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Why Cities Are Our Most Important Innovation Platform

2013 November 17
by Greg Satell

When we think about innovation, we tend to think about individual gifts of insight—researchers in crisp, white lab coats, slick tech entrepreneurs with fancy gadgets and VC’s doing inspired deals.

Yet, the truth is that innovation is a messy business. It’s full of blind alleys and half-baked ideas, random collisions and abrupt changes in direction.  Ideas mix and recombine, fail, reemerge and, in the end, a precious few become wildly successful.

Innovation, most of all, is driven by collaboration.  So it takes more than just smart people, but diversity as well.  Different people, working on different things, colliding together in unexpected ways is what brings about important new ideas.  That’s why, more than anything else, vibrant cities are crucial to our continued ability to innovate and compete.

The Essential Elements Of Innovative Cities

In The Rise Of The Creative Class, author and urbanist Richard Florida argues that culture is a primary driver of innovation.  After all, if the best and the brightest can go anywhere, why wouldn’t they go to a place they will enjoy living in?

Further, he posits that three elements are crucial—talent, technology and tolerance—all of which cities have in spades.   The first two are obvious, but studies also show that diversity trumps even ability when it comes to getting optimal results.  A homogenous culture, even made up of very smart people, isn’t likely to produce much.

As Steve Jobs noted, creativity is about connecting things.  The more random collisions you have with people who have different ideas, the more creative you’ll be.  That’s why he designed Apple’s new headquarters to facilitate interactions, with lots of open spaces and common areas.

It’s also why cities need more than office buildings and research parks.  They need cafes, music festivals, art shows and other places where creative people meet and exchange ideas.

Cities Create New, High Value Work

Urban areas, as Jane Jacobs pointed out in her classic, The Economy of Cities, are not particularly efficient.  They’re expensive, hard to navigate places.  So it shouldn’t be surprising that most production happens outside of cities—in farms and factory towns where land and labor are cheap.

Yet cities create new work and that’s key to their success.  Jacobs argues that progress begins with import replacement.  For example, in the mid-20th century, Tokyo imported lots of bicycles, which created a large market for repair shops.  In time, those shops began making their own parts, which led to manufacturing whole bicycles and then exports.

This can only happen in a city where there are an abundance of repair shops.  A small town is unlikely to generate enough demand for a new component supplier nor will it provide the network of relationships necessary to transform components into a full product.  Only cities can do that.

Bicycles are, of course, a simplistic example.  Yet go to city with a healthy tech sector and you’ll find entrepreneurs following the same model.  Venture capitalists mixing with entrepreneurs, hardware guys running into software guys, buyers working out of the same building with sellers.  That’s how new work and new economies are created.

The Incredible Potential Of Cities

One of Jacobs’s chief insights was that import replacement was necessary to diversify goods flowing into the city and is therefore a precursor to new types of work and exports. In effect, learning to do old things in new ways forges the path to doing completely new things we never thought of before.

For example, today the major imports of cities are food and energy.  As the efficiency of solar power continues to improve and new techniques such as vertical farming become increasingly viable, there is great potential for cities to replace many of these imports.

That, along with improvements in energy management and other ideas like autonomous cars, which will help reduce traffic, have the potential to dramatically increase the economic output of cities, make them more livable and attract more people with new ideas that can create new kinds of work.

By 2050, 70% of the world’s population will live in urban areas.  Our future, no doubt, greatly depends on our ability to develop our cities.  How we build is how we dwell.

Neglecting Our Cities Neglects Our Future

Unfortunately, while our future lies in our ability to create new work, political power is rooted in incumbency.  We subsidize rural areas, while immigration reform stalls and investment in the arts languishes.  Incumbent industries attract corporate welfare, while electric cars are subjected to legislation limiting their sale.

Our infrastructure remains a national disgrace.  A businessman flying into London enjoys the speed and comfort of the Heathrow Express, while one traveling to New York City endures traffic and blight coming in from JFK.  Europeans build the Chunnel, while in the US, governors reject federal funding for much needed transit projects.

While there are some bright spots, such as Tony Hsieh’s Downtown Project in Las Vegas, Michael Porter’s Initiative for a Competitive Inner City and the Living Cities organization, the truth is that our commitment to our cities is fairly paltry.  All too often, urban investments are seen as giveaways. either to the poor or to overeducated elites.

If we are to continue to innovate, we need to invest not only in research and development, but in city life, where random collisions transform old work into new work, solve problems and create value.

– Greg

2 Responses leave one →
  1. Rylee Rocha permalink
    December 4, 2013

    I wonder if one day, things will change, and not as many people will want to live in the cities. But I really like the idea of them getting out of the office to find diversity and other peoples opinions on their decisions.

  2. December 5, 2013

    It is an interesting thought, but for the next 50 years or so, we can expect the urban population to grow. It’ll be interesting if we eventually see a change in developed countries, but less developed countries will drive the trend globally.

    – Greg

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