September 01, 2010
Airplanes, Telecomm Cut Optimal City Size
City size needed for successful industries has shrunk due to cheap air flights and low costs and high speeds for telecommunications and internet access.
EAST LANSING, Mich. -- A city’s size no longer is the key factor in building vibrant local economies, according to a study by a Michigan State University sociologist.
Zachary Neal found that although America's largest cities once had the most sophisticated economies, today that honor goes to cities with many connections to other places, regardless of their size. The study was published online Aug. 30 in the research journal City and Community.
The rise of commercial aviation, high-speed rail, the Internet and other technological advances have allowed smaller cities to compete with urban powers such as New York and Chicago, Neal said. The study identifies Denver, Phoenix and even Bentonville, Ark. – Wal-Mart’s corporate home – as some of the most well-connected and economically sophisticated communities.
Air travel started the trend. Low cost communications further accelerated it. What I wonder: How essential is the air travel? Will very high res teleconferencing substantially reduce the need for business air travel?
Neal examined the population and air-traffic data for 64 U.S. cities from 1900 to 2000. He found that a city’s population was the most important factor for its economy until the 1950s, when the spread of commercial air travel fostered more cross-country business networks. That trend continued with advances such as teleconferencing and the growth of the Internet.
To the extent that high speed internet and very high res 3-D video teleconferencing can reduce the need for air travel the communications technologies will also open up economic development to smaller cities and towns that are not near airports. Any place where enough brain power can concentrate will be sufficient to build up an industry.
Does anyone have a suggestion for an affordable, easy-to-use, home videoconferencing setup? I have a family of 6, scattered around the country that would like to do a joint conference...
Telecommunications are a useful tool but in the end there is no substitute from actually visiting the people you intend to do business with (and/or actually undertake business with), subsequently meeting with them face to face on a regular basis. In addition you should visit their place of business, their suppliers and customers and related parties. A diligence (which should be on-going) requires you to be thorough before doing business, while doing business and for a period of time after your transactions are completed.
For example, there is a well known US manufacturer which implies its products are A-1 quality "Made in USA". Prior to placing an order upon them I visited the city where they are located and arranged to view the "plant" anonymously. The "plant" is a warehouse of product imported from China and elsewhere. The quality is very good, as I soon established by identifying and visiting the actual manufacturer in China. A significant cost saving was made available to me by cutting out the middle-man warehousing operation in the USA. Further, after face to face discussion with the Chinese manufacturers and their suppliers (some in China and some in Australia), product specification has been altered to more closely meet my customer requirements. Additionally, I am now in possession of information which could allow a successful short of the US organisation or a raid on its customer base.
The point is that in the end you need to be able to travel to see things directly for yourself. Telecommunications are not a substitute for the physical presence jet-travel allows. It is far too easy for telecommunications to be employed to mislead, either by commission or ommission.
When AI-driven virtual reality becomes available, the world will organize by like-minded groups, not by cities or countries. At least war will become less likely.
The inclusion of "high-speed RAIL" in the list of connectors destroyed the credibility of the study. What high-speped rail line is servicing Bentonville, Arkansas? Or even Phoenix, Arizona? Air travel, yes. Internet? Definitely yes. High-speed rail? Politics getting in the way of science once again. Although I see the study is by a sociologist and, as we know, there is as much "science" in the social sciences as their cheese in a boxed Kraft macaroni-and-cheese dinner.
"Air travel started the trend. Low cost communications further accelerated it. What I wonder: How essential is the air travel? Will very high res teleconferencing substantially reduce the need for business air travel?"
Think FREIGHT , overnight delivery
the part you need can very well be made across country, shipped to you, and no down time, cheaper than from across town
If you're allowed to define "most sophisticated economies" however you please, of course you can write a paper which turns common sense (and more importantly, real world relevance) on its head.
I doubt many tech companies or financial service providers will be rushing to set up shop in sophisticated Bentonville, Ark.
Also, I wonder if the author considers the fact that for places like Denver and Phoenix to exist at all as mid-sized economies, they have to be "well-connected"--because they're in the middle of nowhere! In other words, being more heavily connected than average is the minimum cost of entry for them, and not an indicator of excellence.
have you looked into Skype?
Nick G asks: "Does anyone have a suggestion for an affordable, easy-to-use, home videoconferencing setup?" How about "Free?" Try Skype; the price is right, and if you have a decent (i.e., about $50) webcam, it comes with most of the software that you will need.
you focus on business but you don't mention anything about what makes a city where successful business people would like to live. For axample. air service is not just important for business trips, but for quality of life overall (it's a pain in the ass to live somewhere where you cannot get a direct flight to ANYWHERE). In addition, the perceived "hipness" of a city makes recruiting top college grads much easier--even in a bad economy there is still competition for the best of the best. Who the hell cares about video-conferencing? And I am guessing that the availability of high speed rail affected few corporate decisions in America for businesses that not directly related to the rail industry already.
You're not real smart sniffy.
I have been in Bentonville for 14 years and nearly every major tech company has an office here with some of their best folks manning it.
We have skinned quite a few big city slickers like yourself who came up here to take advantage of us hillbillies, gonna show us how it's done.
You know, it must have been dumb luck that we happened to build the largest and most sophisticated retail organization in the world... one that uses technology like no one else... an accident I tell ya...
sydneybristow & Ken Mitchell,
Thanks. Any suggestions on webcams, or are they all pretty good as long as you don't go too cheap?
Sniffy makes the classic error of letting his biases direct his thinking.
Once you realize that the production of actionable intelligence is not dependent on the gatekeepers of the Ivy Leagues and their wannabe offspring (Duke, Stanford, et al.) you can begin to free yourself from the delusions of superiority held by Northern/elite bigotry that has strangled our country in massive debt, broken Government, and corrupt corporations.
"The rise of commercial aviation, high-speed rail, the Internet and other technological advances have allowed smaller cities to compete with urban powers"
Probably not high speed rail.
"I doubt many tech companies or financial service providers will be rushing to set up shop in sophisticated Bentonville, Ark."
It's pretty clear you've never been to Bentonville. Locating in AR and keeping Ivy League grads out of senior management(generally - I think there might be one) seems to have served WalMart pretty well.
"At least war will become less likely"
Why do you think that?
"the perceived "hipness" of a city makes recruiting top college grads much easier"
From a business standpoint, someone unwilling to relocate to develop their career would be excluded from the "top grad" category by definition.
Tele-conferencing will never eliminate the need for business travel, because there are a lot more reasons that people travel on business, than just for meetings, conferences, negotiations, and talk. There are technicians who install and/or troubleshoot/maintain electronic and mechanical systems. There are people in companies' real estate departments who select sites for locations. There are company trainers who have to conduct hands-on training that can't be properly done via video. There are company auditors who have to check paperwork and procedures on site. There are construction department people who have to travel to see far-flung locations, in order to get the information they need to design newly leased sites, or to plan the remodel or expansion of existing company sites. Construction department or real estate department may also have to deal with zoning boards, or planning commisions, or city coucils, or city permit offices. And there is a lot of travel required by the fact that people can't physically handle objects and materials that are on a video screen.
There are so many different reasons that people have to travel on business, that I have to wonder what percentage of business travel is actually replaceable by teleconferencing. I'd bet that that percentage is a lot smaller than what most people would guess.
joe said: "And I am guessing that the availability of high speed rail affected few corporate decisions in America for businesses that not directly related to the rail industry already."
I don't think the article was limiting the city-size principle to the size of cities in the U.S. In places where high-speed rail is a big part of the transportation system, e.g., Japan, it figures into the city-size equation in the same way that air travel does.
Emergent socioeconomic techniques such as telecommunting/teleconferencing/Vworlds exert change at the margin. Since profit also occurs by definition at the margin, it is not required for a new technique to even partially replace the prior technique to have disproportionate "overthrow" affects. A mature technology/socioeconomic technique depends on taking advantage of sparse market growth opportunities and suffers dramatically slower growth/lower profits even though the competing technique may currently be marginal. This is because the new technique actually reduces growth of the incumbent yet exhausted paradigm. Once a tipping point is reached, a massive flow of new socio-economic forces will come to the aid of the new technique resulting in the exponential acceleration of its attractiveness, viability, and overwhelming competitiveness.
For instance, telecommuting and teleconferencing are being benefited by moore's and metcalfe's laws simultaneously. The operating speeds of these technologies are 186,000 miles per second. The fidelity improves at the rate of the laws and the price performance generates steamroller deflation. The operating speed of aircraft is 2/3 the speed of sound. I think we know which one will win. Therefore, geographic location/concentration gradually loses importance and value in the same way that farms close to cities lost value with the introduction of refrigerated rail cars.
My office has a $500,000 Cisco Telepresence set-up and it is pretty amazing. Full wall of screens, life-sized images, hidden speakers making it seem like its coming from the images, even half a conference table where half is in our office and the other half is on the screens in the other office. You really feel like you met someone after having a meeting with it. Hell, I watched a co-worker surreptitiously sneak a peek down a woman's shirt who was leaning over for a bagel 2000 miles away. This could totally replace most air travel one day if it gets cheap enough.
The study looked at the data from 1900 to 2000. Air travel was slower than rail for a big part of that time
Teleconferencing is really only useful for the type of work that can be done in offices and conference rooms. That type of work may be Hollywood's perception of the business world, but it's not the majority of work to do in the real world.
Let's take the above-mentioned Wal-Mart for an example. When they build a new location, someone who knows their cash-register systems has to install the systems. That can't be done by remote control. When they decided to update their cash-register systems to include self-service check out stations in some locations, people who knew what they were doing had to install those systems. When they open new locations, teams of people have to train all the new hires. Someone has to deal with the construction design changes (which can even include landscaping) demanded by city inspectors, that the city decided to wait until the last minute to let them know about. Someone has to inspect the quality of the finish work (carpet, paint, tile, woodwork, decor, etc.), to see that it is up to company standards at multiple construction sites. Someone has to install the new security-camera systems that interface with the company's computer systems (if Wal-Mart is upgrading to those like some companies are).
How can Wal-Mart's district and regional managers evaluate how well the managers of individual locations are doing their jobs, without visiting the locations, and seeing how clean the locations are, and how well the employees interact with customers? They can't do that from a conference room.
The idea that teleconferencing could "totally replace" most business travel, is just silly. Business involves a hell of a lot more than Hollywood's image of wheeling and dealing, and negotiations, and meetings.
However, for working couples, especially those with one or more high level executive jobs, larger cities will still be more important. We chose Houston in part because it offered a number of potential future positions for each of us. There are probably only about 5 cities in the US that could offer my spouse opportunities that make use of her training and experience and likewise offer me opportunities that match my skill and experience. I've known a number of couples in similar situations. I also know high level executives (I'm talking about CFO's VPs and CEOs of major public companies) who have turned down opportunities in towns that only have one or two such positions because that means if their job goes they have to move again. In Houston and some similar cities they know if they lose such a position there's a reasonable opportunity of finding another.
Moreover, Houston is central enough and such a huge number of flights, you can fly almost anywhere several times a day and even return the same evening.
I'm sure Betonville and a lot of mid-size towns are wonderful places to live. If they offered multiple opportunities of the type my wife and I need, I would prefer such a place. But they don't.
I'd like to see those air travel stats from 1900, heck even the ones from 1903 from that early hightech metropolis of Kitty Hawk would make interesting reading.
I would expect in the future store inspection visits could be done more efficiently virtually since they can be done on a moment's notice for any length of time. The time spent traveling to stores would be more efficiently spent watching what goes on in several stores at once at a bank of high res cameras, with dozens of such cameras per store.
Think about what a camera system with really powerful computer software could track along with some sensors: Arrival and departure times of each employee, patterns of human movements suggestive of shoplifting, arguments, shoppers who seemingly can't find what they are looking for, and loafing employees.
Stores with poor performance could get the instant yet secret scrutiny of several store performance experts scattered around the country or the world.
I expect most store inspections to go away, because I expect most stores to go away.
Notice how Borders and Barnes & Noble are doing lately? Circling the drain.
Certainly record and DVD stores are going down for the count. Book stores are up next. The info distribution stores are mostly going bye bye.
Regarding physical goods: Any idea what the rate is for the shift of various products from store-bought versus ordered-and-delivered? My own purchasing has shifted to about 90% ordered on the internet for everything but food, car parts, and some gardening supplies. I rarely go into conventional department stores any more. I buy all my clothing online.
Also, I rarely use cash any more. Plus, my mail volume, junk mail aside, has plunged by about 90%.
I've long believed that the greatest economic failure of the Bush administration was the the TSA.
Think of anything you have ever needed to purchase right away, in your work or in your home life. Has a simple plumbing repair ever cost you more than one trip to a hardware store? Has building a simple bookshelf, let alone anything more complicated, ever cost you more than one trip to the hardware store? Because of an unexpected event suddenly popping up in your life -- for instance, the news that you have to travel to a funeral -- have you ever had a sudden need to purchase some piece of clothing you didn't have? Have you ever forgotten to get a birthday gift or Valentine's Day gift until the last moment? Has a plumbing leak ever forced you to suddenly need a wet-dry vacuum cleaner? Have you ever been away from home, when a ballpoint pen leak meant you needed a new shirt? Have you ever suddenly needed a can of carpet cleaner? How about a roll of packing tape, a ream of printer paper, or an ink-jet cartridge, or a pen, or some batteries?
When you really need something, you need it NOW, not tomorrow. And even to get it tomorrow, you have to pay a lot extra for overnight shipping. Sure, there are a lot things that can wait a day or more, and there are a lot things that can be purchased online, but the need for brick-and-mortar stores is not going to disappear. If you're in a shoe store, and you don't like the feel of a pair of shoes you've tried on, you simply try a different pair, right then and there. If you don't like the feel of a pair of shoes you've purchased online, the process of returning the pair and getting another to try on will probably take a week, even if the seller has excellent service.
In the 1950s and '60s, before the advent of Office Depot, Office Max, and Staples, if you needed an office chair, or a desk, or a filing cabinet, you had to go to your local office supply store, order what you needed from their catalogs, and then wait for it to be shipped in. The small office supply stores did not carry much in inventory. People stopped shopping at the smaller office supply stores with the advent of the above-named stores, because they could now get what they needed when they needed it.
There's no question that the commercial landscape is going to change for brick-and-mortar stores, but people will not be satisfied with having order-online-and-ship as their only option for all their needs.
Part of their demand my not be met with online shopping but a large part will so there will be need for a lot less brick-and-mortar.