro Indy has been doing reasonably well as noted. But Bloomington, Lafayette, and Columbus (sort of small satellite metros to Indy) have also done very well. In fact, all three actually outperformed Indy on STEM job growth.

Additionally, three other large, competitively advantaged metro areas take in Indiana territory: Chicago, Cincinnati, and Louisville. These are all, like Indy, places with the scale and talent concentrations to win. True, none of the Indiana counties that are part of those metros is in the favored quarter. But they still have plenty of opportunities. I’ve written about Northwest Indiana before, for example, which should do well if it gets its act together.

This covers a broad swath of the state from the Northwest to the Southeast. It comes as no surprise to me that Honda chose to locate its plant half way between Indianapolis and Cincinnati, for example.

The state should align its resources, policies, and investments to enable these metro regions to thrive. This doesn’t mean jacking up tax rates. Indiana should retain its competitively advantaged tax structure. But it should mean no further erosion in Indiana’s already parsimonious services. The state is already well-positioned fiscally, and in a situation with diminishing marginal returns to further contraction.

Next, empower localities and regions to better themselves in accordance with their own strategies. This means an end to one size fits all, least common denominator thinking. These regions need to be let out from under the thumb of the General Assembly. That means more, not less flexibility for localities. Places like Indianapolis, Bloomington, and Lafayette would dearly love to undertake further self-improvement initiatives, but the state thinks that’s a bad idea. (I believe this is part of the subtle re-balancing attempt I mentioned).

It also means using the state’s power to encourage metro and extended region thinking. For example, last year within a few months of each other the mayors of Indianapolis, Anderson, and Muncie all made overseas trade trips – separately and to different places. That’s nuts. The state should be encouraging them to do more joint development.

This also means recognizing the symbiotic relationship that exists between the core and periphery in the extended Central Indiana region, clearly the state’s most important. The outlying smaller cities, towns, and rural areas watch Indianapolis TV stations, largely cheer for its sports teams, get taken to its hospitals for trauma or specialist care, fly out of its airport, etc. Metro Indianapolis and its leadership have also basically created and funded much of the state’s economic development efforts (e.g., Biocrossroads) and many community development initiatives (the Lilly Endowment). Many statewide organizations are in effect Indianapolis ones that do double duty in serving the state. For example, the Indiana Historical Society. (There is no Indianapolis Historical Society).

On the other side of the equation, Indianapolis would not have the Colts and a lot of other things without the heft added from the outer rings out counties that are customers for these amenities. It benefits massively from that, particularly since it’s a marginal scale city. One of the biggest differences between Indy and Louisville is that Indy was fortunate enough to have a highly populated ring of counties within an hour’s drive.

So in addition to aligning economic development strategies around metros, and freeing localities to pursue differentiated strategies, the state should encourage the next ring or two of counties that are in the sphere of influence of major metros to align with their nearest larger neighbor.

Contrary to popular belief, this is a win-win. When I was in Warsaw, Indiana, people were concerned that many highly paid employees of the local orthopedics companies lived in Ft. Wayne. From a local perspective, that’s understandable and obviously they want to be competitive for that talent and should be all means go for it. On the other hand, what if Ft. Wayne wasn’t there for those people to live in? Would those orthopedics companies be able to recruit the talent they need to stay located in small town Indiana?

It’s similar for other places. Michael Hicks, and economist at Ball State in Muncie, said, “Almost all our local economic policies target business investment and masquerade as job creation efforts. We abate taxes, apply TIFs and woo businesses all over the state, but then the employees who receive middle-class wages (say $18 an hour or more) choose the nicest place to live within a 40-mile radius. So, we bring a nice factory to Muncie, and the employees all commute from Noblesville.” Maybe Muncie isn’t completely happy about this, understandably. But would they have been able to recruit those plants at all (and the associated taxes they pay and the jobs for anybody who does stay local) if higher paid workers didn’t have the option to live in suburban Noblesville? Would the labor force be there?

I saw a similar dynamic in Columbus. Younger workers recruited by Cummins Engine chose to live in Greenwood (near south suburban Indy). Columbus wants to keep upgrading itself to be more attractive – a good idea. But the ability to reverse commute from Indy is an advantage for them.

Louisville, Kentucky has one of the highest rates of exurban commuting the country because so many Hoosiers in rural communities drive in for good paying work.

This is the sort of thinking and planning that needs to be going on. Realistically, most of these small industrial cities and rural areas are not positioned to go it alone and they shouldn’t be supported by the state in attempting to do so. They need to a align with a winning team.

There are two groups of places that require special attention. One is the mid-sized metro regions of Ft. Wayne, Evansville, and South Bend-Elkhart. These places are too far from larger metros and aren’t large enough themselves to have fully competitive economies. No surprise two of the three lost STEM jobs. Evansville has done better recently on the backs of Toyota, but has a vast rural hinterland it cannot carry with its small size. The region has done ok of late, but it has also received gigantic subsidies in the form of multiple massive highway investments, and now a massive coal gasification plant subsidy. I don’t believe this is sustainable. These places need special assistance from the state to devise and implement strategies.

The other grouping consists of rural and small industrial areas that are too far outside the orbit of a major metro to effectively align with it. This would includes places like Richmond or Blackford County. They might get lucky and land a major plant, but realistically they are going to require state aid for some time to maintain critical services.

For the last two groups especially, there also needs to be a commitment by the state’s top brain hubs – Indy and the two university towns – to applying their intellectual and other resources to the difficult problem at hand. Part of that involves helping them be the best place of their genre that they can. While cities are competitively advantaged today, not everybody wants to live in one. So there is still an addressable market, if not as large, for other places.

Put it together and here’s the map that needs to be changed. It’s percentage change in jobs, 2000-2012:

Pretty depressing. Urban core counties had some losses, but suburban Indy, Chicago, and Cincy did decently (Louisville’s less well), plus Bloomington area, Lafayette, and Columbus. You see also the strong performance of Southwest Indiana which is fantastic, but the sustainability of which I think is in question. Wages are higher in metro areas too, by the way. Here’s the average weekly wage in 2012, which shows most of the state’s metros doing comparatively well:

In short, I suggest:

- Retain lean fiscal structure but limit further contractions
- Goal is to build middle class or better economy, not bottom feeding
- Align economic development efforts to metro areas, particularly larger, competitively advantages locations. Align capital investment in this direction as well.
- Greater local autonomy to pursue differentiated strategies for the variegated areas of the state
- Special attention/help to strategically disadvantaged communities, but not entire state policy directed to servicing their needs.
- Utilization of transfers for the chronically unemployed pending a federal answer, but again, not redirection of state policy to attract $9/hr jobs.

This requires a lot of fleshing out to be sure, but I think is broadly the direction.

Back to Gov. Mike Pence, would he be on board with this? He’s Tea Party friendly to be sure and interested in fiscal contraction. But he’s not a one-trick pony. He’s actually taken some interesting steps in this regard. He is subsidizing non-stop flights from Indianapolis to San Francisco for the benefit of the local tech community. He also wants to establish another life sciences research institute in Indy. And he’s talked about more regionally focused economic development efforts. It’s a welcome start. I think he groks the situation more than people might credit him for. Keep in mind that he did not establish the state’s current approach, which arguably even pre-dated Mitch Daniels, and he has to deal with political realities. And if as they say only Nixon could go to China, then although a reorienting of strategy is not about writing big checks, still perhaps only someone with conservative bona fides like Pence can push the state towards a metro-centric rethink.

Thursday, January 9th, 2014

More Fun With Per Capita Incomes

After yesterday’s post, I thought I’d throw up some additional comparisons, this time at the metro level. County and metro per capita incomes only go back to 1969, not 1929, but there are still interesting things to see. I’ll post these without analysis for you to ponder on your own. Again, all data from the Bureau of Economic Analysis, with charts via Telestrian.

The five boroughs of New York City (Manhattan=New York County, Brooklyn=Kings County, Staten Island=Richmond County). In the case of Manhattan, it’s worth noting that this is a mean not a median value.

New York vs. Los Angeles. Keep in mind, the exurbs of LA are technically considered a separate metro area (Riverside-San Bernardino) and so aren’t included in the LA metro figures:

Chicago vs. Indianapolis:

Denver vs. the Twin Cities vs. Seattle:

Atlanta vs. Dallas-Ft. Worth vs. Houston:

Memphis vs. Nashville:

Cincinnati vs. Cleveland vs. Columbus:

Friday, December 13th, 2013

The Marginality of Parking

I’ve long argued that complaining about “there’s no parking” or having to “pay for parking” is just a convenient scapegoat excuse people give when the product on offer isn’t a compelling enough buy. If your downtown doesn’t offer enough value vs. a suburban office park location, naturally employees having to pay to park sounds like a huge imposition. If an attraction is lame, then of course people don’t want to pay to park there.

I just came across another example of this in action. Attendance at Indiana Pacers games has spiked this year. It’s not hard to figure out why: they started winning games and have a team that doesn’t repel fans. Not long ago their arena was so empty it reminded me of the old days at Market Square where they used to hang a curtain around the upper deck to screen off the empty seats. Those Pacers were a team of thugs that got involved with fights with fans in the stands at the game, and shootouts at strip clubs afterwards. They also didn’t do a lot of winning.

Parking charges on game nights remained quite hefty throughout. The fluctuations in attendance had nothing to do with parking and high parking prices aren’t preventing sellouts this year. The lesson is clear: create a compelling product in your downtown or business district and parking won’t be an obstacle.

It’s amazing how often parking is viewed as determinant. Here’s a particularly sad example from Providence. It’s a marketing ad for downtown, which Greater City Providence called, “Come For the Parking, Stay For the Parking.” Please. (If the video doesn’t display for you, click here).

Don’t be that guy.

Thursday, December 12th, 2013

My Master Plan to Win the War For Indianapolis Government Buildings


The Marion County Jail in Downtown Indianapolis. Source: indy.gov

The Indianapolis Business Journal reported that Mayor Greg Ballard is championing a plan to relocate the jail out of downtown. This is an idea I’ve been touting to anyone who’ll listen since at least 2009, so obviously I’m a big fan of the concept. Though let me hasten to add I’m not endorsing any particular plan as I haven’t seen one.

I’ve always encouraged people to think about public transit investments first as about transportation. But also to ask what it is that implementing an expanded transit system like IndyConnect would let you do that you couldn’t do before. This is one of those things.

More about that in a moment. But first, this is only one part of what I see as a long term reconfiguration of city government space in downtown Indianapolis. I call it my “master plan to win the war” because I see it as game changing for the east and southeast parts of downtown. The components are:

  1. Relocate the jail and criminal courts to a new complex on an old industrial site on the near West Side in proximity to the proposed Washington St. transit corridor. (I was thinking the former GM site originally).
  1. Relocate the civil courts into a new downtown state judicial complex. (The state supreme court already wants one of these, so include the appeals court and local courts as well).
  1. Renovate the old City Hall as, well, the new City Hall housing the Mayor, Council, and executive functions.
  1. Move the rest of the office users into leased space. (I was thinking originally about using this to anchor the MSA site redevelopment and add an office component to the mix of use because the site was so close to the old City Hall).
  1. Implode the City-County Building, demolish the jail, and redevelop Marion County Jail II and Liberty Hall. (I kid you not, one of the jail locations is called Liberty Hall. I think it is used for work-release today, so may be viable as that if managed properly and there’s a particular benefit to locating it downtown for access to employment).
  1. Put all the land used by these facilities back onto the tax rolls by selling for development.

The benefit of this is eliminating multiple significant barriers to development, ones that keep the various districts undergoing redevelopment from feeding off each other. And while it wouldn’t fully pay for the projects, it would put large amounts of prime downtown land back to taxable use.

I’m not suggesting that the city should go do all this right away. Nobody has this kind of money laying around. Rather it’s vision to be implemented as the components reach end of lifecycle and need replacement or hugely expensive upgrades. Though to some extent they are all already there.

First the jail. The sheriff claims a new modern jail could be run with his existing staff. This would save money by allowing the city to dump the private contractor that runs Marion County Jail II. (News reports have criticized the sheriff’s spending. So if even the guy who is accused of spending too much money says it can be done for less, take him up on the offer).

And why put a jail on your city’s most valuable real estate? That doesn’t seem to make much sense today. New York and Chicago don’t have their jails downtown. (In fairness I should note the federal government has remand facilities in both CBDs however). A message board commenter noted that even in Indiana, Evansville’s Vanderburgh County Jail is away from downtown.

I actually got this idea when I was living in Chicago and was summoned to jury duty. The Cook County Jail and a criminal court building are located at 26th and California near Little Village. I had some time to kill while waiting around during a recess so I found myself walking down 26th St. spending money. I’m like, if I’m spending money, maybe other people are spending money too.

Downtown, jails inhibit development. But at an old industrial site near a transit served commercial street, a jail could actually inject life into a struggling neighborhood while still being reasonably centrally located. That’s a win-win.

It’s understandable why the jail would be downtown now for historical reasons. And downtown is the one area that’s reasonable to get to with transit today. That’s important when 10% of households don’t own a car. Those families should not be burdened with an inaccessible jail and courts, particularly when the poor are alas too often involved with the justice system. That’s why enhanced transit service on Washington is so important. It’s the link that enables people to get to the new jail. In this case, transit actually facilitates de-centralization, not centralization.

Some will no doubt say this is a waste of money and the jail doesn’t need to be replaced yet. It would not appear that there’s a burning platform to do this immediately. And it’s easy to point at Wayne County, Michigan as a cautionary tale of what can go wrong. But let’s be realistic. Anybody who’s been around Indy a while knows that there’s always at least one nine figure public construction project going at all times. With the new Eskenazi Hospital just wrapping up, it’s time for the next installment, and this looks like it’s the one. If a nine figure project is going to happen regardless, it might as well be something that’s actually great.

The merits of spending can of course be debated. But I’d like to suggest one benefit of these projects that’s often overlooked. I’m totally speculating with this, I’ll admit. But I see the implicit commitment to keep these construction projects going as a way to bind organized labor into the governing consensus. Indy has had remarkably few organized labor problems and I suspect this is one reason why. Labor is being taken care of. It also means labor is invested in keeping the city healthy, because a broke city means no more projects which means no more jobs for union construction workers.

Apart from purely debates about dollars, I suspect the most controversial part of my master plan is imploding the City-County Building. It’s a classic modernist era structure on an entire city block much of which is devoted to a plaza (with I think underground parking). Notably, the gorgeous historic Marion County Court House was demolished when the CCB was built. Here’s a picture:


Source: wikimapia.org

There’s not exactly a plethora of this type of modernism in Indy and demolishing it would be a loss. However, in my view it’s not a great building. It’s a massive development barrier/dead zone where it stands. And it needs huge money spent in renovations and is probably costly to operate. In the summer, even the 25th floor (where the mayor’s office is located), has insufficient air conditioning, for example. I say implode it and redevelop the block in the private sector.

Here are pictures of some other buildings I mentioned:


Old City Hall, empty and with the windows closed up. Source: ibj.com


Marion County Jail II (Source: indy.gov)

Sunday, November 10th, 2013

Credibility, Cancelling Projects, and Sunk Costs

I was surprised to see that last Wednesday’s post on Cincinnati’s culture of self-sabotage received such a huge response. In light of that, I want to circle back and more fully address the idea of cancelling projects.

What I do not want you to take away from that is that once started, projects should never be stopped on account of the money spent. That’s called the sunk cost fallacy. Money that’s been spent has been spent. One needs to look forward to the future expected benefits and costs. There are certainly many cases in which pulling the plug can be a good idea. For example, Indiana Gov. Mitch Daniels reversed the privatization of certain social services functions after he determined it was unlikely the contract would ever work out like originally envisioned. This an example of someone taking a risk, trying to make it work, then acknowledging it didn’t rather than continuing to double down on a mistake.

On the other hand, I do not see the majority of these rail cancellations as having anything to do with benefit/cost analysis. You may notice, it’s only transit projects that ever seem to get the ax. Since the era of the freeway revolts, it’s tough to name any governor or mayor that has ever sent back earmarks on a highway project, or ever cancelled any road project they could actually get money to build on the grounds that it’s a boondoggle. (My hypothesis continues to be that there’s no highway boondoggle big enough that even the most fiscally conservative governor is willing to kill it). Clearly, the cancellations in these cases is based on an ideological animus to transit specifically.

That is, unless it is baser motivations at play. Chris Christie’s cancellation of the ARC tunnel project enabled him to use the funds New Jersey had pledged to the project to bailout the state’s bankrupt highway fund. He’s not demonstrated any hesitancy to push even questionable and expensive transit projects when they involve Somebody Else’s Money. For example, he wants the Port Authority to spend a billion dollars on an extension of PATH service to Newark Airport, which many consider an inappropriate use of funds. Christie’s motivation appears to be bribing United Airlines to add flights to Atlantic City, whose gambling market is imploding. (Read up on the Revel Casino deal if you want to know more about this sordid story).

Meanwhile, many of these cancellations are proving to be costly in their own right. I noted before how Cincinnati had already let $95 million in contracts out the total $133 million cost of the streetcar, how it will have to repay federal grants that were going to pay for a big slug of the project, and likely end up with at best a minor financial win and potentially a loss.

It’s the same in Wisconsin. Gov. Scott Walker trumpeted that he was returning an $810 million stimulus grant for rail upgrades between Madison and Milwaukee. Apparently although the federal government was going to pay 100% of the construction costs through the stimulus bill, he didn’t want the state to have to pick up the estimated $7.5 million in annual operating costs. (How much the state actually would have had to pay incrementally is a an open point. The existing Hiawatha operating costs were being 90% paid for by federal funds. It’s by no means clear that the state would have been on the hook for the full amount anyway). The feds were actually generous enough to reimburse Wisconsin for money it had spent on the rail line it decided not to build. However, that did not prove to be the end of the matter. Train maker Talgo is planning to sue the state of Wisconsin for $66 million for breach of contract. Given that it actually built trainsets for the state, this seems like a strong case. Also, if the state does lose, it might also be forced to immediately repay an additional $70 million in loans. The state could have paid operating costs for a long time for that kind of money – and it would actually having something to show for it other than a hole in its bank account.

So from a financial perspective, it’s not even clear cancelling these projects was a good move – even if you look solely at costs and ignore benefits.

But beyond the financials, these types of things also show communities that have deep internal divides, and which as a result require businesses and residents to apply an additional uncertainty premium into investment business cases there to account for the likelihood that a) promised actions by the government may not actually occur, even if they are in flight and b) that the community may not be able to muster the staying power to make the kind of long term investments that are necessary for any community to retain marketplace relevance. Though hardly immune to infrastructure drama, New York City just put water tunnel #3 into service for Manhattan. This is a project that was started in the 1970s. That’s the type of long term thinking that has kept a place like New York on top. In short, credibility counts for something, and places like Cincinnati and Wisconsin have damaged theirs.

I want to contrast this with one of the legendary stories of Indianapolis. In the late 1980s it embarked on construction of a downtown mall. Maybe that wasn’t the best idea in the world. The city definitely didn’t have its act fully together. Two entire city blocks had been excavated and were literally holes in the ground. No anchor stores had been signed and it wasn’t clear if the project would or even could be finished. A lot of the public suggested scrapping the project. Some suggested turning the empty blocks into ice rinks. Others trying to bring in a Wal-Mart. Instead, city leaders across the board came together to commit to the project, including many of the downtown corporations investing in the project. It got built. While generally successful, the mall has certainly had its share of troubles over the years and may not even survive over the long term given the disfavor of the mall format. However, one thing that project demonstrated is that Indianapolis finishes what it starts. In short, they have credibility and an ability to execute that’s simply better than most places. I suspect that’s one of the reasons metro Indy has so outperformed Cincinnati in population, job, and reputational growth, despite having far, far fewer natural assets to start with. They aren’t constantly shooting themselves in the foot.

This is also why even though there are road projects out there I did not think were a wise use of funds – say I-69 in Indiana, to pick one I’ve criticized – once they are being built I’m all in favor of getting them done as quickly and cheaply as possible. And then letting the communities in question live with the consequences of making that choice, for good or ill. Again, that doesn’t mean no project should ever be cancelled, but you need to pick your battles. Communities are not well served when project debates turn into endless years of scorched earth politics, litigation, etc. in which neither side will ever given an inch on anything.

Sunday, October 27th, 2013

The Magic of Microclusters

If you look at the list of target industries for any given city or state, you usually find several from the same list of five common items: high technology, life sciences (under various names), green tech, advanced manufacturing, logistics. Take a few from this list, and add a legacy industry if there’s one or two where you are already particularly strong, and there you have it.

The problem is that everybody and their brother is now claiming to be a tech or startup “hub”, etc. And there’s probably some fairness in that. Starting companies is much easier than it used to be, and despite the so-called “20 minute rule”, venture capitalists seem very willing to travel to find deals where they can make good money. For example, payments startup Dwolla didn’t have trouble attracting top name backers even though it was in Des Moines.

So in a sense everybody can play right now. At some point though, there will inevitably be another shakeout of sorts. If you want to be a long term survivor, have a claim to fame that will make you stand out from the crowd, generate above average returns, etc., you need to have something that makes you distinct.

One way to do that is to be sub-specialized. “High tech” is an extremely broad category. A city could have a large number of nominally high tech companies that are totally unalike, and which do not form any type of real ecosystem, integrated supply chain, etc. This is a cluster in name only.

One way to stand out is a concept I’ve called “microclusters”. That is, rather than simply saying “We’re high tech”, you have some specialty within the broader tech industry where you can be a real national leader.

A couple of news stories make me revisit this with regards to the internet marketing microcluster in Indianapolis. Like most cities, Indy is targeting, you guessed it, high tech, life sciences, green tech, advanced manufacturing, and logistics. The main promotional organization for high tech is called Techpoint. (I should note this organization does double duty as a statewide group as well).

But somehow, organically, within tech generally Indianapolis had a lot of startups in the internet marketing space. There were something like 70 or so last time I saw someone who had made a list. One of them, Exact Target, was recently acquired by Salesforce.com for $2.5 billion. That’s a legitimate exit by any standards. Also recently, a content marketing cloud provider called Compendium was bought by Oracle for its own marketing cloud suite. (Terms not disclosed but surely much, much smaller).

When two tech bluechip names decide to go fishing in the same pond for companies in the same field, you start to think there’s something to it. (Salesforce and Oracle weren’t the first either. Terradata bought out a company called Aprimo for $525 million a couple years ago). Wanting to build on the momentum, Techpoint just held a big shindig called M-Tech to launch a campaign they are launching in an effort to boost the city’s marketing technology cluster.

What will this turn into? I don’t know. A news report about M-Tech noted potential challenges from competitors. What’s more, if there’s no pipeline of new companies, this sort of thing will fizzle out. But if money and talent continues to develop new solutions and companies in a place where there’s real domain expertise and a bona fide ecosystem, it will potentially give the city a niche where it can be a truly top tier player and not just another me-too startup hub.

On a more mature level, I wrote some years back about the motorsports industry cluster in Indianapolis. Everybody knows the Indianapolis Motor Speedway and the 500-mile Race, but Indianapolis Raceway Park (now Lucas Oil Raceway) in Brownsburg also happens to be home to arguably the top drag racing event in the US. It’s near Brownsburg predominantly where a collection of (as of 2008 when I got the last report) 400 motorsports companies, employing 8,800 people at average wages of around $50,000/year is centered. Thus this cluster is both a sub-industry (a type of advanced manufacturing) microcluster and a geographic one. (I might note it’s certainly not the only global location in this industry as places like London and Charlotte also have such clusters). People have actually moved to Indianapolis from as far away as Australia and England to start companies in this space, a pretty good indicator it’s a real opportunity zone.

Again, both of these grew organically, so I don’t want to suggest that you can conjure one up with an economic development program. But I suspect most cities have a few of these out there or in the process of developing. It just so happens I know Indianapolis well and so can name what’s there. Identifying these and providing institutional or infrastructural support (e.g., specialized community college training programs) is probably a worthwhile endeavor.

Today’s economy doesn’t have one plant employing 10,000 people. But a good microcluster can be as impactful if not more so. Obviously the smaller your metro, the bigger a splash something like this will make. What’s more, specialization and a true integrated ecosystem can produce what Warren Buffett calls a “wide moat” business that can be defended against upstarts. Also recall that Jack Welch at GE famously didn’t want to be in a business if he couldn’t be #1 or #2 at it. It’s not realistic for smaller cities to ever think they’ll be #1 or #2 in tech generally, nor even have the large tech scene of a New York or Chicago. But they can find particular areas where they can punch above their weight. And as the recent Indy acquisitions show, generate legitimate big dollar exits.

Update: Richard Layman posted some additional thoughts on his blog.

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