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  • Tech and Energy Hubs Top Performing Cities in 2013

    Tech and energy were the two key factors for top performing cities in 2013, as determined by the Milken Institute 's annual Best Performing Cities report. The top 25 large cities in the ranking is a mix of tech hubs and energy hubs (or both). Texas, California, and Colorado dominate, with 15 of the top 25 large cities between them. Columbia, MO comes in as the top performing small city. What does it take to be the top city? Here's a little more on Austin, TX from the report: Austin-Round Rock-San Marcos, Texas, reclaimed the top spot in our 2013 Best-Performing Cities ranking after slipping to second last year. Austin ranked second in long-term job growth and ninth in one-year job growth in the latest index. A rising technology center, it is creating high-quality employment that improves the region’s overall wage structure. Economic development officials rightly tout its business-friendly, low-tax, low-regulation climate when recruiting outside the state, particularly when soliciting California firms. Austin’s recruitment strategy includes promoting the startups of local entrepreneurs, the spinouts from the local University of Texas campus, and the number and quality of UT graduates. Austin’s technology base is fairly diversified: hardware, chips and communication gear, computer system design, Internet-related services, and biomedical research. The metro has its share of homegrown tech companies—Dell, Freescale Semiconductor, Flextronics International, and National Instruments among them—and has been successful at attracting technology icons from elsewhere as well. For instance, Apple now employs 3,500 in the metro area, where it can hire designers and engineers for less than in its headquarters of Cupertino, California. In addition, IBM has more than 6,000 employees in the metro area. The homegrown National Instruments, which produces testing and measurement instruments and associated software, announced in February that it will add 1,000 jobs with an average wage exceeding $72,000. The financial services sector is also adding jobs. Visa plans to build a software development center in Austin that will employ 800 workers with an anticipated average salary of $112,000.3 Incentives certainly played a role in Visa’s choosing Austin, but the city has other draws: skilled young professionals and a hip image that makes it easy to recruit workers from out of state. Accenture, AT&T, and Time Warner Cable announced major expansions in the Austin area this year. This influx of young professionals, who prefer renting or buying condominiums, is also changing the mix of housing construction and causing builders to hire. Multifamily construction permits almost tripled in 2012 vs. 2011, hitting 11,300. Construction employment shot up 7.6 percent from June 2012 to June 2013. The Austin Chamber of Commerce has played an active role in the city’s success. The chamber led Opportunity Austin, a five-year effort launched in 2004 to promote investment resulting in job creation. Its aim was to create 72,000 regional jobs. At year-end 2012, 190,900 jobs had been added with wages totaling $9.9 billion.4 Opportunity Austin 3.0—the next five-year phase—will focus on eight industries: clean technology, data centers, digital media, HQ/regional offices, medical device/biosciences, semiconductors, software, and wireless. You can learn more about the report, and use an interactive version of the below map, here .
  • Richard Florida on the Urbanized Economic Landscape

    Once, not too long ago, New York City was the place where financing for new tech business came from--not so much where the new firms were being started. The money flowed out, mainly, to Silicon Valley, and, to a lesser extent, Cambridge. Now, New York City is one of the top spots for companies that are receiving venture capital. At the same time, San Francisco now has more startup activity than the Silicon Valley. It is all a part of an important movement back to urban centers, and what Richard Florida calls a "knowledge energy growth model." In this interview with McKinsey Insights , Florida lays out the relationship between creative economies, cities, new companies, and VC firms in this new growth model:
  • James Surowiecki on 'Deadbeat Governments'

    A lot of city and state governments have a pension problem. Before we come to the conclusion that pensions simply aren't viable, James Surowiecki wants us to look more closely at the decisions politicians made--and the payments they did not make--that got them, or their hometowns, into this predicament. From the New Yorker's Financial Page : How did states and cities get into this jam? By following Mark Twain’s famous dictum: Never put off till tomorrow what you can do the day after tomorrow. In principle, providing for pensions isn’t difficult: governments set aside money every year to fund them, just as workers contribute a percentage of their salary every year. But that means raising taxes or spending less on things that voters like, so politicians often just let pension contributions slide, passing the bill on to future taxpayers. Politicians are adept at rationalizing such irresponsible behavior. When markets are up and pension funds are flush, they say that there’s no need to add money. When times are bad and tax revenue drops, they say that they can’t afford contributions. Illinois, for instance, has been shortchanging its pension fund forever. “The politicians in Illinois are deadbeats,” Alicia Munnell, the director of the Center for Retirement Research, at Boston College, told me. “They just did not pay their bills, and, lo and behold, they’re finding that they can’t make up for all those years of not doing what they were supposed to do.” Governments also got in the habit of promising workers higher pensions in the future so that they would accept lower wages in the present. To make matters worse, whenever pension funds looked especially robust public employees lobbied for higher pensions, and politicians were all too willing to grant them. In 1999, at the height of the tech bubble, California retroactively increased benefits for every government employee by twenty-five to fifty per cent. This was terrible policy. As Munnell says, “You have to put aside the excess return you earn in good times to cover your costs when the bad times hit.” But lots of states did similar things. Even more egregious, Detroit’s pension fund routinely sent bonus payments to retirees whenever it had a good year. This weakened the fund and increased the burden on taxpayers, but, since pension accounting is eye-glazingly dull, few complained.; Everyone pushed off the day of reckoning, with no real thought for the taxpayers who would eventually have to foot the bill. Now that that day has arrived, you can see why governments want to claw back some of the benefits that were handed out. But this would be unjust: state and city employees worked for those benefits—teaching kids, policing the streets, and so on—and they often did so for lower wages than they would have accepted with no promise of a pension. Governments should live up to their obligations, but we can’t let them make irresponsible promises again. The temptation to defer expenditure is intrinsically hard for politicians to resist. We need reforms to control costs and to insure that governments actually pay their bills. Read the full article here .
  • The Economist: San Francisco Struggles With Success

    The San Francisco narrative seems destined to always be attached to its 19th century boomtown days--the gold rush. The San Francisco of the last few decades has been the center of another gold rush of sorts. This boom seems more sustainable, but as The Economist points out in the following video, San Francisco is experiencing quite a few challenges as a result of its enormous success:
  • Cities: The Place for Faster Learning and Faster Innovation

    Want to learn and innovate faster? Get yourself to a place that is full of creative people inventing, making, and doing new things at a rapid pace. In other words, get to a city. At least that's the advice of John Hagel . Hagel works "at the intersection of business strategy and information technology , " so one might expect him to tout the power of digital connectivity to overcome the importance of place. But in this Big Think interview, he argues that innovation hubs matter now as much as ever.
  • The Big Gap Between Boston and St. Louis

    This World Series features two historic baseball teams with among the most ardent fan bases in the country. And the teams have looked evenly matched on the field. Off the field, the fans may as well be living in different countries, considering how different the economies of Boston and St. Louis are. If you want to go to a game in Boston, the ticket alone will cost you 81% more than in St. Louis. Next City 's Bill Bradley looks at the price gap: Some people might point to the respective team’s stadium capacity: Busch Stadium in St. Louis holds 46,861 while Fenway Park in Boston clocks in at 37,400. There are fewer tickets in Boston, therefore the tickets are more expensive. Supply and demand, it’s simple economics. But take a closer look at the two metro regions, and it becomes quite clear — to borrow a phrase from noted St. Louis luminary Nelly — that it must be the money. “Personal income in Boston per person is $55,000 annually in the metro area,” Brian Goff, distinguished professor of economics at Western Kentucky University, told me. “For St. Louis, it’s $43,000.” St. Louis, Goff said, has a total personal income of $117 billion annually. Boston’s more than doubles that, with $250 billion. There’s just more money to go around in Beantown. As Tim McLaughlin wrote at Reuters earlier this week, someone earning $100,000 after taxes in Boston is equal to $65,000 in St. Louis. The average price of a ticket in Boston is $1,1486.11, according to ESPN. In St. Louis, it’ $819.93. The Boston metro area boasts 4.5 million people and St. Louis, 2.6 million. They are equally crazed baseball cities with rabid fan bases. That means a pool of two million more people who might want tickets to the fall classic out East. (This doesn’t even include the Red Sox fans scattered all over New England outside the Boston metro region.) “St. Louis is one of the premiere baseball towns in the U.S.,” Goff continued. “But so is Boston. There’s not more interest in baseball in St. Louis than there is in Boston. And yet Boston is bigger, has more income per person and much more total income than in St. Louis. That’s going to drive up the price of tickets.” Read Why World Series Tickets Cost 81 Percent More in Boston Than St. Louis here .
  • McKinsey Global Institute: The Shifting Urban Landscape in Global Business

    There is a re-balancing coming for global business. Growing urban business centers in emerging economies are poised to take their places on the global stage. In a new report, McKinsey Global Institute researchers project that by 2025 45% of Fortune Global 500 companies will be based in emerging economies (though by then we may need to change that label). In emerging regions, the leading cities for business today are likely to capture a disproportionate share of company growth in the future. The number of large companies based in São Paolo, for instance, could more than triple by 2025. Beijing and Istanbul could have more than twice as many head offices as they do today. Yet company headquarters will become more dispersed across the emerging world: about 280 of its up-and-coming cities could host a large company for the first time, thus becoming new hubs in global industry networks. Although many city officials focus on luring corporate head offices, relatively few companies actually move them. But as thousands of global businesses expand into new markets, giving themselves a real choice of locations, the more promising opportunity for cities lies in attracting foreign subsidiaries. China is without a doubt the most powerful growth engine for new global companies, and now is the time for forward-thinking cities to build their reputations among its business leaders. The largest foreign subsidiaries cluster heavily in just a few key cities in each region of the world. Thanks to the highly effective efforts of Singapore’s economic-development board, that country is far and away the location of choice for Western multinationals setting up operations in Asia’s emerging economies. Other cities should learn from Singapore’s approach. The quality of the business environment isn’t the only consideration. Cities with reputations for a high quality of life—such as Prague, Sydney, and Toronto—have been more successful than others in attracting the foreign operations of multinationals. But in selecting locations for future expansion, the emerging world’s more diverse companies may consider a broader set of criteria, including the personal ties of executives educated abroad, the need to diversify family holdings, reputation building at home, or an exceptional willingness to enter frontier markets. Access the full report, Urban world: The shifting global business landscape , here .
  • McKinsey Insights: 'How to Make a Great City'

    Forget the political rhetoric. It is cities that drive the global economy. And the healthier and more attractive a city is as a place to work, do business, and live, the more it will help drive economic growth. That is why we have been hearing so much about the need for innovative cities for the last decade. McKinsey has a new report out called How to make a great city. The full report is worth attention. To put it succinctly, McKinsey researchers have come to the conclusion that effective urban leaders "do three things really well: They achieve smart growth. They do more with less. They win support for change. You can download the full report here .
  • The Earth's Economic Center of Gravity is Shifting: McKinsey Global Institute Report on Rising Cities and Consumer Class Growth in Emerging Markets

    Global economic growth over the next decade will be driven largely by growing cities in emerging economies, according to a fascinating new report from the McKinsey Global Institute , titled Urban world: Cities and the rise of the consuming class . Of the 600 cities that the report cites as the most important drivers of the global economy, 440 are in emerging economies. And while McKinsey Global projects the "City 600" will account for 65% of global growth by 2025--rising some $30 trillion over that span--the 440 cities in emerging economies will account for nearly half of all global growth on their own. Also, the report projects that we will see 1 billion new consumers from these 440 cities. McKinsey Global calls this development "the most significant shift in the earth’s economic center of gravity in history." From the report: The incomes of these new consuming classes are rising even faster than the number of individuals in the consuming classes. This means that many products and services are hitting take-off points at which their consumption rises swiftly and steeply. By 2025, urban consumers are likely to inject around $20 trillion a year in additional spending into the world economy. Catering to the burgeoning urban consumer classes will also require a boom in the construction of buildings and infrastructure. We estimate that cities will need annual physical capital investment to more than double from nearly $10 trillion today to more than $20 trillion by 2025, the lion’s share of which will be in the emerging world. This huge sum of consumption and investment could inject more than $30 trillion of annual spending into the world economy by 2025—a powerful and welcome boost to global economic growth. But there will be challenges, too. Rapidly urbanizing emerging economies and their increasingly wealthy consumers are already driving strong demand for the world’s natural and capital resources. The global investment rate and resource prices have jumped and could rise further. Cities can be part of the solution to such stresses, as concentrated population centers can be more productive in their resource use than areas that are more sparsely populated. But if cities fail to invest in a way that keeps abreast of the rising needs of their growing populations, they may lock in inefficient, costly practices that will become constraints to sustained growth later on. How countries and cities meet this rising urban demand therefore matters a great deal. Beyond the direct impact of the investment, their choices will have broad effects on global demand for resources, capital investment, and labor market outcomes. Read the full report here . You can also explore the City 600 and the economic of cities globally with a new interactive map from the McKinsey Global Institute. Click here .
  • Enrico Moretti's 'New Geography of Jobs'

    Looks like we have another book for the beach (if the rain stops on the East Coast, that is). Berkeley economist Enrico Moretti 's The New Geography of Jobs lays out the challenge for most communities in America. The best trained workers tend to move away from home by the time they are thirty to those places where the economy is vibrant and business is innovative. Moretti says that means other communities need to figure out how to create a healthier "economic ecosystem" to develop environments that encourage innovation. Moretti spoke with Marketplace 's Kai Ryssdal about geography and jobs last week:
  • Switzerland and Japan Take Top 4 Spots on World's Most Expensive Cities List

    Zurich has supplanted Tokyo as the most expensive city in the world, according to the Economist Intelligence Unit . The struggles in the EU seem to have pushed already pricey Swiss cities Zurich and Geneva into the top three most expensive cities, as the Swiss Franc keeps getting more and more valuable. From the EIU's Worldwide Cost of Living 2012 report: Both Japan and Switzerland have seen strong currency movements over the last few years which have made them relatively more expensive. This has become especially true of Switzerland in the last year, where investors looking for a haven currency outside the beleaguered Eurozone have invested heavily in the Swiss Franc, prompting an unprecedented move by the Swiss government to peg the Swiss Franc to the Euro to keep the currency competitive. Although Switzerland has long featured in, or around, the world’s most expensive cities, the strong swing in currency headwinds is responsible for Zurich’s current elevated position. In local terms the opposite has been true, with relatively cheaper imports and a stable economy keeping local price inflation low. This mirrors a similar situation in Japan over recent years which resulted in Tokyo and Osaka traditionally holding the unenviable title of being the world’s most expensive cities. Local inflation in mature markets always has far less influence on the relative cost of living than the currency movements of the countries in question. This also explains the recent presence of Australian cities like Sydney and Melbourne in the ten most expensive locations as last year saw the Australian dollar pass parity with the US dollar from holding half that value a decade ago. New Yorkers with empty pockets may be surprised to learn that their city isn't near the top of the list. In fact, no American city cracks the top ten this year. Here are the ten most expensive cities: Read the EIU's release here .
  • The Rise of Municipal Bonds

    It seems that while a lot of us weren't paying close attention, many US cities provided a better return for investors in 2011 than we were anticipating. Municipal bonds are rising in price, according to the Wall Street Journal 's Liam Denning . And while there is still a fair bit of risk, especially in bond tied to real estate related projects, the fear that there were going to be massive defaults in the last year did not turn out to be true. The potential for higher yields, it seems, drove investors to the muni bond market. Those yields, Denning tells Mean Street host Evan Newmark , are not likely to remain so high:
  • Brookings Global MetroMonitor: Metro Areas Continue to Drive Growth Worldwide, But Fastest Growth is in Emerging Economies

    The Brookings Institution 's Global MetroMonitor for 2011 paints a picture of shifting strength from cities in the developed nations to Asia and South America. Not that the metro areas of the US and Western Europe are not still vital drivers of the global economy, but the growth was elsewhere in between 2010 and 2011. Note where much of the blue is on this map: The map is a helpful supplement to the report (click here to access the interactive map). As it shows, most of the strongest performing metro areas--90%, in fact--are outside of the US and Western Europe, while almost all of the weakest are in Japan, the US, and Western Europe. Alan Berube , director of research for the Brookings Metropolitan Policy Program and one of the authors of the report, notes some of the key takeaways from the Global MetroMonitor in this video: Read the full report here .
  • Mathematical Properties of Cities

    At first listen, Physicist Geoffrey West comes across as a city hater. He argues that urbanization has brought about all of the major problems facing the world today. But then, West also thinks that cities hold the keys to fixing global problems. He says they are "vacuum cleaners" sucking up all the creative thinkers and innovators and putting them in a place where they can feed off of the ideas of other creative thinkers and innovators. In a recent talk at TedGlobal in Edinburgh, West shared a remarkable discovery about cities that may help us understand how they tick. West takes a mathematical approach to understanding cities, and he says there are basic mathematical laws that make human behavior in urban settings highly predictable. And it works for understanding corporations as well. Here is the speech:
  • Helsinki Tops Monocle's 2011 Most Liveable City Index

    We woke up this morning to find out that Monocle has named Helsinki the winning city in its most liveable city index for 2011 . Being in Helsinki at the moment, this made perfect sense. As Finland spent the latter half of the 21st Century working to make the transition from a rural nation with an economy driven by timber and manufacturing to a more dynamic economy that placed value in innovation and design, Helsinki grew to become an important urban center. Today, Helsinki is a vibrant, highly efficient city. And Monocle's index ranking reflects the cultural wealth of the place, but it is also a result of the growth of small businesses, many that fall within the city's core design-driven creative economy. In an interview with Monocle, Helsinki's mayor, Jussi Pajunen , talks about how his country is building and growing at a time when others are cutting back. Take a listen, here . Also, take a look at Monocle's short video about Helsinki and why it was picked as the most liveable city. Click here .