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The economics of cities

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Monday, April 11, 2011

BY BILL CONERLY

Every business leader should understand the role that cities play in economic, and corporate, growth. A good way to get that understanding is Ed Glaeser's new book, The Triumph of Cities.
Glaeser makes the critical point that cities are where people communicate the most. That communication includes:

•    Business opportunities ("Fred's company is looking for a new marketing firm.")
•    Business methods ("Mary's found a way to re-design her product to reduce waste.")

It's also where many people come to trade. Going to the city means that there will be specilized resources (goods, services, employees) available for purchase, as well as companies and people who may want your highly specialized service. Adam Smith started the Wealth of Nations talking about the wonders of specialization, then explained that the specialization is limited by the size of the market. (Small towns might support a baker and a blacksmith, but not a bookbinder or tool and dye maker.)

McKenzie Quarterly has an interesting set of articles and interactive maps about Global Cities of the Future.

Business strategy lessons about cities: Whether you are located in a big city, a suburb or a small town, keep in mind the communication needed to advance your firm. Employees up and down the organization need to meet with other people: customers, suppliers, and even competitors. Don't neglect people in seemingly unrelated businesses. It's not unusual for companies in one industry to learn a trick from other industries. In big cities, a lot of this happens naturally. However, it can always be improved. If your business is located in a suburb or small town, senior management should try to facilitate and encourage interaction between employees and other business people.

One idea for stimulating thought and discussion: bring in someone to meet with your senior management team and present ideas about the business challenges and opportunities that he sees in the world. It will broaden your team's horizons.

For more from Bill Conerly, visit his blog, Businomics.

 
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