Why Baltics does not compete for talent?

10. December, 2017

Foto: Providus

On December 4, 2017 PROVIDUS and Konrad Adenauer Stiftung organized Public Policy Forum Migration Policies: Competing for Talent. The main issues discussed were what are the existing and potential benefits of migration and how does migration diversify country's economy and society. One of the participants in the discussion was Kristjan Lepik (MOVE Guides) who shared his vision with Linda Jākobsone, PROVIDUS communications project manager.

Linda Jākobsone: Could you tell a bit more what the company you created – Teleport – does and how is it related to migration?

Kristjan Lepik: We started 3 years ago and we launched the start-up Teleport two and a half years ago. It aims for people to find the best city in the world to work and live in based on data. Now we have a unique data matrix of 300 layers of data on 260 cities in the world. We have managed to get 300,000 registered users, that sample size is very good to take learnings from that data. We ask people what they value in life. Whether it is big cities, small cities, nature, start-ups – peoples’ choices are very different and based on them we offer everybody the best city choices. There is no one and single TOP 10, everybody is different. We were acquired by the US company MOVE Guides this spring. MOVE Guides helps companies to move people from one place to another.

I have also over the years advised many cities in Europe, because we think that people move to cities not to countries. I was really surprised when I came to Riga two years ago, lots of capital/business attraction projects but nobody in the city government or LIAA is dealing with talent attraction. That is changing now a bit. Considering how hard the Western European cities are working on this, there needs to be a much stronger effort.

Jākobsone: What do people consider as important when moving?
Lepik: If I would have to guess my first thought would be that probably the cost is the most important one. But it is not. It is clean environment. That is super surprising but data clearly shows that. I think sometimes in the Baltics we forget what an amazing place we have in the terms of nature, clean water and clean air and how close are the forests.

I was in Riga last year speaking at the Stockholm School of Economics conference, there was Morten Hansen [Head of Economics Department] on the panel with me and he said – who wants to come here? I said – you are Danish and you are here, people are very different in the world. Around 10 million people can move in Europe but only one million has moved. If we get 10% out of that one million in Europe to come to Baltics, that would be 100 000 people. We cannot manage that. So if only 1% of all the movers in Europe want to come here that is already enough. So now the question is how to sell that, how to be visible to them and how to have companies who are willing to hire from abroad and integrate those people.

Jākobsone: Besides clean nature, what else matters for top talent who is on the move?
Lepik: Number two is cost of living. That is what I would have guessed being first. Number three is safety. Number four is tolerance. So the smart people who move, they want tolerance. They do not what any kind of discrimination. If that is present, and in some areas in the Baltics we have that, so it is a no-go.

Jākobsone: Do you see Estonia and Tallinn attractive according to the four criteria – clean environment, cost of living, safety and tolerance?
Lepik: Looking at the data, it shows that the start-up scene in Estonia is better, and that is also important to talent. So it is one plus that we have over Latvia and Lithuania but all in all I should say – if we could call this place where we are a product, I think the products are similar. Although we – Latvians, Lithuanians and Estonians – think we are different people, to outsiders we are quite similar. So I think it is in a way one market for talent and it just depends on where they would get the offer. Looking at the data – actually we have a super good product. If you look at the top four criteria, it is very clean, lots of nature, quite cheap, and safety is also good. So it is a great product to sell. But I think all the Baltic countries are not selling it well.

World is full of great cities, so the one that sells better gets the people. It is a two way thing, you need to sell it and you need to build environment thinking whether it is suitable to a talent.

Jākobsone: Why do you think we are failing in selling Baltics to talents?
Lepik: I think it is partly due to the problem that politically there is no clear view whether we want to attract talent. It is controversial due to refugees and the alternative, alt-right, nationalistic parties surely know how to play this card well.
With smart talent on the move that is different. Because what people usually do not understand is what Enricco Moretti, US mobility researcher, has said – one knowledge worker coming in creates five additional service jobs. People who come here want an apartment to rent and somebody local gets money for that, they need somebody taking care of their child when they work, they need food, they need hairdressing etc. That creates additional business for local people. I think that if Estonia and Latvia were super closed and no foreign people would come in the GDP would be maybe 5% – 10% lower.

If people come here they will bring additional jobs in the local economy but also their own tax base. They pay taxes on their salaries and everything they consume here. Take Brexit – we see it from our business right now – this is real. Companies are leaving Great Britain or London. They are not small companies. If they bring 100 persons from London to Amsterdam that means that all consumption moves with them. And the taxes those persons pay as well.

Jākobsone: From the sectoral perspective – IT definitely is the one that needs talent in our countries, are there other sectors, do you see it from your data?
Lepik: I think IT is the easiest because people are used to work in English. In our company [MOVE Guides] we have offices in four countries, also in Tallinn. All the work is in English although half of our Tallinn office is Estonian and the other half is not. But in other sectors there is also need for smart talent. It is not only the IT, it is design, I think in Baltics we are not very good at sales, so bringing foreign sales persons in or letting them work where the client is, that is how the world works.

I think we started [in Teleport] with a term nomad, trying to target people who just work remotely, it was too narrow. Then we started targeting start-up people, but then we got a lot of requests from other professionals and then we turned the term around into knowledge worker. So whether that is a doctor or a teacher, an architect, what we tell people is – try Teleport out. You have been born randomly somewhere but is it the right place? People might sometimes be unhappy with stuff because they are just in a wrong place.

Jākobsone: We heard recently of the example of European Medicines Agency moving from London to Amsterdam. One of the arguments mentioned in favor of Amsterdam was that it is very well connected. Riga is also quite well connected.
Lepik: Yes, our data shows that connectivity is also a factor which plays into the decision. I can bring my own company’s example, when Teleport was acquired this spring, MOVE Guides initially were a bit not sure whether to keep it in Tallinn. The initial plan was that people can work in London and that is true as well. But what happened is that we decided to keep it and now the Tallinn office is growing the fastest. Because the company also saw that the quality and the price level here is very good.

Jākobsone: Why did you come up with the idea of Teleport initially?
Lepik: As a start-up I think you need to find something where there is a possibility to disrupt. You can use software to change something completely. I think Uber and Taxify have changed completely the way we use taxis. We think we can use this in mobility. People should move more but it is not easy to go somewhere but if you have the data already how to go, if you have a good system how to get a job offer, this would change. Especially younger people are much, much more willing to move.

Having a background in macroeconomics I am pretty sure that in Europe there will 10, maybe 50 cities that are really good knowledge centers or hubs, where people want to go. Imagine if people move more, these knowledge centers will bring in capital and those countries will do really good economically. And the other countries will have a really tough time.

Either the business environment is not being good like in France, Brexit pushing people out or a country like Poland or Hungary taking this very nationalistic approach, talent does not want to go there. It might feel very good in the short term but if you one moment decide that OK we will change this nationalistic approach and we are trying now to be more friendly, your branding is already hurt. It is damaged. Takes a long time to come out of that. With Brexit the companies that decide to move out, that is a long term decision. If now the UK will say the Brexit won’t happen, the companies will say OK, but they will not move those people back.

On the other hand, there is all this fear about the different. Our data shows on the map very clearly that tolerance in Western Europe is so much better than in Eastern Europe. That is part of our history – during Soviet times there were no foreigners. So culturally it is very hard to accept them. And I think that is often why people who have not met them or worked with smart foreign people are scared. If you meet a good foreign person you say: “Hey, he is like me!’. That makes it so much easier. So I think culturally we are learning and what our data shows – tolerance is better in Baltics than in many Eastern European countries. So we are not good but we are not terrible.

Jākobsone: In the long term we need more political will to work on these matters but in short term – with Brexit happening now, do you think we can attract some talent leaving London to come to the Baltics?
Lepik: Some of them do. But for example having talked to Berlin, (I do not know if they will admit it publicly) they have a plan for that how to bring these companies over. We do not, without a plan and funding it won’t happen on big scale. We have a good opportunity here but we are not using it. We could sell it there pretty aggressively. Also IT wise – how establishing a company here is not that expensive and things like that.

Jākobsone: One of the other things you are doing is advising the Estonian government on e-residency?
Lepik: Yes, I have done that. We [in Estonia] have so many companies having started by the people who could not be in Estonia otherwise. I think it is an amazing plan. We have had discussions among friends that you do not need to be physically in Estonia to be Estonian. To be honest I am not fully sure I consider myself Estonian. I think I am European. And we see that young people take that [approach] more and more.

Country borders are losing importance. Many companies just work cross-border. And so you have to think differently due to that. One of our advisers Parag Khanna, who has written many books on this, have said we should not spend pixels on maps on borders but on connections. Take the same approach to Baltics.

Surely there are Scandinavian ties, there are Russian ties among Baltic countries. It is much more in the globalized world about whom you are connected to. How to increase the connectedness to Western Europe for example.

Jākobsone: So the current Presidency of Estonia in the Council of the European Union would be a part of it?
Lepik: Exactly. Although some people want to build walls and different fences I think the world is fundamentally becoming more borderless. People can move, capital can move.
What we in Baltics overestimate is how visible we are. Sometimes we get a quote like Financial Times writing about us, Bloomberg or what not and we say: “Oh, yeah, everybody in the world is writing about us.” But they are writing about everything! The world is full of information. There are some spots where we can be noticed but all in all we are not that visible. So lots of people do not even think of coming here after Brexit, it is not an option because they do not know. And marketing is really expensive, so how to do it smartly and how to target people the right way, that is really crucial.

For a small country to be visible it is very difficult but it is possible. First you must understand what your selling argument is, what people want and then how to reach them. I have seen countries and cities that have huge advertisements in newspapers, that does not work. You need detailed great offers. It requires a system to be done, it means systematic funding, systematic smart people. One really good example is not that big city in Netherlands, they have around 200 000 people, is Eindhoven. They have hotels that tax and that tax goes to the city marketing. It is very logical – if they bring people in hotels will do better, if they get even more people in they do even better and they get more money. We need this kind of bold approaches. If we do not do much we will be mediocre and probably that means we will not be among the top knowledge hubs.

The main key to economic growth is the talent attraction. For example Skype – it started as an international project, people came from Norway and Denmark, all the technical engineering – from Estonia. When Skype was sold the four founders got money that was equal to 1% of GDP of Estonia. Four persons. If you can have people who do projects like that this will change things.

Jākobsone: So you are saying that the world is changing in so many ways that the only question is whether we are going to jump on it or let it go?
Lepik: Yes, exactly. I would like to hear during elections is what is our 10 year story. I think the subcontracting has been a really good business for us. We have been for Scandinavia and other Western European countries super smart, fast, hardworking, cheap. But that cannot go on. We are getting more expensive, they are moving elsewhere, so have to start building our products. We cannot be the subcontractors, we have to be the owners. What do we want to build, what is the structure, do we want smart people for that, will we close the borders. I would love to have this 10 year story – it is normally kind of general, we want to be wise, smart etc. It is unclear for everybody.

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