People across the country have been moving out of big cities en masse during the pandemic. The exodus began before the pandemic but has sped up since.

Many people were leaving expensive urban metropolis areas like San Francisco or New York for affordable destinations, whether that meant the suburbs or a smaller city or town.

There’s been some speculation that cities will be left empty following Covid-19. And others say the changes will be temporary, as they were after previous shocks (e.g. 9/11, 2008 Financial Crisis).

The Cost Benefit of Leaving Cities

As people leave cities like San Francisco for destinations like Reno or Boise, they are likely seeking quality-of-life changes.

They may not earn as much in Reno, but they can buy a bigger house and live economically better than they were able to in San Francisco. And as cities have shut down, the amenities of city life are no longer compelling. But that’s likely temporary.

Many technology and knowledge workers can do the core of their jobs from anywhere, so it makes relocating easier and financially attractive if they can keep a big city paycheck. But they may have fewer options if they decide to change jobs in the future.

Cities are vital for innovation-driven economic growth. Cities are where people come together, where ideas are exchanged, where innovation happens. It’s where energy is converted to creation.

Cities are Complex Adaptive Systems

Why are cities important to innovation and growth?

First, cities are metabolically more efficient the larger they are, meaning they consume less resources per capita to sustain themselves as their populations grow in comparative scale. Second, socioeconomic activity, such as innovation or wealth creation, increases exponentially as population size increases.

Geoffrey West, a complexity scientist at the Santa Fe Institute, is an expert on cities. His book, Scale: The Universal Laws of Life, Growth, and Death in Organisms, Cities, and Companies, explores how cities are essentially complex adaptive systems, not unlike living creatures. In it, he says that when comparing cities by population size, as the population increases, it follows two logarithmic scaling laws, one that provides economies of scale (efficiencies) in infrastructure and the other providing exponential socioeconomic growth.

West says that as cities get larger, they scale sublinearly with infrastructure, which means they use less resources per capita, the larger they are. They realize economies of scale as they grow. Specifically, this follows a logarithmic power law with an exponent of about 0.85. Essentially, as the population doubles, it uses 15% less energy than a linear relationship would show.

At the same time, socioeconomic metrics (innovation, economic growth, wealth, crime, disease) scale superlinearly, following a logarithmic power law with an exponent of about 1.15. Essentially, as the population increases, innovation and wages and wealth increase exponentially. Unfortunately, so does crime and increased transmission of diseases, as we’ve all experienced with Covid-19.

West pointed out that the 15% energy savings we see with every doubling of size of the city is complementary and approximately equal to the 15% gains in socioeconomic activity.

With this in mind, the cost benefit analysis of people migrating out of cities is counter to economic growth.

Creativity and Cities

We’ve long recognized the importance of creativity and innovation in cities as a driver for economic growth. Countless studies and books have been written about Silicon Valley magic.

Cities are often ranked by their potential or desirability, partly based on innovation or creativity metrics. Some of the indicators of various rankings include: number of patents filed; number of cafés; number of startups; proportionate amount of office space used by startups; number of museums or art galleries or film festivals; air quality; food diversity; job diversity; number of and distance to nearby research universities, and so on.

In fact, city builders around the world try to emulate aspects of creative cities like San Francisco and San Jose.

But it’s not that easy. The energy that creates that environment cannot necessarily be manufactured by design. It’s organic. It’s driven by the reactivity of people coming together, engaging one another.

The late urban activist Jane Jacobs who led the effort to save Greenwich Village’s Washington Square Park from being torn down to build an expressway in the 1960s, once said, “[Cities] differ from towns and suburbs in basic ways, and one of these is that cities are, by definition, full of strangers.”

The bringing together of strangers, of diverse people from diverse places, is what provides cities with the spark of life, with energy to create.

Passion, Serendipity, Innovation and Growth in Cities

John Hagel at Deloitte writes and talks frequently about the importance of passion and a learning disposition, as a driver for both individual and organizational growth. He uses the term “passion of the explorer” to describe an archetype and outlines a basic taxonomy to describe passion. He says passion of the explorer starts with a “commitment to personal improvement,” supported by a two key dispositions: 1) A questing disposition to push oneself and try to attain higher levels of performance and realize potential; and 2) A disposition to connect with others who share the same or similar passion.

Hagel juxtaposes the passion of the explorer with the passion of the true believer. The true believer has a clear destination and firm commitment to reaching it, but they can be closed to possibilities or information that’s counter to their goals. Entrepreneurs are often true believers.

Passionate explorers, on the other hand, commit to a domain but often have no idea where the path will take them. They’re constantly seeking new challenges and take in the world with an open mind, always trying to improve themselves and provide greater impact on the world around them. They have a learning mindset and openness that enables them and their organizations to adapt to change more easily and overcome obstacles.

The passionate explorer certainly doesn’t define everyone who migrates to cities, but it characterizes many of those people who are driven to be part of a domain or movement, who want to meet and engage others who have similar passions, who want to participate in the Zeitgeist, even if they don’t know where it might lead them.

When we go to a new city, we often meet many more people in that first year or two than we do after we settle into our careers, pastimes, and relationships there. We open ourselves to the unknown and unexpected, to the happenchance of synchronicity. This openness prepares us for possibility. And it’s a key underlying factor to learning and innovation. In a previous whitepaper, The Metrics of Innovation, I explored the importance of networks to innovation in and around organizations. The same applies to innovation and economic growth in cities.  

In some ways, it’s why we go to business conferences or even cultural events, to participate in a similar environment for a few days. We don’t go for the content (those long slide presentations!). We go for the serendipitous encounters we’ll have in the bar or at dinner or randomly in the hallway. We go to connect with people who have a passion for the same domain. We go to discover something new, to uncover some unknown, to gain new insights, which can help us and our organizations grow and expand.

Building Economic Cities

Cities are complex and dynamic. They aren’t embodied or characterized by the buildings and architecture. Cities are the people and the vast web of their connecting interests.

Let me digress for a minute and talk about building cities from scratch before returning to talk about innovation and economic growth in our companies and cities.

A few years ago, I briefly advised on a pilot city building project in China.

One of the projects, the first of six pilot cities was ambitious. Located just north of Beijing, it was a 55-square kilometer city (about half the size of San Francisco) modelled in vision as a high-tech innovation city, with a life sciences park, a cyber port on the water and a venture capital island connected by tram over a river to the adjacent district, and high-quality residential neighborhoods. The mockups looked like Disneyland.

This Disney version of Silicon Valley will eventually thrive, but it may thrive in ways that haven’t yet been conceived and only after the spark of life grabs hold and a community naturally emerges. This may take several generations and economic cycles, and it may have an identity that has little or nothing to do with the ambitious vision.

We can find similar efforts (old and new) around the world, particularly in the developing world: Astana, Kazakhstan; Songdo, South Korea; Naypyidaw, Myanmar; King Abdullah Economic City, Saudi Arabia; Masdar, UAE; Canberra, Australia (not a developing country); Brasilia, Brazil.

The visions for many of these cities seem bounded in Utopian ideals with ambitions for innovation and economic growth. They’re driven by cutting edge architecture and aspire to be global economic hubs and seats of government.

None inspire a sense of life and vitality.

Some of the reviews of these cities are eerily like critiques we often hear about suburbs and gated communities. It’s not a surprise that many are modelled, at least in part, after Ebenezer Howard’s garden city movement, which has also influenced many suburbs:

Canberra: “Canberra is like going to grandma’s house. Other Australian cities are doing brash, creative things but here everything is wrapped in plastic.”

Brasilia: “Brasilia is a mirror of Brazilian society,” historian and urban planning professor Vicente Del Rio says. “Those with power live in a little island or cocoon. Those who don’t—which is the majority—live on the outside.”

Masdar: It’s been described as a “a green ghost town.” Another said, “When I first came here three years ago, Masdar City was very quiet. Unfortunately, it is still very quiet.”

Astana: “For a large part of the year, public life in the city practically freezes over.” "The way the city is planned means that citizens principally live in isolation, travelling by car from home to work and back again. There are few public spaces for people to congregate."

Jane Jacobs criticized the ideas of the garden city movement. “[Ebenezer Howard’s] aim was the creation of self-sufficient small towns,” said Jacobs, “really very nice towns if you were docile and had no plans of your own and did not mind spending your life with others with no plans of their own. As in all Utopias, the right to have plans of any significance belonged only to the planner in charge.”

Many of these cities will likely come to represent economic and class disparity. Just as we can segregate in the suburbs to a degree, these cities will effect segregated societies to a similar degree, as Jacobs suggested.

Emerald Cities: Why do We Try to Build Economic Utopias?

Most, if not all, of these planned cities have already been (or will likely be) called failures. Not because they cannot succeed, but because cities, as Geoffrey West pointed out, are complex adaptive systems; they grow and thrive in ways similar to how bacteria might grow. They evolve like life evolves, adapting to the environment. For a city, that environment is made up of the people, to which the city must adapt.

The architectural vision and urban planning have little ability to drive what happens within that framework.

Or, as Jane Jacobs said, “There is no logic that can be superimposed on the city; people make it, and it is to them, not buildings, that we must fit our plans.”

Man has made many attempts large and small at building private and exclusive Utopias, whether as economic systems or in the form of a city or gated suburban community. Our efforts at creating a man-made Eden will no doubt continue. In these endeavors, we overlook the complexity of life. We overlook the fact that we’re messy, that we make irrational decisions. That our interests and ambitions are varied.

As I previously said in an article about values, innovation and the future of capitalism, if we learned anything from neo-classical economics, it is that people are unpredictable. No Utopian ideal and no amount of refining and finessing of the blueprint in an economic vision (whether it’s an urban planning document or a grand unifying theory of economics) can make the purely theoretical fit the complexities of life and choice. Thus, Utopias of any sort (which we might view as theoretical expressions of frictionless economic perfection) will always fall short.

Former New York Times architectural critic Nicolai Ouroussoff wrote in 2010 about King Abdullah Economic City in Saudi Arabia. His words can apply to all these cities as economic experiments: “These cities are driven by anxiety over the future, not utopian idealism.”

Ouroussoff is right about the anxiety that drives the visions of these cities.

But I’ll amend his sentiment slightly: Utopian idealism is born from anxiety over the future.

This is why we try to build economic Utopias: We fear others who are different from us. And thus, we fear the process of open organic growth and that fear is likely based in desire to maintain the status quo, particularly for the class of economic people who imagine and develop these Utopian cities as landscapes of frictionless perfection.

The world will continue to urbanize. In 2018, the United Nations World Urbanization Prospects Report reported that by 2050, 68% of the world’s population will live in cities. Today, 55% of the world’s population lives in cities. Most of that urban migration will occur in developing countries. We need to build cities, but we simply don’t know how.

We tend to overlay simplistic ideas on top of the real complexities of life and existence. And not to be overlooked, we overestimate our own abilities.

Or rather: We’re overconfident in our ability to conquer nature.

Innovation Comes from the Free Exchange of Ideas

What China and Saudi Arabia and Myanmar and Kazakhstan and other developing countries that are building visionary economic cities might not fully appreciate is that creativity and innovation and passion and leadership (the foundations of economic growth) involve the free exchange of ideas more than anything else, certainly more than architecture and shiny buildings and using form in an attempt to prescribe outcome.

Why is this relevant to American cities and economic growth?

Innovation doesn’t come from a vision of a city with great architecture or a city that has a venture capital island. It comes from the people who make the city, who engage in it daily; it comes from freedom of expression.

It comes from art, philosophy and the expressions of Uneconomic Man; it comes from a passion to realize our own potential as well as humanity’s potential.

It comes from trust and from feeling safe enough to share ideas and collaborate.

It comes from diversity and the movement of people and ideas and inspiration in an open adaptive system, not a closed, controlled system.  

Economic growth is maximized when it’s not exclusive; when it invites engagement and diversity, when more people participate. This brings me back to American cities.

Economic Growth Cannot Afford to Leave Minorities Behind

We know that diversity of ideas and people drives innovation and exponential economic growth, yet even in our most innovative cities, we often fail to engage existing racially diverse communities to fuel growth.

Is it because it’s the outsiders and newcomers who are meeting new people and engaging in new ideas at scale, while those who are already part of the landscape continue to go about their lives as they’ve always done, which reinforces a status quo?

That might be part of it, but certainly not the whole of it. Systemic racism plays a role and is often perpetuated through economic cycles.  

How can we ensure that the next growth cycle is more inclusive and raises more people into the middle class?

One of the biggest challenges that thriving cities have is that the socioeconomic growth tends to lead to gentrification in previously diverse neighborhoods.

Even though gentrification is often a result of economic growth in a city, it creates an environment that is characterized by a sense of uniformity and homogeneity. It diminishes the feel and dynamic culture of a thriving city as neighborhoods start to emulate the suburbs. At the same time, it disenfranchises minorities and the poor. Recall those large planned cities I just talked about. They’re essentially preplanned for homogenous populations, which is part of their failure.

Diversity Should Drive the Next Wave of Growth

The consequences of gentrification are that the activity of innovation and the exchange of ideas becomes increasingly one dimensional with a greater number of people who have similar backgrounds and ideologies.

It’s the same homogeneity we sometimes see in C-suites and Boardrooms of large Fortune 500 companies. Many of those companies, though certainly not all, are led by people who largely grew up in similar communities, went to similar schools, got similar educations, hold similar business philosophies and share many of the same biases.

There’s not much diversity, not only racial, ethnic and gender diversity, but diversity of thought driven by outside thinkers who challenge prevailing mindsets. This leads to groupthink, status quo bias, risk aversion, and other biases. It also makes those companies less able to innovate and adapt. They mostly operate to sustain the status quo and their efforts at innovation are largely focused on safe efficiency gains.

Gentrification does the same thing to innovation and creativity. The spark of life in cities that Jane Jacobs invokes starts to fade.

The irony of a downturn and the exodus of people from a city is that most of those leaving are the gentrified. That perhaps creates an opportunity for change.

As people return to the big cities over the next couple years, let’s recognize that economic growth will go further with greater diversity of ideas and people. Let’s also remember that cities are the people. It’s their ideas and passion and vision that create.

I don’t know if it can be said any better than what urbanist Lewis Mumford said (and Geoffrey West echoed): “The chief function of the city is to convert power into form, energy into culture, dead matter into the living symbols of art, biological reproduction into social creativity.”

Thank you for reading. I posted this article on LinkedIn. Please leave a comment there.

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Tags: #Innovation #UrbanPlanning #Humanity #Passion #EconomicGrowth #Diversity #Serendipity #StatusQuo #BehavioralEconomics #GardenCityMovement #WealthDisparity #Bias #Gentrification #RoadAhead