Yule Heibel's Library tagged economics →  View Popular

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.

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.

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.

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

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.

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.

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).

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.

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.

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.

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.

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.