Twin Cities investment in people is the right move

November 24, 2018

The way the Amazon.com HQ2 fiasco turned out raised one question that leaders of lots of cities and states have to be thinking about, including in the clear loser of the first round of Amazons process, the Twin Cities.

Are we big enough to compete?

Amazon concluded its national search for a second headquarters, whatever that was supposed to be, by announcing two new campuses on the East Coast. One of the planned sites lies in suburban Virginia across the Potomac River from Washington, D.C., and the other is in New York.

Neither place needed an economic shot in the arm. In fact, thats what made them attractive in the first place to Amazon, which will be looking to recruit from a deep and wide talent pool that already exists in those regions, made up of folks attracted by opportunity and lifestyle.

New York needs no introduction as a business hub, but Washington, D.C., has been coming up fast. Greater Washington now has more than 6.2 million people, an increase of about 10 percent since the 2000 census. And with median household income right at $100,000, greater Washington trails only the metropolitan areas of Northern California in affluence.

The Washington area had just a handful of Fortune 500 company headquarters in the mid-1970s, but in recent years its often had as many companies on Fortunes famous list as the Twin Cities, although Washingtons total recently slipped back a couple, to 15.

It also has the third-best market in North America for technology workers, according to the latest ranking by the real estate firm CBRE. The Twin Cities appeared well down this list, with a tech worker talent pool not much more than a third the size of Greater Washingtons.

The Twin Cities isnt a minor league place, of course, now home to about 3.6 million people, including the part of the metro area that spills across the river into western Wisconsin, making it the 16th biggest metro area in the country.

Its one of only four metropolitan areas in the nations top 25 that are in the Midwest, and the only one of the four that can really be said to be growing, with a nearly 8 percent population gain since the 2010 census.

Im really convinced one of the things thats keeping the Minnesota economy going is the Twin Cities, and that the Twin Cities is able to keep going because of this idea that we didnt invest in companies, we invested in people, said Louis Johnston, economist and economic historian with College of St. Benedict and St. Johns University.

We didnt try to prop up Control Data, the leading private employer of 45 years ago, he said. And if Medtronic starts to go we shouldnt try to prop it up. Its better to make sure the people have the education and skills and let the companies come and go.

In fact, the Twin Cities is doing great compared with its Midwestern neighbors, with Twin Cities residents generally richer, healthier and better educated. The median family income in greater Milwaukee is not quite $60,000, while here its almost $77,000, based on the most recent census estimates.

Nearly 42 percent of people 25 and older in the Twin Cities have at least a college degree, vs. 37 percent in greater Des Moines and 31 percent in metropolitan Detroit. The high school graduation rate is higher for the Twin Cities, too.

One tempting conclusion is that the leadership of the Metropolitan Milwaukee Association of Commerce might be fretting about economic growth, but no one in Minnesota needs to.

Yet we dont compete with Milwaukee or Des Moines, making it hard to really care who wins a head-to-head competition between Midwestern regions for a given economic development project. Whats important is how companies based here, from startups to the Fortune 500, are faring against their tough competitors located anywhere.

What the recent news has shown us is that important technology-oriented companies based in the biggest and most vibrant metropolitan areas seem to be doing great, never mind that they have set up shop in some of the costliest places.

Remember that technology businesses dont need to win a low-cost producer contest or locate themselves next to any raw-material sources or even big customers. What they need to grow is access to talented engineers, project managers, marketers and customer service people. And its easiest to recruit them in places where there are a lot of those people already.

And as they grow, these companies have a way of pulling neighbors in technology along with them, both by serving as magnets for talented people as well as turning into good places for startups to recruit from. And as these people move throughout the business hub, know-how and ideas seep between companies, helping all of them.

Johnston calls this know-how recipes, his favorite metaphor for how this knowledge gets created and then shared, kind of like borrowing a neighbors recipe card for green bean casserole.

That seems to be much more important to economic growth now than the ability to build a giant factory in a greenfield, Johnston said.

How the Twin Cities fares in this competition over the next couple of decades cant be easily forecast, course, and Johnston pointed out that it was pure serendipity that led to a technology industry getting established here in the first place.

One little reassuring bit of research came out this year, at about the time Minnesota learned it was even not going to be on the shortlist of the 20 finalists for Amazon. From the Brookings Institution, this study tracked where millennials with a college degree lived as of 2015.

Of the top 10 metropolitan areas with a disproportionately high number of well-educated millennials, the only big one in the Midwest is the Twin Cities, where 47 percent of 25- to 34-year-olds have earned their degree.

It seems fair to conclude that the people Minnesota needs to maintain a vibrant and growing economy are already here.

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