Blogs & Comment

Want to build a truly innovative economy? Get a good barista

Former rustbelts trying to lure in high-tech companies need to focus on creating the kind of cities where knowledge workers actually want to live

Barista making an espresso


You are a municipal economic development officer and it’s your job to turn your city into the next technology boomtown. You have two meetings on this imaginary morning. One is with a paper millionaire in a hoodie who wants you to gift him some land for the startup campus he wants to build. There is hype around this kid. His company could be the next Uber. The other meeting is with the woman who owns your daughter’s favourite artisanal coffee shop. She wants help getting a liquor licence so she can pull espresso shots in the morning and pour local craft beer at night. But here’s the thing: you only have time to prepare for one of those meetings. Who will benefit from your full attention—the barista or the billionaire wannabe?

No-brainer, right? Every government on the planet wants to get into the business of raising “unicorns”—the term dreamed up years back to describe startups worth more than $1 billion. Canada’s hyperactive economic development minister, Navdeep Bains, is working on an “innovation agenda” that is meant to seed future world-beaters. The G20 leaders did little of substance at their latest summit, but they did release a “Blueprint on Innovative Growth” and a “New Industrial Revolution Action Plan.” Your assessment of these documents will depend on how cynical you are, but it is clear that the world’s major economies are at least giving the subject some serious thought.

Back to the nerd and the hipster. How many people can a coffee shop employ? A dozen? The tech geek is promising to hire hundreds of highly paid engineers. The debate is over: give the kid and the private-equity backers everything they want. The only thing left to do is write the press release. Right?

There is a rough template for creating tech wealth: cluster companies around universities and let ’er rip. Proximity enables the geeks to congregate easily to swap ideas; meanwhile, the corporate types are always around to nudge the professors in a direction that will lead to a breakthrough that can be commercialized. The promise of future millions—or at least a decent salary—will keep good people around, especially if you build a headquarters that doubles as the adult equivalent of a romper room.

But what happens when the talent tires of the office rock-climbing wall? Or when they realize that every Nespresso capsule tastes the same, no matter the colour? Here’s what happens: they bolt for Boston, Silicon Valley, Paris or any number of places that offer amenities worthy of their big salaries. Luisa Gagliardi of the University of Geneva studied more than one million housing transactions in British cities between 1995 and 2001 and found that highly educated workers’ “consumption of amenities”—restaurant meals, park visits, etc.—was 10% greater than that of less educated workers who earned the same income. Gagliardi’s conclusion: if you need highly skilled talent, you’d better make sure those people have something to do when they aren’t at work.

Earlier this year, Antoine van Agtmael, a former World Bank official, and Fred Bakker, a retired newspaper editor, published The Smartest Places on Earth: Why Rustbelts are the Emerging Hotspots of Global Innovation. They spent a couple of years touring old industrial cities in Europe and the United States to test their theory that such places were becoming the beating hearts of 21st-century industries such as biotechnology and mobile communications. Their survey of places such as Albany, N.Y., and Dresden, Germany, bore out their theory that there is something special about the combination of world-class universities, ambitious entrepreneurs, and empty factories that lend themselves to cool loft spaces. And they noticed something else: all of the “brainbelts” they discovered were populated with hip bars, coffee shops and restaurants. Collaboration is what makes these places successful, which means communities must build “innovation districts that align with the preferences of innovation-minded people and entities,” van Agtmael and Bakker write.

In other words, be nice to hipsters. You won’t create the next Amazon without them.