The secret to Detroit’s turnaround
Ten years ago, if someone in Detroit said he or she was an entrepreneur, your first thought might have been they were out of a job.
From 2000-10, Michigan lost over 850,000 jobs — more than all other states combined. Even before Detroit entered bankruptcy, it was clear that the region could no longer rely on just one industry as the source of its wealth and prosperity. Around the nation, theories abound on the best approaches to revitalize rust belt economies.
Many in southeast Michigan coalesced around an economic development strategy that was part of Detroit’s DNA: entrepreneurship. In order to rise again, Detroit would need to diversify its economy through innovation, small business growth, and culture change.
In the absence of a well-functioning private market, philanthropists stepped in. Ten foundations, both local and national, came together to commit $100 million to a new fund. And so the New Economy Initiative (NEI) was born in 2007, with the ambitious goal of transforming a failing economy into a diversified engine of opportunity through entrepreneurship.
Nearly 10 years later, it’s clear this model of entrepreneurship-centered economic development is beginning to transform Metro Detroit’s economy.
Since 2009, NEI’s investments in organizations supporting entrepreneurs have helped launch 1,700 companies (40 percent of which are minority-owned, twice the national average) and create 17,500 jobs (many in high-tech sectors), according to new studies by the W.E. Upjohn Institute for Employment Research and PricewaterhouseCoopers. This has boosted output in the regional economy by nearly $3 billion.
There is also a changing of culture in southeast Michigan. We’re no longer skeptical of entrepreneurs; entrepreneurship is both encouraged and celebrated.
In a recent survey, over 60 percent of local entrepreneurs said they are receiving more attention from local governments and media today than they were five years ago. The percent who felt there was sufficient financial and technical support for businesses like theirs increased three-fold over that same period. Since 2007, the number of business service providers — including accelerators, incubators, and training programs — jumped from only a handful to nearly 60 in 2016
As Justine Sheu, the founder of two local tech startups, recently put it: “Three millennials with zero business backgrounds were able to build and grow two companies because of the ecosystem here. ... The entrepreneurial energy is palpable.”
While every region is unique, there are universally applicable lessons to be drawn from this experience.
First, investing in inclusion is critical. Historically underrepresented groups — women, people of color, immigrants — must be central to economic development efforts. Cities cannot afford to apply a neighborhood or urban core strategy alone; they must take a truly regional approach. Inclusiveness extends to the type and size of businesses, as well. We must support the barbershop and biomedical research center, tamale-makers and tech companies.
Second, we need to define cities by their assets, not deficits. When many would talk about Detroit, they were fixated on the city’s shortcomings. Yet the region has the largest concentration of engineers in the world, a wellspring of creatives, and three top-tier universities. Investment decisions should be directed toward areas where value already exists, not simply toward solving for the deficiencies.
Lastly, collaboration should be celebrated. Building something as complex as an economic ecosystem requires the private, public and nonprofit sectors to work together. Financial resources are important, but so too is leadership, vision and connections. As NEI learned, to foster innovation you must first embody it.
Our collective task now — in southeast Michigan and across the nation — is to ensure that this progress is felt by each and every person who calls Detroit home.
Pamela Lewis is the director of the New Economy Initiative.