Creative destruction and Michael Bloomberg: Why being fired in New York ain't always so terrible

Posted by: Peter Coy on July 13

Guest blog from Economics Editor Peter Coy

new york city.jpg
I’ve been scrounging around lately for evidence to make a case for optimism. It’s for a double issue in August. Just found a great example today. Hat tip to Greg Mankiw for pointing out this article called “The Reinventive City” in the Manhattan Institute’s City Journal by Mankiw’s Harvard colleague Edward Glaeser.

Glaeser’s lead anecdote concerns New York City’s billionaire mayor, Michael Bloomberg, whose rise to fame and fortune began when he was fired by Salomon Brothers in the recession year of 1981. As we all know by now, Bloomberg parlayed his $10 million severance check and the abundance of computer savvy he picked up on the job into the omnipresent financial-information company known as Bloomberg.

Here’s how Glaeser puts it:

Despite being a continent away from Silicon Valley, Bloomberg created his own computer firm. New York had provided him with the critical requirements for entrepreneurship: skilled workers, financing, access to customers, and knowledge.
The success of Bloomberg’s company reflects the great advantages of being in New York even during a recession. Today, Gotham’s strengths—competition, diversity, access to the world, and, most of all, human capital, made even more potent through proximity—will enable the city to reinvent itself, as it has done several times in the past, and survive the current economic storm.

For a guy who works in Cambridge, Mass., and presumably roots for the Red Sox, Glaeser writes a pretty good love letter to New York. He’s got wonderful stories about the China trade, the garment industry, the invention of the Xerox machine, etc., etc., right up to the present. Says Glaeser:

New York will continue to have a comparative advantage at producing ideas. That advantage occurs because big cities are, at their heart, the absence of distance between people and firms. Talent, whether painterly or financial, gets magnified because of urban concentration. Cities thrive by connecting people.

Michael Bloomberg might never have gotten where he is today if it hadn’t been for the severe recession of the early 1980s. Who knows what world-changing companies will be launched—perhaps right in New York City—because of the current crisis?

P.S.: That cover image is from a cover package that BusinessWeek put together in the aftermath of the Sept. 11, 2001, terror attacks that destroyed the World Trade Center.

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Reader Comments

cm

July 13, 2009 11:00 PM

Shorter article: You too can make it into the top 1%!

CompEng

July 14, 2009 12:03 AM

CM,

Nice. Except he's a member of a more elite club than most mere 1%'ers :)

cm

July 14, 2009 03:22 AM

CompEng: That's right. I hope I was still able to capture the essence of the message.

Ajay

July 14, 2009 05:07 AM

Don't be silly, this wasn't a self help-style article about how you too can make it big. Rather, it kept repeating the stupid thesis that NY would rebound cuz cities are competitive and lead to ideas spreading, while dumbly dismissing technology as incapable of obsoleting these advantages. What's particularly funny is that he then suggests health care and education as possible saviors for NY, hilarious cuz tech's gonna destroy those two next. Also funny when he suggests tech in NY when it's well-known that tech has never gotten anywhere there, unless you count the downtrodden IT departments of the financiers.

I hang out in online channels where I can discuss my ideas with people from Virginia to France, local proximity is now worthless and competition is global. NY real estate will see a small rebound when the next tech boom kicks off, but it's all downhill from there for decades, as for all big cities. Why would you pay the inflated prices to live in those cities when you can live anywhere with internet and be able to reach anybody else with internet? We'll see a great migration away from the cities, as all the information workers, who only went there for the work, will move out to their favorite smaller towns and work virtually. This was the last hurrah for NY, they just don't realize it yet.

Alan

July 14, 2009 08:18 AM

Yeah and then when everyone lives in a suburb and all cities are abandonded, everyone will know how proximity is worthless because there is obviously no need for major metropolitan areas.

And New York is on the way out. Obviously. Jeez dude do you listen to the French when they tell you that?

CompEng

July 14, 2009 09:32 AM


It's true that the article wasn't a you-too-can-be-rich peptalk. That was only a mild sub-theme. But it's true that "successful" people tend not to be very interested in anyone much less "successful" then they are. :)

My take on the (potential) advantage of cities is public transportation and everything being physically close by. I loved it back in school when I could live without a car, and I've really enjoyed the time I've spent in NYC and a couple other big cities. The internet overcomes a lot of that, but not all people are as productive without F2F meetings, at least with the people they work with constantly. It may be only psychological, but it's a very real factor.

Alexandra

July 14, 2009 11:01 AM

It's true: NY generates the energy that generates the ideas that generates the businesses. The very air is electric with possibilities.

cm

July 14, 2009 10:23 PM

I have obviously been commenting on the (not very hidden) subtext, while it wasn't my intent to ridicule the author.

But do I really have to point out how the original post starts: "I’ve been scrounging around lately for evidence to make a case for optimism. (...) Just found a great example today."

Justin Samuels

July 15, 2009 08:49 AM

New York City and other big cities aren't necessarily expensive. It depends on how much you're making.

Also, some parts of town are cheaper than others.

As for small towns, if real estate is cheaper, it's because they make LESS MONEY.

I live in New York, and I love it here because of the social, professional, and institutional connections I have here. I will not be moving out to some place like Tennessee.

LAO

July 15, 2009 11:12 AM

Doesn't anyone remember the BW guest article by a woman who insisted that $250,000 is not enough for a family of 3 to live in NYC? Since I don't live there (and if I choose to believe her), I am left to imagine that retail, food service, medical staff, public education, and most other non-financial employees are forced to live elbow-to-elbow or in the subway, or soon will if their sweetie loses his/her job.

Meanwhile, the riches of the rest of the nation continue to be sucked into perpetuating the unaffordability of NYC (and a few other global financial centers), just because it is so darn appealing, apparently. If that is not proof of failure of the simplistic free market model and its presumptions about monetary motivation, I don't know what is. On the other hand, perhaps the true genius of Sam Walton and Warren Buffet is that they knew enough not to spend a few hundred $K to live when they began. I find greater optimism in the idea that economic turmoil will inspire a few more astute people to do their math homework and see opportunity, without a Bloomberg sized fortune as a prerequisite.

cm

July 16, 2009 12:57 AM

LAO: The solution to your conundrum is that the service staff and workers in "commodity occupations" largely commutes in from outer service worker communities/districts, the same as in all other metropolitan areas.

I'm not intimately familiar with what the more and less posh neighborhoods of NYC are. But I can imagine for the prime areas of Manhattan 250K will not do it.

Thank you for your interest. This blog is no longer active.

 

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Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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