I'm Ending the Two Blog Experiment

I wanted to have two blogs to prevent my other one, Technology and the City, from getting too broad, but have quickly found it's easier to just to keep everything in one place. You can continue to read posts on the Post-Technology Economy over there.

Robotics Technology Park Under Development in Decatur, AL

Just a few miles from the NASA facility in Huntsville, the state of Alabama is developing a robotics research and technology center. NASA and the U.S. Missile Command will the first users, but it will also provide services for commercial customers.

Ann Arbor SPARK Joins New SE Michigan Econ Dev Push

It's 2010. Why does Michigan have a "New Economy Initiative"? I think someone needs to tell the econ dev people in Michigan that the tech bubble burst 10 years ago.

Skin Care Specialists Now a Top 10 Growth Profession

Mundane personal service jobs are becoming some of the fastest growing professions. Here and in my other blog, I've written about the "cool" and "creative" jobs defining the future, such as nail care, social work, and teaching. Employment in these sectors correlates more strongly to having a vagina than to having an advanced degree, but they are way too boring for any urban pundit to start writing about.

While I don't think its author is about to do a book tour, so you won't see its findings on television or in a promotional poster at Barnes & Noble, the Department of Labor's Occupational Outlook Handbook has some interesting findings. It ranks the top 10 growth professions for the next 8 years, and coming in at #8 - skin care specialist. Yes, for all the hype about "creative classes", "knowledge workers", and other sorts of nonsense, skin care is now a leading growth profession.

In addition to skin care, athletic trainer makes the list, as does home health care aide. Even the engineering jobs are mostly angled towards people and medicine, as opposed to faster computers or communications. Only 2 of the top 10 professions have anything to do with finance or IT.

Now here's what's also interesting - very few of these jobs get done by people who work for publicly traded companies. They're typically done by not-for-profits, government agencies, or small businesses. Those strip mall manicurists, athletic trainers, and physicians assistants typically work for themselves or an owner they know personally, not a publicly-traded company - an important implication for investors.

Moneyweek: How to Profit as the Machines Take Over

Interesting anecdote about a British hospital where robots will be doing some of the cleaning and dispensing pills. They cite a study claiming professional service robots will grow 80% from 2009 to 2012, but even at that seemingly high rate, we're still not cracking 25% per year.

200,000 Robots in U.S. Factories Now

And robot sales are picking up according to the Robotics Industry Association. I also like how they've rebranded their annual conference "Automate", much better than the "International Robots, Vision & Motion Control Show"

Pennsylvania Launches New Site Location Website

Was just playing around with the site, not a bad way to get commercial real estate information.

Green Energy Power Plants - Jobs are in Construction, not Production

Under tremendous pressure to reduce costs to get to parity with grid electricity, green manufacturing and production are being done highly efficiently, with much of the work going to semi-skilled construction laborers, not change-the-world college graduates. eSolar and Brightsource Energy are building solar thermal power plants in the Desert Southwest, most of which have about an 11:1 construction to operating job ratio. Brightsource's Ivanpah plant, which will have a rated capacity of 392 MW, will produce nearly 1,000 construction jobs, but just 86 permanent jobs. eSolar's smaller 5 MW Sierra SunTower plant created 250 construction jobs, but just 21 permanent jobs.

The Caithness 845 MW wind farm in Oregon will have just 35 permanent workers, and 400 construction jobs, similar to the 11:1 construction-operating ratio seen with solar thermal. One worker per 24 MW is about 1/4th less than a typical coal-fired plant. While it helps make wind power cheaper, it also shows how much of the opportunity with greentech will be in construction, which is not unlike data centers and other emerging technology areas. They are so automated and efficient that once they are up and running, they are better at creating wealth than jobs.

Coal Mining - Production Up, Employment Down

Sourcewatch has put up a good chart showing how productivity increases in mining have cut employment in that industry. In 1930, the U.S. produced 527 million short tons, and about 1% of the national workforce at the time, or 644,000 Americans, worked in coal mines. By 2000, the country was producing 1,073 million short tons, and just 71,000 Americans worked in mines, so worker productivity increased about 15-fold.

Ohio State - New Hospital Will Create 6,000 Jobs Plus 5,000 Construction Jobs

Groundbreaking is scheduled for today.

Ohio State Hospital Expansion

NY State to End Empire Zone Program

The 22 year-old program was plagued with charges of companies abusing the tax credits it offered. More recently, frustrated officials didn't like how it was being used for retail jobs, not fancy "tech" jobs. Hardly surprising though considering retail still accounts for 13% of all private sector employment.

NY Empire Zone Program to be Scrapped

Toyota Restarting Construction on Mississippi Plant - $650,000 in capital costs per job

After halting work when the economy crashed in 2008, Toyota is resuming work on its $1.3 billion Corolla and Prius plant in Blue Springs, MS, which is near Tupelo, and about 90 minutes southeast of Memphis. In addition to right-to-work laws, one reason it chose Blue Springs over its now closed Fremont, CA plant is access to parts suppliers in the nearby I-20 corridor, which has become a modern version of Detroit.

With 2,000 employees on-site and $1.3 billion in capital needed to build the plant, it'll be spending $650,000 in capital per job created. A little less than the $1 million in capital per new job Dow Kokam will be spending on its new Michigan battery plant, but a strong indication nonetheless of how modern manufacturing often creates more economic activity in construction than in production.

Minnesota Dept. of Employment and Economic Development - Unemployment's Down to 7%

Don't see many pundits talking up the significance of animal feeds, soybeans, and Hard Red Spring Wheat, but they are among Minnesota's top exports, and it's unemployment rate is much lower than many places being hailed as "innovative" or "creative".

Minnesota Sees 5,600 Jobs Added in May

U.S. Economic Development Agency Offering Grants for Regional Innovation Clusters

One of the problems of the "tech" economy right now is that there are hundreds of cities, counties, and states fighting to be in the top 10 places for greentech and biotech. This has done a lot for photographers who sell stock photos of lab coat techs starting at test tubes, but has done little for the communities trying to get their message to stand out.

The U.S. Economic Development Agency has a plan that will help counter this, and is now offering grants to help municipalities and states identify some of their unique strengths through its Regional Innovation Clusters Mapping Project. This is a great opportunity for localities with blurred messages about "life sciences" to develop a more precise message that will resonate with prospective employers.

Innovation and Creativity Won't Create New Jobs

Conventional wisdom, as told by academics, urban pundits, and others who can't write a paragraph without a verb that ends in “-ize”, is that we need to innovate to grow our economy. They'll make some claims about R&D, math and science education, venture capital, foreign competition...but I can't tell you what they say after that point, because by then I've already clicked over to mlb.com to check baseball scores.

Still, for the limited portions of the pundits' bullsh, I mean insights, that are compatible with a normal attention span, I hear a lot of the same conventional wisdom that's been out there for 30 years that basically says science jobs are good, service jobs are bad. That somehow the only way to create a reasonable wage for most Americans is through scientific breakthroughs, even though many of the breakthroughs we've had since World War 2 have led to the sort of productivity gains that has auto workers greeting shoppers at Wal-Mart, while creating new industries unimaginable 60 years ago, such as nail salons owned by Vietnamese immigrants.

One Industry Where No One Ever Complains about Foreign Competition
Personal care industries, from pedicuring (is that what you call that industry?) to nursing to social work, go unnoticed by the chattering class, because it's far more impressive to go on PBS and talk about the need for more innovation than it is to tell Gwen Ifill that the old hag who used to do those nail commercials in the 80s has been replaced by some lady who didn't speak a word of English back then, and now works 60 hours a week polishing toes.

The reason personal care industries do not get much attention is because they are done by women. And no industry dominated by women is featured in any economic development brochure, or has any urban pundit earning high fees on the lecture circuit.

Now this is not an issue of feminism, but of economic reality. Personal care jobs don't get automated or forced into a technology-inspired cycle of productivity gains. They might like to be called “technicians”, but nail care workers aren't about to go under because of new automation software, nor do they have to worry about people in New Jersey flying to Bangalore for manicures. Same goes for teachers, nurses, social workers, and other large professions where over 75% of the workers are women.

These personal care jobs also pay fairly well, often with excellent benefits, and allow for the middle class ideal we're supposed to get by educating more people in math and science, so that they can create new technologies that will automate existing middle class jobs.

Women are the new working middle class, and you can't automate their jobs away. So what about guys? What are we supposed to do?

Corporate Finance is Still Dominated by Men
Being automated out of their middle class jobs, men are increasingly being pushed to the extremes of the economy. We're either competing with foreign day laborers for home repair and construction work, or rising to the top of finance and business. Since 2001, I've consulted for over 100 hedge funds who were investing in technology companies, and don't think I've spoken to more than three women as part of that effort. Same goes for the marketing executives at the technology companies. Outside of public relations, maybe 10% have been women and the number doesn't seem to be rising.

Now you can't expect a business to pay people any more than a market wage, and fortunately for many women, the school systems, hospitals, and social service agencies they work for don't qualify as “businesses”. And the hair care, nail care people generally don't have to deal with the pressures of faraway shareholders, but rather the owner who's working the cash register and has been annoying them lately.

In terms of national competitiveness, the answer to the “mancession” is not more innovation or creativity. What exactly is Germany or Japan working on that will compete with the iPad?

Rather, the issue is how men choose to respond to the innovation we already have.

Boring Economic Development, Low Unemployment

One of the biggest misconceptions in economic development is that cities must show themselves to be "cool" and "innovative" to attract workers and employers. But there is no data to back any of this up, unless you consider position in a magazine ranking more important than unemployment rate.

Many Plains metro regions, from Fargo to Sioux City, have well-below average rates of unemployment. One reason is their connection to agriculture. While hundreds of cities, counties, and states chase after a trickle of biotech and greentech jobs, places that never really moved beyond agriculture into industrial manufacturing are doing better than those crossing their fingers that their taxpayer giveaway will win that 80 person biotech lab.

Like manufacturing, agricultural employment continues to get squeezed by productivity gains and automation. But unlike traditional manufacturing, the U.S. runs a trade surplus in agricultural goods, exporting over $100 billion worth of grains, dairy, poultry, and livestock a year. This keeps the wealth here, and more importantly, continues to make the Plains the world's leading center of agriculture much as Silicon Valley is for semiconductor design. South Dakota, whose leading export is processed foods, is home to some of the lowest metro unemployment rates in the country. And unlike coastal cities, Plains cities' low costs of living prevent massive income disparities from developing.

Being in a region that runs trade surpluses, and is home to large exporters makes the larger cities more attractive to immigrants. 15% of Minneapolis residents were born outside the U.S., compared to just 4% of Cleveland residents. Minnesota's biggest exporter, Cargill, is in the exciting business of exporting grains for feeding livestock, hardly the sort of activity that will get Duluth on Fortune's next "Hot 20 cities for singles" listing.

Rather than chasing after some solar panel factory that will be competing with similar facilities in Malaysia and the Philippines, it can make much sense for states and cities, especially those off the coasts, to take a second look at under-appreciated industries that run trade surpluses.

The Difference Between Seattle and Portland

Portland has recently launched a campaign to attract jobs, so that all the highly educated coffee shop workers in the Pearl District might have a chance of using their degrees sometime soon.

While urban planners have not stopped fawning over its light rail system since the first spike went in the ground, Metro Portland currently has 10.5% unemployment, while regional rival Seattle is at 8.2%. One reason Seattle is doing better economically is because it's home to industries that run trade surpluses - particularly business software and aerospace, neither of which has a big presence in Portland.

One of the biggest sources of job losses for many regions isn't a glossy marketing brochure from a competing state's Econ Dev Authority, but foreign competition. Rubber, steel, autos are sectors where we run big trade deficits, and the result is clear in many parts of the eastern Great Lakes.

Buffalo has turned a corner in economic development, not by telling everyone it's "cool" or "creative", but by taking advantage of its border with Canada. They got Labatt Brewing to move from Norwalk, Connecticut for this reason. They've also got a big food exporter with Rich Products, and an unemployment rate below the national average.

There are generally two major drains on any region's job growth - automation and foreign competition. You can't do much about the former, but you can do a lot about the latter, as long as you recruit industries where America runs trade surpluses - no matter how boring they might sound to the people who write "Top 20 Cities for ...." magazine lists.

KPMG - Suburban Tyson's Office to Have More Workers than Downtown DC Office

KPMG is shifting 300 people from its downtown Washington office to Tyson's Corner. The accounting firm got a $250,000 grant from the Commonwealth of Virginia as part of the move. As a result of the shift, the Tyson's office will have 150 more people than the downtown office.

Michigan Battery Factory - Over $1 Million in Construction Costs Per Worker

Midland, Michigan, about 2 hours northwest of Detroit, is going crazy because a joint venture, which includes Dow Chemical, has agreed to build a battery plant in the city of 42,000 people. The press it's getting is a little out of hand, and includes a ribbon cutting ceremony with Vice President Biden.

The interesting thing here in terms of job creation is that the capital cost of the plant, which is reported to be $322 million, and is heavily subsidized by local and Federal government programs, is going to come with just 320 permanent jobs. The issue isn't just the subsidy, but the fact that productivity will be so high, that it will take $1 million of capital investment for each required worker.

Now I don't know how many construction jobs this will create, but it wouldn't be surprising if it rivaled the ongoing manufacturing jobs. This is a great example of the Post-Technology Economy, where automation and productivity have created a situation where very few non-construction jobs come out of such a massive capital investment. You can see even more dramatic numbers in alternative energy generation, where Oregon's Shepherd's Flat Wind Farm will require $845 million in capital outlays, create 400 construction jobs, but just 35 ongoing jobs. So that's about $25 million in capital per permanent job, and an 11:1 construction to operating job ratio.

While I'm not going to say the plant is a bad thing for Midland, the hype:job ratio for the facility is ridiculous.

Virginia Offering Tax Credits to Movie Makers

Not sure I'm a big fan of this, especially because I'm a Virginia taxpayer. Problem is it's a me-too attempt at recruiting filmmakers. The second-to-last sentence says it all "Virginia joins 42 other states and the District with similar incentives".

Hard to say you're a great location for business when you're catching up to everyone else in a zero-sum game.

Here's a list of movies and films made in Virginia.

Where the Biotech Jobs Are

The image of a lab technician staring at a test tube has become economic development porn. The first time you see one of these pictures it's interesting, but after awhile they all start to look the same. Nonetheless, from Michigan to Mississippi, states, counties, and cities are falling all over themselves to attract companies who make their employees wear safety goggles. But unlike failed attempts to win Internet companies from Silicon Valley in 1999, current efforts to recruit biotech companies aren't linked to fads or an overheated stock market, and are likely to continue for years. But is it really worth it?

The current craze to recruit companies in the sophisticated science sector has led to at least 10 states being in the top 5 for biotech jobs, if you believe all you hear about the industry. It's kind of like how there are 15 cities in the country with the most bars & restaurants per capita, at least according to people I used to visit when I was in college.

The reason economic development propaganda has outdone simple mathematics is that econ dev officials like to choose from any one of a number of metrics that put them in the best light, so we often hear about VC dollars raised, PhDs per capita, patents filed by local companies, but none of these has proven to correlate closely with commercial success. As we learned in the late 90s, raising money from a follow-the-herd venture capitalist is quite different than earning revenue from a paying customer.

The best measure of economic development is not an academic degree or a me too investment in a hot industry, but economic activity. And the best way to measure that is jobs. For example, here in the DC area, we have more satellite jobs than metro San Francisco, NY, and Boston combined, according to indeed.com. We're the leader in this industry that shuns publicity and doesn't attract much VC, mostly because government's its #1 client. But that doesn't mean it's "multipler effect" is any lower, in spite of its limited ability to generate test tube photo ops. I've also heard that we're #1 in biotech due to Montgomery County's "science hubs", although I've never met anyone who drives to a "hub" everyday for work.

According to indeed, there are over 800 biotech openings within 25 miles of Fenway Park, but fewer than 300 within 25 miles of the White House. The numbers don't change if you center your search on Bethesda's Medical Center metro stop. MIT and the Boston medical industry have done far more to create biotech jobs than Johns Hopkins and NIH, in spite of the latter being a leader in research grants. University of Washington has also been a leader in winning research grants, but there are only around 100 biotech jobs within 25 miles of the South Lake Union biotech center Microsoft co-founder Paul Allen has been developing in Seattle.

There are over 800 biotech jobs within 25 miles of Genentech's South San Francisco headquarters, but fewer than 200 near Amgen's Thousand Oaks HQ near Los Angeles. San Diego actually beats out LA for biotech jobs, although all the PhDs at UCSD and Scripps aren't enough to put that region in the same league as Boston or the I-78 pharma corridor in New Jersey. Once you get outside these coastal areas, the numbers fall off substantially, with many of the available jobs limited to sales & BD.

But even in Boston, just 2% of all indeed listings contain the keyword "biotech", fewer than the number mentioning C++ or Java, and nearly four times less than the number asking for SQL skills. But in spite of these figures, don't expect a disheveled programmer to replace the lab coat guy on your state's economic development website.

The Decline of Venture Capital, Part 3 - the 2010s vs. the 1990s

Implementing Technology vs. Creating New Products
Having one of the thousands of companies deploying Oracle 11g in your state is less exciting than having one of the few companies developing new business software, but the former is tied to far more jobs now that these products have been around so long and installed by so many. In an Indeed search last year, I found four times as many openings in Metro Boston for SQL Programmers than for people with biotech experience....in Boston. So many companies in different industries now USE technology, that having expertise implementing it will create tons more jobs than a venture-funded “innovator” developing it.

If Boston needs more people to deploy technology than to create it, you can rest assured Detroit, Cleveland, and Salt Lake City are in the same position. But there's little chance you'll see a database administrator performing routine maintenance on an econ development agency's glossy brochure, even though the lab coat guy whose picture is there represents a tiny share of regional employment.

Green Tech Disappointments
As Biotech and IT have matured, many venture capitalists have turned to Green Tech/Clean Tech/Alt Energy for new investments. But unlike Biotech and IT, many green tech companies have 20-30% gross margins, far lower than the 50-90% gross margins typically seen in venture-funded industries. Because unlike a pill, semiconductor, or software license, most clean tech products have high unit costs.

Historically, one of the chief financial justifications for VC was that unlike industrial manufacturing, high-tech manufacturing created tremendous cash flows past break-even, because raw material costs and labor costs per unit were extremely low, while upfront costs were much higher than industrial manufacturing because of specially-created clean rooms and much higher R&D. Venture capitalists would traditionally hold the company as it raced to cover its high fixed costs, and then sell it or let it go public as it got closer to profitability. But the economics of green tech manufacturing aren't all that different from old-school industrial manufacturing.

Like a car, solar panels (including the thin film products) have high raw material costs. While many use the same material as semiconductors, they don't get smaller every two years like computer chips do. As a result, they have much higher unit costs and are not a great fit for venture investment, in spite of the dreamy hype of the last few years that led to many bad investments in this sector. Fewer companies can get sold or go public when they're not just unprofitable, but need another $1 billion of capital to break-even.

Even with all the feel good clean/green euphoria, venture capitalists are moving away from green tech manufacturing and toward smart grid and energy management, but the companies in these sectors are basically industry-specific software developers.


It's the 2010s, not the 1990s
While VC never had a significant impact outside a few regions, its time as a catalyst for economic development has long passed. Boring companies implementing someone else's technology hold far more promise for new jobs than flashy companies trying to build something “cool”.

The Decline of Venture Capital, Part 2 - Venture Operating Expense

With the advent of Software-as-a-Service, $3 products designed for the App Store, and with virtually all semiconductor companies going fabless, many startups looking for money plan to use the cash to pay operating expenses, not for capital outlays. This is a major shift from the traditional VC investment which was too risky for bank finance, and too technical for just about any loan officer.

While there are still a handful of companies that need money for R&D and new production facilities, many companies seeking funding have a product, but they need money to hire salespeople and develop marketing campaigns. Software, a long-time VC favorite, has turned into Software-as-a-Service (SaaS), where companies pay a monthly fee, not one upfront charge to use the product. For software developers, chasing after “recurring revenue” taxes sales and marketing resources extensively. Salesforce.com, a leading SaaS provider, spent 61% of its revenue last quarter on SG&As (sales, general, and admin. costs), including commissions and advertising. Meanwhile, traditional software vendor Oracle spent less than a quarter of its revenue on such expenses.

Similar to the SaaS startups, small development shops running websites or placing products in the App Store do not have massive R&D budgets or capital requirements. But they need salespeople and marketing staff to turn their products into revenue. While these companies can bring some capital needs for servers and network equipment, these requirements are not all that different from non-technology companies which need the same products to run a network and maintain databases, which is also why there are more people implementing technology than creating it.

The Decline of Venture Capital, Part 1

During the late 90's craze to label every region with a Silicon prefix, there were at least 10 states claiming to be in the top 5 for venture capital raised. Terrified of looking connected to the “old economy”, economic development officials from Utah to New York were anxious to tell people what venture capitalists were doing in their state.

While the recession of the early 2000s cooled the “Silicon Prairie, Forest, Alley, Dominion, Beach, Mountain” nonsense, regions still saw attachments to venture capital as essential for marketing themselves, as well as for financing startups that promised to employ hundreds of people. However, most of these efforts created more hype than jobs, and the 100 person startup remained a rounding error compared to the 18,000 people working in area hospitals.

Venture capital has gone into an even further decline the last few years, and many of the issues surrounding limited funds are not tied to the recession, but changes in the technology industry, specifically:

* Startups seeking funding for operating costs, not capital expenditures
* Poor performance of “Green Technology” investments
* More people implementing technology than creating it – a key consideration for economic development

...stay tuned for Part 2

Welcome to the Post-Technology Economy

In the 15 years since the Netscape IPO, we've seen a fairly quick maturation of technology. It has become a huge part of most people's lives, both at home and at work. Yet many Economic Development agencies are acting like they did when Netscape had just gone public, chasing after anything with the word "tech" in it.

In this blog, I'll look at how places can develop their economies when technology jobs come and go so quickly, and when professions with employment growth, such as nursing, teaching, and social work, depend more on face-to-face contact than improving productivity through the use of computers.

Additionally, I'm not an academic and don't write like one. I strive to keep things simple and understandable. I'm also looking at this from what is happening and what could happen, not what should happen. I'm neither a luddite nor a tech advocate, rather I'm just trying to help people plan for the future when I see some people expecting the late 90s techie-finance economy to make some sort of return, and others placing too much hope in greentech, biotech, and anything else they can attach the suffix "-tech" to.