Richard Florida, "The Flight of the Creative Class: The New Global Competition for Talent", Rotman Lifelong Learning 2005, June 3, 2005

Lifelong Learning 2005, Rotman School of Management, (University of Toronto), held at the Fairmont Royal York Hotel, June 3, 2005, 1:15 p.m.

Richard Florida, Hirst Professor of Public Policy, George Mason University

These participant's notes were created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. These should not be viewed as official transcripts of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. These notes have been contributed by David Ing (daviding@systemicbusiness.org) of the Systemic Business Community ( http://systemicbusiness.org ).

Introduction by Roger Martin

• Almost had Richard at U. of Toronto, couldn't convince the government that his work was important

[Richard Florida]

This book has stimulated experiences in the U.S.

Will reprise the thesis of the Creative Class

• Then will talk about the new book, then open up for discussion
• Will also talk about the HBR aricle that will appear in July, with Jim Goodman, SAS Institute

What have I learned since Creative Class?

• 1. The competition for talent isn't in any particular place.
• In the ways that industry was globalized (e.g. GM, Chrysler, Ford, Peugeot, ...) that's what's happening for cities.
• 2. The rise of the knowledge driven type of capital isn't without its problems.
• For techno-globalistic optimists, there are are lot of issues (reference Tom Friedman)

Two stories.

1. Invited to speak at the KnowledgeWave conference in New Zealand

• Carrie Pendergast, mayor asked to come to Wellington
• Spoke to Peter Jackson, who was working on editing Lord of the King #2 and #3
• Negotiated over the phone
• Invited to see studio, though that it would be a cutesie studio, with NZ accent
• First saw beautiful soundstages, had to make special sword becaues Liv Tyler couldn't lift a real sword
• Heard a lot of accents: American, New York, French
• Map with pins in it: animation people from MIT, Stanford
• Jackson said that are building a place in Wellington, 400,000 people, where we can attract the best people.
• Don't want to build Hollywood -- hyper-creative people -- but would like to build another place here, where the creative people can be free of distractions of L.A.
• There are people from all around the world, and have to bring them together

2005 Hollywood's top 100 moguls, but Peter Jackson is #1, and didn't do it in Hollywood.

Competition for talent is global.

Not a student of arts and culture.

• 99.9% of critics focus on one finding, where we show that places with gay communities (bohemian index), have higher creativity.
• Have been accused of having a gay agenda
• Have been accused of undermining the family
• Underming Judeo-Christian society

I was trying to figure out why places like Toronto and Vancouver grow, and Cleveland and Pittsburgh don't

• Classical economic performance is based on technology
• Robert Solow: the more technology you have, the better you'll do
• The other story: the more talent, the better you'll do
• Both are true, but most economists treat them as stocks: universities, colleges, or something that sticks around
• Struck me as wrong, primarily as living in Pittsburgh
• Carnegie-Mellon is great: Microsoft, Sun Micro, Google; Jonas Salk, Westinghouse (not there) ...
• Talent is not a stock, but a flow
• If it's a flow, you need to understand what attracts them
• Diverse, vibrant, open, meritocratic, free places

Third metric: tolerance

• Great misinterpretation.
• It's not one that determines any other.
• For a great place, city, nation, have to be (a) great technology enabler; (b) talent attracting and (c) tolerant

Like creative than knowledge better, because it captures a human inherent talent better

• Transition from industrial to creative economy is the biggest since the industrial revolution, and perhaps bigger than that.
• It's the way that people and live
• Total transformation

If look back 100 years ago, most people worked on farms, some in factories, less than 10% in creative

• By 1950, 15% creative.

Now, about 150M people worldwide (depending on how you define technicians), 30-40% of the people work in creative jobs

• If divide into agicultural, industrial and creative, economic value is 50%

Postrel, The Substance of Style

Looked at occupations that have grown the most: interior designers, obstetrician

• Most of the value from the creative component

People read the book, about a class, and think it's about an elite

• Chose creative, because it's intrinsically and inherently human
• While 30% to 40% have the opportunity to participate in the creative economy -- we make twice as much as manufacturing -- it means that the rest are falling further behind
• Studied Toyota production system: said won't base knowledge on superior engineers, but the collective intelligence of people who work on the floor.
• 60% or 70% of wasted creativity that is the opportunity
• Those that figure out that creative capability will have that advantage.
• Creativity doesn't know anything about social and cultural barriers, doesn't care about income, background, age.
• Organizations that win are those that are the most open, to creative people
• Toronto has become one of the most diverse cities in the world

Flight of the Creative Class points out: there's lots of reasons that the U.S. is a superpower -- which is mythical

• Large country?
• US took in all of the strange people that everyone didn't want
• Canada did this, and Australia is starting to take them
• e.g. Italians, Russians, Indians and Chinese
• 30% of all high tech businesses founded in Silicon Valley were either Indian or Chinese

We have talent deficits: we can't hire people to run our technology companies

• Opportunities for Sweden, Netherland, when U.S. says that they'll restrict immigration
• Talent advantage shifting to Toronto and Vancouver

Globalization and competition for talent

Thomas Friedman has written "The World is Flat"

• People in Pakistan can compete, because you don't have to immigrate
• Bill Gates says the world is not flat
• The technology work is spiky
• There might be 25 to 50 places in the world that matter
• The great contradiction in the world -- Friedman is right is that the technology has done this -- why is the world so concentrated?
• The number of patented innovations, find spikes in San Fran, Waterloo, Toronto, Austin

Brookings Institute: contrasted New York City and Pittsburgh

• People are connected all of the world
• The one connection is to Washington DC
• This spikiness, and income inequality is increasing, that housing is becoming inaffordable
• Becoming real economic divides
• If we think the world is flat and level, we'll miss that people have to manage this

Looked in detail at SAS: how to manage creative people

• We know, but few act: the literature says people are intrinsically motivated.
• Drucker: You can't bribe these people, they're volunteers
• Amabile: You act and enable your creative actions

Looked at this with Jim Goodale:

• SAS has high profits, low turnover in customers and employee turnover
• #1: Creative people are intrinsically motivated
• The challenges to people is different, depending on what we do
• Sales executive not motivated just by sales quotas, but by peers
• They insource everything
• Gardening and landscaping is driven by the ability to do great work
• #2 Eliminate all hassle and distractions, wherever they happen
• Day cares
• #3 Real sources of innovation are not necessarily inside, but live and breath in the external environment with customers and users
• Jeff Pfeffer says that SAS users looks like a Greatful Dead concern
• Have a solid knowledge management system
• When you combine emphasis on #1, #2 and low turnover and focus on customer, you can see where the real knowledge capital is.

HBR editor said: the creative capital that is in employee's head -- scratched this out

• The creative capital that is between people and their customers
• Individuals are important, but SAS is more than the sum of its parts
• Creative capital is in the long-term relationships
• Sales person has a sales engineer, may service a customer for 5 to 7 years
• Relationships are the sources of creative energy

Asked Jim, after study: did you study Toyota production system? High performance management?

• We just do what makes sense.
• Just built it over time, organically.
• Looks like a management system that built from the best and brightest.
• It's all just regular common sense.
• People don't care about promotions, they hate policy and procedures, and they want to work on ways that express themselves.

Questions

Technology, talent and tolerance. In Toronto, there are so many qualified people doing so many unqualified jobs. The U.S. has done a better job. The American dream has been at the core of success? Is it still there?

• It's a global dream
• Used to be great job, great salary, great home.
• Now, young peoplle can't afford to buy a home
• In Washington, have a condo for $750K
• In Boston, home over $1M
• Home ownership is falling
• Under-utilized capacity: what is really sitting in front of us is a bunch of under-utilized resources
• Thought were talking about jurisdictional advantage
• Instead of having Ph.D. is driving a cab: the place that figures out how to tap that, there's the real challenge
• It's not just attracting talent, it's using it.

Have you studied how companies like SAS attract to cities. I'm drawn to New York, but not to my job.

• Overlay between creative companies and the places they play.
• People say that it's impossible that people would choose a city; economists say that people go to greatest monetary return
• In younger people, location search for lifestyle is the #1 factor
• interesting outcomes are where creative organizations find creative places
• Had done a lot of work in Memphis: there's a good company: FedEx
• FedEx said that we need to fix the Memphis problem, because need technology people, but how could we live in Memphis
• Blacks don't want to live in Cincinnati, and gays wouldn't get housing
• People are driven to open and economic places
• Lots of companies founded in Pittsburgh, e.g. Lycos, couldn't attract people, and had to move to Boston
• The country to watch is Spain: new prime minister is trying to make Spain -- which has wonderful cities -- open to immigration, including gays; women well-represented in politics
• Now countries are playing the game

SAS environment? Could you do this at GM?

• Environment was organically developed over time.
• Leader was originally a professor
• From academic research, has figured out that leaders make a difference
• In Baltimore, young leader makes a difference
• Did a study of auto industry, 10 years ago
• Tendency to get locked into bureaucracy
• Ford, Mercedes, etc. say that their most advanced plants are outside of their core
• Scary: to break up relationships, the company will move because its employees and communities get locked into a set of practices
• it's easier to build greenfield
• Talent-rich people do well because of mobility of the labour force: companies can remake themselves, while staying in the same place.

Why are large corporations not able to achieve this? Focus on smaller groups, smaller organizations?

• The next book: The Flight from the Corporation
• Those that have principles, processes, having problems.
• David Kelly: Ideo: a number of small businesses
• However, in Toyota model, the workgroup works
• Larger organizations can do this, but not top down
• Has to be a heterarchy, not a hierarchy: that's a challenge

Creative class, that could earn living in a different way. C. P. Snow, technical versus literary class. Landowners. Backlash against reforms. Creative companies, getting into a body shop.

• Have been some debates on how we define creative class, not the last word
• Have tried to define class, as Weber or Marx would do: on how you use capital
• Land, industry.
• In the creative class, economic includes technology and literary
• In industrial revolution, there were 2 separate unions, for the technological aristrocracy.
• This was defined differently, class by human occupation
• Economists at Utecht tested, took measures against a classical definition of human capital, ran econometrics, and said that the occupations make sense, better than human capital -- and should be considered a new standard for economic growth.
• Could be done with better work
• Occupational measure, if running a company or city, instead of just understanding education, can look at literary and theatre cluster, can create an economic base, and can act strategically.
• There's a lot more work on occupationally-based measures.