Harnessing Creativity: Profound Changes in Commerce Require a New Way of Thinking, Economist Says

July 01, 2005
  Economist Richard Florida signs copies of his new book, The Flight of the Creative Class, during the St. Louis Fed's recent conference on entrepreneurship in Memphis, Tenn.

Yes, it's true. Entrepreneurship is ultimately about business development and growth. But the Fed's Striking the Right Notes on Entrepreneurship conference in Memphis this past April tried to mine thinking on the topic more deeply. If entrepreneurs are not born, but made, then it might follow that entrepreneurial communities can be created.

Could entrepreneurship also be about culture and creativity? It might be that culture plays an important role in the level of entrepreneurial activity across communities, states and nations. The conference planning team thought that economist and author Richard Florida could help advance thinking in this vein by presenting his theories on economic development and entrepreneurship.

While working as a professor of economic development at Harvard in the late 1990s, Florida was shaken by a situation in Pittsburgh that prompted him to start rethinking a field he had worked in for almost 20 years. Like many, he believed that if communities built high-tech industries, they could attract people. Good, high-paying jobs would be created and, as the theory goes, if you create good jobs, the people will come.

Pittsburgh had been working to create jobs in research, development, technology, engineering, marketing, management, leadership and business development. Then, one well-known telecommunications company decided to move from Pittsburgh to Boston to gain access to a readily available pool of knowledgeable, talented and creative people. Leaders in the Pittsburgh region had worked hard to assist in the creation of this pioneering firm and so were discouraged by the move. In this instance, instead of people coming to Pittsburgh where the jobs were, the jobs were moving to where the people were. This single incident caused Florida to reconsider not only everything he had written about and taught his students, but also some of the basic precepts of his profession. He started thinking in a new way.

People Create Energy

Florida proposes that communities, states and nations that want to become more entrepreneurial will create worth and generate higher living standards and good jobs.

However, they must understand that it will not come as it once did from assembly lines, big factories or a great stock of raw materials.

Intuitively, people know that creative energy in a community comes from people. "The first and foremost asset you have is people," Florida says. "People are the core of economic competitiveness; and the places that develop, harness, mobilize the creativity of their people and attract new creative people are the places that will prosper." This is no easy task. Because every single human is creative, the real challenge according to Florida is to "harness the creativity—not of the 30 percent of people who are already in this class but of each and every human being, or as many as possible."

Florida wrote The Rise of the Creative Class and uses the term creative economy, making a point to steer clear of other terms, such as knowledge economy, information economy and high-tech economy. Those descriptions are elitist, and they draw off a privileged few people with very high skills, he says. Florida intentionally uses creative class because, according to his definition, all people are creative. The term includes all people in all businesses and communities.

Place, the Entrepreneurial Ecosystem

Creativity is important because it is really the same thing as entrepreneurship. Creativity is the power force, and people are the necessary ingredient, Florida says. "You've got to produce them in great schools and get them great universities, but you've got to be a place that welcomes them," he says.

Place—a community, region, state or nation—is critical. What infrastructures do communities need to generate entrepreneurship and business development, to create jobs and increase living standards, and to sustain a vibrant entrepreneurial climate? Florida says that for places to prosper, they need a functioning ecosystem that not only develops creative people, but attracts them, retains them and gives them a reason to stay and a reason to engage in developing and building new businesses.

He proposed four key points:

  1. The community needs to support entrepreneurship or a "social structure of innovation." This means an entire social structure that promotes innovations, where people are not considered failures because they fail in business, where it's OK to fail once, twice or even three times because they are learning to grow and rebound.
  2. The community needs to develop a "thick" labor market. This means one in which employment opportunities abound. People want a place that not only offers them one job but many jobs and that offers a lot of opportunity and challenge. Florida suggested that research indicates that people become entrepreneurs for the challenge and the intrinsic rewards rather than because of money.
  3. The community ecosystem has to be open. This means communities have to create environments that not only challenge people at work but that also allow people to be themselves. "It has to be a place that values people regardless of race or gender, sexual orientation, lifestyle preference, or the kind of family you want to build," he says. "Creativity doesn't know anything about the social categories we have imposed on ourselves and comes equally to all." The places that win the economic battle are not simply the ones that attract the creative people from outside, but that give everyone an equal chance to come there and start and build a business and prosper. Florida's research suggests that integrated places create and grow more entrepreneurial businesses than segregated places. His research also shows that places that are more open to immigrants grow and have a higher level of entrepreneurial activity.
  4. The community must include social and economic diversity. Florida cautions against what he sees as a looming divide between those in the prosperous creative class and those who are left behind, wondering, "How do I fit in to a changing economy?"

"We are making our high-growth creative centers places where only rich people can live," he says, citing the lack of affordable housing in places such as San Francisco and Boston. The levels of income and equality and housing affordability exclude opportunities for the young college graduate or entrepreneur.

"In building entrepreneurship and an economic agenda, we've got to build an urban agenda," Florida says. "An urban agenda, not because it's to help the poor. We've got to help poor people. Not because it's to help build more affordable housing. We've got to have more affordable housing. Not because we want to make sure we don't have social problems. Yes, we want to eliminate crime. But because strong cities are actually the ecosystems that we need to generate wealth. That's one of the key things we need to understand."

Going Forward

Communities, regions and states grapple with identifying competitors and finding smart ways to compete. Florida says the challenge facing U.S. communities is that the globalization wave that hit the auto, electronics and steel industries is what now confronts us.

For the first time, he says, two things are happening: regions and now other countries are competing with U.S. communities for the creative class.

"You see, you're not competing with the suburbs," he says. "You're not competing with Omaha, St. Louis, Memphis, Little Rock or Oxford. You're not competing against San Francisco and Austin. You're competing against Wellington and Sidney and Melbourne, Australia, and Toronto and Vancouver and Montreal and Waterloo, Canada. Dublin, Ireland, has the fastest growth of the creative class in the world."

In his most recent book, The Flight of the Creative Class, Florida says that the world's really great cities have awakened and that around the world, there are 150 million people whose jobs fall into the creative category. He theorizes that the same way Americans are looking for the best cities to live in, that offer the most entrepreneurial opportunity, that offer the most success, these members of the worldwide creative class are doing the same thing.

What can you do?

See how your city compares: www.creativeclass.org Individual and family-based entrepreneurs in rural and distressed urban areas can find more information at: www.sohodojo.com

Bridges is a regular review of regional community and economic development issues. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.

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