Where To Get Rich

The Forbes 400 issue a couple of weeks back had an interesting Richard Karlgaard article entitled “Where To Get Rich”. In it he compares different cities in the US according to their abilities to attract, and keep, smart residents:

Best place to make a future FORBES 400 fortune? Start with this proposition: The most valuable natural resource in the 21st century is brains. Smart people tend to be mobile. Watch where they go! Because where they go, robust economic activity will follow.

The characteristics he suggests looking for in a city of growth and wealth are

  • Universities
  • Stellar K-12 education
  • Capital for experimentation
  • Capital for business risk
  • Low taxes and light regulations
  • Love of creative mess
  • Inclusive optimism
  • Respect for the risk taker

Some of his comments on each attribute are particularly striking. My favorite is his comment on creative mess:

Central planning always fails, whether in Cuba or in American cities. You simply can’t plan your way to greatness. What cities can do is create the conditions for success. I always advise cities to forget million-dollar bets on a single industry–biotech is hot now–and instead make hundreds of $10,000 bets on bright entrepreneurs who need cheap rent and a pat on the back. Why not Wi-Fi up the downtown so that entrepreneurs can sit in coffee shops and surf the Net? Why not lighten the regulatory load for startups? Why not run business plan contests, open to everybody in town, regardless of age or pedigree, with $5,000 prizes?

And on respect for the risk taker:

Here’s a test. You gather 200 friends and acquaintances in a room–the sort of people who attended your wedding or might attend your funeral–and you clink a glass. The room goes silent. You announce: “I’ve just quit my job! I’m starting a company!” Watch the immediate reaction. In some communities, people will burst into applause. In others, people will stare at their shoelaces, check their watches and go home. Thriving communities applaud the bold risk-taker.

What’s interesting to me about this article is how important many of these attributes have been throughout history for creating the conditions for dynamism and growth. I teach European Economic History, and “love of creative mess” and “respect for the risk taker” are two of the attributes that best explain economic growth differentials, both within Europe and in Europe relative to other areas.

One thought on “Where To Get Rich

  1. I think there’s a couple of missing points. First, access to cheap office space, low wages, and equipment is very useful. Also, it seems to be a common factor in most of the businesses Karlgaard menions. Look at all the businesses that started in people’s spare bedrooms!

    Costs aren’t just regulations and taxes. Second, sometimes isolation can help by creating temporary market opportunities in the local region.

Comments are closed.