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DCMetroRaleigh

DC, ATL, RDU Amongst Brain-Gain Cities

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http://www.washingtonpost.com/wp-dyn/artic...1-2003Nov8.html

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.

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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.

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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."

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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.

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