43 Comments

You ask: what will replace the organized meetups at Stanford in the early Si Valley days? Well, most technically complex scientific communities depend on annual conferences with annual attendances of 5000, 10000 people and beyond. Conference venues for that size group require 2-4 years advance booking and have hefty fees for cancellations in the last 6-12 months. So 2020 was a disastrous year as all had to go virtual, and some had little time to redo arrangements. The result was a big drawdown of "rainy day" funds. The one I am involved with, NeurIPS (which covers from neuroscience to machine learning, AI, robotics etc, and is a premiere recruiting opportunity for corporate sponsors), was already starting to distribute its satellite activities by adding virtual meetups. A year of being fully online for a week with a schedule each day that was designed to be accessible from Beijing to Moscow has greatly accelerated the transition. The results for the December 2021 meeting are still under debate, but even under a better than expected world recovery from pandemic and populist insanity, I expect that the hybrid conference design will evolve further. A critical question is whether this will serve the recruiting and image-boosting needs of major sponsors, whose support has provided the cushion that got several conferences through the shutdown.

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One factor that's not mentioned is tolerance. The nativist attitudes of many in low-density areas of the country are a barrier to their regional development (even if the central cities are tolerant, they are often small islands in MAGAland). A friend of mine did a series of interviews with business leaders in NYC. One finding that jumped out of his research was that execs felt that they could get any talent, from anywhere in the world, to relocate to NYC if they needed them and that was a prime reason they intended to keep their operations there.

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My wife is from the Middle East, and we met in NYC. NYC is the only place she feels “at home” with no normative expectations.

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Much of your post is about San Francisco. How much of SF's attraction comes from the fact that CA prohibits non-compete agreements? CA start ups can turbocharge their growth by cherry picking the best employees from their competitors, a luxury not available to companies located in, say, Houston. If workers move out of SF they may be subject to a non-compete -- that's a heavy price to pay for their career. Could a federal law banning non-competes speed the departure of employees from California?

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It's not a tall order! Our firm has been tracking the exodus away from superstar cities for several years now. It's unethical, really, to concentrate so much capital, deep networks and so many resources in five or six places while everyone else scrambles to expand.

Furthermore, the idea venture capital firms have to be 20 minutes away from their startups is myopic and, also, simply not true. Being two or three hours away is just fine, and encouraging people to relocate to new places is a worthy mission as it helps to spread expertise and passion around in new locales.

Thanks, and best,

Pia Sawhney

Armory Square Ventures

www.armorysv.com

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Two Things:

- I wonder how much some of the exodus from the cities is just the acceleration of millennials following a typical pattern of college-> city life -> suburbs. Millennials, a bigger generation than both Gen X and likely Gen Z, now have a median age of approximately 30 years old.

- Somewhat similarly, I also wonder how much we overstate people moving to Austin as people moving to smaller cities nearby: for example, Sacramento, CA or Tacoma, WA. Example: https://markets.ft.com/data/announce/detail?dockey=600-202012290800PR_NEWS_USPRX____SF34146-1

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Don’t forget transportation! I hope to avoid owning a car for as long as possible and there are only a handful of cities where that’s feasible.

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I often see discussions of "knowledge work in superstar cities" that seem to implicitly assume "knowledge work" means "elite, highly remunerated workers in technology, law, finance, and consulting." Or rather pithily, the fields that new Harvard grads enter: https://features.thecrimson.com/2020/senior-survey/after-harvard/

What about other industries that employ highly educated people, like traditional (i.e. physical) engineering, healthcare, medicine, aerospace, etc.? These industries seem much more geographically distributed (and much less amenable to remote work) than does tech/finance. Despite being less "sexy" at the moment, chemical engineers and gastroenterologists are undoubtedly knowledge workers--who are also well paid--but they also don't seem to cluster in superstar cities like San Francisco, New York, etc. anywhere close to the way the tech/finance elites do. Moreover, there are millions of people like financial advisors, insurance agents, personal injury attorneys, web developers for small businesses, etc. who are clearly employed in what could only be called "information technology," "law," and "financial services" but are not clustered in superstar cities. But they don't appear in the Wall Street Journal, so we don't talk about them.

Elites have been clustering in geographically small, tightly bound networks for all of human history, which makes perfect sense if one is of the not-so-controversial opinion that elitehood is primarily a function of social connections. So of course employees at Google, McKinsey, and Goldman Sachs will invariably cluster, for the same reason that nineteenth century British aristocrats did--because they are elites! And you don't get to be an elite without participating in elite society!

The question I'm getting at is this: From an expanded definition of what "knowledge industries" are, is clustering in general anywhere near as prevalent a phenomenon as conversations focusing on elite clustering make it seem? More importantly, how much does elite clustering actually matter to the average person?

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1) Do cities offer any amenities to families? NYC seems at times to me actively built to make living with children more annoying. I was surprised to see children totally absent from your analysis here, which overall I thought did a good job analyzing the work from anywhere situation.

2) From reading about finance it seems like there's a lot of signaling that's built around physical presence. You bring people to show you're serious. You go out to a fancy meal to indicate interest. Anyway, I wonder if those sorts of signals are a different kind of uncounted benefit of physical clustering.

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There are definitely things about cities that make it harder to live there with a family--you'll need to buy a larger home, in a market where space is more expensive (and you're competing against groups of roommates for the multi-bedroom units, who can put a salary-earning adult in every bedroom; three roommates in a three bedroom can plausibly pull in more salary than two parents plus two kids, even if the mom and dad earn higher salaries than any individual of the three roommates).

On the other hand, cities make it possible to get around without a car. Letting your twelve-year-old take the subway to band practice or soccer without having to schlep them yourself can be liberating. It varies by family!

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If I can get my kids to band practice on their own maybe I can eke a little salary out of them? Or maybe they can take the subway to ibanking practice? Will keep thinking on this.

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If your 12-year-old gets that Goldman Sachs internship in the financial district, she'll definitely thank you for the easier commute.

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My family specifically wanted to stay in San Francisco (or Oakland, if the commute had worked out) for the amenities. Like everything, it's been upended by the pandemic, but before that it was great that we could bike to museums like the California Academy of Sciences or a quick train ride to a baseball game. Even with the pandemic, we've been doing a tour of playgrounds and thanks to the density of the city, we pretty much hit a new one every weekend, usually without even thinking about taking a car.

It's definitely true that there are some differences. We have a small home, for example. We do actually have a back yard, but it's also pretty tiny. I don't really consider either of those to be much of a real drawback personally, though.

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I am raising two children in NYC. It’s a great experience for children. But it does cost a lot of money to make basic things (like getting the kids to and from school) manageable.

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We've got three, and it's clearly manageable and there are nice things about it. (We're near family, which is VERY nice.)

The thing I always come back to is Barnes and Noble. We live uptown, and there is a Barnes and Noble some 100 blocks away. Great, sometimes we want to take our kids to get books. To get us all downtown involves: snacks, strollers, stairs, and actually it takes anywhere from 30 - 60 minutes to get there once we leave our door since there's a transfer on the subway. All in all, taking my family to get a book on a Sunday morning is a 2-3 hour commitment.

I grew up in the suburbs. It takes 10 minutes to drive to the mall and to a bookstore, 10 minutes to drive back. You throw the kids in the car, badabing badaboom you're there.

It's stuff like that that makes me wonder if I've made a bad life decision or three.

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All of this remote liberation talk fails to meet the fundamental shift of remote employees being put into direct competition with a global workforce who will do 90% of your job for 20% of your bloated salary. No CFO will tolerate paying American salaries for that work ever again.

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If this was possible people could already outsource their own jobs and pocket the difference, which does sometimes happen but not often. There are many obstacles in the way, but one is that people don't simply "do a job" at the professional level. The people you have define the work to be done and their job descriptions change to fit them, or people end up doing extra informal work that ends up being business critical.

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Certainly people like Tim Ferris popularized this idea with the 4-Hour Workweek. But it's a bit hubristic in your own company or industry, let alone your own country, to believe that somehow you're not replaceable. If you can be replaced by a remote worker living large in rural Kansas, you are much more likely to be replaced by a remote worker much hungrier than you living in Myanmar.

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Thanks for an interesting essay. A couple of quick points:

1. The hot city vs. not-so hot cities or - God forbid! - country living misses the great in-between, the suburbs and satellite cities like Princeton, which offer food, culture and access to the big city via train. We can't all live in Williamsburg...

2. Young and unmarried people can jump around for a while, but at some point they get married and have kids, and their parents are getting old and need support. Hard to do that from Tokyo.

3. People are social animals, and there are good reasons for why they live in cities. Biology and anthropology (David Sloan Williams, Joseph Henrich).

4. Paul Collier has a very good discussion about cities and land rent in his book The Future of Capitalism: Facing the New Anxieties, building on Henry George. A big part of the profits of location ought to be taxed, since it accrues from crowding and not any person's effort.

Hans Sandberg

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I can probably speak to the cultural amenities piece of this, and I think it's going to be tough to replace. I'm quasi-retired from the scene now, but I did improv comedy for a number of years; similar factors apply to any number of cultural clusters (live music, scripted theater, standup, probably even film/tv production, sculpture and painting though I'm less familiar with those)

* Remote is not a good substitute. I've attended a bunch of virtual comedy shows since the pandemic started, and it's a really crappy experience. As a comedian performing, you rely a lot on feedback from the audience--who's laughing, are people paying attention, what gets a good reaction. That's totally gone on virtual platforms. I'd say that a Zoom job interview, book club or business meeting is probably 90% as good as an in-person one; for a comedy show that number drops to like 30%, or even lower for acts that revolve around spectactle (e.g. fire-eaters, acrobats, burlesque dancers, etc.)

* It's hard to do necessary prep work. An improv team probably practices together in person, often once a week. A theater troupe does tons of rehearsals. A band has to jam together a lot before they can effectively play a show. This work isn't public, obviously, but it's important for being good, and it's hard to accomplish virtually.

*You need to be in a community of similar performers. It's much easier to do good improv with seven people than it is to do it with two people (and doing good improv with one person is borderline impossible). Music is the same way--even most solo acts have a backing band. Even things like an art gallery exhibition often display works from multiple artists under a broad theme. But to form these collaborations, you need to float in a sea of people interested in doing the same thing. I hosted an improv show for several years, because I happened to be taking a class. Me and a classmate would regularly go to a bar after class, we happened to click personally and eventually hatched an idea for a show. That would never happen without serendipitous personal interaction with other artists, and that's very tough to replicate virtually

Obviously, physical size isn't the only factor here. Nashville has a booming music scene despite being a midsized city, because it's essentially a historic industry cluster. But it's easier to find a cultural scene (and an audience) the bigger your city is, which will pose a real challenge for the Tulsas of the world.

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«Venture capital firms are still way too obsessed with being physically near to their portfolio companies. I don’t know of any study on this, but it seems like mostly or entirely a cultural thing.»

My guess knowing a bit how that world really works is that many VCs being smart are also big incumbent landlords (and vice-versa many big incumbent landlords are also VC investors) in "hot-spot" areas, and are keen to ensure that as much of the investor capital they hand over to portfolio companies and their employees ends up in rents and capital gains for themselves. After all during the California gold rush most prospectors did not make much, but the places where they spent their money made a lot more.

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I'd really like networking to go more online. Americans already expect too much of each other at work, creating stress and personal issues. Then we expect people to spend their free time getting to know people for professional purposes. I don't think that's a fair expectation and at least moving more of it online would alleviate that.

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Networking online sounds even more miserable than networking in person. Socializing is probably the hardest activity to do online; it's simply a lower quality experience than anything that takes place in person.

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Great article, but I take issue with describing Dallas as a second tier city. For one thing, it is quickly becoming the YIMBY capital of the world. And more people will ultimately be great for Dallas.

https://www.cnbc.com/2020/12/15/people-are-migrating-to-these-cities-amid-covid-19-linkedin.html

Second, it is one of only 13 US cities with all 4 major sports teams.

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I guess I think the terminology should be different. If you want to describe 'superstar' cities as only Silicon Valley, NY, LA, DC then sure. But there has to be a "Tier 1" that would include Dallas. There are significant differences between Dallas and Sacramento/Tulsa.

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As a former Dallas resident, I too was perplexed by the Tulsa-equivalence.

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If only moving to Tokyo were as simple as is stated in this piece (or at all possible).

For all of us American citizens stuck in America who don't want to be tethered to an automobile, there aren't many options out there. NYC may be a crumbling failure-in-slow-motion but as of 2021 its density and transit infrastructure facilitate a convenient, environmentally responsible lifestyle unavailable in the vast majority of U.S. metros.

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Portland (Oregon) has great public transportation. It's easy to get around and have a good life without a car. Unlike Seattle which is decades behind where it should be for a city of its size and wealth.

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The wrong question is being asked regarding startups.

To be clear: startups are always going to be coming up and (mostly) failing.

However, what happened in SV and worldwide since 2015 is an aberration. Different views exist on why, but my personal view is that this aberration arose due to China relaxing its currency control policy in 2015 - which enabled $1 trillion to escape that ecosystem. Some significant part of that funded the ginormous, profitless startup bubble for Uber, Airbnb, Tesla and many other companies.

Some might point to Softbank instead; I would note that Softbank's massive over-reach such as with WeWork was also due to China - specifically Softbank's early investment in Alibaba. I would also note that Softbank was the final stage but that it was 2015 which was clearly the peak for overall startup ecosystem valuations - not late stage WeWork.

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