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Economic Impact: The City as a Social Portfolio « The Captured Perspective
Great 'Captured Perspective' blog post by Peter Boumgarden, who comments on Richard Florida's Atlantic Monthly piece:
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"...cities are not just portfolios that emerge segmented for risk, but also social entities that respond positively to this differentiation with increased generativity. Cities are not only portfolios, but also social entities where diverse individuals interacting results in additional benefits for the growth of that city, over and above the lower risk of economic failure. In this way, a city might best be conceived a social portfolio.
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Tags: captured_perspective, peter_boumgarden, richard_florida, social_capital, cities, diversity, economics on 2009-03-04 -All Annotations (3) -About
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What this means is that cities are not just portfolios that emerge segmented for risk, but also social entities that respond positively to this differentiation with increased generativity. Cities are not only portfolios, but also social entities where diverse individuals interacting results in additional benefits for the growth of that city, over and above the lower risk of economic failure. In this way, a city might best be conceived a social portfolio.
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What this means is that cities are not just portfolios that emerge segmented for risk, but also social entities that respond positively to this differentiation with increased generativity. Cities are not only portfolios, but also social entities where diverse individuals interacting results in additional benefits for the growth of that city, over and above the lower risk of economic failure. In this way, a city might best be conceived a social portfolio.
What you have in a city like Detroit (or unfortunately, many mid-major Midwestern cities, St. Louis included) is a poor social portfolio- resulting from a significant lack of industry diversity, and a lack of concentrated interaction among any diversity. Taken together, these cities are both at higher risk of collapse given the right conditions, and a lower ‘risk’ of growth and innovation.
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What this means is that cities are not just portfolios that emerge segmented for risk, but also social entities that respond positively to this differentiation with increased generativity. Cities are not only portfolios, but also social entities where diverse individuals interacting results in additional benefits for the growth of that city, over and above the lower risk of economic failure. In this way, a city might best be conceived a social portfolio.
What you have in a city like Detroit (or unfortunately, many mid-major Midwestern cities, St. Louis included) is a poor social portfolio- resulting from a significant lack of industry diversity, and a lack of concentrated interaction among any diversity. Taken together, these cities are both at higher risk of collapse given the right conditions, and a lower ‘risk’ of growth and innovation.
The Atlantic Online | March 2009 | How the Crash Will Reshape America | Richard Florida
Richard Florida on how the financial crash will affect specific geographical locales and cities in the US / in North America. On NYC, he notes that its diversified economy - even though it's home to Wall Street, which may well be moribund if not dead already - will see the city through the worst of it.
Tags: richard_florida, economy, economics, cities on 2009-02-24 and saved by 20 people -All Annotations (55) -About
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The great urbanist Jane Jacobs was among the first to identify cities’ diverse economic and social structures as the true engines of growth. Although the specialization identified by Adam Smith creates powerful efficiency gains, Jacobs argued that the jostling of many different professions and different types of people, all in a dense environment, is an essential spur to innovation—to the creation of things that are truly new. And innovation, in the long run, is what keeps cities vital and relevant.
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In 2005, I asked a top-ranking official at a major investment bank whether the city’s rising real-estate prices were affecting his company’s ability to attract global talent. He responded simply: “We are the cause, not the effect, of the real-estate bubble.” (As it turns out, he was only half right.) Stratospheric real-estate prices have made New York less diverse over time, and arguably less stimulating.
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In his 2005 book, The World Is Flat, Thomas Friedman argues, essentially, that the global economic playing field has been leveled, and that anyone, anywhere, can now innovate, produce, and compete on a par with, say, workers in Seattle or entrepreneurs in Silicon Valley. But this argument isn’t quite right, and doesn’t accurately describe the evolution of the global economy in recent years.
In fact, as I described in an earlier article for this magazine (“The World Is Spiky,” October 2005 [link opens PDF]), place still matters in the modern economy—and the competitive advantage of the world’s most successful city-regions seems to be growing, not shrinking. To understand how the current crisis is likely to affect different places in the United States, it’s important to understand the forces that have been slowly remaking our economic landscape for a generation or more.
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Pacific Northwest’s Cascadia, stretching from Portland through Seattle to Vancouver
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The ability of different cities and regions to attract highly educated people—or human capital—has diverged, according to research by the Harvard economists Edward Glaeser and Christopher Berry, among others. Thirty years ago, educational attainment was spread relatively uniformly throughout the country, but that’s no longer the case. Cities like Seattle, San Francisco, Austin, Raleigh, and Boston now have two or three times the concentration of college graduates of Akron or Buffalo. Among people with postgraduate degrees, the disparities are wider still. The geographic sorting of people by ability and educational attainment, on this scale, is unprecedented.
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University of Chicago economist and Nobel laureate Robert Lucas declared that the spillovers in knowledge that result from talent-clustering are the main cause of economic growth
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Well-educated professionals and creative workers who live together in dense ecosystems, interacting directly, generate ideas and turn them into products and services faster than talented people in other places can. There is no evidence that globalization or the Internet has changed that. Indeed, as globalization has increased the financial return on innovation by widening the consumer market, the pull of innovative places, already dense with highly talented workers, has only grown stronger, creating a snowball effect. Talent-rich ecosystems are not easy to replicate, and to realize their full economic value, talented and ambitious people increasingly need to live within them.
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Big, talent-attracting places benefit from accelerated rates of “urban metabolism,” according to a pioneering theory of urban evolution developed by a multidisciplinary team of researchers affiliated with the SantaFe Institute. The rate at which living things convert food into energy—their metabolic rate—tends to slow as organisms increase in size. But when the Santa Fe team examined trends in innovation, patent activity, wages, and GDP, they found that successful cities, unlike biological organisms, actually get faster as they grow. In order to grow bigger and overcome diseconomies of scale like congestion and rising housing and business costs, cities must become more efficient, innovative, and productive. The researchers dubbed the extraordinarily rapid metabolic rate that successful cities are able to achieve “super-linear” scaling. “By almost any measure,” they wrote, “the larger a city’s population, the greater the innovation and wealth creation per person.” Places like New York with finance and media, Los Angeles with film and music, and Silicon Valley with hightech are all examples of high-metabolism places.
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While the crisis may have begun in New York, it will likely find its fullest bloom in the interior of the country—in older, manufacturing regions whose heydays are long past and in newer, shallow-rooted Sun Belt communities whose recent booms have been fueled in part by real-estate speculation, overdevelopment, and fictitious housing wealth.
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In November, nationwide unemployment in manufacturing and production occupations was already 9.4 percent. Compare that with the professional occupations, where it was just a little over 3 percent. According to an analysis done by Michael Mandel, the chief economist at BusinessWeek, jobs in the “tangible” sector—that is, production, construction, extraction, and transport—declined by nearly 1.8 million between December 2007 and November 2008, while those in the intangible sector—what I call the “creative class” of scientists, engineers, managers, and professionals—increased by more than 500,000. Both sorts of jobs are regionally concentrated. Paul Krugman has noted that the worst of the crisis, so far at least, can be seen in a “Slump Belt,” heavy with manufacturing centers, running from the industrial Midwest down into the Carolinas. Large swaths of the Northeast, with its professional and creative centers, have been better insulated.
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Still, as its population density dips further, the city’s struggle to provide services and prevent blight across an ever-emptier landscape will only intensify.
That’s the challenge that many Rust Belt cities share: managing population decline without becoming blighted. The task is doubly difficult because as the manufacturing industry has shrunk, the local high-end services—finance, law, consulting—that it once supported have diminished as well, absorbed by bigger regional hubs and globally connected cities. In Chicago, for instance, the country’s 50 biggest law firms grew by 2,130 lawyers from 1984 to 2006, according to William Henderson and Arthur Alderson of Indiana University. Throughout the rest of the Midwest, these firms added a total of just 169 attorneys. Jones Day, founded in 1893 and today one of the country’s largest law firms, no longer considers its Cleveland office “headquarters”—that’s in Washington, D.C.—but rather its “founding office.”
Many second-tier midwestern cities have tried to reinvent themselves in different ways, with varying degrees of success. Pittsburgh, for instance, has sought to reimagine itself as a high-tech center, and has met with more success than just about anywhere else. Still, its population has declined from a high of almost 700,000 in the mid-20th century to roughly 300,000 today. There will be fewer manufacturing jobs on the other side of the crisis, and the U.S. economic landscape will be more uneven—“spikier”—as a result. Many of the old industrial centers will be further diminished, perhaps permanently so.
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But in the heady days of the housing bubble, some Sun Belt cities—Phoenix and Las Vegas are the best examples—developed economies centered largely on real estate and construction. With sunny weather and plenty of flat, empty land, they got caught in a classic boom cycle. Although these places drew tourists, retirees, and some industry—firms seeking bigger footprints at lower costs—much of the cities’ development came from, well, development itself. At a minimum, these places will take a long, long time to regain the ground they’ve recently lost in local wealth and housing values. It’s not unthinkable that some of them could be in for an extended period of further decline.
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To an uncommon degree, the economic boom in these cities was propelled by housing appreciation: as prices rose, more people moved in, seeking inexpensive lifestyles and the opportunity to get in on the real-estate market where it was rising, but still affordable. Local homeowners pumped more and more capital out of their houses as well, taking out home-equity loans and injecting money into the local economy in the form of home improvements and demand for retail goods and low-level services. Cities grew, tax coffers filled, spending continued, more people arrived. Yet the boom itself neither followed nor resulted in the development of sustainable, scalable, highly productive industries or services. It was fueled and funded by housing, and housing was its primary product. Whole cities and metro regions became giant Ponzi schemes.
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From October 2007 through October 2008, the Phoenix area registered the largest decline in housing values in the country: 32.7 percent. (Las Vegas was just a whisker behind, at 31.7 percent. Housing in the New York region, by contrast, fell by just 7.5 percent over the same period.) Overstretched and overbuilt, the region is now experiencing a fiscal double whammy, as its many retirees—some 21 percent of its residents are older than 55—have seen their retirement savings decimated. Mortgages Limited, the state’s largest private commercial lender, filed for bankruptcy last summer. The city is running a $200 million budget deficit, which is only expected to grow. Last fall, the city government petitioned for federal funds to help it deal with the financial crisis. “We had a big bubble here, and it burst,” Anthony Sanders, a professor of economics and finance at ASU, told USA Today in December. “We’ve taken Kevin Costner’s Field of Dreams and now it’s Field of Screams. If you build it, nobody comes.”
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Will people wash out of these places as fast as they washed in, leaving empty sprawl and all the ills that accompany it? Will these cities gradually attract more businesses and industries, allowing them to build more-diverse and more-resilient economies? Or will they subsist on tourism—which may be meager for quite some time—and on the Social Security checks of their retirees? No matter what, their character and atmosphere are likely to change radically.
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Every phase or epoch of capitalism has its own distinct geography, or what economic geographers call the “spatial fix” for the era. The physical character of the economy—the way land is used, the location of homes and businesses, the physical infrastructure that ties everything together—shapes consumption, production, and innovation. As the economy grows and evolves, so too must the landscape.
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Positioning the economy to grow strongly in the coming decades will require not just fiscal stimulus or industrial reform; it will require a new kind of geography as well, a new spatial fix for the next chapter of American economic history.
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Suburbanization was the spatial fix for the industrial age—the geographic expression of mass production and the early credit economy.
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Demand for houses was symbiotic with demand for cars, and both were helped along by federal highway construction, among other infrastructure projects that subsidized a new suburban lifestyle and in turn fueled demand for all manner of household goods. More recently, innovations in finance like adjustable-rate mortgages and securitized subprime loans expanded homeownership further and kept demand high. By 2004, a record 69.2 percent of American families owned their home.
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The places that thrive today are those with the highest velocity of ideas, the highest density of talented and creative people, the highest rate of metabolism. Velocity and density are not words that many people use when describing the suburbs. The economy is driven by key urban areas; a different geography is required.
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The bubble encouraged massive, unsustainable growth in places where land was cheap and the real-estate economy dominant. It encouraged low-density sprawl, which is ill-fitted to a creative, postindustrial economy.
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The solution begins with the removal of homeownership from its long-privileged place at the center of the U.S. economy. Substantial incentives for homeownership (from tax breaks to artificially low mortgage-interest rates) distort demand, encouraging people to buy bigger houses than they otherwise would. That means less spending on medical technology, or software, or alternative energy—the sectors and products that could drive U.S. growth and exports in the coming years. Artificial demand for bigger houses also skews residential patterns, leading to excessive low-density suburban growth. The measures that prop up this demand should be eliminated.
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in both the United States and Europe, those places with higher homeownership rates also suffer from higher unemployment. Homeownership, Oswald found, is a more important predictor of unemployment than rates of unionization or the generosity of welfare benefits. Too often, it ties people to declining or blighted locations, and forces them into work—if they can find it—that is a poor match for their interests and abilities.
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we need to encourage growth in the regions and cities that are best positioned to compete in the coming decades: the great mega-regions that already power the economy, and the smaller, talent-attracting innovation centers inside them—places like Silicon Valley, Boulder, Austin, and the North Carolina Research Triangle.
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we need to make elite cities and key mega-regions more attractive and affordable for all of America’s classes, not just the upper crust. High housing costs in these cities and in the more convenient suburbs around them, along with congested sprawl farther afield, have conspired to drive lower-income Americans away from these places over the past 30 years. This is profoundly unhealthy for our society.
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If there is one constant in the history of capitalist development, it is the ever-more-intensive use of space. Today, we need to begin making smarter use of both our urban spaces and the suburban rings that surround them—packing in more people, more affordably, while at the same time improving their quality of life. That means liberal zoning and building codes within cities to allow more residential development, more mixed-use development in suburbs and cities alike, the in-filling of suburban cores near rail links, new investment in rail, and congestion pricing for travel on our roads. Not everyone wants to live in city centers, and the suburbs are not about to disappear. But we can do a much better job of connecting suburbs to cities and to each other, and allowing regions to grow bigger and denser without losing their velocity.
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Places like Pittsburgh have shown that a city can stay vibrant as it shrinks, by redeveloping its core to attract young professionals and creative types, and by cultivating high-growth services and industries. And in limited ways, we can help faltering cities to manage their decline better, and to sustain better lives for the people who stay in them.
A User's Guide to 21st Century Economics - Umair Haque - HarvardBusiness.org
Umair Haque's Jan.7/09 piece, self-explanatory title. Lots of great ideas - and something about the reference to "symmetrical competition" made me think of Greg Lynn's rejection of symmetry in architecture (to maximize resources) and also of how waste is a major 21st c. trope.
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Where do new rules come from? Here are five questions every decision maker should kick off 2009 by asking - and five results summarizing some of the new rules we've learned over the last year at the Lab.
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Tags: umair_haque, harvard_business, analysis, economics, symmetry on 2009-01-18 and saved by 10 people -All Annotations (11) -About
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20th century business isn't fit for 21st century economics. Yesterday's businesses were built for a world of overconsumption, artificially cheap production, symmetrical competition, and macroeconomic stability. That was yesterday. Today, the herd of industrial-era dinosaurs is going to be mercilessly culled - unless they can evolve to fit a radically altered economic environment.
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Where do new rules come from? Here are five questions every decision maker should kick off 2009 by asking - and five results summarizing some of the new rules we've learned over the last year at the Lab.
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What is the role of marketing in a world where consumption must slow?
In the 20th century, marketing was the pusher of a consumption addiction
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companies who create perceived value are significantly less profitable and more vulnerable than companies who are rethinking marketing to create real value
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What is the role of distribution in a world where consumption, savings, and investment will accelerate in volatility?
In the 20th century, advantage was attained by seizing or building distribution channels.
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value chains built on inert channels are significantly less profitable than value chains built on circuits - two-way channels, where context flows in one direction, and goods in the other.
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What is the role of production in a world where consumption becomes savings?
In the 20th century, economies of mass scale led giant, evil corporations to a cost advantage. The flipside was a world of homogeneous, mass-made widgets overflowing from bleak exurban shelves.
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companies who can rescale production at the micro-level are disproportionately more profitable and powerful.
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What is the role of strategy in a world where the game is no longer about winning more consumption than rivals?
In the 20th century, strategic thinking helped players "win" wars fought against rivals - the most strategic player "won" the greatest relative share of consumption (market share, mind share, etc).
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What is the role of innovation in a world where greater investment will flow to reinventing moribund industries?
In the 20th century, innovation was about processes, products, and services: -
higher-order innovation - business model, strategic, and management innovation - is associated with significantly more powerful and durable value creation.
Extracting Value From Free | PSFK
Can't sell copies of anything anymore if it's easy to make copies. So what's left? "[Kevn Kelly] sees the solution to this conundrum hinging on being able to identify qualities that themselves can’t be copied and believes we must do this from the perspective of a user. Kelly refers to these as “generatives” - things that are better than free."
Tags: psfk, kevin_kelly, capitalism, economics, web_2.0 on 2008-12-09 -All Annotations (8) -About
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- Immediacy
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Personalization
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Interpretation
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Authenticity
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Accessibility
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Embodiment
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Findability
How To Be a 21st Century Capitalist - Umair Haque
Haque makes a case similar to "Natural Capitalism"'s - if you capitalize what's currently expended (as a negative externality, say), you attach "real" value to it.
Some interesting points/ questions, too:
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Capital deepening is the foundation of next-generation value creation. Why is capital deepening so important? The reason that capitalism can destroy the world is that most of the world doesn't exist in an economic sense. And so when we capitalize rainforests, endangered species, community, the foregone opportunities of the poor, our own well-being - then they will finally have value: they can finally be priced, and so the fatcats of the world won't be free to destroy them with impunity.
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Today's so-called capitalists are anything but: mostly, they're charlatans, impostors, and poseurs. But today's most radical innovators are revolutionary, ironically enough, because they are learning to be genuine capitalists once again - capitalists in the 21st century sense of the word. They are discovering how to create value by growing new resources composed of social, natural, human, and cultural capital. By doing so, they are pumping new blood into capitalism's failing heart.
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The bit on capital being a consensus is also thought-provoking.
Tags: umair_haque, capitalism, economics on 2008-12-09 and saved by 4 people -All Annotations (14) -About
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So here's what 21st century capitalism looks like.
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20th century capitalism, in other words, marginally valued pure financial capital too highly, while marginally valuing human, natural, social, and cultural capital at zero - or, at the limit, negatively.
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Reigniting global growth depends on deepening the global capital base.
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Capital deepening is the foundation of next-generation value creation.
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The reason that capitalism can destroy the world is that most of the world doesn't exist in an economic sense. And so when we capitalize rainforests, endangered species, community, the foregone opportunities of the poor, our own well-being - then they will finally have value: they can finally be priced, and so the fatcats of the world won't be free to destroy them with impunity.
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Next-generation businesses are built on next-generation assets.
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Next-generation businesses are critical because next-generation assets are the key to rebalancing capitalism's toxic value equation. Bailing out the same old assets, building roads to nowhere, or subsidizing overconsumption - none of those are necessary or sufficient to reignite global growth. Ultimately, only next-generation assets can redefine how productive capitalism can be in the 21st century.
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Capitalize something. Here's one of the commandments of next-generation business: capitalize something. That's how a new generation of entrepreneurs will kickstart next-gen businesses and make their fortunes.
Today's so-called capitalists are anything but: mostly, they're charlatans, impostors, and poseurs. But today's most radical innovators are revolutionary, ironically enough, because they are learning to be genuine capitalists once again - capitalists in the 21st century sense of the word. They are discovering how to create value by growing new resources composed of social, natural, human, and cultural capital. By doing so, they are pumping new blood into capitalism's failing heart.
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Capital is a consensus.
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Want to capitalize something? Start a movement and build a consensus. Capital is formed when people are willing to agree that something has value.
Better Place || Electric Changes Everything
Hmmm, from the header: "electric changes everything :: When we break the cycle of oil dependence, new things become possible. See how the switch to electric transforms the relationship between cars, people and the planet."
Proposed solution? Electric everything?
Portal page.
Interesting - lots to explore...
Tags: ecology, economics, environment, electricity, futurismo, better_place, shai_agassi on 2008-12-01 and saved by 2 people -All Annotations (1) -About
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Business Guide - David Suzuki Foundation
"New guide to cutting greenhouse gas emissions shows how businesses can save millions and the environment." Portal page for downloading the document(s), etc.
Tags: environment, ecology, economics, business, david_suzuki, green_strategies on 2008-12-01 -All Annotations (0) -About
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The Bellows » Economics for Dummies
A great post by Ryan Avent critiquing the notion of "sunk costs," particularly as (speciously) applied to suburbia. In particular, Avent shows why, when talking about suburban housing, the concept of "sunk cost" is not (or should not be) a disincentive to selling.
Tags: the_bellows, ryan_avent, oil, peak_oil, suburbia, transportation, sunk_costs, economics on 2008-11-16 -All Annotations (0) -About
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seven for 2007 | varnelis.net
I've had this open in a browser tab for days, wanting to bookmark it, but hesitating because I found it impossible to describe, tag, or in any way categorize. So, let's just say it's "wow" and one of the best recaps-cum-predictions amongst the blogs. Read it.
Tags: architecture, cities, cloud_computing, creatives, economics, ideas, predictions, privacy, reference, wow on 2008-01-09 and saved by 2 people -All Annotations (0) -About
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Finding your Starbucks Quotient :: CHICAGO SUN-TIMES :: Neighborhoods
Tags: cities, economics, liveability, starbucks on 2007-10-21 -All Annotations (0) -About
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short for Starbucks Quotient -- a bellwether number I've come up with that can be used to determine if your hood is happening. Whether you like it or not.
Corinne, a junior at the Latin School, lives in part of the Gold Coast that's tied for having the top SBQ in Chicago.
In 60611, there are 12 spots where you can get a grande, nonfat, no-whip, sugar-free vanilla latte with a slice of lemon loaf, and a tip for the barista for about seven bucks.
"I never counted all of them. I just thought there was a Starbucks on every corner," Corinne says.
That's the running joke for a lot of people living in a neighborhood with a high SBQ. But it's not exactly true.
So, I enlisted the help of Sun-Times computer-assisted reporting guru, Art Golab, to map out the SBQ for every Chicago postal district.
What Ol' Art found was that besides in the Loop and at O'Hare Airport -- where nobody lives but there're 20 Starbucks kiosks -- three ZIP codes in Old Town, Lincoln Park and the Gold Coast have 12 Starbucks each.
There're five Starbucks per 10,000 residents in Streeterville. And about two Starbucks for every 10,000 residents in the Lincoln Park and the Gold Coast ZIP codes.
What does a hood's SBQ say about the people who live there?
Well, parts of town with the most Starbucks are home to rich, white families who take home more than $60,000 a year, according to people who keep track of those things.
Less sophisticated Starbucks researchers use the company's store locator to find out how many Starbucks you can find in a five-mile radius -- which some blogger in 2005 dubbed "Starbucks Density."
Back then, the greatest Starbucks Density in the world -- if you believe everything you read on a blog -- was found in London, which boasted 170 Starbucks locations in a five-mile radius.
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There can be no doubt that people need Starbucks, and having plenty to choose from factors into the decisions city folks make on where to buy a condo, rent an apartment or even attend college.
Lincoln Park Realtor Ben Osbun says that when he shows a condo in an up-an-coming part of town that still has more crack dealers than coffee houses he brings along a map of where prospective buyers can find the nearest Starbucks.
"Not the nearest coffee house," he says. "It's a map of the nearest Starbucks."
And Eliana, Corinne and their friends agreed that a university's SBQ -- like its academic reputation and opportunities for meeting cute boys -- is something to consider before they pick a place to spend their parents' money on college.
"I wouldn't not go to a college because it doesn't have a Starbucks," Eliana says. "But it's something to keep in mind. Definitely."
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And it's not just in the land of plenty-o-Starbucks where coffee drinkers find the Frappuccino comforting.
Down on the South Side, where the SBQ is often zero, folks say the handful of Starbucks are pleasant nooks where they don't have to worry about getting pounced on by a stranger.
At the South Side's newest Starbucks on 35th and State -- the former home of the Stateway Gardens projects -- Ted Barrett says the coffee shop makes the neighborhood feel more friendly.
"Yesterday, I talked to four or five people who I probably wouldn't have otherwise," Ted says. "You don't have to worry that you're gonna get hustled, like you might on the street."
But sometimes, paying five bucks a cup for a fancy coffee drink does feel like you're getting your pocket picked, says Phil Redd, a Starbucks regular from Bronzeville.
"I come here every day and get the same thing. A grande caramel Frappuccino," he says. "It's like having a new bill: $4.37 a day."
That's what you can expect when your SBQ improves.
Reason Magazine - The Secrets of Intangible Wealth by Ronal Bailey
Tags: development, economic_development, economics, reason_magazine, wealth on 2007-10-21 and saved by 9 people -All Annotations (0) -About
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But what is intangible wealth, and how on earth is it measured? And what does it mean for the world's people—poor and rich? That's where the story gets even more interesting.
Two years ago the World Bank's environmental economics department set out to assess the relative contributions of various kinds of capital to economic development. Its study, "Where is the Wealth of Nations?: Measuring Capital for the 21st Century," began by defining natural capital as the sum of nonrenewable resources (including oil, natural gas, coal and mineral resources), cropland, pasture land, forested areas and protected areas. Produced, or built, capital is what many of us think of when we think of capital: the sum of machinery, equipment, and structures (including infrastructure) and urban land.
But once the value of all these are added up, the economists found something big was still missing: the vast majority of world's wealth! If one simply adds up the current value of a country's natural resources and produced, or built, capital, there's no way that can account for that country's level of income.
The rest is the result of "intangible" factors—such as the trust among people in a society, an efficient judicial system, clear property rights and effective government. All this intangible capital also boosts the productivity of labor and results in higher total wealth. In fact, the World Bank finds, "Human capital and the value of institutions (as measured by rule of law) constitute the largest share of wealth in virtually all countries."
Once one takes into account all of the world's natural resources and produced capital, 80% of the wealth of rich countries and 60% of the wealth of poor countries is of this intangible type. The bottom line: "Rich countries are largely rich because of the skills of their populations and the quality of the institutions supporting economic activity." -
the rule of law explains 57 percent of countries' intangible capital. Education accounts for 36 percent.
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The World Bank study bolsters the deep insights of the late development economist Peter Bauer. In his brilliant 1972 book Dissent on Development, Bauer wrote: "If all conditions for development other than capital are present, capital will soon be generated locally or will be available . . . from abroad. . . . If, however, the conditions for development are not present, then aid . . . will be necessarily unproductive and therefore ineffective. Thus, if the mainsprings of development are present, material progress will occur even without foreign aid. If they are absent, it will not occur even with aid."
The World Bank's pathbreaking "Where is the Wealth of Nations?" convincingly demonstrates that the "mainsprings of development" are the rule of law and a good school system.
Cruise-ship business booming
Tags: economics, ideology, tourism, victoria on 2006-08-29 -All Annotations (0) -About
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- letter-to-the-editor response re. Alaskan tax on cruise ship passengerspost by lampertina on 2006-08-29
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I'm curious why the article referred to the cruise ship industry as "beleaguered."Add Sticky Note
- this is an excellent point -- the local media always like to play up the "little red riding hood" complex (this is my thesis that it was only the wolf that made LRRH significant; without the wolf, who would care 2-cents about L'il Hood? So, you need the wolf to make people care...posted by lampertina on 2006-08-29
Robert Theobald andThe Healing Century. Radio National Transcripts: The Inevitable/Impossible Transformation: Grasping our Moment in Time.
Tags: ecology, economics, socialtheory, theobald on 2006-06-12 -All Annotations (0) -About
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Into this supercharged atmosphere came a report from a new group called The Club of Rome. Entitled, The Limits to Growth, it set out the reasons why growth could not continue for an unlimited time.
I was at the press conference and meeting which launched this document. Indeed, I knew the person who worked on its release in Washington, DC. We had a major disagreement. I argued that the message which people would take from the book was a deeply pessimistic one. He hoped that the ending would cause people to recognize that the predictions of the volume could be altered. My experience over the decade convinced me that I was right.
Human beings cannot live with pessimism. They inevitably look for potentials. The inevitable reaction to the challenge to the growth model was to reinforce it and to come up with rationales for continuing the current system. Prime Minister Margaret Thatcher and President Ronald Reagan were prime movers in reestablishing the faith in current systems. By the nineties, those who challenged the current belief patterns were told firmly that there were "no choices" and that we needed to stay the course in order to be successful, and indeed even to survive in an increasingly competitive world.
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it is still necessary to face a massive dilemma that has developed at both the community and the theoretical level. If each group in a community is entitled to its own views, how then can decisions be taken? What are the patterns of judgement which enable cloture to be achieved? Failure to answer this question in any satisfactory way is one of the primary reasons for the current decline in citizenship activities. There is a sense that processes go on for ever and that nothing final is ever achieved.
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Today's decision-making processes are based on the assumption that we are conducting an argument in which all the players accept the same basic view of reality.
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David Bell, who keeps up with the direction and pace of technological change argues that "Bizarre changes are happening today in our cultures. Many of the shifts are "seismic" - that is to say "subsurface" - the surface icons are still in place. Macro theorists have done an absolutely brilliant job of disguising - and providing dismissive language for these subsurface changes - to avoid freaking out the customer and the electorate."
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In the middle ages, we learned that the earth was not the center of the universe. This understanding was traumatic and widely resisted. However, human beings maintained their sense that their role was central by placing their species outside the web of nature. We continued to assume that we were in charge and that the world would adjust itself to our wishes. It is this hubris which is now recognized by science as being dangerously wrong.
We are now learning, slowly and painfully, that the underlying dynamics of the universe cannot be understood in mechanical cause and effect terms. We live within a far more complex web of interactions which defy analysis. Sometimes, systems shift rapidly as a result of a minimal impact: for example, an avalanche can be set off by a loud noise if the conditions are right. On the other hand, systems can be so stable that huge efforts will be absorbed without any impact at all. Understanding which leverage points are most effective is one of the higher-level skills.
One of the primary results of this shift in our fundamental thinking is to necessarily destroy our current faith in the ability of technology to lead us out of our current crises. Jacques Ellul, a remarkable French thinker of the twentieth century, illuminated the result of our current technological emphases. He showed that it resulted in a belief that there was "one best way" to deal with challenges. His book "La Technique" was one of those that demonstrated how our thought patterns gave us no space for alternative ideas.
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We need to use technology intelligently for it can buy us time to make the overall changes in direction which are necessary - but the core processes which will enable us to live well on planet earth are not to be found at this level.
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The most remarkable result of the first three acts of our twentieth century drama is that they have loosened the ability of these powerful groups to force agreement with their views. Act one has led people to make up their own minds about the realities they confront. This is one extraordinary and still little understood shift that is driving our culture today. Coercive power of all sorts is being increasingly resisted. People are demanding the right to make up their own minds. Neighborhoods and communities challenge the current power of governments to impose their vision on them while denying the perceived needs of citizens.
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If coercive power is not appropriate, how do decisions get made at all? This issue shows itself at both the practical and the theoretical level. At the practical level, it is all too often impossible to reach cloture. Decisions are hashed and rehashed endlessly. Even after a decision is apparently taken, those who were unhappy feel the right to continue to challenge its legitimacy. It is this frustration with the current processes which is leading many to withdraw from citizen activities - or to long for the good old days when decisions were made in smoky rooms and could be imposed on the community and society!
There is a theoretical basis which supports this failure to create effective decisions. There is a quite powerful school of thought which argues that there are no realities or standards which should constrain behavior. If this is true then there is no way to argue that one response is better or worse than another. Each group then can feel justified in pushing for its own agenda and, if it is denied, becoming more and more vociferous - and eventually violent - if its demands are not met.
The clash between coercive power tactics and the denial of any ability to set standards has led to massive confusion within institutions and the culture in general. This had led to high, and growing levels of stress.
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The broader the framework, the more difficult the arguments necessarily become. While a few people are able to deal with this level of explanation, most people do not have the skills or the energy to do so. In addition, the fact that there are more and more competing theories means that no one set of ideas can be expected to become the way in which we think in the future.
This pattern which leads to ever-greater complexity has occurred frequently in the development of ideas. A model becomes more and more difficult, with more and more exceptions, until it clearly becomes unmanageable. At that time a new, and simpler, explanation is postulated which enables reality to be explained more fully and successfully.
Current theoretical models are an extension, although a profoundly useful one, of current industrial era patterns. They assume that there is a right way to look at the world and are thus part of the expert/professional dynamic which is currently dying.
Are we at the point that we can state a simpler view which enables us to see reality more clearly? I am convinced that we are. The alternative view is that reality is strictly situational. Each of us necessarily struggles, individually and within the groups of which we are a part, to find our own understanding of the patterns which surround us. Each of us has to choose our own unique view that will evolve as conditions change around us.
Each of us necessarily chooses those behaviors which seem to serve us best. While our views are necessarily subjective, the choices we make will only be satisfactory if they are informed and constrained by our knowledge of the feedback loops in which our lives are embedded. The better we are at sorting out the essential from the trivial, the more likely it is that our choices will lead to our satisfaction and that of others.
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This concept of people making sense of their own lives seems highly unrealistic to those who still accept industrial-era beliefs. The industrial era saw people as machines which could be honed to serve as factors of production. In return for giving over their lives to the productive system, they would be rewarded with goods and services. More critically, we assumed that most people most of the time would behave badly if they were not constrained by the law.
Robert Fulford's column about The Nature of Economies by Jane Jacobs
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She wants to
demonstrate that economic life, far from being superimposed on the natural world, is a part of
nature. -
It seems to me that much of what I have read about her, and much of what I have heard said
about her, ignores these crucial aspects of her thinking, perhaps out of a fear that they might add
up to something truly dreadful -- conservativism.
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