Thursday, August 22, 2013

Entrepreneurs and diversification

Diversification prompts resilience. It's a common sense notion but it's nice to see research that corroborates the idea that the notion applies to cities. They are more likely to survive if their portfolio of talent is diversified. We should say metropolitan areas rather than cities because we must include suburbs and hinterlands for it to work.

Alex Anas reports that doubling metropolitan area size only increases average commute times by about 10 percent. How could that be? All that spreading out is much better than "unplanned sprawl;" people do not choose locations foolishly; they consider co-locating with others they do business with.

I had previously blogged about the fact that U.S. suburban area growth does a better job of predicting central city growth than vice versa. First, they complement each other which surprises zero-sum thinkers. Second, suburban locations are opportunities for many; they can connect and link from there also; they can access local labor and they may find cheaper land.

It bears repeating that almost anyone in almost any supply chain manages many networks, some physical and some virtual. We choose networks along with location. Making the good choices keeps business in business. This is the way entrpreneurs maintain their edge. They are not lemmings in some "unplanned sprawl" fiasco.

Diversification is nice but it takes the actions of alert entrepreneurs to cash in on it. Being able to move into new fields is abetted by variety of local talents. Call that a necessary condition but call successful entrepreneurship added to that the sufficient one.