We have spoken over the years -- here, here, and here -- about the centralizing and decentralizing forces that play out within our cities. Agglomeration economies, for example, are a centralizing force. There are real economic benefits to people and firms clustering together in cities.
However, there are also many decentralizing forces. Traffic congestion is one. And of course, the pandemic also proved to be a powerful one for many cities.
But the fact that we even have cities in the first place should tell you that the centralizing forces do tend to win out over the decentralizing ones. And a perfect example of this is Tokyo. Usually considered to be the largest metropolitan area in the world, Tokyo has about the population of Canada in one city region.
And here, the centralizing forces are so great -- even for families -- that the government actually pays people to relocate to places
We have spoken over the years -- here, here, and here -- about the centralizing and decentralizing forces that play out within our cities. Agglomeration economies, for example, are a centralizing force. There are real economic benefits to people and firms clustering together in cities.
However, there are also many decentralizing forces. Traffic congestion is one. And of course, the pandemic also proved to be a powerful one for many cities.
But the fact that we even have cities in the first place should tell you that the centralizing forces do tend to win out over the decentralizing ones. And a perfect example of this is Tokyo. Usually considered to be the largest metropolitan area in the world, Tokyo has about the population of Canada in one city region.
And here, the centralizing forces are so great -- even for families -- that the government actually pays people to relocate to places
outside
of Tokyo's 23 wards (and its immediately surrounding areas). Previously the maximum figure was ¥300,000 per child (~CA$3,056), but this has now been
A key driver of this is surely Japan's demographic problem (namely a shrinking and aging population base). But it doesn't change the fact that lots of people appear drawn to the world's largest city.
Venture firm a16z just announced that it will be "moving its headquarters to the cloud." At the same time, it announced 3 new offices in Miami Beach, New York, and Santa Monica. These will be in addition to their existing offices in Menlo Park and San Francisco.
Part of their argument is that hybrid work is weakening the network effects and agglomeration economies associated with being right in Silicon Valley. So they've deiced to be virtual, but still have offices where they can "materialize physically" when needed.
They acknowledge that physical presence is important for developing a company's culture, building relationships, and helping entrepreneurs (their core business).
What's interesting about all of this is that it's further validation for Miami (Beach). Here is one of the most important venture firms out there saying that when they quickly materialize in real life, they want to be able to do that in Miami Beach.
It also raises some interesting questions. Because even if the network effects of Silicon Valley are weakening when it comes to tech, this announcement still speaks to the importance of agglomeration economies. These three new office locations were chosen for a reason.
A key driver of this is surely Japan's demographic problem (namely a shrinking and aging population base). But it doesn't change the fact that lots of people appear drawn to the world's largest city.
Venture firm a16z just announced that it will be "moving its headquarters to the cloud." At the same time, it announced 3 new offices in Miami Beach, New York, and Santa Monica. These will be in addition to their existing offices in Menlo Park and San Francisco.
Part of their argument is that hybrid work is weakening the network effects and agglomeration economies associated with being right in Silicon Valley. So they've deiced to be virtual, but still have offices where they can "materialize physically" when needed.
They acknowledge that physical presence is important for developing a company's culture, building relationships, and helping entrepreneurs (their core business).
What's interesting about all of this is that it's further validation for Miami (Beach). Here is one of the most important venture firms out there saying that when they quickly materialize in real life, they want to be able to do that in Miami Beach.
It also raises some interesting questions. Because even if the network effects of Silicon Valley are weakening when it comes to tech, this announcement still speaks to the importance of agglomeration economies. These three new office locations were chosen for a reason.
Earlier this year, Enrico Moretti, who is a professor at UC Berkeley, published
this research paper
looking at the effect of high-tech clusters on productivity and innovation. (I am unclear if there is any relationship to the Italian brewing company Birra Moretti.)
One of the things he looks at in the paper is the decline of Kodak. Headquartered in Rochester, New York, Kodak famously missed the transition to digital photography. And so by the late 1990s, they were forced to start letting people go. The result was an almost 50% decline in the size of the entire "high-tech cluster" in Rochester.
But what Moretti goes on to test in his paper is the impact that this employment decline had on productivity and innovation outside of Kodak and outside of the photography sector (but within Rochester). And what he found was that between 1996 and 2007, the productivity of non-Kodak inventors dropped by about 20%!
This, of course, is one of the great features of cities. Even if you're not working at some big company with lots of smart people, just being in the same city, on the same block, or within the same office building, can make you more productive. It turns out that business ecosystems are pretty interconnected. Spillovers are important.
For more on this topic, check out this recent Wired article by Viviane Callier. In it she makes the case that remote work is going to negatively impact productivity and innovation over the long run.
looking at the effect of high-tech clusters on productivity and innovation. (I am unclear if there is any relationship to the Italian brewing company Birra Moretti.)
One of the things he looks at in the paper is the decline of Kodak. Headquartered in Rochester, New York, Kodak famously missed the transition to digital photography. And so by the late 1990s, they were forced to start letting people go. The result was an almost 50% decline in the size of the entire "high-tech cluster" in Rochester.
But what Moretti goes on to test in his paper is the impact that this employment decline had on productivity and innovation outside of Kodak and outside of the photography sector (but within Rochester). And what he found was that between 1996 and 2007, the productivity of non-Kodak inventors dropped by about 20%!
This, of course, is one of the great features of cities. Even if you're not working at some big company with lots of smart people, just being in the same city, on the same block, or within the same office building, can make you more productive. It turns out that business ecosystems are pretty interconnected. Spillovers are important.
For more on this topic, check out this recent Wired article by Viviane Callier. In it she makes the case that remote work is going to negatively impact productivity and innovation over the long run.
