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MIND FACTORY

Unlike Youngstown, Birmingham or Rhode Island, Austin has had a business development strategy in place since the 1980s.

"We made a very clear and conscious decision that above all we were going to kowtow to the creative classes," said Lee Cooke, a former mayor.

From food to music and entrepreneurial opportunities, Austin has focused on attracting creative people.

"It's very simple. Creativity begets creativity," said local state senator Kirk Watson.

Austin's strategy has paid off. The city's population has tripled to around 750,000 in 2009 from 250,000 in 1970. According to the U.S. Bureau of Labor Statistics, the city of Austin had the highest level of job creation in America from 2003 to 2008. Private sector jobs overtook public sector ones -- it is the Texas state capital -- in the mid-1990s.

Austin has become known as a city of entrepreneurs -- Michael Dell founded computer maker Dell Inc while studying at the University of Texas in 1984 -- and has grown as people have flocked here looking for jobs.

While the inflow has slowed during the recession, the city is still a magnet for people like Norbert Wangnick. An entrepreneur who sold his niche recruitment firm in Germany at the peak of the market in 2007, Wangnick, 45, moved to Austin late in 2008. After a year off, he is looking to either invest in a company or start a new one.

"Austin has so much energy," he said. "It's a great place to be if you want to start a business."

The city, which hosts the annual SXSW live music festival and considers itself a cultural oasis in Texas, is a strongly Democratic city in a Republican state. Former mayor Cooke, a Republican, said Austin's political leanings are not in line with his own or the more conservative business establishment. But he added that this fact is irrelevant.

"The choices we have made concerning the economic future of this city transcend politics," he said. "This is about everyone pulling together."

Cooperating for the good of the community is something Cooke said is lacking at the national level in America.

"I'd like to get rid of all 535 politicians in Washington and get rid of all the politics of the last 75 years," he said. "Washington is all about the politics of self-perpetuation, not doing what is right for the country."

The cornerstone of Austin's strategy is coordination among the city, businesses and its biggest asset -- the University of Texas at Austin. With 50,000 students, it is one of the country's largest universities and a research powerhouse -- biomedical science, engineering, math, physical sciences. UT vice president for research Juan Sanchez estimates some 10 companies graduate from the university's incubator every year.

Senator Watson said Austin's fortunes have been a mixture of luck and the sense to capitalize on its "enterprise value."

"We were lucky in that we weren't like Detroit, we didn't have an old industrial factory to protect," he said. "In places like Detroit it's understandable spending a lot of energy trying to save the old factory because it means jobs for local people. What we have here is UT."

"UT is our mind factory."

Watson describes that "mind factory" in largely industrial terms, even referring to students as "natural resources."

Watson and Gary Farmer, chairman of Opportunity Austin -- a regional economic development strategy -- recall visiting Samsung Electronics Co Ltd in South Korea in 2005 with UT's Sanchez to persuade the world's top maker of memory chips to choose Austin for a new semiconductor plant.

Watson and Farmer say a critical moment came when Sanchez informed Samsung executives that there were hundreds of Korean students at UT. In April 2006 Samsung said it would invest $3.5 billion in a plant here creating nearly 1,000 jobs.

"The authorities in Austin, the business community and the university have marched in step for a long time," Sanchez said. "Much of this has been based on the recognition of UT's potential."

Sanchez said such recognition is growing in America.

"There is a growing understanding that intellectual capital is going to be at least as important as manufacturing and natural resources," he said.