Connecting Neighborhoods, Not Nations: Small Geographic Scales of Globalization
Globalization doesn’t connect nation states or urban regions. Via talent migration, globalization connects neighborhoods. Richard Florida with some numbers detailing the economic geography of globalization in the United States:
America’s wealthiest neighborhoods are also concentrated in a relatively small number of metros across the country. … Nearly a quarter of them are in the New York metropolitan area. Another ten percent (102) are found in Greater Washington, D.C. The Bos-Wash corridor — including D.C., Baltimore, Philadelphia, New York, Hartford, Providence, Worcester, and Boston — accounts for 41 percent. On the West Coast, greater L.A. (including Orange County) is home to 9 percent, and the Bay Area as a whole (the Combined Statistical Area that includes Oakland and San Jose) accounts for another 6 percent.
To repeat, 41 percent of America’s wealthiest neighborhoods are concentrated along the East Coast from Boston to Washington, DC. Citing another Richard Florida statistic, the economy of the Bos-Wash corridor is larger than Germany’s (currently the fourth biggest economy in the entire world). But the scale of megalopolis obscures how globalization has changed from a game of bigger is better to a dance with someone you know and trust. The financial crisis turned the world upside down:
The recent financial turmoil has shattered many of the previous assumptions in the 21st-century banking world. It has become painfully clear that moving credit risk round the world in complex chains did not make the system safer and more efficient – as bankers once claimed.
So, as bankers reel in shock, this poses an intriguing new question: will recent experience now force a rethink of assumptions in non- financial spheres too? After all, in recent years so-called “Davos man” has taken it for granted that globalisation, free market capitalism and innovation were all thoroughly good things. But as faith wilts, might business leaders rethink their dependency on, say, cross-border manufacturing supply chains, too?
There are hints of a change afoot. This week, for example, Gerard Kleisterlee, chief executive of Philips, the electronics group, told the Financial Times he expected large companies to move away from far-flung globalised supply chains. He blamed the shift on “green” issues, explaining “a future where energy is more expensive and less plentifully available will lead to more regional supply chains”.
Blair Effron, one of the founders of the independent investment bank Centerview Partners, says the rise of boutiques has been predicated on their ability to work closely with a much smaller client base. “We are around our clients all the time, not just when they are doing transactions, and try to go as deeply as we can to understand their businesses.” …
… “The balance sheet plays less of a role in deals, which means advice and human capital have become a more wanted quantity,” says Ashley Serrao, a banking analyst at Credit Suisse.
The tilt towards seeking advice from specialist M&A advisers rather than defaulting to one bank for all a company’s financial needs points to an increasingly fragmented professional services landscape. In the case of the banking sector, it also illustrates the migration of talent from bulge-bracket lenders to smaller operations, removed from the regulatory and political wrangling that has dogged big banks since the start of the financial crisis.
The talent migration from bulge-bracket lenders to smaller operations mirrors the real estate refugee’s relocation down the urban hierarchy. The scale of commerce withdraws to the neighborhood. Financial capital follows human capital along lines of trust:
“I cannot scale my business because I cannot hire enough of the quality of people needed,” says Mr Studzinski. “In a boutique you don’t have the balance sheet and product suite to fall back on, so you need people who already have serious, trusted relationships who can bring in business and a network from the start – that’s a rare person.”
Globalization is not dead or dying. Globalization is diffusing from centers of agglomeration. The agents of diffusion are talent itself, gentrifying Cleveland neighborhoods with international social capital amassed in Brooklyn.
Photo Credit: Globalization and Neighborhoods/shutterstock