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.

I was reading Aaron Renn’s post this morning on America’s vacant housing challenge and I was reminded of the stark contrast between what we are experiencing here in Toronto and what the US is experiencing in a lot of its coastal cities, compared to what is happening in many legacy cities in the US. The former industrial centers. In this latter case, the discussion is around neighborhoods reaching a tipping point in terms of vacant homes and then spiralling out of control. Below is an excerpt from a study that Renn cites in his post. It is from the Lincoln Institute of Land Policy and it’s called “The Empty House Next Door.” The above chart should also tell you a lot about the magnitude of this problem.

Hypervacancy has been rising steadily in legacy cities since the 1990s. Although only one out of sixteen census tracts in Cleveland was hypervacant in 1990, by 2010, one out of two tracts in that city had reached hypervacancy. When vacancies rise above approximately 20 percent of an area’s total properties, the number of vacant buildings and lots may continue to grow indefinitely. Although vacancies rarely reach 100 percent—because even the most distressed neighbor- hood may have a few long-term owners—the market effectively ceases to function. Houses sell, if they sell at all, only to investors at rock bottom prices while the neighborhoods become areas of concentrated poverty, unemployment, and health problems.

Below is a good discussion with Aaron Renn about how to brand a city. I fully agree with two of the points he makes: (1) Not enough cities are thinking holistically about this topic and (2) tech startups, bicycle lanes, and craft breweries aren’t going to cut it as a strategy. Every city is focusing on that sort of stuff these days. Zero differentiation. Find something germane to your city and start building on it. If you can’t see the embedded podcast below, click here.

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