Print this

Email this

Submit a Question

» The creative class » Gender and investing

The creative class

What do you mean? Who are they?

RICHARD FLORIDA: Well, the creative class are really the growth engine of the U.S. and world economies. It’s scientists, engineers, people in technology, innovators and entrepreneurs, but also artists, musicians, designers, and people who work in entertainment.

COLVIN: It sounds like a fairly narrow slice of the economy and of the total employment in the economy. I gather you’ve found it as not.

FLORIDA: Well, people like Peter Drucker used to call this the knowledge worker. And what we did was broaden that definition to include arts and entertainment in addition to professions in science and technology. It’s about 30 to 35 percent of the workforce in an advanced industrial country. And get this: about 50 percent of all wages and salaries paid in the United States or in other advanced countries comes from this creative sector of the economy, or what I call the creative class.

COLVIN: It’s amazing. So it includes lawyers as well.

FLORIDA: Yes.

COLVIN: Scientists of all kinds, researchers, academics.

FLORIDA: Anyone who thinks in their job for a living. We divide it in two. The super creative, the scientists, the engineers, the artists, the designers, and people in the entertainment fields, and then the managerial part of the creative class, which includes traditional professionals in law, finance, and health care.

COLVIN: And you have written creativity is now the decisive source of competitive advantage. What do you mean?

FLORIDA: Absolutely. The places that add creative value, whether it’s in software or in biotechnology or in new exciting products that we wear, clothing, footwear, eyewear, handbags, or in the restaurant and food industries, those economies that add creative value will be the winners because the playing field has been leveled in traditional industries where manufacturing and labor flows to cheaper costs and better business climates.

COLVIN: Of the many people who have been interested in your first book, The Rise of the Creative Class, a lot of them were people who run cities, who are trying to plan cities, trying to attract more people, better, bigger economy to their city. What are you finding the best cities are doing to attract this class?

FLORIDA: Well, the interesting thing is around the world mayors get it. We call them the mayor players. The mayors are the folks driving the global creative economy, whether it’s Martin O'Malley in Baltimore, Md., John Hickinlooper in Denver, Colo., Gavin Newsom in San Francisco, Calif. You know, it’s interesting when Time named its mayors of the year, the mayors who were doing the creative thing in their cities dominated the rankings around the world. A person like Job Cohen in Amsterdam, and now we even hear folks as far off as Shanghai in China are trying to build a creative economy. What’s happening, though, which is a big challenge for the U.S. economy, we used to think it was Austin competing with Seattle, Pittsburgh competing with Cleveland, LA against New York. What’s really happening, it’s just as our industries were globalized 20 years ago, cities are competing against the global best. It’s New York against London, Sidney against Toronto, and so on.

COLVIN: And so what do the best, most competitive cities do? What do they actually do to attract the creative class?

FLORIDA: Well, the first thing they don’t do is any of this stadium and convention center and going crazy with the $800 million subsidies. That’s a big mistake. What they do do is they get the small things right. Now some of my critics say Florida doesn’t care about crime and safety. Crime, safety and infrastructure are the basics. You have to do them. In addition to that, you have to motivate people to want to come and live and stay in your city. Two things, you’ve got to invest in creativity, great schools, great universities, great arts and culture, and more importantly you’ve got to make sure your city is open to everyone, a city that welcomes immigrants, a city that welcomes artists and musicians, a city that welcomes the gay and lesbian population, a city that’s open, because creative people come in every single type.

COLVIN: Well, what you’re saying that this is in large part sort of more than a policy thing. It’s a cultural thing as well, right?

FLORIDA: It’s an organic thing. And I was just at the U.S. Conference of Mayors, and we did a panel with mayors from around the country and experts. We called it a kind of organic leadership, a leadership that isn’t it’s my way or the highway and I have the plan for the city, a kind of a leadership, whether it’s a mayor, a governor, or someone in the executive branch, that says we need your energy, come be a part of this and create a vision that people can work towards.

COLVIN: Now if I recall properly, Austin was at or near the top of your creativity index, right? Was it number one?

FLORIDA: Austin was number one. Actually and in terms of creative class percentage, not the overall index, right now the Raleigh-Durham research triangle is up and coming. Washington’s good, San Francisco’s good, Boston, too.

COLVIN: Well, now the reason I mention it is I just get the feeling, maybe I’m wrong, but I get the feeling that Austin didn’t do anything in particular consciously to attract the creative class. There was just something about the place that attracted it, and then it became a self-fulfilling deal.

FLORIDA: A lot of this, and most of it is organic, although Kirk Watson, the former mayor, who was just a fabulous leader of this style, he did two things. One, they made sure they invested in technology, and not only lured companies, but they made sure the folks in Austin, that they made the University of Texas a world-class research center. The other thing they did that most people forget is they made in Austin a hotbed for the music scene, for independent filmmaking, and for all forms of arts and culture.

COLVIN: Now, your new book is called the Flight of the Creative Class. This is obviously bad news, since we’ve already established that this is what every city in every country needs. The creative class is fleeing the United States?

FLORIDA: Well, not quite. What my book really says is there’s 150 million people worldwide who are members of this creative class. What made the United States great over our entire tempo of development is that we attracted the best and brightest from around the world, from Andrew Carnegie to Andrew Grove in semiconductors, Albert Einstein and Enrico Ferme, to Serge Brin in Google, Jerry Yang in Yahoo, what’s happening today is two things. One, other countries in other cities are after these people. They want them to come back, they want them to stay, and they want them to move. The second thing, which my book talks about, is we are restricting immigration and making it harder for these people to come here and do the things that they’ve done in the past.

COLVIN: And so where is the creative class going, the people who might have been coming here in the past?

FLORIDA: Well, where other people focus on the rise of China and India, I say China and India are important. They compete in manufacturing. What’s happening, though, as the book says, Toronto and Vancouver are becoming destinations, Sydney and Melbourne, some of the great European cities, not only London, but Dublin, Stockholm and Amsterdam. The book says if each of these places takes one, two, three, five to 10 percent, the United States suffers a cumulative loss. It’s more likely that we’ll be hurt by a thousand cuts than a mortal death blow.

COLVIN: Now, this is really interesting, because the conventional view of course is that the future kings of the world economy are going to be China, India, countries like that. The cities you have mentioned are in the big old western economies. Is it possible that instead these places could become the kings of the future world economy?

FLORIDA: I think the world economy, and I agree with Peter Drucker on this, the world economy is going to become much more multi-polar. I think it’s a myth that we’re going to see the rise of another great power. Because talent is mobile and the labor market for creative people is global, people get a chance to move. When I ask people now where they would go, virtually everyone I ask in America has two or three foreign cities. They might say I like New York the best and I would go to DC, but they say maybe Sidney or Toronto or Paris or London. This is a worldwide labor market, and I think the United States is going to be challenged by a variety of small challengers and large challengers, as well.

COLVIN: Well, obviously part of the challenge for the United States is not only to attract as much of the creative class of the world as possible, but to develop it as well. And this I’m sure puzzles a lot of people, because they think, well, creative class, creativity sounds like an inborn trait. You’ve got it or you don’t, and furthermore most people don’t. Is that view correct?

FLORIDA: Well, the first thing with regard to the United States, you’ve nailed it. You mentioned the budget deficit and the trade deficit. I think there’s a bigger deficit we face, and it’s the one we’ve got to get our arms wrapped around. We face a talent deficit, which dwarfs the budget and the trade deficit combined. Fifty percent of our computer scientists are foreign born. Fifty percent of the people we need to run a biotech industry come from other countries. The talent deficit is the one that threatens us the most, and quite frankly we have creative people. My book says every single person is creative. What we are doing in our education system is actually squelching that creative energy out of people.

COLVIN: And so that would be one of the main things that government in this country could do, because I’m sure this is what everyone is thinking. Well, okay, what can we do? Is education top of the list?

FLORIDA: Well, government I think needs to do three things. Invest in creativity. That means remake our primary and secondary education system to be creativity enhancing. It means focusing on our universities and investing in our universities. And it means investing in arts and culture. It means secondly investing in our cities. Our cities are the engines of the creative economy. Our ten largest city regions are the third biggest economy in the world. And thirdly we have to recommit ourselves to being an open country, attracting the best and brightest. Because in the long run we have to develop our own, but right now we have to make sure we have the people coming in from the rest of the world to run our leading edge industrial sectors.

COLVIN: Well, to get specific, this is one of the great issues of course in the technology industry, the visa requirements that the United States currently imposes, and the major tech companies want these things tremendously liberalized to let in the people they would like to hire. Do you think that’s a good idea?

FLORIDA: It has to be done, and what’s happening is quite perverse. And I understand why people are concerned about immigration. I don’t understand this craziness with the borders. But what’s happening of course is when they can’t get these folks in the country, when they go to Stanford or MIT, they simply hire them in their foreign branches. They’ll put them in the Shanghai branch or the Bangalore branch or the Stockholm branch.

The point is, why don’t we have these folks in the United States? John Doerr, the venture capitalist in Silicon Valley says it best. When a kid graduates from Stanford with a diploma, staple that green card to the diploma.

COLVIN: What are the chances?

FLORIDA: Well, I think we’re too distracted and in the book I say this. I think our federal government -- the mayors get this, the governors get this -- our federal government is so distracted with issues, whether it’s Social Security or issues of homeland security, I believe security is important, but we’re distracted. What I really think needs to happen -- and I offer a challenge, and I noticed, humbly I noticed, Bill Gates issued the same challenge, and Tom Friedman did too -- business has got to get involved. The last time we faced a competitive challenge, Jack Young came to Washington and said we need a counsel on competitiveness. Business needs to make this challenge to American government. We need people, we need to keep our borders open, we need talent, and we need to invest in creativity. I’d like to see business launch a creativity commission in this country.

COLVIN: You’re a great advocate of cities and what they can do and what they can become. Are suburbs a problem?

FLORIDA: No, and I think some of my critics have gotten this wrong. You know, I’ve tried to reach out to some of my critics more recently. My book, the first book, and this book, and this book even nails it more directly, a great region is a great inner city for young people, single people, some immigrants, some people who are living alternative lifestyles, the gay and lesbian population. To make a region great, you have to have great suburbs with great schools and great streets. People live a life cycle. When they move to a city, they move to an inner city. As they get older and have kids, they move to a suburb. The best regions have a portfolio of options for every kind of family.

COLVIN: Put it all together. And you mentioned fleetingly a while ago stadiums and how this is the wrong way to go, the monster development of stadiums and so forth. Is it because there’s something bad about that or just because you feel it’s a waste of money?

FLORIDA: You know, I’ve been in debate over the nature of urban affairs for 10 years, and I have many critics. I will tell you one thing, myself and each one of my critics right and left agree on, is this stadium building is senseless. There is not a single urbanist of substance in this country who will say do this thing. I do not understand why otherwise sensible mayors go down this road. We know they don’t generate revenue. We know they cost more than they’re worth. Spend that money where it counts. Invest in your people, invest in creativity, invest in safety and security, invest in schools, and invest in parks. Over the long run that will pay off for your town.

COLVIN: Richard Florida, thank you very much for your views.

FLORIDA: Oh, it’s been great being with you, Geoff. Thanks for having me on.

Gender and investing

KAREN GIBBS: Well, it may fall short of being an actual genetic defect, but whatever it is about men that prevents them from asking for driving directions apparently impairs their investing abilities as well, at least when compared to women. That’s one interpretation from a groundbreaking new study that finds women make fewer investing mistakes than men. Caroline Gundeck directs Women’s Business Development for Merrill Lynch. Author of the study, she joins us from Princeton, N.J. Well, Caroline, how is it that women tend to make fewer investing mistakes than men?

CAROLINE GUNDECK: Well, I think that what the study came out and showed was, and probably one of the most surprising things that came out of the study, was that women are not emotional investors, that they take their time, they have patience, and they seek advice.

GIBBS: Well, that’s interesting because women are always said to be such emotional creatures. How do we manage to take the emotion out of investing?

GUNDECK: That’s so true. We often see, and that’s what many people seem to think, that women are emotional. However, it’s because they have to take care of their families. They take care of their parents. They’re working and on a day-to-day basis are taking kids to sports activities. So what they realize is that they need an expert to handle their investments. They seek advice. When they seek advice, that expert keeps them on track, and making sure that they reach their long-term plans.

GIBBS: Well, are women’s investing motivations different from men then?

GUNDECK: I think the motivation for women from what we have seen is that they want, when they take a look at their own investment situations, they want a long-term plan. They want a road map that they can follow so that they know where they’re going to be a year from now, five years from now, and ten years from now.

GIBBS: Well, this study also identified four distinct investing personalities. Where do women fall in the terms of competitive, measured, reluctant, or unprepared investors?

GUNDECK: You know, it’s very, when we took a look at it what was interesting was women are prepared investors in a way, because they seek advice and do their homework. They ask for different opinions from friends, from colleagues, and then start doing research on their own. Before they make a decision, they want to be sure it’s the right decision for their situation. They may make a mistake, and what we’ve found from the study was that if they do make a mistake, they’re not going to repeat that mistake twice.

GIBBS: I take it that men do make some of these mistakes.

GUNDECK: Yes, and what the study showed from the men that we interviewed was that they enjoyed investing. It was a sport to them. They heard the hottest stock tip and they said, “That’s what I need to own.” And when it wasn’t and it didn’t go in the right direction, they would then go back and say, “Okay, what’s the next hottest stock tip?” and continuously making the same mistake.

GIBBS: Do women learn from their mistakes?

GUNDECK: They absolutely do. Like I said before, they may make the mistake once, but they’re not going to make it twice.

GIBBS: What is different about the way men and women approach investing?

GUNDECK: I think the difference is that women look long term and are looking for a long-term plan, whereas what we found from the study was that men want an immediate answer, something that’s going to happen today. Women weren’t looking for that within the study. What they were looking for is a long-term approach to their finances. They wanted to know that they were going to continue to be successful into their retirement.

GIBBS: How about the factor of independence? Does this play a role at all in the differences between men and women?

» Gender influences

GUNDECK: I think that independence does play a role, and what we saw with men is that they had more of a camaraderie with investing, that they took advice from their friends, from their colleagues, you know, whereas the women said, “You know what? I am making the decision, and it’s a decision that I am making to go to an expert.” Because I know, and it’s so interesting, you mentioned the directions and asking for directions, but with a leaky faucet, you know, so many of us have that leaky faucet in the house that my husband says, “I can fix it, I can fix it,” where I’m calling the plumber to say it’s got to be fixed.

GIBBS: Well, let’s talk about those great habits. What is something, the gender issues aside, that all of us should take away from this study?

GUNDECK: I think the very first thing is to realize what our capabilities are, you know, that we have a lot of things on our plate and we specialize, you know, individually specialize in doing different things, whether I’m a mom, whether I’m running a business, I’m an executive at a company. I realize and what the women realized was their area of expertise was not investing, so they went to an expert and sought advice and got the advice from the expert that kept them on track.

GIBBS: If men go to ask for advice and they get it, are they happier? Do they feel more successful?

GUNDECK: It’s very interesting you ask that question, because in the survey we asked that of men and said, “When you ask for advice do you take it?” And many of the men said, “Yeah, we listen to it, but we don’t necessarily take the advice. We still go with what we think is going to be the best road to follow.”

GIBBS: Interesting. So there still is this dichotomy between the final end product, which is of course financial success and security, but different routes of getting to that.

GUNDECK: Absolutely, you’re right.

GIBBS: What do you think the mistakes are that are made most of the time in trying to get to this final destination?

GUNDECK: I think one of the mistakes is that you think it’s going to happen overnight, that the minute that you decide that you want, you have a plan, or you have a goal that you’re going to reach, that it’s going to happen overnight. The second thing is that money is a very personal thing. What’s good for one person is not necessarily good for the next, so you need to look at your own situation and then work with an expert to be able to reach that goal.

GIBBS: Do you think those experts actually make different kinds of recommendations to women than men?

GUNDECK: When we speak to women investors and men investors, what we encourage them to do is interview several different candidates for people who are going to be managing your portfolio, because the most important is going to be the relationship. If you have a good relationship with the person that’s giving you advice, then you will be able to give them everything that they need to know about you to make you financially successful.

GIBBS: Let’s talk about the importance of women in the investing world. Now the landscape has definitely changed, both the landscape of investors and those offering advice. What influence have women had?

GUNDECK: Women during their lifetime will make 85 to 90 percent of the financial decisions in their household during their lifetime, and why? Because unfortunately the average age of widowhood is 55. When we look statistically, we are going to be managing the money, so we have to be empowered to be able to make the decisions to continue our financial success and live in the lifestyle that we’re going to be accustomed to.

GIBBS: Have you seen an increase in the marketing to women by Wall Street?

GUNDECK: I think the increase, I think it’s always been there because women have always been an economic and a tremendous economic entity in this country. You know, currently we have 10.6 million women-owned businesses in this country. Almost half of all privately-held companies are owned by women.

GIBBS: But a lot of surveys, in fact the study that you ran, shows that women are uncomfortable investing, they don’t feel that they know enough about it, and they don’t enjoy it. How do you get over those hurdles?

GUNDECK: You go to the expert. I will tell you that I don’t enjoy fixing my kitchen sink, so I’m going to call the expert to come in and make sure that they take care of the problem.

GIBBS: And is this the advice then you give to everyone investing, men and women?

GUNDECK: Men and women, seek advice.

GIBBS: Caroline Gundeck, thanks very much for joining us.

GIBBS: Caroline, how do we demystify investing for women, young and old?

GUNDECK: I think the first step that everybody has to take and especially for anyone is that they have to take a look at their own financial situation and just get into it. Don’t wait, don’t procrastinate, because what happens when you procrastinate is you may be missing opportunity. So the first step is to get all of your paperwork together and then go and sit down with a professional. Ask your friends. Who do they work with? Who is somebody they feel confident with? Go to some of the major institutions and say you’d like to interview some of their financial advisors, because the importance is working with somebody you feel comfortable with. Remember this is one of the most important things in your life. You want to be sure you’re working with someone you feel comfortable with.

GIBBS: When you say paperwork, what type of paperwork are you talking? Your weekly budget, your monthly budget? What do we need to bring to the expert?

GUNDECK: To the experts, and in fact they will probably give you a checklist of what you need to get ready. They will tell you that you’ll need your bank statements, your brokerage statements, your retirement accounts, pay stubs. Do you have a will? What type of retirement plan do you have? Those are all the things that you will put together. But that’s not something that you have to worry about. Once you sit down with your financial advisor, they will give you a checklist and tell you what you need to get together.

GIBBS: If as the study says women are much better at investing than men, should men then hand over the reins to women when it comes to the household investing pocketbook?

GUNDECK: Absolutely.

GIBBS: Caroline Gundeck, thank you very much for joining us.

GUNDECK: Thank you.