Top Talent and HQ2

A popular parlor game around the Raleigh/Durham area of late, like in many other cities, has been handicapping our region’s chances of being picked for Amazon’s HQ2. My guess is that we’re in the top 3 or 4 cities, but hey, who knows? There are lots of pro/con positions for Raleigh (which really means the whole Research Triangle region): ex. available office space plus plenty of room to expand and good housing inventory, but a paucity of public transport. It’s a fun exercise to go back and forth on.

Yet one factor looms above the others, and it’s a persistent source of insecurity by the not just the Raleigh/Durham metro, but dozens of others around the country: the local availability of “top talent.” Specifically, this criticism says that the region in question does not have access to a global pool of people who can run or lead a major corporation. Since people run companies, not being able to tap that pool is a kiss of death. Fin.

The genius behind Thiel’s famous interview question, “what do you believe that no one else does?” is that it reveals where a person sees opportunity. It’s awfully hard to build something new and valuable if you only hold consensus views, after all. So here’s one of mine: 90% of consensus ideas about “talent,” including the one above, are utter nonsense. It’s both a self-serving criticism by Ascelaland devotees and implicitly relies on a whole theory of “talent” that is logically inconsistent and perpetuates a toxic and reductive view of what humans can do.

Where is Top Talent?

As I talked about in “You should be paying attention to North Carolina:

There are certain stories and trends that the national media routinely misses because it’s so hyperfocused on what’s happening in the big coastal metros. This isn’t an “elite mainstream media” criticism – it’s just a function of where their readership is concentrated and where most of their reporters and correspondents are based. North Carolina’s evolution is one of these stories.

The economic primacy of NYC or SF win them not only outsized media attention, but as a result, they happen to be where a lot of the Serious Thinkers who weigh in on topics like these live. Whether executives, politicians, academics or investors, this group of chatterati is heavily concentrated in perhaps 5 giant coastal mega-metros, and deeply invested in a variety of narratives about these cities’ outsized success in the last 10-20 years.

This is one reason why you hear so much less about the success narratives outside of them. Some of my personal favorite examples of this are the “Texas Miracle,” Utah’s emergence as a heavyweight in enterprise cloud software, or the Upper South’s tremendous growth (if Virginia, the Carolinas and Georgia were a state, we’d be about the size of California, and growing a lot faster). These narratives of whole regions get a fraction of the media attention of Apple’s new headquarters construction, giving the idea that they’re of equal importance. They are not.

For pundits and journalists living in a mega-metro, these places are mostly destinations and subjects for story pitches that are crafted to fit an archetype for mass audience consumption. When was the last time you read a major media story about Austin without mentioning South by Southwest and barbecue? (Before the recent bombing tragedy, that is – though even many of those found a way to work in barbecue anyway.)

The hypergrowth and concentration of Silicon Valley has caused many to forget that specialized talent, both technical, managerial and otherwise, is in much larger supply across the country (and world) than the media narrative suggests. North Carolina presents numerous such examples: IBM, Red Hat, SAS (my company) have all very successfully built global enterprises for decades, both by recruiting local talent and importing others. Down the road in Charlotte, they have more people working in financial services than anywhere outside of New York, and are steadily siphoning more of them away every year.

Of course, this doesn’t mean that Podunk, Nowheresville is as good a place for a tech firm to set up shop as Menlo Park. There’s probably a requisite population size that makes sense, and certain institutions that stabilize a thriving area and help build a pipeline of new talent: good government, high-quality schools and universities, affordable housing, amenities that appeal to people who have many different professional options. But these prerequisites actually qualify a lot of metro regions in the country – and many/most mega-metros compare pretty poorly.

As John Updike once said, “The true New Yorker secretly believes that people living anywhere else have to be, in some sense, kidding.” The same is true of many pundits who simply don’t understand how companies who don’t have their headquarters in NYC or SF or DC or Boston are able to function. And this is also because most of them have a very specific idea of who that “top talent” is, and what they look like.

Who is Top Talent?

If a highly talented candidate were to shake your hand and show you a resume, could you accurately identify him/her as talented?

I’ll stop you before you respond – the answer is no, you could not. Volumes of psychology research bear out that almost no one is able to accurately identify highly competent/less competent people as such. Resumes, educational credentials, even interviews have been demonstrated time and time again to all be very poor indicators of job performance. A very small number of companies have moved away from these candidate selection practices, but they nevertheless remain the standard procedure for most.

Most firms in most industries still practice a form of pattern-matching as their recruitment strategy. That is, they look for a familiar combination of credentials, background and social cues to decide who to hire. This pattern-matching sometimes manifests as only recruiting from certain universities, or among candidates with a certain number of years in Industry X. It results in a striking type of monoculture, most famously in tech (and investing):

Another question: let’s say you were a talented person. How would you know? And how would you signal that to potential employers?

If you believe that “top talent” is concentrated at highly prestigious (and expensive) universities, Wall Street firms, consultancies and tech companies, and rare everywhere else, you might say that a talented person should just go to Harvard and then work at Google or McKinsey or Goldman Sachs. Simple, right?

The reality, of course, is that there is no such thing as a meritocracy where the cream rises to the top. All of the credentialing institutions in our society are heavily laden with built-in privilege networks that are difficult to overcome, getting more so all the time, and have precisely nothing to do with innate talent. “Talent” takes innumerable forms and adapts to the situations it is placed into. It can be found anywhere. This is not to say that specific skills can be found anywhere, but they can usually be developed.

Those specific skills that are in demand in one place, by the way, are usually in demand everywhere else, too. Startups’ and entrepreneurs’ #1 complaint in the Raleigh/Durham area are exactly the same as those in Silicon Valley, Austin, Seattle, New York or elsewhere: recruiting good people. Everyone complains about it, wherever they are. (Psst – the answer is pretty obvious.)

What is Top Talent?

Even the idea of a coherent thing called “talent” is riddled with inconsistency and poor thinking.

If “talent” is meant to mean the innate potential for a person to learn and perform complex tasks, then it’s fairly obvious that talent is not rare. Humans can learn to do almost anything, and are limited almost exclusively by our beliefs about what we are capable of. (Props here to Carol Dweck’s book Mindset on growth versus fixed attitudes.) No one is born with an innate ability to be a 10x engineer, brilliant physicist or incisive writer. These skills are learned and developed.

If, on the other hand, “talent” refers to a wide variety of skillsets that can be put to work on specific tasks, then identifying those particular skills or interests is probably a more productive exercise than grouping them all under one banner like “talent.” Looking for skilled tax accountants is not like finding good Java developers, graphic designers or executive managers.

Smart companies don’t just go looking for skilled people – they develop them, too. Internally developing the skills that a company needs to grow and advance may be a big investment, but it can pay off in the form of building a smarter and more effective organization in the long run. Unfortunately, most large companies today have dramatically cut their training programs, and now expect new candidates with highly specific skills ready on day one (at the same salary levels).

HQ2 in Raleigh?

I don’t know. You don’t know. I don’t think Raleigh is the most likely spot, but, gun to my head, I’d say we have a 15-20% shot. We’ll see.

What I do think is that if we were having this discussion back in 1994, not one person would’ve said that Seattle was the logical place to situate and grow what would become one of the most important companies in American history. It just sort of happened. And, look – it worked! Seattle grew, and despite not having all the “global talent” of a place like New York or LA, Amazon turned out just fine.

My perspective on this is admittedly colored by working at a global software corporation that has never had a problem being based in Cary (a suburb of Raleigh). Raleigh is hot now, but 20-30 years ago, it was considered something of a backwater, and yet – IBM was fine. SAS was fine. The whole ecosystem that has grown up in the Research Triangle was fine. Turns out, you can absolutely grow a global company outside of a prestige address in NYC or SF.

Dropping a second headquarters in the middle of a metropolis like New York doesn’t sound, to me, like a very “Amazon” thing to do. I guess we’ll see. But I suspect that Amazon’s roots gives Bezos a little healthy skepticism about the imperative for a Madison Avenue address.

 

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