A Tale of Turnaround Cities
Why small towns and cities need to develop “sticky capital”
After all that’s been said and done, the results of Amazon’s HQ2 Hunger Games Edition aren’t surprising. Were they going to settle for anything less than the metropolitan areas of New York City and a Washington DC suburb as locations of their co-headquarters? Both places are already concentrated top tech hubs and are prima donnas of innovation. After all of hoopla about competition, HQ2 wound up going where many observers of urban economics predicted: where huge pools of talent are already clustered. Setting up shop in these cities is easy and convenient; it’s like Prime Now delivery for business development.
Was it worth it: engaging 238 American cities, counties and states across the United States in a brutal bidding war in exchange for boosting their economic growth? The Silicon Valley savior complex was strong with this one. Quite a few cities on the HQ2 shortlist sit far from any coast: Indianapolis, IN; Pittsburgh, PA; Columbus, OH; Raleigh, NC. Cities large and small were falling over themselves to present Amazon with the sweetest deal, offering tax breaks, cash incentives and infrastructure improvements worth millions.
The fact that the competition ever appeared fierce, though, is a sign of how far American cities have come over the past generation. It’s hard to imagine many of the top contenders being taken seriously 25 years ago, when cities were still struggling to find their footing after years of economic decline. But when an obscenely wealthy tech company decides to invest further in the most economically vital places on earth, it only exacerbates the divide between America’s most successful metros and the rest of the country. It’s clear that economic development organizations in communities outside of these “superstar cities” need a new strategy to stay relevant.
Some cities have already realized this, and were confident enough in their futures to politely tell Amazon “thanks, but no thanks.” Consider Little Rock, Arkansas’ reaction to the Amazon bid. In a full-page ad it bought in a Jeff Bezos-owned publication, the Little Rock Regional Chamber of Commerce coolly and cleverly explained why Amazon’s HQ2 is just not right for Little Rock. The playful ad styled as a break-up letter pointed out that Little Rock missed many of the requirements in Amazon’s RFP — and how that’s Amazon’s unfortunate loss. The stunt quickly went viral and got Little Rock more eyeballs and attention than almost any other city in the running. The campaign doesn’t just raise awareness for a small city like Little Rock; it also elevates its potential and makes its residents proud.
San Antonio also dropped out of the running early in the race. The mayor and a county judge wrote a letter to Jeff Bezos informing him that they no longer wanted San Antonio to be considered for HQ2. “It’s hard to imagine that a forward-thinking company like Amazon hasn’t already selected its preferred location…” they wrote. “Sure, we have a competitive toolkit of incentives, but blindly giving away the farm isn’t our style.”
While everyone’s busily asking what these regions can do to attract the type of human capital and investment that Big Tech is doling out, they might be better off looking inwards and developing locally. Municipalities can offer up all the lucrative incentives in the world to bring in new talent and money, but can they really claim victory if the results don’t serve the people who were already there to begin with? In order to grow their economies, cities and towns need “sticky capital,” the type of investments that don’t just build companies and organizations but help root them in place.
Coming off of Amazon’s search, city and state governments are hyper-aware of their current assets and challenges to attracting talent. They’ve taken stock of how people live, work, play in and explore their areas. How can they use this research not to lure Silicon Valley juggernauts, but to help grow local businesses interested in staying put?
Nashville won the HQ2 consolation prize, of sorts — an operations center that will receive about $230 million in investments and hire 5,000 full-time workers — largely because it was already doing a great job of making smart investments in its anchor institutions and local entrepreneurs. The city’s long-standing healthcare industry complements a booming music scene and an entrepreneurial program by Launch Tennessee that offers mentorship and incubator spaces. Pair that with the historic Ryman Auditorium, the Music City Center and the annual 36|86 Entrepreneurship Festival, and it’s obvious that the bona fide hockey town has found thoughtful and economically sustainable ways of leveraging its anchor institutions.
Opportunities for developing sticky capital go well beyond the hospitals, universities, and colleges, the traditional anchor institutions that make up the so-called “eds and meds” sector. Today, places ranging from museums and libraries to public parks and places of worship are becoming economic innovators. These are places that are rooted in a specific community: you can’t just take a church or mosque and move it across the country for tax incentives, because the congregation can’t come with you. This means that they have every incentive to help the surrounding community to thrive. They know their communities and can work with cities to identify and foster opportunity.
At ThoughtMatter we spend a great deal of time thinking about the concept of place. We’ve worked on brand identity, messaging and marketing for a wide variety of place-focused organizations, from nonprofits like Tacoma Arts Live and the New-York Historical Society to economic development agencies the Staten Island Chamber of Commerce and the Lower East Side Partnership. We’ve written about how craft breweries, micro-libraries and even laundromats can become cultivators of community at a divisive cultural moment.
As Queens-based congresswoman Alexandria Ocasio-Cortez tweeted shortly after the HQ2 announcement, “Displacement is not community development.” Economic development is often something we imagine coming from outside, but there is existing talent and creativity in any community. It may not be tech talent, but a strong economy is a diverse economy, and trying to become the next Silicon Valley is, for most cities, a losing game. The original Silicon Valley is still the indisputable center of tech, even as its titans expand their presence in political and media centers like DC and New York.
Pursuing investment from firms located elsewhere isn’t an intrinsically bad idea for cities, but so long as it remains the dominant economic development strategy it will always prove an uphill battle. As the magnetism of “superstar cities” shows no sign of weakening, local development needs to play a larger role in small- and mid-sized American cities. In a culture where everyone wants to be the Uber of something, we recommend being proudly, unapologetically you.