Demographic, Drucker, And The Entrepreneurial Society
I. Demographics, Drucker, and the Entrepreneurial SocietyI've written and referenced much about the significant demographic shifts in the U.S. in terms of entrepreneurship and innovation; namely that foreign-born have emerged as a major force of transformative economic activity --- in both urban neighborhoods and high-tech laboratories. In reference to entrepreneurial start-ups and technology patent filings, immigrants are disproportionately represented and significantly outpacing the American-born demographic. The impact of foreign born talent and capital in high-growth technology companies is equally impressive. In terms of demographic growth, nearly 2/3 of all population growth in the U.S. during the 1990s was attributed to immigrants and their children (compare this surge in people with the progressive depopulation of rust belt cities and the concomittant loss of talent, energy and economic base). This force of foreign-born talent and entrepreneurship is an opportunity for cities and states that embrace this change. Those regions that ignore, or even emote hostility to, this global wave of talent undermines the economic prospects of its own citizens. During this holiday season, you might enjoy revisiting Peter Drucker's 1985 book, "Innovation and Entrepreneurship" which talks of the dangers of ignoring demographic patterns. In this book, Drucker also criticizes public policies that seek to centrally "plan" entrepreneurship and innovation (as opposed to a "decentralized" and "autonomous" entrepreneurial ecosystems) and that seek to build high-tech and high-tech alone ("a healthy brain in a dead body") Passages from this important Drucker work help illuminate: On Demographic Change "of all external changes, demographics... are the clearest. They are unambiguous. They have the most predictable consequences. They also have known and almost certain lead times......All this is so obvious that no one, one should think, needs to be reminded of the importance of demographics. And indeed businessmen, economists and politicians have always acknowledged the critical importance of population trends, movements, and dynamics. But they also believed that they did not have to pay attention to demographcs in their day-today decisions. Population changes .... were thought to occur so slowly and over such long time spans as to be of little practical concern...demographic changes were "secular" changes, of interest to the historian and the statistician rather than to the businessman or the administrator. This was always a dangerous error....The belief that population changed slowly in times past is pure myth.....In the twentieth century it is sheer folly to disregard demographics. The basic assumption for our time must be that populations are inherently unstable and subject to sudden sharp changes --- and that they are the first environmental factor that a decision maker, whether businessman or politician, analyzes and thinks through. Few issues in this century, for instance, will be as critical to both domestic and international politics as the aging of the population in the developed countries on the one hand and the tidal wave of young adults in the Third World on the other hand.... What makes demographics such a rewarding opportunity for the entrepreneur is precisely its neglect by decision makers, whether businessmen, public-service staffs, or governmental policy makers. They still cling to the assumption that demographics do not change -- or do not change fast. Indeed, they reject even the plainest evidence of demographic changes..... The unwillingess, or inability, of the experts to accept demographic realities which do not conform to what they take for granted gives the entrepreneur his opportunity. The lead times are known. The events themselves have already happened. But no one accepts them as reality, let alone as opportunity." On the Development of an "Entrepreneurial Society" The first priority in talking about the public policies and governmental measures needed in the entrepreneurial society is to define what will not work -- especially as the policies that will not work are so popular today. "Planning" as the term is commonly understood is actually incompatible with an entrepreneurial society and economy. Innovatin does indeed need to be purposeful and entrepreneurship has to be managed. But innovation, almost by definition, has to be decentralized, ad hoc, autonomous, specific, and micro-economic. It had better start small, tentative, flexible. Indeed, the opportunities for innovation are found, on the whole, only way down and close to events. They are not be found in the massive aggregates with which the planner deals of necessity, but in the deviations therefrom --- in the unexpected, in the incongruity, in the difference between "the glass is half full" and "the glass is half empty." In the weak link in a process. By the time the deviation becomes "statistically significant" and thereby visible to the planner, it is too late. Innovative opportunities do not come with the tempest but with the rustling of the breeze... It is popular today, especially in Europe, to believe that a country can have "high tech entrepreneurship" by itself... But it is a delusion. Indeed a policy that promotes high tech and high tech alone ....and that otherwise is as hostile to entrepreneurship as France, West Germany and even England still are --- will not even produce high tech. All it can come up with is another expensive flop, another supersonic Concorde, a little gloire, oceans of red ink, but neither jobs nor technological leadership. High tech in the first place -- that this is, of course, one of the major premises of this book, is only one area of innovation and entrepreneurship. The great bulk of innovations lies in other areas. But also, a high-tech policy will run into political obstacles that will defeat it in short order. In terms of job creation, high tech is the maker of tomorrow rather than the maker of today... "high tech" in the United States created no more jobs in the period 1970 -85 than "smokestack" lost: about five to six million. All the additional jobs in the American economy during that period -- a total of 35 million ---- were created by new ventures that were not "high tech" but "middle tech," "low tech," or "no-tech." Above all, to have "high tech" entrepreneurship alone without it being embedded in a broad entrepreneurial economy of "no-tech," "low-tech," and "middle tech" is like having a mountaintop without the mountain. Even high-tech people in such a situation will not take jobs in a new, risky, high tech ventures. They will prefer the security a job in the large, established, "safe" company or in a government agency.... But the other innovative ventures are also needed to supply capital that high tech requires. Knowledge-based innovation, and in particualr high-tech innovation, has the longest lead time between investment and profitability. The world's computer industry did not break even unitl the late seventies, that is, after thirty loss years... The French are right, of course: economic and political strength these days requires a high-tech position, whether in information technology, in biology, or in automation. The French surely have the scientific and technical capacity. And yet it is most unlikely (I am tempted to say impossible) for any country to be innovative and entrepreneurial in high tech without having an entrepreneurial economy. High tech is indeed the leading edge, but there cannot be an edge without a knife. There cannot be a viable high tech sector by itself any more than there can be a healthy brain in a dead body. There must be an economy full of innovators and entrepreneurs, with entrepreneurial vision and entrepreneurial values, with access to venture capital, and filled with entrepreneurial vigor." II. Alberto Sangiovanni-Vincentelli I recently had the privilege of having espresso with Dr. Alberto Sangiovanni-Vincentelli, an immigrant from Italy who founded two mega electronic design automation design firms in Silicon Valley, Cadence and Synopsis (each with 5,000 employees.) The stories Dr Alberto tells about the pathways to success (and the necessary environment to facilitate success) are real life. Current, on-the-ground exposure to the messy confluence of countless interactions (many of them fortuitious) within tech-rich regions is critical in understanding the dynamics of a vibrant knowledge-based economy. Dr. Alberto talks about having a diverse ecosystem of universities, vc's, tech innovators, entrepreneurs, etc.----feeding off each other and open to each other (even if they are competitors). Luck often has a big role in how things develop. Out of 10 company ideas, you are lucky to have 1 succeed. But you must have at east 10 to get the 1. Dr. Alberto makes the analogy of the valley as the "rain forest" of tech entrepreneurship---- rich, thick biodiversity from which wondrous and often unexpected things spring (and he says that immigrant innovators and entrepreneurs plaly a huge part in that unplanned but successful economy!). I also sat down recently with the presidents of largest immigrant tech entrepreneurship orgs in the U.S., TIE (www.tie.org), HYSTA (www.hysta.org), Monte Jade (www.montejade.org). They offer incredible global networks with which to partner on rust belt economic development. Led by Baiju Shah, President of BioEnterprise, and Eddy Zai, President of The Cleveland Group of Companies, a growing group of business, government and civic leaders in Northeast Ohio understand this opportunity and have recently launched Ohio's first TiE Chapter http://ohio.tie.org/ . At this moment of great economic challenge and decline (http://www.washingtonpost.com/wp-dyn/content/article/2008/12/26/AR2008122601837.html?sid=ST2008122602011&s_pos=), the rust belt should not fight this trend of globalization and talent attraction, but instead should open up and embrace it. Nothing less than bold and innovative action is acceptable. III. Is the glass half-empty or half full? new paper by University of Akron on Global Opportunities, November, 2008 Continuing Drucker's "half-empty/half-full" analogy, two University of Akron professors published a fine paper on Northeast Ohio's opportunities to capitalize on growing the local economy through attraction of international investment and foreign companies, high-skill immigrants, and increasing the region's exports. "Is the Glass Half Empty or Half Full? A Whitepaper on Doing International Business In the Northeast Ohio Region" November, 2008, by Bill Hauser, PhD, Department of Marketing & International Business, College of Business Administration, the University of Akron; and AnneMarie Scarisbrick-Hauser, PhD, Department of Public Administration & Urban Affairs & Fellow, Bliss Institute for Applied Politics, The University of Akron: "Immigration: Challenges & Assistance The Northeast Ohio region's history and economy was built on the foundation of generations of immigrants from around the world. However, in the first part of the 21st century with its distressed economy, loss of jobs, fear of terrorism, and rise of U.S. ethnocentrism, immigration has become a contentious issue. On one hand is the recognized need for educated and skilled labor to help jumpstart the economy. On the other hand is the strong protectionist sentiment about taking jobs away from American workers. This debate is complicated and while it is not the subject of this paper it must be mentioned as one of the leading perceptual challenges to foreign growth in the region. Population growth normally happens in two different ways. The first is due to natural processes where the number of births exceeds the number of deaths in a given area. The second is due to migration with individuals moving into (immigration) and out of (emigration) the area. For years, the United States and the Northeast Ohio region have faced what has been termed as zero population growth or a relative equity between the number of births and the number of deaths. However, as the dominant middle-aged population in Northeast Ohio reach their senior years, the pendulum may actually shift to more pronounced negative natural population growth where the number of deaths significantly outnumber births. In this case, population growth in the region will be even more dependent on immigration. In the 21st century, foreign immigration is no longer the traditional push strategy where poorer, unskilled immigrants move into the area to improve their financial and living conditions. Instead, it has become a pull strategy where skilled immigrants are being drawn to the area to fill needed gaps. Research has demonstrated that immigrants tend to start companies at a greater rate than the general population especially in the areas of small businesses, technology start-ups, and international trade. Currently, two related initiatives are being proposed as innovative ways to deal with this issue. The first proposed initiative is called the Talent Blueprint Project. Designed by the Cleveland Council on World Affairs and Richard Herman, one of the region's leading immigration attorneys, the intent of Talent Blueprint is to collaborate with regional public and private entities to attract new foreign talent and capital to the area in the form of more foreign students, workers, and entrepreneurs. Currently, this initiative is focusing on lobbying congress and other governmental bodies to lift the cap on H1-B visas, especially for skilled foreign workers willing to settle in distressed economic areas. Additionally, this group is working to develop support for a "welcome center" that would be physical and/or digital and would provide comprehensive information and services on immigration and resettlement, as well as, marketing the region to potential target immigrants. The second related initiative is the "high skill immigration zone." The intent of this initiative is to propose a new national immigration law that would create zones in the U.S.'s most distressed cities. At the heart of this would be the creation of immigration incentives that would be used to attract foreign companies to locate, grow, and especially remain in the region. Upon implementation, the hope is that the process would create a cumulative effect where companies will locate in the area because of the reduced barriers to hiring foreign talent. These new companies, as they grow and expand, will then create job opportunities for local workers. At the same time, the influx of talent and skills will draw other companies to the area and, therefore, stimulate the region's economy. Neither one of these two initiatives should be viewed as a panacea to resolve immigration and economic problems in Northeast Ohio. They are innovative attempts at finding actionable ways to deal with the current situation. As one would expect, however, they are not without their critics. The primary debate here, as in other discussions of immigration reform, is the fear of loss of jobs to U.S. citizens. While this debate is too complex and comprehensive to receive fair treatment in this paper, the above initiatives should at least be recognized as attempts by forward thinking organizations in the Northeast Ohio region to deal with an ominous challenge to its growth and revitalization...... Immigration & Resettlement Assistance As is observed in the previous discussion, immigration is currently a complex and contentious issue in the United States. As such, maneuvering through the process requires professional assistance. Northeast Ohio is fortunate to have a large number of resources from experienced immigration attorneys and law firms to international trade assistance groups available to help foreign businesses successfully navigate the process. Similarly, the region has numerous private and public agencies that will help families resettle into the area. These groups or agencies are located in each of the region's major metropolitan areas. They can be accessed directly by companies and families or can be referred to by international business and trade groups in the region. In most cases, services are provided at little or no cost to the new immigrants and their families." This whitepaper was commissioned as an independent research project by the Northeast Ohio Trade & Economic Consortium (NEOTEC). NEOTEC serves as the administrator for Foreign Trade Zone 181, assists companies with export development through the NEOTEC International Trade Assistance Center (ITAC), and promotes Northeast Ohio to international and domestic businesses to increase the region's role in the global economy The report includes excellent interviews with Tom Sudow, Vice President, Attraction for Team NEO and Director of Business Development, Global Cardiovascular Innovation Center at the Cleveland Clinic; and Bob Bowman, Deputy Mayor and Director of Economic Development for the City of Akron: both successful champions in attracting international companies, foreign direct investment, and welcoming global talent to Northeast Ohio.
http://www.uakron.edu/colleges/cba/docs/HauserNEOWhitepaper.pdf IV. Ann Arbor: Execute Innovative Ideas Leaders in Ann Arbor are making high-skill and entrepreneurial immigrants a priority of its economic development agenda: "Attracting foreign born knowledge workers is directly related to sustained economic growth and entrepreneurialism (a recent Duke University study determined that half of all startup companies in California have foreign born owners and investors). We have good diversity with over 100 ethnic groups represented in our community and can build on this to attract foreign companies and investment in our region. Cultural ambassador programs expedite trade among the international regions as well as help integrate company workers into the cultural and social fabric of their new community. We currently have programs for India and some mid eastern and European regions and this program should be expanded to include more European, South American and African regions".
http://annarborregionsuccess.org/work-groups/regional-vision-strategies-and-actions/execute-innovative-ideas#attracting-foreign-born-knowledge V. Obama's Pitch to rebuild the economy and make the U.S. safer by welcoming global talent. The Following is from Obama's Campaign platform: "Attract Foreign Talent: The flipside to promoting American arts and culture abroad is welcoming members of the foreign arts community to America. Opening America's doors to students and professional artists provides the kind of two-way cultural understanding that can break down the barriers that feed hatred and fear. As America tightened visa restrictions after 9/11, the world's most talented students and artists, who used to come here, went elsewhere. Barack Obama and Joe Biden will streamline the visa process to return America to its rightful place as the world's top destination for artists and art students.
http://www.barackobama.com/pdf/issues/additional/Obama_FactSheet_Arts.pdf From Patrick Thibodeau, Info World, November 6, 2008 Isn't increasing H-1B visas and permanent residency green cards a nonstarter of an issue during a recession? No. In fact, the visa issue may reappear with a vengeance, and here's why. Obama wants to double basic research spending over 10 years, and a lot of that money will fund research at U.S. universities that enroll thousands of foreign students. In the fall of 2007, of the approximately 112,559 students enrolled in U.S. engineering graduate programs, IT related and otherwise, 50% were non-U.S. citizens, according to the Council of Graduate Schools, in a report released in September (Report PDF). Visa proponents argue that it makes little sense to improve basic research at universities only to force graduate students back to their home countries. Basic research is a cornerstone of Obama's tech and energy policy, and the polar opposite of the Bush administration, which actually cut basic federal research funding. (See this chart by the National Science Foundation.) If Obama can find the money to increase basic research, then the issue of keeping foreign students in the U.S., especially those students who work on government-funded research projects, brings these two issues together. Some tech lobbyists believe that increases in H-1B visas and green cards won't happen as long as U.S. companies are cutting jobs. But that will mean the debate will shift as well. "What do we need to do to ensure that we can grow our way out of this (downturn), innovate our way out this? You can't have that discussion without talking about immigration," said Robert Hoffman, vice president of congressional and legislative affairs at Oracle Corp., and co-chairman of Compete America, a lobbying group that supports raising the H-1B visa cap. "Basic research is a cornerstone of Obama's tech and energy policy, and the polar opposite of the Bush administration, which actually cut basic federal research funding. (See this chart by the National Science Foundation.) If Obama can find the money to increase basic research, then the issue of keeping foreign students in the U.S., especially those students who work on government-funded research projects, brings these two issues together"
http://www.networkworld.com/news/2008/110608-faq-why-obama-may-back.html?hpg1=bn VI. Pittsburgh Demographics; Global War for Talent and Investment Thanks to my friend Jim Russell at CleveBurgh Diaspora (http://burghdiaspora.blogspot.com/), I'm able to keep up on the Pittsburgh happenings. Looks like Pitttsburgh has high-skill jobs opening-up and not enough people with the necessary skills to fill them --- so it's seeking talent from outside its borders: "But there's a challenging side to our recovery.And that's shown on the chart as well. Even as our employment has been on the rise, our population has been on the decline. Some of this is the "echo effect" of the population loss we experienced in the 1980s. Many young people moved away, and that means there is a smaller percentage of the population having babies here today. But we've also lagged the nation in attracting people to move here. It used to be because we didn't have jobs. Today we do – both jobs being created and jobs being vacated as baby boomers retire. And that's putting a squeeze on employers, who can't find enough of the people they need. Beyond raw demographics there's another issue with which we have to come to grips – a skills mismatch. Our region's workforce lacks the right set of skills to fill the jobs that are opening and that are being created. All of this interferes with our ability to attract business investment. In fact, workforce tops the list of factors every company considers when it's thinking about expanding or relocating. As you'll read on this page, the Pittsburgh Regional Alliance, an affiliate of theAllegheny Conference on Comunity Development and a partnership of economic development organizations throughout our region, has enjoyed real successes in recent years attracting business investment to create jobs. But, if we don't have the right skilled workforce, it will be hard for this trend to continue. And we're not the only region that is facing this challenge. In fact, there is a global war for talent ahead of us. In some industries it's already here." http://www.alleghenyconference.org/PDFs/ImagineBusTimesInsert1108.pdf
http://www.imaginemynewjob.com/ VII. A Few More Notes on Singapore's Aggresive Strategy To Recruit Foreign Talent and Accelerate Its Knowledge Economy "Focus: Japanese firms in Singapore's newest R & D hub" Dubbed Singapore's science and technology powerhouse, it is focusing on research in ''infocomm'' technology, physical sciences and engineering. About 1 kilometer away is Biopolis, focusing on biomedical research, which opened in 2003. Both are part of a sprawling development called ''One-North'' that is targeted to promote research and development in Singapore in the 21st century. Fusionopolis itself is being built in six phases on 30 hectares. The futuristic two-tower complex of the first phase was completed last month, but the second phase is only expected to be ready in 2012. The three Japanese companies that have set up operations there are Panasonic Electric Works Asia Pacific Pte. Ltd., a subsidiary of Panasonic Electric Works Ltd., Seiko Instruments Inc. and Nitto Denko Corp., said Nur Sahara, a spokeswoman for Singapore's Agency for Science, Technology and Research. Nitto Denko on Wednesday officially opened its Asia technical center at the complex where it will conduct research into organic electronics, a new upshoot of the electronics industry, company officials said. Singapore is its fourth global R&D site after Japan, the United States and a facility in Europe, they said. The Osaka-based company plans to invest S$10 million (US$6.6 million) over the next three years to conduct research in collaboration with local research institutions. One of its initial projects is developing a sensory device for the healthcare industry that could be commercialized in about five years to cater to expected strong demand for such products due to an ageing society in many developed countries. Yasuo Ninomiya, Nitto Denko's chief technology officer, said the company chose Singapore due to the availability of a ''pool of local and foreign talent to tap, a strong R&D infrastructure and intellectual property laws.'' As for the other two Japanese companies, Panasonic Labs will be doing research into new technology for energy systems while Seiko Instruments is looking at data storage and microelectronics. The three are among 13 companies that have set up operations at the complex, which also houses several of Singapore's state-run research institutes. Besides pouring huge investments to lay out the infrastructure to attract foreign companies to conduct research, Singapore has also aggressively lured foreign researchers to overcome a shortage of researchers due to the country's small population of 4.8 million, of which about 1 million are foreigners. More than 2,500 researchers are working at Fusionopolis and Biopolis, more than half foreigners from more than 50 countries. The government has made major investments in research and development in order to foster our economic growth and long term competitiveness, Singapore Prime Minister Lee Hsien Loong said when he opened Fusionopolis. Last year, Singapore recorded its highest-ever gross domestic expenditure on research and development at S$6.3 billion, a 26 percent jump from 2006.
http://home.kyodo.co.jp/modules/fstStory/index.php?storyid=411682 More on Singapore: In an extensive Special Advertising Section of last month's Technology Review Magazine published by MIT, Singapore promotes its investments and strategy in promoting high-growth company development: "On October 17, 2008, Fusionopolis officially opened its glass doors to the public. The opening marks the first step of a 30-hectare experiment to bring diverse ideas, talent, expertise and businesses together in one compact environment to create new innovations. It houses 800 scientists, engineeers anbd game developers from laboratories of A*STAR and corporatinosin th infocomm technology, media, physical sciences and engineering indsutries. By 2012, that number will reach 2,400... Companies such as Ubisoft, EA, Linden Labs, Asian Food Channel, Panasonic and Vestar are among the 14 corporations that have set up laboratories and space in Fusinopolis.....Designed as an iconic development by the late internationally renowned Japanese architect Kisho Kurokawa, it offers an integrated "work-live-play-learn" environment to foster that chance encounter that could spark th next big discovery....The overriding idea behind these innovations is to create beautiful communal areas that facilitate the flow of ideas .. Singapore launched its well-known life sciences initiatve in 2000. The government focused on attracting top life scientists to the country and set up 13 research institutes and consortia under A*START. Biopolis opened in 2003. ...Today Biopolis hosts two thousand rearchsers and R&D labs of major international corporations such as GlaxoSmithKline, Novartis, Eli Lilly and Takaeda. in economic terms the experiment was a sucsss as well: from 2000 through 2007 the share of the national economy contributed by the biomedical sciences quadrupled from $6.3 billion to $24 billion ... But a new approach is now required, says Charles Zukowski, chairman of A*STAR's Science and Enigneering Research Council, which oversees the seven institutions. "the only way we're going to create products and services that tackle these large and complicated societal problems is by bringing together experts that have deep knowledge in particular areas. This means creating an environment where multidisciplinary teams can flourish while sustaining deep expertisee, " adds Zukowski. Fusionoplis embodies this new cultural change...."The end objective is to generate and nurture more technologically innovative and highly scaleabe start-ups for Singapore, similar to those found in technology hotbeds like Silicon Valley, Boston and Taiwan"... Singapore provides a conducive environment as a living laboratory where companies can experiment and develop world-class solutions...The research workforce increased from 15,800 in 2000 to 27,300 in 2007. "This is also an opportunity to position Singapore as an attractive location for talent from all over th world," said Beh Swan, Managing Director of EDB. "Many new breakthroughs are being developed at the edges of different disciplines. We have a critical mass of researchers at Biopolis and Fusionopolis. We want barriers to fall down and synergies to gush up," said Charles Zukowski. "Not only is the reserach group highly interdisciplinary, it is also highly international," Both Lim and Zukowski agree that it all boils down to building a culture of collaboration. Scientific facilities are also shared. "Researchers spend most of their time in labs. These shared facilities create more opportunities for scientists to speak to one another," says Chong. "Singaporeans are well known for our ability to work together. It's ingrained in our DNA, says Lim. We're trying to infuse this in the research culture in Singapore." A new ecosystem of innovation is building up in Singapore, with startups, local companies, and national laboratories creating new dazzling technologies and innovations."
Richard Herman, Esq. is the principal of Richard T. Herman & Associates, a Cleveland multicultural law firm speaking over 10 languages and serving diverse communities. He can be reached at: firstname.lastname@example.org
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