The New York Times in an article entitled Jim Farley tries to reinvent Ford and catch up to Elon Musk and Tesla writes:

Yet Wall Street still thinks that Tesla, which is worth more than $1 trillion, will dominate the industry and that companies like Ford, worth $62 billion, and G.M., $58 billion, will become relative minnows.

The possibility of Ford and G.M. becoming mobility industry minnows should terrify state policymakers and economic development leaders. Because if they are minnows––minor players in the new electric, autonomous, connected mobility industry––Michigan will be well on its way to being Michissippi. One of the nation’s least prosperous states.

What made Michigan one of the most prosperous places on the planet for most of the 20th century was not making motor vehicles, but inventing, designing and developing both the vehicle and the process for making vehicles. We were the early 20th Century’s Silicon Valley: the place where the next economy was invented and commercialized.

Michigan’s position as the North American center of the auto industry is still a function of our being the place where internal-combustion, non-autonomous, non-connected vehicles are designed and developed. And being the center of the North American auto industry is a central component of Michigan’s current diminished prosperity.

Michigan can only retain its position as the North American center of the auto industry if we are the place where mobility industry vehicles, propulsion system(s) and software in the vehicle are invented, designed and developed. And that increasingly is software-development driven. As Ford CEO Jim Farley explains in a terrific New Yorker article:

The electrification of Ford’s fleet isn’t the most challenging task that the company faces. As Jim Farley explained after my Rouge tour, “This industry is overly focused on the propulsion change. But the real change is that we are moving to a software-defined experience for our customers.” That experience will gradually replace what drivers do now, until Ford’s fleet becomes fully autonomous, at some point years from now. “Can we sleep in our cars?” Farley asked, in a way that suggested the answer will be yes. “Can we use them as business places, so we leave for work an hour later?” Again, yes. “Then the drive totally changes.

… Farley pointed to the recent history of the mobile phone as “the most powerful proxy for what we are going through.” In 2007, he went on, “three of the biggest mobile-phone-makers were BlackBerry, Nokia, and Motorola.” A few years later, Apple- and Google-made mobile devices took over, and they were much more than telephones. “And the most important thing was that the software decided what kind of hardware got put on those machines,” Farley added. When it came to the device business, hardware-centric companies had given way to software-first ones, and the customer experience was defined by the embedded operating system.

The transition to a software-driven industry means that losing the Rivian headquarters to California is far more important to Michigan’s future prosperity than where electric vehicles are assembled or batteries are made. And even more important to Michigan’s future prosperity is the success of Ford’s new Corktown facility. The place where Ford is centering their invention, design, development and commercialization of electric, autonomous and connected vehicles.

Detroit Three assembly and battery plants in states like Tennessee and Kentucky, and Michigan too, will be of little value if the Detroit Three are the equivalent of BlackBerry, Nokia, and Motorola.

What should terrify the rest of us is the lack of evidence that any state policymaker of either party or any economic development leader is terrified at the possibility of the Detroit Three being mobility industry minnows.

To make matters worse, the auto/mobility industry’s Lansing representatives are, by and large, missing in action. Focused almost exclusively on Michigan winning assembly and battery plants. Pushing for more and more taxpayer subsidies for factories and for an education system that pushes others’ kids into the skilled trades to work in those factories.

Being competitive for factories and training for factory-floor skilled trade workers is not what will determine whether the Detroit Three are mobility industry minnows or not. That will be determined by whether Michigan has the talent necessary to be the place where the new software-driven mobility industry is invented, designed and developed.

That requires a fundamental transformation in Michigan’s economic strategy. From factory focused to knowledge-enterprise focused. From competing for business investments based on low costs to competing for business investments on high talent––particularly young adults with four-year degrees or more––concentrations focused. To do that requires substantially higher public investments in education for all Michigan children from birth through college and in creating places where talent wants to live, work and play.

In a terrific Crain’s article entitled Why Ford’s Corktown project may mean more to Michigan’s future than the next battery plant, Chad Livengood lays out the required transformation in Michigan economic policy:

Despite the enormous potential Ford’s train station project has for both Detroit and Michigan, policymakers here are still chasing jobs assembling batteries instead of jobs inventing new technologies to make batteries capable of propelling an F-150 from Monroe to Mackinaw City and back on a single charge.

In response to Ford dissing its home state over shovel-ready land and industrial electricity rates, Michigan’s policymakers from both political parties went straight back to an all-too-familiar economic development playbook: Buying hourly production jobs with taxpayer-funded incentives.

… But where is the new $1 billion investment in Michigan’s knowledge economy? Where is the workforce investment in the college degree-dependent automotive technology fields that can be traced to decades of prosperity in places like West Bloomfield Township, Novi and Ann Arbor?

There’s been no similar effort of that scale to, for example, invest in the education and retention of software developers to meet the needs of Ford, GM and Stellantis (the automaker formerly known as Fiat Chrysler Automobiles) — or Michigan’s nonautomotive corporate titans such as Dow, Whirlpool, Stryker, Steelcase and Amway.

Rather, there’s been a 20-year disinvestment in higher education in this state, which ranks dead last in state taxpayer-funded need-based financial aid for students.

This is the state of Michigan’s economic policy as it relates to creating more knowledge-based jobs, which, unlike manufacturing jobs, are actually growing.

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For years we ended our presentations with a slide that said Michigan must get younger and better educated or we will get poorer. Where younger meant a place where Michigan was retaining those who grew up here and attracting mobile young talent from any place on the planet. And better educated primarily meant increasing the proportion of adults––particularly young adults––who had a four-year degree or more.

We didn’t get younger or better educated and we did get poorer. Falling from 99 percent of the nation in per capita income in 2000 to 89 percent in 2020. Falling from 18th to 33rd. If Michigan had just stayed at 99 percent per capita income in Michigan in 2020 would have been higher by $5,656 in 2020.

Maybe more concerning is this from a 2020 Automotive News article: Rivian CEO RJ Scaringe “believes California is a cool place to be and Detroit has an old technology image,” a former Rivian executive told Automotive News. “He thinks California represents tomorrow and Detroit is all about yesterday.” Where Detroit means the region and the automotive industry, not just the city.

Another way of saying this is California is young, Michigan is old. Where yes old means the average age of its residents, but also our communities and our economy. Michigan is over concentrated in neighborhoods of drivable suburbanism and under concentrated in neighborhoods of walkable urbanism. The state’s economy is over concentrated in declining sectors and under concentrated in the growing, high-wage knowledge-based sectors.

Michigan’s fundamental economic problem is that we do not have enough young adults––new entrants into the labor market––to replace retiring Boomers. And that the young adults we do have, too few are high-skilled, particularly too few have a four-year degree.

Using the Rivian CEO’s framing that California represents tomorrow here is what the ratio of 20-29 year olds compared to 55-64 year olds looks like in the U.S., Michigan and California: US: +4.3 percent, California: +15.9 percent; MI: -2.0 percent

If Michigan had the same ratio as the U.S. there would be 85,000 more 20-29 year olds in Michigan today. If we had the same ratio as California there would be 243,000 more 20-29 year olds in Michigan today.

In terms of young adults with a four-year degree or more in 2019 37.1 percent of the nation’s 25-44 year olds had a B.A. or more; California was at 38.2 percent, Michigan at 34.4 percent. Michigan ranked 31st. (Massachusetts is the leader at 52.9 percent. Minnesota is the Great Lakes best at 43.5 percent.)

What is particularly worrisome is Michigan is doing worse on both measures in 2020 compared to 2010 at the end of the so-called lost decade. In 2010 Michigan’s 20-29 to 55-64 ratio was 100 percent vs 98 percent in 2020. In terms of 25-44 with a four-year degree or more Michigan trailed the nation in 2010 by 2.2 percentage points compared to 2.7 percentage points in 2019.

If the state doesn’t change these realities the state’s economy cannot grow much. Not having enough young adults is the path to slow growth. Not having enough young talent is the path to low prosperity.

Over two decades of research has taught us one fundamental lesson: Talent = economic growth. Then New York City Mayor Michael Bloomberg got it right when he wrote in a Financial Times column:

Many newly successful cities on the global stage – such as Shenzhen and Dubai – have sought to make themselves attractive to businesses based on price and infrastructure subsidies. Those competitive advantages can work in the short term, but they tend to be transitory. For cities to have sustained success, they must compete for the grand prize: intellectual capital and talent. I have long believed that talent attracts capital far more effectively and consistently than capital attracts talent.

Creating a place where people want to live and work becomes even more important as Michigan goes through at least a decade and a half where the number of older workers leaving the labor market will exceed younger workers entering the labor market. Regions without the quality of place that mobile talent is looking for will be at a substantial disadvantage.

To create those places––to get younger and better educated––will require five fundamental shifts in Michigan’s approach to economic policy:

• Shift from an emphasis on being a low-cost state to a state that develops, retains and attracts human capital as its core strategy for economic success.
• Shift from intolerance to welcoming all people from any place on the planet
• Shift from an economic strategy based on low taxes to one that recognizes taxes must be balanced with the need for public investments in education from birth through college and in creating places where people want to live and work.
• Shift from state limitations that prevent cities and regions from controlling their own destinies to giving them the flexibility to develop, finance and implement their own quality of place strategies.
• Shift from accepting a crumbling 20th century infrastructure to providing a world-class 21st century infrastructure.

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