Imagining the Entrepreneurial City

At the Economic Development Assembly the subject arose of how Kansas City should brand itself. One possible idea that surfaced was as America’s Entrepreneurial Capital.

One of the participants who championed this idea was Terry Dunn, CEO of J.E. Dunn Construction. One variable that makes this positioning strategy realistic is that Kansas City is home to the world’s leading foundation dedicated to entrepreneurial research, the storied Kauffman Foundation.

At Dunn’s suggestion, we contacted the foundation’s CEO, Carl Schramm, to get his take on the idea, and he was entirely bullish about it. As he noted, the Kauffman Foundation has done a great deal of research already on what it takes to make a city or state entrepreneur-friendly. Nor was Schramm shy about the impact of the foundation on the city’s potential branding. “No other city in the world has an asset like the Kauffman Foundation,” said Schramm.

Kansas City has some other assets, as well. Perhaps most notably, it has a history of recognizing and celebrating successful entrepreneurs. The average person in Kansas City can name a dozen prominent city builders—the Halls, the Dunns, the Kempers, Henry Bloch, J.C. Nichols, Ewing Kauffman—and the list goes on. “This is really in the gene code here,” said Schramm.

In Baltimore, by contrast, the city from which Schramm hails, the man on the street would be hard-pressed to name one entrepreneur. And if he could name even one, he might talk about that person in the negative. In Kansas City, however, the citizenry is inclined to think positively of the people who built this community and brought jobs here.

The timing may be right, as well. The decision by Google to lay the infrastructure for ultra-high-speed digital communication in the two Kansas Cities—Missouri and Kansas—gives the region a place to start and a reason to get started. Said Schramm, “Why don’t we, with the coming of Google, just declare Kansas City to be America’s entrepreneurial city?”

With Google in process, the Kauffman Foundation in place, and an entrepreneur-friendly culture as part of our legacy, all that it would take is for the policy makers in the region to will themselves towards the decisions that make organic growth possible. If they sincerely strive to adopt entrepreneurial polices, the positioning is an honest one, Schramm believes. No other city is claiming the position.

As Schramm stressed, cities almost always generate their own momentum. “The nature of the city is that it grew itself,” said Schramm of Kansas City. “That is how our country grew, come to think of it.”

So few cities have prospered by bringing in business from outside that the model is scarcely worth copying. And those cities that have succeeded along these lines—Schramm cited Charlotte, N.C., as a prime example—are subject to failure when the recruited industry suffers—as Charlotte has with the banking retrenchment post-2008. These migratory businesses, Charlotte learned, have shallow roots.

To strive successfully towards the goal of being an entrepreneurial city, mayors and other policy makers have to make some counter-instinctive decisions. Schramm does not think this will be easy. “If you learned how to be a city manager,” said Schramm, “you will insist on Department of Economic Development” in your administrative and bureaucratic arsenal.

Another obstacle is that virtually every city hall in America is geared towards reining in the “messy capitalism” that makes for organic growth. In its studies, however, the Kauffman Foundation has discovered certain guidelines that cities ought to follow if they hope to orient their cultures towards unsubsidized growth:

Lay Off the Planning. Said Schramm, “Our prescription grows out of the antithesis of planning.” As he explained, would-be city planners almost all go through the same kind of academic programs. These programs emphasize what Schramm calls “physicality.” That is, they stress spaces, transportation, buildings, and the like. These programs insist on an urban ideal that cities—and the people in them—ought to follow.

This is the kind of thinking that has led to pedestrian malls and light rail lines and a variety of lesser amenities that almost never work. “Scratch any urbanist,” said Schramm, “and he or she will find the suburbs reprehensible.” The planner knows how people should live better than the people do.

Schramm’s vision is much more people-centric. He believes that the thinking citizen knows what is in his or her best interest better than the planner does. The cities that are growing in America, Schramm argued, are virtually all multi-centric, much as Kansas City is.

Moreover, people like to work where they live. If that community does not punish initiative, people will create jobs where they live and keep those jobs there barring the miraculous. Garmin, for instance,
has stayed in Olathe. It did not need Silicon Valley to succeed.

Have the right people and the right culture. Said Schramm, “Our wealth is in our people.” KC, he noted, prospered historically not because economic development offices reached out and recruited Joyce Hall from Nebraska or Clinton Burns and Thomas McDonnell from California. They came here on their own as young men precisely because they saw opportunity here. They did not need tax-increment financing, nor did they expect it.

No one exemplifies the role of the individual in creating wealth and jobs better than Ewing Kauffman. He grew up on a hardscrabble Cass County farm. He built his business in the basement of a modest Brookside home. All that he needed really was a government that enforced the rule of law and that otherwise stayed out of his way.

Get synergy going among the small firms. The Kauffman Foundation has studied this issue widely and initiated any number of programs to make entrepreneurial synergy happen. The goal of these exercises, said Schramm, “is to induce great ideas out of the population.” Schramm has great faith in that population.

Given our rural heritage, the Midwest has long been a cradle of inspired tinkering. Thomas Edison came out of Michigan. So, too, did Henry Ford. The Wright Brothers came out of Ohio. Robert Noyce, the father of Silicon Valley, got his grounding in Iowa. It is no accident that Kansas City has more engineers per capita than any city in the country.

Among the programs that Kauffman is developing, this one in conjunction with UMKC, is an open machine shop for tinkerers. When complete, would-be inventors will have a sophisticated workshop at their disposal to turn ideas into innovations. “Not all businesses have to be high-tech,” said Schramm.

Facilitate—then get out of the way. Government, said Schramm emphatically, should not involve itself in venture funds. Its “experts” should not engage in picking winners and losers. Schramm did not
make this point casually. The Kauffman Foundation has studied some 2,000 public ventures and found exactly one that works, he said. Those are not good odds (although the instinct of the planner is to
study the one that does and try to imitate it.)

“There is plenty of private money around,” said Schramm. Even in Kansas City. The Kauffman Foundation can’t carry the burden of distributing venture capital. That is not its role, but it can make the kind of studied recommendations that will lead to capital formation and distribution.

Schramm understands full well how difficult it will be for a mayor to transcend the current economic development model. As to the inevitable economic development department, said Schramm, “We should imagine a city without one.”

In the absence of that ED mindset, the policy maker starts with a simple declaration, “Hey, we are a city of entrepreneurs.” From there, all it takes is the will to follow through—a whole ton of it.