When teaching at UCLA in the 1980s, I asked my class what they wanted to do when they graduated. "I want to be an entertainment lawyer." "I want to be a set designer." "I want to be a producer." These weren't the kind of answers one would typically expect to hear from 18-year-olds, but these were Los Angeles kids. They had a sense of who succeeded in local industry, and they knew people (sometimes their fathers) in those jobs. What this told me was that new ideas and creativity aren't just the property of individual entrepreneurs. The creative industries that constantly produce new ideas depend on knowledge that develops in particular places and that may be handed down from one generation to another. It also shows me that innovation and place are connected. The people who live in some cities develop a particular genius for making things and for continuous innovation that we need to celebrate and foster.

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Strangely, we seem to have lost this understanding about cities and creativity. We live in an era when innovation doesn't mean making things or making things better. It is about making deals—finance first, invention second. So the new geography of innovation is centered on places prominent during the financial bubble: San Francisco, Boston, New York. In these cities, dealmakers connect with the venture capital that allows them to demonstrate proof of concept and with the financiers who can find buyers for their "app" or bioscience intellectual property in global markets.

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Richard Florida's Martin Prosperity Institute recently released a report on these "start-up cities" that illustrates how narrow our ideas about innovation have become, and how few cities and industries are considered players. If you aren't in the computer or biosciences, which show the highest rates of return for venture capital, your new ideas and inventions rapidly fall outside the frame of what counts as innovation. There is another model. It's not sexy. Nor is it built around quick returns and get-rich-quick schemes. It's the kind of innovation that transforms industries through learning, experimentation and application: product and process innovation. So, while the Nobel Prize-winning invention of graphene came from two brilliant British scientists, it is being adapted, tested and commercialized for industrial use in the Chinese electronics industry in cities such as Wuxi and Shenzen. These cities have the know-how to use the new material to transform products and processes. They have something more than entrepreneurs. They have industries.

For another example of the difference between innovation in financial deals and in products and processes, we can look at a U.S. city that is missing from the institute's map of start-up cities: Houston. It is adding jobs and growing at an exceptional rate because of an industrial innovation in how to extract oil and gas.

Whether you are for or against hydraulic fracturing, there is no doubt that it is a disruptive technology that is transforming the U.S. economy. This technology did not spring full-blown from the mind of one entrepreneur. It developed after years of testing and information-sharing among engineers and rig crews and geologists. It was rooted in the business of oil and gas extraction and in the place—Houston —where people think about how to improve and profit from resource extraction every day.

