Unlock the full potential of people in left-behind places, October 2018
Application for our second mission are now open. To apply please click here.
Why we’ve chosen this mission?
Across the developed world, two issues dominate the headlines. Firstly, the despair and anger of places (often termed the “rust belt” areas) that feel left behind by the economic changes of the last few decades. Secondly, a fear that the next waves of economic change (like A.I. and the rise of China) will leave behind a whole set of other places.
The most pressing need is to create new solutions for the people living in left-behind places. But if we can get those solutions right, we will have the tools to prevent other places falling behind in the future.
Most of the debate about these solutions focuses on what Governments should do. Clearly there are lots of important solutions that do depend on Government action, like redistributing income, land-use regulation and taxation. But a lot more of the solutions could and should rely on people in left-behind places transforming their own lives, as individuals, as families, as businesses and as communities. They need direct access to a diverse range of innovative solutions - in education, enterprise, healthcare, financial services, transport, new types of employment, housing, recreation, personal development, business growth, family support, etc.
We believe that this is a great space for entrepreneurs who can create new commercial and affordable products and services that help people with the motivation, opportunities and capabilities to live the most fulfilling lives.
There are deep insights from social science into both the problems and solutions, and exciting opportunities to match those insights with tech products and services. Given the common issues they face, left-behind places in the developed world provide scalable, global market opportunities for entrepreneurs, selling directly to consumers and to businesses.
Do you want to join this mission?
On October 1st 2018 in London, we will bring together 50 Founders from around the world with the common mission of unlocking the full potential of left-behind places. The cohort will have a diverse mix of business, tech, creative and specialist skills. The businesses they build will be ambitious, using exponential tech to achieve scale and pace of impact, and innovative, shooting for the stars rather than playing it safe. The people who join the mission will have lots of skills, creativity and energy, and will be open minded about the solutions they want to create.
Could you be one of the Founders on the programme? The programme offers you the chance to: explore with experts the problems faced in left-behind places; design, test and build innovative and effective solutions that are loved by users; find your Co-Founder and create your new business; and access investors and partners to back your vision. During the course of the programme you will develop new life-changing networks and learn new skills.
During the programme you will be paid a £12K stipend paid in equal installments over the 9 months, have a co-working space with your fellow 50 Founders and be supported by an intensive programme and an extensive network of distinguished experts.
Alternatively, could you be one of the people who helps these 50 Founders?
We’re looking for experts who can help these Founders succeed by sharing expertise, insights, access to users, funding or networks. If you would like to join - as a Founder or Expert: https://www.zinc.vc/join/.
What would success look like? Well, 50 years ago, a group of social scientists, creative artists and business people focused on the mission of “mastering the addictive power of TV to do some good in the world”. The result was Sesame Street, the most-watched kids’ TV show ever across 140 countries, having more educational impact on poor minority children than expensive pre-schools, generating the $1billion Muppet franchise and still going strong.
That’s the scale of social, commercial and lasting impact we envision for the businesses that come out of Zinc.
The Left-Behind Places
More than 150m people in the developed world live in regions that are still struggling to recover from the decline of traditional industries during the 1970s, 1980s and 1990s.
The massive loss of jobs in coal, textiles, shipbuilding, ports, steel and manufacturing has left a “rust belt”. The rust belt issues unite hundreds of cities, towns and suburbs across: the North and Midlands of England; the North East of France; the Ruhr region of Germany; the Great Lakes, Mid-West and Appalachian regions of the US; the south of Wales; the industrial monotowns of the former Soviet Union; the Wallonia region of Belgium; traditional port cities like Baltimore, Marseilles or Genoa; the Saxony and Saxony-Anhalt areas of East Germany; southern Ontario; the Silesian areas of Poland and the Czech Republic; northern Kyushu in Japan; small industrial cities in New England; the West Central region of Scotland; and more.
As well as these concentrated regions, there are rust belt areas scattered across the West, in places that have struggled to adapt to economic change, be they coastal resorts that went out of fashion, housing estates where people don’t want to live anymore, or market towns where people no longer choose to shop. Nor is it just the West that has these problems - over 100m of China’s population live in the rust belt region of Manchuria.
Sometimes, we forget just how dramatic the changes have been. Perhaps the most iconic rust belt city is Flint, Michigan. In 1970, it was the wealthiest city in the US. Today, it is the poorest. It is a city where the majority of men aged 25-54 do not work. Since 1970, major cities like Cleveland and Detroit have lost half of their population and their household incomes have dropped by a third. The gap that has opened up between the struggling cities of the rust belt and the most successful places can be staggering. In the UK, we can contrast some of the hardest hit places (e.g Sunderland, Stoke, Mansfield) with the strongest small cities in the South-East (e.g. Reading, Swindon, Slough). The most successful places generate twice as much financial value per worker, are 3 times better at creating new businesses, have twice as many people with college degrees and earn 50% higher wages.
Classical economics suggests that the regions of a country will rebalance themselves over time, as investors seeking lower costs and available workers find the depressed areas more attractive than the high cost, tight labour markets of the booming areas. That hasn’t been happening though. In a global economy, the rust belt areas have fallen into the middle income trap: unable to compete on costs with developing countries, unable to compete on skills or innovation with the magnet cities that attract the world’s smartest workers and investors. The magnet cities are often disconnected from the rust belt, operating in global networks across national borders, e.g. the hinterland of Silicon Valley is in Shenzen and automotive supply chains move parts across thousands, not just tens, of miles.
Of course it is not all bad news. Across the rust belt regions, the average income per person exceeds $20,000 a year, giving an annual household spend of over $3 trillion. The industrial legacy has endowed these regions with great assets, e.g. a quarter of the world’s Top 100 Universities are in the rust belt regions. The biggest cities in these regions (e.g. Chicago or Manchester) had the economic diversity and population density to be more resilient than many of the smaller cities. There have been remarkable examples of regeneration in all of the rust belt areas, e.g. the reuse of inner city and waterfront industrial buildings and land for new housing and employment. Large numbers of service industry jobs have been created and unemployment rates are relatively low in many rust belt cities. As part of the regeneration, all of the rust belt areas have an upbeat story of their progress, celebrating their hard-won victories and promoting themselves as great places to live, work and visit. The upbeat stories are inspiring and a tribute to the vision and tenacity of the people behind them. But they can distract attention from the problems that remain unsolved. For example, for all of Manchester’s success in regeneration, it is still the most deprived local authority in England. In spite of Pittsburgh’s high profile new tech capabilities, it has fewer high-value jobs than 20 years ago, low levels of business start-ups and venture capital, a stagnant population, endemic poverty and an ageing, lower-skill workforce.
8 problems that currently limit the potential of people in left-behind areas
We have identified 8 challenges that face these left-behind areas. They combine together, and feed off each other, to create either virtuous or vicious circles for individuals, families, businesses and communities. We need to transform the ambitions of the private sector about preventing, limiting and reversing the negative impacts of these problems. In the next Zinc programme, our 50 Founders will focus on these linked challenges, find insights about how they can be overcome, design and test potential solutions and then create new businesses to develop, market and scale their chosen solution. The 8 challenges are set out below.
1. Social Mobility
The chances of young people doing better than their parents are often at their lowest in the rust belt. In the US, poor kids in the big coastal cities are twice as likely as poor kids in rust belt cities to become well-off as adults. For example, San Jose has the best social mobility in the developed world and Milwaukee has the worst. Poor kids in London are twice as likely to go to university as poor kids in the UK rustbelt. In London, more than half of poor kids do well at school, compared to a third in the rust belt. However, social mobility is much more about the social experience of young people than the quality of the local economy. And this is where kids in the rust belt are being held back. High levels of family breakdown, residential segregation by race and/or income, weak social networks and low levels of community participation, high levels of inequality and poor schools have the highest correlation with poor social mobility. Unfortunately, they also correlate highly with rust belt areas.
People in left-behind places are living shorter lives and more of the years they do live are dominated by illness and disability. In the UK’s rustbelt cities, boys born today can expect 12 years less of healthy life and to die 6 years sooner than boys born in the most successful cities. Chronic illness levels can be double those in prosperous cities and much of that ill-health is closely associated with misery and self-neglect: depression, pain, diabetes, chest problems, preventable cancers, obesity and substance misuse. In the UK, the likelihood of working-age people in the rust belt leading ‘limited lives’ due to disability and illness is double that of the more prosperous regions. Half of the people on disability benefits have mental health issues, mostly depression and anxiety. The UK numbers have doubled in the last 20 years, the US numbers have grown even more. Children in deprived areas are 3 times more likely than those in the best-off areas to experience multiple traumas in their childhood - living in households with domestic violence, drug use, incarceration, alcohol abuse and parental separation. Those adverse experiences lead to them being several times more likely to have health-harming behaviours when they grow-up, including poor diet, misuse of drugs and alcohol, underage sex and poor diet.
Low and stagnant wages have been blighting the rust belt areas, even when their national and global economies are growing well. Millions of people have dropped out of the labour market. Whilst the official unemployment numbers may be relatively low, this masks the large numbers of people in rust belt areas who are neither in work, nor looking for it. In the UK, the employment rates in successful places are 25% higher than in the rust belt. The people dropping out include young people Not in Education, Employment or Training (NEETs), high numbers of people on disability and sickness benefits, lower levels of women workers and premature retirement. Many of those in work are under-employed, in that they don’t have the hours they want or jobs that use their skills to the full. There are very limited opportunities for career or income progression in the new, low-wage service jobs that have dominated job-growth in the rust belt. So, in addition to people suffering from endemic poverty, there is a much larger population in the rust belt who have suffered from the decline in good jobs and chances to get on in life. Currently, access to the best jobs is often permanently closed to people who didn’t get a college education and professional training in their 20s.
4. Vulnerability to Automation
It is a sad irony that the places most vulnerable to the next wave of job losses from automation are in the rustbelt. Typically, a large number of the new jobs in the rust belt have been created or sustained in call centres, back office processing centres, retail, warehousing and public administration. And manual work still dominates in much of the rust belt, e.g. 6 out of 10 jobs in the UK’s coalfield areas are manual, compared to 4 out of 10 in London. These are all areas under immediate threat of automation from current technology.
The rust belt areas have fewer businesses than the most successful areas and lower levels of new business creation. Of the companies they do have, too many have poor productivity, resulting in low wages and the threat of automation. For example, small cities in the South East of England are 50% more productive than small cities in the English rust belt. That’s partly about the different mix of jobs in those areas, e.g. the lack of the best jobs in the creative, tech and financial sectors. For example, Sunderland has Barclays’ call centre and Nissan’s car factory, but London has the investment bankers and car designers for both companies. As well as the job mix, there are long-standing problems around the quality of management in many low-productivity companies in the rust belt areas. Low levels of R&D undermine the future of many rust belt areas. In the UK, for example, R&D intensity is 10 times higher in the best-performing areas of the South East than in Greater Manchester or South Yorkshire. The lower levels of skills and R&D reduces the capacity of rust belt areas to bring in revenue from exports. This is made worse by the shift in employment and business creation towards non-tradeable, local services, which don’t bring external cash into the rust belt economies in the way that manufacturing, coal-mining, tourism, etc. used to do.
The rust belt areas have struggled to attract and retain the best talent. In the most successful cities, 40-50% of the workforce is college-educated, double the rate of many rust belt areas. For example, London - with just 20% of the UK workforce - attracts 40% of the UK’s top graduates. Rust belt cities with great universities lack the career opportunities to retain their high calibre students once they graduate. There is a vicious circle where the rust belt cities lack the well-paid, highly productive employers (e.g. the high value parts of the tech, creative and financial sectors) that attract top talent, and the lack of top talent means that they don’t attract the top employers. The academic and youth-focused education systems have badly failed to provide people in the rust belt with the right sort of lifelong, flexible and affordable vocational and personal development opportunities to change and upgrade their careers. Education is too institutionalised to meet modern needs, or to take advantage of new approaches. That leaves a big space for innovation in those institutions. But also outside them. For example, kids in the UK spend twice as much time looking at screens as they spend in school, so educators don’t need to be constrained by what schools choose to do. Unfortunately, a lot of people are pursuing courses that are bad value in terms of their time and expense, because that’s all there is.
7. Class, Gender and Race
The rust belt is often associated with a traditional white working class. That group has faced profound challenges. For example, the hardest hit groups have been those with the fewest educational qualifications, many of whom grew up to expect fairly well-paid, local jobs and older, displaced workers who have struggled to find new ways back into the labour market. Traditional gender identities in the working class have clashed with the new economy. Men have had to come to terms with the decline of traditional manual and unionised jobs, and with the growth of service jobs that are traditionally dominated by women, poorly paid and lacking career progression, e.g in social care, customer service, hospitality, childcare and beauty. A quarter of American women now work in one of the 22 female-dominated occupations that pay poverty wages, in spite of a quarter of them being college-educated. Internationally, women in the rust belt areas have been slower to grasp the opportunities for self-employment.
But this urgent focus on the white working class can overlook important racial and ethnic dimensions. Some of the highest levels of racial segregation in the US are found in rust-belt cities, coupled with even worse outcomes for Black individuals. Chicago is a powerful case study. Young Black individuals are more than 5 times more likely to be out of work than young White individuals. Areas with 40% or more Black population have not been gentrified. In contrast to big coastal cities, Black wages have declined sharply since 2000. North Lawnwood has lost two-thirds of its peak population and is over 90% Black, with almost half of the population living below the poverty line. A number of European rust belt cities became more diverse when immigrants (including refugees) filled homes and jobs that local people no longer wanted during their industrial decline. However, some of these cities have struggled to integrate and are undermined by ethnic tension, e.g. Malmo. In other cities, businesses and jobs are segregated by race, e.g. in the UK a quarter of Pakistani-origin men are taxi-drivers and half of Bangladeshi-origin men work in ethnic restaurants.
8. Quality of Life
Quality of life for too many people is plagued by higher levels of crime, isolation, financial vulnerability and immobility. In the UK, rust belt cities experience 3 times as much violent crime and twice as much domestic abuse as the most successful places. In many rust belt communities, the majority of people have virtually zero savings, low levels of insurance and high exposure to high-cost credit. In the UK, for example, people without home contents insurance are 3 times more likely to be burgled. Chronic loneliness has grown sharply in recent decades, with adverse impacts on individual health and community wellbeing. In many rust belt areas, there has been a marked decline in social capital, with the weakening of ties traditionally provided by both big employers and churches, and their associated community associations. Physical mobility within areas is a constraint for many people, whether that is due to poor transportation or the ‘mental maps’ that limit people’s horizons. Fewer people are leaving the rust belt areas. That may sound like good news. But that isn’t necessarily true for individuals. Geographical mobility within western countries has declined sharply in recent years, as broken housing markets, excessive demands for qualifications and risk-aversion have reduced people’s chances of leaving for somewhere better.
Are you up for the challenge?
Within and across these 8 challenges, there are huge opportunities for innovative entrepreneurs to create solutions that are life-changing for millions of people. We hope that you will be inspired to join our mission, either as one of the 50 Founders who builds a new commercial business, or as one of the people who helps them. You can apply to join this mission as a Founder or expert at: https://www.zinc.vc/join/.