I found a fascinating interview with Richard Florida on BNET. He’s the author of Who’s Your City, about what he calls a "spiky" economy and how that affects different regions. Judging by the interview, I’ll be looking forward to reading the book.
|Who’s Your City?: How the Creative Economy Is Making Where to Live the Most Important Decision of Your Life
by Richard Florida
From what I gather (and I apologize, this is without having read the book, just following the links), his idea relates to fundamental economic drivers aligning themselves regionally. I guess the easiest way to see this quickly is the following regional summary:
If you ask me, the “megaregions” that will have the best go in the future — not just out of this recession, but in the long-term — are going to be the Pacific-facing megas. They are the three clusters on North America’s west coast — Cascadia, NorCal, and SoCal — as well as Shanghai and the major Australian metros. The geographic middle of the United States will have no global growth centers, and while New York will remain a global financial center, you generally won’t even see growth in the northeast. I predict a shifting out to the left coast. We’re looking at a Pacific future.
Having grown up in the San Francisco Bay area, and then moved to Eugene OR, I think I’ve seen in my lifetime how what he’s calling NorCal and Cascadia have grown, and have been seemingly quicker to grow. Real estate values seemed, to me at least, to hold up better during recessions. Here is more from that interview:
BNET: Does this trough represent a buying opportunity in one of those regions?
Florida: If I were investing in real estate, I’d buy in the San Francisco Bay Area, in the core or in areas just on the periphery that are cheaper but attractive for weekend homes. There are two parts to that strategy. I think the whole cost of gas issue is overblown. Most people who are creative class workers would prefer cheaper gas, but it’s the time-cost that gets them. No one can afford to spend two hours commuting. So the core will carry a higher and higher premium.
The second is that the San Francisco region is buoyed by earned wealth like few others. In the Bay Area and Silicon Valley, wages constitute about 80 percent of wealth. Compare that to southern Florida, where only about 20 percent of the wealth is derived from wages. The economy is mostly transferred wealth, whether it’s snowbirds buying condos or capital flight from Latin America. NorCal’s wealth is real wealth.
BNET: But in the last downturn, when the markets crashed and business spending and investment capital collapsed in 2001, the Bay Area was one of the hardest hit regional economies because of its concentration in tech and telecom.
Florida: And look how it’s come back. It’s just like the Wharton School’s Joseph Gyourko says. He doesn’t say that “superstar cities” like San Jose and San Francisco stay up all the time. His point is that they crash but they come roaring back. I don’t think Phoenix and Las Vegas, which enjoyed so much growth during the recent housing boom, will come roaring back. Places that aren’t on the global grid will just get pummeled.
It makes me wonder how regions have linked to growth in the past. Were the big cities of the U.S. industrial boom — Detroit as the auto industry grew up, for example, and Pittsburgh with the steel industry — associated with growth and creativity a century ago?
It also makes me wonder how long these trends last. Is the huge difference in real estate between the San Francisco peninsula and Silicon Valley, compared to most of the United States, a factor that slows growth in those expensive areas, or simply a reflection of their relation to the new growth industries of the last generation or so?
Could there also be a quality of life factor? I believe that in the generation or so after the second world war, California attracted a lot of people for quality of life reasons. My parents, for example, moved to California in 1954, long before there was a Silicon Valley or a high-tech industry there. It was a matter of weather, proximity to outdoor activities, and other factors like those two. I was way too young to know then or remember now, but I wonder if real estate wasn’t also cheaper then, compared to the more crowded areas of the East; and if the same factors would play the same today, when economic factors are so much different.
And a final thought, also quoting from the BNET interview:
BNET: What is the main message you’d like people to take away from your book?
Florida: My goal in writing “Who’s Your City” was to force people to think about this: To what degree is place a driver of your standard of living? Real people don’t think about this at all. Real people think about, “I gotta get a job, I want to find a boyfriend or girlfriend.”
And, finally, here’s where this started: