April 5, 1999

Neighborhood Outposts on the Economic Frontier
Sowing Seeds of Change
"Hockey or Watching the Daisies Grow"
The Dismal Science Meets the "Game of Life"

Clusters of Innovation: Minnesota, Looking Ahead

Neighborhood Outposts on the
Economic Frontier

Late morning may be the best time to drop in at the Starbuck's on the corner of Ford Parkway and Cleveland Avenue in St. Paul. It's not too busy then, and the green awnings shield you from the sun as you sit at a table next to the full-frame windows on the east.

I'm enjoying my first ever "Venti Americano" here in my "neighborhood" coffee shop, a description that is perhaps something of a stretch when applied to the omnipresent Seattle-based Starbuck's, which just signed a deal to open up outlets in China. I am reading an account of the founder of the enterprise, Howard Schultz.

Schultz is reported to have made more money, on paper at least, as a board member of the electronic auctioneer eBay, Inc. than as founder, chairman and CEO of Starbuck's. His shares in eBay, following a second IPO recently executed, are worth about $130 million. "Not bad for attending a handful of board meetings over nine months," writes Adam Lashinsky, the "Silicon Street" columnist for the San Jose Mercury News. But then, as his columnist colleague Dan Gillmor wrote a few days later, eBay's market capitalization already "exceeds the combined values of the nation's top newspaper companies." What a world!

Besides its convenient corner location in Highland Park, Starbuck's stands out in my mind for two other reasons. It is the congregating spot for some Ethiopian immigrants. They enjoy getting together here, maybe having a smoke at the sidewalk tables, maybe playing a board game, or just chatting over coffee. Highland Village as Global Village.

The second thing that comes to mind at my neighborhood Starbuck's is its cozy "flow-through filter" relationship with the Barnes & Noble Bookseller next door. The diffusion of traffic between the stores is encouraged. You can take your coffee into the bookstore and sit at a table next to the newsstand just beyond the magnetic-strip sentries that separate the two franchises.

Barnes & Noble is playing catch-up to Seattle-based Amazon.com in the online bookselling business, with half ownership in Barnesandnoble.com. Like eBay, Inc., Barnesandnoble.com is launching its second IPO, and this time it has lined up some heavy hitters including Goldman Sachs, Salomon Smith Barney, and Merrill Lynch & Co. "Barnesandnoble.com has embraced the Internet culture, primarily by acknowledging that the path to victory is to lose as much money as possible," writes Lashinsky.

If ultimately successful, however, Lashinsky thinks it's possible that "the [Barnes & Noble] 'dot.com' might even end up owning the [Barnes & Noble] 'Inc.'"

Meanwhile, the "Inc." continues to make inroads into the universities through its $750 million college bookstore division, which already manages 350 stores including those at Harvard and Yale. Now it has its sights set on Stanford University, the seed factory of Silicon Valley whose bookstore was once the envy of universities around the country.

Ever-more signs of changing times.

Sowing Seeds of Change

Starbuck's and Barnes & Noble sit on land once occupied by Power's Department Store. Power's was one of my mother's favorite Twin Cities' stores. I also remember Power's for it "Power's Girl" models. I had a friend who was one in the 1960s. Her Power's Girl companion was Lonnie Anderson. That was before Anderson moved to Hollywood to become a star.

But the department store is not one of my hangouts. So except for some wistfulness over the passing of an era and its characteristic architecture, I didn't protest when the wrecking ball showed and took it out.

Highland Village has undergone a renaissance of sorts over the past decade or so. Lots of little shops and boutiques and restaurants to go with new banks and human and animal clinics and fitness and rec centers and video outlets. Down Ford Parkway toward the Mississippi River, in front of the Ford Plant, a billboard sign advertises the UAW (United Auto Workers) - Ford - MnSCU (Minnesota State Colleges and Universities) Training Center. The March 24th edition of the Highland Villager  reports that the new $7 million training center set to open in Highland "will keep Ford and the state abreast of changing technology."

On the wall of the bakery at the Lund's supermarket, a blowup of a photo taken early in the century shows workers laying pavement in Highland, then peppered with a few houses against a backdrop of open prairie. Today Highland Park is prime residential real estate, located close to the Twin Cities International Airport to the south, bordering the Mississippi River and Minneapolis on the west, with lots of cultural amenities.

But how did Highland Park get from there to here? How did the corner at Ford Parkway and Cleveland Avenue get from Power's and its comfortable department store familiarity to Starbuck's and Barnes & Noble with their international brand-name identities and carefully manicured operations and symbiotic arrangements?

One of the hottest fields in contemporary economics is so-called economic geography. The "new economic geography," according to a recent article in The Economist , concerns itself with "clusters" of economic activity and regional growth disparities--with where economic activity occurs and why. Its chief cartographer is Paul Krugman, professor of economics at MIT.

I began to think about Highland Village after reading Krugman's description of what was happening in his own neighborhood in an account entitled "Some Chaotic Thoughts on Regional Dynamics". The opening paragraphs set the scene:

"There is a small 'Japantown' near my house - a cluster of noodle shops, sushi bars, groceries, and Japanese bookstores. Most though not all of the shops are in the Porter Exchange, a grand old building that used to be the Cambridge Sears outlet. The building, with its high ceilings and open floor plan, was unable to find a good use for an extended period after Sears moved out, but turns out to be quite well suited to use as a sort of mall. The location also turns out to be excellent: because many of the patrons are public-transit-using students at MIT and other area schools, it benefits from its proximity to the Porter Square stop on the Red Line. The cluster seems to be growing; perhaps one day Porter Exchange will be only the nucleus of a large and distinctive shopping district.

"How did that building become available? Sears discovered that a location with poor access to highways and limited parking could not compete with stores in suburban shopping malls. So why did they build it there in the first place? I don't know this for sure, but I would guess that the location was actually a very good one when the building first went up, far enough away from downtown to offer inexpensive land and room to build, but still accessible because of the trolley line that ran up Massachusetts Avenue. And Mass. Ave., as we all know, began as a track for cattle drovers...."

But how indeed do such clusters get established in the first place, asks Krugman? How is it, he wonders, that a Georgia teen makes a tufted bedspread as a wedding gift and 60 years later Dalton, Georgia is the country's carpet capital? Or, to take an example closer to home, how is it that the encounter between a surgeon and an equipment repairman would make Minnesota synonymous with medical technology 40 years later?

Based on his studies and insights, Krugman is convinced that the emergence of economic activity is not random but is  chaotic. A pattern exists, based on the principles of chaos--of nonlinear dynamics. In the case of high-tech clusters, the variables typically include

• transportation and communications systems and their costs
• core competencies and skills sets, and
• the research infrastructure

Krugman and his colleagues Masahisa Fujita and Anthony Venables attempt to give some tangibles to the "chaos" of the new economic geography in their recent book The Spatial Economy: Cities, Regions, and International Trade  (1999).

The authors unabashedly embrace computer modeling to help explain the interplay of diverse economic forces and cumulative processes. Global behavior of the new economic geography is "analytically intractable" and "must be explored via the computer" to determine, for example, when a spatial concentration of economic activity is sustainable, or where the next "Silicon Valley" might emerge.

They turn to "evolutionary game theory" for guidance. They return to nature to see what strategies it employs--to see how organisms develop and evolve.

"Hockey or Watching the Daisies Grow"

An edited volume of Alan M. Turing's writings on Morphogenesis  (1992) begins with a photostat copy of a caricature by his mother "of Alan at hockey," dated "Springtime 1923."

The curious thing about the drawing is that, while most players are huddled around the one of the goals in the outdoor arena, Alan is off to the side investigating a flower emerging just off the field. Mrs. Turing titled the sketch "Hockey or Watching the Daisies Grow."

Alan Mathison Turing "conceived the modern computer in 1935," write B. Jack Copeland and Diane Proudfoot in the April 1999 edition of Scientific American. "Today all digital computers are, in essence, 'Turing machines.'"

The article focuses on Turing's contributions to computers, artificial intelligence, neural networks, and "hypercomputation" by a "universal machine" with limitless memory capable of performing all conceivable calculations. Turing imagined an "Oracle" which would allow the universal machine to "compute the uncomputable." Unfortunately, Turing's death in 1954, presumably by his own hand, has shelved the oracle in the attic of dusty concepts.

But not so his ideas about biological emergence. In the final years of his life, the wonder he displayed at such emergence while playing hockey came, so to speak, full flower. He immersed himself in trying to understand the physical and chemical processes that produce pattern formation in nature and that are responsible for phyllotaxis, the arrangements of leaves on the stems of plants. In so doing, he pioneered the field of artificial life.

While investigating morphogenesis, Turing "achieved the distinction of being the first to engage in the computer-assisted exploration of nonlinear dynamical systems," write Copeland and Proudfoot. "His theory used nonlinear differential equations to express the chemistry of growth."

In his brief and incomplete "Outline of the Development of a Daisy," Turing writes: "At a certain point in the development of the daisy the anatomical changes begin. From this point, as has been mentioned, it becomes hopelessly impracticable to follow the process mathematically...."

I suppose if Turing had at his disposal the oracle hypercomputer he had earlier envisioned, he could have forged ahead and laid out nature's daisy program for the whole world to see. And today Paul Krugman would have an easier time of it, too.

Krugman, in his piece "Some Chaotic Thoughts on Regional Dynamics," asserts that "the history of New England's changing industrial structure often seems to be a story of events that were more or less deterministic, but whose outcome nonetheless could not have been predicted." To the unenlightened such as myself, I take this to mean that something rational is at work, but figuring out what it is, and then predicting it, well, good luck.

Again, Krugman: "The high-technology industries of Massachusetts...did not emerge by accident; they were there largely as a legacy of World War II and Cold War research. And this research was concentrated in Cambridge because of the presence of universities, which was ultimately the product of the need of Puritans for someplace to train preachers.

"At each stage there was a clear reason for what happened; but nobody could possibly have predicted the sequence."

The Dismal Science Meets the "Game of Life"

The Santa Fe Institute is a private, non-profit, multidisciplinary research and education center, founded 15 years ago, with the goal of "creating a new kind of scientific research community" devoted to pursuing "emerging science."

Visiting scientists from universities and research institutions from around the world study the science of complexity, which looks at the underlying patterns in natural and social phenomena. As a visiting journalist describes it, researchers collaborate on projects "ranging from the communication patterns of ants to the way information spreads across economic markets." The aim of the Institute's exploration of these phenomena is "to help define new research directions within the scientific community at large and to shed light on problems that challenge our global society."

It is a place where Alan Turing's ideas on biological emergence and Paul Krugman's on spatial economics converge in an interdisciplinary catalytic dialogue.

Institute researchers, including Krugman, have been studying "The Economy as an Evolving Complex System" for more than a decade. What has emerged is the so-called "Santa Fe approach." In this approach, adaptive nonlinear networks found in ecology and in immune and nervous system biology--networks characterized by distributed processes, self-organization, and emerging structures--are applied to economics. Through the Santa Fe approach the study of economics is moved from traditional "mechanistic" models to "living" models.

In this business, your neighbors can make all the difference. Scientists use "Game of Life" computer models involving "cellular automata" to try to understand how simple rules govern the behavior of individual cells--behavior which in toto results in complexity without the need of a central command authority to direct the action.

Recently, George Johnson of the New York Times  described Institute research that uses a computer program called "cellular automaton" in "Mindless Creatures Acting 'Mindfully.'"

Even in two-dimensional arrays, cells responding to the behavior of their closest neighbors produce remarkable patterns on the screen: "Tick by tick a dazzling array of lifelike patterns unfolds, merging, dissolving, oscillating," Johnson writes. "Like the cells of a slime mold or the ants in an anthill, the cells of the cellular automaton trade information only with their immediate neighbors, but they link up into complex systems that sprawl across the screen."

Using the program, investigators imagine the evolution of "digital chromosomes" in individual cells--"the long row of 1's and 0's representing the rule table." They imagine the evolution of morphogenetic rules of intercellular behavior that guide the emergence of tissues and the unfolding architecture of multicellular organisms.

To understand how the program works, the scientists needed to step back and take a "bird's eye view" of the distinct patterns emerging on the screen.

Cellular automation "dancing between order (left) and chaos (right)." James P. Crutchfield, Santa Fe Institute.

What they determined is that the key lay not in the predominantly black or white or checkered regions themselves, but in "the boundary lines between them," which "began to resemble tracks of colliding particles like one sees in photographs from physics experiments." The research on cellular automata and artificial evolution "borders on magic," said one researcher.

The researchers are pondering "whether the patterns that emerge in their simulations bear something in common with those that emerge inside the brain," Johnson writes. "Neurons exchanging electrochemical signals with their immediate neighbors somehow give rise to grand thoughts and mental images representing things in the outside world."

I heard an echo of neural-network visionary Alan Turing in that metaphor. Pondering game theory and whether "machines can think," he believed that "at the end of the century the use of words and general educated opinion will have altered so much that one will be able to speak of machines thinking without expecting to be contradicted."

Machines that think and chips that see. Late last month the New York Times  reported that a researcher at Johns Hopkins University had created an "artificial eye chip" by harnessing "neural-network technology gleaned from the biology of the human eye." Using hybrid analog-digital CMOS, Ralph Etienne-Cummings created a chip with surface arrays of photosensitive pixels that can sense, filter, and track moving objects.

"God's Eyes for Sale" by Ivan Amato.
MIT's Technology Review, 
March/April 1999. Copyright (c) 1999
MIT Technology Review

Overhead, high-resolution satellites--"God's Eyes"--continue to track us on the ground. They watch us 24-hours a day, weather-permitting. The images they capture show vast oceans, variegated land masses, swirling storm fronts, and the destructiveness of some natural and human activities. They also show areas of economic boom. Compare, for example, images of the Seattle shoreline in 1990 and today. Count the number of new homes and yachts.

Today, the southwest corner of Ford Parkway and Cleveland Avenue in St. Paul, seen from space, shows a large rectangle stretching from east to west. Barnes & Noble is in the middle section. Starbuck's resides on its eastern flank.

On its western flank, zooming in closely, you see a banner sign draped across the window of a vacant building. The sign announces that a Chipotle Mexican Grill will open soon. Chipotle is owned by Denver-based World Foods.

A bronze plaque on the building's facade reads: "This Boston Market Store is dedicated to women and families fighting breast cancer. Established Mother's Day, 1996."

Ever-more signs of changing times.

  --William Hoffman
  hoffm003@tc.umn.edu