Saturday, December 14, 2013

Why New York Is Different

Joel Kotkin and his colleagues over at New Geography have invested many millions of pixels making the case that the suburbs are not dead. Their argument is solid: the so-called back to the city movement is very small scale, Millennials show every sign of wanting to live in single-family, detached houses, and the most thriving locations are suburban-like places, such as Houston, Dallas, or Oklahoma City. New technology looks to strengthen the suburban trend, as telecommuting and driverless cars reduce the pain and expense of commuting.

I totally agree with New Geography on the general trend. The effort to force people into higher density housing is doomed to fail. More mass transit is mostly a waste of money (the Second Avenue subway line being a rare exception). But within that larger trend, there are eddies and countercurrents that flow backwards. The larger movement to the suburbs notwithstanding, there are a handful of cities that will do very well as traditional cities. They are the obvious suspects: San Francisco, Boston, Washington, possibly Chicago. Maybe a few more.

And within that handful, New York City will excel. Unlike as is sometimes implied over at New Geography, New York is a lot more than just a "luxury city." Instead, it has a unique niche in both America and the world that no other city can fill. 

My argument has three parts: The beginning of New York in the 17th Century, the people who live in New York today, and the uniquely incredible value New York adds to the economy.

The Dutch founded New York in 1624. Unlike the British, French, and Spanish, the Dutch had no desire to extract resources from the land. Not for them was taming the wilderness, mining for gold, or raising cattle. Unlike other colonists, the Dutch settled accounts with the Indians as quickly as possible, in legend buying Manhattan for $24. A few of their number got as far up the Hudson as Albany, but beyond that, early Dutch influence on American settlement was negligible.

Unlike any other colony in the Americas, New York was founded from Day One as a commercial center. Think of it as a 17th Century version of Hong Kong. Lower Manhattan--even in 1624--was a shipping, trading, and financial center. It was never a farming or manufacturing town.

That legacy holds to the present day. Colin Woodard has published a now famous map showing the eleven nations of North America. By far the smallest geographically, but unmistakably distinctive, is New Netherlands, a region that doesn't even include all of New York's modern suburbs. How can this be? The Dutch lost their colony to the Brits in 1664--they were only there for 40 years. A negligible fraction of New York's current residents are descended from those original Dutch settlers. And yet that crucial heritage persists.

Today New York is known for having the largest Jewish population outside of Israel. Most of these people came over through Ellis Island, along with a much larger number of other immigrants from other places. Those other folks didn't stick around long--the Swedes headed for Minnesota, the Irish moved to Chicago, and so on. The Jews stayed in New York, and not just because they're lazy. The Jews have been a commercial people since Medieval times, and it made sense for them to settle in a place founded on commerce. The Dutch had built them a congenial home.

The other prominent commercial class in the US are the overseas Chinese. These settled first in California, where today they are disproportionately dominant in Silicon Valley. But by far the largest Chinese community in the Americas is in New York--initially along East Canal Street. Today there are multiple Chinatowns throughout the metropolitan area, nine in the City alone. They deal in everything from rags to restaurants. The formerly slum-like Lower East Side is now a suburb of Chinatown, full of back-office businesses, run by an increasingly wealthy population.

Jews and Chinese--these are Peter Stuyvesant's descendants. They compete with each other. The diamond trade has long been a Jewish business, but recently Chinese traders are gaining market share.

Other cities have ethnic commercial classes. I've mentioned the Chinese in Silicon Valley. Hollywood's studio moguls tend to be Jewish. Mormons play that role in thriving Salt Lake City. But as far as I know, New York is the only city in the country (and likely the world) that has two, large immigrant communities that both bring substantial commercial expertise. Of course there are Jews and Chinese in places like Los Angeles and Houston, but the numbers are vastly smaller, both in absolute terms and as a fraction of the population. Indeed, it is surprising how few Chinese live in Los Angeles.

So why are these ethnic communities so valuable to the cities in which they settle? In particular, the Jews bring an attribute uniquely relevant to Mr. Kotkin's thesis. Observant Jews are not allowed to drive or take the bus to synagogue on the Sabbath--they have to walk. That means they all have to live within walking distance of each other. This enforced close living, augmented by shared religious practice and intermarriage, breeds trust and very high levels of social capital. Trust is a marketable commodity--people will do business with banks where the employees are trustworthy.

Famously, among New York's diamond traders, million dollar deals are sealed with a handshake. So is it any wonder that the money center banks are all headquartered in New York? You can move the buildings and the computer services to North Carolina or South Dakota or wherever. But you can't move the community. Ultimately, banking is about trust, and that is something that close-knit, ethnic communities have in spades.

There are other industries where New York has a lock. The rag trade is one. Perhaps partly because Jews have to walk, New York is a densely settled, very walkable city. The women (and men) are out in public, showing off their duds. Because they're on the street, in public, going about they're daily business, fashion trends happen in New York. Accordingly, New York hosts thousands of blogs like this one. That's how people dress in New York City.

There are three fashion capitals in the world--New York, Paris, and Tokyo. New York and Paris are beautiful cities, adding a marvelous backdrop to any photo shoot. Tokyo, while not beautiful, is nevertheless glamorous. All three cities are built for walking and public transport--it's one big fashion show. Compare that to Houston, where stylish people drive around in cars with tinted windows. How can you model clothes in a car? Houston will never be a fashion center--and neither will Los Angeles, Chicago, or Sioux Falls.

A second industry is food. Yes, they grow the goods in Kansas, package it in Illinois, and eat it around the world. But where do they invent the stuff?

Tyler Cowen says that the best ethnic food is found in suburban strip malls. I think he's probably right. But that's not the food that most people eat most of the time. What most people eat is some creative combination of ethnic and comfort food, tasty and cleverly made. Few are going to eat the oddball dishes they serve at Cantonese restaurants. 

But lots of people patronize a New York fast food chain called Happy Taco. Forget Tex-Mex; think Mexiasian. Or JapoItalian. Or Peruvithai. Or whatever combinations of cuisines you can think of. People like ethnic food, but they like it modified, synthesized, palatable, and recognizable. Creating this nouvelle cuisine requires business acumen, lots of fresh ingredients, educated consumers willing to try, and a labor force with sufficient expertise. And ideally, all the restaurants are within walking distance of each other.

I've just described New York City. What you'll eat at Applebee's tomorrow, they're cooking up in New York City today.

Further Reading:

1 comment:

  1. Actually, Joel is not totally correct, people rather live in even Los Angeles than Maywood or Huntington Park the heavily Hispanic towns of La. In fact in Orange County south of La, the fastest growing city is a mid tier suburb called Irvine it went from 165,000 to over 230,000 and now is the 91 st largest city. Irvine shows that there is a trend between the small suburb and large city that is taken place. In fact in suburban OC, Irvine, Anaheim and Santa Ana have more population growth than the white suburbs in So Orange County.