It was a hot day in December in Miami, and I was walking down the street, going from the Wynwood District to Overtown. The Wynwood District is the new tech and arts district in Miami. Overtown is the historically Black community, riven by the highways of the mid-20th century.
I needed a hat, so I stopped into a store that sold electric vehicles – scooters – and had a few branded caps on display. At least, a scooter store is what it seemed to me to be. But the manager and one of the co-owners of SimplyEV quickly corrected me.
“This is about micro-mobility,” said Mauricio Diaz, president of SimplyEV. With a background in consumer electronics, the partners in the company saw the next opportunity in the rise of cities and neighborhoods and new ways to get around them, Diaz said. E-scooters and e-bikes made by the likes of Segway and House of Lithium are the future – but people are going to need places to shop for and service them. Now, SimplyEV plans to open 50 of the stores across the United States in 2022 and 2023, according to a press release.
I couldn’t help but think this entrepreneur with a long track record in understanding consumer tastes was on to something: The close city living that has been the purview of wealthy people who could afford places like New York and San Francisco is spreading with the rise of regional business capitals across the country.
The net effect of that will be good in some ways – for the environment, for instance. It could also splinter the culture of the United States further – or potentially serve as other versions of American mixing bowls, bringing people together.
How Many Business Capitals Does a Growing Country Require?
It has been said that America has had two capitals for hundreds of years: Washington, D.C., the political capital, and New York City, the financial capital. In the late 20th century, Silicon Valley emerged as a third capital, stealing some of New York’s business thunder.
Tech, the dominant industry of the late 20th and early 21st century, lent almost all its economic power to those three places, and a few other adjacent coastal cities, like Boston and Seattle.. The Brookings Institution has said that almost all the high-paying innovation economy jobs were created in five big cities. “90% of the nation’s innovation sector employment growth (between 2005 and 2017) was generated in just five major coastal cities: Seattle, Boston, San Francisco, San Diego, and San Jose, Calif.,” it said in March 2020.
Regional capitals, like Atlanta, Miami, Austin and Denver-Boulder, have been rising for a while, but they didn’t have the same business clout as the mega cities – with the result that those few elite cities became a little bit like gated communities, with room for wealthy people and poor people working in service jobs. Finance and technology centered there. If you were educated and wanted a short commute, the best restaurants and shops, and to rub shoulders with the most interesting people, you had to be able to work in one of those high-paying industries. The pandemic, along with inflation and people’s changing tastes, are changing that picture – putting city living in reach of the middle class again. And the new tech tools that we learned to use during the pandemic will help drive the shift.
Growth markets such as Atlanta, Austin, Charlotte, Dallas, Denver, Miami, Nashville and Raleigh have witnessed 10-year population growth between 10-30%, outpacing the 2010-2020 U.S. population growth of 7.1%. Residents are drawn to a lower cost of living, a lower average commute time and increasingly valued amenities, real estate and investment management firm JLL found in a 2021 report.
One clear sign that quality of business opportunities is on the rise in these cities: they’re drawing the attention of foreign investors. Foreign investment volume in Atlanta, Austin, Dallas, Charlotte, Miami and Raleigh rose 100-200% in the last four years, according to JLL.
Tech and Finance are Shifting to the New Business Capitals
Chris Stegner, founder of Very Big Things, a Miami company that designs digital products for startups, moved to Miami from Seattle 15 years ago for a basic amenity: more sun. Of course there wasn’t much of a tech scene then, he said, but he’s glad he’s stuck to it as Miami tech flourished.
“I’ve seen the tech ecosystem continuing to build, really starting to see it catch fire, I’d say like in the last seven years, and then from there just every year more and more momentum building from that,” he said.
You could always say, of Texas or Florida, that they were big important states. But they couldn’t be as big or as important as California and New York, because they didn’t have the finance or tech. Hence, the Brookings Institution research, which many people have used as justification for putting federal government resources into developing tech hubs elsewhere.
Post pandemic, it’s much harder to make the case for the regional business capitals as needing support – especially since one of the key drivers of their tech industry growth is lower taxes.
Miami’s tech migration kicked off when Founders Fund luminaries disenchanted with California engaged with Miami’s Republican mayor, Francis Suarez. In December 2020, Delian Asparouhov, a principal with the San Francisco-based fund, tweeted “What if we move Silicon Valley to Miami?” Suarez replied, “How can I help?”
A media frenzy erupted, pronouncing the rise of Miami’s tech hub. Shortly after, the famously conservative tech exec Peter Thiel moved Founders Fund to Miami, Microsoft announced a new 50,000 square foot office downtown and Japan-based conglomerate Softbank, which houses its $5 billion Latin America Fund in the city, announced it will be investing $100 million in startups based in Miami or ones that are relocating there.
(In fact the whole exchange looked so scripted to me I wondered if SoftBank’s’ CEO TK TK wasn’t just angry that he’d been blamed by the Silicon Valley elites for the WeWork debacle).
In any case, both Austin and Miami are clearly on the map to stay. They’re already stealing some of Silicon Valley’s thunder. The proportion of venture capital invested in Silicon Valley startups dropped 30% in 2021, CNBC reported.
“If it had not been for all the work that had gone into it previously, I would say maybe this is something that could be fleeting,” said Felice Gorordo, CEO of eMerge Americas, a group that has been working with leaders in local government, education and entrepreneurship to make Miami a tech hub for years, late last year. “But we have a very strong foundation, and a very collaborative ecosystem.”
Straight Line from Politics to Geography to Business
The historic business capitals are generally blue cities in blue states. The new centers of economic power are rising in more politically diverse places. In turn, that’s drawing people who like the red state advantages.
Not only are Florida and Texas taxes low compared to California and New York, but almost every other regional city is too. Jared Walczak, the vice president of state projects at the Tax Foundation, a U.S. tax policy nonprofit, spoke to Times of E last year. There’s no individual tax in Florida or Texas, he said, and Florida’s corporate rate and state taxes are very low; Texas has no corporate tax rate at all. To put it into perspective, the Tax Foundation ranked Florida’s tax system fourth in its 2021 State Business Tax Climate Index. California ranked 49th.
The rising regional business capitals feel politically diverse in other ways, too. Just a few blocks from SimplyEV, in the heart of the new arts-and-tech district, I noticed a big gun range that would have seemed more at home in rural Idaho than a city – but that’s because the cities I’m used to are New York and Silicon Valley.
The regional business capitals are generally blue cities in red states, which means there are culture clashes developing – but those clashes are also giving rise to unique compromises. The future gets invented in cities not because of the top talent there – thought it’s a factor – but because the talented people have to learn how to get along with people who are different than they are.
The biggest differences in American culture right are political. Watch for the future in places like Miami, Austin and Kansas City (arguably the new capital of the Lower Midwest). The low-tax contingent of conversative America ran headlong into the culturally conservative Republicans over the recent law banning early abortions in Texas.
“Texas has so many advantages, and we’re at, in my opinion, a dangerous risk of losing that competitive advantage because of the [divisive political climate] that is happening because it makes us not welcoming of all people in all talent and young talent,” said Mellie Price, founder of Austin-based Purposeful Capital and executive director of University of Texas at Austin’s Texas Venture Labs, told Times of E.
Inflation, Climate Change and Back to Scooters
Changes in patterns in the way people live often coincide with other changes in transportation and technology. The forms that houses and cities take evolve. The old cities of Europe are walking trails, woven together. Tall windows and high ceilings sprang up to match the height of a person on horseback. Cars enabled far-flung grassy suburbs. The pandemic shifted our patterns of living in ways that are still unfolding.
Two other forces are likely to result in even more innovations in transportation that enable even more people to live – and enjoy living – in city environments: Inflation will push the cost of travel up (domestic flight tickets were already up 30%), which I think means that people will stay rooted – and they’ll want to be close to more amenities at once. The balance will favor city living in smaller cities. And, there will be new technologies to combat climate change. Like the scooters.
Standing in that shop in Miami, I could imagine a city dweller’s life in a regional business capital, a place where I wouldn’t need a car and could find an apartment with two or three bedrooms for an affordable amount of money. In Kansas City – where Meta (Facebook) just announced an $800M data center – a luxury place downtown with three bedrooms rents for $2,800 a month. In New York: $8,500.
Proximity Turned into a Luxury
For the past 10 years, there’s been an increasing divide in the country. Only the very wealthiest people were able to afford to live the kind of lives they wanted, close to their jobs, to the arts, or to the recreation they enjoyed, or to shop at boutiques instead of chains.
Standing on the balcony of the Airbnb we rented in Miami, I thought about what Miami feels like now. The answer was a full-fledged city on the rise, with every sector, and every tension, it needs to thrive. That’s the way New York felt in the late 1990s. I’ve had a similar feeling in other regional capitals I’ve visited over the last two years, from Kansas City to Baltimore to Denver-Boulder. I even felt that way in Northwest Arkansas, where the bike trails are attracting a very specific subset of business people.
Proximity turned into a luxury over the past 20 years. The pandemic helped everyone remember how important it is – and now, we have the technology that democratizes it. Whether we’re wise enough to create government and corporate policies that continue to spread economic energy across geographies remains to be seen.
Skyler Rossi contributed to this commentary.