Are Supercities Like New York About to Shrink? A Debate

(Bloomberg Opinion) -- For much of the past three decades, America's biggest cities — especially on the coasts — have been some of the country's most important engines of economic growth. They flourished by attracting knowledge industries such as technology and finance, while urban revival made them appealing places to live for the young, well-educated people who worked in those sectors. The coronavirus shutdowns have cast doubt on the outlook for that economic growth formula. Bloomberg Opinion writers Conor Sen and Noah Smith met recently online to discuss the prospects for U.S. cities. 

Conor Sen: Noah, we’ve been debating economic geography for a while. A couple of years ago you and I had a debate where you argued that we should continue to build bigger, denser cities because they’re good for productivity and provide more opportunity for people.  I argued that we should focus on urbanizing suburbs because that seemed to be where the momentum was both in terms of migration patterns and also because that’s more politically achievable.

Coronavirus fears and a growing trend toward remote work seem to be pushing things in that direction. I could see a future where affluent suburbs are a form of “have your cake and eat it too” urbanism, where communities have tech jobs, fancy coffee shops and luxury retailers, walkability and transit that meet the needs of the rich, and large single-family houses without the congestion and poverty of cities. Is that where we’re headed? How are you thinking about things?

Noah Smith: I’m moving a bit toward your position, but not because of the pandemic. Plenty of dense cities have suppressed coronavirus much more effectively than U.S. suburbs.

Instead, I see two factors pushing people out of the superstar cities. First, coronavirus has forced a lot of companies to realize that it's possible to manage a remote workforce with tools such as Zoom and Slack. Second, despite a few victories for density advocates, bipartisan NIMBYism has largely prevailed. I can see a future where high-value knowledge industries such as software are mostly produced in a scattered archipelago of small towns and comfortable suburbs outfitted with cookie-cutter kits of co-working spaces, restaurants, bars and apartment blocks.

But for that to happen, there are still some barriers that have to be overcome. Companies have to feel comfortable hiring and training new workers remotely. People have to feel comfortable without an office to go into. Young workers have to feel assured that the dating pools in small cities will be big enough and high-quality enough. How do you see those things happening?

CS: I think we’ll see the emergence of a newly defined phase of life for elite knowledge workers. Arguably that trend has been in place for a while; it’s just that it’ll become more pronounced. It will go something like this: Great students will attend elite private and public universities all over the country. Many of them will then move to cities such as New York, San Francisco and Los Angeles for access to career development and dating markets.

As those young professionals move up in their careers, pair up and age into their 30s, many of them will then transition to culturally similar suburban or lower-cost communities, taking their knowledge jobs with them, which they can then do remotely while still having access to their professional networks, which exist largely online. Living in Brooklyn or the Mission District of San Francisco in your 20s will be seen as akin to going to college, a transitory development phase of young adulthood that you intend to eventually “graduate” from. The spots in cities they vacate will then be filled by new crops of people in their 20s. This is largely what I did in my own life. The urban areas and suburbs  will end up catering to the people they’re recruiting, while managing whatever resistance occurs from longtime residents upset about seeing their communities change. Do you see this happening, and if so, what second-order effects should we look out for?

NS: Living in a big city as a young person and then moving out to the ’burbs when you have kids is hardly a novel life path. The crucial question for tech cities such as San Francisco and Seattle is whether the suburbs that the 30-something workers move to will be on the outskirts of a big city (as they are now), or in some small pleasant town or exurb with no real relationship to the urban core. And that will depend on how easy it is to have everyone older than 30 or 35 working remotely. Will physical offices be the equivalent of classrooms and pickup bars for young singles who are managed remotely by talking heads on Zoom and Slack from halfway across the country or the world?

If telework and small-town amenities have advanced to that point, older workers really can just move to wherever land is cheap. They can have a big house and a yard and drive five minutes to the upscale shopping village and forget about ever having to commute to Manhattan or San Francisco. But for companies to accept this deal, they’ll need to be comfortable with senior management mostly being remote. How realistic is that?

CS: A thought that’s been running through my mind as the coronavirus has forced us to replace physical commerce and social interactions with their digital and online counterparts is that while technology enables lots of new ways of doing things, ultimately the ways in which we do them is a choice that’s up to us. Do people prefer working remotely or in an office? Do they prefer living in dense urban areas, moderately dense suburban areas, or small towns and rural areas? In what circumstances are buying things online preferable to buying them in stores? What arrangements do employers prefer? We’re getting a trial run with many of these things now, but ultimately technology disruption isn’t inevitable — it's a choice that’s up to us. It could be that online-offline dynamics run in cycles, much as cities have had boom-and-bust cycles. And there’s probably no one-size-fits-all answer here.

NS: People make choices, sure, but economic forces shape those choices. Tech hubs such as San Francisco don’t just exist just because they’re fun places to live. They’re also convenient places for knowledge workers to mingle and exchange knowledge and ideas, for workers and companies to find new jobs and employees easily and quickly, and for startups to meet financiers. All of that feeds into productivity, which raises incomes, even if some of that income goes straight into the pockets of local landlords. Until and unless tech can replace that productivity, companies are still going to demand that workers be nearby, and cities such as San Francisco — and their landlords — will continue to collect huge windfalls of taxes and rent. Coronavirus has made me less confident that these cities are invincible, but I’m definitely not ready to declare them over quite yet.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Conor Sen is a Bloomberg Opinion columnist. He is a portfolio manager for New River Investments in Atlanta and has been a contributor to the Atlantic and Business Insider.

Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.

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