It was a dismal news day in which the main business newspapers were obsessed with the stories of failed executives: Michael Eisner was finally ousted as Chairman of Disney; Sir Philip Watts was forced to resign as chairman of Royal Dutch Shell; and Bernard Ebbers pleaded not guilty to fraud charges in his former role as chairman and CEO of WorldCom. Rather than dwell further on these sad tales of human frailty, this page will focus on: what makes a city successful?

David Wessel writes on this interesting and important question in today's Wall Street Journal and suggests that if a city isn't sunny, it needs to be smart. Air-conditioning and tourism benefit Las Vegas and immigrants pour into Miami. But, asks Wessel, why is Boston doing so much better than Philadelphia? Minneapolis better than Milwaukee? Columbus, Ohio, better than Cleveland? In Scotland, why is Edinburgh doing so much better than Glasgow? 

The answer according to economist Edward Glaeser is the same as for people: if you aren't born lucky or popular, be smart. American cities outside the Sunbelt that have particularly skilled and well-educated populations prosper. These cities do better at adapting when the economic winds shift. 

The story of Boston

Boston for instance stagnated in the late 1700s as New York and Philadelphia, with better ports and locations closer to the South, rose. But Boston prospered, again, in the early 1800s because it had the people who crewed, captained and owned sailing ships important to that era's maritime economy. With the advent of the steamship, which required fewer skilled workers, Boston suffered.  But the combination of Yankee money and ingenuity and cheap Irish labor turned Boston into a successful factory town. This phase peaked about 1920, and it began losing people around 1950. By 1980, three-quarters of Boston's houses were valued at less than the cost of building them. But Boston once again boomed as a center of finance and technology. Its population has been rising since about 1980. Its skilled people, both home-grown and recruited, are key. 

Cities with bigger educated populations have more success than others at arresting urban decay, Glaeser's number-crunching finds. Skilled, educated workers may react more quickly when the economy changes, reinventing the cities in which they live, he speculates. Luring and keeping smart, educated people is crucial. Access to raw materials or major transportation arteries is no longer sufficient for urban success, and tax breaks to attract companies aren't always the right recipe. "Boston's ability to regenerate itself hinged upon its ability to attract residents, not just firms," Glaeser says.

The story of the Asian clusters and job outsourcing

But it's not simply clustering of smart people that make the difference. John Seely Brown will also be talking about the political and economic importance of turning clusters into ecologies in our forthcoming book, Storytelling in Organizations (to be published by Elsevier in July 2004). Clustering of skills in one place enables the creation of an ecology. The reason industrial clusters such as Silicon Valley really work is because of the substantial amount of cross-pollination of ideas. The difference between an ecology and a cluster is that the ecology really stresses not only the organic nature of  things but the cross-pollination of ideas and the the re-mixing of ideas. Inside Xerox PARC, there were many different disciplines working in the same building that part of the magical power of that was the ability to cross-fertilize different sensibilities and different points of view, people from different disciplines, focused on some central type of problem.  It's the cross-pollination of ideas that builds kind of a spiral of learning and increases innovation.

Brown points out that this is the hidden story of job outsourcing, which is not really about lower salaries overseas. What virtually no American writer or pundit or politician seems yet to understand, is that in certain parts of Asia, certain parts of Indian, Malaysia, Singapore, Hong Kong, and southern China, tight innovation ecologies are beginning to evolve that have specialized on particular kinds of skills. One skill is software in India.  Another is the capacity to extrude plastics to build beautiful plastic moldings for consumer electronics as in an area just outside of Hong Kong. There are other examples all over southern China, Hong Kong and India, where highly specialized ecologies are leading a radical deepening of skills within that group. 

These developments in Asia are analogous to what happened in Silicon Valley. This issue has suddenly emerged as something driving presidential politics. The challenge to the US is not so much wage arbitration, which everybody writes about, but the need to nurture these bootstrapping techniques that, when unleashed, can lead to a radical development of very specialized capabilities.

The problem of jobs in the US thus isn't primarily one of salaries or of passing laws that will "block jobs going overseas", as politicians naively suggest. It's more about creating the conditions that enable skill ecologies to flourish. In one sense, that has always happened, as we can see from the history of Boston. But what took place in Boston over centuries is now taking place at a dramatically accelerated pace - within a couple of years. 

The implications for the US economy

To create a positive job story, the US needs to become smarter in creating ecologies with a highly distributed set of specialized capabilities.

Learn about the forthcoming book co-authored by John Seely Brown
Read the Wall Street Journal article

For more examples of Storytelling in The News, go to the Archive