The haves vs. the have-nots

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I won’t super belabor these points. There’s some “new” research from the Brookings Institute here — I put “new” in quotes because I think it’s stuff people have known for a while, including:

Such high levels of territorial polarization are a grave national problem. At the economic end of the equation, the costs of excessive tech concentration are creating serious negative externalities. These range from spiraling home prices and traffic gridlock in the superstar hubs to a problematic “sorting” of workers, with college-educated workers clustering in the star cities, leaving other metro areas to make do with thinner talent reservoirs. As a result, whole portions of the nation may now be falling into “traps” of underdevelopment — and that is creating baleful social impacts. Many Americans now reside far from the opportunities associated with the nation’s innovation centers, undercutting economic inclusion and raising social justice issues. Regional divergence is also clearly driving “backlash” political dynamics that are exacerbating the nation’s policy stalemates.

Basically, the argument here is that most of “innovation” or “tech” growth happens in about five U.S. cities — San Francisco, Seattle, Boston, New York, and Austin, give or take. (There are others, of course.) As a result, urban “haves” flock to these superstar cities for job opportunities, leaving B-Tier cities behind with lesser talent pools. This creates political and economic upheaval, as we’ve increasingly seen.

Again, these arguments are not new — and they’re not entirely correct 100 percent either. More people are leaving NYC right now than almost at any time in history, likely due to insane rents + only about five-six professions can get you a bunch of money there. (I left NYC in 2012 and have not been back.) 35% of San Francisco residents are considering getting out. Seattle is having similar problems with people leaving, and both San Francisco and Seattle are probably not helped by New Yorker articles about how they could be easily swept into the ocean.

So, people do leave tech hubs. Rents are ridiculous. But broadly, what Brookings is saying is right.

General Motors vs. Google

Here’s a long-form article about the rise of automation, and I want you to pay attention to this section:

Google offers a vivid illustration of how new technologies create new opportunities. Two computer-science students at Stanford go looking for a research project, and the result, within two decades, is worth more than the G.D.P. of a country like Norway or Austria. But Google also illustrates how, in the age of automation, new wealth can be created without creating new jobs. Google employs about sixty thousand workers. General Motors, which has a tenth of the market capitalization, employs two hundred and fifteen thousand people. And this is G.M. post-Watson. In the late nineteen-seventies, the carmaker’s workforce numbered more than eight hundred thousand.

215,000 people vs. 60,000 people — and the latter grouping is making 10x the money, give or take. Now, Google’s business model is way too reliant on search, and Page/Brin have been out the door for a half-decade, so who knows if Google is a long-term play deal. But the numbers are staggering.

To get rich in tech, we just don’t need as many human beings. So that’s a factor in this equation too. You can build a multi-billion dollar company with maybe 25% of the worker need of a “physical asset” (i.e. cars) company.

And we wonder why CEOs are racing to automate?

Speaking of…

I’m pretty #piped financially right now. I was in a discussion with one place about a potential 2020 gig, and their CEO yanked the rug from me with the logic that he wants to hire less human beings and develop more automated processes. This is broadly where we are heading. CEO greed is scaled. Get your nut. If that’s the play, then it doesn’t so much matter if you live in Kansas City, Seattle, Anchorage, Dallas, or Mobile. If CEOs want to find ways to pay you less and not pay you insurance, the system isn’t set up too great regardless of specific geo. (Although at that point, cost of living becomes increasingly relevant. I’ve been broke in two pockets of the past five years and if I was anywhere but Texas, it would have been much harder.)

Can we do anything?

The focus of the Brookings article is on creating more innovation hubs, like we did with RDU / Research Triangle. I think that’s certainly possible, but there are some hiccups around young people wanting to live in “hip” areas and this prevailing notion that the only work being done anymore that matters is being done in Silicon Valley. I don’t necessarily know if we can turn Indianapolis into Silicon Valley, but we can definitely try!

Case in point: friend of a friend started a biz in Cincinnati. Within three years, as it was gaining traction, he moved it (and his family) to Denver, because Denver was a better source of the talent he needed. That, at a small scale, changes the economic condition of Cincy (a possible big business leaves), changes the political condition of Colorado (someone with Midwest values be entering), changes the housing market of Denver (a dude who can afford more be entering), etc. It’s a micro-level, yes. But it matters and it shapes how America is being shaped. No wonder we’re all nervous wrecks.

Your take on this stuff?

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