If we don’t use money, what do we use?

Sorry to everyone for the delay. Though it’s not unusual for this blog to have long pauses between articles— it’s definitely never been the intention to have this sort of gap for what should be a follow-up/sequel. The trade wars that have played out so intensely over the past few months have had quite a bit of relevance on this topic, and so it was put on hold until now. Without further ado…

Without reaching into the bucket for motivations like civic duty, I’d like to simply companies as basic widget work units. Some sort of simple black box that takes costs, resources, and opportunity to churn out an output (perhaps represented by stock price or some other form of validation).

Costs would be external imposed necessities: taxes, regulation, tariffs(cough)

Resources would be materials for production: physical and intellectual

Opportunity is well… opportunity: Market, timing, trends and user behavior

So far, governments have by an almost absolute margin only thought of incentives in terms of monetary costs. The country-wide deal hunting spree set off by Amazon was an example of it in play— come and we’ll increase your bottomline. The current threat of tariffs to move companies back to the US is the reverse— come back or we’ll destroy it.

The last article spoke about why the first doesn’t really work: companies aren’t loyal, it will only open a bidding war, and ultimately only benefits areas already doing well.

Now with the horror of experience, we’re getting to see why the latter might not work either. Politically and economically, it is a disaster if it fails. But if it succeeds, its future looks very much like its reverse— delivering every country into mandatory protectionism and forever leaving behind economies and peoples still striving to catch up.

Unfortunately or fortunately, opportunity like the stage of technology or the market is really something that noone can control. Its possible that perhaps with mass propaganda a population can be biased immensely for or against certain sectors or products (cigarettes anyone?). But because of the moral hazard involved in that, it’s something that we should be incredibly wary of and actively caution actors against via a case by case basis.

So that leaves us with resources—or more specifically—human capital.

As part of the proposals, Amazon had requested cities to provide certain data points: educational infrastructure, number of certain industry classes (such as data science programs), and some measures of living expenses. Metrics that all share a commonality that they were not made proposal-tailored, but rather are longstanding advantages that the city had come through by luck and proper foresight.

If the monetary parts of the deals were incentives, then these data points were the deal-breaker stakes. And that might mean governments need to take a wholly different perspective at their proposals.

Instead of thinking of it as how to draw in companies, governments need to rephrase it as building a culture. This correctly reprioritizes/proportionates how we appropriate funds: focusing on the parts that lead to more of that desired innovation end result by increasing their causes: education, appropriate regulation/legal and financial systems, and a healthy local living economy before any financial incentives. If the area is already struggling, devoting everything to pulling in a large company won’t save it— it’ll simply leave it hostage to a hostile life support system (as they eventually threaten to leave as leverage during the inevitable end of contract negotiations).

But not all areas are equally gifted. They could be trailing behind in population, colleges, economy, or even raw resources. What do those struggling areas do then. The ones still coming to terms with the new economic trends and left in the vestiges of the old?

Unfortunately, I don’t think there’s an easy solution. They have only 2 paths: focus and adapt or go multi-disciplinary.

The first means pursuing a laser focus on education to draw and create the best talent on the thing that they’re best positioned for. We see this occur naturally in the areas that do see some success with startup culture: New York and fintech (thanks to Wall Street) and Boston and biotech(thanks to its amazing wealth of great universities conducting research).

“…economies should develop policies that aim either to fix a bottleneck or increase an existing strength, to the extent that this fits with prevailing norms and values in a society.”

Global Entrepreneurship Monitor (GEM) 2018/2019 report

This means that those areas need to focus on finding their regional niche and invest heavily into it. If the state specialty is oil for example (looking at you Alaska), state and businesses should push local universities to dive into those topics for what the future in that would look like: whether it be environmental sustainability or geo-engineering. City governments in population-rich but resource-poor areas would instead focus on fields that leverage that: innovating on sharing economy services or optimizing delivery and manufacturing (if that is what they were doing).

The second is something entirely different. For areas that do not find themselves particularly well positioned for any major arm of the future, they can position themselves as a meeting hub for talents all over the world. A kind of multi-disciplinary paradise where residents of areas from the first path can visit and join.

Issue is that there are only so many places that can succeed no matter the path. The timer had started ticking years ago, and the game only allows for so many winners. Factor into the necessity of needing to be privileged with factors outside of control like an already somewhat healthy regional economy and political willingness and it seems almost hopeless.

“The five states with the highest startup activity in the 2015 Index were Montana, Wyoming, North Dakota, Colorado, and Vermont. The high level of startup activity in these states is likely associated with the very high real GDP growth most of these states have recently experienced.”

2015 The Kauffman Index Startup Activity

But still it has to be done. So that we can be left with hundreds of successful and independent metropolises instead of a handful of super-dense and homogenous megapolises.

Endnote: There’s a certain bit that can be said of the rising trend of remote workers and the falling influence of higher education in certain intellectual fields. Personally, I don’t believe that the remote workers trend is any solution. Just as they are now, those individuals still prefer going with relatively urban destinations for living and focus on lower costs of living. The second is valid to a degree as it depends on the discipline. However, fields like medicine or physics will still be there for a long time until VR or AR go to much more developed scales than they are now. But that future and culture will be so far different from now, that planning for it may just be a dream.

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