DARPA and our Future Innovation Policies

If you’re a follower of US science and technology policy, you likely have heard and read a lot about the DARPA (The Defense Advanced Research Projects Agency), the Pentagon’s independent research arm.  DARPA gets this attention for a reason.  It has an impressive track record:  it “invented the internet” or at least pioneered its early development and rollout.  And, it’s also backed major breakthroughs in major fields like semiconductors, autonomous vehicles, and satellites.

For many, DARPA represents a path not taken—where the US could have assumed a more expansive role in investing in R&D and scientific advancements. If we were going to get serious about industrial policy, we’d likely do it with some version of DARPA, which has a great track record of making investments that provide benefits for government agencies, businesses, and the general public.  (There’s a reason why DARPA-like agencies exist at the Departments of Energy and Homeland Security too).

If you’re intrigued about the history and potential future of DARPA or DARPA-like institutions, you’d be hard pressed to find a better guide than a new book entitled The DARPA Model for Transformative Technologies.  (A potential alternative title?  “Everything you ever Wanted to Know about DARPA but were Afraid to Ask”).  The book is edited by Bill Bonvillian, Dick Van Atta, and Pat Windham, all of whom have toiled long years in the technology policy world.  It’s a deep dive, with 15 chapters digging into DARPA’s history, processes, and industry connections.   This is a highly varied set of contributions, but the final concluding chapter does a good job of summing up.  DARPA is a high performance organization, but its success is highly dependent on the robust innovation infrastructure around it.  If we want to see more successful innovation polices, we can’t just clone DARPA.  We also need to make real and sustained investments in innovation across the board.  NOTE:  The book is available for free download here.

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Recruiting At-Home Workers

New York’s Rockefeller Institute of Government has created a new Future of Labor Research Center, and the Center’s first study is making me optimistic about their future work. Where the Mobile Workforce is Living shares data and insights on, you guessed it!, where the mobile workforce is living.  Specifically, it reviews the latest numbers on home-based workers, and shows that, nationally, about 5.3% of Americans currently work from home.  This may not sound like a big number, but it accounts for 8.2 million people.  And, their recent growth rates—up 47% since 2005—is pretty impressive too.

A deeper dive into the date offers some useful trends.  A large number of these workers are based in traditional tech centers, but many are located in other places as well.  In fact, the highest relative share of at-home workers can be found in places like Summit Park UT, Boulder CO, and Taos NM.  (Fort Leonard Wood, MO has the highest share among US regions).  Economic developers will be intrigued by survey results that show 7 out of 10 surveyed at-home workers would consider moving to a new location and are looking for locations outside of major cities.  This suggests that strategies to attract and recruit at-home workers (what we used to call “lone eagles”) could pay dividends.

The report suggests two broad approaches to this “recruitment:” 1) Push local amenities as a magnet, especially in scenic areas of the Mountain West and elsewhere, and 2) Mix recruitment and local entrepreneurship programs to help the self-employed (both existing and new residents) to develop and grow businesses.  This latter strategy is being embraced via new programs—in areas like Vermont, Tulsa OK, the Shoals region of Alabama—that offer incentives to attract new workers and entrepreneurs.   If these trends persist, these strategies are likely to become a more important part of the program mix for rural communities around the US.

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Local Food Systems and Kitchen Incubators

Local food systems development has been a hot topic in community development circles for some time now.  These efforts typically use agriculture and food development as tools to advance community economic development and to improve community health outcomes.   They may include programs that develop farmer’s markets, provide local food at area schools and hospitals, or create local capacities for value-added agriculture.  Many such efforts also revolve around the development of kitchen incubators or commercial kitchens, where entrepreneurs can produce food products at scale, and learn the ins and outs of business development.  An excellent new compendium, U.S. Kitchen Incubators: An Industry Update, provides an in-depth look at what’s happening in this sector.

This is the third such study, with previous releases in 2013 and 2016.  Today, 600 such facilities are operating around the US, and 180 locations participated in this survey.  Most sites are very small, with 69% of surveyed locations operating with less than 5,000 square feet of space. They also operate on tight budgets—half of spaces have budgets of $500,000 or less.  They offer a mix of services, such as storage space, classes and workshops, food production spaces, and help with licensing and certifications.

The report describes an industry in what we might call the awkward teenage years.  It has grown in numbers and in the range of activities under way, but it has not yet developed a systematic set of programs, metrics, or “best practices.”   Facility and program managers would like to see better support systems, such as consulting and mentoring, and, as always, program funding, especially working capital, remains scarce.  The industry is doing a good job of addressing these growing pains, and continued growth is expected.  That’s a good thing—as these facilities are an important cog in building more prosperous—and healthier—communities.

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The Liquid Workforce

Our colleagues over the in UK have come up with some useful terms for what we Americans have been calling the gig economy workforce.  Some folks use the “precariat” and a new term, the “liquid workforce” is also gaining traction.  A new Demos study, The Liquidity Trap, examines the precarious experience of Britain’s liquid workforce, with a focus on improving the social safety net for independent workers.  Work life for Britain’s liquid workforce can be challenging.    These workers are much more likely to be poorly paid than their fully employed counterparts.  In fact, while a segment of these workers are well-paid, 22% of the UK liquid workforce makes less than $13,000 per year.  Not surprisingly, these workers also tend to have spotty benefits, and are also more likely to use non-traditional financial tools like pay-day lending.   Liquid workers like the flexibility of this work style, but nearly half would be willing to trade flexibility for a more secure work experience.

The report makes a number of recommendations to improve services for the liquid workforce.  These include the development of new financial services for independent workers, and new schemes that allow workers to move with benefits as they transition to new work.  This latter provision might work something like our current COBRA laws which allow for extended health care coverage.  The report also calls for bigger solutions, such as a national funding pool that could provide portable benefits to this workforce.  Several European economies, including Belgium, use a benefit model of this sort, which is often referred to as the Ghent system (named after the city of Ghent, Belgium).  While the report is UK-focused, it contains some interesting ideas—big and small—for how we can better support the growing independent or “liquid” workforce.

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What’s Next for the Community Reinvestment Act?

Washington is pretty consumed with big issues of impeachment and government budgets nowadays, but lots of interesting and important debates on other issues are also underway.  One big one concerns reform of the Community Reinvestment Act (CRA), the 1977 law that reviews and assesses bank performance in terms of lending and other activities focused on low-income communities.   Among other things, the CRA was originally designed to combat “red-lining” and to encourage more bank investment in distressed communities.  (For background on CRA’s impacts, check out this 2019 Urban Institute report.)

Federal agencies have been debating CRA modernization and receiving community and industry input for some time.  Last week, the Office of the Comptroller of the Currency (OCC) released its draft proposals for CRA modernization.  There’s a lot in this plan, which weighs in at 240 pages in length.  One primary focus is to clarify what activities and investments count for CRA credit.   Nearly all observers agree that banks need more clarity and guidance on CRA-related investments, but many advocates for distressed and under-capitalized communities are worried about the current draft.  They argue that the new rules are too “loose” and will encourage investments in projects, such as sports stadiums or higher-priced real estate, that do little to help low income communities and residents.  Big changes in CRA rules could have especially strong impacts on sectors like the Community Development Financial Institutions (CDFI) industry, which relies heavily on CRA-related investments.

We will soon be in the midst of a 60 day comment period on the OCC’s proposal.  If you have ideas and inputs, please share them so that they can be considered before a final rule is promulgated in spring 2020.  You can also learn more about positions on all sides of the debate from the American Bankers Association to the Opportunity Finance Network to the National Alliance of Community Economic Development Associations.  CRA has been, and will continue to be an important tool in our community development toolbox.  Thus, it’s essential that we find ways to ensure that these dollars are invested in a manner that best supports economic and community development.

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Investing in New Tech Hubs

Today, I attended a Capitol Hill briefing on a new Brookings/ITIF report on The Case for Growth Centers:  How to Spread Tech Innovation across America.   The report and its recommendations build on the uncomfortable fact that America’s innovation and technology economy is highly concentrated, with most activity centered in a few states and metro areas.  In fact, only five metro areas account for 90% of America’s innovation sector growth since 2005. If you’re in Seattle, Boston, or the Bay Area, you’re reaping the benefits of major technology investments.  If you live elsewhere, you might see some limited trickle down impacts.   The report recommends a series of new investments in regional growth centers (in mid-sized to larger cities like Birmingham, Boise, Indianapolis, or Pittsburgh), with an emphasis on strong innovation inputs—in the form of R&D funds, workforce training dollars, and other incentives.   In many ways, this proposal echoes similar efforts such as the Economic Development Administration’s I6 program or the WIRED program of the 1990s.  (As we noted in our recent newsletter, the new book, Jumpstarting America, includes a similar proposal.)  The difference here is that this plan calls for real money–$100 billion over ten years—and the funds are targeted to high-potential larger metros (over 500,000 in population) that have many of the essential innovation building blocks already in place.   Not surprisingly, I like this basic concept as I strongly believe that we have been underfunding place-based economic development for decades.  I can quibble with some parts of the plan.  For example, it may place too much emphasis on innovation and technology inputs and not enough attention on talent development. I’d also like to see a similar focus on smaller metro areas as well.   But, it’s a good start and a good place to begin a much-needed debate, and hopefully conclude with some equally much-needed new policy directions too.

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Talent Attraction Incentives: The Debate Heats Up

In today’s tight labor markets, communities around the US are starved for talent.  Some places are so starved that they’ve created incentive programs to attract talented workers.  Some years ago, several places in Kansas opted for free land as a potential talent magnet.  Today’s incentives tend to be cash-based, either as direct payments or some form of alternative support such as student loan forgiveness in certain high-demand fields.  New programs in Tulsa and Vermont, among others, have been recently introduced, and are focusing on attracting remote workers and free-lancers.   Vermont’s program was unveiled in 2018, and offers up to $10,000 to support some expenses for incoming workers.   In year one, the program attracted 300 new residents, but this effort is already sparking a heated public debate   Last week, the state’s auditor  raised questions about the program’s impact and value.  In this report, his office argued that the program is providing incentives to people who would have moved to Vermont any way.  This debate over the “but for” question is common:  Would the desired action have occurred “but for” the incentive?   The audit claims that Vermont’s new talent migrants are coming for quality of life and natural amenities, and don’t need the incentive.  That may be true, but it’s also true that folks who move only because of a $10,000 incentive may not be the type of talent we want in our communities!   There are no easy answers here, but this type of discussion is likely to become more common as communities around the US introduce more innovative—and more risky—strategies to close the talent gap.

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EntreWorks Insights–New Books Issue

They were playing Christmas music at my doctor’s office this week.  That’s too early!  But, it’s not too early for the EntreWorks Insights holiday recommended reads issue!   Check out our takes on new and interesting books for those with wonky interest in community building, economic development, and what’s next in our profession.  You can access other newsletter issues and subscribe here.

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Global Entrepreneurship Week: November 18-24, 2019

Mark your calendars for the week of November 18-24, 2019, the 12th annual celebration of Global Entrepreneurship Week.  GEW is a big deal around the world.  It currently engages 20,000 partners in 170 countries, who sponsor 35,000 events that engage more than 10 million people.  All of this work is devoted to telling the story of how entrepreneurship can be a tool for personal enrichment, economic development, and community building.  It’s an excuse to throw a great party, while learning something and doing good along the way!  There are tons (actually 35,000) of great events going on during the week, and lots of cool activities here in the US as well.  As home to the Kauffman Foundation, Kansas City always celebrates GEW in a big way, with several dozen great events planned for the week.  I’m also pleased to see several current and former EntreWorks Consulting clients who are using GEW events and activities as part of their regional ecosystem building activities. For example, in Fort Worth, the local team is supporting a gala event at the Fort Worth Science Museum, a special Startup Weekend event, and workshops on a diverse set of topics including food-focused startups, doing business in Vietnam, real estate trends, and tips for effective marketing. Smaller towns can and do get in the mix too.  In Monroe County Pennsylvania, Startup Pocono is sponsoring workshops and boot camps on coding, entrepreneurial finance, graphic design, and many other topics.  Check out the GEW USA site for events in your area, and get out there and support your local entrepreneurs.   If your region isn’t engaged with GEW 2019, make plans to participate in GEW 2020!

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Abandoned Mine Lands: Addressing the Legacy of Coal

The US coal industry has been swamped with bad news lately, with the recent bankruptcies of Blackjewel and Murray Energy leading to major hardships for miners, their families and surrounding communities.  As we attempt to address these immediate hardships, we need to also remember painful long-term legacies of coal such as rising black lung rates and the growing problems of abandoned mine lands (AML).  This latter problem is especially thorny, as former coal regions face major environmental problems such as water contamination, land subsidence, and a dearth of funding for land reclamation.  The Office of Surface Mining Reclamation and Enforcement manages a federal AML reclamation fund with a current funding pool valued at $2.3 billion.  While this is a sizable sum, the estimated cost to remediate current AML sites exceeds $10 billion. (You can see a map of AML sites here.)

Remediating abandoned mine lands is essential if we truly want to revitalize coal-impacted communities in Appalachia and elsewhere. We will need additional funds to support reclamation and to build capacity in impact communities.  Some interesting pilot projects are underway, thanks to the new AML Reclamation Economic Development Pilot program and other initiatives, such as the POWER program for coal-reliant regions.  (See the latest edition of Appalachian Voices for nice summary of current issues.)  There’s lots of work to do, but there are also lots of opportunities where strategic investments can have huge impacts.  For a look at these opportunities, check out A New Horizon, an excellent new compendium of worthwhile and catalytic AML-related projects in Kentucky, Ohio, Virginia, and West Virginia.  Investing in land reclamation can bring short and medium-term benefits in the form of new economic opportunities and new local capacity, while also remediating long term environmental damage from past mining activities.  This is the right and fair thing to do for coal-impacted communities.

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