It is worth reiterating that one of the main reasons the majority of people live in cities is because they would like to make money and improve their economic status. There are, of course, other reasons too, but making money is an enduring attractor. In Alain Bertaud's book, Order Without Design: How Markets Shape Cities, he famously argued that cities are, first and foremost, labour markets.

Because of this, the success of cities depends on their ability to harness talent and turn it into economic progress. New York City, for example, is the city it is today because it was the largest port of entry for immigrants. And because transportation costs were high at the time, people arrived in New York and stayed in New York to work and create businesses.

The same thing is generally true today in the San Francisco Bay Area. It is estimated that roughly 50% of all tech startups and 59 of the top 100 highest-valued unicorns have a foreign-born founder. (I'd love to know what percentage are Canadian graduates of the University of Waterloo.) These are immigrants looking for money and economic opportunity, and the local ecosystem is providing the right preconditions.

But if the preconditions for success disappear, people will start to both leave and not come in the first place. So, it's also worth reiterating that the fortunes of cities have always risen and fallen over a long enough time horizon. Here's a great excerpt from a recent Bloomberg article by Richard Frost and Mary Hui, talking about what "war-rattled Dubai can learn from Hong Kong's expat exodus."

Financial centers rise and fall with the tides of geopolitics. From the mid-1500s, the tiny Portuguese enclave of Macau served as the primary intermediary for trade between Europe, Japan and China. In the mid-1800s, it was displaced by Hong Kong, which Britain secured by defeating the Qing dynasty. Hong Kong, in turn, was overtaken by Shanghai in the 1920s, when its more glamorous though still Western-run rival became the wealthiest city in East Asia. Both were occupied by Japanese forces during World War II, and their expatriate elite were interned in camps.

Shanghai never regained its prewar status. After their 1949 victory in China’s civil war, the Communists seized foreign-owned assets, bringing an end to the dominance of one of Asia’s most prominent business dynasties — the Baghdadi-Jewish Sassoon family, known as the “Rothschilds of the East.” The exodus of wealthy Shanghainese to Hong Kong helped lay the foundations for the city’s modern-day revival as Asia’s leading financial hub.

But between the protests of the 2010s, the 2020 national security law, and the draconian pandemic lockdowns, in recent years, it did feel like Hong Kong might be at risk of losing at least some of its status as a global financial hub. According to the latest Global Financial Centres Index, Hong Kong is still ranked third, behind New York and London, respectively. But Singapore is nipping at its heels in fourth position.

Today, some are arguing that the current turmoil in the Middle East has broken the promise of Dubai as a stable, global financial capital where influencers roam freely on the beach. People are, not surprisingly, leaving in the immediate term, but will it be lasting? I think it's too early to be calling the fall of Dubai, but there's no question that this is a meaningful exogenous shock. Its real estate index fell 30% in two weeks.

History shows us that there are no guarantees. Preeminence exists until something happens, and then it doesn't. If this war becomes protracted, it will be a major problem for Dubai. Capital and talent want openness, stability, opportunity, and a favourable business environment (keep taxes reasonable and get out of the way). After all, it's arguably the main reason why people come to cities in the first place.

Cover photo by Sepehr Moradian on Unsplash

Chart via the Global Financial Centres Index

I was talking about this with my friend Evgeny Tchebotarev last night:

The transfer of sovereignty over Hong Kong (also known as the handover) happened at midnight on July 1, 1997. At the time, Hong Kong had a population of about 6.5 million people and China had a population of about 1.23 billion people. But Hong Kong punched well above its weight class and its GDP as a percentage of mainland China's GDP was about 18.4% (see above). In other words, Hong Kong represented about 0.53% of the population, but almost 1/5 of China's economic output. Today, well as of 2018, this number has declined to 2.7% (again, see above). Hong Kong still possesses a number of structural benefits compared to mainland China, but its position as a global financial center is not guaranteed.

Graph: Investopedia

I started reading a new book this weekend called, The Global Edge: Miami in the Twenty-First Century.

When many (or perhaps most) people think of Miami/Miami Beach, they think of its beaches and resorts. And that is certainly a mainstay of the region's offering. But over the past few decades, Miami has also emerged as an important global city (albeit at a more regional scale) and as a center for art and culture. Miami has the second largest concentration of international banks in the United States after New York, which begins to speak to the region's importance for Latin America.

New York City is what it is today because it was the port of entry for new immigrants coming to the United States. This same phenomenon is what reshaped the Miami economy, starting first with Cuban exiles. Today, the city remains a refuge for Latin Americans searching for greater political and economic stability. As my friend from Miami likes to tell me, "the best thing about Miami is that it's so close to the United States."

I'm enjoying this book and I bet some of you will as well.

It is worth reiterating that one of the main reasons the majority of people live in cities is because they would like to make money and improve their economic status. There are, of course, other reasons too, but making money is an enduring attractor. In Alain Bertaud's book, Order Without Design: How Markets Shape Cities, he famously argued that cities are, first and foremost, labour markets.

Because of this, the success of cities depends on their ability to harness talent and turn it into economic progress. New York City, for example, is the city it is today because it was the largest port of entry for immigrants. And because transportation costs were high at the time, people arrived in New York and stayed in New York to work and create businesses.

The same thing is generally true today in the San Francisco Bay Area. It is estimated that roughly 50% of all tech startups and 59 of the top 100 highest-valued unicorns have a foreign-born founder. (I'd love to know what percentage are Canadian graduates of the University of Waterloo.) These are immigrants looking for money and economic opportunity, and the local ecosystem is providing the right preconditions.

But if the preconditions for success disappear, people will start to both leave and not come in the first place. So, it's also worth reiterating that the fortunes of cities have always risen and fallen over a long enough time horizon. Here's a great excerpt from a recent Bloomberg article by Richard Frost and Mary Hui, talking about what "war-rattled Dubai can learn from Hong Kong's expat exodus."

Financial centers rise and fall with the tides of geopolitics. From the mid-1500s, the tiny Portuguese enclave of Macau served as the primary intermediary for trade between Europe, Japan and China. In the mid-1800s, it was displaced by Hong Kong, which Britain secured by defeating the Qing dynasty. Hong Kong, in turn, was overtaken by Shanghai in the 1920s, when its more glamorous though still Western-run rival became the wealthiest city in East Asia. Both were occupied by Japanese forces during World War II, and their expatriate elite were interned in camps.

Shanghai never regained its prewar status. After their 1949 victory in China’s civil war, the Communists seized foreign-owned assets, bringing an end to the dominance of one of Asia’s most prominent business dynasties — the Baghdadi-Jewish Sassoon family, known as the “Rothschilds of the East.” The exodus of wealthy Shanghainese to Hong Kong helped lay the foundations for the city’s modern-day revival as Asia’s leading financial hub.

But between the protests of the 2010s, the 2020 national security law, and the draconian pandemic lockdowns, in recent years, it did feel like Hong Kong might be at risk of losing at least some of its status as a global financial hub. According to the latest Global Financial Centres Index, Hong Kong is still ranked third, behind New York and London, respectively. But Singapore is nipping at its heels in fourth position.

Today, some are arguing that the current turmoil in the Middle East has broken the promise of Dubai as a stable, global financial capital where influencers roam freely on the beach. People are, not surprisingly, leaving in the immediate term, but will it be lasting? I think it's too early to be calling the fall of Dubai, but there's no question that this is a meaningful exogenous shock. Its real estate index fell 30% in two weeks.

History shows us that there are no guarantees. Preeminence exists until something happens, and then it doesn't. If this war becomes protracted, it will be a major problem for Dubai. Capital and talent want openness, stability, opportunity, and a favourable business environment (keep taxes reasonable and get out of the way). After all, it's arguably the main reason why people come to cities in the first place.

Cover photo by Sepehr Moradian on Unsplash

Chart via the Global Financial Centres Index

I was talking about this with my friend Evgeny Tchebotarev last night:

The transfer of sovereignty over Hong Kong (also known as the handover) happened at midnight on July 1, 1997. At the time, Hong Kong had a population of about 6.5 million people and China had a population of about 1.23 billion people. But Hong Kong punched well above its weight class and its GDP as a percentage of mainland China's GDP was about 18.4% (see above). In other words, Hong Kong represented about 0.53% of the population, but almost 1/5 of China's economic output. Today, well as of 2018, this number has declined to 2.7% (again, see above). Hong Kong still possesses a number of structural benefits compared to mainland China, but its position as a global financial center is not guaranteed.

Graph: Investopedia

I started reading a new book this weekend called, The Global Edge: Miami in the Twenty-First Century.

When many (or perhaps most) people think of Miami/Miami Beach, they think of its beaches and resorts. And that is certainly a mainstay of the region's offering. But over the past few decades, Miami has also emerged as an important global city (albeit at a more regional scale) and as a center for art and culture. Miami has the second largest concentration of international banks in the United States after New York, which begins to speak to the region's importance for Latin America.

New York City is what it is today because it was the port of entry for new immigrants coming to the United States. This same phenomenon is what reshaped the Miami economy, starting first with Cuban exiles. Today, the city remains a refuge for Latin Americans searching for greater political and economic stability. As my friend from Miami likes to tell me, "the best thing about Miami is that it's so close to the United States."

I'm enjoying this book and I bet some of you will as well.