Over the past few months on this blog, I’ve started to introduce business terms into the way I describe and talk about cities. I’ve referred to residents and visitors as customers of a city, experiences within a city as products and services, and cities themselves as businesses. Until now though, I hadn’t explicitly talked about this parallel or fleshed it out in any sort of detail. But I think it’s an interesting one so I’d like to do a bit of that today.
The reason I started referencing cities with business terms is because I think it speaks to 3 important characteristics of cities. First, cities, just like businesses, are in direct competition with each other. We rank cities. We compare GDP per capita. And they fight, or at least should, to attract the best people and to achieve economic dominance.
Second, city prosperity can be ephemeral. We tend to think of cities as being quite permanent–centuries old–but history is littered with failed cities or cities that simply lost their economic importance (see Detroit). Consider this: The center of trade at one point was the Mediterranean Sea. Then, as the New World emerged, it shifted to the Atlantic. And now, one might argue that it’s moving over to the Pacific (and Asia). Either way, these macro shifts push certain cities to thrive and others to decline. The time horizon is longer than, say the rise and fall of Blackberry, but it’s similar nonetheless. Nothing is guaranteed.
Third, cities have become centers of lifestyle and consumption. That’s why I previously argued that any economic development strategy should consider lifestyle, and whether or not people actually want to live in the place. In business terms, you need to offer products and services that people actually want. You need to respond to customer needs.
And if you think of cities in this way, I think you’ll come to the conclusion that, just like businesses, strong cities require strong leadership and management. They need to ensure that they’re delivering the right products and services to their customers and that they’re staying ahead of the innovation curve.
The switching costs may be higher for cities compared to, again, something like a mobile phone, but that doesn’t mean people won’t eventually vote with their feet and leave for somewhere better.
Imagine this sequence of events (and don’t peak by clicking on any of the links).
The year is 1994.
You notice that the internet is starting to become a big deal and that more and more products are being sold online. As a result of this trend, you decide to start an online business.
You write up the business plan and begin operations out of your garage. You then get lucky (or you’re just smart and talented). Within 2 months, sales reach $20,000/week. That’s over a million dollars a year.
Business continues to grow and within 3 years you’re able to take your company public, raising $54 million at a $438 million valuation. Over the subsequent two years, you’re then able to raise an additional $2.2 billion in debt to fund your continued growth.
The year is now 2000.
You were just named Time magazine Man of the Year. And traditional brick-and-mortar retailers are really taking notice (i.e. suing you). That’s pretty impressive after only 6 years of operation.