From the Good Ideas File: Look what those public types can do!

OK, I know this story is from Finland, and it’s about a federal legislation thing which means it’s not exactly a Rip-Off-And-Duplicate for a lot of you.  But one of the things that I pound on in the book is the need to CrowdSource Wisdom from the public — we need to engage them deeply and meaningfully, in not only telling us whether they like or don’t like something, but in partnering with us to actually make intelligent decisions and enable good things to happen.  The benefits are exhaustive — from building a base of support, to redirecting disruptive debate, to -gasp- maybe even making better decisions.  I am pretty well convinced that most of the dysfunction and wasted time and money we see in our public meetings, our planning, our “community engagement” efforts, etc., would largely go away if we would remake our public engagement processes.

Hence the importance of this exercise, which was tried on a new proposal for off-road traffic.  The goal, as the authors say, was to test whether this kind of law-making would work,  And it looks like it does.  So when I posted this article to EngagingCities last week, it went in the Good Ideas File at the same time.

I’ll give you the top-level summary below; go to EngagingCities or theGovLab.org for the full story, which is well worth your time.

 

Here are some lessons learned from this pioneering project so far.

1. People participate in a constructive way.

A substantial number of people are really eager to participate, when they are given a meaningful opportunity to do so. That opportunity needs to be something that they care about. And there needs to be a plausible promise: meaning, their participation must lead to something.

2. The crowd is not delusional about its potential impact on the law. 

The crowd is hopeful, but realistic. They understand that one idea or opinion may not count so much at the end. And there are hundreds of other opinions too that need to be heard, and the end-result, the law, will be a compromise of many perspectives.

3. Crowdsourcing creates learning moments.

As the participants exchanged information and arguments on the crowdsourcing platform, they learned from each other. As one interviewee, who participated in crowdsourcing said:

“I’m somewhat surprised to see that the online process serves as a way to add to the participants’ knowledgebase and correcting their incorrect perceptions. I had read carefully the current law and the expired bill, and I realized that quite many participants didn’t have correct understanding about the terms about the law and its implementation. But, in many conversation threads these misconceptions seemed to transform into correct ones, when somebody corrected the false information and told where to find correct information.”

4. Crowdsourcing as knowledge search

In our case, we were crowdsourcing ideas to improve the law, not delegating ultimate decision-making power to the crowd so the problem of legitimacy is not necessarily acute. Because the focus was on idea and information collection, an idea didn’t gain more weight from being voted on multiple times.

5. The crowd is smart.

Based on the idea evaluation results collected so far, we conclude that the crowd – at least this specific Finnish crowd – is smart. The evaluation took place on a new crowd evaluation tool built by David Lee at Stanford University. Each participant reviewed a random sample of ideas by comparing, ranking and rating them. Based on the evaluation analysis, it seems that the crowd preferred commonsensical and nuanced ideas, while rejecting vague and extreme ones.

6. Minority voices were not lost.

What proved a very interesting and successful method to analyze the evaluation results was clustering….  Being able to identify a minority cluster is important because it helps us analyze the results of the crowd evaluation at a more detailed level. With clustering, the voice of the minorities is separated out from the majority, allowing us to hear the minority. The use of this technique can also function as a motivating factor for minorities to participate in online crowdsourcing efforts, because we can promise them that their voices won’t be simply drowned out by whatever majority emerges.

 

 

Random Excerpt: Does the Talent want what we’re offering?

Every week I open The Local Economy Revolution: What’s Changed and How You Can Help  to a different section, copy out the first selection I see, and past it in here.  Like what you see?  Check out the whole book – print or e-reader. You’ll be glad you did.  Honest and for true.

 

This section is edited from a piece written by my good friend Bill Lutz, a community development manager in a pretty forward-thinking small city. Bill captures the essence of the conflict that faces economic development today — and sets it in the framework of ongoing generational change.

We need to have our eyes wide open about how the world is changing around us, especially if we are old enough to have gotten comfortable with the status quo.  As a Gen Xer, I find myself straddling two increasingly divergent views of the world — views that are firmly ensconced among people ten years older, and ten years younger, than I am.

In my professional life, I don’t see this division as pronounced anywhere as it is in the world of economic development.  Too often the actions of community leaders in the field, on the ground, reflect old and unspoken assumptions about what a community needs for its economy. And as Bill points out, in a different way than anything else I have read on this topic, our assumptions about something as fundamental as what it is that the “talent” wants may be diverging from reality.

We’re going to have to change. So we might as well get started. I’ll let Bill take it from here

___

Last month, a nearby city collected a major win in the game of economic development.  A nutritional supplement maker decided to build a new production plant for one of their products in this small community.  The project will lead to the building of a new $270 million facility and create in excess of 200 jobs.  These are substantial and impressive figures.

Each week, drive by the site and each week there is more and more progress on this massively large building.  But I can’t help but wonder if this facility is creating the jobs that our future employees will want to fill.

Is any project that promises hundreds of jobs creating the jobs that future employees will want to fill?

I know it’s almost sacrilegious to ask such questions in the heartland of American manufacturing, and there’s no shortage of people out there who would be glad to take any job, not matter what. But in terms of the people that we keep identifying as the Talent, I think these are more open questions than we want to admit.

Ask anyone currently managing manufacturing industries, and you’ll hear the same refrain: there are not enough qualified people to fill the jobs that are out there.  That sounds counter intuitive, given the relatively high unemployment rates.  Looking at those that are younger, the unemployment rates are even higher.  And we increasingly attribute that to a Job-Skills Mismatch, and try to redouble efforts to provide new, better, more sophisticated training.

And yet, these gaps persist — and they persist so broadly that it’s clearly more than a one-industry problem. There’s something more pervasive here, even after we account for the usual complaints of less-than-ideal literacy skills, work ethic, drug testing, etc.

All of those issues might be factors, and more. But I think it’s too convenient to simply blame this generation’s perceived lack of work ethic or poor education.  I am sure my grandfather’s generation thought my father’s peers were a bunch of slack-jawed hippies who couldn’t carry their own weight.

What I am starting to believe is that the jobs we are creating aren’t the types of jobs the next generation wants or needs to fill.

If you read a broad cross-section of the regional and national press about economic development issues, two themes emerge pretty consistently:

#1:  Economic developers all across the country are tripping over themselves to get big businesses to come to town — and often throwing a lot of money at them in the hopes that this will make something happen.

#2: Young job seekers, particularly the ones that we identify as our potential Talent, aren’t interested in working for big corporate conglomerates. There’s growing evidence – and there has been for a decade or more – that post-Boomer workers are looking for something very different from the Organization Man model that most corporations still hew to in their practices… even if the promises that were supposed to come with Organization Man employment can no longer be trusted.

Take those two statements together, and you get a very different sense of where the problem might lie.

The post-Boomer generations of workers grew up in turbulent times.  In many parts of the U.S. and the world, they saw their parents and other adults lose their jobs, whether it was the manufacturing collapse of the 1970s and 80s or the corporate restructuring of the 1980s and 1990s. They know that their parents had been told that theirs were supposed to be career jobs, but it didn’t turn out that way.  Job loss wasn’t invented in 2008 – the post-Boomer generations, to a large extent, never had reason to develop faith in the corporation.

pink slip

From doug-johnson.squarespace.com

In part due to the lack of these jobs, many in this generation grew up with their mothers going to work leading to another generational phenomenon: the latchkey kid.  These were the kids that came home from school to an empty house, and it was in these few hours a day that these kids learned to be self-reliant.

So can we honestly be surprised when we see that the most talented of this generation of self-reliant individuals reject the job offers of big business when they come to town, or don’t last when they discover what a mismatch there is between their guts and these places?

There’s lots of information, both legitimate and sort of pop culture-ish, that claims that post-Boomer workers demand to be flexible and agile.  They want to continually build new skills and new abilities, and if necessary, many are willing to do it on their own.  Fewer and fewer of these workers seem to be interested in signing up for a job, only to be pigeon-holed in a dead end — especially with the ever-present risk of a pink slip handing over their head.

We keep trying to get more jobs, more economic development.  But potentially the biggest problem, and the one that no one seems to be addressing, is that this approach to economic development may fail to answer a much more significant question:

Are the communities we live in attracting the kind of jobs and careers we need if we want to sustain our communities’ futures?

From the Good Ideas File: for the innovator, the problem becomes the innovation source

At its core, The Local Economy Revolution is all about community innovation.  We’ve seldom thought systematically about how to innovate communities before, even though we need to do it all the time and have seldom needed to do it intentionally more than we do now.  Thankfully, innovation is a major topic for business types, and if we’re thoughtful we can transfer some of what they have learned in the last few years to our work.  I’ve even done a podcast interview with a person at Procter & Gamble whose job is to train people within that big corporation to identify potential innovations and bring them to light.  If they find innovation so necessary that they train people to do it, then chances are you can, too.

This article from a business blog cites a study that was completed on the oil and gas industry — not exactly government or community work, but the findings are illustrative — and probably transferrable, since they have to do more with how we as people perceive barriers and opportunities than anything else.  This first selection summarizes that oil and gas study:

One of the questions that they asked is “what are your barriers to business success?” Here are the answers for three groups of firms: those that don’t innovate on the left, the middle is firms that do some innovation, and the right are the novel innovators – the ones that come up with completely new to the industry innovations.

barrierstosuccess

For the non-innovators, everything gets in the way.  But for the general innovators, the main barriers are learning challenges and contracting constraints.  The big finding is that for the novel innovators, there are no external barriers.

This is a really important finding.  When I talk with firms that struggle with innovation, all I hear about are the barriers.  There are labour problems, and too much competition.  Their industries are over-regulated, and they face too much uncertainty.

The big idea in this work is that novel innovators face these problems as well, but instead of letting them prevent innovation, they use them to spur innovation….

If you view issues like red tape, labour problems and competition as barriers, then they will make you less competitive.  But if you view them as innovation triggers, you will be much more likely to succeed.  Innovative firms in this study are nine times more likely to find ways to increase productivity than non-innovative firms are.  A big part of the reason why is that the innovators respond to barriers differently.  Instead of seeing them as something that blocks progress, they view barriers as a trigger that requires an innovative response.

Constraints spur innovation, if you have the right attitude.  Where others see only barriers, innovators see opportunities.

In a sense, a barrier is an opportunity if you can look at it from another perspective.  Sounds cliche, but it appears to be true.

From the Good Ideas File: auction website to help sell abandoned homes

Sometimes Good Ideas sound so simple that we’re inclined to say “really?  that’s a new thing?”  But in the world of community revitalization, sometimes even the supposedly easy things to do are much harder than they look.

Here’s the lead of the article from the Detroit Free Press:

The website — www.buildingdetroit.org — went live Monday. It will be the city’s clearinghouse for auctions of homes that the city offers through a program Duggan announced last week in which Detroit goes to court to force owners of vacant homes to fix them up and get them occupied or risk deeding them to the city.

The first 15 homes will begin being auctioned in early May. Twelve of them are in the city’s East English Village neighborhood on the city’s east side, some in very good condition and some needing renovations. The first auction will be May 5; the homes and schedule are available on the web site.

“Were laying another huge piece in place in Detroit’s strategy to fight blight,” Duggan said at a news conference, flanked by City Council President Brenda Jones and Councilman Andre Spivey, whose council district represents that neighborhood. “It is not enough to just demolish.”

I’ve written at the Wise Economy Workshop blog about my concern that people too easily think that demolishing abandoned buildings is the only answer, or the right answer — or even more delusional, that all we have to do is demolish, and then “The Market” would take care of the rest.  We didn’t have any real reason to think that in the 1990s, and with the enormous glut of urban vacant lots in most older cities today, there’s even less reason to think there’s a prayer of that now.

Initiatives like this need to be targeted to specific areas like this one is, and they have to include only habitable buildings to keep them functional , and there’s never enough money or staff to do all the properties that you could be doing right now.  And that means that the impacts aren’t immediately visible to the broader public, and that means that there will always be someone saying “They’re Not Doing Anything” or “They’re Not Doing Enough” or “We Need to Do Some Big Thing Instead of This.”

But I think that this is how you actually do make an impact — it’s a multi-strategy, multi-step, not-one-sizes-fits-all situation.  It takes a coordinated collection of strategies, and this is clearly a good one to have in the quivver.

From the Good Ideas & Make Della See Red file: ANOTHER state figures out crowdfunding (Hint: Not Ohio)

I’m simultaneous really glad to see this story from MiBiz.com, and now ratcheted up another notch on my irritation at the Ohio Securities Division for its asinine treatment of the same exact issue.  Here’s the lead of the MiBiz story — and a little, particularly aggravating, additional background:

A new crowdfunding portal wants to encourage everyday people to invest in Michigan-based real estate projects that support startups and small businesses.

The barrier to entry: $100.

Within the next 30 to 60 days, the Ann Arbor-based Michigan Municipal League and Washington, D.C.-based Fundrise LLC hope to launch a new website (Michigan.fundrise.com) that will allow Michigan residents to invest in in-state real estate projects.

Fundrise offers accredited and unaccredited investors a way to invest in community-based development across the country, but its efforts in Michigan were made easier by the signing of the Michigan Invests Locally Exemption (MILE) Act. The law, signed by Gov. Rick Snyder last December, liberalized the process of equity-based crowdfunding for Michigan residents.

Executives at the MML see the partnership with Fundrise as a way to offer brick and mortar investment opportunities across the state to complement its work with Localstake, another equity crowdfunding portal for small businesses.

ANOTHER crowdfunding portal.

In an economy that is transitioning swiftly from large to micro-businesses,

where most banks are still so tight with their funds that many entrepreneurs can’t even imagine getting the kinds of loans that we used to take for granted,

where homeownership is declining (a conventional, and personally risky, source of collateral for start-up funds),

and when more and more of the businesses with the best potential for long-term viability can’t get the time of day from a conventional loan source….

We need crowdfunding.

We need it to make more businesses more viable, we need it to give people more options for investing their funds than in the conventional vehicles (many of which have proved to be a lot less reliable than we thought).  And we need it to enable people to put their money into their communities, to play an active role in making our places better.  We cannot count on government programs or big charities or the like to help us out the way we used to, and they’re only going to keep fading.  Increasingly, those investments are going to be on us.

Need, and demand, for crowdfunding is furiously high and getting more intense every day.  The US Securities and Exchange Commission, which has spent an obscenely long time figuring out the federal rules, has been passed up by states such as Michigan and Georgia and others, who have gone ahead and figured out how to get this done.  Meanwhile, the comparable agency in one of the states that most arguably needs crowdfunding capacity — one of the states that has been hit hardest by the economic upheavals of the last two generations — has not only dragged its feet, but appears to be determined to persecute the first person in Ohio to see this potential and try to make it a reality for Ohio communities and businesses.

OK, I’m a little pissed.  Actually, a lot pissed, and for a while now.   If you’re in Ohio, and you want small businesses and economically healthy communities, you should be pissed, too.

 

From the Good Ideas File: Three different strategies for entrepreneurs in historic spaces

The National Trust for Historic Preservation’s Green Lab has been doing some very interesting research and policy work around the environmental and sustainability implications of preserving and reusing historic buildings (short version: it’s a good thing).  This article was a particularly good candidate for the Good Ideas file because it gives you a good peek into three different types of flexible/coworking/incubation spaces — an issue that I wrote about recently over at the Wise Economy.  These strategies would fundamentally work in a lot of spaces, but I think it’s worth noting that the character of a historic building can make them more appealing for this type of arrangement — although, as I noted in the Wise Economy piece, not all buildings are ideally suited for all activities, and you have to pay some pretty serious attention to fitting the activity to the space.

This article, by Green Lab Executive Director James Lindberg, also does a good job of indicating that the conventional incubator model — give ’em cheap space and a shared copier — doesn’t have much relevance to most businesses looking for these kinds of spaces today:

Curator. Outreach coordinator. Education director. Sounds like the staff directory for a historic site, right?

Actually these are job descriptions for staff at an increasingly popular type of office building. Variously described as shared spaces, multi-tenant centers, co-working spaces or hubs, these buildings bring together a mix of tenants who share a common mission. Shared spaces offer a kind of “third place” that fits somewhere between the sterile cubicle farm and the isolated home office. Collaboration is encouraged through open and flexible floor plans, multiple gathering spaces, and amenities like cafes and game areas. Many of these offices have dedicated staff who organize training programs, educational events, tours, and community outreach.

And after a review of the three examples he had visited, James makes this observation, very much on the mark:

co working space

From Preservation Nation blog. Photo by James Lindberg

The idea of multiple entities sharing office space in historic buildings is not entirely new. All kinds of older buildings, from schools to hospitals to entire campuses, have been converted to office space for groups of nonprofit tenants. And the “business incubator” concept has long been used to support new businesses and fill empty spaces in Main Street commercial blocks and other buildings. Low rents were the key to success for many of these projects.

Affordability is still important, but changes in communication technology and workplace culture are helping to make the shared space model even more robust. Older buildings often have just the kind of open, flexible, and architecturally distinctive environments that many companies, organizations, and workers are now seeking. In years past, some of these spaces might have seemed too rough or too difficult to subdivide into private offices or cubicles. Today, nothing says “start up” or “community-based” better than the creative, low-cost reuse of a previously overlooked building that connects tenants with each other and to the community around them.

 

Random Excerpt: How to Fix Incentives

Every week I crack open The Local Economy Revolutionflip to a random page and put that brief section in here.  Like what you see?  Check out how to get a copy of the book for your very own.  

We’ve been talking (or, well, not talking) about incentives in economic development in the US a lot lately. They work, they don’t work. They’re necessary, they waste money. You need this control, that recapture method, no you don’t, that’s gonna backfire. So on and so on.

Perhaps it’s time to take a big step back– to revisit what an incentive was supposed to do in the first place. And perhaps it’s confront where and how our practices are going awry, and re-formulate incentives programs– not throw them away, not just control them better, but fix them, so that they do what our communities need, and so that they are worth the money we invest in them.

First, let’s take the Wayback Machine to Econ Development 101:

The purpose of an economic incentive is to make something happen in the free market that market forces alone can’t do. An incentive is supposed to exist to give the market a push in a direction that it can’t/isn’t going by itself at this moment. It’s there to fill a gap.

Typically, says Econ Dev 101, the incentive is needed because the market can’t see or isn’t aware of an opportunity — because it’s a new opportunity, because the market is overlooking a location’s potential due to negative assumptions about it, etc. The incentive is designed to kick-start the change, to get the market opportunity over that initial hump. That’s why we started giving out incentives — to overcome barriers to entry so that the potential of a labor pool or a technology or a place could be discovered by the market.

No one would say that goal of an incentive is to replace the market, or contort the market, or fake up the market. But it’s hard to miss that this is exactly what many incentives do.

So, if an incentive is supposed to do what Econ Dev 101 said, it follows that any incentive should have the following characteristics:

 

  • Time limited–not just in terms of a specific deal having an expiration date, but time limited in availability.  If the purpose of the incentive is to change the market, eventually the incentive should facilitate a change in the free market by demonstrating that a business type or a business location can actually work economically. If that case has been made — if businesses can make a go of it — then the incentive has done what it was designed to do, and it should not be offered anymore. Extending the incentive might be OK if that market opportunity still exists but hasn’t fully taken off yet, such as might happen if an area experiences a natural disaster. But the incentive has to stop being available at some point. If it continues after the market no longer needs it, it’s not levering the market — it’s distorting it.  And a market that can’t survive without the incentive is probably too fragile, too risky to the surrounding community to be worth supporting.
  • Grow a market. The incentive has to be targeted specifically to emerging or sleeper market opportunities–like the “but for” test that many incentive programs at least give lip service to, but more.  An incentive should be available, not just when Project X won’t work without it, but when the larger market opportunity, with all of its potential, can’t take off without it. The incentive shouldn’t be about that specific business, although it may technically get applied to one business. An effective incentive will demonstrate potential to grow the opportunity — to grow the market segment, the market ecosystem. To grow something that is bigger and more impactful than any one business.  The argument (the provable, demonstrable argument, as much as possible) has to be that incentivizing Project X will facilitate the growth of a whole sector, not just one firm.  Part of the reason why the focus has to shift from incentivizing one business to growing a market is that most of us aren’t going to see many individual business opportunities that can single-handedly make a big impact on the local economy. We all know that businesses are getting smaller and smaller, and almost no one is seeing the four-digit employment investments anymore, no matter how much sugar they throw in the pot. If from nothing other than a pragmatic point of view, the purpose of an incentive has to be building an economic sector, not just one individual business, because any one individual business is going to be just a drop in the bucket of the job and investment growth our communities need.

A nice side benefit: an incentive that’s focused on building a sector rather than a business can also spread out the risk. Instead of chewing our fingernails worrying that Business Y is going to renege on its incentive agreement, or move the day after the incentive runs out, or somehow otherwise break that supposed bond of trust and smear a lot of egg on our faces, an incentive strategy that focuses on building a sector should lessen the economic development initiative’s dependence on any one business. If Business Y pulls something down the road, a strategy that has focused on using incentive money to build a sector, rather than just make Business Y happy, should have a decent chance at having created a larger system in which Business Y’s employees, suppliers, etc. can find other beneficial options.  So the question to ask isn’t, “Do we need to do this incentive to get this business?”The real question is, “Are we building a base of human capital, expertise, relationships that can outlive any one business?”  Remember, businesses aren’t just getting smaller, but there’s lots of evidence that the life span of the average business is shrinking as well. So it makes less and less sense to bet the farm on one of them, even if that one looks really cool. Remember, a lot of communities thought General Motors looked like a good incentive risk in 2005.

  • Grow Workforce capacity. This point follows on to the need to feed the growth of a sector, not just a business. Whether we’re talking about office, service, manufacturing, tech, whatever, we know more and more that the most valuable and most critical asset we can offer is the skills and capabilities of our workforce.  If we need businesses to help us understand the sector’s workforce needs, and people’s capacities are at least partially built through their work experience — and those businesses where they work become smaller and shorter-lived and generally more fluid everyday — how much sense does it make to just hand businesses a piece of our precious funds and hope that something good will happen for its workers?  Why not structure some conditions around building the capacity of their employees? Why not have an agreement about how they will support or participate in the training, networking, connection-building needed to grow their sector in your community?  That’s not going to ask much of them beyond basic good business practices (retain your employees because that’s cheaper than hiring, build good relationships with your suppliers so you can get credit if you need it, etc.) You might as well give them a little extra push in that direction — especially as businesses get smaller and owners and managers may not always fully realize how much they need to be part of the larger system. And since they’re going to have to do at least some training, you’re probably not adding significant cost.
  • Directly improve the community. Here’s one you know, but maybe don’t want to say out loud:  Your citizens are sick of throwing their hard-earned tax money at businesses that they don’t think give a damn about their community.  Popular pressure is probably the biggest single threat to current incentives practices — and as people get better at self-organizing, and as anyone with a mobile phone becomes their own broadcast network, that pressure is going to build. That’s the nature of the social media, internet world. So why not give yourself some cover from the public watchdogs, and use incentives to prod businesses to be better community citizens?  Plus, you’ve got precedent. Planning commissions routinely require developers who want a variance or special zoning to do a little extra — more landscaping, higher quality facade materials, etc. If you, Madame Developer, don’t want to do that, you can use the standard zoning without going through any extra process. But if you give us a little extra, you can use our expedited process or get special exemptions.  Why not ask a potential incentive recipient, explicitly, how will you give back? How will you help build our community? How can you contribute as a corporate citizen?  After all, it’s your taxpayers’ money.  They want more return on the investment. And sooner or later, that’s what they’re probably going to demand.
  • Manage our risk if the project doesn’t work as we hope it will.  Clawbacks are fine in some cases, but if your goal is to facilitate meaningful change in the local economy, demanding the money back could backfire. Venture capitalists demand high returns, but they also expect that some of their investments will go belly-up. And in the tech world, which tends to be a leading indicator for a lot of other long-term growth sectors, the entrepreneur who has failed is often considered a better investment risk for next time, because presumably he/she has learned a few things that will make the next attempt better.  Trying to grab the money back in a case like that could be shooting larger goals to grow a sector in the foot. Don’t get me wrong, people absolutely have to be held responsible for their actions, and communities cannot just say “oh, well” and watch their money get piddled away on boondoggle projects and pipe dreams. But elaborate legal mechanisms to recapture as many red cents as possible may be less useful to communities than two other simple strategies: better evaluation of risks and benefits, and spreading the risks across more incentive recipients.  The poor overlooked stepchild in economic development is business retention, and its sidekick entrepreneurship. Let me rephrase: we give those two a lot of lip service anymore. A lot. But where does the money in the budget mostly go?

There’s an old saw that says that where your treasure lies, there your heart lies. There’s so, so much evidence that supporting local businesses and helping grow new businesses makes for a stronger economy long-term than does any recruitment. But if we know that, why does so much money go to incentives, and so little to doing meaningful things to help local businesses get better?  What else can we do with our funds to improve their capacity and resilience? What training do they need? What connections? What information?