Earlier this week the WSJ announced that Sidewalk Labs (Alphabet Inc.’s urban innovation organization) is close to a deal with Waterfront Toronto to develop a new 12-acre section of the eastern waterfront. Sidewalk Labs would be their innovation and funding partner. It’s not final yet and it’s still subject to board approval, but the sentiment is that it should go.

There aren’t a lot of details about the project – other than the fact that it will be fairly big, up to 3 million square feet – but the overall intent is digital city building. It’s about imagining what a city could be if you built it today “from the internet up.” More info about Sidewalk Labs, here.

I thought of this project as I read Seth Godin’s daily blog post this morning in bed. Here are two snippets from that post:

When a new technology arrives, it’s often the nerds and the neophiliacs who embrace it. People who see themselves as busy and important often dismiss the new medium or tool as a bit of a gimmick and then “go back to work.”

There’s never a guarantee that the next technology is going to be the one that moves to the center of the conversation. But it’s certain that a new technology will. It always has.

Openness matters.

I’m anxious to learn more details about the project, but this is obviously very exciting. It also creates momentum and strengthens the case for Amazon HQ2 in Toronto. The above 12-acre Quayside area is only the tip of the iceberg. There’s the rest of the eastern waterfront and also East Harbour.

Some people have been critical of this city’s push for Amazon HQ2. Anthony Lacavera, chairman of Globalive Capital, called this “the biggest Trojan Horse of all time.” His view is that Amazon would simply use HQ2 Toronto as a mechanism for cheaper labor (USD > CAD) and to siphon the best and brightest down to the US.

Now, I agree that it would be more impactful to create the next Amazon then to simply lure in its second headquarters. Big entrepreneurial successes are what fuel the darwinian evolution of startup hubs. The founders, early employees and investors make boatloads of money and then they start reinvesting that back into the ecosystem by, among other things, backing the next generation of entrepreneurs.

But does this necessarily mean that an Amazon HQ2 would be detrimental to Toronto by acting as a conduit to the US? Will it discourage entrepreneurship? Should we eschew all US firms out of fear that this may in fact happen? I don’t think so.

There’s tremendous value in concentrating smart people in one place – ideas build on ideas. And I don’t think technology has been able to disrupt that, at least not yet. One example of this is a theory that Paul Graham calls the Milanese Leonardo:

You can see how powerful cities are from something I wrote about earlier: the case of the Milanese Leonardo. Practically every fifteenth century Italian painter you’ve heard of was from Florence, even though Milan was just as big. People in Florence weren’t genetically different, so you have to assume there was someone born in Milan with as much natural ability as Leonardo. What happened to him?

And his reasoning is as follows:

Nothing is more powerful than a community of talented people working on related problems. Genes count for little by comparison: being a genetic Leonardo was not enough to compensate for having been born near Milan instead of Florence. Today we move around more, but great work still comes disproportionately from a few hotspots: the Bauhaus, the Manhattan Project, the New Yorker, Lockheed’s Skunk Works, Xerox Parc.

Xerox Parc (Palo Alto Research Company) is a great example of the kind of positive externalities that can happen as a result of smart people being in close proximity to each other while they wrestle with similar problems. It has been well documented that it was Steve Jobs’ visit to Xerox Parc that inspired many of Apple’s early innovations.

So my view: let’s increase Toronto’s urban metabolism and make it the Florence of 1450.

Ed Clark – who is leading the charge for HQ2 in Toronto – has been clear that large taxpayer subsidies are not on the table for Amazon. That would not be fair to the existing companies in this city. If that is what it is going to take, then we are not going to win. We will win based on our city, our human capital, and our openness to the rest of the world. That feels right.

Welcome Sidewalk Labs. Welcome Amazon. This city is open for business and to new ideas. 

Image: Waterfront Toronto

We often talk about superstar cities such as New York, London and, in the case of tech, San Francisco. But what about the superstar people that drive these economies?

Aaron Renn recently wrote a post called “The Superstar Gap”, where he argues that the interior of the U.S. is suffering from a big handicap because of its lack of superstars. Chicago is one example he gives. Very good, but not the best.

He also cites a 2010 analysis by Carl Wohlt that shows the “100 Most Creative People in Business” predominately living in the West and Northeast, compared to the Midwest and South.

This is interesting because – if we assume this gap to be true – it gets me thinking about a number of important questions:

• Is it that the interior isn’t effectively fostering superstar talent?

• How much superstar talent is actually latent and untapped?

• Is it that superstar talent is getting sucked into a select few superstar cities, away from other places? Definitely happening.
  

• How many superstar cities (filled with superstar people) can sustainably exist in today’s world?

Now by definition, superstar talent is going to be a smaller segment of the population – it’s one tail of the bell curve. 

But I do think we should be careful not to assume that the raw talent doesn’t exist in certain cities. People and place are linked, and superstar cities are arguably just empowering new forms of individual superstardom.

If we are to use successful startups as one measure of superstardom, it’s important to keep in mind that they are incredibly fragile in their nascent stages. The right people need to come together. The right funding has to fall into place. And the list goes on. 

Below is an excerpt from a 2006 essay by Paul Graham (Y Combinator) called, Want to start a startup?

Successful startups are almost never started by one person. Usually they begin with a conversation in which someone mentions that something would be a good idea for a company, and his friend says, “Yeah, that is a good idea, let’s try it.” If you’re missing that second person who says “let’s try it,” the startup never happens.

That someone might have been a superstar.

When I met with all of the lovely folks from Amsterdam last week, one of the things that I mentioned about intensification is that it is almost certainly a contributing factor towards innovation, agglomeration economies, and the overall startup ecosystem here Toronto. 

I don’t know to what extent, but I feel it happening. And there’s lots of research correlating urban density with innovation. 

The continued densification of Toronto means it is constantly becoming easier to schedule that morning coffee before going into the office or to pop into that meetup after work. And those sorts of things are hugely valuable in today’s economy.

I talked about a number of local startups in my presentation, including 500px, Wattpad and Wealthsimple. But I didn’t show any hard data. So I’d like to do that today. Below is a chart showing total venture funding (internet/software) and the number of deals (Seed to A/B/C/D) in Toronto since 2009:

It was taken from this Medium post. Supposedly this places us 12th in the world as far as startup cities go.

Again, who knows how much of this venture growth has been helped along by intensification. After all: “Silicon Valley proper is soul-crushing suburban sprawl.” But I would bet money that it’s moving the needle in the right direction.

Here is another relevant post by venture capitalist Albert Wenger where he talks about the great startup ecosystem that Toronto is growing. He posted it earlier today.

All of this is important because some of these deals will spawn big companies. And those companies will the hire lots of people, as well as consume space. 

Real estate developers like to talk about how they create jobs. And we do. But we can’t have a city of people just building buildings. People and businesses need to fill that space and that hinges on entrepreneurs who are willing to go out there and forge something new for themselves. Fortunately, Toronto seems to have a growing number of those kinds of people.