Saturday 17 August 2013

Cities thrive in mix-and-match economy

People mix and match work and life. Innovators mix and match ideas and technology. When such connections matter, cities thrive.
By Sanjeev Sanyal, Published The Straits Times, 15 Aug 2013

TODAY, many scholars agree that cities are the geographic centres of the future.

If this sounds like a truism at a time when the majority of the world's population is urbanised - currently around 52 per cent - and more than 80 per cent of world gross domestic product is concentrated in urban clusters, in fact, it is not.

As recently as the 1990s, many commentators and scholars argued that technology would make cities irrelevant. The Internet and mobile communications, then infant technologies, would make it unnecessary for people to live and work in urban concentrations. Why live in crowded and expensive Manhattan or Hong Kong, so the argument went, when one can work from the ski slope?

Yet cities have boomed like never before in the last two decades.

McKinsey Global Institute estimates that 600 of the top urban centres, accounting for a fifth of world population, generate 60 per cent of global GDP.

In the United States, cities with a population of more than 150,000 account for 84 per cent of GDP. Even in newly urban China, cities with more than 200,000 inhabitants account for 78 per cent of the economy.

The dominance of cities is likely to increase in the coming decades as Africa and South Asia begin to rapidly urbanise. Discussion of the world's socio-economic trajectory revolves invariably around cities.

Cities enjoy enormous economic power as nodes in an interconnected, globalised world.

According to a recent MasterCard Worldwide survey by economists Yuwa Hedrick-Wong and Desmond Choong, the world's top 132 urban hubs saw an estimated 30 per cent increase in international visitor arrivals and a 39 per cent increase in their cross-border spending between 2009 and 2013. This was even as the world's real GDP rose by a mere 16.8 per cent during the period.

Why have cities been so successful in the 21st century?

The triumph of cities

A COMBINATION of factors explains the phenomenon and can be summarised in two broad categories: 21st century lifestyles and the importance of density.

Lifestyles have fundamentally changed in the last two decades.

In the last century, life was based on regular cycles. People worked in offices and factories, returning home in the evening for dinner with the family, watching television before falling asleep and repeating all of this the next day. Weekends and holidays were spent doing chores and relaxing.

Such regular cycles do not apply any more. People now mix and match activities - they work at their desks but they may also meet friends for lunch, do chores, visit the gym, make a presentation, shop online, travel on business and so on.

Similarly, life at home is not clearly demarcated as people work online or attend to conference calls even as they fit in time for family and leisure.

The nuclear family is no longer the standard social unit and has given way to a multiplicity of household arrangements - singles, multi-generational families, couples with/without children, friends sharing and so on.

This universe of multi-tasking and social multiplicity means that 21st-century lifestyles require a dense concentration of amenities that the average citizen can mix and match according to their requirements.

This includes easy access to hard amenities like airports, bars, restaurants, shops, hotels, public transport, schools, theatres, offices, sports facilities and parks. It also requires soft amenities like clubs, religious and political communities, and social networks.

The Internet has allowed more people to access a greater multiplicity of these amenities, and consequently has made cities attractive places to live a lifestyle defined by diversity and multi-tasking.

Breaking down silos

CITIES have become the hubs for innovation and creativity as value-generation has become more about breaking down silos. Until the late 19th century, most innovation was driven by generalists and tinkerers.

While knowledge accumulation was relatively slow, its application across different fields was quick.

In the 20th century, knowledge-creating became the job of specialists in universities and government/private labs. This dramatically sped up knowledge accumulation within silos but slowed cross-disciplinary application and understanding.

But this source of technological change is slowing.

Estimates by economists Pierre Azoulay and Ben Jones suggest that the productivity of an American R&D worker in 2000 was a mere 15 per cent of a similar researcher in 1950.

Yet we seem to live in a world of constant innovation - where is all this innovation coming from?

Value-generation and innovation today are increasingly about connecting the dots between different silos. Extraordinary innovations in diverse fields such as gastronomy, entertainment, media and lifestyle are made possible by mixing different technologies and skills.

Facebook and Twitter, for instance, are not technological innovations but are better seen as social innovations made possible by the application of communications technology.

This environment dramatically increases the economic value of certain kinds of cities that concentrate different kinds of human capital, and encourage random connections and face-to-face interactions between people.

This, in turn, allows the urban economy to flexibly mix and match different skills and knowledge silos that generate large productivity increases.

Studies show that a doubling of a city's population can increase economic productivity on average by 130 per cent. Certain kinds of cities can do much better than the average.

There is an underlying similarity between the social and economic factors driving urban success - it is the ability of cities to "mix and match" everything from ideas to social requirements.

The writer is a global strategist for Deutsche Bank Markets Research in Singapore. This is adapted from a longer analysis written for the bank.

PART 2 TOMORROW: What is the favoured transport mode for city dwellers? Not driving. Just walking.

By Sanjeev Sanyal, Published The Straits Times, 15 Aug 2013

THE inclusion of cities like London, Tokyo or New York in the global cities lists should not be surprising. They are well- established hubs backed by large national economies and the weight of history. But it is interesting that virtually every list puts Singapore and Hong Kong in the top 10.

In fact, a survey of high net-worth individuals placed Singapore even above New York by 2023.

Yet, it is often forgotten that the inclusion of the two cities in the big league is very recent and there were many commentators who would have written them off 15 years ago.

Indeed, many people had speculated that Hong Kong would not survive the handover of 1997.

The predictions for Singapore were even more dire after a series of shocks suffered by the city-state.

First, it was hurt by the Asian financial crisis of 1997-98. Even though Singapore was not directly involved, its economic hinterland was devastated. Next it was hurt by the tech downturn of 2000. And, then came the Sars epidemic in 2003 (this also hurt Hong Kong).

Till 1997, Singapore had had a dream run by converting itself from a Third World colonial outpost to a First World commercial hub. But between 1997 and 2002, it seemed like it had run out of luck and some detractors argued that it would inevitably decluster and slip into oblivion.

The Government, however, boldly decided to double its bet and convert Singapore into Asia's premier global city. This strategy was not without its critics.

As a participant in the heated debates of that time, I remember how sceptics argued that global cities had always emerged naturally and were not deliberately built up (incidentally this is not true given the evidence of Medici Florence and Hausmann's Paris among others).

Fortunately, the Singaporean authorities took the plunge. Singapore's strategy is a good example of how mix-and-match economics can be applied to cities.

The Government invested heavily in creating a human capital cluster by opening up immigration, creating new universities and think-tanks and inviting reputed foreign institutions to set up shop.

At the same time, it invested in sectors such as leisure and entertainment - Gardens by the Bay, Formula One racing, casinos and so on. Most interestingly, it actively used urban design to encourage the random interactions and networks that drive 21st-century cities. The best way to understand this is to visit the city centre. Within a walkable radius of the financial district, one will find the Singapore Management University, the Esplanade theatre complex, the Marina Bay Sands complex (with conference centre, casino and shopping), a number of new museums, a colonial-era cricket club and the new extension to the financial district (which is also mixed in with residential buildings).

Added to the mix is a floating stadium and many hotels, bars and restaurants.

The authorities even went so far as to add a Formula One race track in the middle of the city even though it causes a great deal of disruption for a few days every year.

Not every ingredient works individually but there can be no doubt that the overall cluster is very successful.

Sharing and walking to cities of tomorrow
Future cities that thrive will be those that promote a sharing economy and walkability
By Sanjeev Sanyal, Published The Straits Times, 16 Aug 2013

THE future success of global cities depends on being able to maintain a competitive cluster of amenities, institutions, financial capital and human capital.

Not all cities will succeed in the 21st century. Cities without a diverse ecosystem and dependent on a single industry run the risk of being hollowed out.

A survey of high net worth individuals by Knight Frank about which cities will matter in 2023 shows a sharp increase in the expected importance of East Asian centres. While such forecasts should always be taken with a pinch of salt, no city in Latin America, Africa or South Asia is expected to join the list.

To play in the big league, large cities in these emerging regions will have to create the ecosystems that allow for mix-and-match dynamics in both social and economic spheres.

As I argued in an article published yesterday, people today mix and match work and life, working a range of hours that requires a dense network of amenities to be available round the clock and nearby.

Innovators mix and match ideas and technology. When such connections matter, cities thrive.

The mix-and-match economics of 21st century cities has important implications for the way we think of how urban centres will evolve over the next few decades.

The sharing economy

IN THE last century, access often meant individual ownership, but this is often not a practical solution when we are switching constantly between different things.

Not only is ownership expensive, it can also be onerous. After all, if I want to swim, I do not need to own a swimming pool, but only need access to one.

This same logic is now applied to more and more aspects of life. The oldest form of urban sharing is public goods such as parks, public transport, roads and drainage.

The idea of the "commons" now has to be expanded to include various forms of private sharing as well.

There are many manifestations of this. The rental bicycles that have proliferated in many cities are one example of this phenomenon.

Car-sharing too is gathering steam after many false starts.

Another example is peer-to-peer renting with people renting out everything from rooms to surfboards and boats.

In all these cases, information technology has been a key enabler by allowing for searching, matching, tracking, screening, payments and feedback.

Another manifestation of private sharing are closed "clubs".

This form of sharing is useful for activities where the product or service is best shared within a closed group. It shows up in social clubs, gated communities, condominiums with multiple amenities, and so on.

There has been a worldwide boom in condominium living.

Confounding tradition, young families now prefer to live in condominium apartments where children can access swimming pools, playgrounds and tennis courts within a secured environment.


THE regular cycles of 20th century life allowed us to rely heavily on one form of transport for most things (for many it was the car or a single form of public transport).

One of the consequences of today's mix-and-match way of living and working is that we need very different urban transport solutions through the day. In the United States, we are seeing a sharp decline in the number of kilometres driven per capita every year. This is especially clear among younger people: Those between 16 and 34 years old drove 23 per cent fewer kilometres on average in 2009 than in 2001.

My recent discussions with the city managers of the world's most advanced cities (New York, London, Singapore and Hong Kong) suggest that walkability is perhaps the single most important dimension to next-generation urban planning.

Walking is the critical backbone that allows people to switch easily between other modes of transportation in a mix-and-match world.

Walkability is not merely about creating sidewalks. It requires a whole ecosystem that includes hardware such as sidewalks, over/under-bridges, signage, street lights and the clustering of amenities within walkable distances.

It also requires soft infrastructure such as safety, security and streetlife.

Moreover, walkability is not just about walking but about easy interconnections with other forms of transport such as buses, taxis, trains, bicyles and even cars.

Manhattan's High Line, Hong Kong's network of elevated walkways and Singapore's underground network are all examples of how urban planners are incorporating walkability into the urban fabric.

In the Global Walkability Index by Deutsche Bank and The Sustainable Planet Institute, a simple comparison of cities around the world found that some of the most successful cities are also very walkable.

Given the logic of mix-and-match economics, this should not be surprising because walkability is not just about transportation but about an urban landscape that allows for multi-tasking, random social interaction, urban buzz and so on.

Based on criteria such as pedestrian infrastructure, connectivity with other transport systems, the ecosystem of shops-offices-homes- streetlife, distance and safety, the Index found Zurich, Singapore and Hong Kong among the top five.

Ironically, large developing country cities like Bangalore and Johannesburg do poorly on this index even though a large proportion of their populations are too poor to own cars.

This will be a major constraint to their future evolution.

But walkability is not always better in developed countries - American cities are generally less walkable than West European and developed Asian cities.

The writer is a global strategist for Deutsche Bank Markets Research in Singapore. This article is adapted from a longer analysis written for the bank.

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