Bill Kerr: Richard Florida is best known for his groundbreaking book The Rise of the Creative Class. In it, he identified a new social class made up of professionals, creatives, and technologists. He argued that creativity was a basic economic force, one that could revive struggling cities. Co-founder of The Atlantic’s popular CityLab website, he’s well positioned to observe the geography of innovation, rising inequality, and other key trends. Welcome to the Managing the Future of Work podcast from Harvard Business School. I’m your host, Bill Kerr. Richard joins us today to discuss global talent hotspots, economic development, the overlooked suburbs, and the current state of the creative class. Welcome, Richard.

Richard Florida: It’s great to be with you. And thank you so much for having me.

Kerr: Richard, you’re an expert on the geography of innovation. I’d like us to begin with how you see the global landscape of innovation evolving.

Florida: In my original studies of the geography of innovation, we’re back in the mid-1980s with a fellow named Martin Kenney. We actually went to the Harvard Business School library, not far from where you are. We actually got old copies of what was called the Venture Capital Journal, and we xeroxed them, and we developed a data file of all venture capital high tech investments. They were in the Silicon Valley and in the suburbs around Route 128. And we had some data on global investments. There were very little, a smattering of them in Europe, virtually nothing in Asia. Of course, today, with a guy named Ian Hathaway, we just did a big, big study of global startup cities. Obviously, the big cities, like, San Francisco—is now the number one hotspot, well eclipsing Silicon Valley, which is to its south. New York and London, which had virtually no high-tech startup innovation back when we started, were in the top five, I think New York was second or third. But what is really astounding is the rise of these global innovation centers. Beijing and Shanghai, and then, Berlin, Amsterdam, Stockholm, Toronto, where I teach and live at least part of the year. But the geography of innovation has become much more big-city oriented—no longer in these suburban clusters—and much more in big global cities. I was shocked by how global this geography has become and how much it is centered in the biggest cities in the world.

Kerr: And what does your research suggest are some of the drivers of that dispersion, moving the talent and the resources away from some of the most traditional tech hubs outward to emerging economies?

Florida: Well, again, as your work so carefully and eloquently on global talent hub speaks to—and we share this, we share this interest—I think the US benefited disproportionately from its ability to attract the best and the brightest. Coming off of World War II, well extending perhaps into the ‘80s, we had the best universities by far. We had the most open borders. We had the most robust economy. And we were the first to figure this out. We were the first to develop these venture capital partnerships, and what we now call serial entrepreneurship and these technology ecosystems. So, we’ve benefited from that tremendous advantage. And I believe up until probably the mid ‘80s, early ‘90s—we probably were accounting for 90 percent, if you measure innovation this way, on commercially viable venture capital investment startups. I think a couple of things happened. One, other people figured this out and decided to invest in their own talent. Also, universities, as we know—you look at those lists, and European universities—of course, Oxford and Cambridge, but others. Asian universities are climbing. The University of Toronto, where I teach. I think we became more restrictive. And obviously technology changed. You no longer need to develop a full-bore corporation, vertically integrated. You can now run a startup with a relatively small footprint and in some sectors, a relatively low level of capital investment. So, for all of those reasons, and the world becoming interconnected. I think we’ve seen it. But it’s still surprising to me. When I look at studies of the patenting data, they show a similar trend—maybe not quite as pronounced, maybe more distributed, not quite as—the word I use is “spiky.” But I think they show a similar trend toward globalization.

Kerr: Yeah, they definitely are becoming more dispersed. Although as you highlight, there’s oftentimes between VC and patenting data, some disparities, for example, of how important Japan is relative to other countries out there. Richard, as you think about even though within the VC data you could have some type of venture investments that are going toward replicating an Uber-like concept into an emerging market first time versus the cutting edge of the next generation of artificial intelligence, how well can we separate those two types of investments?

Florida: Well, I think in the bulk data, so if you look at the overall investment data, particularly with regard to China and its big cities, exactly what you say is happening. We’re seeing these imitative investments. I certainly think the US remains the best talent hub. It has the best universities. It has the strongest ecosystems. Now, I would say that those ecosystems have moved away. They’ve moved from the Silicon Valley to San Francisco proper. They moved from the Boston suburbs to Cambridge and within the City of Boston. They’ve moved into New York, and I think London. That said, as an American, I’m worried. If I think back to the concerns in the late ‘70s and early ‘80s about declining US manufacturing competitiveness, I am actually more concerned now. My first book was called The Breakthrough Illusion and was talking about how the US had this extraordinary advantage and breakthrough but wasn’t capitalizing in manufacturing, written in 1993. That I’m very worried now that we are not cognizant enough as a nation of the potential challenge to our innovative hegemony, and that the quick coming up of European, Asian, Chinese, and Indian competitors is something we should be a little bit more concerned about.

Kerr: And where’s going to be the friction that this rebalancing would lead to these worries? Is it about the creation of future jobs? Is it the quality of the future jobs? Is it some form of AI race as to who’s got the stronger technology and some extra winner-take-all markets there? Do you have a sense of how this friction could emerge?

Florida: What I’m worried about is the US never was really good at capturing the later stages of the product cycle, but always could get the first wave. So, what I’m worried about is if we do lose the innovative frontier, yeah, then we lose everything we’ve been good at, and we lose the jobs and, and the productivity, the rents, the Schumpeterian rents that go along with that. I do think our advantage really remains in talent. I do think we are almost uniquely open. Look, I mean, I live a good chunk of the year in Canada, and Canada’s a very open country. Parts of Europe and Australia, New Zealand, but the United States is not only open to talent, it attracts a certain kind of talent and activates it in a very different way. So, in the long-run, I’m hopeful. We’ve just got to wake up.

Kerr: Yeah. And if you’re a business leader right now, you already need to react to where these emerging technologies are going to be coming to life. You have oftentimes for multinationals, global product markets and global technology races, so it’s very important to reach out. And then, as you highlight also, where those jobs are going to go. We consistently find with research that jobs develop disproportionately around sites of breakthrough innovation. And, yes, they’re going to be moving to manufacturing hubs and elsewhere, but those are great jobs to be able to keep.

Florida: The best jobs, and the high multiplier jobs, right? If you look at Enrico Moretti’s work, as well, you get the best jobs around these sites of breakthrough innovation, you get the super profits, and you get the great multiplier effects, so all of those, I think. And I’m astounded, as someone who’s been interested in competitiveness for a long time now, how little noise...If I think about the formation of the Council on Competitiveness, and Michael Porter’s work and others, and the conversation about the decay of US manufacturing, I don’t hear a similar chorus of voices around this. So, it’s something that worries me. And maybe that’s because the world is more global and our outlooks are more global. They’re not as nationalistic as they once were. But yeah, I’m surprised there hasn’t been more cause for concern about this.

Kerr: Richard, let’s dial it back to The Rise of the Creative Class, which was your breakthrough best-seller in the early 2000s. Tell us about how that book came about, and then also where’s the creative class today?

Florida: So, I was living in Pittsburgh at the time, teaching at Carnegie Mellon. And we were doing these analyses, Bill, that we were looking at the productivity of faculty in computer science and software engineering and electrical engineering on a per R&D dollar, or even per capita basis, in patenting, in research productivity and in startup productivity. And we were right up there. We were right up there with Stanford and MIT, and on some metrics ahead. But what happens is when someone would get a great idea, they would have that startup, and that startup would leave. The venture capitalists, in particular, would reel them say, “You’ve got to come to the Valley. You’ve got to come to Boston. And that’s where the ecosystem is.” And in fact, when I was visiting Harvard, visiting the Kennedy School—I tell the story in the book—one of our startups actually relocated from Pittsburgh to Boston for just this reason. And, so I had been playing around with a very simple idea that in those days, and you still know this, because it’s still prevalent in business school and economics, the preponderance of research was on firm-location decisions. Where do firms locate and why? What were the reasons? Was it incentives? Was it wages, cost structures? To what degree did labor quality—didn’t even have the word called “talent” in those days—labor quality factor in? And one day it hit me that maybe there was another set of location decisions that people make. And that’s when people started to talk about this word talent, which is a rubric for “human capital.” And, well, that’s where The Rise of the Creative Class came from. I said, “Why don’t I start to look at the location of talent, the clustering of human beings?” And, of course, I was very influenced by Mike Porter, and Michael was doing this analysis of industrial clusters. What happened was I wanted to do an analysis of skill clusters. And you can’t do an analysis of educational clusters because it’s a homogeneous measure. All you get is people with a BA and above or people with a master’s degree or above. And I said, “Oh, there’s a Bureau of Labor Statistics data file, which allows you to look at occupations. It has roughly 850-some-odd occupations. Let’s do that.” So, of course I didn’t want to call it a creative class. I didn’t want to call it anything. I would have called it an occupational cluster. My editor at the time looked at the data and said, “You’ve just identified a new class.” And I’m like, “Are you crazy?” I mean, that’s like what Marx did, not what I...” He’s like, “Look at your own data.” And what it showed was, in these knowledge-based occupations—managerial, business, technology, and then we added arts, culture, design—about 5 percent of the workforce worked in these occupations in 1900, about 10 percent of them worked in 1950. In about 1980, you get this huge inflection, where this creative class group, the knowledge workers, the business people, the managers, the educators, the doctors, and so on and so forth, the artists, it goes from about 15 percent of the workforce to 33 percent of the workforce. And then we did just a cross-section. And the cross-section was some places had 10 percent and some places had 45 percent. And we were just like, “Oh. My. God.” So that’s where it came from. And then the book was about that. And it was about what was new about this group? They work with their minds. And then how were they looking at work? They were working in a different kind of way. And what kinds of places were they looking for? Another guy said, “Well, could we measure arts broadcast and arts productions?” And we said, “Well, we can kind of Bohemian factor. We can look at where artists and musicians actually live.” And those analyses were done kind of tongue-in-cheek to start, but they were very interesting. And, of course, they led us over time to a new way of thinking. And then again, I wrote the book thinking it would sell like all my other books, a dozen copies to friends and family and a thousand copies to libraries. And a fellow named Paul Glastris published an essay in The Washington Monthly. It was an excerpt of the book. That’s what made the book. It wasn’t me. It was this article that went viral and created something-

Kerr: It sounds like that editor was worth his or her weight in gold for having defined that class.

Florida: Yeah. I think it was all a net good. I’ll tell you, it’s an interesting time of growth when that happens to one of your ideas. You either grow up fast or the tidal wave takes you under.

Kerr: Richard, the millennials would, I guess, have been approximately between zero and one year old at the time that the book was published. But they’re now getting to be the plurality of the workforce. So, how is the creative class concept applied to the millennials? Are they following or accentuating the patterns you described of going from the ‘80s to the ‘90s to so forth?

Florida: They are now emerging into a labor market defined by this new kind of knowledge or innovation or I call “the creative”—they’re all the same thing. So, in their way of dealing with the world is different than a baby boomer. A baby boomer’s looking back at the old industrial economy saying, “Oh, my god. What did I lose?” The other person is just saying, “This is what I have to navigate.” Just like they’re digital natives or social media natives. So, I think they have a set of tools that are better at navigating these economic structures and it’s more intuitive to them. What’s different is that, when I was writing the book, there was an unbridled optimism. This was a big new change. It was a knowledge economy. Technology was going to save us. We were all techno-, I mean mostly techno-optimists. I think for the millennials, they’ve seen a lot of disappointment, not only a big economic catastrophe. Increasingly, maybe they’re a little bit even more pessimistic. So, I think the optimism has been tempered for good. For good, but also for ill. I’m very nervous about this backlash. I think it’s long overdue. But I’m also worried that it could really hurt, particularly at a time the US is seeing global competition, that it could hurt our chances for the future. But I think they have a more nuanced view.

Kerr: Well speaking of backlash, it’s a great segue to our next section. I want to talk about Amazon HQ2. You were very vocal and led a bit of the backlash against the HQ2 process. So, I want to just begin with why. What was it about the way that was set up that you found so damaging?

Florida: So first off, I’m a huge fan of Amazon the corporation. I think they’re a fabulous company delivering value to the customer. What I worried about was two things, and I want to parse them. One was Amazon’s behavior and the second was the behavior of local and state governments. Let me start with the second. I was flabbergasted by the way state and local governments ... but a group of very progressive left-wing mayors, who I know and are my friends—Bill de Blasio, Eric Garcetti, Bill Peduto in Pittsburgh—it was a who’s who of the most progressive mayors in America, who otherwise say they are devoted to addressing economic disadvantage and inequality—who ran to the table and then other mayors and governors with billions of dollars of subsidies. Now the one thing we know in my field of research is those subsidies are a waste of money. Corporations pick where they want to locate based on a variety of factors—talent, ecosystem, transport access, whatever. And then they go out and they manipulate these local governments to get subsidies. That’s why we organized. I was amazed by how many brilliant economists of note signed onto the little petition we put together. But I think Amazon made a mistake. And it’s why corporations need to better understand locations—not only locational strategy, which I think has to be a new field of business, but how to manage communities. Amazon is a big company that’s brand really matters. They took a lot of heat, as I predicted they would because people would get angry at these incentives. Now, I think people got angrier than I envisioned. I think there was a backlash to this with AOC [Representative Alexandria Ocasio-Cortez] and others that I could have never anticipated. But I was worried that it would hurt their bottom line. The pulling out of New York was not a good thing—for them or for New York. That’s why I think we need a new appreciation in business schools in particular—I teach at a business school. Public policy schools, too. But business schools and corporate management of how important location is and how to do it right. So how to do it—not in this way that you’ve foisted it on a community and make them compete—how to engage communities as partners, how to think seriously about what you need in location, to do it the right way, engage communities and local governments as partners, and make the kind of investments that are required to make you successful. One more thing I said about Amazon is why would they bankrupt their new hometown? It makes no sense to me why you would put so much fiscal pressure on a state and local government when you need them to invest alongside you over the long haul in education, transport, affordable housing, and so on and so forth. So, I just think it’s a big thing we need to fix. It’s better thinking and better management and better strategic thinking and better strategic action around location and engagement with cities.

Kerr: In the background, you’ve done some recent research about headquarter movements and where the top 100 corporations, top 500 corporations, are locating their head offices. Tell us a little bit about how that geography is shifting.

Florida: There was this long literature on the factors with which corporate headquarters locate. The main finding in that literature, over a long period of time, was that corporations were avoiding high cost locations like New York and Boston and heading to the Sun Belt, into the suburbs of the Sun Belt where costs were lower, they could have a big campus, there wasn’t a lot of congestion. So, we redid this. We looked a Fortune 500 headquarters location for the past 50 years and we found a couple things. It’s true that many of the established corporate headquarters locations have lost HQs: Chicago, Detroit, Pittsburgh—and New York and Los Angeles. But what we also found is that the corporate headquarters, which were going to more suburban locations, are now coming back fairly significantly almost in every metric—not all of them, but almost in every metric to the urban center. So, we’re not seeing as much as the suburbanization of corporate headquarters. In fact, we’re seeing a fairly significant movement back to the urban core. So, I think when I balance that all out, I think the corporate headquarters are going more to superstar cities. Now, that’s not just New York and Los Angeles and San Francisco. You have to put the Atlantas and Miamis and Dallases and Houstons. But those are still big megacities with large global airports. They’re not trending to go to the smaller suburban areas, the smaller metros, which they were doing. They’re tending to consolidate in the biggest metros and biggest cities in the United States.

Kerr: And maybe continue on that theme. If it’s not HQ2 or some other way of drawing one of these headquarters, what’s your recommendation for place-based development? How can an aspiring city improve its positioning?

Florida: I’m the person who coined the term “winner-take-all urbanism” and has been talking about the growth of superstar cities—like New York, like San Francisco, like London. There was just a study out from the Brookings Institution that showed 90 percent of all high-tech job growth has occurred in five metropolitan areas, two of which are in the Bay Area, San Francisco and San Jose. That leaves Boston, Seattle and I think San Diego. So, there’s no doubt that our geography is very spikey and that there has been a very small group of winners. And that’s not just in the United States. The example I use is that New York is about 10 percent of our GDP. Toronto’s about 20 percent of Canadian GDP. London is about a third of the UK GDP. And Seoul is 50 percent of Korean GDP. So this isn’t just something that’s true in the United States. That said, I do think we’re at an inflection point now, because of the costs in these superstar cities, because they’ve lost their allure—they’re no longer the hippest places in the universe. There’s lots of really cool stuff going on in Houston and Dallas and smaller cities like Pittsburgh and Nashville and Tulsa, and I could go on and on, Bentonville, Arkansas. I think the people are just saying, “I can do something elsewhere.” Then what can communities do? They can be very focused and strategic in what they do well. Nashville is a great example. It figured out that it does music well and just a decade ago decided that it could build a music cluster. Pittsburgh, after years of hemming and hawing about bringing back steel, finally the city leaders said, “We could do software and we can do self-driving cars, and we can do robots.” Detroit finally said, “We’re not just an automotive place. We’re a place that has all the skills that go into the design of automobiles.” But the place I’ve been doing some work with the George Kaiser Foundation—Tulsa—Tulsa didn’t really have an economic core. They decided to do remote worker fellowships and artists fellowships. When they did their remote worker called “Tulsa Remote,“ they got 10,000 applications from people who can work remotely—basically, folks from LA and Boston and New York, who said they don’t want to pay high housing costs anymore. So, you have to be strategic. You can’t just lure companies. You have to build up your place in your community. I think we’re seeing a new wave of thinking about place-based economic development.

Kerr: Yeah. That diversity of city experience is a very important aspect of the US and goes back to your earlier discussions about the role of increasing diversity in the US economy and the importance that has. Tell us about some of your work on suburbia.

Florida: In most counties of the world, affluent people live in the center city core, and poor people live out in the ... whatever the suburbs might be. For a whole variety of reasons, lots of them painful and disturbing, we developed very thriving suburbs. And quite interestingly, even though many of our rural areas have had trauma, if you compare the United States to most other places on the planet, we still have a lot of people in rural areas—and—I can document there’s at least 100 rural places in America that are growing like gangbusters, that are attracting the creative class, attracting investments, growing around colleges and amenities. So, our geography is very variegated. But in the suburbs now, it used to be that suburbs attracted the middle class—you know, affluent people, college-educated people. Hard-working people like my dad, with a seventh-grade education, thought it was a land of opportunity. The suburbs attracted business and industry. I think now what’s happened, of course, is that as there’s been a movement of industry and talent back to the urban center. For a whole variety of reasons, less advantage and more economic disadvantage has been pushed out to the ‘burbs. So, you have this patchwork, where you have some very affluent suburbs next to some very poor suburbs. Just like in the urban center, you have some very affluent, gentrified neighborhoods next to very poor neighborhoods. So, I think we have this mixed up—I call it a “patchwork geography”—where the terms that we used to use of suburbs—affluent suburb and poor city—no longer apply. And we have this polyglot, or patchwork, of communities that make up a metro area, some very advantaged, some very disadvantaged, but with a missing middle, if you will. That middle of our geography, those strong middle-class neighborhoods that propelled so many Americans onward and upward, they’re the things that have fallen out and refracted into these areas of concentrated advantage surrounded by suburban and urban stands of concentrated economic disadvantage.

Kerr: Richard, you’ve mentioned a couple times in this podcast Toronto. It gets a lot of love these days, a lot of attention. Tell us about your perspective on what’s happening north of the border, the AI community that’s developing there. What’s the future of Toronto look like?

Florida: We’re a world beater in AI research, a world beater in computer science. I think media, real estate and finance have been the thing that really propelled Toronto. I think it’s done very well. I think. I think it’s a place from an American point of view, much less violence; the healthcare system really works, it really does; educational system, where no matter what your economic situation is, there’s a good public school because we’re provincially funded. I think it’s the social safety net stuff in Toronto that shows that could be combined with an economic, an innovative, and prosperous economy. So, for me it’s been a great learning experience, and I do really love it there.

Kerr: You’ve also been at Toronto at some early examples of things like populism entering the electoral process. You see both some of the technology edge, but you also see some of the pushbacks.

Florida: I moved to Toronto and it had a very progressive mayor, a guy named David Miller, developing an incredibly prescient agenda for inclusion and prosperity and innovation. And out of this, we got this, really the first populist in North America, Rob Ford, the guy who campaigns as an anti-creative class candidate: rip out the bike lanes, it’s the downtown elites, these university types, the snooty people who live in gentrified neighborhoods.

Kerr: So, Richard, as you’re thinking about skills development, should it be focused on your local strengths or should it be something that connects into the broader kind of workforce dynamics of the future?

Florida: I think both. The first thing is I think one of the things we’ve made some progress on is giving places a set of tools to really identify their skills. That’s why I created the idea of the creative class—to identify your occupational clusters across 800 occupations of what you’re strong in. Number two, because we can’t predict in advance so well what will be the future, I think you have to take a broader brush. Certainly, when I was at Carnegie Mellon in Pittsburgh, no one could’ve predicted self-driving cars. The self-driving technology was being used for tanks. All of a sudden because Carnegie Mellon was doing self-driving military equipment, boom! There comes a time when that becomes a new industrial sector. But there’s a third component—and here a fellow named Tim Bartek at the Upjohn Institute has been so great on this. We also think about the skills upgrading of less-advantaged people. And here, Tim has been really quite eloquent on place-based policy. One trend in economics has been we’re going to move all the low skilled people and we’re going to focus on mobility and get them to other places where their skills can be better used. So, we move them from the Rust Belt to the Sun Belt or wherever. What Tim says is a very small fraction of people actually do move. No matter what study he’s looked at, the preponderance of people is to stay rooted where they are, a very large majority. And if they don’t have jobs, it creates all sorts of devastating social and economic consequences. What Tim says is you’ve got to develop a skills-based policy for low skilled people. So, making them more productive, working in convenience stores and in service work, in retail work. Making them more productive in the kinds of blue-collar jobs that remain.

Kerr: Thinking about a city that’s not in the top 10 and will not be in the top 10 in the near future, what could they do to best enhance their economic development?

Florida: I’ll use Pittsburgh as my example. For better and worse, I think I had impact in Pittsburgh. I said then is: You’re fortunate enough to have great universities. You’ve got to orient economic development, not around corporate recruitment, but around building an ecosystem around the university. Every person who selects your city—a student, a professor, an immigrant—that’s a talent. We talked about business recruitment and business attraction? Talent attraction and talent recruitment! Every one of them is someone you should be actively recruiting to stay and be a member of your community, even when they leave part of a diaspora. You should be really focusing on what you can do well, and focusing on your niche. I think Pittsburgh found that niche with self-driving and with robots and a few other things. You’ve got to find what you do well. Make investments that are sticky, that are place-based. That’s why people say this is funny stuff, but, like, a bike lane, a good park. People think this is frivolity, a bike lane or a great park. But if you have kids, you take your kids to the darn park. This is what creates quality of life. Good schools. We can go on and on about the things that make a place great, but those things stick. They don’t go away. It’s not like you’re throwing money at a company. And then, be fast, because this isn’t a science; it’s an art. Well, you have to look at evidence—what works and what doesn’t. But be fast. Make small bets, don’t make huge bets. And be willing to change if the bet doesn’t work, because chances are, we know the odds of bets. Not all of them work. One in 10 work, three in 10 work. So be fast enough and flexible enough to change your bets over time.

Kerr: Richard, thanks so much for coming in today to talk to us about global talent hotspots, how suburbia is evolving, and also where the creative class is today. We appreciate your time.

Florida: Hey, thank you.

Fuller: Thank you for listening to this episode of the Managing the Future of Work podcast. To find out more about our project on the future of work, visit our website at hbs.edu/managing-the-future-of-work.