We have talked a lot on this blog about the concentration of economic activity in global cities. Here is an old post about a paper called “winner-take-all-cities”, which documents the overrepresentation of talent, economic activity, innovation, and wealth creation in a select number of alpha cities.
But this same phenomenon is playing out in a myriad of different ways. Aaron Renn calls this the “superstar effect” and has been writing about it for years. Another more recent example is this post by Richard Kerby called: Where did you go to school?
Kerby looked at where venture capitalists in the US went to school and discovered that around 40% of them have gone to one of two schools: Stanford or Harvard. His argument is that not only is the venture capital industry lacking in gender and racial diversity, but it’s also lacking in cognitive diversity.
My point with this post, though, is one of hyper-concentration. Tech is a dominant force in today’s economy. And in 2017, nearly 45% of all venture capital investment in the US went to companies located in the Bay Area – meaning San Francisco and San Jose.
So here is an example of a select number of schools training a select number of minds that then go on to invest in a select number of cities. Fred Wilson, who is a venture capitalist, has a good response to this problem of diversity in the VC industry.
But, of course, this is bigger than just the VC business.