The well manicured facial hair gives it away. Andrew Carnegie wanted to be where the action was. At the young age of 35, and already fantastically wealthy, Carnegie moved to New York City from Pittsburgh in 1869. Interestingly, like a lot of today’s young post-collegiates, Carnegie lived with his mother (albeit in a suite of rooms in a luxury hotel).
As biographer David Nasaw writes,
Carnegie also wanted to devote his time to literature and culture… Having traveled to London and Paris and spent a great deal of time in New York and Philadelphia, Carnegie could no longer close his eyes to the reality that Pittsburgh was just too small, too provincial, too uncultured and uncultivated for him.
The key to Carnegie’s decision to leave his burgeoning steel operations behind in Pittsburgh in the capable hands of his lieutenants, went well beyond culture – New York was the epicenter of American capitalism. While steel required brawn, factories, iron ore and coal, the real juice for the expansion of the Carnegie empire needed to come from the bankers and brokers who loaned the money and provided the financing. They lived in New York, so Carnegie needed to be in New York. The opportunity to surround himself with culture was a perk that New York offered.
Culture and capital are intoxicating mixtures that lead to fantastic economic growth. It’s the reason why young people continue to move to London, San Francisco, Hong Kong, and Tokyo in droves in spite of enormous real estate expenses.
Silicon Valley and New York may be economically painful places for young entrepreneurs to live in the short run, but the payoff is huge if frequent interaction with capital sources can be facilitated. Its also pretty damn fun to live in these cities.
Last week, Singapore revealed that it has ambitions to become the “Asian version of Silicon Valley”. While this phrase almost borders on cliche, it seems that Singapore may have a fighting chance. As Southeast Asia’s financial hub, the city-state is well positioned to offer young technology companies a place to find bankers and investors. Singapore invested $324 million in startups last year – ten times that of Hong Kong. The government matches private investment on a dollar-for-dollar basis.
Singapore, by many accounts is fairly boring (the government is famous for its enforcement of orderliness), but as more young people move in, the fun will follow.
This makes life difficult for the third tier cities with a dearth of youth culture and a minimal amount of investment capital. While it seems paradoxical in the current age where anyone can do their work from just about anywhere that a young person would choose the most expensive places to live, the short term pain is worth the long term gain. Capital and culture win every time.