This seems to be the moment in time when we finally are faced squarely with making a fundamental choice: whether we are content for Memphis to become the Southern version of Cleveland or whether we have the courage to throw aside business as usual once and for all to mobilize an ambitious, bold, unprecedented campaign for growth.

We have written before about how such an effort requires us to think differently but more to the point, it calls us on us to act differently.  Over the years, we have become expert at adopting the latest language about economic development – regionalism, entrepreneurism, innovative ecosystems, talent development, and more – while by and large our behavior stays the same.

As a result, we engage in regular bouts of self-hypnosis in which we convince ourselves that we are working on the important issues when what we’re actually doing is talking about them.  About seven years ago, we wrote that Memphis is like a frog sitting in a pan of water that is oblivious to the fact that the water is getting hotter and hotter until it boils to death.

It’s hard to imagine the water getting hotter than it is today.  With tectonic shifts in the economy, the geography of jobs, and the nature of the jobs war, we are staring into a future where we compete more and more with Mexico and other similar countries and less and less with American cities that we optimistically list as our peers.

Breaking the Mold

Here’s the reality check: when the 21st century began, we were in the bottom rungs of cities when it came to the various economic drivers and indicators that gauge a city’s ability to succeed in today’s economy.  Although there are some achievements and momentum we can point to with pride (and we have), the truth is that we’re still in the bottom rungs.

We tend to define success by comparing how we are doing now with how we were doing 15 years ago.  Lacking is a regular, realistic assessment of how we compare to the 50 largest U.S. metros and other cities in our peer group, and because of it, we fail to notice that we’re still not gaining ground.  We are running in place, the ultimate result that comes from incremental progress.

Here’s the thing: We have done some smart things to be more competitive, but they tend to be more about tweaking existing programs or creating new programs that by and large continue to do what we have been doing rather than about creating better systems that identify structural weaknesses, adopt new approaches, and set out on a different path to the future.  In other words, we need a fundamental shift not just in how we’ve been doing things but what we can do differently.

It’s been a decade this year since we pioneered national thinking about talent, and in that process, we learned what motivates location decisions by 25-34 year-old professionals and what cities can do to attract and retain them.  That said, we continue to lose the workers that we need most – 25-34 year-old college-educated workers – and in their place, we are attracting workers who often lack the skills that make us competitive in a knowledge and innovation economy.

Haves and Have Nots

As we have written for several years, smart people are moving where there are other smart people.  It’s why a few cities are the big winners in the competition for talent, and unfortunately, we’re not among them.

Since we first wrote about this trend, it’s only accelerated and it is dividing cities even more quickly into the haves and have-nots.  Today, as the economy shifts from hard goods to innovation and knowledge, workforce quality drives everything in its path, because it is a key determinant in our ability to compete for the innovation sector jobs that are growing more rapidly than other segments of our economy.

The global economy has turned many products into cheap commodities, and programs to compete with third world nations for jobs making cheap products are a race to the bottom. For too long, our economic development strategies have been caught in the commodity trap, stemming from our background as an agricultural center and continuing with our emphasis on behind the nation’s distribution center.

Commodity economic development is premised on appealing to companies which make their decisions based on the lowest prices. This kind of economic development is forever in a race to offer the cheapest land and the cheapest workers, and it results in almost $100 million in tax breaks that are given whether a company needs them or not.

Cheap Cities

Because our commodities tradition is in businesses with thin profit margins, our economic development culture is one with an aversion to risk-taking, which in turn undercuts innovation and entrepreneurship. Cities with commodity mentalities think they can grow their economies with low wages, low land costs, low utility costs, low taxes.  In a commodities world, these are seen as the factors that must be controlled to keep prices down, and they are often cited as justification for the tax abatements that we hand out to any company that can complete the forms.

There is another path to the future, but we have yet to prove that we are willing to take it.  That said, we ignore it at our own risk because innovation-related sectors have higher salaries and there is a multiplier effect in which every one of these jobs generate five other jobs outside of the innovation sector. In other words, the innovation economy will not provide the majority of jobs in the U.S., but its multiplier effect is about two to three times larger than manufacturing.

And like talent before it, the innovation economy is creating a distinct geography, and so far, Memphis looks like it will be located outside the geography for the innovation economy, as workers driving this economy send the message that it matters more where someone lives than what their CV says.  After all, the statistics are clear – cities with higher percentages of college-educated workers have higher salaries.

It should come as no surprise to anyone in economic development that human capital and innovation are inextricably interrelated.  It doesn’t matter whether you call it the new economy, the knowledge economy, or the innovation economy, it’s all about human capital, and it’s why we have to get serious now about improving our workforce.


In the time that we’ve talked – and only talked – about creating a higher skill workforce but did nothing about it, China has turned around its entire economy.  Yes, the work of improving our workforce is not easy and it is not quick, but if China can turn around an entire nation, surely, we can begin the journey from where we are to where we have to be to attract better, higher-paying jobs.

As Dr. Don Berwick has said: “Every system is perfectly designed to achieve exactly the results it achieves.” Often, we act as if our economic challenges just happened or were driven by forces beyond our control.  And yet, our economic development strategies are perfectly designed to achieve exactly the results they achieve.

That must change.  It all begins with human capital, and it is why human capital must be the centerpiece of all economic development plan in this community.