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Why Tech Firms Flock to Expensive Cities | WSJ - YouTube
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- [Narrator] This is Hudson Yards.
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Late in 2019, Facebook completed a lease
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for over 1.5 million square feet of space
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across three buildings in the area.
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Amazon also has an office down the street.
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And if you go further
down the Hudson River,
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you'll find a cluster of buildings
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leased or owned by Google.
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It seems like everyone in tech wants
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a piece of New York City's West Side.
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- There's a reason that most of the major
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big tech brand platforms
are based in a few places.
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They wanna be near each other
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and they wanna be near
some of the same resources.
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- [Narrator] Mark Muro is a fellow
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at the Brookings Institution,
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a Washington DC think tank.
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He and other economists call
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this clustering agglomeration.
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- Agglomeration is the
tendency of economic activity
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to gather, or cluster, or clump together.
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It happens because
there are often benefits
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to businesses, workers, and institutions
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being close to each other.
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- [Narrator] That clustering
can build up an economy,
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but there's a catch.
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- Even the winners
don't feel like winners.
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If you're in traffic choked,
expensive San Francisco
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you don't feel like the current clustering
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is working for you,
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and neither does anybody
else in the United States
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and in the Heartland.
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- [Narrator] To understand how
an agglomeration gets going,
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consider New York City.
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Tech clusters typically rely
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on a robust pool of workers
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and the labor pool in New York
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is more educated than
the national average.
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Analysts say that it's become difficult
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to find qualified workers
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in hotspots like Silicon Valley,
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which makes New York
attractive for expansion.
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Experts say that labor is key.
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- Obviously, we've seen
these clusters develop,
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you know, all over the world.
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The reason they occur is because,
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when you draw people together
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they learn from each other.
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- [Narrator] Capacity for
growth on the far West Side
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grew in the 2000s during
Michael Bloomberg's
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run as city mayor.
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Doctoroff was his deputy.
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- We did 140 separate
rezonings of the city.
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Often of old, under
utilized, industrial land
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that opened up the capacity to develop
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all sorts of new areas.
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So, we embarked on a massive expansion
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of capacity for space.
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- [Narrator] The city
also extended the subway
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for the first time in 25 years.
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- [Dan] One of the big problems
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on the West Side of Manhattan
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was there was no great
way to get over here.
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$3 billion was invested in
the extension of the subway
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into the area as well
as other infrastructure.
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- [Narrator] Also the city provided land
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and millions of dollars for
a new Cornell Tech campus.
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- Cornell Tech plays a crucial role
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in the New York tech ecosystem.
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Often times, the research
really shows is that
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universities catalyze
that kind of collaboration
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better than almost any other institution.
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- [Narrator] All this new development
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laid the groundwork for tech companies
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to open offices on the West Side,
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forming a cluster of
highly skilled workers.
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- A big agglomeration of say
high-tech economic activity
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is simply going to be more productive
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and more competitive than others
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because think of what
it has close proximity,
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highly specialized workers,
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highly specialized providers
of business services.
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- [Narrator] Research
from Mr. Muro and others
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suggest that workers who
live in these clusters
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tend to be more productive
than those who don't.
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Here's a chart that measures
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output per worker by industry group.
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Workers in industries like
manufacturing or retail
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tend to be more productive
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if they're in a top cluster.
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That advantage stretches further
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if you're a worker in
an innovation industry.
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The effects are so potent
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that some of the cities
who've generated clusters
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are pulling away from
the rest of the country.
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But that poses challenges for Americans
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both in and outside the clusters.
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- You only have to look at the complaints
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of people who live in
Seattle or the Bay Area
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to see that very serious
negative implications
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of excessive or poorly
managed agglomeration.
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- [Narrator] Like the tech hubs
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in Seattle and San Francisco,
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New York has issue with affordability.
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Late in 2019, the median
home in New York City
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sold for $563,000 which was much higher
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than the national median.
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A similar story unfolds
in the commuting data.
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Most states in the New
York metropolitan region,
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have commute times well
above national averages.
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And in the city proper,
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commute times are on the rise.
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In some cases,
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tech workers earn enough
to make the pain worthwhile
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and that's encouraging educated people
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to leave smaller cities.
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In the big coastal cities,
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wage and employment levels are outpacing
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other parts of the country.
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- We have Google,
Facebook, Amazon combined
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over 20,000 jobs in the near future.
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We have 9,000 startups in New York City.
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It's increasingly true that
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every company is a tech company.
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Whether you're in finance,
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whether you're in real estate,
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whether you're in fashion, media.
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You name it,
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all of these sectors are
already headquartered here,
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and they need people who understand
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and know how to build technology.
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- [Narrator] In regions
further from the top,
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incomes and employment
levels aren't keeping pace,
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which sends a message.
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- For the foreseeable future,
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to really have a great
career in tech in America,
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you probably do need to head out to
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the Bay Area, or New York, or Seattle
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and work for one of the big tech titans.
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I think that's an unfortunate
reality in the United States.
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(upbeat music)
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