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Wednesday, July 28, 2010
If You Don’t Have Startups, You Don’t Have Jobs
I spent half of last week in the US states of Arkansas, Louisiana and Texas.  I was there to help the Coordinating and Development Corporation – an economic development agency serving a region called the Ark-La-Tex, which bridges parts of all three states – launch an Intelligent Community initiative.  

The weather was breathtakingly hot.  When I returned to New York City, the weather was also breathtakingly hot. It has apparently been breathtakingly hot in Germany, the UK and other parts of northern Europe.  Hotter than in Athens, Rome or the other normal hot spots.  

Weather is like that.  Frequently surprising and always local.  Weather connects us all, but the connections are astoundingly complex. If you want to know what tomorrow’s weather will be, find out the direction and strength of the prevailing winds and then look upwind to see what weather they are having over there today.  Then feed that information, and a great deal more, into a powerful computer.       

Speaking of information processing, the US government has recently released a data set called Business Dynamics Statistics. The Kaufman Foundation has used it as the basis for a new report, “The Importance of Startups in Job Creation and Job Destruction.”  It contains news both surprising and important at the local level.  

Given how much time Americans spend claiming that their country is unique and exceptional, it is proper to ask whether people in other countries should care about this new information.  But I believe that the results apply to any place where the barriers to business creation are not too high, and government does not make the destruction of jobs prohibitively expensive (with the unintended consequence of stunting job creation).  

Previous studies have shown that, in the US, all net job growth comes from companies less than five years old.  More established companies are net destroyers of jobs.  This is an astounding statistic, because it means the 80% of economic development resources, which communities typically devote to attracting established businesses from outside, essentially goes to waste.  Attracting an employer with 500 new jobs makes great headlines.  But if that employer is 10 or 20 or 50 years old, the odds are that its total employment is shrinking – because it has become expert at doing more with less, year after year.  That shrinkage may not affect your community in the short term.  But then, your weather can be balmy while communities upwind of you are being pummeled by storms.  It’s just a matter of time until the weather comes your way.    

The headline of the most recent study is even more astounding.  Nearly all net jobs in the US since 1977 have been created by start-ups in their first year of business.  In every other year of life, companies in the aggregate destroy more jobs than they create.  The graph below shows average job creation and loss by company age from 1992 to 2006.  Startups created 3 million jobs and destroyed none in their first year.  That statistic seems unlikely, until you give it some thought.  Startups create jobs by definition, whether it is just a sole proprietor or a venture-backed team.  How many burn out in the first year?  Effectively, none.  It is in later years that success and failure become apparent and job destruction begins.  Job creation continues but job destruction proceeds just a bit faster, with new startups in new industries increasing the overall base of employment. 

The implications are profound.  The way to improve the odds of good economic weather in your community is to make it a hot spot for startups.  That’s much easier said than done.  In the Ark-La-Tex, there are a few successful examples of incubators for technology and manufacturing companies.  Ideally, other communities will see their success and try to imitate them.  But this is a region whose economy was based on timber and low-skilled manufacturing, both of which have shrunk drastically in the past decade, not technology and entrepreneurship.  

The discovery of natural gas shale is also creating new economic opportunity.  That is a more comfortable fit for a place where resource extraction was one of the major industries.  If it spurs startups in exploration, production and new gas technologies, it will become a blessing to the entire region.  If the mineral wealth is cornered by a few existing companies, it will produce little long-term benefit.  A small number of organizations and people will get rich.  Exploration and production will produce a number of good-paying jobs for the low-skilled.  But little will change in the region’s overall prosperity unless natural gas becomes a driver of widespread innovation.    

American author Mark Twain once wrote that “Everybody talks about the weather but nobody does anything about it.”   The good news is that, in the Ark-La-Tex as in Intelligent Communities around the world, they are giving it a serious try. 
Saturday, July 17, 2010
Does Broadband Make Kids Smarter?

It was a story that would stop any Intelligent Community in its tracks.  

Economists at the University of Chicago studied the educational outcomes of children in low-income families who were given vouchers to help buy computers.  "We found a negative effect on academic achievement," said assistant professor Ofer Malamud, "I was surprised, but as we presented our findings at various seminars, people in the audience said they weren't surprised, given their own experiences with their school-age children."

In "Computers at Home: Educational Hope vs. Teenage Reality," Randall Stross reports on several studies in Romania and the United States that all point to the same thing.  Simply giving a computer and broadband access to low-income students does nothing, on average, to improve educational achievement – except for helping them acquire the skills needed to play online games and use social media.

A Duke University study of middle school students, which ran from 2000 to 2005, actually found that broadband and education can conflict.  Students posted significantly lower math test scores after the first broadband service providers showed up in their neighborhood, and significantly lower reading scores when the number of broadband providers passed four.  Not exactly what we were hoping for from greater competition in the broadband market.  As with the U Chicago study, the effects were confined to lower-income households.  

What's going on?  Social scientists are understandably wary about speculating in this delicate area.  The Duke study authors did suggest that in low-income households, parental supervision might be spottier.  After all, the students may be the first computer users in the family, which puts them in a position of authority.  (Haven't we all turned to a 12-year-old for technology advice at some point?)  

A volunteer installer for the Eastserve project in Manchester, England told me a story of being called into a home by a woman who said her subsidized PC wasn't working.  When he visited, she had the PC set up in the living room and her five children sitting in a row before it.  He checked it and everything seemed to be working.  Rubbish, said Mom.  It's not doing anything.  "Make it go," she demanded.  She apparently thought it was some variant on a television, which would switch on and entertain the kids without need for effort on anyone's part.  Not an unreasonable assumption, really.  Just wrong.  

We all know how easy it is to waste time on the Web and with computer games.  They are like the television only so much more engaging because they are interactive.  So it really shouldn't be surprising that putting technology into the hands of the untrained and under-supervised may produce the opposite of what we hope for.  

The article brings home to me the value of context.  Intelligent Communities tend to be good at managing this subtle but essential thing.  They know it is not enough to provide access to technology.  Reasonable expectations are required.  The user must be trained.  The trainer of the user must be trained.  The environment must be structured to produce success.  Whether it is deploying a broadband network, creating an innovation program or, yes, promoting digital inclusion, the process is at least as important as the product.

In Cleveland, Ohio, USA, Case Western Reserve University is using its existing campus network to deploy ultrafast broadband and computers into adjoining low-income neighborhoods.  With the network is going a small army of students and professors.  They are providing the context, which is research. While expecting to do good, the university wants to explore how low-income families can actually use broadband to improve their lives, increase their incomes and build community ties.  What the Case Western team discovers will be applied more widely to help reduce the immense gap between the digitally literate and illiterate in modern societies.  

Context is powerful.  That Eastserve volunteer in Manchester told me something else that has stuck with me.  In addition to doing installation and service on the project's low-cost PCs, he also leads training classes.  He told me that the last place he wanted to train people was in a school classroom.  He would go to people's homes, to community centers, to libraries – anywhere other than a school.  I asked why.  Because, he said, most of the people in this poor district had a miserable experience in school.  School was a place where they failed, over and over, and learned to pretend that it didn't matter.  So to make them return there for training was to start them off on the wrong foot.  Just like introducing poor kids to PCs and expecting them learn more than the skills needed for World of Warcraft.

Wednesday, July 14, 2010

If my colleague Robert Bell is not always certain about the future of the world (see his June 19 blog), who in the world can blame him?  However, fear not for I am in the office right down the hall from my friend here in New York and frequently walk into his air-conditioned office to assure him to keep the faith.  I am pleased to report to you that he mainly does.  (John Jung too!)

I assure you that the world and its communities will be fine, not only because we will soon figure out how to make wind turbines  and advance  energy technologies worthy of the serious investments required, and which Robert discusses.  Nor will we be fine simply because a whiz kid somewhere in New York University’s Polytechnic Institute, Tallinn, Estonia or the University of Waterloo are well on their way toward inventing the world’s next battery - or the next smart soccer ball (one which hopefully will guide the kicks of aging players on Italy’s football team into the net at the NEXT World Cup!).  These innovations, as they arrive, will do what innovations and technologies do for societies fortunate enough to have them: they will make work more productive and daily physical life increasingly convenient, while underpinning robust economic activity.  (By the way, if recent studies are accurate: we will all work longer and harder as a result.)

For those in the rest of the world’s communities it will also turn out fine, over time, because this has increasingly been the trend.  Long-suffering peoples rise up.  Over the past 17 years nearly one billion people have been lifted from abject poverty in Asia.  One of the goals of the Intelligent Community Association, stated in its first board meeting in New York, is to reach out to other communities to share knowledge and best practices.  To bring the rest of us along, and to keep the faith that our tribes, when enlightened with strong ideas, can restore each of us to the point of balance.

I am frequently accused of having faith.  It is not the blind faith which allows any snake oil to be consumed at any cost.  It reflects, I believe, what poet and former Czech president Vaclav Havel once suggested was a cautiously chalky brightness.  Havel noted that to hope in a sober way is not to act with the conviction that something will turn out well but with the certainty that something makes sense, regardless of how it turns out.  

To make sense and to act accordingly are embedded in our nature and in our spirit.  We are built to persist, no matter what.  Like a good battery, we seem built to last.  As a species we have much in our selves, in our cultures and in our communities to rely on, although a long way to go to be confident enough to rely on them totally.  William Faulkner famously got it right in his often quoted 1950 Noble Prize speech when he conferred upon humanity final victory.  He said that humankind will “not simply endure its existence, but rather prevail over it.”  I have never doubted this.  It was said by wiser folks long before Faulkner got around to identifying it as his reason to get out of bed and make coffee in the morning.  

As I see more of the world, and am allowed the privilege to go inside its remarkable Intelligent Communities and discuss the hope filled plans of its leaders and champions, I can tell you that there I see astonishingly bright flares of depth and purpose, as well as awful moments and harsh setbacks.  However you do not leave a place like Windsor or Sunderland or Suwon without confirming the truth of Faulkner’s core proposition.  It too is mine and that of all of us here at ICF.  We must, in our age of the “new tribalism,” take a cue from our elders and our mentors and stop wringing our hands.  

Another person who has a Nobel Prize somewhere in his home, The Dalai Lama, notes quite frequently that human beings are designed for joy.  Think of it.  Here is monk who was literally chased out of his native country the same year that Faulkner offered his vision of light, while nearby Korea was being shredded by civil war, never to return.  He would have every reason to mourn the loss of his beloved community and to be despondently negative about the future of humanity.  Rather than wring his hands he grabbed his meditation beads.  He chose light.  He chooses still the universal mandate to build.  To be fine.  To say “OK.”  I do not know how this will turn out.  But it will turn toward light.  Like the earth.  He is not different in his inner mandate to build than Kristina Verner, Scot Rourke, Amirzai Sangin, and Andre Santini are in their approach to build broadband communities and tribes that connect to the rest of the enlightened communities we are gathering each year through our awards program.  

If William Faulkner, Vaclav Havel, the Dalia Lama, and Robert Bell and John Jung aren’t authorities with high enough standing for you, I finally cite even HIGHER authorities:  my mother and father, who as they entered their eighth decades of life reminded me with conviction as their community suffered that “We are never given more by our creator than we are able to bear.”  

Indeed.  Keeping the faith is to keep the tribe intact.

As I anticipate the 2011 submissions for Intelligent Community of the Year, what do I expect?  Prevailing may not mean, entirely, complete economic prowess in one generation.  Faulkner believed that prevailing meant, first, a dedication to overcoming fear and thus to recall “old verities and truths of the human heart.”  

This is step one toward becoming a healthy Intelligent Community.  

While we study and award the impact of access technologies on communities and other criteria, ICF is also, I see, repackaging old truths with a new vocabulary.  A great deal of the new vocabulary is written by people like you, who submit Smart21 nominations to ICF and share with us your stories of challenge and responses to the challenges.  Never underestimate how powerful your story is, nor how “fine” you have become on your way to sending us your submission.  You would be surprised!
In my remarks during the Intelligent Community of the Year Awards Luncheon in May I said that I believed that what was failing us at this hour of history were national governments and national leaders.  Their predilection to use heavy tones of fear as their way to focus collective attention is not only working poorly, it is undermining the essential cue we must take to nourish our communities and our spirits.  We need a cue to move forward with hope.  

Moments after I said this, Professor Cheol-Soo Park took the stage and in perfect English and with the timing of an actor thrilled the audience as he accepted Suwon’s award as the Intelligent Community of the Year.  He not only proved that Suwon had overcome the fallout from a serious national debt crisis of the late 1990’s, and that the small nation of Korea itself had prevailed over the ravages of nearly 50 years of occupation, civil war and the challenges of a backward, insular nation, gosh darn it all Suwon had also become “happy!”  Happy Suwon.  A place of faith, where the rising light of a future that was better for its children than it had been for its elders had emerged.  Who knew?  Happy Suwon is a place Faulkner, the Dalai Lama and Pietro and Aquila Zacharilla would claim as a community they could feel at home in these days too.

There are hundreds of others out there like Suwon (I just know it), and if you are one of them, we want to know that you are “OK.”  Send in your nominations and, if you have time, drop me an email to let me know what anchors your faith in your community for 2011 and beyond!

Billboards throughout Windsor, Canada demonstrate a community that will prevail.  (June 2010)

Saturday, July 10, 2010
103° F. in the Shade and Feeling Fine

It was one hundred three degrees Fahrenheit (39° C.) in New York City's Central Park on Wednesday.  The temperature set records.  A newspaper reporter tried but failed to fry an egg on the pavement of Times Square.  

But you know what didn't happen?  New York's electrical grid did not go down, despite logging some of the highest demand in its history.  No more than 4,000 customers in a city of 8 million lost power for some hours.  That's it.  

From the vantage point of my air-conditioned office in the Financial District, I can point to at least one reason.   The connectivity revolution.

In 1977, during a heat wave lasting many days, lightning strikes took out electrical generators and triggered a 2-day blackout that affected almost every neighborhood in the city.  America was deep in recession and the city was in the midst of a fiscal crisis.  The blackout led to riots, looting and vandalism that made headlines across the US.  It was one of those touchstone events that long-time New Yorkers can still talk about with dread.  

A smaller version, during another heat wave in 2006, killed power to 100,000 customers for more than a week.  It happened because the utility, Consolidated Edison, made poor decisions based on poor information about its aging infrastructure and current demand.     

But it didn't happen on Wednesday.  This time, Con Ed had the right management systems, connectivity and a rudimentary smart-grid system in place.  From its command center, Con Ed responded to a substation that caught fire by instantly dispatching a replacement generator.  It arranged for horse-racing to be called off in Belmont Park and for trains to slow down in order to save electricity.  

Con Ed signaled building managers throughout the city, including mine, to help.  Shortly before noon, we heard over the public address system that elevator service was being reduced by 25%, and lights turned off in common areas.  We were asked to turn off any nonessential lights and equipment.      

Using radio technology installed by Carrier, the air-conditioning manufacturer, Con Ed signaled 20,000 residential air-conditioners to cycle on and off more slowly – only once every 30 minutes – to reduce demand.  

All told, by using ICT effectively and staying ahead of the potential crisis, Con Ed shaved 400 megawatts off total demand, which would otherwise have exceeded 13,500 megawatts.  It made all the difference.    

In 2001, ICF named New York City as its Intelligent Community of the Year.  And the Con Ed story shows an Intelligent Community at its best: collaboration among multiple government agencies, for-profit businesses and individual citizens, enabled by information and communications technology, to master a crisis and maintain quality of life.  

There are stories like these in communities around the world, and we want to hear them.  ICF has opened its 2011 Intelligent Community Awards cycle.  Communities have until the 24th of September to nominate themselves.  In October, we will announce our Smart21 Communities in Suwon, South Korea, our current Intelligent Community of the Year.  Three months later, we will narrow it to the Top Seven, announced at a ceremony at the Pacific Telecommunications Council conference in Honolulu, Hawaii. And at our own Building the Broadband Economy conference, one will be named the Intelligent Community of the Year.  

The payoff for communities is substantial.  Just ask our "alumni" – the more than 80 Smart21, Top Seven and ICs of the Year – about the image value, the local excitement and the regional pride they earned.  Not to mention the affirmation of the path they are on.  And now, there is another benefit: the opportunity to join the new Intelligent Community Association, whose members are all honorees of our program.   Together, they will be raising the bar for us all.   

Monday, July 5, 2010
Walking the Line

A few years ago, I acquired property on the coast of the state of Maine.  Soon after, a neighbor invited me to "walk the line," as he put it.  The only time I had heard the phrase before was in a Johnny Cash song.  But it turned out that he meant walking together along the property line separating his place from mine, so that the new guy (me) would be clear on what was mine and what was not.  I took it in the neighborly way it was intended, and was glad to learn about another custom of my native land. 

I have been thinking about lines a good deal recently.  As the financial crisis of 2009 became (in the industrialized nations) the recession of 2010 and may become the double-dip recession or even depression of 2011, lines have become a big problem.  In the US, the line between conservative and liberal politics runs right down the center of our national legislature.  The majority swings Democratic or Republican every few years but seldom by more than a few votes.  Canada has a Conservative Prime Minister at the helm of a minority government.  In Britain, an evenly-divided electorate produced the first peacetime coalition government in the nation's history.  Germany has had coalition governments for years.  Across the Continent, with a few notable exceptions, governments are rising and falling on a few small shifts in the electorate. 

So how is it working – governing with a dividing line down the center of the body politic?  Not so great.  How else to explain why governments on both sides of the Atlantic are cutting their budgets in the midst of one of the worst recessions since the 1930s?  The last government in the US that tried to do that was led by Herbert Hoover, and that didn't turn out very well.  To their credit, national governments launched massive fiscal stimulus last year to stop the plunge into the abyss – but being almost evenly divided between political philosophies, they cannot go the distance.  Action produces reaction.  With each vote a swing vote, the more impassioned side at any given moment tends to win.   It reminds me of a wonderful and sad poem by Ethan Coen of the film-making Coen Brothers: "The Drunken Driver Has the Right of Way."  In this case, the drunken drivers are going to experiment with a big dose of fiscal tightening in the midst of the worst recession since 1933.   Fasten your seat belt. 

Fortunately, lines do not always divide.  Sometimes they connect.  In the Broadband Economy, communities can establish vital connections across regional, state, provincial and national boundaries.  

Communities are usually on the receiving end of national and regional policies they can do little to shape.  By engaging with other communities and learning from their example, they can gain a healthy measure of independence. 

When Bristol decided to build its own fiber-to-the-premises network, it was declaring independence from the laws of the US Commonwealth of Virginia that forbid municipalities from doing any such thing.  A legal battle ensued, which cost $2.5 million in fees and required changing laws in the state capitol, but Bristol persevered and won.  When this year's Intelligent Community of the Year – Suwon, South Korea – began to develop an economy based on small-to-midsize companies, it was declaring independence from South Korea's mighty chaebol conglomerates, to which most people look for employment.    When government, business and universities in the Eindhoven region of the Netherlands created the Brainport innovation accelerator, they were declaring independence from the top-down, bureaucratic, bean-counter approach that much economic development in the European Union seems to take. 

Maybe I have independence on the brain because I am writing this on the day after our Fourth of July celebrations in America.  But I have observed that Intelligent Communities have this characteristic in common.  They do not wait instructions from a higher authority.  They do not even particularly want a higher authority to do tell them what to do.  They prefer to take action, to make their own mistakes, to correct them and do better the next time.  They take responsibility for their own destinies. 

When communities take action, they most often turn to other communities for ideas on what works and what does not.  The lines that connect them are usually informal ones - conversations between colleagues, brief email exchanges, chance meetings at workshops.  But sometimes they rise to something more permanent.  In May, fifteen of the Intelligent Communities honored by ICF voted to form the Intelligent Community Association as a permanent global learning network.  Another dozen or more are waiting in the wings.  At a time when our economic fate seems to rest with whoever can shout loudest from his side of the line, I applaud those willing to think differently, and to seek out like-minded allies wherever they may be.  


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