Sixty years ago, Akron, Ohio’s rubber industry employed more than 50,000 people. But in the 1980s, as three of the four major tire companies left the city, most of those jobs disappeared. Times were dire for years, but gradually the region began to capitalize on its existing strengths—the material science expertise of its research universities, its workforce of engineers, scientists and tradespeople—and reinvent itself as the center of the polymer industry. According to statistics from the city’s website, upwards of 35,000 people in the Akron area are now employed in approximately 400 polymer-related companies.
Other Rust Belt cities, too, such as Albany, N.Y. and Pittsburgh, are re-emerging as new forces in manufacturing and technology, write Antoine van Agtmael and Fred Bakker, authors of the new book The Smartest Places on Earth: Why Rustbelts Are the Emerging Hotspots of Global Innovation. This is happening in Europe as well. Eindhoven, Holland, a former company town for Philips and DAF Trucking, has established a collaborative research institute, Holst Centre, and remade itself as a center for wireless sensor technologies and flexible electronics.
The future looks bright, the authors argue, because these “Brainbelts” have what emerging markets don’t: a skilled manufacturing workforce, a well-developed system of research universities and a culture of innovation.
This growth is facilitated by connectors—dynamic leaders who dream big and bring together people with seemingly disparate interests, getting them to build on their strengths to create a new model. In Akron, the connector was Luis Proenza, now the president emeritus of the University of Akron. In Albany, it’s Alain Kaloyerso, president of SUNY Polytechnic Institute.
The book—which does have a bit of a flyover feel with the authors popping into cities for quick tours that highlight bustling areas, not eyesores—had its beginnings when van Agtmael, an economist and former CEO of an emerging markets equity firm, heard something surprising on his world travels. David Ku, the chief financial officer of the Chinese semiconductor company Mediatek, confided that he was worried about American competition. Ku said the R&D at competitor Qualcomm was so far ahead that he was worried Mediatek wouldn’t survive.
Bakker, the retired editor-in-chief of Holland’s major financial newspaper, Het Financieele Dagblad, heard similar rumblings while traveling through Mexico, Indonesia, South Korea, and Turkey.
“The low-cost labor advantage” in those countries “was losing power,” the authors write. “Making things cheap to gain an edge over high-cost Western companies just wasn’t cutting it anymore. The days of the low-cost advantage were essentially over.”
Van Agtmael said in an interview that initially, he and Bakker were looking at “whether manufacturing is coming back. And what we realized is that it’s not your father’s manufacturing coming back. Something very new was happening.” Old manufacturing cities “were becoming very innovative again. We had learned the trick of sharing brainpower very effectively, not just within academia, but between universities and startups and big companies.”
The other trick was building on old industrial expertise with advanced manufacturing methods like robotics and 3-D printing.
It’s not earth-shattering to anyone successful in manufacturing today that technology has reshaped the industry. But van Agtmael and Bakker take a closer look than most at what gels—what the factors are that can transform a Rust Belt City into a Brain Belt city.
Van Agtmael spoke with IndustryWeek during a tour for the just-released book.
Q: When I heard about the book’s premise …
A: You were skeptical.
Q: Yes. I thought, why hold up Akron as a model? It has a lot of potential, but the poverty rate is still very high—over 40% in the city—and the labor force is lower than it was in 2010.
A: When you have your back against the wall and have real, real problems—what I call a life-threatening situation, you don’t get out of it in a year or two. The results start to show really in ten plus years. So they’ve started to [show results] now. But it takes time. Rather than being down in the dumps as some of our presidential candidates on the left and right would like us to be, if you see there actually is a future, then things look different. … Northeast Ohio is now a leader in polymer in the United States, and for that matter in the world. It makes a difference.
Q: Reading the book, I can’t help but thinking that Rust Belt cities that haven’t made this sort of turnaround—Cleveland, which was just named the most distressed city in the country by the Economic Innovation Group, comes to mind. They have some of the elements of success, like a good technical university or a specialized workforce, but lack a connector.
A: To be a connector, number one, you have to have vision. Number two, you have to have conviction. Number three, you must be in a position like a university president, or a mayor or a former head of a major corporation, where you know people and where you have learned how to persuade. This is all based on sitting down with people and getting them to working together, not on telling people what to do.
Connectors are also energetic. This takes hard work; this takes disappointment—Proenza has his detractors. And you have to be able to push through critical masses.
Q: Is workforce training a key to success for these Brainbelt cities?
For people who have no skills or few skills, it’s going to be very hard in this new economy. But I think at least in part this issue can be addressed by going away from the college obsession that all of us as parents have. For many people—and Germany is the best example of that--there’s a very good future in the new economy, if you are trained well to do all kinds of things professionally. And the best way to do that is the way they do it in Germany. And that is in what’s called work-study programs. They’re basically apprentice programs where you spend half of your time in school and half working in the factory, and when you’re done, you have a job.
The European apprenticeship programs, I think you mentioned in the book, are not a perfect fit for the United States.
Siemens for example, has hundreds of thousands of these apprentices in Germany and has tried it here, and it’s hard going. It’s hard here because we spend unbelievable amounts on [four-year] college education, and we’re being cheap on spending money on apprenticeship programs or giving people a chance to do a community college and come out with not a huge amount of debt.
Ten years down the road, what does the picture look like for these Brainbelt cities?
What I have seen here in Akron, in Albany, in Minneapolis, in Portland, Oregon, in the (North Carolina) Triangle, is that there are a lot of areas that used to be Pittsburgh. There are a lot of areas that were dead, rat-infested, drug-influenced areas with a high degree of poverty and unemployment. And what we’re seeing is that these areas are beginning to turn around.
You take a place like Saratoga, New York, which is near the Global Foundaries factory. It used to be a dump. Now there are people walking around from all over the world; restaurants are going up. It requires an economic stimulus, and it requires people to get together and say, “Now we have the opportunity to fix it up and do it better.” Has it happened everywhere? No. Is it as good as it was once before? No. But it has that potential.
Just getting the potential workforce up to speed, though, is that an issue? In Cleveland, where I am, we have a problem with basic literacy.
There’s a lot that needs to be done. We have basically been derelict about educating the poor in the cities. You don’t fix that overnight. We’ve been trying for a long time. There are two big hurdles. The first is that we don’t have in this country—unlike most advanced countries—equal opportunity in education. To put it very simple, if you’re rich you have plenty of opportunities; if you’re poor it’s much harder. And that needs to be fixed, and that’s very difficult in the current political climate. Take places like Washington D.C. The Washington school system used to be terrible. Now there’s some progress, but there are other places like Baltimore where it hasn’t happened. So it’s different from place to place.
The other thing is rather than just focusing on college, we as a nation should be focusing on postsecondary education. We will have by 2020 nationwide 5 million jobs to be filled that are postsecondary jobs. Half of the jobs in this new economy really require postsecondary skills. Not college or Ph.Ds, but postsecondary skills.
Do you think low completion rates at community colleges are a hurdle to Brainbelt success?
Yes. All of this stuff needs work. And partially the completion rates are low because many high schools are not doing a good job.
Even in community colleges—and here I would agree with Bernie Sanders—you can’t saddle people with huge debts, and then they fall behind, they have a child, and they drop out. It’s not because they’re stupid. They can’t manage it.
The other problem is that community colleges started to say, “OK, we’re not really a two year school, we are a four-year preparatory school.” That’s probably a mistake. It’s what I call the college obsession. Their job is to create a workforce that has good postsecondary skills. Now are there those who have both the brains and the drive and the interest to go on? Great. But don’t feel that you’re not successful if you don’t go that route. And that’s sometimes the message that comes across.
Cities that aren’t quite making it happen yet—what can they do?
Wake up and take a trip to Germany and see how they do things there. And see how they are still a huge exporter to China and other places. Why? Because they never chose the route of trying to make things as cheap and smart as possible. Number two, they treat their workers with respect. The factories are unbelievable. The canteens look like a restaurant. It’s not a do-good society-- they are very competitive companies, very smart. And they do work-study well and it is just really important.
If you go to Stuttgart, take a look at their Fraunhofer (collaborative public-university-business research institute). We’re starting to do that with these national manufacturing institutes that Obama put in. That’s a pure copy of Fraunhofer.
Don’t get me wrong—there’s a lot of dynamism here. We’re starting to do this collaboration between universities and startups really well. And we’re doing it better than anywhere else in the world.