Washington Post article on brain drain

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http://www.washingtonpost.com/ac2/wp-dyn/A17201-2003Nov8?language=printer





washingtonpost.com
Brain-Gain Cities Attract Educated Young


By Blaine Harden
Washington Post Staff Writer
Sunday, November 9, 2003; Page A01


First of two articles

SEATTLE

In a Darwinian fight for survival, American cities are
scheming to steal each other's young. They want
ambitious young people with graduate degrees in such
fields as genome science, bio-informatics and
entrepreneurial management.

Sam Long was easy pickings. He was born, reared and
very well educated in Cleveland. With a focus on early
stage venture capital, he earned his MBA at Case
Western Reserve University. Venture capital is in
Long's blood. His great-great-grandfather invested in
Standard Oil of Ohio, the company that John D.
Rockefeller built in Cleveland in the late 19th
century.

In the early 21st century, Cleveland desperately needs
entrepreneurs, but it never had a shot at keeping
Long. He wanted to sail in Puget Sound, ski in the
Cascades and swim in Seattle's deep pool of money,
ideas and risk-taking young investors.

He now runs a small venture capital company. It sniffs
out software ideas, many of them incubated in the
computer science department at the University of
Washington. "Birds of a feather, you know," said Long,
who arrived here in 1992, when he was 28. "There are
more people like me in Seattle."

Long is part of an elite intercity migration that is
rapidly remaking the way American cities rise and
fall. In the 2000 Census, demographers found what they
describe as a new, brain-driven, winner-take-all
pattern in urban growth.

"A pack of cities is racing away from everybody else
in terms of their ability to attract and retain an
educated workforce," said Bruce Katz, director of the
Center on Urban and Metropolitan Policy at the
Brookings Institution. "It is a sobering trend for
cities left behind."

The long economic downturn has stalled growth and
increased unemployment in almost every U.S. city, and
has brought a sense of near-desperation to the
intercity fight for young talent. Mayors, business
leaders and university presidents are scrambling to
secure new technology companies and entice young
people to live downtown.

"In our business, you have to cannibalize," said Ron
Sims, the county executive of King County, which
surrounds Seattle, and a Democratic candidate for
governor of Washington state. "Many cities don't fight
back very well."

In addition to Seattle, the largest brain-gain cities
include Austin, Atlanta, Boston, Denver, Minneapolis,
San Diego, San Francisco, Washington, and Raleigh and
Durham, N.C.

The rising tide of well-schooled talent has created a
self-reinforcing cycle. Newcomers such as Sam Long
have made a handful of cities richer, more densely
populated and more capable of squeezing wealth out of
the next big thing that a knowledge-based economy
might serve up.

Some of these cities are blessed with relatively
young, homegrown billionaires. They understand
technology and are making huge bets to lure more
talent. Seattle, with Microsoft Corp. co-founders Paul
G. Allen and Bill Gates fronting much of the money, is
probably making the most expensive such bet in the
country -- on biotechnology.

"If you have the resources," said Allen, the world's
fourth-richest man ($20.1 billion), "you try to do
positive things. You help keep momentum going."

Brain-gain cities are hardly immune to the economic
cycle. In the tech-driven recession, Seattle, like San
Francisco and Austin, endured wrenching levels of
business failure and unemployment. The Seattle area
lost more than 60,000 jobs in the past four years, as
average wages declined and population growth
stagnated. But this city and those like it remain
national leaders in the availability of venture
capital, and demographers say they appear to have kept
most of their educated young people, who hang on even
without good jobs.

The winner-take-all pattern of the past decade differs
substantially from the Rust Belt decline and Sun Belt
growth of the 1970s and '80s. Then, manufacturing
companies moved south in search of a low-wage,
nonunion workforce. Now, talented individuals are
voting with their feet to live in cities where the
work is smart, the culture is cool and the environment
is clean.

Migrants on the move to winner-take-all-cities are
most accurately identified by education and ambition,
rather than by skin color or country of birth. They
are part of a striving class of young Americans for
whom race, ethnicity and geographic origin tend to be
less meaningful than professional achievement,
business connections and income.

The Sun Belt is no sure winner in this migration. Such
cities as Miami and El Paso are struggling to keep
college graduates, who are flocking to such
foul-weather havens as Minneapolis, Seattle and Ann
Arbor, Mich.

Among the country's 100 largest metro areas, the 25
that entered the 1990s with the largest share of
college graduates had, by the end of the decade,
sponged up graduates at twice the rate of the other 75
cities, according to a Brookings analysis of the
census.

Talent helps make these top-tier cities diverse,
tolerant and rich with the cultural amenities that
help them steal still more talent.

These cities tend to have a high percentage of
residents who are artists, writers and musicians, as
well as large and visible gay communities. They often
have pedestrian neighborhoods, with good food, live
music and theater. The percentage of foreign-born
residents is also high in these cities, reflecting a
significant population of college-educated imports.

"The great advantage of places like Seattle is that
they have become the kind of place where young people
want to freaking be," said Richard Florida, a
professor of regional economic development at Carnegie
Mellon University in Pittsburgh.

Florida is author of "The Rise of the Creative Class,"
an influential book among big-city politicians and
urban planners. It tells them they can secure the
future of their cities by tending to the care and
feeding of smart young people.

Rapid population growth, by itself, does not guarantee
that a city will experience a relative gain in college
graduates. In most cases, extraordinary growth is a
negative indicator.

With the exception of Austin, none of the 10
fastest-growing U.S. cities of the 1990s ranked among
the top 25 cities for increases in the percentage of
residents with college degrees. The fastest-growing
city, Las Vegas, leads the nation in attracting more
high school dropouts than college graduates.

"Really fast-growing places, like Las Vegas and
Phoenix, have needs not associated with college
education, like the construction industry and service
workers for retirement communities," said William H.
Frey, a demographer at the University of Michigan.

Another peculiarity of brain-gain cities is that they
have a tendency to lose residents of lesser
educational attainment, even as they vacuum up more
college graduates.

In the second half of the 1990s, San Francisco
experienced a 6.5 percent decline in residents who had
only a high school degree, according to Frey's
analysis of census data. At the same time, the number
of college graduates rose by 2.8 percent. Driven
mostly by housing costs, a similar trend exists in
Seattle and other brain-gain cities.

Frey said this demographic crosscurrent appears to
have continued through the high-tech recession. It
helps explain why -- even as the college-educated
young continue to cluster in a handful of cities --
broader demographic trends show a substantial movement
of people from large metropolitan centers to outer
suburbs, small cities and rural areas.

"Clearly, as the economy got bad, lesser-educated
folks had a harder time staying in San Francisco,"
Frey said. "My guess is that the higher-educated folks
found a way to stay, or they circulated to one of the
other idea-opolises, like Seattle."

New York, Chicago and Los Angeles are perennial
magnets of high-end talent, but their size and the
constant churning of their population make it
difficult for demographers to discern the
winner-take-all pattern identified in mid-size cities.

What is easy -- and depressing -- to see in
brain-drain cities is the extraordinary cost of losing
talent. The departure of people such as Sam Long from
these cities has stalled growth, lowered per-capita
income and prevented the formation of a critical mass
of risk-takers who can create high-paying jobs.

Besides Cleveland, these cities include Baltimore;
Buffalo; Detroit; Hartford, Conn.; Milwaukee; Miami;
Newark; Pittsburgh; St. Louis; and Stockton and Lodi,
Calif.

Some of the damage to these cities is to their spirit,
as they have lost the swagger of youth. "There is a
pervasive inferiority complex in this town," said Mark
A. Rosenberger, programming director of WVIZ, a public
television station in Cleveland. "People are afraid to
try new things. They fear they will fail."

It is a cultural weakness of the city, said Peter B.
Lewis, the Cleveland-born billionaire who heads the
Progressive Corp., an insurance company that is the
largest private employer in the area. "People leave
because they are not challenged and people leave
because they feel different. There are better venues
than Cleveland, if you are creative. Cleveland has
never been particularly good in keeping its oddballs,"
he said.

For the past two years, Cleveland's daily newspaper,
the Plain Dealer, has published a series of reports
about the city's "Quiet Crisis" of disappearing talent
and economic stagnation.

The graduates most likely to leave the Cleveland area
have degrees linked to innovation. A recent series in
the Plain Dealer found that the higher their degree,
the more likely young people were to move. The
newspaper found that about two-thirds of doctoral
graduates in engineering, the sciences and the
creative arts cleared out of Ohio between 1991 and
2001.

A recent Census Bureau report reinforced that finding
of brain drain, saying the Cleveland region lost
young, single college graduates to other parts of the
country in the late 1990s. It was one of only three of
the nation's 20 largest metropolitan areas to do so.

Cities such as Cleveland have become painfully aware
of what they are losing, and their leaders have come
to regard cities such as Seattle as mortal enemies.

"Are they a threat to the survival of Cleveland?
Absolutely," said Manuel Glynias, a Cleveland-born
scientist and entrepreneur. "Are they a threat that we
haven't figured out how to answer yet? Absolutely."

His own story is not encouraging -- unless you live in
a winner-take-all city.

In 1996, he created a successful bio-informatics
company called NetGenics, which employed 100 people in
downtown Cleveland and won accolades in the local
media as a harbinger of the city's high-tech future.
His employees wrote software that allowed drug
companies to make better use of vast amounts of
research data.

But NetGenics did not grow as fast as its primary
competitor, the German company Lion. Part of the
problem, Glynias said, was that he could not find
marketing people in Cleveland who understood
high-tech. Lion bought NetGenics last year and has
moved many of its jobs to San Diego, a major biotech
center. The last jobs left Cleveland this summer.

"It was felt that there were better places to do
business in a high-tech sort of way," Glynias said.
"If Cleveland can't find a way to stop this, I will be
visiting my children and grandchildren in San Diego or
Austin or Seattle."

'A Totally Unfair Fight'


It might seem unfair to set up Cleveland as a foil for
Seattle, like arranging a prizefight between a
has-been and a cocky contender. But the comparison
mirrors a national reality, as Austin, Minneapolis and
Boston routinely poach talent -- and steal the future
-- from cities such as San Antonio, St. Louis and
Hartford.

"It is a totally unfair fight, and it is the way the
market works now," said Michael Fogarty, director of
the School of Urban Studies at Portland State
University and former professor of economics at Case
Western.

Cleveland and Seattle are about the same size, with
about a half-million residents inside the city limits
and 2 million-plus in the metro region. Both cities
have a history of big money. Each produced the richest
men of its era (Rockefeller and Gates). In an
explosion of capitalistic energy, they became
world-famous centers for technical innovation,
entrepreneurial creativity and a bullying business
style that pushed -- and sometimes broke -- the limits
of the law.

These bursts of prosperity, of course, were separated
by nearly a century. Cleveland flowered in the second
half of the 19th century and peaked by 1930, when
productivity started to slide in steelmaking and
metalworking.

As with many cities in the Rust Belt, the population
began to decline in the 1960s. Racial segregation
played a chronically corrosive role, as poverty rose,
public schools nose-dived and whites fled to the
suburbs.

Sprawl was encouraged and hugely subsidized by Ohio's
tax policy. It sucked gas taxes out of Cleveland and
other cities, and the state spent the money on roads
in rural areas that often blossomed into affluent
suburbs. At the same time, Cleveland failed to become
a "gateway city" for new immigrants. Large waves of
Asian or Latin American immigrants did not pour into
the city or its close-in suburbs (as occurred in
Seattle and Washington) to replace those who had been
vacuumed out by subsidized sprawl.

Cleveland's population in 1950 was 914,808, but it
lost 30 percent of its residents in the 1970s, 15
percent in the '80s and 5 percent in the '90s.
Rockefeller left early, moving to New York before the
turn of the century.

Although Seattle is mired in its worst recession in
three decades and hobbled by the loss of about 17,000
jobs at Boeing Co., it is an altogether different
story.

The city has succeeded in shifting its economic base
over the years -- from lumber and fishing to airplane
manufacturing to high-tech enterprises and specialty
retail. Its school system, although far from perfect,
never collapsed. It does not have intractable pockets
of poverty. It does not have to clean up the festering
environmental legacy of the industrial age. It is 70
percent white, 13 percent Asian, 5.4 percent black and
5 percent Hispanic. (Cleveland is 51 percent black,
41.5 percent white and 7.3 percent Hispanic.)

The success of U.S. cities, demographers agree, is not
related to racial composition but rather to education
levels. High levels of immigration by nonwhite college
graduates in the 1990s to such cities as Seattle,
Austin and San Francisco have been a major factor in
their prosperity. At the same time, the relative
dearth of college-educated immigrants of any race to
cities such as Cleveland is viewed as a key reason for
their decline.

Although Cleveland has sprawled without growth,
Seattle has grown while winning a come-from-behind
fight against sprawl. After losing population to the
suburbs for 30 years, it turned a corner in the '90s,
growing by 9 percent, with many newcomers moving to
housing near the waterfront.

State law has forced more than 80 percent of new
housing construction to occur inside designated urban
zones in King County. Population growth continues in
Seattle, although the recession slowed it to a crawl.

Thanks in large measure to the drawing power of such
companies as Microsoft, Amazon.com Inc. and Starbucks
Corp., Seattle ranks near the top on virtually every
national index of knowledge-based urban muscle.

More than a half-million people moved to King County
in the past two decades and about 10,000 millionaires
were minted, mostly at Microsoft. Forty-seven percent
of Seattleites have at least a bachelor's degree,
about twice the national rate and four times higher
than Cleveland's.

More households have access to the Internet (80.6
percent) than in any other U.S. city, and Seattle
ranked second in the country (after Minneapolis) in a
recent survey of literacy. The city also ranks among
the top five high-tech cities in percentages of
creative artists, foreign-born residents and gays.

The emergence of winner-take-all cities is usually
linked to the presence of a dominating research
university. Seattle is no exception. The University of
Washington, which is in the city, has doubled its
research budget in the past decade and is the
country's leading public university as measured by
federal funding.

Among urban scholars, business leaders and big-city
politicians, there is a chicken-and-egg debate over
what exactly makes a high-tech city grow. Does
technology come first and lure talent? Or does the
mere presence of talent, through some creative
alchemy, hatch technology that spawns high-paying
jobs? A look at a recent software startup in Seattle
suggests the answer is both.

The new company, called Performant Inc., emerged from
an idea that Seattle investors quickly grasped and
bathed in a nourishing pot of money. One of them was
Sam Long, the venture capitalist who moved here from
Cleveland.

Three years ago, Long got a call from Ashutosh Tiwary,
an Indian immigrant and doctoral student at the
University of Washington's School of Computer Science
and Engineering.

Tiwary had an idea that came to him while he was
working part time at Boeing, where he was
troubleshooting design software for new aircraft. He
found a way to diagnose why computer systems at major
companies often slow to a crawl. His software could
speed them up.

He took the idea back to the university, where a
professor and a senior software researcher from
Microsoft (an adjunct professor) saw its potential.
They helped him refine, patent and market a product.
They also hooked him up with a venture capital company
run by wealthy Microsoft retirees. That company, in
turn, gave him Long's phone number.

Long quickly invested $750,000, part of the $10
million that Tiwary and his partners raised during the
teeth of Seattle's recession. This spring, they sold
the company, doubling their investors' money. Thirty
jobs created by the company are staying in Seattle.

Tiwary said he never would have come up with the idea
-- or made money from it so quickly -- had he not been
in Seattle. He moved there in the late 1990s, by way
of India, Texas and California.

"There is a business ecosystem here that is both
creative and technical," said Tiwary, now a vice
president at Mercury Interactive Corp., the company
that bought him out. "It starts with people who
understand technology, have built successful things
before and want to do it again. It is a little bit of
an addiction."

At the very top of the entrepreneurial food chain in
Seattle, the addiction to risk-taking is being turned
loose on biotech.

The city's two richest residents -- with the backing
of the University of Washington and enthusiastic help
from the city and county governments -- are
bankrolling a bet that could supercharge the local
economy for decades to come. Seattle is already a
leader in biotech, but lags far behind Boston and San
Francisco.

Paul Allen has spent $225 million of his own money to
close the gap -- fast. "You have to be ready to take
advantage of the next big cycle," Allen said.

He said Seattle has strung together all the beads on
that thread: a research university, a cooperative city
government, lots of venture capital and "you have to
be able to attract people. . . . That is just not a
problem in Seattle."

In the past decade, Allen has bought 50 acres in
downtown Seattle for a biotech research center. His
company, Vulcan, is transforming a sterile stretch of
parking lots, used-furniture stores and badly designed
streets into what is expected to be the nation's
largest urban life-science campus.

It will have the capacity to employ 20,000 scientists
and technicians, according to Vulcan. If Allen's plan
works, about 10,000 of them would live in a pedestrian
neighborhood at the south end of the city's Lake
Union, amid new restaurants, nightclubs and retail
stores surmounted by apartments.

To help Seattle create a critical mass of biotech
talent, Gates donated $70 million this spring to the
University of Washington to build departments of
genome science and bioengineering. For nearly a
decade, Gates has used his money and his fame to
recruit eminent biotech scientists from around the
country.

"Gates and Allen are giving the city a real forward
momentum," said Leroy Hood, whom Gates lured from the
California Institute of Technology to start a
biotechnology department at the University of
Washington. "In 10 years, I think Boeing will be
irrelevant to Seattle."

Trying Hard in Cleveland


Scholars who study U.S. cities agree that Cleveland
has probably tried harder -- and achieved more -- than
any other major brain-drain city.

It has substantially rebuilt its downtown, winning
national attention as a "comeback city" with the Rock
and Roll Hall of Fame, as well as new complexes for
professional baseball, basketball and football. The
percentage of residents with high school degrees has
increased and concentrated poverty has been reduced.

The fastest-growing neighborhood in Cleveland is the
downtown core. There, city government has worked with
developers to turn warehouses and abandoned department
stores into apartments that appeal to young
professionals. Cleveland's leading university, Case
Western, is urging students and faculty to live in the
city. It is spending hundreds of millions of dollars
for new housing and for a retail neighborhood near the
university.

"You must position yourself as the place people want
to move to, rather than from," said the school's new
president, Edward M. Hundert.

He is demanding that the school's researchers work
with, rather than compete against, other local
research centers, such as the Cleveland Clinic and
University Hospitals of Cleveland.

"This is a city that, against all odds, is getting its
act together," said Katz, whose Urban Affairs Center
at Brookings monitors most major U.S. cities. "I
believe that if Cleveland had not tried so hard, it
would look like St. Louis or Detroit."

And yet, in Cleveland -- as in many other brain-drain
cities that are trying to fight back -- the loss of
talent continues.

Throughout the '90s, even as Cleveland made its highly
publicized comeback, it continued to lose college
graduates and income. It lost about $35 billion
because it could not keep the people and maintain the
per-capita income it had in 1990, according to an
analysis in the Plain Dealer.

A critical mass of money, ideas and risk-taking has
not coalesced in Cleveland, said David Morgenthaler,
one of the country's most eminent venture capitalists.
He manages $2 billion and lives in Cleveland.
Morgenthaler said he would love to invest more money
in his home town. But he does not do so because the
city "does not breed enough good horses to bet on."

His judgment is echoed in Cleveland's dismal ranking
among the 50 largest cities as measured by venture
capital as a percentage of the metro economy.
Cleveland ranks 42nd, while Seattle ranks second,
behind San Francisco.

"Cleveland lives off the past, and the executives from
these old industries are still the community leaders,"
Morgenthaler said. "The city has made progress, but it
is not close to where it has to be."

A decade after leaving Cleveland for Seattle, Sam Long
wishes his hometown well, but says he cannot conceive
of a reason he would live there.

He just built a four-bedroom house near Lake
Washington in one of Seattle's most expensive
neighborhoods. At regular dinners with friends from
the computer science department at the University of
Washington, he schemes about turning ideas into money.


"We talk of pie in the sky," he said.

In Seattle, unlike his home town and many other cities
that keep losing young talent, pie in the sky has a
way of turning into high-paying jobs and companies
that own the future.

Tomorrow: Washington




© 2003 The Washington Post Company
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