seeing the forest and the trees

Seeing the Forest and the Trees:Seeing the Forest and the Trees:The Unique CEOs for Cities LensThe Unique CEOs for Cities Lens

Annual MeetingMay 6, 2005

by: Robert Weissbourd RW Ventures, LLC

THE FOLLOWING PRESENTATION HAS BEEN APPROVED FOR

MATURE AUDIENCESTHE FOLLOWING PRESENTATION HAS BEEN APPROVED FOR

MATURE AUDIENCES

R THIS PRESENTATION HAS BEEN RATED R FOR CONTENT. AUDIENCE DISCRETION ADVISED.

R E S T R I C T E D

CONTENT MAY BE UNSUBSTANTIATED,OPINIONATED AND PROVOCATIVE

AgendaAgenda

What Have We Learned?

Implications for Policy and Practice

Organizational Implications

Comments and Discussion

AgendaAgenda


•The Role of Cities•Geography of the New Economy•Drivers of the New Economy•Market Forces

Cities Drive the National EconomyCities Drive the National Economy

0% 20% 40% 60% 80% 100%

Aggregate Personal Income

Consumer Expenditures

Tax Payments

Total Economic Grow th

Manufacturing Value Added

Exports

Business Establishments

MSA as % of US Total Nonmetro as % of US Total

The Role of CitiesThe Role of Cities

Cities and Economic Prosperity• Cities make a disproportionate

contribution to the nation’s economic output

• City economies are particularly concentrated in key types of new economic activity

• Cities are hubs for metropolitan areas

• Cities are drivers of metropolitan economies

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Museums, botanical, zoological gardens

Educational services

Legal Services

Health Services

Depository institutions

Insurance Carriers

Communication

Air Transportation

Hub Functions of Cities

Suburban % of Total MSA Employment City % of Total MSA Employment

The Role of CitiesThe Role of CitiesCities are Even More Important in the Global, Knowledge EconomyCities are Even More Important in the Global, Knowledge Economy

Increased Value of Knowledge Factors…

• High skilled labor force• Intellectual property• Product innovation; flexible

customization• Customer networks• Knowledge management capacities300%

400%

500%

600%

Lead to New Drivers of Productivity which Favor Cities

• Dense knowledge networks• Functional specialization• Innovative capacity

hang

e

Gross Domestic Product% Growth over last 50 years

0%

100%

200%

$s lbs

% C

Greenspan: Greenspan: Fundamental change Fundamental change in the economy towards intangible in the economy towards intangible assetsassets

Economic Growth Worldwide has been Characterized by Urbanization

The Role of CitesThe Role of Cites

Demographic Shifts Enhance CitiesDemographic Shifts Enhance CitiesUS Population Growth

800,000

3,456,577

Population Growth 1990-2000(Top 100 Cities)

Native Born

Foreign Born

The top 100 cities added 4.3 million in population between 1990 and 2000. 80% of this growth was due to increases in the foreign born population.

The U.S. added 33 million in population between 1990 and 2000. 35% of this growth was due to increases in the foreign born population.

65%

35%

• Population growth fueled by immigrants settling primarily in urban areas

• Aging baby boomers increasingly choose to return to cities

• Young and singles get married later, enjoy urban lifestyle longer

• Cities Increasingly perceived as centers of business, culture and progress rather than crime and poverty (Celinda Lake Poll)

Median Growth (1990-2000)

02468

1012

Population Per Capita Income

1st Principle1st PrincipleThe Role of CitiesThe Role of Cities

Adapted from Gastner, Shalizi and Newman, University of Michigan

National Policy National Policy = = Urban PolicyUrban Policy(and vice(and vice--versa)versa)

Geography of the New EconomyGeography of the New Economy

Cities Perform in a Global EconomyCities Perform in a Global Economy

01,000,000

2,000,000

3,000,0004,000,000

5,000,000

6,000,0007,000,000

8,000,000

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

(in Millions of $)

050,000

100,000150,000

200,000250,000300,000350,000

1994 1995 1996 1997 1998 1999 2000

Source: BEA

The World is Smaller –Markets are Transnational

U.S. Assets Abroad up 1500% Since 1976(in Millions of $)

Foreign Assets in US up 600% (1994 - 2000)

Cost of a 3 Minute Phone Call from NY to London

$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

1960 1970 1980 1990 2000

Source: Paul Masson, 2001


Markets Are Specializing Across CountriesMarkets Are Specializing Across Countries

Is the sky falling?

“Tech jobs leave U.S. for India, Russia. Who’s to blame?”

– July 2003

“Is your job next?”– February 2003

“American legislators are accusing India of stealing jobs”

– June 2003

“America’s pain, India’s gain”

– January 2003

“3.3 million U.S. service jobs to go offshore by 2015”

– November 2002

“Can America Lose These Jobs and Still Prosper?”

– July 2003

U.S. House Sub-business Committee

Sawhney on Outsourcing: Is The Sky Falling?

Labor Markets Increasingly Operate on a Global Scale

2nd Principle2nd PrincipleGeography of the New EconomyGeography of the New Economy

Urban Policy Must Reflect that the Economy is GlobalUrban Policy Must Reflect that the Economy is Global

Cities and Suburbs are LinkedCities and Suburbs are Linked

00.10.20.3

0.4

0.50.6

0.7

1970 1980 1990 2000

Income Levels Housing Values

Spe

arm

an R

ank

Cor

rela

tion

Wages Move in Tandem

-

10,000

20,000

30,000

40,000

50,000

60,000

0 10,000 20,000 30,000 40,000 50,000 60,000

City

Sub

urb

Correlation = 0.77, significantat the .01 level (two-tailed)


The Economy is RegionalThe Economy is Regional

CITYREGIONAL ECONOMY

ENVIRONMENT

AMENITIES

UTILITIES

TRANSPORTATION

HOSPITALS

AIRPORTS

HOUSING

JOBS

CITYCITY

CORPORATE SERVICES

SUPPLY CHAINS

MUSEUMS

CONSUMER MARKETS


3rd Principle3rd PrincipleGeography of the New EconomyGeography of the New Economy

Urban Policy Must Be RegionalUrban Policy Must Be Regional

Drivers of the New EconomyDrivers of the New Economy

Are Current Growth Patterns Efficient? Are Current Growth Patterns Efficient?

Regional Economic Efficiency Requires:

• Taking Advantage of Density• Building Livable Communities• Aligning Components of the

Economy (e.g. Reducing Jobs-Housing Mismatch)

• Efficient Regional Infrastructure

Source: Chicago Metropolis 2020


Equity and Opportunity are Good for BusinessEquity and Opportunity are Good for Business-.2

0.2

.4.6

Wag

e G

row

th (1

990-

2000

)

0 .1 .2 .3 .4Poverty Rate (1990)

Changing Dynamics Findings:• Inequality has negative effect

on income growth• Hispanic Segregation has a

negative effect on income growth

Regional Economic Efficiency Requires:•Using All Deployable Assets

•Avoiding Costs of Concentrated Poverty

4th Principle4th PrincipleDrivers of the New EconomyDrivers of the New Economy

An Efficient Regional Economy Uses allAn Efficient Regional Economy Uses allof its Assets and Organizes them Wellof its Assets and Organizes them Well

The Role of Knowledge Factors is Increasing Throughout the EconomyThe Role of Knowledge Factors is Increasing Throughout the Economy


Wage Growth Increases with Digital Economy1

.8

.4

.20 5-5

Wag

e G

row

th19

90-2

000

(PM

SA)

.6Grand Rapids, MI

Rochester, NY

San Diego, CA

Austin, TX

Presence of Digital Economy Factors

The Value of Output per Hour has Increased More than Ten-Fold Over the Last 100 Years


The Importance of EducationThe Importance of Education

Wag

e G

row

th 1

990-

2000

(Log

, MSA

)

% Adults with BA or Higher 1990

-.20

.2.4

.6

.1 .2 .3 .4 .5

Cleveland, OH

Washington D.C.

Richmond, VA

Providence, RI

St. Paul, MN

Houston, TXChicago, IL

Columbus, OH

Indianapolis, IN

San Antonio, TX

College Education is the Biggest Driver of Economic Growth(and High School Alone is Barely Significant Anymore)

Functional and Occupational Concentrations are Increasingly ImportantFunctional and Occupational Concentrations are Increasingly Important

Sectoral Specialization (Manufacturing)

0.330.340.340.350.350.360.360.370.370.380.38

1977 1987 1997Gin

i Coe

ff. B

ased

on

Em

ploy

men

t Sha

reFunctional Specialization

(Management vs. Production)

0%5%

10%15%20%

25%30%35%40%45%

1970 1980 1990Per

cent

Diff

eren

ce fr

om N

atio

nal A

vera

ge


MSAs with Pop > 5,000,000Source: Duranton and Puga 2002

Estimated Effect on Income Growth (MSA)

0.0

Professional

Managerial

Sales

Clerical

Precision Production

Machine Operator

Transportation Equipment*

Material Handler & Laborer

Farming*

Services (Non HHD)

Knowledge Industries, Functions and Occupations Attract BAs and Drive GrowthKnowledge Industries, Functions and Occupations Attract BAs and Drive Growth

Information Sector

05

10A

ttain

men

t Gro

wth

(199

0-20

00)

.1 .2 .3 .4 .5Information Sector as % Total Earnings

Finance, Insurance, and Real Estate

05

10A

ttain

men

t Gro

wth

(19

90-2

000)

0 .05 .1 .15Share workers in Finance, Insurance, and Real Estate

Manufacturing

05

10A

ttain

men

t Gro

wth

(199

0-20

00)

0 .05 .1 .15 .2 .25% Employment In Manufacturing


Business Services

05

10A

ttain

men

t Gro

wth

(199

0-20

00)

.02 .03 .04 .05 .06 .07% Employed In Business and Repair Services

KnowledgeKnowledgeFunctionsFunctions

ProductiveProductiveIndustriesIndustries

High HCHigh HCOccupationsOccupations


5th Principle5th Principle

Invest WiselyInvest Wisely

Create a Knowledge Intensive EconomyCreate a Knowledge Intensive Economy

http://www.tomcross-artist.com/images/jpgs/LOR/Gandalffull.html


Multiple Drivers of SuccessMultiple Drivers of Success

High School Degree

Age 35-44

Business Services

Sprawl Index

Professional Jobs

College Degree

Exports

Immigration (1980s)

Hispanic Segregation

-0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0Estimated Effect on Income Growth

(Standardized Regression Coefficient: with 95% Confidence Interval)

No Silver Bullet: Many Factors Matter


Varied City Types and PerformanceVaried City Types and PerformanceIncome Growth vs. Population Growth 1990-2000

Top 110 CitiesFastest

Slowest FastestGrowth in Population (Rank)

Gro

wth

in In

com

e pe

r Cap

ita (R

ank)

WashiWashington D.C.ngton D.C.

Jacksonville, FLJacksonville, FL

Chicago, ILChicago, IL

Indianapolis, INIndianapolis, IN

Boston, MABoston, MA

Baltimore, MDBaltimore, MD

St. Paul, MNSt. Paul, MN

Cleveland, OHCleveland, OHColumbus, OHColumbus, OHChattanooga, TNChattanooga, TN

Houston, TXHouston, TX

San Antonio, TXSan Antonio, TX

Richmond, VARichmond, VA

MilwMilwaukee, WIaukee, WI

Great Variation in City Economic Types, Paths, Outcomes



Build on Your Unique StrengthsBuild on Your Unique Strengths

Learnings from the Field: the Business of DevelopmentLearnings from the Field: the Business of Development

Market ForcesMarket Forces

$0

$50

$100

$150

$200

$250

$300

1999 2000 2001 2002 2003

Shorebank Corporation: Total Community Development Investment(in millions)

$0

$2

$4

$6

$8

1999 2000 2001 2002 2003

ShoreBank Corporation: Net Income(in millions)

• Widespread Success of CDFIs

• Effective Tax Credit Policies (EITC, LIHTC, NMTC)

• Annie E. Casey Foundation – from children to families to neighborhoods to economics…


Goals: Aligning Markets and DevelopmentGoals: Aligning Markets and Development

High AlignmentHigh Alignment

Low AlignmentLow Alignment

Market Market RefiningRefiningMarket solution Market solution possible with possible with new information, new information, products or products or networks

Market Market InterventionInterventionMarket solution Market solution possible if possible if market market operations and operations and environment environment changed changed through public through public policy and policy and advocacy

Market Market RedefiningRedefiningMarket solution Market solution possible if possible if market market operations and operations and market market environment environment changed through changed through private activities

networks

private activities

Pure MarketPure MarketMarket solution Market solution possible; market possible; market already already generates generates development development outcomesoutcomesNonNon--MarketMarket

No market No market solution; market solution; market is not the is not the appropriate appropriate channelchannel

advocacy

Market InterestsMarket Interests

Development Development GoalsGoals

Adapted from Kahane /Weiser/Ford CIIAdapted from Kahane /Weiser/Ford CII


Goals: Aligning Markets and DevelopmentGoals: Aligning Markets and DevelopmentHigh AlignmentHigh Alignment

Low AlignmentLow Alignment

Market Market RefiningRefiningMarket solution Market solution possible with possible with new information, new information, products or products or networks

Market Market InterventionInterventionMarket solution Market solution possible if possible if market market operations and operations and environment environment changed changed through public through public policy and policy and advocacy

Market Market RedefiningRedefiningMarket solution Market solution possible if possible if market market operations and operations and market market environment environment changed through changed through private activities

networks

private activities

advocacy

Pure MarketPure MarketMarket solution Market solution possible; market possible; market already already generates CED generates CED outcomesoutcomes

NonNon--MarketMarket

No market No market solution; market solution; market is not the is not the appropriate appropriate channelchannel

Market InterestsMarket Interests

CED GoalsCED Goals

Adapted from Kahane, Weiser, Ford CIIAdapted from Kahane, Weiser, Ford CII

Make Market Make Market WorkWork

(Addressing (Addressing Internal Internal Imperfections)Imperfections)Change Market Change Market

ParametersParameters

(Using Market (Using Market Mechanisms)Mechanisms)

Change Market Change Market ParametersParameters

(Using Non(Using Non--market market Mechanisms)Mechanisms)

Vital Work Vital Work ––

but not market but not market based!based!

Market Works:Market Works:

Company profits Company profits while providing while providing Development Development impact.impact.



In Our Economy, Markets are the Most Powerful In Our Economy, Markets are the Most Powerful Mechanism for Wealth CreationMechanism for Wealth Creation

Harness Market ForcesHarness Market Forces

What Have We Learned?What Have We Learned?

1. National Policy = Urban Policy

2. Urban Policy must Reflect that the Economy is Global

3. Urban Policy must be Regional (the region is the economic unit that performs in the global economy)

4. An Efficient Regional Economy Uses all of its Assets and Organizes them Well

5. Invest Wisely -- Create a Knowledge-Intensive Economy

6. Harness Market Forces

7. Build on Your Unique Strengths

AgendaAgenda





1. National Policy = Urban Policy1. National Policy = Urban Policy

• Strategy 1.1: Strengthen Urban Economies to Strengthen the Nation

• Policies and Programs:– See, Everything under the other Principles

• Strategy 1.2: Focus on the Urban Economic Effects of National Policies

• Policies and Programs: – Tailor immigration policy to local labor force needs; – Health care;– Banking regulation (e.g. CRA)– Transportation.

2. Urban Policy Must Reflect that the Economy is Global

2. Urban Policy Must Reflect that the Economy is Global

• Strategy 2.1: Enable Regions to Compete in Global Economy

• Policies and Programs:– Strengthen infrastructure for participation in global economy; – Identify and support your niches in the global economy;– Leverage international linkages and FDI (e.g. Seattle Trade

Development Alliance)

• Strategy 2.2: Reap Long-Term Benefits of Offshoring While Addressing Short-Term Costs

• Policies and Programs:– Focus on job retraining and education; – Foster entrepreneurship; – Invest in innovation

3. Urban Policy Must Be Regional3. Urban Policy Must Be Regional

• Strategy 3.1: Support Regional Infrastructure, Integration and Planning

• Policies and Programs:– City-suburb partnerships, particularly aimed at managing growth

patterns (e.g. Metro regional government in Portland); – States limiting government fragmentation and consolidating land

use and zoning powers; – State and federal governments encouraging cooperation among

jurisdictions

[See Strategy 4 and related Policies and Programs as well.]

4. An Efficient Regional Economy Uses All of its Assets and Organizes Them Well

4. An Efficient Regional Economy Uses All of its Assets and Organizes Them Well

• Strategy 4.1: Deploy Human Capital, Take Advantage of Diversity• Policies and Programs:

– Workforce Development; – Regional Housing and Transportation Planning (Chicago Metropolis 2020); – ESL Classes and Targeted Workforce Development for Immigrant Population;– Reduce cost of healthcare

• Strategy 4.2: Reduce Negative Effects of Concentrated Poverty• Policies and Programs:

– Financial Education and IDAs– Earned Income Tax Credit; – Affordable Housing and Mixed-Income Communities (HOPE VI, Sec. 8, LIHTC)

• Strategy 4.3: Promote Regional Economic Efficiency• Policies and Programs:

– “Fix it first” transportation policy (Maryland) – Correct State and Federal Policies that Favor Sprawl– Downtown Revitalization (e.g. Central Philadelphia Dev. Corp; Denver Downtown

Housing Office)– Asset-Based, rather than Deficiency-Based, Community Economic Development



• Strategy 5.1: Focus on Innovation and Commercialization of Knowledge

• Policies and Programs: – R&D tax credit; – University-industry partnerships (e.g. Research Triangle Park); – Industry Innovation Initiatives (e.g. Innovation @ Scale in Rhode

Island, Bay Area Science and Innovation Consortium); – Investment in Business Incubators; – Incentives for Start Up and Academic Inventors.

• Strategy 5.2: Invest in Knowledge Functions, Industries and Occupations

• Policies and Programs: – Identify and build on your unique concentration of human capital-

intensive industries and occupations – Look beyond industry clusters

5. Invest Wisely to Create a Knowledge-Intensive Economy5. Invest Wisely to Create a Knowledge-Intensive Economy

• Strategy 5.3: Invest in Education, at All Levels

• Policies and Programs: – School finance reform -- Make education system more

equitable by revising school funding (e.g. move away from property tax system);

– Charter/small schools; – Teacher quality and compensation; – Improve job market connections (e.g. KIP in Philadelphia,

Summer of Cuyahoga in Cleveland); – Early childhood and family support. – Attract BAs through investment in the economy, not just quality

of life.

6. Harness Market Forces6. Harness Market Forces

• Strategy 6.1: Use Government as Market Enabler

• Policies and Programs:– Focus direct interventions on areas where markets can’t work; – Provide the market preconditions of infrastructure and human

capital (health and education)– Supplement – don’t supplant – the market where possible:

EITC, LIHTC, and New Markets Tax Credit– Support CDFIs; – Gather and release critical information that can improve market

operations in urban areas (e.g. American Community Survey); – Increase government efficiency (e.g. e-government, inter-

agency cooperation).

7. Build on Your Unique Strengths7. Build on Your Unique Strengths

• Strategy 7.1: Build on Overlap of Local Assets, Economic Drivers and Geographic Connections

• Policies and Programs:– Increase availability of flexible funding sources (e.g. CDBG)– Develop more targeted economic investment programs to

support varying economic functional concentrations; – Take into account different roles cities play in the context of

regional and global economy. – Focus here should be first on practice, not policy.

AgendaAgenda


“It is one of the happy incidents of the federal system that one courageous State may ... serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country”

- Supreme Court Justice Louis Brandeis, quoted in Osbourne, Laboratories of Democracy

The Unique CEOs for Cities LensThe Unique CEOs for Cities Lens

Applied Research: addressing current problems; leading to

practical solutions

Policy informed by best practices

Grounded Knowledge to test and inform policy

Three Priority Areas of FocusThree Priority Areas of Focus

•R&D: Value Added Economic Strategies

•Practice: “Clinical Economics” (Sachs)

•Policy: Build Majority Coalition

R&D

Value Added Economic StrategiesValue Added Economic Strategies

• Compete on Value, not Costs – not zero sum game• CEOs’ Focus: Best Practices for Prosperity in the Knowledge Economy:– Education, at all levels

– Regional Efficiency Strategies

– Knowledge-Intensive Occupational and Functional Concentrations

– Commercialization of Knowledge, Entrepreneurship and Innovation

Practice

“Clinical Economics”“Clinical Economics”

Sophisticated, Targeted Diagnostic Tools

National Research• Cities Survey• Urban System Design• City-Suburb Linkages• ….

Local Services• Metro Audit• Industry by Occ. Analysis• Customized Typologies• ….

Customized Products and Solutions

Policy

Making Policy HappenMaking Policy HappenClosely and Deeply Divided

RepublicanDemocrat

Closely but not Deeply Divided

RepublicanDemocrat

Source: Morris Fiorina, “Culture War?”

Build Majority Coalition Around Urban Agenda for State and Federal Policy Reform

AgendaAgenda





Seeing the Forest and the Trees:Seeing the Forest and the Trees:The Unique CEOs for Cities LensThe Unique CEOs for Cities Lens

Annual MeetingMay 6, 2005

by: Robert Weissbourd RW Ventures, LLC

seeing the forest and the trees

Economy & Finance