In sports, there is one big sin. Fans can forgive a team that loses to an opponent that’s bigger or stronger or more talented, but they can’t forgive a team that doesn’t hustle. That’s a problem of leadership, be it on the field or on the coaching staff. Many a technically superior team has lost to a weaker opponent that simply out-hustled them.
That takes me from sports to “The Global Startup Ecosystem Report 2020,” an annual economic report by StartUp Genome, a San Francisco-based nonprofit that studies the startup economy worldwide. I looked yesterday at how many of the rising star cities the report cites around the world are also very youthful cities, much more so than American cities. Youth alone isn’t sufficient but youth combined with education does create a potent combination that poses a competitive challenge. Today I’ll look at the education part of that equation: Are we getting out-hustled by other countries, not just educationally but also in other ways?
Here are some of the nuggets from the report:
- In Serbia, the schools are introducing “entrepreneurship education at all levels … with an overall goal of Serbia creating up to 1,200 active startups that attract worldwide investors.” For context, the population of Serbia is 6.9 million, so slightly smaller than Virginia at 8.6 million.
- In Hungary, some 4,000 students are enrolled in a “Startup University” program at more than 200 colleges. That program is described as a “two semester-long e-learning course” that focuses on “idea generation, financial planning, market strategies, IP rights, the investing world and the business presentation.” Last year one European business group named this the “most innovative development project in Europe 2021.” Startup Genome says the goal is to “supercharge the startup community” in Hungary. Context: The population of Hungary is 9.75 million, so a little bigger than Virginia.
- In Mexico, the government has “opened 120 tuition-free specialist technology universities between 2006 and 2012. Every year, over 130,000 engineers graduate in Mexico.” StartUp Genome says Mexico’s goal is to create a talented labor pool so that it can offer “nearshoring” opportunities where global companies can set up shop in Mexico, “save approximately 67% in labor costs” and still do business in the United States. We may be worried about the entirely wrong problem on our southern border.
In some of the places, the number of college students seems staggering. Kuala Lumpur, Malaysia, has a population of 1.8 million and 330,000 college students, StartUp Genome says. Virginia has a population of 8.6 million and 517,438 college students. Now, not all of Kuala Lumpur’s students may be from the capital city but on a per capita basis it sure seems to be doing a better job of getting students into higher education. Right now, only 12.4% of Malaysian adults over 25 have a college degree, according to the World Bank. (The United States is at 37.5%.) That Malaysian figure is going to rise, though, and pretty sharply, too. Right now, 43% of Malaysian high school graduates are going on to college, according to The Global Economy. In the United States, the figure is about 66%. Malaysia may not catch up to the United States, but it’s sure going to close the gap. (Yes, I know that college isn’t the only measure of skills; the big push now is to encourage more people to pursue the trades, but even many of those require some community college education these days.) In any case, all this is still a useful measure of how the world is changing and becoming more competitive.
Now for another comparison: In terms of educational attainment, Malaysia at 12.4% of adults with a college degree currently ranks on a par with Charles City County (12.8%), Grayson County (12.8%) and Henry County (12.8%) and higher than seven Virginia localities: Charlotte County (11.9%), Buckingham County (11.4%), Buchanan County (10.8%), Lunenburg County (10.6%), Galax (10.3%), Dickenson County (9.3%), Greensville County (7.5%). We know that Malaysia now is set to dramatically raise the percentage of adults with a college degree; are these localities? The Harvest Foundation is paying for high school graduates in Martinsville and Henry County to attend community college. What about these other localities?
The big-picture point: The educational gap between the United States and other countries is going to narrow and, to the extent that education drives the so-called knowledge economy, that means the economic geography of the future is going to look a lot different. Some of these so-called developing countries may still be developing in rural areas, but they are growing First World metropolitan areas that are very much plugged into a global economy. StartUp Genome singles out Kuala Lumpur as a place with “high broadband penetration, a robust financial sector, and a business-friendly regulator financial sector, and a business-friendly regulatory framework, making the city a digitally savvy market segment for startups to penetrate.” Amazon, Facebook, Google and Microsoft now all have offices there.
In Virginia, the buzz right now is about the “talent pipeline” – making sure students are getting educated for the jobs we have or want to have. That was part of Virginia’s incentive package for Amazon, pledging to step up the production of students with computer backgrounds. We should congratulate ourselves for that but maybe we shouldn’t get too busy patting ourselves on the back, because other countries are doing the same thing. Finland has built a strong sector in the video gaming industry. Now, StartUp Genome says, more than 20 universities in the country offer programs in gaming and draw students from around the world. That’s another theme that runs through this report: The places with the most active startup scenes also have the most liberal immigration policies; the ability to attract talent from around the world is part of what helps them create such deep talent pools. The StartUp Genome report specifically says that Canada’s “favorable immigration policies” have “attracted a steady influx of highly-skilled newcomers” to Toronto who have helped the city build the highest concentration of artificial intelligence companies in the world. Toronto is now the fastest-growing startup ecosystem in North America, the report says. The weather there may sometimes be cold but the economy is blazing hot.
Now, we don’t live in a zero-sum world. The more that other countries develop their economies, that’s better for all of us. For those worried about uncontrolled immigration along the Mexican border, it’s important to remember what’s causing that: countries in Latin America that are desperately poor and racked by violence. Of course people want out. If those countries were more economically prosperous and politically stable, we wouldn’t see all that migration north. Still, we do need to be aware of competition. In a global economy, we’re competing with the world so we need to keep up with the world. Are we? Are we, like Serbia, teaching “entrepreneurship education” at all levels? Are we, like Hungary, enrolling students in two-semester programs to learn how to start a business? Are we, like Mexico, offering tuition-free education? (In some places, yes. Martinsville and Henry County have that Harvest Foundation grant working for it;. Many but not all community colleges have locally funded scholarship programs that make attendance tuition free; Michael Hemphill wrote about the requirements for Giles County to attend New River Community College without paying tuition. Former Gov. Ralph Northam introduced the so-called “G3” program that effectively made certain community college programs tuition-free.)
Here are some other things being done around that world that we might want to pay attention to – and perhaps copy.
- Some governments are helping new businesses pay for their first employees. The Telangana state in India pays a certain amount per employee for the first year of operation. In Finland, government grants “offer new entrepreneurs around $763 per month for 12 months while they get their businesses off the ground.” Israel offers wage subsidies for new employers that range “from 10 to 40% depending on the employee’s background” – and some of those subsidies run for several years.
- Not surprisingly, StartUp Genome gives high marks for places with low taxes. In Serbia, “startup founders pay no tax on their salary for the first three years after founding a business.”
- Likewise, places with easy regulations get rated high for startups. In Hungary, “a new company can be registered and receive a VAT [value added tax] number in 72 hours.” In Denmark, “You can register a company … in 15 minutes with an electronic application.” (When we incorporated Cardinal News a year ago, it took weeks before the state got around to our paperwork.)
- Several places are making a big play for “digital nomads,” the global version of remote workers. In the United States, some communities – the closest to us are Johnson City, Tennessee, and West Virginia – have incentive programs for remote workers where they essentially will pay someone to come live in their community. (Advocates say that’s really just a marketing ploy, no different from a bank offering a toaster to a new customer.) Sri Lanka is doing much the same. It’s offering free airfare, coworking space, 14 weeks of free internet and 14 weeks of free living space for “digital nomads.” The main difference is that Sri Lanka’s program is aimed at attracting long-term (up to a year) tourists, not necessarily full-time residents.
- From time to time, I hear rural Virginia promoted as a great location for certain back-office operations. It would be. But we’re not alone. Buenos Aires, Argentina, is promoting itself the same way. The city is “just one hour ahead of U.S. East Coast time, four hours behind London, and four hours ahead of Silicon Valley, making it a strategic location for teams working remotely or serving a variety of international clients.”
You’ll notice that these examples span the political spectrum. Republicans will like the parts about low taxes and light regulations. Democrats will like the parts about free education and relaxed immigration. If nothing else, that would seem to illustrate how neither party has a monopoly on pro-business policies. Here’s a group that’s full-on pro-capitalism that says parts of each party’s agenda helps – and other parts hurt. In any case, I return to my main point: Here’s what others around the world are doing. How are we doing?