Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 1067

“Every unemployed American is a failure of entrepreneurial imagination.” -Edward Glaeser

At the end of September, economist  Edward Glaeser returned to the Manhattan Institute to deliver the 2017 James Q. Wilson Lecture. If you’re a regular reader of this blog, you may remember that he was there in 2016 and delivered a presentation called “ The End of Work .” 

This year’s talk continues that theme, but focuses on joblessness and economic stagnation in the US Heartland. 

The solutions he puts forward are based on a very simple economic model for growth that he refers to as “rules and schools.” Simply put: The rules of a place need to support business and entrepreneurship and the people need to be educated.

One example he gives is of a woman in Detroit who was trying to start a food truck business but had to wait 18 months for a permit. There’s no reason that should happen. He blames the insider restaurant lobby for working to keep competition at bay. The rules are bad. We have similar problems here in Toronto with our food trucks. I think it’s wrong.

He also pokes fun at the Bilbao effect . Yes, Frank Gehry created a beautiful piece of architecture. But did it lower the unemployment rate?

The last thing I’ll mention are his comments regarding Amazon HQ2 because I like how he frames it. 

Firstly, Amazon is going select a city that doesn’t need Amazon. It’s going to go where there’s already abundant human capital. 

Secondly, “ smokestack chasing ” is not the right economic development strategy. The key questions should be: How will this benefit our human capital and how many new firms could it create?

If you have an hour, check out Ed Glaeser’s talk. If you can’t see it below, click here .

[youtube https://www.youtube.com/watch?v=e8LvHpRCUYk?rel=0&w=560&h=315]

The Globe and Mail recently published an article about Canada’s highest paid workers . It uses census data spanning 2005 to 2015.

There’s a feature that allows you to enter your before tax income, your location, and your gender to see how you compare to “the 1 percent.”

But in case you don’t feel like doing that, here’s the minimum income required to be in the top 1 percent as of 2015 for each province/territory:

And here are the communities where the 1% saw the biggest pay increases:

The data certainly underscores how important commodities have been for growing individual incomes. Alberta, Newfoundland, and Saskatchewan are resource-rich provinces.

However, the above data doesn’t capture the collapse of oil prices in 2014. So it would be important to also consider what this data looks like outside of a commodities boom.

Charts: The Globe and Mail

Earlier this week the WSJ announced that Sidewalk Labs (Alphabet Inc.’s urban innovation organization) is close to a deal with Waterfront Toronto to develop a new 12-acre section of the eastern waterfront. Sidewalk Labs would be their innovation and funding partner . It’s not final yet and it’s still subject to board approval, but the sentiment is that it should go.

There aren’t a lot of details about the project – other than the fact that it will be fairly big, up to 3 million square feet – but the overall intent is digital city building. It’s about imagining what a city could be if you built it today “from the internet up.” More info about Sidewalk Labs, here .

I thought of this project as I read Seth Godin’s daily blog post this morning in bed. Here are two snippets from that post:

When a new technology arrives, it’s often the nerds and the neophiliacs who embrace it. People who see themselves as busy and important often dismiss the new medium or tool as a bit of a gimmick and then “go back to work.”

There’s never a guarantee that the next technology is going to be the one that moves to the center of the conversation. But it’s certain that a new technology will. It always has.

Openness matters.

I’m anxious to learn more details about the project, but this is obviously very exciting. It also creates momentum and strengthens the case for Amazon HQ2 in Toronto. The above 12-acre Quayside area is only the tip of the iceberg. There’s the rest of the eastern waterfront and also East Harbour .

Some people have been critical of this city’s push for Amazon HQ2. Anthony Lacavera, chairman of Globalive Capital, called this “ the biggest Trojan Horse of all time .” His view is that Amazon would simply use HQ2 Toronto as a mechanism for cheaper labor (USD > CAD) and to siphon the best and brightest down to the US.

Now, I agree that it would be more impactful to create the next Amazon then to simply lure in its second headquarters. Big entrepreneurial successes are what fuel  the darwinian evolution of startup hubs . The founders, early employees and investors make boatloads of money and then they start reinvesting that back into the ecosystem by, among other things, backing the next generation of entrepreneurs.

But does this necessarily mean that an Amazon HQ2 would be detrimental to Toronto by acting as a conduit to the US? Will it discourage entrepreneurship? Should we eschew all US firms out of fear that this may in fact happen? I don’t think so.

There’s tremendous value in concentrating smart people in one place – ideas build on ideas. And I don’t think technology has been able to disrupt that, at least not yet. One example of this is a theory that Paul Graham calls the Milanese Leonardo :

You can see how powerful cities are from something I wrote about earlier : the case of the Milanese Leonardo. Practically every fifteenth century Italian painter you’ve heard of was from Florence, even though Milan was just as big. People in Florence weren’t genetically different, so you have to assume there was someone born in Milan with as much natural ability as Leonardo. What happened to him?

And his reasoning is as follows :

Nothing is more powerful than a community of talented people working on related problems. Genes count for little by comparison: being a genetic Leonardo was not enough to compensate for having been born near Milan instead of Florence. Today we move around more, but great work still comes disproportionately from a few hotspots: the Bauhaus, the Manhattan Project, the New Yorker, Lockheed’s Skunk Works, Xerox Parc.

Xerox Parc (Palo Alto Research Company) is a great example of the kind of positive externalities that can happen as a result of smart people being in close proximity to each other while they wrestle with similar problems. It has been well documented that it was Steve Jobs’ visit to Xerox Parc that inspired many of Apple’s early innovations.

So my view: let’s increase Toronto’s urban metabolism and make it the Florence of 1450 .

Ed Clark – who is leading the charge for HQ2 in Toronto – has been clear that large taxpayer subsidies are not on the table for Amazon . That would not be fair to the existing companies in this city. If that is what it is going to take, then we are not going to win. We will win based on our city, our human capital, and our openness to the rest of the world. That feels right.

Welcome Sidewalk Labs. Welcome Amazon. This city is open for business and to new ideas. 

Image: Waterfront Toronto