Saturday, July 16, 2005

Parents: CHILL OUT.

July 17, 2005
Listen, Kid, You Have to Be Tough to Make It in This Business Today

By JULIE BICK
DECISIONS about pricing, product mix and location tumbled through Alex Waggoner's mind as he started his enterprise. His business adviser observed his interactions with potential customers and counseled him about a more aggressive sales approach.

Was he a hotshot Wharton graduate working with a venture capitalist? No, Alex was just 6, setting up a summer lemonade stand in Seattle, and his business adviser was his mother.

Now 7 and in his second year as a lemonade salesman, Alex has decided to post signs in his neighborhood, directing people to his stand, "instead of yelling as they go by." He will also sell cookies, because his little sister likes them.

For many children, the lemonade stand has become a first entrepreneurial venture, complete with parents who coach them on business practices. "Why shouldn't he learn how to run a business?" asked Alex's mother, Angela Wu, a lawyer. "He needs to learn how to take care of himself."

In some ways, a childhood tradition may again be giving way to a modern, more structured mind-set. Pickup sandlot baseball has morphed over the years into Little League. Knocking on a friend's door after school is now a "play date." Biking around with your elementary-school buddies all summer, unsupervised until dark? That might precipitate a call to child protective services for neglect.

So it seems only natural that lemonade stands are following the path of other traditions to become more closely supervised, more rigorous endeavors - and more consciously educational. Magazines aimed at parents laud lemonade stands as aids to math, literacy and social development. The neighborhood juice purveyors of yesterday are becoming the mini-Trumps of today.

For the children and their parents, help abounds - on the Internet, in bookstores and classrooms and even in summer camps. The venerable Junior Achievement organization now has an Internet student center with sample business plans, video testimonials and an online game where children can try running a business. The Sunkist Company provides a how-to list on its Web site for youngsters setting up lemonade stands, including requisite legal coverage (get your parents' permission) and a semi-sophisticated worksheet for calculating profits.

Even preschoolers may not be too young. For those who are 3 and up, One Step Ahead, an online children's store based in Lake Bluff, Ill., offers a $99.95 wooden pushcart for selling lemonade.

"It's not like when we were young and you'd just set up a folding table at the end of your driveway and sell cups of lemonade for a nickel," said Brad Kaufmann, a Junior Achievement spokesman. "More kids are eager to learn real business skills at an earlier age, and their parents are right there to help them."

In Baltimore, David Scher and his wife, Judith Schagrin, helped their 10-year-old daughter, Kate, and a friend sell lemonade to raise money for less fortunate children.

"I think it's good for kids to know that sales is not a dirty word," said Mr. Scher, a Morgan Stanley financial adviser. "It's a win-win scenario if you find out what someone wants, and you can get it for them and make a profit."

Devising a strategy that would be at home on "The Apprentice," he helped the girls set up their stand in a park frequented by dog walkers and suggested bringing along dog treats as a way to drum up business.

Ms. Schagrin, a social worker, was glad that her daughter saw that she could earn money and donate it to charity. Both parents agreed that Kate had learned what is needed to prepare for a new business, as well as the importance of meeting deadlines. And all found that working together for six hours to make $40 can be exhausting.

"Parents seem to be involved more deeply in all aspects of their kids' lives these days," Mr. Kaufmann said, "so starting a new business fits right in with ballet, Little League and piano practice."

A lemonade stand tends to be a child's first business because it is simple to create, and parents can help. Although the stands are straightforward to set up and run, they can encompass all the business basics from the classic "four P's" of business school - product, place, pricing and promotion - to inventory management and profit margins.

"Free enterprise is the backbone of this country," Mr. Kaufmann said, "so why not introduce it early in life?"

Steve Mariotti, founder of the National Foundation for Teaching Entrepreneurship (www.nfte.com), said he had noticed an uptick in the number of calls he received from parents seeking advice on their children's lemonade stands. He applauded the trend, saying, "The sooner a young person can put together resources and communicate a need to other human beings, the better."

Mr. Mariotti has been working with his own nieces on their lemonade stands since each girl was 6. Now that they are 9 and 11, he said, "they can go toe to toe with any first-year M.B.A. on cost allocation."

While some youngsters may thrive on cost allocation, or niche marketing strategies, others have simpler loves.

Finley Tevlin, 8, and his brother, Liam, 11, have moved on from lemonade stands to delivering home-baked brownies in their Seattle neighborhood. They say their father, an entrepreneur himself, dreams out loud at the dinner table about how his sons could expand their delivery service by gathering their neighborhood friends together to create an army of brownie sellers. "But my very favorite part of the business is bringing the brownies to people's houses," Finley said, "because I get to ride my bike."


Copyright 2005 The New York Times Company

Keeping up appearances.

Beyond how one says something is how one hows.

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July 17, 2005
Type Casting

By ROB WALKER
Bello

In a world of images, words sometimes don't seem to have as much value as appearances. But what about the appearance of words? While most of us don't think about typography, beyond choosing among the preinstalled fonts in our home computers, consider an up-and-coming font, like Bello. Bello recently won a best new ''display font'' award from the Type Directors Club, and is on pace to sell a respectable 160 licenses in its first year. Underware, the European three-man type foundry that created Bello, will be on hand at the font-maker gathering TypeCon in New York City this weekend. Yet it's unlikely that you have heard of Bello. ''People are very unaware of this whole business,'' says Akiem Helmling, one of Underware's principals.

Like many creative businesses, typography has been radically reshaped by technology. Font-making was once rooted in expensive metal-and-machine processes that date back to Gutenberg, but today it is thoroughly digital. Linotype, Bitstream and other big companies are a bit like major record labels, with catalogs full of reliable classics like Helvetica and Futura -- the type of type sold in packages to software companies. There are also hundreds of smaller players: indies, in music-business terms. Emigre is one of the best known of these (with hit fonts like Mrs Eaves), along with Hoefler & Frere-Jones, House Industries and P22. Such firms may sell licenses for one person to use a single font for $50 or less, or sell packages of fonts for multiple users to design firms, ad agencies and the like. (They also create custom typefaces for specific clients, for much larger fees.) Meanwhile, as Tamye Riggs, executive director of the Society of Typographic Aficionados, points out, the digital revolution has also spawned tools that make it easy for almost anyone to create a new font and sell it for as little as $2 -- or even give it away as a form of promotion. Not surprisingly, font piracy is pervasive. ''Just like MP3's,'' Riggs says.

One thing that allows typographers to continue making a living is the fact that tastes evolve. In a 1976 essay reprinted in her book ''The Sponsored Life,'' Leslie Savan, the media critic, assessed the dominance of Helvetica: its clean, authoritative, sans serif look reassured us ''that the problems threatening to spill over are being contained.'' (Serifs are the little flourishes on the edges of letter strokes. This column is printed in serif-y Garamond.) The 1990's saw a huge spike in messier and trickier fonts -- ''grunge'' fonts, some were called in the trade. Gary Munch, president of the Type Directors Club, says that Trixie may have become the most famous of these when it was used as the ''X'' in the title of ''The X-Files.'' In the last few years, the trend has been toward ''script'' fonts that look more handmade, like Bello.

Type obviously appears in all kinds of places, from book text to billboards, and Bello is a display font, meaning it looks better bigger. Its handmade look does not so much suggest writing as sign-painting. Based on lettering done with a brush, it evolved from a series of experiments with hand-drawn letters. Established and currently popular script fonts include P22 Cézanne (based on the handwriting of the artist) and Felt Tip Roman (based on the handwriting of Mark Simonson, the type designer who created it). Bello is too new to be at their level; Helmling figures that it takes about five years for a font to become a bona fide success, with sales of 500 or more licenses a year. Still, Bello is working its way more widely into the real world. One designer has just used it as the basis of a Coldplay tour T-shirt, for instance.

One tricky thing about script fonts is that in actual handwriting, the form of one letter might be affected by the letter next to it. Interestingly, Bello uses a digital format called OpenType, which, among other things, makes just such adjustments. As you type the word ''Bello,'' for example, the second ''l'' looks different from the first. Helmling suggests this may be exactly what people find attractive about Bello and other script fonts. It's not just the appeal of ''handwritten flavor,'' as he puts it, in a digital age. It's the way that technology allows users to harness those comforting imperfections perfectly.

E-mail: consumed@nytimes.com.


Copyright 2005 The New York Times Company

Innovation and marketing.

A national economy, like a business, needs to do at least one, and preferably both well.

Entrepreneurship and media. America does both well. Most countries in Europe do neither well.

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Innovation Gives Finland A Firm Grasp on Its Future
Economy Offers a New Model for Old Europe
By Robert G. Kaiser
Washington Post Staff Writer
Thursday, July 14, 2005; A21

HELSINKI -- The political and economic malaise that afflicts so much of Europe this summer has not infected this northernmost outpost of the European Union. The contrast between Finland's optimism about the future and Old Europe's gloom is striking.

While France, the Netherlands, Italy, Germany and others are stumbling, Finland prospers, both economically and psychologically. The recent "no" votes in France and the Netherlands that undermined, perhaps fatally, the E.U.'s proposed constitution have produced a pervasive despair in much of Europe that did not turn up in recent interviews with scores of Finns.

"The Finnish model could offer some elements of a way out of the European crisis," said Pekka Himanen, a 31-year-old philosopher and co-author of a much-discussed book about Finland's successes.

Not that Finns have all the answers. Like all Europeans, they are producing too few babies to pay the promised welfare-state benefits to an ever-growing contingent of senior citizens. The new jobs created by their high-tech successes have been matched by losses from low-tech plant closures, so unemployment remains high -- about 10 percent.

Nevertheless, the Finns know they are much better placed now than many of their Old Europe neighbors to the south. Exploiting their small size (5.2 million people) and ethnic homogeneity, the Finns have proven themselves successful experimenters and innovators.

Fifteen years ago, Finland faced a full-scale depression, brought on by the loss of the country's most important markets as the Soviet Union disintegrated. Unemployment soared to 20 percent. But the Finns took control of their future, made painful adjustments and came out of the crisis with an economy that the World Economic Forum in Davos, Switzerland, ranks as the most competitive in the world.

The major economies of the E.U. are growing too slowly -- and their elderly populations are growing too quickly -- to preserve the traditional welfare state and provide adequate jobs today, or to offer the prospect of genuine competitiveness in the global economy tomorrow, many Europeans agree. In this view, the countries invest too little in education, research and development and do too little innovating. But there is no consensus on a course of action to fix these problems. Many people worry about preserving a social system that is rich in benefits for all.

"Right now," said Himanen, the young Finnish intellectual, "Europe is like a once-fit top athlete who has fallen out of shape. Instead of taking action, the athlete keeps writing new strategic plans on how to get back into shape: 'I could go running, I could go swimming,' and so on. Sometimes it feels that the European logic is: 'When I'm in better shape, I will start exercising.' "

But "it was actions and not words that created the Finnish model," Himanen added.

Those actions reflected a pragmatic spirit typical of Finland in its brief history as an independent country (Russian control ended in 1917). A relatively backward agricultural country became a high-tech powerhouse with labor productivity as good or better than that in the United States, but also a welfare state as generous as any in Europe.

Perhaps the most revealing statistic behind this transformation is Finland's commitment to research and development. The Finns put 3.5 percent of their domestic product into R&D last year, second in the world to Sweden (about 4.3 percent) and far ahead of the United States (about 2.6 percent) or the E.U. as a whole (less than 2 percent).

R&D expenditures symbolize the Finnish resolve to preserve a comfortable place in a globalized world for an underpopulated nation with thousands of lakes and billions of trees. Typically, the decision to spend so much on scientific research and the adaptation of its results to commercial purposes was the result of a broad political consensus. Finland steadily increased government spending on R&D throughout the 1990s, when all other spending was either cut or frozen.

Three Finnish institutions channel this money. One is a unique body called Tekes, the national technology agency. It supports both basic and applied research, granting about 40 percent of its funds to universities and other research institutions and 60 percent to businesses.

This year, according to Veli-Pekka Saarnivaara, the president of Tekes, the organization will give out nearly $540 million, or more than $10,000 for each Finnish citizen. A U.S. agency investing a comparable amount per capita would put $300 billion a year into American R&D.

Tekes is an entirely autonomous agency funded by the Finnish government. This "quite special" arrangement, as Saarnivaara put it, reflects one factor that sets Finland apart from many other industrial democracies -- Finns trust their government. Visitors from other countries who express admiration for Tekes tell Saarnivaara that such an operation would be impossible in their countries "because of the corruption," he said in an interview here.

The second source of the agency's independence is its reputation as a wise and discreet investor. For 20 years, Saarnivaara said, the agency has worked closely with private firms, helping them decide where to place their R&D bets, working collaboratively to identify markets and products, persuading Finnish universities and research organizations to collaborate with business.

"We are helping to plan R&D projects that we will then fund," he said. About a third of the projects Tekes funds fail completely, Saarnivaara said. He would like that percentage to be higher -- in other words, he would like to take more risks.

A second Finnish institution that supports the research and development efforts is Sitra, the Finnish National Fund for Research and Development, founded in 1967. Its budget is just a tenth that of Tekes, but its impact on Finnish business has been enormous. It acts as a venture capitalist, investing money earned by its own $750 million endowment in the start-ups and new ventures of established companies.

Sitra is run by Esko Aho, who was Finland's prime minister during the crisis years of the early 1990s and was nearly elected president in 2000.

Sitra's endowment came largely from a block of shares in Nokia that the government acquired in return for its support of the company's cell phone enterprise when it was in its infancy. Nokia was "a miracle," as Aho put it in an interview.

Since making a major commitment to telecommunications in the early 1990s, Nokia (a Sitra client itself) has grown into the world's leading cell phone maker. Its $35 billion in annual sales drives the Finnish economy.

Sitra, too, is politically autonomous. Revealingly, more than 90 percent of the companies in which Sitra has invested were previously supported by Tekes, an example of how Finland has become what Himanen and his co-author, Manuel Castells, a Spanish-born sociologist, call "a network society."

A third important source of R&D funding is the Finnish Academy of Science and Letters. Until Reijo Vihko became its president in 1996, it was a clubby organization that channeled research funds to established scientists and labs without much regard for how good they were. Vihko, a former medical professor, turned the academy upside down, according to several Finnish scientists.

"The main point was to concentrate on centers of excellence," Vihko said in an interview. That meant giving money to the best scientists with the most promising projects and cutting off others whose work wasn't getting anywhere. Many of the latter were prominent people with good connections in government and the news media, Vihko said. They orchestrated a lot of criticism of his changes.

Sirpa Jalkanen, director of the MediCity Research Laboratory at Turku University and one of 26 "professors of the academy" in the country, a title reserved for the finest scholars, said Vihko's reforms brought an entirely new spirit to Finnish science. "There's a lot of enthusiasm, much more money," she said. The academy and other funders of basic research "are really supporting science at an international level."

Vihko's victims -- many of them prominent older members of the scientific community -- were furious, she said, but "Reijo is a person who is afraid of no one." In a lesson for Old Europeans who contemplate undertaking comparable reforms in their societies, Jalkanen said she learned from watching Vihko that proponents of fundamental change "get so much opposition, you have to be very strong and really believe in what you are doing."

The Finnish Academy now provides about $240 million annually for basic science in Finland.

Funding from public institutions constitutes only about a third of R&D expenditures; the rest comes from businesses. This, according to numerous Finnish business leaders, reflects the consensus in society that only by staying ahead intellectually and technologically can Finland hope to sustain its standing as one of the world's most successful countries.

Finland's ability to perform with the best in the world also depends on its educational system, widely recognized as the finest in Europe. It, too, was reformed under the leadership of one forceful personality, Erkki Aho, supported by key political leaders and, ultimately, a strong consensus in the society. Aho, now 68 and retired, was director general of the Finnish National Board of Education.

Finns are proud of their accomplishments over the last generation, when their country largely reinvented itself. But with characteristic modesty, they shy away from a visitor's suggestion that Old Europe can learn from their example. "Italians aren't linear thinkers like us," observed Finland's ambassador to the United States, Jukka Valtasaari, interviewed in Washington, "and the French are a melting-pot country" far different than the homogeneous Finns.

But a bigger difference may be the Finns' willingness to change. Today, Finns talk nervously about whether the country can reinvent itself once again in the next 30 years or so. Some fear complacency. "The perception is we don't have to change right now," said Risto Siilasmaa, 39, president of an Internet security firm called F-Secure that he founded in 1988.

Esko Aho, the former prime minister, said he is worried that "people are so satisfied with the present. We can turn out like France and Germany today if we aren't careful. We have to wake up now before it is too late. It's time to rethink our national strategy again."

Staff researcher Robert Thomason in Washington contributed to this report.

© 2005 The Washington Post Company

The postal demographics of affluence.

Only 3 of the 50 most affluent zip codes are not on the coast. Atherton is #1. Interesting characterization of behavioral differences from that of the general public--question is, are those behaviors a consequence of wealth or predictor of wealth? That is, even before aggregating the funds required to pursue these frequently expensive pastimes, do affinities for such behaviors already exist? Do people who like to travel or enjoy listening to classical music more likely to succeed financially? Or are they purely a byproduct of having too much disposable income (expensive hotels abroad, pricey symphony tickets)?

Are there externally observable behaviors that can indicate that someone is going to do well, and how close does one have to be to observe those behaviors?

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EXPLORING AMERICA'S RICHEST ZIP CODES
Population Migrates Inward but Big Money Hugs the Coasts
April 04, 2005
By Bradley Johnson

NEW YORK (AdAge.com) -- If you want to follow the money, get on a plane. Forty-five of the nation’s 50 most affluent ZIP codes hug the East and West coasts. Fly-over Land has just three, on the North Shore of Chicago. Atlanta’s Buckhead is the South’s sole outpost in this rich territory. The sun spot of Paradise Valley, Ariz., rounds out the list.

How Rich ZIP People Are Different

The nation is moving south and west -- population center point is now southern Missouri -- but the Northeast is still the money belt. Metropolitan New York is home to nearly half -- 24 -- of the ritzy 50 ZIPs. Add in Boston (five), Philadelphia’s Main Line (two) and suburban Washington (one), and the Northeast corridor accounts for 32 of the most-prized ZIP codes, according to data compiled for Advertising Age’s American Demographics by ESRI, a supplier of geographic information-systems software and data.

Elite households

The 50 ZIPs are home to 201,799 households and 565,125 residents. This elite group -- just 0.2% of the U.S. population -- last year had an average household income of $294,000, four times the national average ($67,572), and average net worth of $1.2 million, about three times the national figure ($468,970), according to American Demographics’ analysis of ESRI data. The top 10 ZIPs, from No. 1 Atherton, Calif., to Old Westbury, N.Y., are all on the coasts.

ESRI ranked ZIP codes based on a formula including such demographic variables as average household income and average net worth. Surging home prices on the coasts have boosted the net worth of households in those regions. But coastal communities also pay better; the coasts are home to nine of the 10 ZIPs with highest household income. (The 10th, Kenilworth, Ill., at least is on the coast of Lake Michigan.)

ESRI found six affluent ZIPs in San Francisco and Silicon Valley, which together form the money center of the West. Los Angeles has just four. Its most celebrated address, Beverly Hills 90210, came in a distant No. 35 nationally, reflecting in part that the ZIP is home to both glitzy houses and not-so-ritzy apartments. Beverly Hills ranked second-lowest in median income; some people only act rich.

Watch less prime-time TV

Overall, the rich aren’t much different from one leafy burg to the next. Across cities and regions, they universally spend big money on home improvements (average annual spending: $10,400) and luxury cars. They go to more live theater. They watch far less prime-time TV and read more news magazines. They travel abroad for business and pleasure. They are nearly twice as likely as the average American to shop online and four times as likely to tune their radios to classical music.

But sift through the data, and you will see subtle differences among regions and cities in consumer purchases and activities, according to Market Potential Indexes supplied by ESRI using data from Mediamark Research Inc.

The Northeast accounts for nearly two-thirds of the ritzy ZIPs (32) and more than half of the affluent ZIPs’ population (about 320,000). The greater New York are -- including the winding roads of Westchester County, Connecticut and northern New Jersey -- is home to 24 top ZIPs and 256,000 residents. Two of the nation’s hubs of old money, Philadelphia and Boston, account for most of the region’s remaining wealthy ZIPs.

Longest commutes

Demos for the Northeast’s affluent ZIPs track closely with those of the affluent Midwest (represented by the Chicago North Shore enclaves of Kenilworth, Glencoe and Lake Forest). Residents (median age 41 to 42) have the longest commutes (34 minutes) among the ritzy 50. They buy more luxury cars and vote in elections more reliably than their rich peers in other regions. They’re twice as likely as the average American to take a vacation on a cruise ship.
Bottom line for marketers and media: If it plays in Peoria (or at least Kenilworth), it should play in Westchester.

But there’s not a lot of population growth. ESRI projects slow growth for most ritzy ZIPs in the Northeast and Midwest; it expects only two of the 35 will see growth greater than 1% a year through 2009. In the West, four of the 14 rich ZIPs should see greater than 1% growth. Atlanta’s rich ZIP should grow 1.5% a year.

Residents of the richest ZIPs in the West are a little more Web-centric than their counterparts elsewhere. The West Coasters are more likely to shop at Amazon.com, to purchase airline tickets online and to own a notebook computer. The tech bent isn’t surprising given that the rich-ZIP list includes the estates of Silicon Valley (Atherton, home of Google CEO Eric Schmidt) and suburban Seattle (Medina, Wash., home of Bill Gates).

West's rich are older

One surprise: The West is the new home for old money -- not old as in inherited, but older as in age. Median age of the rich list’s 14 West Coast ZIPs is 46, four to five years above that of affluent ZIPs in other regions. What gives? Don’t blame it on Sunbelt retirees. The median age in Los Altos, a pillar of Silicon Valley, is above that of desert oasis Paradise Valley.

Median ages for the rich ZIPs in Northern California and Los Angeles are around the mid-40s. That’s a reminder of how Silicon Valley is getting older (Apple Computer’s Steve Jobs now qualifies for membership in AARP). In Southern California, the aging residents of Santa Monica 90402 go (OK, drive) to the gym more than their cohorts in any other ritzy 50 ZIP. They’re heading toward age 50, but rich residents of that seaside town are not about to surrender their youth.

Friday, July 15, 2005

Well written two part piece on social dynamics in America.

Note the difference in tone and perspective compared with the Fortune piece posted earlier.

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Centrifugal forces

2,573 words
16 July 2005
The Economist
SUN
English
(c) The Economist Newspaper Limited, London 2005. All rights reserved

Centrifugal forces

Americans are still restless in the midst of plenty

“IN THE second century of the Christian era,” Edward Gibbon began his “Decline and Fall of the Roman Empire”, “the empire of Rome comprehended the fairest part of the earth and the most civilised portion of mankind.” America could lay claim to a modern equivalent. At the start of the 21st century, the empire of the United States has created the most open and dynamic society in the world.

One indicator of social dynamism is population growth. In the 20th century, America's population increased by 250%, whereas France's and Britain's rose by less than 60%. In the past ten years, the number of Americans has risen from 263m to almost 300m, the fastest growth for 40 years. America's population is rising more than twice as fast as the European Union's, and two-thirds of that growth comes from natural increase, whereas almost all the modest rise in the EU's population recently has come from immigration.

America's population is dynamic in comparison not only with Europe but also with some of the fastest-growing developing countries. Its fertility rate is higher not only than China's (because of that country's one-child policy), but Brazil's and South Korea's too. By 2050, America's median age (the point at which half the population is older, half younger) will be less than six years higher than its 2000 level of 35 (see chart 1). China will have aged by 15 years to about 45, and South Korea by a withering 22 years, to 54.

America is the only country to have maintained industrial-era patterns of demographic growth in a post-industrial age. Except for the Arab world and a handful of middle-income Latin American countries, all the countries with fertility rates higher than America's are very poor. If a willingness to reproduce is a measure of a rich country's confidence in the future, then America is supremely self-confident.

That trait seems to be hard-wired into the American character. “The greatest asset of the American, so often ridiculed by Europeans, is his belief in progress,” wrote a Swede, Victor Vinde, in 1945. Today, two-thirds of Americans think they will achieve the American Dream of self-improvement at some point in their lifetime. This year, Americans will spend almost $700m on self-help books. “The Purpose-Driven Life”, a 40-day religious course of self-improvement, has sold 25m copies, more than any other non-fiction book except the Bible.

Americans work harder than almost anyone else—300 hours a year more than Europeans. They switch jobs more often—about once every seven years, compared with once every 11 years in Germany and Japan. Except in traffic, the country has developed a cult of speed—fast food, fast banking (“It's your money,” runs one financial advertisement, “get to it faster”), fast everything. Many of the country's founding myths are variations on the Odyssey—wagon trails to the west, the Lewis and Clark expedition, Huckleberry Finn.

America's unemployment rate, at around 5%, is roughly half that in Germany, France and Italy. Its rate of home ownership has risen to almost 70%, higher than ever before. By encouraging flexible labour markets and deep mortgage markets, America has reinforced the cycle of population growth, economic success and demographic dynamism.

A dynamic society also means an open one: open to trade and immigration. National-security hawks dream about limiting such openness, and during the 2004 election campaign America briefly agonised about outsourcing. But by any normal measure, the country remains extraordinarily open. Trade barriers are low. Since 1990 exports and imports have risen as a share of GDP, and over the same period nearly 14m new immigrants have entered America legally. Not all the effects of this openness are beneficial, but America's ability to absorb newcomers has been the envy of other countries.

A dynamic American society has always meant a well-educated and technologically advanced one. True, there are deep-seated problems in secondary education: in an international study, American 10-year-olds came 12th out of 25 countries in mathematics and sixth in science. But the quality and quantity of intellectual life in America is still the highest in the world. A quarter of American adults have a university education. The country produces one-third of the world's scientific papers, employs two-thirds of the world's Nobel-prize winners, has 17 of the top 20 universities (as ranked by Shanghai's Jiao Tong University) and has more ideas-based workers than anyone else.

A mobile society

Yet what really matters is not just growth per se, but where it happens and what impact it has. The country's size and wealth, combined with its meritocratic traditions and technological prowess, have made it unusually easy for Americans to move around in search of new opportunities. “In the United States,” wrote Alexis de Tocqueville, “a man builds a house in which to spend his old age, and he sells it before the roof is on; he plants a garden and lets it just as the trees are coming into bearing...he embraces a profession and gives it up; he settles a place and soon afterwards leaves to carry his changeable longings elsewhere.” In some ways, this restlessness in the midst of plenty is America's most remarkable feature.

This year, around 40m Americans—one in seven—will move house, the equivalent of the entire population of Spain. Between 1995 and 2000, almost half of all Americans have changed address, more (often far more) than in any European country. With home-ownership rates so high in America, you might have expected less mobility, and indeed it has declined compared with the 1960s, when about a fifth of the population moved every year.

But America is not settling down. On the one hand, the young, restless and rich move around as much as ever; on the other, a stable, older and less well-off America is sitting tight, bringing down average mobility. Different groups live in different areas and different kinds of places, and face diverging futures.

The young move house most often: in 2003, 30% of people in their 20s did, compared with under 5% of the over-60s. Movers also tend to be better educated: almost half of all university graduates moved at some point between 1995 and 2000, and so did a remarkable four-fifths of 25-34-year-old college graduates. According to Bill Frey, a demographer at the University of Michigan, America is producing a footloose generation of the best-educated.

Overall, the most common reason for moving is to get a better house. But for one group of Americans, the main reason for moving is work. The people in this group are also the most likely to move from state to state, not just across the road. For them, there has been no decline in mobility since the 1950s. During the 1990s, 73m Americans—more than two Californias—moved from one state to another.

It seems, then, that a lot of well-educated, risk-taking Americans are moving constantly in search of the Next Big Thing. Richard Slotkin, a historian of the frontier, points out that this has happened before. The west was settled not by a representative sample of the nation, but by particular groups: the young; individual ethnic groups; and children of earlier pioneers. But the west was not just a place, it was also a particular kind of economy, in which those who worked hardest could double or treble their fortunes. The current movement of the educated young is a high-tech version of the frontier spirit.

America is also sorting itself out by place, into fast- and slow-growing cities. The pace of change is extraordinary. In the past 25 years, Las Vegas has increased in population by 250% and Austin by 140%. Twenty-two metropolitan regions, almost all in the sunbelt, have more than doubled in size. These fast-growing places are demographically distinctive. Between now and 2030, America's median age will rise by just over three years, but in Colorado and North Carolina—migration magnets in the sunbelt—the median age will rise by only about one and a half years.

On the other hand, 30 metropolitan regions have seen their population fall since 1990, many of them in the Ohio valley. In the worst hit, Weirton, a steel town in West Virginia, the population has dropped by over 10%. Pittsburgh and Buffalo suffered population losses of about 3%. And whereas fast-growing states are “younging”, these laggards will see their median age rise fast to 2030.

Just as America is separating by region, so it is dividing up by types of place. The fastest-growing bits of the country over the past five years have been new suburban areas on the far edge of big cities, such as Riverside and San Bernardino Counties in southern California. The big losers from domestic migration were Los Angeles, New York and Chicago, which all saw an outflow of around 400,000 people. Cook County, which contains downtown Chicago, was the second-largest loser of domestic population. Will County, on Chicago's southern outskirts, was the sixth-largest gainer. As ambitious young married couples everywhere flee urban problems of bad schools and snarled traffic, America has become the first society in the world to classify more than half its population as suburban.

But what does all this sorting out add up to? Is it just a zero-sum game in which people shift from one place to another, with some winning and some losing, but leaving the nation as a whole no better off? Does it erode social bonds, leaving America worse off? Or does mobility itself produce benefits that are greater than the sum of their parts?

Moving must be good for the movers themselves, otherwise they would not bother. They are shifting from the downtowns and inner suburbs to new suburbs and exurbs in order to achieve a 21st-century version of the American Dream. Instead of the ranch house, the Chevrolet and the colour television of old, they want—and are getting—a McMansion, a Lexus SUV and high-speed internet access.

Mobility is good for the new suburbs, too. Formerly synonymous with stultifying boredom, conformity and white bread, they have become the most vibrant parts of the American economy. In the 1990s, three-quarters of all new office space was built in suburbs, and job growth there was three times higher than in the downtowns. Suburbia saw the birth and growth of Microsoft, Cisco, Dell and most of America's other high-tech giants.

Those gains might not have been possible but for the way that migration is shifting the best and the brightest to the places where the new jobs are being created. Traditionally, the best-educated areas were in the north-east, especially Boston, where more than one-third of the residents have college degrees. But in 1995-2000, the places that saw the largest absolute increase in the number of people with college degrees were Atlanta, the unofficial capital of the new South, and Phoenix, which 25 years ago was only one generation away from being a cattle town. At least these are diversified economic hubs. But Las Vegas too, home of Liberace and Celine Dion, saw its graduate population rise by over 20% in the late 1990s, proportionately the largest brain gain of any city.

There are also signs that the dynamism of fast-growing areas feeds off itself. Nevada, the state with the largest number of people who have moved from somewhere else (29% in 1995-2000), also has the highest proportion of people moving house (59% in that period). In contrast, Pennsylvania, with almost 80% of residents born in the state, has the second-lowest rate of moving house. If mobility brings benefits, then its self-reinforcing quality produces benefits squared. America is not just mobile. It is a perpetual-motion machine.

The corollary of educational upgrading in new areas is educational loss in old industrial centres. Black inner cities have been especially hard hit by the sudden flight of the best-educated African-Americans, who since desegregation have had a choice about where they lived. Overall, the populations of cities in the north-east declined in the 1990s, whereas in the west they increased by 20%; cities with a lot of manufacturing grew much more slowly than average.

Flavour of the year

The wider worry is that America's great sorting-out could damage the country by producing a stratified land of haves and have-nots, and creating more class divisions (of which more later in this survey). Yet there is also plenty to counter the forces of separation. America's successful areas are not set in stone. In the 1960s, the new frontiers were California, Texas and Florida. In the 1980s and 1990s, they were Nevada, Arizona and Colorado. Now they have shifted yet again. Some of the fastest-growing counties of the past five years have been in the snowbelt: Kendall County, near Chicago; Lincoln County, South Dakota; Delaware County in central Ohio; and Scott County, south of Minneapolis. Within the sunbelt, people are moving from congested coastal hubs to smaller towns in the interior south and west. Miami is out, Orlando is in. Riverside is taking up where Los Angeles left off.

Nothing exemplifies the diffusion of the haves better than the spread of gated communities. Decried when they first appeared as elitist retreats, gated communities are now spreading to the middle class. According to a census bureau report in 2003, about 7m American households (over 6% of the total) live behind walls and fences, but for new houses in California the proportion is 40%.

Next, there has been a marked increase in ethnic minorities in new suburbs. They now make up more than one-quarter of the suburban population, compared with less than one-fifth in 1990. If you drive around the San Fernando Valley (“The Valley”, supposedly the great white sprawl of Los Angeles), you will see Ethiopian, Thai and Korean restaurants, Mexican and Salvadorean grocery stores, Chinese lawyers and an Armenian cultural centre, all in the space of one block. Nationwide, roughly half of all Asians and Latinos and two-fifths of blacks live in suburbs.

Or consider one of the great hidden stories of the past few years: the return of blacks to the South. For decades, southern labourers sought more money and less prejudice in industrial cities. In the late 1960s, black populations dropped most steeply in places such as Birmingham and Mobile in Alabama or New Orleans, Lafayette and Shreveport in Louisiana. Some of the largest gainers were Los Angeles, Detroit, Chicago, San Francisco and New York. Yet in 1995-2000, those were the five cities that lost the largest number of blacks. Conversely, Atlanta gained 114,000 African-Americans, followed by Dallas, Charlotte and Orlando. This is helping to erode racial segregation. An index developed by Edward Glaeser and Jacob Vigdor, two economists, shows that in the medium-sized metro areas of the South, segregation has dropped.

But perhaps the most important factor in making Americans less separate is immigration, the subject of the next article.

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The Americano dream

1,559 words
16 July 2005
The Economist
SUN
English
(c) The Economist Newspaper Limited, London 2005. All rights reserved

The Americano dream

If domestic mobility is a centrifuge, immigration is a melting pot

AMERICA is going through one of its periodic bursts of high immigration. According to the Census Bureau, the country is home to about 34m people born abroad, half as many again as ten years ago. It is also going through one of its periodic panics about the subject.

Self-styled “minutemen” search for illegal immigrants on the border between Mexico and Arizona. Hospitals say they are being bankrupted by the cost of treating illegal aliens. The Republican Party is riven between those who want to crack down on illegal immigration and those who want to regularise it.

The critics fear that the Hispanic wave—especially that part rolling in from Mexico, which accounts for about two-thirds of the total—is in danger of creating two nations: the existing one (which Robert Levine, in the Public Interest magazine, dubbed the “Anglo-Protestant-African-Catholic-Indian-German-Irish-Jewish-Italian-Slavic-Asian society”), and a Spanish-speaking sub-group. The new wave is unusually big, say the worriers; it is growing unusually fast, is unusually cohesive (everyone speaks Spanish) and, unlike previous waves of immigrants, it is fed by a country next door that is continually refreshing the cultural differences between Hispanic immigrants and the rest of the country. As Samuel Huntington expressed it in his book, “Who are We?”, published last year, “Mexican immigration is leading towards the demographic reconquista of areas Americans took from Mexico...it is also blurring the border between Mexico and America, introducing a very different culture.”

If true, this would obviously be a big problem in its own right. It would also reinforce centrifugal trends that are already present in American society. But this section will argue that such fears are much exaggerated. There are problems, to be sure, though these mostly concern America's immigration policy and illegal immigrants. But legal immigrants are neither as numerous nor as culturally different as the pessimists fear. And, far from exacerbating the centrifugal forces in America, immigrants are helping to counteract them.

Some 34m Americans, around 11% of the population, were born abroad. That sounds a lot. But in 1890, a time of mass immigration of Italians, Irish and Jews, that proportion was 15%. At one point, the Irish alone made up 10% of the population.

By far the largest immigrant group now consists of Hispanics. They accounted for around half of America's total population increase between 2000 and 2004, more than in the 1990s. Half the Hispanics are under 27. The Census Bureau forecasts that by 2050 the Hispanic population will have increased by 200%, the population as a whole by 50% and whites by only 30%. At that point, Hispanics will make up just under a quarter of the population, and Mexicans about one-sixth.

That would indeed be a huge share for a single immigrant nation. But by 2050, the descendants of the first Mexican immigrants will be into the fourth or fifth generation. The question is whether by then they will still be a strongly distinctive group. The signs are that, following in the paths of their Irish and Italian predecessors, they will have become assimilated.

Before that, though, stop to consider some of the effects that the immigrants are already having. New arrivals tend to head for New York, Los Angeles, San Francisco, Chicago, Miami and other cities. Over half the immigrants first settle in one of these gateways, and two-thirds of the foreign-born population live in states surrounding them. This is not surprising. The gateways contain networks of people, companies and churches that make newcomers feel at home. The law reinforces this clustering, because family reunification is a common means of legal entry.

As it happens, these preferences are extremely fortunate for America as a whole, because the melting pots are precisely the places that domestic migrants have been leaving in droves. Those five traditional entry points, plus Philadelphia, were the half-dozen cities with the largest net losses of white population during the 1990s.

A never-ending supply

As the previous section has pointed out, departing domestic migrants tend to be younger, hard-working families. New immigrants are also typically younger, hard-working people with families. They help to make up for the domestic outflow (the big difference is that they are far less well-educated). In other words, they save America's great cities from ageing rapidly.

But although Hispanic immigrants arrive at the same points of entry as their Irish and Italian predecessors, they soon spread to the rest of the country. Hispanic and Asian families crop up in the most unlikely places: Indian computer programmers in Plano or Austin, Mexican farm workers in the Dakotas, Asian entrepreneurs in Las Vegas.

The cities that have seen the fastest growth in Hispanics lately are not the traditional magnets of Los Angeles and New York, but smaller cities of the New South—places such as Greensboro, Raleigh and Charlotte, North Carolina. In all of those, the Hispanic population rose by around 600% during the 1990s. The top attractions for Asians are no longer San Francisco and Los Angeles but Atlanta and Las Vegas. That is one reason why America's growing towns and new suburbs are more racially integrated than its old cities.

This immigrant diffusion piggybacks on domestic migration and is essential to the boom in America's fastest-growing areas. Without it, cities that have attracted lots of well-educated domestic migrants would have seized up, becoming top-heavy with university graduates. Arguably, that is happening in San Francisco. But in many boomtowns, Latinos have poured in to take up the basic jobs in construction, food and distribution that cities need to back up their growth. The cities of the inland South and west are wealthy because white Americans are pouring into them. But they keep growing because immigrants are tagging along in the domestic migrants' wake.

This dispersal is allaying the main fear of immigration's critics: that Hispanics will cluster in giant ghettos without interacting with the rest of America. It is true that illegal immigrants are often trapped in a semi-criminalised shadow economy, unable to move up or out. But for the legal sort, the signs of mobility and assimilation are everywhere—not assimilation as in becoming the same as everyone else, but assimilation as in becoming citizens, taking part in politics, enlisting in the army, paying taxes and speaking English.

America seems in no danger of becoming a society divided by language. In 2002, a survey by the Pew Hispanic Centre and the Kaiser Family Foundation found that over 90% of second-generation Hispanics were either bilingual or mainly English-speaking, split equally between the two. In the third generation, more than three-quarters were mainly English-speaking. In the same year, a market-research company, Cultural Access, found that young Latinos watched twice as much English-language as Spanish-language television.

Like their predecessors, Hispanics are busy bettering themselves. First-generation Mexican immmigrant men in their late 40s have had six fewer years of full-time education than their white American-born peers. Their sons are only one year short. That is still regrettable. A mere 10% of Hispanics have university degrees, and the high-school drop-out rate among Hispanic immigrants is worryingly high. Over 40% of 16- to 24-year-old immigrants lack a high-school diploma. But among the children of Hispanic immigrants, the drop-out rate is much lower.

Politically, Hispanics are moving into the mainstream at about the same rate as the Italians or Irish did in the 20th century. This year, Antonio Villaraigosa became mayor of Los Angeles, America's second-largest city, the first Hispanic to hold that job. In 2004, two Hispanics became senators, Mel Martinez in Florida and Ken Salazar in Colorado; 25 congressmen have Hispanic backgrounds. This might be a problem if Hispanic politicians had separatist agendas, such as demanding obligatory Spanish-language teaching in schools. But they do not. Naturally there are specific Hispanic concerns, as there are for all ethnic groups in America (for example, how to deal with illegal immigrants). But Hispanic politics is diverse, and its spectrum is similar to that of the country as a whole. It ranges from the Texan conservatism of the attorney-general, Alberto Gonzales, to the Californian liberalism of Mr Villaraigosa.

Lastly, there is evidence that new immigrants, Hispanics especially, are joining the rest of the American people in the most direct possible way: by marrying them. Almost a third of all marriages involving a Hispanic or Asian partner cross racial lines (counting Hispanics as a race for this purpose). By most standards, American rates of mixed-race marriage have been low: one in 23 marriages in 1990, up to one in 15 in 2000. Latinos seem to be leading the way in breaking down that barrier. Nearly half of all the 3.7m inter-racial marriages in the country have one Hispanic partner. In states with a lot of Hispanic immigration, the rate is surprisingly high: 14% in California and Nevada, around 11% in Washington state, Colorado and Arizona. At this rate, intermarriage will soon stop being exotic and become mainstream. It is another way of stirring the melting pot.

Clubs will keep us together.

Out of trouble and off the streets.

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The glue of society

2,495 words
16 July 2005
The Economist
SUN
English
(c) The Economist Newspaper Limited, London 2005. All rights reserved

The glue of society

Americans are joining clubs again

ON CHRISTMAS DAY 2004, Rick Warren, the pastor of Saddleback church in southern California, got a telephone call from Thailand. The caller, a pastor whom Mr Warren had trained, said a tsunami had just been reported and many people would need help. Before the tsunami had even struck Sri Lanka, Mr Warren was calling a vast network of churches in South-East Asia who got parishioners to safety, and e-mailing an even vaster network of clubs in southern California. Thousands of volunteers went into action overnight. Within a day, food and medicine worth millions of dollars were winging their way from a single church to the disaster-hit regions. This was American civic volunteerism in action, updated for the 21st century.

Voluntary associations have been the secret ingredient of American social dynamism since the country's foundation. “Americans of all ages”, wrote Alexis de Tocqueville, “are forever forming associations.” By connecting people to their neighbours and to the wider world, argued de Tocqueville, civic associations made Americans better informed, safer, richer and better able to govern themselves and create a just and stable society. They developed to provide something for everyone: fraternal bodies such as the Kiwanis and Elks for men, cross-class federations such as the League of Women Voters for women, scouts and girl guides for boys and girls. There were farmers' groups, industrial unions and associations of Elvis impersonators. If the great sorting-out is pulling social bonds apart, then Americans' love of clubs seems the most likely glue to put them back together again.

But will it? In 2000, Robert Putnam, a professor at Harvard, wrote a celebrated book, “Bowling Alone”, which claimed that America's civil society was in crisis. Mr Putnam pointed out that in the two decades to the mid-1990s, the number of Americans who said they had attended a public meeting on local or school affairs had fallen by a third. The proportion who said they attended club meetings fell from nearly two-thirds of the population in the mid-1970s to a little over one-third in the late 1990s.

It was not solely the decline in volunteerism that was the problem. The composition of civic associations was also changing. As many of Mr Putnam's critics pointed out, the absolute number of voluntary associations rocketed during that period, from around 8,000 in the 1950s to just over 20,000 in 2,000. Optimists said this showed that, far from falling apart, civil society in America was actually flourishing. Americans were finding new ways of linking up and influencing public life.

However, it turned out that the new associations belonged to a different species. Whereas the old clubs had many functions, social, recreational and professional, most of the new organisations—bodies such as the Sierra Club or NARAL, a reproductive-rights group—were professionally led advocacy groups. Whereas the old clubs had networks of local chapters that met frequently, the new bodies often had no such networks, or their chapters met only rarely. And whereas the old clubs depended on annual membership dues, the advocacy groups got their money from foundation grants or direct-mail appeals.

The result, argues Theda Skocpol of Harvard University, was that mass participatory civic life in America declined, despite the proliferation of new bodies. The old associations reinforced ideals of good citizenship. Local and national leaders had to take some note of their members' views. And surprisingly large numbers learned the workings of democracy at first hand. National federations could have thousands of local chapters, each with a number of officers elected each year. Mrs Skocpol calculates that in 1955, the 20 largest voluntary associations alone had 5% of the adult population serving in some capacity or other. All these local officers had to run meetings, handle membership dues, keep records and so on.

By contrast, people typically become members of one of the new bodies by replying to a direct-mail shot. There are no local officials. National leaders spend their time fund-raising or lobbying politicians in Washington to change the law. These are not primary schools of democracy.

At first sight, the shift from one kind of organisation to another seems inevitable: it is a product of mobility. “People are like plants,” says Mr Putnam. “When you re-pot us, it takes a while to put down new roots.” Clubs tend to be products of stability. But Americans were moving around a lot, so they started joining long-distance organisations instead of face-to-face clubs.

Yet that cannot be the whole story. There were more face-to-face clubs in the 1950s, when geographical mobility was even higher than it is now. Part of the explanation is that civic volunteerism is also being eroded by things that have little to do with mobility per se: television and computers; hours spent stuck in traffic jams; even the decline of family meals because both parents are at work.

In need of friends

But the bigger part of the explanation has to do with the paradoxical impact of mobility itself on people's clubbiness. Its direct effect is to disrupt community ties. You see this, for example, among Hispanic immigrants, who have lower rates of joining voluntary associations than do native-born Americans. But the indirect effect of mobility is to stimulate the appetite for social bonds, so when they arrive, immigrants strive to rebuild networks—for example, by organising huge celebrations for Cinco de Mayo (Mexico's national day).

Hence the decline of community ties may well be connected to continued geographic mobility. But that does not mean, as pessimists fear, that mobility will continue to eat away at them until America becomes totally atomised. Because mobility stimulates demand for clubs, you would expect to find new forms of civil volunteerism starting to crop up. And you do: after years of decline, civil society is staging a comeback.

This is showing up in three areas. First, after the terrorist attacks of September 11th 2001, civic and public engagement spiked. Church-going and other sorts of voluntary activity increased. Trust in government rose sharply, to a level not seen since the 1960s. Most of these things dropped again soon afterwards, but not all of them.

The 2004 election saw the biggest turnout for almost 40 years. George Bush's vote was 23% higher than it had been in 2000, and John Kerry's was 16% higher than Al Gore's had been, though the smaller parties did less well. The campaign also produced volunteers in droves. There were specific explanations for this: the election was close, and America was at war. Still, September 11th may also have re-engaged Americans with public life.

Moreover, there are now four years of indicators showing that the terrorist attacks had an enduring impact on one specific group: those who were in their late teens or early 20s at the time. A project at the University of Maryland under Bill Galston is looking at the attitudes of this dotcom generation. In the year after September 11th, volunteering by 15-25-year-olds leapt, with 40% saying they had volunteered over the previous 12 months, compared with a third for all age groups. That surge has endured. The University of California at Los Angeles is tracking civic engagement at universities, and has found that college freshmen are much more likely to keep up to date with and discuss politics than they were in 2000.

After the second world war, the shared experience of combat created a “greatest generation” that consistently voted more, joined more clubs and volunteered more hours than either their parents or their children. It is too early to tell whether the terrorist attacks will have anything like that impact. But the evidence is growing that they have created a “9/11 generation”.

Second, the internet is at last beginning to have an effect on voluntary associations. When Mr Putnam published “Bowling Alone”, one of the most common objections to his thesis was that he had underestimated the role of technology (which was then caught up in the dotcom bubble). Yes, the techno-optimists said, people may not be joining traditional clubs, but they are joining “virtual communities” online. Five years later, they are being proved right.

The electronic welcome mat

At first, it seemed as though Mr Putnam's scepticism was justified. The anonymity of virtual communities appeared to be fatal to the creation of trust and of real civic bonds. When half the members of a teenage girls' online chatroom turned out to be middle-aged men, it was hardly a Tocquevillean moment. But over the past few years, online groups have started to use “convening technology” to create face-to-face social bonds. For example, if you go to meetup.com, you can type in where you live and what your interests are—say Young Republicans, Chihuahuas or Brazilian reggae—and the site will tell you where and when Young Republicans, Chihuahua fanciers or Brazilian reggae enthusiasts are meeting up within 15 miles of your home over the next two weeks.

One of the founders of Meetup, in New York in the aftermath of the September 11th attacks, was Scott Heiferman, who had been reading “Bowling Alone”. “In those first few days after 9/11”, he says, “New York felt more like a city of neighbours than of strangers. The question I started with was: how do you start an association today? Do you need a building in Washington? No, you go online.”

Since 2002, Meetup has been the forum for over 100,000 clubs with 2m members. This spring there were 2,400 Meetup meetings a week, about 50% more than a year earlier. It is true that these are often meetings of the like-minded, of people with particular tastes in common, rather than universal gatherings of the old national federations that tied disparate groups together. It is also too early to say whether a single website will reverse decades of civic decline: meetup.com is only three years old and has just started charging, with unpredictable consequences.

Still, the growth is impressive. And Meetup is not the only example. One of the most interesting sideshows of the 2004 election was Howard Dean's successful use of the internet to mobilise supporters and raise money. Politically, his campaign was a disaster, but party managers everywhere took notice.

Moreover, these internet-generated meetings are the traditional face-to-face kind that Mr Heiferman calls “the old Tocquevillean stuff”. To cite one small example, the New York Chihuahua club organised a protest by city dog owners against attempts to close dog parks. “The 300 Chihuahua groups around the world think of themselves as a chapter-based organisation,” says Mr Heiferman. In the past, when you moved house, you could lose touch with your local chapter. Now you go on online and plug into a network.

The third force helping to revive old-fashioned civic life is religion, and one sort of religious organisation in particular, the megachurch. In many ways, religion itself is an exception to the rule that chapter-based voluntary associations are in decline. Churches are the archetypical civic clubs. Congregations meet regularly face to face. They give money every week. Parish committees are the equivalents of local chapters. Churches have long played a hidden (and sometimes not so hidden) part in political life, from the black churches' role in the civil-rights era to Evangelical Protestant churches in Mr Bush's re-election.

Reliable figures on recent church attendance are hard to come by, but both Gallup polls and church records suggest it was flat between about 1980 and 1998. Some studies, and a mass of anecdotal evidence, suggest that in the past few years attendance may well have been rising. It is pretty safe to say that church attendance has not fallen—and that alone makes churches stand out from the general civic decline.

But over the past few years, one particular part of the American religious line-up has done far more than merely avoid decline. This is the megachurch, usually defined as a church with an average congregation of more than 2,000 each weekend. In 1960, there were fewer than ten of these. Now the number has risen to at least 1,200, according to the Hartford Institute for Religion Research. Twenty of these churches have weekly congregations of 10,000; three have over 20,000. They are Willow Creek outside Chicago, Lakewood in Houston and California's Saddleback. Nearly all their growth has taken place in the past 20 years. Saddleback, which has 82,000 people on its church rolls, held its first service 25 years ago.

Mr Putnam points to two aspects of the success of megachurches that matter to civic organisation in America. Neither has anything to do with doctrine. The first is that founders of megachurches made them attractive to people who were mildly religious but not committed in advance. Mr Warren of Saddleback and Bill Hybels of Willow Creek both went round asking neighbours who did not go to church what they disliked about it and what would persuade them to go.

They redesigned their churches on the basis of this consumer research. Out went 200-year-old hymns, pulpits and even church-like buildings. In came information booths, food courts, churches that look like schools, reggae services and sermons with Powerpoint presentations. As one Californian pastor told the Hartford Institute, “We're trying to create an environment here so the unchurched person can come in and say, ‘This is a church like I have never known.' ” If megachurches can win millions of new supporters by lowering barriers to entry, there is no reason why secular civic organisations cannot do the same.

The second and more important feature of the megachurches is that they have created huge numbers of small groups. Saddleback has 2,600 small groups, co-ordinated by 9,200 ministers, for its congregation to join—for computer nerds, cyclists, knitters, you name it. This is a close approximation to the thousands of chapters of the old-fashioned voluntary associations, and makes it possible to engage in social activism on a grand scale. Last year, Saddleback decided to feed all 42,000 homeless people in Orange County for 40 days, and did it.

According to Peter Drucker, a veteran management writer, “The most significant phenomenon in the first half of the 20th century was the company. The most significant phenomenon in the second half of the 20th century was the large pastoral church.” Just as small churches civilised the Wild West because they were the first real community organisations in frontier towns, so megachurches—which are most prevalent in new suburbs and in the sunbelt—are providing community bonds on the new frontier of America's middle-class migrants.

We may know otherwise.

The current situation for California vs. the rest of America may predict the situation for America vs. the rest of the world. Here we have long been handicapped by a subpar public school system and a suspect immigration policy. People from all over come here for quality graduate education--many go back home, but many like the quality of life and stay. Capable individuals who have the capacity to constantly reinvent themselves and adapt thrive here--the others become marginalized into service support capacities or have to acquiesce altogether and move away. The result is a more potent socioeconomic engine, both varied and lean, residing at the top of the value chain. What would prevent America from achieving the same status with respect to the rest of the world? Protectionism. Welfare. Parochialism. Nostalgia. A failure to simply recognize the following: there is no such thing as a social contract in the modern world.

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America Isn't Ready [Here's What To Do About It] In the relentless, global, tech-driven, cost-cutting struggle for business ...

GEOFFREY COLVIN
4,405 words
25 July 2005
Fortune
U.S. Edition
70
English
© 2005 Time Incorporated. Provided by ProQuest Information and Learning. All Rights Reserved.

IT'S A CRISIS OF CONFIDENCE unlike anything America has felt in a generation. Residents of tiny Newton, Iowa, wake up to the distressing news that a Chinese firm--What's it called? Haier? That's Chinese?--wants to buy their biggest employer, the famed but foundering Maytag appliance company. Two days later, out of nowhere, a massive, government-owned Chinese oil company muscles into the bidding for America's Unocal. The very next day a ship in Xinsha, China, loads the first Chinese-made cars bound for the West, where they'll compete with the products of Detroit's struggling old giants.

All in one week. And only two months earlier a Chinese company most Americans had never heard of took over the personal computer business formerly owned--and mismanaged into billions of dollars of losses--by the great IBM.

"Can America compete?" is the nation's new No. 1 anxiety, the topic of emotional debate in bars and boardrooms, the title of seminars and speeches offered by the liberal Progressive Policy Institute, the conservative economist Todd Buchholz, and countless schools and Rotary Clubs. The question is almost right, but not quite. We're wringing our hands over the wrong thing. The problem isn't Chinese companies threatening U.S. firms. It's U.S. workers unable to compete with those in China--or India, or South Korea. The real question is, "Can Americans compete?"

The stakes are mammoth: Respectable analysts believe it's possible--not certain, but possible--that the U.S. standard of living, after decades of steady ascent, could stall or even begin to decline. More worrisome is the chance that if the world's most powerful nation finds itself getting poorer rather than richer, some kind of domestic or even global political crisis could follow.

As for the big question at the center of it all--Can we compete?- -the answer isn't obvious. The don't-worry-be-happy crowd points out that our last national fit of wailing and garment rending, when Japan was going to smite us in the 1980s, proved unfounded. We adapted and prospered, as we always had (and Japan didn't). But today's situation is so starkly different that it's tough to find comfort in our experience then.

We're not building human capital the way we used to. Our primary and secondary schools are falling behind the rest of the world's. Our universities are still excellent, but the foreign students who come to them are increasingly taking their educations back home. As other nations multiply their science and engineering graduates-- building the foundation for economic progress--ours are declining, in part because those fields are seen as nerdish and simply uncool. And our culture prizes cool.

No one is saying that Americans can't adapt and win once more. But look at our preparedness today for the emerging global economy, and the conclusion seems unavoidable: We're not ready.

To understand better whether Americans are destined to be the scrawny and pathetic dweebs on the world's economic beach, it's necessary to refine the question. Who is most threatened? How come? What will it take to make America stronger in a new economic world? What political forces could propel--or derail--progress?

Many iconic U.S. firms--Coca-Cola, Procter & Gamble, Texas Instruments --already do most of their business and employ most of their workers outside the U.S. Conversely, some of the most American brands you can think of--Hellmann's mayonnaise, Jeeps, BV California wines--are owned by non-U.S. companies (Unilever, DaimlerChrysler, and Diageo, respectively). To complicate matters further, many products of U.S. companies are made outside the U.S.--Maytag refrigerators are no longer made in Galesburg, Ill., but in Mexico-- while many non-U.S. companies make products here--your new Toyota may have come from Kentucky. Now add a few more twists: Your Dell laptop may have been assembled in Malaysia from parts made by American companies in Thailand.

The truth is that large companies transcended nationality long ago, and globalization gives them as many opportunities as problems. It increasingly lets them hire, source, and sell wherever they like, and that is basically good news no matter where the incorporation papers are filed.

For American workers, globalization is a radically dicier proposition--far more so than most of them realize. The fast- changing economy is exposing vast numbers of them to global labor competition, and it's a contest millions of them can't win right now.

Three main factors are changing the game. First, the world economy is based increasingly on information, bits and bytes that have to be analyzed, processed, and moved around. Examples: software, financial services, media. Second, the cost of handling those bits and bytes--that is, of computing and telecommunications-- is in free fall. Wide swaths of economic activity can be performed almost anywhere, at least in theory.

Turning theory into reality is the third factor: Low-cost countries--not just China and India but also Mexico, Malaysia, Brazil, and others--are turning out large numbers of well-educated young people fully qualified to work in an information-based economy. China will produce about 3.3 million college graduates this year, India 3.1 million (all of them English-speaking), the U.S. just 1.3 million. In engineering, China's graduates will number over 600,000, India's 350,000, America's only about 70,000.

The result is that many Americans who thought outsourcing only threatened factory workers and call-center operators are about to learn otherwise. That is a giant development, because information- based services are the heart of the U.S. economy. With 76% of its jobs in services, America's economy is the most service-intensive of any major country's. Of course many of those jobs can't be shipped abroad: Chefs, barbers, utility and NFL linemen, and many others know they can't be replaced by even the smartest person in Bangalore.

But growing numbers of other service jobs are not safe. Everyone has heard about the insurance-claims processors, accountants, and medical transcriptionists in India and elsewhere who've taken away U.S. jobs by doing the same work for much less money. More alarming is that the value of outsourced jobs is steadily rising. Morgan Stanley is hiring Indian bond analysts, fearsome quants who can make or cost a company millions. Texas Instruments is conducting critical parts of its next-generation chip development--extraordinarily complex work on which the company is betting its future--in India. American computer programmers who made $100,000 a year or more are getting fired because Indians and Chinese do the same work for one- fifth the cost or less.

The big question is how far all this will go. A massive new study from the McKinsey Global Institute predicts that some industries could be changed beyond recognition. In packaged software worldwide, 49% of jobs could in theory be outsourced to low-wage countries; in infotech services, 44%. In other industries the potential job shifts are smaller but still so large they'd create major dislocations: Some 25% of worldwide banking jobs could be sent offshore, 19% of insurance jobs, 13% of pharmaceutical jobs.

Looking at occupations rather than industries, some fields will never be the same. McKinsey figures that 52% of engineering jobs are amenable to offshoring, as are 31% of accounting jobs.

Adding up all the numbers, McKinsey calculates that some 9.6 million U.S. service jobs could theoretically be sent offshore today. That is a staggering number. If all those jobs really did get outsourced, the U.S. unemployment rate would leap from 5% to 11.4%. For various reasons, not all those jobs will get sent abroad. Some companies aren't big enough to make the effort worthwhile. Some have infotech systems so old or messed up that they can't adapt to offshoring. Some managers just don't like the idea.

McKinsey figures that about 4.1 million service jobs will actually get offshored from high-wage countries to low-wage countries by 2008. It doesn't make a forecast for U.S. jobs, but others have done so. Forrester Research puts the number at 3.4 million white-collar jobs by 2015. Researchers at the University of California at Berkeley believe the number will be far larger, perhaps 14 million.

Even those numbers could be too low, because they're based on surveys of company plans today and extrapolations of current trends- -always iffy predictors. Professor Thomas H. Davenport of Babson College believes that outsourcing is about to become radically easier and more widespread for a seemingly mundane reason. Davenport sees industry groups and professional associations rapidly standardizing processes like purchasing and billing, making them easy to measure and assess. When that happens, he says, "the low costs and low risks of outsourcing will accelerate the flow of jobs offshore."

The downward pressure on U.S. wages could be more immediate and severe than you might imagine. It is tempting to suppose that the giant U.S. economy couldn't have felt much strain yet; the total number of offshored white-collar jobs is probably fewer than a million so far. But it doesn't take the shifting of many jobs to produce ripple effects through the whole economy.

Why? Most U.S. workers whose jobs are sent overseas will try to find new ones, perhaps in other industries or occupations. So the offshoring of any jobs will produce job seekers who will tend to push wages down even in industries in which outsourcing isn't happening. Far more significantly, the mere threat of moving jobs offshore is enough to hold wages down--those growing armies of skilled workers around the world are increasing the labor supply in many occupations, and the immutable law of markets is that when supply goes up, prices come down. It has happened in all kinds of other markets--food, clothing, microchips, appliances. Why not in labor?

Some economists believe they see it happening already. They note that something extremely odd occurred in the U.S. economy last year: Average compensation, including pay and benefits, fell. That is a rare event; the last time it happened was 14 years ago. More important, it usually happens in or around recessions or when productivity is going nowhere. But last year wasn't like that. Productivity rose. The economy grew. The unemployment rate was low and falling. Every indicator pointed to strong wage increases, but just the opposite happened. Now some of the nation's most eminent economists, including professor Richard B. Freeman of Harvard and Stephen Roach of Morgan Stanley, believe the supply of overseas workers in newly globalizing labor markets is holding U.S. pay down and will do so for years.

All those university graduates in China and India threaten U.S. living standards in another way. Paradoxically, it's not because they'll end up working for U.S. employers, but because some of them won't, finding jobs instead with domestic companies in their own countries. That's a problem for America if many of those graduates are top students in science and engineering.

You might wonder why we're constantly reading about Chinese graduates in engineering and not in law, medicine, literature, or philosophy. Why this veneration of the pocket-protector set? Engineering is fine, but there's more to life than technology, isn't there? Obviously there is. The question--and for America and the West it's a huge question--is whether there can be economic dominance without technology leadership.

Many economists would say no. "There is no other fundamental mover of economic development than science and technology," Columbia University professor Jeffrey Sachs has said. He notes that until the scientific revolution began in the 17th century, virtually everyone lived on the verge of subsistence. Three centuries of technology breakthroughs are the root of today's abundance in the developed world, and those with a technological edge--America, Japan, and Western Europe--still have the highest standard of living.

So in a world economy that threatens to pull down American wages, the key to fighting back is maintaining technological superiority-- continually creating high-value new jobs that workers in the rest of the world can't do yet. What are the chances? A worrisome sign is that the brightest students from many Asian countries are staying home to get their Ph.D.s rather than coming to America, as they did in rising numbers until the mid-1990s (see charts). Those foreign Ph.D.s have been the driving force in scores of America's most successful and innovative tech firms, but now we're getting fewer of them, and other countries are getting more.

Perhaps worse, those who still come to America for their Ph.D.s-- arguably the best of the best--are returning home in increasing numbers. In economies like China's or India's, growing two or three times faster than America's, elite students see huge opportunities. Even foreign nationals well established in the U.S. are heading home. "Many of my friends are going back," says professor Godwin Wong of Berkeley's Haas School of Business. "They're leaving big corporate jobs here because they can make more money in China."

For the U.S. the loss of technology leadership could be historic. Without that advantage, there would be little to prevent living standards in the world's interconnected economies from equilibrating. The rest of the world's living standards would rise, and-- at least in the near term--America's would decline.

Combine all those trends and the picture isn't encouraging for America. Though the U.S. is still the world's biggest and strongest economy by far, many Americans, from hourly workers to CEOs, feel as if they're getting sand kicked in their faces. They know they need some serious muscle building to match the other guys on the beach. And they're remarkably agreed on how to do it.

The No. 1 policy prescription, almost regardless of whom you ask, comes down to one word: education. In an economy where technology leadership determines the winners, education trumps everything. That's a problem for America. Our fourth-graders are among the world's best in math and science, but by ninth grade they've fallen way behind (see table). As Bill Gates says, "This isn't an accident or a flaw in the system; it is the system."

The good news is that we've overhauled the system before. A century ago, as America changed from an agricultural to an industrial economy, something called the high school movement swept the country. City and town leaders realized that an eighth-grade education, which was all that most people got, was no longer enough. They built and staffed high schools but rejected the European model, which prepared a small minority of young people for college, opting instead to prepare a majority of young people for life and work. This was a revolutionary concept, and many European authorities thought it foolish. But as research by Harvard's Claudia Goldin and Lawrence F. Katz has shown, by 1940, America was far and away the world's best-educated nation, a critical element of its post--World War II economic dominance.

We responded to a changing world again in 1958, after the USSR orbited Sputnik while our rockets kept blowing up on the launch pad. Congress passed the National Defense Education Act, which appropriated federal money for education in math, science, and foreign languages. It worked, along with America's grass-roots response to the threat. We went to the moon, science and engineering became cool, even glamorous, and we gained a wide technology lead.

Now we need to revolutionize our schools again. As the world's richest country, we certainly have the resources, but we seemingly lack the will, while many of our competitors are obsessed with education. In China it's common for middle-school students to attend school from 7:30 A.M. to noon, then from 2 P.M. until 5, and again from 7 to 8:30 P.M. Contrast that with a nation where millions of parents are happy to let their kids spend hours hanging out at the mall or playing Grand Theft Auto on their Xbox or watching Pimp My Ride on MTV. To be sure, many upper-middle-class parents live in wealthy school districts with excellent schools, and they're making private tutoring firms like Sylvan Learning Centers and Kumon into fast-growing businesses. But for most in the broad middle class or below, a top-notch K--12 education is a world away.

Evidence is mounting that the way to begin reform is for legislators to establish high standards for public schools and make the schools more accountable to parents. But even if that notion becomes a movement, it's not clear that better education will guarantee U.S. economic dominance. If we could somehow get our high school math and science scores up to South Korean standards, which would be a gargantuan achievement, then by that measure we'd be as good as they are--but they'd still be cheaper.

A prescription urged just as widely is immigration reform. A critical element of America's economic dominance has been its attraction for the world's brightest, most ambitious people, but today's immigration laws favor family reunification far above talent, intelligence, or credentials. If Albert Einstein wanted to move in today but had no U.S. relatives, he'd have to get in line behind thousands of poorly educated manual laborers who did. In a global economic competition, that policy seems crazy. John Doerr, the legendary Silicon Valley venture capitalist, recommends that every foreign student who gets a Ph.D. at a U.S. university should also get a green card (granting permanent residency) stapled to his or her diploma. But U.S. policy is moving in the opposite direction. The number of available H1-B visas, which allow highly qualified foreign workers to remain in the U.S. for up to six years, has been cut from 195,000 to just 65,000 a year, based on security concerns following 9/11.

U.S. spending on R&D will also have to increase if the country wants to remain technologically dominant. The Task Force on the Future of American Innovation, a group of academic societies, high- tech companies, and industry associations, concludes in a recent report that "the United States still leads the world in research and discovery, but our advantage is rapidly eroding, and our global competitors may soon overtake us." Aggregate R&D spending by six fast-growing economies (China, Ireland, Israel, Singapore, South Korea, Taiwan) is on track to exceed U.S. spending in a few years. Industrial R&D continues to increase, but 71% of that spending is on development, not the kind of basic research that created the transistor and the laser. Federal funding of research in the physical sciences has been declining as a percentage of GDP for 30 years. The Council on Competitiveness, consisting of CEOs, university presidents, and labor leaders, wants federal research spending increased substantially, to 1% of GDP--about $110 billion a year.

Incredible as it seems, America's infotech infrastructure is no longer world-class. We rank only 12th globally in the number of broadband connections per 100 inhabitants. Look closer and the situation is even worse. South Korea is not only more wired (No. 1 globally) but its connections are far faster than ours and are available not just through wires but also through virtually every cellphone. And speaking of our cellphone infrastructure--please don't. Anyone who travels globally knows it's awful by world standards.

Fixing all these problems would be a project of overwhelming proportions, yet it still might not make American workers competitive in today's global labor market. The reason, again, is cost. American workers are enormously more expensive than their peers almost anywhere but in Western Europe. So they must confront what may be the most important question of their working lives: How can they be worth what they cost?

As increasing numbers of them find that they can't be, at least in the short run, the result could be political upheaval. A return to protectionism is looming. When the end of global textile quotas earlier this year caused the rapid loss of 17,000 U.S. jobs--a tiny number in a nation of 141 million workers--the administration found a loophole in the trade treaty and quickly reimposed restrictions. Senator Charles Schumer (D-New York) introduced a bill to impose a 27.5% tariff on Chinese imports, and five Republican Senators signed on as co-sponsors. The Central America Free Trade Agreement, the impact of which would be minuscule in the U.S., is struggling to pass Congress. (No one in Washington seems to think NAFTA would stand a chance of approval today.)

If it all sounds terribly gloomy, it's important to remember that gloominess has a very poor record in predicting the U.S. economy. Many traits that have helped us meet previous challenges are still with us: flexible labor markets, the world's most highly developed capital markets, and a culture that moves on from failure and embraces new ideas. Companies aren't standing still. Trilogy, a business software company in Austin, realized almost three years ago that hiring programmers in the U.S. no longer made sense because it could get them in India for one-fifth the cost. So it offered to help its U.S. coders learn higher-level work, becoming business experts who could help Trilogy customers make more money--for example, by showing Goodyear how to price tires more intelligently. As a general principle, learning higher-level work is what American workers have to do.

And exactly what work would that be? No one is sure, though history says not to panic. Economic crises rarely reveal their solutions, but the solutions usually come along. When U.S. business went through the trauma of restructuring in the 1980s, millions of middle managers got cashiered and wondered what they'd do next. Undreamed-of new industries developed (cellphones, biotech, Internet services), and by the mid-'90s the unemployment rate was the lowest in decades.

That's history. It offers hope but no assurances. History says the rise of China, India, and other developing economies could someday lead to a new equilibrium that's better for everyone. With resources deployed globally to their best use, prices could come down and living standards could eventually increase everywhere. After all, America's rise didn't impoverish Europe. On the contrary, the success of each continent helped the other get richer.

What happens next in the U.S. depends on how workers respond. Trilogy CEO Joe Liemandt recalls what happened when he told programmers he wouldn't need them as programmers anymore: "We told them they could react in one of three ways. They could get really pissed, they could be in denial, or they could work with us to retool their skills. And we had people in each group."

It's time for a massive, urgent American response to the global challenge. As Cisco chief John Chambers says flatly, "We are not competitive." Where to start? Venture capitalist John Doerr, one of America's most passionate competitiveness campaigners, calls education "the largest and most screwed-up part of the American economy." He'd start there. GE chief Jeff Immelt has attacked America's newly restrictive student visa rules. Others focus first on R&D spending or the broadband infrastructure. But the greatest challenge will be changing a culture that neither values education nor sacrifices the present for the future as much as it used to--or as much as our competitors do. And you'd better believe that American business has a role to play--after years of dot-com-bust- and scandal-driven reticence, more corporate leaders need to summon the courage to lead.

While optimism has always been the best guide to predicting the U.S. economy, today's situation is unprecedented. Global product markets have been with us forever and continue to expand. Global capital markets are still developing--watch out, Unocal and Maytag. But global labor markets on a broad scale are a new phenomenon that could, for better or worse, transform the country. How we respond-- in our businesses, our government, and our culture--will shape America in the deepest way.

FEEDBACK gcolvin@fortunemail.com

Don't worry about U.S. companies. Worry about U.S. workers.

Math Problem

U.S. students have fallen behind in mathematical achievement. Here's how 15-year-olds rank against their peers, by country:

1. Finland

2. South Korea

3. Canada

4. Hong Kong

5. Netherlands

28. United States

The time has come for a massive, urgent American response.

See also additional images in Cover Image file and Table of Contents of same issue.See also 4 accompanying articles on pages 78 - 89 of same issue.

THREE COLOR ILLUSTRATIONS: ILLUSTRATIONS BY R. SIKORYAK, IN HOMAGE TO THE CLASSIC CHARLES ATLAS ADVERTISEMENT COLOR PHOTO: SCOUT TUFANKJIA--AP PROGRAMMERS PROTEST in New York against the outsourcing of jobs to places like Chennai, India (below), where tech workers learn Excel. COLOR PHOTO: BOTTOM: SAMANTHA APPLETON [See Caption Above] COLOR PHOTO: MICHAEL REYNOLDS--LANDOV MOVING UP In China, these desperately poor girls in Guyuan county get tuition help from a fund for improving women's education. COLOR CHART: FORTUNE CHART / SOURCE: NATIONAL SCIENCE FOUNDATION Learning Curve Foreign doctoral candidates, who once flocked to U.S. universities, increasingly stay home. Chinese students who earned doctorates at universities in ... China -- 7,000 + U.S -- 2,000+ South Korean students who earned doctorates at universities in ... South Korea -- 2,000+ U.S. -- < 1,000 Taiwanese students who earned doctorates at universities in ... Taiwan -- 1,000 U.S. -- < 1,000

Our stories define us.

If you cannot tell a story about yourself, what has your life meant, really?

---

Title: What's Your Story?
By: Ibarra, Herminia; Lineback, Kent
Harvard Business Review, 0017-8012
January 1, 2005, Vol. 83, Issue 1

Section: MANAGING YOURSELF

What's Your Story?

All of us construct narratives about ourselves -- where we've come from, where we're going. The kinds of stories we tell make an enormous difference in how well we cope with change.

At a recent networking event, senior managers who'd been downsized out of high-paying corporate jobs took turns telling what they had done before and what they were looking for next. Person after person stood up and recounted a laundry list of credentials and jobs, in chronological order. Many felt compelled to begin with their first job, some even with their place of birth. The accounting was meticulous.

Most people spent their allotted two minutes (and lost the attention of those around them) before they even reached the punch line -- the description of what they were seeking. Those who did leave time to wrap up tended merely to list the four or five (disparate) things they might be interested in pursuing next. In the feedback sessions that followed each round of presentations, these "fact tellers" were hard to help. The people listening couldn't readily understand how their knowledge and contacts might bear upon the teller's situation. Even worse, they didn't feel compelled to try very hard.

In our research and coaching on career reorientation, we've witnessed many people struggling to explain what they want to do next and why a change makes sense. One of us, in the context of writing a book, has studied a wide variety of major career shifts; the other has worked extensively with organizations and individuals on the use of narrative to bring about positive change. Each of us has been to enough networking events to know that the one we've described here is not unusual. But we've also seen a lot of people in the midst of significant transitions make effective use of contacts and successfully enlist supporters. What we've come to understand is that one factor more than any other makes the difference: the ability to craft a good story.

Why You Need a Story

All of us tell stories about ourselves. Stories define us. To know someone well is to know her story -- the experiences that have shaped her, the trials and turning points that have tested her. When we want someone to know us, we share stories of our childhoods, our families, our school years, our first loves, the development of our political views, and so on.

Seldom is a good story so needed, though, as when a major change of professional direction is under way -when we are leaving A without yet having left it and moving toward B without yet having gotten there. In a time of such unsettling transition, telling a compelling story to coworkers, bosses, friends, or family -- or strangers in a conference room -- inspires belief in our motives, character, and capacity to reach the goals we've set.

Let's be clear: In urging the use of effective narrative, we're not opening the door to tall tales. By "story" we don't mean "something made up to make a bad situation look good." Rather, we're talking about accounts that are deeply true and so engaging that listeners feel they have a stake in our success. This dynamic was lacking in the event described above. Without a story, there was no context to render career facts meaningful, no promise of a third act in which achieving a goal (getting a job, for instance) would resolve the drama.

Creating and telling a story that resonates also helps us believe in ourselves. Most of us experience the transition to a new working life as a time of confusion, loss, insecurity, and uncertainty. We are scared. "Will I look back one day and think this was the best thing that ever happened?" we ask ourselves. "Or will I realize that this was the beginning of the end, that it was all downhill from here?" We oscillate between holding on to the past and embracing the future. Why? We have lost the narrative thread of our professional life. Without a compelling story that lends meaning, unity, and purpose to our lives, we feel lost and rudderless. We need a good story to reassure us that our plans make sense -- that, in moving on, we are not discarding everything we have worked so hard to accomplish and selfishly putting family and livelihood at risk. It will give us motivation and help us endure frustration, suffering, and hard work.

A good story, then, is essential for making a successful transition. Yet most of us -- like those at the networking event -- fail to use the power of storytelling in pursuit of our cause. Or, when we do craft a story, we do it badly. In part, this may be because many of us have forgotten how to tell stories. But even the best storytellers find tales of transition challenging, with their built-in problems and tensions. Not knowing how to resolve these conflicts, we retreat to telling "just the facts.”

Your Story Has Inherent Drama

At first glance, it's not obvious why stories of transition should present any problems at all. Almost by definition, they contain the stuff of good narrative. (See the sidebar "Key Elements of a Classic Story.") The protagonist is you, of course, and what's at stake is your career. Only love, life, and death could be more important. And transition is always about a world that's changed. You've been let go, or you've somehow decided your life doesn't work anymore. Perhaps you've reached an event or insight that represents a point of no return -- one that marks the end of the second act, a period of frustration and struggle. In the end, if all goes well, you resolve the tension and uncertainty and embark on a new chapter in your life or career.

Not only do transition stories have all the elements of a classic tale, but they have the most important ones in spades. Notice what moves a story along. It's change, conflict, tension, discontinuity. What hooks us in a movie or novel is the turning point, the break with the past, the fact that the world has changed in some intriguing and fascinating way that will force the protagonist to discover and reveal who he truly is. If those elements are missing, the story will be flat. It will lack what novelist John Gardner called profluence of development -- the sense of moving forward, of going somewhere. Transition stories don't have this problem.

Think, for example, of the biblical story of Saint Paul's conversion. In his zeal for Jewish law, Saul had become a violent persecutor of Christians. On the road to Damascus, as the story is told in the New Testament, he was surrounded by light and struck to the ground. A voice from heaven addressed him: "Saul, Saul, why do you persecute me?" He was unable to see; after he changed his mind about Christians, he saw the light, literally. And thus, Saul became Paul, one of the principal architects of Christianity.

What could be more dramatic? Like the Saul-to-Paul saga, most after-the-fact accounts of career change include striking jolts and triggers: palpable moments when things click into place and a desirable option materializes. The scales fall from our eyes, and the right course becomes obvious -- or taking the leap suddenly looks easy.

Here's how that turning point took shape for one manager, a 46-year-old information technologist named Lucy Hartman (names in the examples throughout this article have been changed). Lucy was seemingly on a course toward executive management, either at her current company or at a start-up. Being coached, however, revealed to her an attractive alternative. She began to wonder about a future as an organizational-development consultant, but she wasn't quite ready to make that change. She did move to a smaller company, where she felt she could apply everything she had learned in coaching. "By this time, it was clear that I wanted to move on to something different," she said. "But I needed to build more confidence before taking a bigger chance on reinventing myself. So I decided to stay in the high-tech environment, which I knew well, but also to go back to school. I started a master's program in organizational development, thinking it would at least make me a better leader and hoping it would be the impetus for a real makeover." Still, Lucy agonized for months over whether to focus exclusively on school, convinced that it wasn't sane to quit a job without having another one lined up.

Three incidents in quick succession made up her mind. First, she attended a conference on organizational change where she heard industry gurus speak and met other people working in the field. She decided this was clearly the community she wanted to be a part of. Second, her firm went through an acquisition, and the restructuring meant a new position for her, one fraught with political jockeying. Third, as she tells it: "One day my husband just asked me, 'Are you happy?' He said, 'If you are, that's great. But you don't look happy. When I ask how you are, all you ever say is that you're tired.'" His question prompted her to quit her job and work full-time on her master's.

Lucy's story illustrates the importance of turning points. We need them to convince ourselves that our story makes sense, and listeners like them because they spin stories off in exciting new directions. They make listeners lean forward and ask the one question every effective story must elicit: "What happened next?”

The Challenge of the Transition Story

Let's return to that networking event and all the drab stories (actually, nonstories) people told. If transition stories, with their drama and discontinuity, lend themselves so well to vivid telling, why did so many people merely recount the basic facts of their careers and avoid the exciting turning points? Why did most of them try to frame the changes in their lives as incremental, logical extensions of what they were doing before? Why did they fail to play up the narrative twists and turns?

To begin with, it's because they were attempting to tell the story while they were still in the middle of the second act. Look back over Lucy's story, and you'll realize that the turning points she described were not very different from incidents all of us experience daily. They assumed great significance for Lucy only because she made them do so. For most of us, turning points are like Lucy's rather than Saul's; they tend to be much more obvious in the telling than in the living. We must learn to use them to propel our stories forward.

Additionally, stories of transition present a challenge because telling them well involves baring some emotion. You have to let the listener know that something is at stake for you personally. When you're in a job interview Or when you are speaking to relative strangers, that is difficult to do.

Another issue that makes life stories (particularly ones about discontinuity) problematic: Not only does a good story require us to trust the listener, but it must also in- spire the listener to trust us. A story about life discontinuity raises red flags about the teller's capabilities, dependability, and predictability. Listeners wonder, "Why should I believe you can excel in a new arena when you don't have a track record to point to?" And on a deeper level, even greater suspicions lurk: "Why should I trust that you won't change your mind about this? You changed your mind before, didn't you?”

To tell a life story that emphasizes such juicy elements as transformation and discontinuity is to invite questions about who we are and whether we can be trusted. No one wants to hire somebody who's likely to fly off in an unexpected direction every six months. So we downplay the very things that might make our stories compelling. To earn the listener's trust, we make ourselves appear safe -- and dull and unremarkable.

Is there a way to tell a lively story and inspire others' confidence? Yes, but it requires a deep understanding of what really makes people believe in what we're saying.

The Struggle for Coherence

All good stories have a characteristic so basic and necessary it's often assumed. That quality is coherence, and it's crucial to life stories of transition.

This was a challenge for Sam Tierman, a former corporate HR executive one of us coached through a career transition. Sam had spent 18 years running HR in a number of good-sized regional banks, but his last three jobs hadn't ended well. He'd been downsized out of one, he'd quit another in frustration, and he'd been fired from the last -- which finally led him to realize he had a career problem. While he was energized by the interplay between individuals and organizations, he hated the mundane, administrative aspects of the work. When he had a boss who considered HR a strategic function and who included the HR head at the executive table, he thrived. But when he worked for someone who saw HR as a body shop -- "Find the bodies, run the benefits, and keep the government off our back" -- Sam hated his work. In his last job, his feelings had been obvious, and a minor problem with some personnel analysis was what did him in. Sam, in fact, had taken this job with high hopes. The CEO who hired him considered HR strategic. Unfortunately, that CEO left and was replaced by one who did not.

As a result, Sam gave up on finding or keeping a boss he could work with in a corporate setting. As do so many frustrated executives, he decided he would prefer to work for a start-up. The problem was that he lacked, on the face of it, any of the experience or qualities wanted by people who found and fund start-ups. It was not obvious how Sam could tell a coherent career story that would bridge the chasm between stodgy overhead departments in banks and the high-energy world of start-ups.

Coherent narratives hang together in ways that feel natural and intuitive. A coherent life story is one that suggests what we all want to believe of ourselves and those we help or hire -- that our lives are series of unfolding, linked events that make sense. In other words, the past is related to the present, and from that trajectory, we can glimpse our future.

Coherence is crucial to a life story of transition because it is the characteristic that most generates the listener's trust. If you can make your story of change and reinvention seem coherent, you will have gone far in convincing the listener that the change makes sense for you and is likely to bring success -- and that you're a stable, trustworthy person.

As important, you will also have gone far in convincing yourself. Indeed, it's the loss of coherence that makes times of transition so difficult to get through. Think of the cartoon character who's run off the edge of a cliff. Legs still churning like crazy, he doesn't realize he's over the abyss -- until he looks down. Each of us in transition feels like that character. Coherence is the solid ground under our feet. Without it, we feel as though we're hanging in midair -- and we're afraid that if we look down, we'll plummet to our doom.

Charlotte Linde, a linguist who has studied the importance of coherence in life stories, makes clear in her work that coherence emerges in large part from continuity and causality. If we fail to observe these two principles, we create a sense of incoherence, or, in Linde's words, the "chilling possibility that one's life is random, accidental, unmotivated." And what's chilling to us will certainly be off-putting to those listening to our stories.

Emphasizing Continuity and Causality

Now it becomes understandable why so many speakers in that networking meeting failed to do more than recite facts. They were trying to downplay discontinuity; to gloss over how large a professional jump they wanted to make; to avoid appearing wayward, lost, and flailing. It was a misguided strategy, for listeners are particularly sensitive to lapses of coherence in life stories. They actually look for coherence in such stories. Failure to acknowledge a large degree of change will put off listeners and undermine their trust.

As storytellers, we must deal explicitly with the magnitude of change our stories communicate. We can do that and still inspire trust if we focus on establishing continuity and causality. The following suggestions can help.

Keep your reasons for change grounded in your character, in who you are. There's probably no rationale for change more compelling than some internal reason, some basic character trait. In its simplest version, this explanation takes the form of "I discovered I'm good at that" or "I like that -- it gives me real pleasure." This approach, noted by Linde and found by us in our work to be extremely useful, allows storytellers to incorporate learning and self-discovery into life stories. We can try something, learn from the experience, and use that learning to deepen our understanding of what we want. Many turning points can be used in this way. Note that it's not wise to base the reasons for transformation primarily outside ourselves. "I got fired" may be a fact we must explain and incorporate into our stories, but it's rarely recognized as a good justification for seeking whatever we're seeking. External reasons tend to create the impression that we simply accept our fate.

Cite multiple reasons for what you want. You might, for instance, mention both personal and professional grounds for making a change. (Obviously, these must be complementary rather than mutually exclusive or contradictory.) The richer and more varied the reasons compelling you to change, the more comprehensible and acceptable that change will appear. Sam, the former HR executive, was able to cite a number of unusual projects he had worked on, which indicated, though in a big-company context, his ability to think and act entrepreneurially. Additionally, his undergraduate training in electrical engineering and his MBA in finance from a prestigious school were evidence of the technical and analytical bent preferred by the start-ups he knew.

Be sure to point out any explanations that extend back in time. A goal rooted in the past will serve far better than one recently conceived. Your story will need to show why you could not pursue the goal originally, but here, external causes -- illness, accident, family problems, being drafted, and so on -- can play a leading role.

Reframe your past in light of the change you're seeking to make. This is not to suggest that you hide anything or prevaricate. We all continually rethink and retell our own life stories. We create different versions that focus on or downplay, include or exclude, different aspects of what has happened to us. Some elements of the jobs we've held probably fit well with our change plans and can be used to link our past experiences with the part of our life that we're advancing toward. The key is to dissect those experiences and find the pieces that relate to our current goals. (For advice on how to do this, see the sidebar "Does Your Résumé Tell a Story?")

Choose a story form that lends itself to your tale of reinvention. Certain forms -- love stories, war stories, epics -- are as old as narrative itself. There are stories of being tested and stories of being punished. When it comes to describing transition and reinvention, it can be helpful to present the story in a vessel familiar to most listeners. Of the time-honored approaches, two to consider are the maturation (or coming-of-age) plot and the education plot.

The maturation plot was useful to Gary McCarthy, who quit his job as a strategy consultant with no idea of what he would do next. As he told his story at age 35, he looked back over his career and realized he had always responded to social pressure, bending to what others thought was the right thing for him to do. After receiving a negative performance appraisal, he saw that he needed to be his own man. "You'd better be damn sure when you wake up that you're doing what you want to be doing," he said to himself, "as opposed to what you feel you ought to be doing or what somebody else thinks you ought to be doing.”

Lucy Hartman's story is a good example of the education plot, which recounts change generated by growing insight and self-understanding. It was a mentor, her executive coach, who let her glimpse a possible new future, and she continued to learn in her master's program and by coaching others. In her version of events, the more she learned about the human side of enterprise, the more she realized her desire to work in and contribute to this area.

All these suggestions are ways to frame the discontinuity in a transition story and provide the coherence that will reassure listeners. They demonstrate that, at your core, the person you were yesterday is the person you are today and the person you will be tomorrow. And they establish that there are good and sufficient causes for change. If you create the sense that your life hangs (and will hang) together, you'll be free to incorporate the dramatic elements of change and turmoil and uncertainty into your story that will make it compelling.

Telling Multiple Stories

We've noted the challenge of crafting a story, complete with dramatic turning points, when the outcome is still far from clear. The truth is, as you embark on a career transition, you will likely find yourself torn among different interests, paths, and priorities. It wouldn't be unusual, for example, for you to work all weekend on a business plan for a start-up, return to your day job on Monday and ask for a transfer to another position or business unit, and then have lunch on Tuesday with a headhunter to explore yet a third option. This is simply the nature of career transition. So how do you reconcile this reality with the need to present a clear, single life story of reinvention, one that implies you know exactly where you're going?

For starters, keep in mind that, in a job interview, you don't establish trust by getting everything off your chest or being completely open about the several possibilities you are exploring. In the early stages of a transition, it is important to identify and actively consider multiple alternatives. But you will explore each option, or type of option, with a different audience.

This means that you must craft different stories for different possible selves (and the various audiences that relate to those selves). Sam chose to focus on start-ups as the result of a process that began with examining his own experience. He realized that he had felt most alive during times he described as "big change fast" -- a bankruptcy, a turnaround, and a rapid reorganization. So he developed three stories to support his goal of building a work life around "big change fast": one about the HR contributions he could make on a team at a consulting company that specialized in taking clients through rapid change; one about working for a firm that bought troubled companies and rapidly turned them around; and one about working for a start-up, probably a venture between its first and second, or second and third, rounds of financing. He tested these stories on friends and at networking events and eventually wrangled referrals and job interviews for each kind of job.

The process is not only about keeping options open as long as possible; it's also about learning which ones to pursue most energetically. In Sam's case, what became clear over a number of conversations was that the consulting firms he respected tended not to hire people of his age and credentials unless they had perfectly relevant experience. Neither did opportunities with turnaround firms appear to be panning out. But Sam did make progress toward some start-ups. After one of them engaged him for a series of consulting assignments, he was able to convert that relationship into a job as chief administrative officer. That position, in turn, exposed him to many contacts in the start-up community. Most important, it stamped him as a bona fide member of that world. Having stripped the stodgy corporate aura from his résumé, he eventually became the CEO of a startup set to commercialize some technology developed by and spun out of a large company. By this point, four fun years had elapsed, and Sam had revised his narrative many times, with each step contributing to a more and more coherent story of change.

Just Tell It

Any veteran storyteller will agree that there's no substitute for practicing in front of a live audience. Tell and retell your story; rework it like a draft of an epic novel until the "right" version emerges.

You can practice your stories in many ways and places. Any context will do in which you're likely to be asked, "What can you tell me about yourself?" or "What do you do?" or "What are you looking for?" Start with family and friends. You may even want to designate a small circle of friends and close colleagues, with their knowledge and approval, your "board of advisers." Their primary function would be to listen and react again and again to your evolving stories. Many of the people we have studied or coached through the transition process have created or joined networking groups for just this purpose.

You'll know you've honed your story when it feels both comfortable and true to you. But you cannot get there until you put yourself in front of others -- ultimately, in front of strangers -- and watch their faces and body language as you speak. For one woman we know, June Prescott, it was not simply that practice made for polished presentation -- although her early efforts to explain herself were provisional, even clumsy. (She was attempting a big career change, from academe to Wall Street.) Each time she wrote a cover letter, interviewed, or updated friends and family on her progress, she better defined what was exciting to her; and in each public declaration of her intent to change careers, she committed herself further.

June's experience teaches a final, important lesson about undergoing change. We use stories to reinvent ourselves. June, like Sam, was able to change because she created a story that justified and motivated such a dramatic shift.

This is the role of storytelling in times of personal transition. Getting the story right is critical, as much for motivating ourselves as for enlisting the help of others. Anyone trying to make a change has to work out a story that connects the old and new selves. For it is in a period of change that we often fail, yet most need, to link our past, present, and future into a compelling whole.

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By Herminia Ibarra and Kent Lineback


Herminia Ibarra (herminia.ibarra@insead.edu) is the InSead Chaired Professor of Organizational Behavior at Insead in Fontainebleau, France, and the author of Working Identity: Unconventional Strategies for Reinventing Your Career (Harvard Business School Press, 2003). Kent Lineback (kentlineback@comcast.net) is a Cambridge, Massachusetts-based writer and coach on storytelling and change.


Key Elements Of a Classic Story

All great stories, from Antigone to Casablanca to Star Wars, derive their power from several basic characteristics:

>> A protagonist the listener cares about. The story must be about a person or group whose struggles we can relate to.

>> A catalyst compelling the protagonist to take action. Somehow the world has changed so that something important is at stake. Typically, the first act of a play is devoted to establishing this fact. It's up to the protagonist to put things right again.

>> Trials and tribulations. The story's second act commences as obstacles produce frustration, conflict, and drama, and often lead the protagonist to change in an essential way. As in The Odyssey, the trials reveal, test. and shape the protagonist's character. Time is spent wandering in the wilderness, far from home.

>> A turning point. This represents a point of no return, which closes the second act. The protagonist can no longer see or do things the same way as before.

>> A resolution. This is the third act, in which the protagonist either succeeds magnificently or fails tragically.

This is the classic beginning-middle-end story structure defined by Aristotle more than 2,300 years ago and used by countless others since. It seems to reflect how the human mind wants to organize reality.

Does Your Résumé Tell a Story?

Though the terms are often used interchangeably, there's a big difference between a curriculum vitae and a résumé.

A CV is an exhaustive and strictly chronological list of facts about your professional life. You may need one, but don't expect it to serve your cause in a period of transition. To the extent it tells a story, that story is constructed wholly in the reader's mind.

If you want to give your credentials narrative shape, use a résumé -- and understand that you will almost certainly need more than one version. Each will highlight and interpret your experience differently in light of the job or career alternatives you're exploring.

The process of putting together a résumé is as valuable as the product, because it entails drafting your story. Everything in the résumé must point to one goal -- which, of course, is the climax of the story you're telling. Build it in three parts.

First, describe the position you want.

Second, create a buffeted list of experience highlights that clearly demonstrate your ability to do that job. Consider every piece of experience you have (don't forget volunteer work or anything else that might apply), and identify which parts support the story you're telling.

Third, summarize your professional work. This section of your résumé has the appearance of a CV, in reverse chronological order, and includes all the relevant positions you've held; for each job, it shows dates of employment as well as your responsibilities and accomplishments. But these descriptions are couched in the same terms as your experience highlights. In fact, every claim in your highlights section (which supports your overall goal) must be supported by your job summaries.

Follow these steps, and your résumé will tell a coherent story. The work you have done, and the skills and interests you have developed and revealed, will point to a clear and desirable resolution: your stated goal.


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Source: Harvard Business Review, Jan2005, Vol. 83 Issue 1, p64, 8p, 4c.
Item Number: 15524480