Barbara Payne's Capitalist Cleveland Blog

News and Views: Entrepreneurs a-thrive in Northeast Ohio


Monday, June 20, 2005

Economic development: What?

Think being cool is what brings people to town? Dr. Steve Belovich, one of Don's Capitalist Cleveland industry titans (find podcast here), writes to us and to the Plain Dealer:
To The Editor -

Akron and Cleveland have been doing a lot of economic introspection lately. Unfortunately, the analyses of both cities were very supply-side oriented. They only looked at the sources of degreed graduates and the regional amenities required to retain them. This is a nice feel-good activity, but expecting that approach to rejuvenate a region is unrealistic.

The real issue is high-wage careers with significant growth potential. That's it. Enough of those and the bright, energetic people will stay and drive all kinds of civic improvement. Without them, the best and brightest will leave the area and put down roots elsewhere.

A classic example is Silicon Valley. My work occasionally takes me there and I can attest to the fact that it is neither "hip", nor "cool". Silicon Valley also lacks many amenities that we take for granted in Northeast Ohio, among them being a great orchestra, good restaurants, a waterfront, decent highways, a great park system and greater libraries (yes, our CCPL is that good). Yet the best and brightest go there. Why? Because they start at $120,000+ a year, earn growth-oriented stock options and have an exciting career. Also, Silicon Valley does not focus on retaining its native population because they know that such a strategy is ridiculously self-limiting. They attract the best and the brightest regardless of origin, which contributes immensely to that region's success.

The economic analyses done on Akron and Cleveland yielded incomplete and/or wrong results because they asked the wrong questions of the wrong people. Asking a garage mechanic about a heart problem or a heart surgeon about an alternator malfunction is idiotic. Rather, start asking people who have actually created businesses how they did it. Ask them what was their approach and what can be done to help other entrepreneurs. Asking the right questions of the right people will yield the right answers.

The "Third Frontier" project was supposed to stop the brain drain and achieve economic success, but it is fundamentally flawed. Instead of investing in what smart entrepreneurs do on their own, The Third Frontier project implicitly tries to create entrepreneurs by investing in specific technologies - not in real businesses. This is the fatal flaw: a technology does not equal a business! Technology, rather, is a starting point and a tool for business. Smart investors know this. Smart investors also know that regional amenities derive from business creation and growth - not the other way around. So, let's focus on creating growth-oriented businesses. Do that, and a lot of great things will happen.
____
Dr. Steve G. Belovich
CEO
IQware, Inc.

3 Comments:

At 8:56 AM, Blogger Anita Campbell said...

Good insights.

One thing I have found is that we have this inferiority complex here in Northeast Ohio. We eat our young.

That's why I don't have any time for this whole economic development shtick. Everyone seems to be chasing after the high growth startups, when the odds are that few of these will make it big -- or even make it, period. And of course if one happens to make it big, they are not likely to employ enough people in this area to justify the tens of millions that taxpayers have plowed into these programs. It's like playing the lottery with taxpayer money -- my money and your money.

Meanwhile, all the rest of the businesses that are actually profitable are ignored. We'd be better off taking that public money and instead of the fool's mission of VC funding (so-o-o-o 1999 -- isn't anyone up on current events?), plowing it into showing small business owners how to get bigger by becoming better salespeople, how to market themselves to paying customers, etc. And by working on tax cuts to make the business environment more friendly.

One thing I've learned is that how you talk about yourself is what people believe. All the denigrating of this area for all its supposed failings, serves absolutely no helpful purpose for my business -- zip, zilch, nada. The sad truth is that I get far far better industry recognition and much more revenue from outside Ohio, than from within.

I suggest we all quit whining about how bad things are, and instead just get down to business. In the words of Jim Cramer on CNBC's Mad Money, "let's make some money."

 
At 3:34 AM, Blogger Barbara Payne said...

Yes, the old Cleveland inferiority complex rages unabated.

I know some entrepreneurs who rather like not having any employees--saves the headaches of managing (and meeting payroll). They can make good money without having to take on the quasi-parental role and paying the huge tax and benefit burdens of being an employer. Could this "every entrepreneur for himself" attitude be part of what's going on in Ohio, too?

 
At 5:21 AM, Blogger Barbara Payne said...

Sorry I somehow missed that Valdis had asked me to post this comment on his behalf...

"Right on Dr. Steve!

"Though, I do disagree with the Library and Restaurants. The Stanford Library is unmatched, and I can show you plenty of good restaurants, especially around Palo Alto.

Valdis Krebs [valdis@orgnet.com]"

 

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